Britain is facing the tightest squeeze in public spending since the 1970s, after leaked Treasury documents showed a major deterioration in the nation's public finances, the Institute for Fiscal Studies will warn tomorrow.
In a blow to Gordon Brown days after he relaunched his premiership by finally admitting that spending would have to be cut, the IFS will confirm Tory warnings that the last budget in April failed to reveal the depth of the public finance crisis.
The IFS will release its latest commentary on Britain's public finances in the wake of the leaking to the Tories of Treasury documents which showed that departmental spending would be cut by a total of 9.3% between 2010 and 2014.
While we are still at the stage in the United States where the US government thinks it can continue on a drunken spending bender at some point the US government is going to go so far that the world money market is going to deliver a real drubbing. The US government can't continue on its current path. Eventually the United States will be as vulnerable to market pressures as the United Kingdom.
Whitehall spending on public services could fall to 20.3pc of gross domestic product (GDP) by 2017, the same level as 1998, the IFS finds, unless the Government imposes further tax increases or cuts in welfare payments. Departmental spending this year is expected to amount to 26.1pc of GDP, a peak since Labour came to power.
When China stops lending to the United States the day of reckoning will arrive.
On top of the traditional economic reasons, a growing number of Mexicans feel unsafe in their own country, particularly wealthier citizens who are targets of kidnap gangs and other forms of crime.
Surveys have shown over the past decade that the main motivation for immigration by Latino populations is overwhelmingly economic, followed by family reunification. But the violence raging across the country, where more than 13,000 have been killed in drug-related violence since Mexican President Felipe Calderón took office in late 2006 and dispatched the military to fight drug gangs, is also pushing people across the border.
The Mexicans ought to stay in their country and fight for it against the criminals.
A big barrier built over the entire length of the US-Mexico border combined with a bigger push to capture ocean-going smugglers is needed. Even the efforts made in recent years to make illegal border crossings riskier have been enough to shift some smugglers toward using ocean routes. Smugglers are shifting toward using sailboats and other boats to smuggle both drugs and people from Mexico to the California coast.
"We've seen a huge spike in smuggling by water," said Lauren Mack, a spokeswoman for the Immigration and Customs Enforcement office in San Diego, California. "It's become very, very risky and difficult to cross by land. Smugglers try to jump where they think we're not looking."
It is a waste to use less than sufficient power and force to stop smuggling. If the US made a much bigger effort to stop smuggling from Mexico then the lawlessness caused by drug gangs would go way down as the money for the gangs dried up. We can help both the United States and Mexico by taking control of our borders to stop smuggling.
The change is evident statewide. Massachusetts, once a top destination for Brazilian immigrants, along with Florida, New Jersey, and New York, used to receive about 50,000 a year during the boom years, says Fausto da Rocha, executive director of the Brazilian Immigrant Center in Allston, Mass. In the past two years, about 17,000 of the state’s approximately 200,000 Brazilians have gone back home, he estimates.
He expects up to 7,000 to decamp this year – and more in 2010 unless the US passes immigration reform that allows illegal immigrants to work in the US. “The economy and immigration crackdown – that’s what pushed the Brazilians back,” Mr. da Rocha says. During the first half of the decade, Brazilians were the second-fastest-growing group of illegal immigrants to the US (behind Indians), according to Alan Marcus, a professor of geography at Towson University in Maryland.
They were flying in on visas and overstaying. A lot of Brazilians have concentrated in Framingham Mass. It would no be hard to find illegals among them. The US government should station a bunch of agents there to work with local police to identify illegals and deport large numbers of them. This would not be hard to do. A big enforcement action in a single community could be used as a demonstration of what could be done in other communities with lots of illegals.
A Madrid research group expects Spain's economy to contract 11% from peak and unemployment to reach 25%. Idea: vacation trips to Spain to see a depression just like grandma lived thru back in the 1930s. Albeit grandma didn't have a welfare state to fall back on.
The Madrid research group RR de Acuña & Asociados said the collapse of Spain's building industry will cause the economy to contract for the next three years, with a peak to trough loss of over 11pc of GDP. The grim forecast is starkly at odds with claims by premier Jose Luis Zapatero, who still says Spain's recession will be milder than elsewhere in Europe.
Spain is going to raise the national value added tax (VAT - like a sales tax) by 2% to pay for welfare benefits for all those unemployed. The Spanish government more optimistically expects unemployment to peak at a mere 18.9%. Time for an extended siesta.
The government expects the Spanish economy, Europe's fifth-largest, will contract by 3.6 percent in 2009 and return to growth by the second half of next year.
But it expects the unemployment rate will rise to 18.9 percent in 2010 after closing this year at 17.9 percent.
Spain went thru a housing bubble much like California's and has a huge overhang of unsold properties. Spain also has a European welfare state with the aforementioned VAT that enables government to achieve a size that California liberals can only dream about. That welfare state puts Spain's unemployment at a higher starting point.
Economist Paul Krugman expects the US unemployment rate still have over a year of increases in store. Though the possibility of America catching up with Spain in terms of increased leisure time still seems low.
"(U.S.) unemployment will peak in early 2011 ... certainly staying very high and possibly rising all next year," Krugman told a business meeting in Slovenia, adding his forecast was based on data from previous U.S. economic crises.
But I expect Peak Oil will prevent a sustained recovery.
If unemployment is going to continue to rise thru early 2011 the eventual peak could be quite high. The US overall is at 9.7% unemployment. But some areas are much higher. Michigan unemployment is already at 15.2% with Nevada at 13.2% and California at 12.2%.
Japan is experiencing deflation. Why buy when things will cost less in the future? Why buy when you might lose your job?
In July, the International Monetary Fund said Japan may face deflation through 2011. The unemployment rate rose to a record high of 5.7 percent and the core consumer price index dropped at an unprecedented pace of 2.2 percent, heightening deflation concerns.
Japan's economy might start growing very slowly in 2010. Then again, maybe not.
The economy will expand 0.8 percent next year after contracting 6 percent in 2009, according to median forecasts, putting assets in the world’s second-biggest economy at a disadvantage to those in countries with higher borrowing costs.
Japan has a government debt of about 200% of GDP. This has got to cause serious problems at some point. With a shrinking population and stagnant economy the cost of paying for that debt could spike. How is Japan going to handle the extended economic contraction that Peak Oil will bring? They seem ill-positioned for it.
If all the liberal newspapers go bankrupt how can they cheerlead for Obama? Really, how can the Left show its support for Obama when so many of their institutions for supporting the Democratic Party's goals are getting undermined by Craig's List and web news site? Fortunately President Obama has the wisdom to support measures to prop up the liberal media.
The president said he is "happy to look at" bills before Congress that would give struggling news organizations tax breaks if they were to restructure as nonprofit businesses.
"I haven't seen detailed proposals yet, but I'll be happy to look at them," Obama told the editors of the Pittsburgh Post-Gazette and Toledo Blade in an interview.
The internet has weakened the hold of the old gatekeepers. So has talk radio. The old gatekeepers are none too happy about this development. While the raw news gathering function of newspapers is still very important and reduction of reporter staffs reduces needed raw information collection the weakening of their ability to influence which issues and positions are legitimate is a beneficial development.
Ordinarily, such numbers would be seen as catastrophic, but these times are not ordinary. The drop in combined print and digital ad revenue last year, 16.6 percent, according to the Newspaper Association of America, was the worst since the Depression. But it looks rosy next to 2009, when revenue fell 28.3 percent in the first quarter and 29 percent in the second.
I like the New York Times in spite of my disagreeing with their editorial position. I hope that newspaper survives. But the better parts of the blogosphere bring some needed balance and bring up stories and information the mainstream liberal media would just as soon ignore.
Lesson here for dictators the world over. If you let your people hear criticism you'll just have to throw them in jail. To avoid unnecessary and avoidable suffering keep them in the dark.
While many have argued that media freedom is integral to a functioning democracy and respect for human rights, a new study is the first to examine the effects of media freedom in countries that lack such democratic institutions as fair elections.
"We would expect to find most free media in democratic states and most controlled media in autocratic states, but this is not always the case," said Jenifer Whitten-Woodring, a doctoral candidate in political science and international relations at USC.
In the September 2009 issue of International Studies Quarterly, Whitten-Woodring shows that media freedom in autocratic states does not necessarily result in improved government treatment of citizens. Indeed, media freedom in the absence of other institutional outlets for dissent is actually associated with greater oppression of human rights, Whitten-Woodring found utilizing data from 93 countries for the years 1981-1995.
If people start complaining out loud and read the complaints of others it probably just increases feelings of dissatisfaction, frustration, and anger. This leads people to do things that any self-respecting dictator can't let them get away with. Before you know it the prisons are full of political opponents and you are spending a lot more money on interrogators and torturers.
Free media reporters think they are so righteous attacking The Man. But all they are doing is feeding vicious cycles of protest, police shooting protesters, and general repression.
Without democratic outlets for dissent, institutional cycles of protest and repression are likely to evolve, according to Whitten-Woodring, leading to the greater possibility of political imprisonment, murder, disappearance and torture in the short term. For example in Iran in the late 1990s, when President Khatami introduced some press freedom and newspapers began to report on violations of human rights, protests and calls for reform were met with further repression.
"I'm not advocating against free media," Whitten-Woodring said, pointing to instances in Mexico and Uganda where an independent media continued to operate despite state oppression and intimidation. "It is imperative to understand how the effects of independent media vary and are dependent on democratic characteristics . . . that make governments more accountable and vulnerable to public opinion."
She continued: "All in all, these findings suggest that although the free media is able to play a watchdog role over government behavior, this does not always result in improved government treatment of citizens."
Is improved government treatment of citizens the bottom line?
Maybe what is needed is a small amount of carefully controlled complaining.
A recent US Census Bureau report has a number of interesting facts about income, poverty, and health insurance coverage. 2008 was not fun for most people.
Between 2007 and 2008, the real median income of non-Hispanic white households declined 2.6 percent (to $55,530); for blacks, it declined 2.8 percent (to $34,218); for Asians, it declined 4.4 percent (to $65,637); and for Hispanics, it declined 5.6 percent (to $37,913). Except for the difference between the declines for non-Hispanic white and Hispanic households, all other differences between the declines were not statistically significant.
Since whites are a shrinking portion of the US population and Asians as a percentage are not growing fast the growth of Hispanics and blacks will cause a decline in overall US per capita income. Peak Oil will also cause a decline in overall per capita income.
Working men earn bigger bucks than working women.
In 2008, the earnings of women who worked full time, year-round was 77 percent of that for corresponding men, down from 78 percent in 2007. The real median earnings of men who worked full time, year-round declined by 1.0 percent between 2007 and 2008, from $46,846 to $46,367. For women, the corresponding drop was 1.9 percent, from $36,451 to $35,745.
But the industries hardest hit in this recession (e.g. manufacturing, mining) are male-dominated. So the recession has been called a mancession. Whereas health, education, and government - all industries that employ more women - have done well in this recession. In May 2009 the male unemployment rate was 10.5% while the female unemployment rate was 8%. A 2.5% gap.
Obama's attempts to extend health insurance to more people would benefit blacks and Hispanics far more than whites.
The uninsured rate and number of uninsured for non-Hispanic whites increased in 2008 to 10.8 percent and 21.3 million, from 10.4 percent and 20.5 million in 2007. The uninsured rate and number of uninsured for blacks in 2008, meanwhile, were not statistically different from 2007, at 19.1 percent and 7.3 million. The uninsured rate for Asians in 2008, 17.6 percent, was not statistically different from 2007.
The percentage of uninsured Hispanics decreased to 30.7 percent in 2008, from 32.1 percent in 2007. The number of uninsured Hispanics was not statistically different in 2008, at 14.6 million.
Based on a three-year average (2006-2008), 31.7 percent of people who reported American Indian and Alaska Native as their race were without coverage. The three-year average uninsured rate for Native Hawaiians and Other Pacific Islanders was 18.5 percent.
Gen. Stanley McChrystal, the top U.S. commander in Afghanistan, is privately requesting between 30,000 and 40,000 more troops, a request that has produced "sticker shock" and "huge resistance" among key lawmakers, sources told FOX News.
Picture this: We leave Afghanistan. The Taliban sweep to power. We go in once again with special forces, air power, and bribery of tribal leaders and sweep the Taliban back out of power.
Or picture this: We leave Afghanistan. But we bribe lots of tribal leaders to keep the Taliban out of power.
Can one of those approaches work?
Our interest: Deny Al Qaeda a big training center. Can't we do this without a big troop presence in Afghanistan?
Update: One can judge an idea at least partly by who is for it. With that thought in mind Thomas Friedman of the New York Times supports a big push in Afghanistan and he thinks we can create "a reasonably noncorrupt Afghan state". Tom, you are funny guy.
The strategy that our new — and impressive — commander in Afghanistan, Gen. Stanley McChrystal, is pursuing calls for additional troops to create something that does not now exist there — a reasonably noncorrupt Afghan state that will serve its people and partner with America in keeping Afghanistan free of drug lords, warlords, the Taliban and Al Qaeda. His plan calls for clearing areas of Taliban control, holding those areas and then building effective local, district and provincial governments — along with a bigger army, real courts, police and public services. Because only with all that can we hold the support of the Afghan people and avoid a Taliban victory and a return of Al Qaeda that could threaten us. That is the theory.
It is worth noting where Friedman stands on other US adventures in foreign lands. Friedman still thinks the invasion of Iraq was a good idea.
It is important to learn from one's mistakes.
Even though the Obama Administration has a physics Nobel Prize winner as Secretary of Energy there's an element of cluelessness to Obama's energy policies. America's government believes we invest too much in oil and natural gas.
The Obama administration opened a new front in its effort to impose $31.5 billion in taxes on oil and gas companies, saying that the nation puts too much emphasis on oil and gas at the expense of other industries.
The chief economist in the Obama administration's Treasury Department testified before a Senate panel that current subsidies "lead to overinvestment" in the oil and gas industry.
Alan Krueger believes what he's saying?
Picture this: We invest less in oil and natural gas. Production rapidly drops. We have to import more and our trade deficit gets much larger. Then the dollar drops in value and imports cost more. Our living standards drop.
We need to keep up investments in oil and natural gas to give us time to develop the replacements for these energy sources. Oil extraction in particular is becoming much more expensive as the remaining oil is harder to reach and more expensive to extract. The cheap oil is gone. We need to spend more, not less, to get what's remaining.
When world oil production starts declining every year and we enter one long recession lasting longer than a decade the current period's energy policy discussions will seem hopelessly naive.
The U.S. oil and natural gas industry supports more than 9 million American jobs and makes significant economic contributions as an employer and purchaser of American goods and services, a new study by PricewaterhouseCoopers (PwC) found.
The study entitled "The Economic Impacts of the Oil and Natural Gas Industry on the U.S. Economy: Employment, Labor Income and Value Added” notes that the industry's total value-added contribution to the national economy was more than $1 trillion, or 7.5 percent of the U.S. gross domestic product, in 2007, the most recent year for which data was available.
I would very much like replacements for oil since I expect world oil production to go into long term irreversible decline starting some time in the next 10 years. We need replacements. But we can't pretend today that we have good replacements for the oil that supplies 95% of current US transportation needs. The investment needed to replace oil will require tens of trillions of dollars and decades to make.
Output at state-owned oil monopoly Petroleos Mexicanos's offshore field Cantarell, once the world's second-largest oil field, has plunged to 500,000 barrels a day from its peak of 2.1 million in 2005.
"I don't recall seeing anything in the industry as dramatic as Cantarell," says Mark Thurber, assistant director for research at the Program on Energy and Sustainable Development at Stanford University.
If this happens to Saudi Arabia's Ghawar oil field then we'll enter an economic depression. As more countries hit their production peaks we become more dependent on the dwindling list remaining producers that are not yet in decline. I expect a series of oil price shocks as a result.
Mexico was America's 2nd biggest supplier in 2007 and will likely cease to supply us any oil within 5 years.
In 2007, Mexico was our second-biggest oil supplier, after Canada. Last year, with a 15% drop in daily barrels supplied, the country dropped to third place behind Saudi Arabia.
Both Saudi Arabia and Mexico are too secretive about the state of their oil fields to allow outside experts to estimate future production trends. Mexico is easier to call though since experts see deep offshore drilling as needed to slow Mexico's oil production decline. Since Mexico's government is spending Pemex revenue on government funding Pemex does not have enough money (or expertise) to do the needed deep offshore exploration and development. So we can count on continued Mexican oil production decline.
Mexico's Chicontepec field has been a disappointment. This decline in Mexican production is going to bring an end to Mexico's role as an oil exporter and therefore reduce funding for their government and depress the Mexican economy. Mexico might even become a net exporter in 5 years time. The United States needs to build a formidable physical border barrier to insulate ourselves from the economic troubles building up south of the border.
Ryan Grim of the Huffington Post (yeah, left-wing but I'm not - so what) has written a good piece on how the US Federal Reserve employs and otherwise funds so many economists that the Fed stifles debate about Fed assumptions and policy.
The Federal Reserve, through its extensive network of consultants, visiting scholars, alumni and staff economists, so thoroughly dominates the field of economics that real criticism of the central bank has become a career liability for members of the profession, an investigation by the Huffington Post has found.This dominance helps explain how, even after the Fed failed to foresee the greatest economic collapse since the Great Depression, the central bank has largely escaped criticism from academic economists. In the Fed's thrall, the economists missed it, too. "The Fed has a lock on the economics world," says Joshua Rosner, a Wall Street analyst who correctly called the meltdown. "There is no room for other views, which I guess is why economists got it so wrong."
The tendency toward consensus and group-think is a big problem. Look at the housing bubble and the larger credit bubble. The vast bulk of professional economists did not recognize the problem. Some of those who did recognize it were not associated with either major universities or the Fed.
One can't simply dismiss this as left-wing carping at free market economists. Milton Friedman thought that the Fed's influence was not healthy.
Even the late Milton Friedman, whose monetary economic theories heavily influenced Greenspan, was concerned about the stifled nature of the debate. Friedman, in a 1993 letter to Auerbach that the author quotes in his book, argued that the Fed practice was harming objectivity: "I cannot disagree with you that having something like 500 economists is extremely unhealthy. As you say, it is not conducive to independent, objective research. You and I know there has been censorship of the material published. Equally important, the location of the economists in the Federal Reserve has had a significant influence on the kind of research they do, biasing that research toward noncontroversial technical papers on method as opposed to substantive papers on policy and results," Friedman wrote.
I'm struck by the fact that Alan Greenspan did not have an impressive set of private sector accomplishments. Timothy Geithner doesn't either. I wish more people who ascend to high positions in government first make their mark in ways totally independent of government-created status hierarchies. We need more people who are from the outside with proven records of accomplishment taking the reins of power.
In recession governments cut services that would be paid by the users of those services. This is wasteful and inefficient.
California drivers can't line up to renew their licenses Friday. Wisconsin natives can't order copies of their birth certificates. Georgia consumers will have to postpone registering complaints with state watchdogs. And stranded motorists in Maryland may have to wait a little longer for highway-department help.
Across the country, cash-strapped state governments are shutting down business for a day at a time to save money. State offices are shuttered Friday in California, Maine, Maryland and Michigan. Rhode Island had planned to join them until a judge on Thursday blocked its closure plan.
People would pay good money to avoid waiting for hours at a DMV office. This is avoidable waste.
A Department of Motor Vehicles office in San Francisco, meanwhile, was packed Thursday with more than 150 people. Last summer, without furloughs, wait times rarely exceeded an hour, but with three furlough days a month, people are waiting more than two hours each day, said Maria De Guia, a motor-vehicle field representative.
If state governments outsourced license renewal, birth certificate ordering, and many other document-related tasks then there'd be no need to cut services for these tasks during an economic downturn. Users could pay a fee for the cost of document processing and the out-sourcing company would fund its employees, offices, and computers from the fees collected. State governments could add additional fees for revenue generation (i.e. taxes) if they wished.
Furloughs amount to an attempt to dodge facing long term problems.
But furloughs do little to address fiscal problems such as ballooning pension costs, and some policy watchdogs fret they are a short-term solution to what is likely to be a long-term problem.
"Many states expanded health-care funding over the last decade and are now having real trouble paying for it," said Robert B. Ward, deputy director of the Rockefeller Institute. Educational programs and economic development also ballooned, he said.
I expect due to Peak Oil that spikes in oil prices to throw the US and other Western countries back into recession repeatedly for at least the next 10 years and likely into the 2020s as well. Governments need to accept they too poor to do all the things they do today. They need to scale back and live within their diminished means.
In a subthread on The Oil Drum about Ayn Rand and Atlas Shrugged a poster named "Boby" makes a great comment about former Federal Reserve Chairman's long association with Ayn Rand: Alan Greenspan is the modern day John Galt.
In my opinion Alan Greenspan is(was)John Galt. In what way you ask? Again in my opinion, history will judge his policies as leading to the destruction of the financial system as we know it.
What a hoot.
Question: What sort of decline rate to you anticipate, in 2012 or whenever it occurs?
Kopits: I don’t have an independent view on that. The IEA has pointed out that decline rates appear to have increased to 6-7%, and PFC has a very interesting chart on the increase in decline rates from offshore wells over time. By the way, these sorts of developments—secular increases in decline rates, for example—are one reason that I think peak oil is upon us already. Are they proof? No, but they are suggestive. And if you work in the industry, you keep running across similar charts, indicative of a system in trouble even if they are not conclusive. At the same time, you have to keep in mind that there are above-ground constraints on production which could influence aggregate decline rates. You have to consider, for example, whether the Saudis will increase production or if Iraq will get better at administrating its oil industry. There are a lot of things we don’t know at this point that will determine decline rates.
Question: Could you tell us about your views on the US oil price threshold for recessions?
Kopits: The US has experienced six recessions since 1972. At least five of these were associated with oil prices. In every case, when oil consumption in the US reached 4% percent of GDP, the US went into recession. Right now, 4% of GDP is $80 oil. So that’s my current view: If the oil price exceeds $80, then expect the US to fall back into recession.
Then we are within $10 per barrel of another recession. Bummer dudes.
I predict many recessions (or a few really long ones) in the next 15 years. Shrinking oil supplies will be the biggest cause.
Question: In the world of oil analytics, what rules does peak oil break?
Kopits: The primary thing that we have learned—or more precisely, re-learned—in the last year is that the global economy will not tolerate oil at any price. In the first half of last year, we had some prognostications of oil at $150, $200, even $500, and they were understandable because of the supply and demand dynamics at the time. But as we’ve seen since, once our oil consumption exceeds 4% of GDP in the US, we go into recession and we cut our oil consumption. The global economy cannot sustain oil at any price. Beyond a certain threshold, the result is likely to be stagflation or recession rather than perpetually increasing oil prices.
Kopits isn't the only oil industry analyst who thinks oil can't go above $100 per barrel for any length of time. The argument is that high prices will cause economic contraction down to a level that crushes enough demand to lower oil prices back below $100 once again.
But I think this line of thinking misses a fundamental change that high oil prices will cause: In industrialized countries oil consumption will shrink more than overall economic activity and oil's portion of total energy will shrink. As oil becomes a smaller portion of the total energy pie oil's price will be able to go higher without turning into 4% of GDP. Therefore as global oil production declines oil will eventually go above $100 per barrel on a sustained basis.
Economist James Hamilton has done a lot of analysis on the effects of oil price shocks on the US economy and concludes we would not have experienced the current sharp recession without the 2007-2009 oil price shock.
In a follow-up on my earlier post, I'd now like to discuss the second part of my paper, Causes and Consequences of the Oil Shock of 2007-08, which I presented today at a conference at the Brookings Institution. Here I'll review the role that the oil price shock may have played in causing the economic recession that began in 2007:Q4.
My paper uses a number of different models that had been fit to earlier historical episodes to see what they imply about the contribution that the oil shock of 2007-08 might have made to real GDP growth over the last year. The approaches surveyed include Edelstein and Kilian (2007), who examined the detailed response of various components of consumer spending, Blanchard and Gali (2007), who studied the extent to which the contribution of oil shocks has significantly decreased over time, my 2003 paper, which emphasized the role of nonlinearities, and a model-free data summary of the observed behavior of different economic magnitudes following this and previous oil shocks. Although the approaches are quite different, they all support a common conclusion: had there been no increase in oil prices between 2007:Q3 and 2008:Q2, the U.S. economy would not have been in a recession over the period 2007:Q4 through 2008:Q3.
If we experience a double dip recession another spike in oil prices will be the cause.
While the United States has high absolute spending on health care at least a dozen industrialized countries had faster percentage growth rates in health care costs from 1990 to 2007. South Korea at 9.6%, Ireland at 9.0%, Poland at 7.8%, Norway at 7.6%, and Greece at 7.1% are among the countries that surpass the US at 5.8%.
Rapidly developing countries like South Korea, Poland, and Ireland have rapidly growing buying power. People are spending more of each marginal dollar on health care as more basic needs are already satisfying. Plus, some of these countries have more rapidly aging populations. So these results are not surprising.
What would be more useful: a chart plotting percentage of GDP spent on health care versus absolute per capita GDP. Though such a chart would still not capture the effect of different age distributions or health habits of different populaces. Some countries are more sick because more smoke or more are obese.
Writing for The New Yorker Steven Brill reports on efforts by the New York City school system to fire incompetent teachers. Bet they do not have this problem in China.
In a windowless room in a shabby office building at Seventh Avenue and Twenty-eighth Street, in Manhattan, a poster is taped to a wall, whose message could easily be the mission statement for a day-care center: “Children are fragile. Handle with care.” It’s a June morning, and there are fifteen people in the room, four of them fast asleep, their heads lying on a card table. Three are playing a board game. Most of the others stand around chatting. Two are arguing over one of the folding chairs. But there are no children here. The inhabitants are all New York City schoolteachers who have been sent to what is officially called a Temporary Reassignment Center but which everyone calls the Rubber Room.
These fifteen teachers, along with about six hundred others, in six larger Rubber Rooms in the city’s five boroughs, have been accused of misconduct, such as hitting or molesting a student, or, in some cases, of incompetence, in a system that rarely calls anyone incompetent.
All told 1700 teachers get paid by the City of New York to do nothing. I really hate the waste and parasitism of big cities.
The teachers have been in the Rubber Room for an average of about three years, doing the same thing every day—which is pretty much nothing at all.
The administrators who want to fire teachers even when the claims against them are unproven argue that it is more important to err on the side of firing more teachers since the vast majority of the dismissed teachers will be of poor quality. The interests of the students should outweigh the fairness to individual teachers. I agree. The schools exist for the students, not for the teachers. But of course the unions end up capturing control of the schools and the interests of teachers take a distant second place.
Other urban school systems are trying to fight against the pernicious affects of tenure and teachers' unions.
The stated rationale for the reassignment centers is unassailable: Get these people away from children, even if tenure rules require that they continue to be paid. Most urban school systems faced with tenure constraints follow the same logic. Los Angeles and San Francisco pay suspended teachers to answer phones, work in warehouses, or just stay home; in Chicago they do clerical work. But the policies implemented by other cities are on a far smaller scale—both because they have fewer teachers and because they have not been as aggressive as Klein and Bloomberg in trying to root out the worst teachers.
Of course the article bows toward political correctness. What elephant in the room goes unmentioned?
By now, most serious studies on education reform have concluded that the critical variable when it comes to kids succeeding in school isn’t money spent on buildings or books but, rather, the quality of their teachers. A study of the Los Angeles public schools published in 2006 by the Brookings Institution concluded that “having a top-quartile teacher rather than a bottom-quartile teacher four years in a row would be enough to close the black-white test score gap.” But, in New York and elsewhere, holding teachers accountable for how well they teach has proved to be a frontier that cannot be crossed.
What happens after a teacher sits in the Rubber Room for years and hundreds of thousands of dollars are spent on hearings and investigations? The arbitrators are reluctant to fire teachers because the arbitrators want to keep their own jobs.
Klein’s explanation is that “most arbitrators are not inclined to dismiss a teacher, because they have to get approved again every year by the union, and the union keeps a scorecard.” (Weingarten denies that the union keeps a scorecard.)
Modest proposal: test the IQs of teachers and fire any teacher who has low IQ. That idea is way beyond the pale for liberal city school systems and for the liberal elites who still dominate the courts, press, and academia.
What worries me most about economic globalization: It increases the pressure for global government. Writing at the Brussels Journal Dr. Richard W. Rahn, Director General of the Center for Global Economic Growth, reports on efforts by the OECD to create an international system of tax collection enforcement.
Do you think the Internal Revenue Service should have the right to share your tax information with foreign governments -- even ones run by thugs and those that engage in human rights abuses and/or suppress freedom in their countries?
A meeting was held in Mexico City last week under the auspices of the Paris-based Organization for Economic Cooperation and Development (OECD), whose implicit goal is to create a global high-tax cartel.
It claims to be in favor of "transparency" and "global economic growth." However, as with many domestic and international government organizations, the OECD's actions are often contrary to its words.
In order to create a global tax cartel, the OECD needs to have tax information shared among nations -- which means that the citizen of any country that signs on to this scheme may have his or her tax information shared with other member jurisdictions.
The European Union especially would like a global tax cartel so that its higher taxes do not drive businesses and people to lower tax countries. America's Left is on board because the Left would like to implement a Value Added Tax (VAT) that would enable the US government's cut of the US economy to rise to European levels of fleecing.
Does the OECD tolerate free speech, dissent, and the quiet exchange of opposing views outside of their meetings? Nope.
The Center for Freedom and Prosperity sent a delegation to the Mexico City meeting. It included my colleague Daniel J. Mitchell, a senior fellow at the Cato Institute. Mr. Mitchell has written extensively on the importance of global tax competition, which is needed for economic growth, the preservation of human rights and civil societies.
Mr. Mitchell was there to provide intellectual support to smaller, low-tax jurisdictions, which were trying to protect their tax sovereignty, and also to report on the meeting.
The international bureaucrats who run the OECD's Fiscal Affairs Committee managed to persuade a hotel to cancel Mr. Mitchell's reservations and then tried to get him thrown out of the public lobby of the hotel where the meeting was held -- as he was quietly talking with delegations from lower-tax jurisdictions and the press. Fortunately, when Mr. Mitchell and members of the press objected to the bullying tactics of the OECD officials, he finally was allowed to stay.
What globalization means to me: Oppression and no place to run to.
Writing in the Washington Monthly Kevin Carey reports on an all-you-can-eat educational buffet for only $99 per month.
Luckily for Solvig, there were new options available. She went online looking for something that fit her wallet and her time horizon, and an ad caught her eye: a company called StraighterLine was offering online courses in subjects like accounting, statistics, and math. This was hardly unusual—hundreds of institutions are online hawking degrees. But one thing about StraighterLine stood out: it offered as many courses as she wanted for a flat rate of $99 a month. “It sounds like a scam,” Solvig thought—she’d run into a lot of shady companies and hard-sell tactics on the Internet. But for $99, why not take a risk?
Solvig threw herself into the work, studying up to eighteen hours a day. And contrary to expectations, the courses turned out to be just what she was looking for. Every morning she would sit down at her kitchen table and log on to a Web site where she could access course materials, read text, watch videos, listen to podcasts, work through problem sets, and take exams. Online study groups were available where she could collaborate with other students via listserv and instant messaging. StraighterLine courses were designed and overseen by professors with PhDs, and she was assigned a course adviser who was available by e-mail. And if Solvig got stuck and needed help, real live tutors were available at any time, day or night, just a mouse click away.
Crucially for Solvig—who needed to get back into the workforce as soon as possible—StraighterLine let students move through courses as quickly or slowly as they chose. Once a course was finished, Solvig could move on to the next one, without paying more. In less than two months, she had finished four complete courses, for less than $200 total. The same courses would have cost her over $2,700 at Northeastern Illinois, $4,200 at Kaplan University, $6,300 at the University of Phoenix, and roughly the gross domestic product of a small Central American nation at an elite private university. They also would have taken two or three times as long to complete.
Read the whole thing. Radical stuff.
I do not see any bricks-and-mortar college or university as immune to the market forces that are building up online. Harvard, MIT, Yale, and Stanford won't be driven out of business by far cheaper online course offerings. But their oxes will be seriously gored. Look at it this way: Even if most kids who are smart enough to get into the Ivy or Caltech decide to go to those really expensive schools if even 10% of their prospective students decide to save bucks (and get thru faster!) online then the demand for what they are selling declines and so does their pricing power.
The biggest appeal of the highest prestige schools is that you get to say that you attended one. The schools confer status on their graduates as a form of hidden IQ test. The use of IQ tests is taboo and legally problematic. But the knowledge that a kid just graduated from MIT provides potential employers a still legitimate filter for talent. But that status-granting function can be fulfilled more cheaply online. Let us consider the ways to provide proxy IQ tests with online education:
The kids who use cheaper online courses to get thru school more quickly in a hard subject gain the most benefit. They save money, demonstrate their superior intellectual ability with both subject matter and age of graduation, and they pick up extra years of income by entering the labor force at a younger age.
I expect hundreds of colleges to out of business in the next few decades. The Left's continued push for more education spending on old style educational institutions is a huge waste of resources. Pitifully low college graduation rates for those who enroll (check out this chart which includes graduation rates) demonstrate that a lot of people are going to college who do not belong there. Better that they waste a year online and for much less money discover that they aren't up to college-level material. But the current regime instead will try to develop incentives to keep them in school.
Online education will be especially valuable for smart kids sitting in grade school and high school classrooms with dumb kids and not especially bright high school and elementary school teachers. Why waste time in the slow (and for me incredibly boring) lane of education? Shift into higher gear and relate to intellectual peers in online course discussion sections. Ask questions of smart tutors. Watch best-of-breed video recorded lectures by great instructors whose time you could not afford to sit in classes with. Online education will be a step up for most smarter students. As more lectures get recorded the number and quality of lectures available to watch will improve dramatically. The future of online education looks bright.
One last point: The acceleration of the rate of learning that online education enables will boost tax revenue by moving the smartest people into the labor market at younger ages.
Overall, the nation split almost right down the middle, with 48 percent favoring Obama’s plan and 51 percent opposed.
But here’s the breakdown on generational lines:
• Americans age 65 and up: 38 percent support the president on this issue.
• Age 50 to 64: 46 percent support.
• Age 35 to 49: 41 percent support
• Age 18 to 34: 60 percent support.
Americans above age 65 know that allocation of tax revenue (or, rather, borrowed money) for Medicare competes with allocation of that same money for medical spenidng for younger cohorts. They do not want competitors because they do not want benefits cuts for themselves.
I think the emphasis on expanded coverage as a first step in health care reform is a mistake. Once government is on the hook to fund more medical spending the prospects for market reforms go down, not up. My fear is that we'll evolve toward a single payer system as more employers shift toward lower cost government-provided medical insurance. A single payer system will reduce the incentives for innovations and improved productivity.
What I'd like to see as incremental improvements on the existing private medical insurance market:
We need more experimentation before making large national changes because we do not know what the real costs will be for a policy first rolled out at the national level. The US government has a number of ways to experiment. For example, it has the US military health system, the Veterans Administration, Medicare, Medicaid, the federal employees medical insurance program, and still other medical programs it runs. The federal government should use these programs to try methods to cut costs and improve quality and convenience. Lead by example rather than by dictates on the rest of us.
The editors of the Christian Science Monitor note that the so-called "jobs American's won't do" do not exist.
Recent recessions have been short enough that jobless Americans who rely on government benefits waited for a "good job" to return. But this "Great Recession" has been long and deep. The unemployment rate has doubled from 4.7 to 9.4 percent, and it may keep rising into next year. Many layoffs appear permanent as whole industries have collapsed and new fields, such as clean energy, are slow to emerge. The percentage of Americans "mal-employed" – working below their skill or education – is higher than in recent recessions.
With people desperate for income, downward mobility may be on the way up. News reports show long lines of applicants for a janitor's job or for work at a factory after a federal raid clears out the illegal workers.
Maybe it's a myth that Americans won't take certain jobs. In fact, a study by the Center for Immigration Studies used 2005-07 data to look at 465 occupations. Only four had a majority of immigrants in them: plasterers and stucco masons, agricultural graders and sorters, personal appliance workers, and tailors and dressmakers.
In every other occupation, such as janitors, maids, and groundskeepers, a large majority were filled by native-born Americans. The report's conclusion: "The often-made argument that immigrants only take jobs Americans don't want is simply wrong."
In what sort of economic environment would our elites like to implement a new immigration amnesty? Americans are taking jobs that teens would normally do. The teenage unemployment rate is a record 25.5%. Highest in over 60 years.
This August, the teenage unemployment rate — that is, the percentage of teenagers who wanted a job who could not find one — was 25.5 percent, its highest level since the government began keeping track of such statistics in 1948. Likewise, the percentage of teenagers over all who were working was at its lowest level in recorded history.
The US economy does not have enough jobs for relatively smarter people (not that the average college grad is as smart as, say, 50 years ago) and so the smarter people are displacing dumber people from low skilled jobs.
Recent college graduates, unable to find higher-paying jobs, are working at places like Starbucks and Gap, taking jobs once held by their younger peers. Half of college graduates under age 25 are in jobs that do not require college degrees, the highest portion in at least 18 years, Mr. Sum said.
We should stop lower IQ immigration. Our economy runs on higher IQs. The intellectually most capable workers create the new wealth and the new industries and jobs.
At a very high level of industrialization Japan still has a low rate of cocaine contamination on the Yen. The Chinese currency already has a higher level of contamination.
In his study, the rate of drug-contaminated money varied geographically from urban to less populated areas. A hundred percent of the sample bills collected from major cities such as Miami, Florida; Boston, Massachusetts; and Detroit, Michigan, tested positive for cocaine, but samples collected from smaller cities such as Salt Lake City, Utah; Niagara Falls, New York;and Dearborn, Michigan, had 87 to 67 percent.
Compared with currency from Brazil, Canada, China and Japan, U.S. bills had the highest percentage of cocaine, with 90 percent of 234 bank notes contaminated. Canada followed with 85 percent and Brazil with 80 percent. China and Japan had the lowest, with 20 and 12 percent respectively.
Japan has a bigger problem with stimulant drug abuse. But I do not have a good sense of how big it is.
Will China's corruption enable a big scaling up of drug abuse as it further industrializes and buying power increases? I doubt that China will be as orderly as Japan.
BEIJING – Police in central China detained 15 parents for a violent protest over factory pollution that left hundreds of local children with lead poisoning, and accused them of links to the banned Falun Gong spiritual movement, villagers said Wednesday.
Villagers mocked the accusation, saying authorities were using the charge to take revenge against parents involved in the Aug. 8 unrest in Hunan province's Wenping township, that broke out after more than 1,300 children were poisoned by emissions from a manganese processing plant. Falun Gong practitioners are relentlessly persecuted by Chinese authorities.
Will China's corruption and lack of democracy put a ceiling on its economic development? Will economic development eventually force the leaders of China to at least institute local elections?
Since China looks on course to become the most powerful country in the world its corruption, pollution, and rising ability to influence other governments matters to the rest of us. I think we can count on many in our own elites to become corrupted by China's money. I think we can also count on larger scale Chinese intellectual property theft. Plus, Chinese pollution and Chinese resource consumption will continue to rise.
In some of the more primitive, corrupt, and despotic regions of the world accurate economic growth measures are hard to come by. Well, night time satellite pictures provide a rough measure of levels of economic development and economic growth.
To improve these estimates, Henderson, Storeygard, and Weil suggest combining measured income data with the changes observed in a country’s “night lights” as seen from outer space. Using U.S. Air Force weather satellite picture composites, they look at changes in a region’s light density over a 10-year period. “Consumption of nearly all goods in the evening requires lights,” they write. “As income rises, so does light usage per person, in both consumption activities and many investment activities.”
When the researchers applied the new methodology to countries with low-quality national income data, the new estimates were significantly different. For example, in the Democratic Republic of Congo, lights suggest a 2.4-percent annual growth rate in GDP, while official estimates suggest a negative 2.6-percent growth over the same time period. The Congo appears to be growing faster than official estimates suggest. At the other end, Myanmar has an official growth rate of 8.6 percent a year, but the lights data imply only a 3.4-percent annual growth rate.
At 3.4% the Myanmar (Burma) growth rate is still faster than you'd expect from listening to Western political commentary about how the military dictatorship in that country is driving it into the ground. Could faith in democracy as the only political system capable of overseeing economic growth blind commentators to the facts on the ground?
Congo: Where's the economic growth happening? In areas outside of the central government's control? Is resource extraction providing the money to fund local electric power generation plants? What's powering the plants? Oil? If it is oil then Peak Oil will reverse the current development. I'd ask the same question about electric power plant energy sources about other countries reported in this survey. Areas that haven't made the transition from oil to other energy sources for electric power generation will be especially hard hit by Peak Oil.
A New York Times article about rising costs of higher education observes that some majors cost a lot more and English is one of the cheaper majors.
“Fine arts has studio-based production, so capital and facility costs are high,” said Jane Wellman, executive director of the nonprofit group Delta Project on Postsecondary Education Costs, Productivity and Accountability, speaking of colleges in general. “Piano tutoring is pretty much one to one in a room with a piano. Pianos are expensive. Agriculture is expensive because of the lab costs, which means a barn.”
An English student, however, is generally a profit center. “They’re paying for the chemistry major and the music major and faculty research,” she said. “They don’t want to talk about it in institutions, because the English department gets mad. The little ugly facts about cross-subsidies are inflammatory, so they get papered over.”
Makes sense. There's a huge surplus of Ph.D.s in English and no need for labs or special equipment to teach the subject. I'd like to know the relative cost of offering the various science, engineering, and business-oriented majors. Is a chemistry or physics department more expensive? Is engineering more expensive than science? Is math cheaper than the hard sciences? Why don't colleges charge different prices for different majors and classes?
Like so many other institutions Lafayette College in Easton PA spends more on non-faculty than on faculty. Why so much parasitism?
Lafayette, like many colleges, spends more on nonfaculty salaries than it does on pay for the teachers. How did that happen? Mr. Weiss uses the evolution of career counseling as an example. He does not recall whether there was a placement office when he was an undergraduate at George Washington University in the 1970s. “Now there is the expectation, and I don’t think it’s misplaced, that students can get help in entering the workplace,” he said. If Lafayette did not create a rigorous support system, he noted, its graduates would be competing with students from other colleges and universities that had done so. “And therefore, we’ve invested very significantly in new administrative staff.”
Kids entering the workplace would benefit more from career-relevant skills than from counseling.
What is it about American society that there has been such a huge proliferation of advisors, counselors, administrators, and specialists to do jobs that could just not get done at all with little loss in the overall productivity of an organization? We see this in government agencies of many kinds. We see this in colleges and universities. I do not think we have much to show for all these added layers, meetings, and committees.
Universities and colleges aren't going to reform themselves without outside incentives and pressures to reform. Only competing ways of delivering educational services (e.g. on the internet with prerecorded lectures and automated tests) will provide the competition needed to create price pressure. As things stand now prices are set by willingness of parents to pay ridiculous amounts to get their kids thru college.
No where does the bill require verification of one’s eligibility on citizenship or immigrant status. Not in the Medicaid part. Not in the Health Insurance Exchange. Not in the government-run insurance option. Not in the taxpayer subsidy for health premium payment. Nowhere.
Robert Rector of the Heritage Foundation has noted this radical departure from other public and means-tested programs. He said at the National Press Club that those seeking to enroll in welfare programs must “be able to substantiate that you’re in the country legally” or for legal immigrants “that you’ve been here over the time limits for eligibility.”
Rector said H.R. 3200 “turns that [eligibility check requirement] on its back and tramples it into the dust. It basically says we will not verify; we will not check.”
In several places, the legislation defers the writing of details to the health bureaucracy. That approach lets lawmakers say “such-and-such isn’t in this bill.”
Modest proposal: We deport all the illegal aliens so that the bill's coverage of health care for illegal aliens becomes irrelevant. While I'm at it: We stop all legal immigration of low to medium skilled immigrants. Set a very high bar for how much money an immigrant has to earn in order to come here and take a job in the United States. How does $75k sound?
Our immigraton policies should make sure immigrants are not a burden to the rest of us. They should be required to pay for their own medical insurance (and that of any family member) if their employer does not provide it and they should be required to pay for it several months in advance so that they don't go off of insurance and stick us with a bill.
The overselling of the value of education causes students to go deeper and deeper into debt. Their ability to borrow more money will just cause schools to raise prices to get that money.
New numbers from the U.S. Education Department show that federal student-loan disbursements—the total amount borrowed by students and received by schools—in the 2008-09 academic year grew about 25% over the previous year, to $75.1 billion. The amount of money students borrow has long been on the rise. But last year far surpassed past increases, which ranged from as low as 1.7% in the 1998-99 school year to almost 17% in 1994-95, according to figures used in President Barack Obama's proposed 2010 budget.
Lots of these students aren't even learning anything economically useful. The article reports on a journalism student graduating from an unimportant university with $60k in debt. With newspapers shriveling up and dying left and right her job prospects are bleak. Another student in the article is got a law degree from U Pitt with $181k in debt, spent a year looking for a job, and finally got one at a small office that probably pays poorly.
As Half Sigma keeps pointing out (again and again and again and a whole lot here) in the United States unless you attend a top 14 law school you are wasting your time and money. The debt students are racking up at lower tier law schools is just a burden that stands in the way of their advancement in life.
Students need detailed data on salaries and job prospects for their areas of interest. They need that income data combined with projected money loan payment costs so they can steer away from schools and majors that put them on the path to poverty and failure. Most of them probably have no idea how deep a hole they are digging for themselves. Many should take a hard look at online courses and reduce their use of bricks-and-mortar schools.
Miyuki Hatoyama, wife of Japan's Prime Minister-elect, Yukio Hatoyama, is a lifestyle guru, a macrobiotics enthusiast, an author of cookery books, a retired actress, a divorcee, and a fearless clothes horse for garments of her own creation, including a skirt made from Hawaiian coffee sacks. But there is more, much more. She has travelled to the planet Venus. And she was once abducted by aliens.
Now, is that cool or what?
Her husband is a real alpha who boasts going after his now wife while she was still married to her previous husband.
It was there, while working in a Japanese restaurant in San Francisco, that she met Yukio, then a graduate student at Stanford University. Miyuki was still married to her first husband. "The average man chooses his mate from among unmarried women," Mr Hatoyama boasted years later. "I chose mine from among all women."
I'm already bored by the Obamas. I thought they'd offer entertainment value even as they implemented policies I think are harmful to my interests and those of most Americans. He's humorless (in addition to being a politically correct persecutor). She's uninteresting to anyone with a brain. We need some more interesting politicians to pay attention to.
After going thru a short honeymoon Obama is unpopular. Where else to turn? The Arnold Schwarzenegger show is running down. We have a choice between this Japanese prime minister and his wife, the very entertaining Silvio Berlusconi of Italy (teen girl, hookers, other entertainment), or who? Is there a third major political figure worth paying attention to?