It is good news for his candidacy if Mr. McCain is making space now for political creativity and policy risks. Last week he laid down an economic plan, even venturing to Democratic redoubts like Youngstown, Ohio, and New Orleans's Ninth Ward. Now he has returned to his health-care reform, based on market principles and increased consumer choice, which he first outlined during the primaries.
He contended that the health insurance and delivery system is in fact failing many Americans – but that it was failing because of market distortions mostly created by the government itself. Fixing these irrationalities would both make insurance more affordable and increase overall coverage in the bargain. Nor would it require the vast new entitlement programs Democrats are eyeing.
His major proposal would change the tax treatment of insurance. To review: Today's tax code permits businesses to deduct the cost of providing insurance to their employees, but it doesn't do the same for individuals. This creates third-party payment problems; workers aren't aware of the full, true costs of many treatment decisions, part of the reason the U.S. has double-digit health-care inflation. And it makes insurance less affordable for everyone outside the employer-based system, who must pay with after-tax dollars besides. Mr. McCain would correct this imbalance with a refundable tax credit, restoring the parity of health dollars.
As the Senator argued, coverage shouldn't be "limited by where you work" and said that "Americans need new choices beyond those offered in employment-based coverage." Focusing on equity is a canny political argument. For those who don't get insurance through their employers, the current system is patently unfair. As the private market for health insurance became revitalized, everyone else would be more liberated from their bosses' system. A significant portion of the uninsured population at any given point is people who left or lost employment; but portable individual policies would follow them from job to job.
That's a broader political and economic argument than the exclusive liberal concentration on the uninsured. Mr. McCain is saying that the health-care system isn't working as it should, or delivering the quality it should, for the large majority of Americans. "The real reform," he noted, "is to restore control over our health-care system to the patients themselves," introducing more competition on price into the system.
It's true that individual subsidies might be required for some people with severe chronic illnesses who might have a harder time finding private insurance in this kind of world. So Mr. McCain sharpened his proposal for high-risk pools to cover "uninsurables," building on current insurance experiments in about two dozen states. Such provisions are crucial to a functioning market but also blunt a political liability that Democrats were eager to exploit in the fall's debates, suggesting that Mr. McCain is preparing to frontally assault liberal health-care assumptions.
If Mr. McCain's plan is short of ideal, the innovative portions outweigh its false lunges. It also energizes the intellectual progress conservatives have made in recent years in their health-care thinking. Not least, it marks significant progress for Mr. McCain, who often hasn't seemed as engaged with domestic policy as he ought to be. Fortunately, it looks as though the curtain is rising for a necessary debate about the role of government in health care.
Wednesday, April 30, 2008
It's a story Hillary Clinton loves to tell, about how the Chinese government bought a good American company in Indiana, laid off all its workers and moved its critical defense technology work to China.
And it's a story with a dramatic, political ending. Republican President George W. Bush could have stopped it, but didn't.
If she were president, she says, she'd fight to protect those jobs. It's just the kind of talk that's helping her win support from working-class Democrats worried about jobs and paychecks, not to mention their country's security.
What Clinton never tells in the oft-repeated tale is the role prominent Democrats played in selling the company and its technology to the Chinese. She never mentions that big-time Democratic contributor George Soros helped put together the deal to sell the company, or that the sale was approved by the administration of her husband.
"The jobs went to China, but so did the technology. And now the United States military has to buy the magnets we need for the smart bombs we invented from China," she said as the union members booed.
Here's the complete story.
In 1995, General Motors decided to sell the Indiana-based Magnequench to a Chinese-American consortium. The consortium included:
Soros, of course, is the wealthy investor who has contributed vast sums to Democratic candidates and liberal causes.
- San Huan New Materials and Hi-Tech Co, a company owned by the Chinese Academy of Sciences;
- Onfem Holdings, a company controlled by the State Nonferrous Metals Industry Administration in the Peoples Republic of China;
- Soros Fund Management, headed by George Soros;
- The Sextant Group, founded by Archibald Cox Jr.;
He's given more than $250,000 to Democratic campaign committees, tens of thousands to individual Democratic candidates, and about $2.5 million to the liberal group, Moveon.org, according to Federal Election Commission records.
He's also contributed to Hillary Clinton's Senate campaign, and to Obama's Senate and presidential campaigns. He contributed to Republican Sen. John McCain's first presidential campaign, in 1999, when he was running against Bush for the Republican nomination.
Because Magnequench made magnets for smart bombs, the sale to a group including foreign owners required approval under a 1988 law.
After a 30-day review, the Clinton administration's Committee on Foreign Investment in the United States, which includes representatives of the Pentagon, approved the sale in 1995.
The buyers reportedly promised to keep manufacturing in the United States.
Yet in 1998, they started building a new plant in China, close to the source of the raw materials used in the magnets.
The company reorganized in 1999, buying out Soros as well as Onfem Holdings.
In 2000, Magnequench bought a magnet factory in Valparaiso, Indiana, the same year it started operations at its China plant.
In 2001, it closed its original plant in Anderson, Indiana.
And in 2003, it decided to close the Valparaiso plant, laying off its 225 workers.
Indiana politicians asked the Bush administration to intervene.
Sen. Evan Bayh, D-Ind., and Rep. Pete Visclosky, D-Ind., said the move would leave the United States without a significant domestic source of rare-earth magnets used in smart bombs. The Valparaiso plant made about 80 percent of the magnets bought by the Pentagon, they said.
The administration did not block the move.
The Clinton campaign did not respond to requests for comment.
Of course, this is the preliminary report, and 2 revisions will be reported in May and June.
And yes, I know there are plenty of government statistics conspiracy theorists out there that exclude any reported data that does not support their theses. My usual response to them: Yes, the government data is noisy, incomplete, and filled with artifacts of error, but can you show me your indicators which are superior to the government data? (Silence and blank stares usually follow).
Here is the last 24 hours of trading of the 2008 Recession contract at Intrade, the huge sell off occurring after the 8:30 am report a few minutes ago:
DISCLOSURE: I am short US.RECESSION.08
Tuesday, April 29, 2008
“Senator Clinton was happy to support earmark reform when she knew the bill would not pass, but when it comes to being a leader on the issue Senator Clinton is nowhere to be found.”
“Hillary Clinton defends these projects as critical to New York, but she doesn’t explain why taxpayers across the country should be forced to fund her pork projects without so much as a vote or why she thinks she knows how to spend their money better than they do. After the United States Senate rejected her request for $1 million for a hippie museum last year, one would think Senator Clinton would have learned her lesson.”
Toomey also derides Congress' Farm Bill for robbing from the middle class to pay the rich, and starving the poor in the process.
I went to Intrade to see the latest results on outcome for each state's vote in the electoral college. The table below shows each state, the latest price for Democratic and GOP candidate to win the state, the number electoral votes and the projected number for the GOP candidate (sorry Dems, it just seemed easier that way).
The projected number is the GOP contract times the number of electoral votes. The total comes to 251.65, which indicates a Democratic victory. Let me add the usual caveats that this is far from scientific, and the trading volume is very light.
A few observations. Once again, Ohio is the Middle C State. The states that are more in the GOP column than Ohio added up to 258 electoral votes, the states that are more Democratic add up to 260. You need 270 to win, so as goes Ohio, so goes the nation. At least, according to Intrade.
Currently, five Bush states are in the Democratic column; Nevada, Colorado, Ohio, New Mexico and Iowa.
There are some things you learn best in calm, some in storm.--Willa Cather
Having financed several of America’s largest home builders, I know a few things about the housing industry. What happened to housing was not a failure of securitization, but rather a disastrous lowering of underwriting standards and other unfortunate practices.--Michael Milken
Look, it’s really quite simple: If there were a significant population of undecided gray aliens in Pennsylvania, right now Hillary Clinton would be talking fondly about her abduction by aliens and all the life lessons learned on that space ship. She’d be scolding Barack Obama for the way he demeans them. Obama, in turn, would say that he understands their bitterness when the US government has spent decades promising change but instead dissecting their kin in Area 51. But if all the gray aliens lived in states like California, Texas, South Dakota, or Vermont, i.e. states that aren’t even close and don’t matter for the nomination? Then we’d never hear a peep (or telepathic signal) about them. If anything, we’d hear about the need to build a big fence and hope that the aliens don’t learn how to fly over it.--"Thoreau", via Virginia Postrel
Monday, April 28, 2008
(In "We Are The World", penned by Richie, Willie Nelson sings the lyric in the post title. Unfortunately, Richie misremembers Satan's temptation of Christ for a miracle that Christ performed).
Another Richie heresy:
We're saving our own lives
The pollsters are calling a dead heat in Indiana. Should you even be interested? The pollsters haven’t done so well in calling past primaries. Gordon Crovitz discusses a better idea in today’s WSJ:
We think of forecasting stock-market performance and presidential outcomes as entirely different exercises. When stocks are assessed for future earnings, we don't look to opinion polls to define their price. Why shouldn't active, anonymous trading on politics, backed by money, work just as well in setting the odds of a political outcome? * * *In contrast, polls depend on getting a representative sample, truthful responses to poll questions, and proper use of statistics. Election-predicting markets seem to work so long as there are enough traders whose aggregate information is fully reflected in bets. * * *Iowa Electronic Markets claims that its results have been more accurate 75% of the time versus some 1,000 opinion polls since the early 1990s.
The problem is that regulations, primarily those against gambling, stunt these markets. The Iowa prediction market operates under a CFTC no action letter that limits bets, and still gets threats from state attorneys general, as Tom Bell writes. For a handy summary of the legal state of play, see Michael Abramowicz’s Predictocracy, 49-53.
And even if you think that prediction markets are like gambling, that doesn't necessarily justify regulating them. As Steve Levitt argues:
To me, there is no difference between a “prediction” market and a “gambling” market. If there is demand for people who either want financial risk surrounding an event or want to hedge risk, why should the government get in the way? It doesn’t matter whether it’s the value of a bond, a share of stock, a presidential election, a firm’s likelihood of hitting its quarterly numbers, or the chances that the White Sox will win the pennant. In general I am not much of a libertarian, but our government’s policy towards gambling is completely idiotic and rife with internal contradictions.
Maybe all this thinking will gain some traction. Then in future elections we may come to see as rather quaint the idea of getting information by asking people to give anonymous opinions about candidates, with no penalty or constraint on lying.
Here are the Intrade v. Zogby standings:
|Wins||Losses||Ties||Pct||Contender||Avg Eve Prob|
And the schedule (Zogby data much more limited than Intrade):
|Score||Date||State||Party||Intrade||Zogby||Winner||Intrade Pct||Zogby Pct|
Using household data on non-durable consumption between 1994 and 2005 we document that much of the rise of income inequality has been offset by a relative decline in the price index of the poor....UPDATE: Mark Perry points out massive deflation:
we find that inflation for households in the lowest tenth percentile of income has been 6 percentage points smaller than inflation for the upper tenth percentile over this period. The lower inflation at low income levels can be explained by three factors: 1) The poor consume a higher share of non-durable goods —whose prices have fallen relative to services over this period; 2) the prices of the set of non-durable goods consumed by the poor has fallen relative to that of the rich; and 3) a higher proportion of the new goods are purchased by the poor.
We examine the role played by Chinese exports in explaining the lower inflation of the poor. Since Chinese exports are concentrated in low-quality non-durable products that are heavily purchased by poorer Americans, we find that about one third of the relative price drops faced by the poor are associated with rising Chinese imports.
... an international phone call that cost $100 in 1973 now costs only $1.60 (adjusted for inflation), and a call that cost $10 now costs only 16 cents.
Sold by Bartels, debunked by Kling & Roberts:
Previous BS installment here.
As I have written here before, looking at slices of the population over time is a very misleading indicator of what happens to particular families over time, particularly when family composition is changing. Arnold Kling makes the same point and does it superbly:
In his new book Unequal Democracy, Larry Bartels writes (p.7),
families at the 20th percentile experienced declining real incomes in 20 of the 58 years...by comparison, families at the 95th percentile have experienced only one decline of 3% or more in their real incomes since 1951.
I have a nit to pick, which is that Census department percentiles are not families.I do not want to succumb to disconfirmation bias, which is the tendency to find one thing wrong with something you disagree with and then dismiss the whole idea. But I have a hard time buying into stories about income inequality that look at the behavior of census percentiles over time. At the very least, the author ought to be clear that movements in census percentiles are not the same as movements in families. Bartels is the opposite of clear on that point.
Another issue that people raise with Census data is that the basic unit is the household. If a household breaks into two households, due to divorce, average household income plunges by 50 percent, even though nobody's income has changed. Trends in household income tend to look worse than trends in income per person.
Arnold has it exactly right. To get an idea of the magnitudes, here are some numbers:
Here's what has happened to the number of households in the US:
2000 105 million
1990 93 million
1980 81 million
1970 63 million
1960 53 million
So between 1960 and 2000, the number of households has doubled. What happened to population over that same period? Again from the Census:
2000 282 million
1990 250 million
1980 228 million
1970 205 million
1960 181 million
The average American household has gotten a lot smaller:
Why did this happen? The obvious answer is that people are having fewer children. That would lower average household size. But that is not much of the story. The real story is a change in the composition of families due to an explosion in divorce in the 60s and 70s. Here's a breakdown of the proportion of total families headed by women:
Year Single Mothers Single Woman w/o kids Total
2000 12.1% 17.2% 29.3%
1990 11.7% 16.8% 28.5%
1980 10.8% 15.4% 26.2%
1970 8.7% 12.4% 21.1%
1960 8.4% 9.8% 18.2%
So over the last half-century, the number of households has increased at a much faster rate than the number of people, mainly because of divorce. That totally contaminates the comparison of percentiles over time and makes it appear that people are falling behind or standing still when in, fact, particular families are seeing their standard of living rise. Arnold calls a nitpick. I call it a massive structural flaw.
Statistics are like a bikini. What they present is suggestive, but what they conceal is vital--Aaron Levenstein
In commodity markets, it’s not uncommon for high demand to cause sharp increases in prices; on short notice, it’s often hard to match the new demand with more supply. The question is whether supply, and trade, can grow to offset market tightness.
Restrictions on the rice trade run the risk of making shortages and high prices permanent. Export restrictions treat rice trade and production as a zero- or negative-sum game where one country’s gain comes at the expense of another. That’s hardly the best way to move forward in a rapidly growing world economy.
This lack of support for trade reflects a broader and disturbing trend. An increasing percentage of the world’s production, including that for agriculture, comes from poor countries. Over all, that’s good for rich countries, which can focus on creating other goods and services, and for the poor countries, which are producing more wealth. But it can slow the speed of adjustment to changing global conditions.
For example, if demand for rice rises, Vietnamese farmers — who remain shackled by many longstanding regulations of communism — aren’t always able to respond quickly. They don’t even have complete freedom to ship and trade rice within their own country.
Poorer countries also tend to be the most protectionist. To make matters worse, about half of the global rice trade is run by politicized state trading boards.
Shortly before leaving Goldman to head up President Clinton's National Economic Council, Mr. Rubin says, he met with Richard B. Fisher, the chairman of Morgan Stanley, to discuss the idea of imposing stricter margin requirements on futures trading. Mr. Rubin says the idea died after the Chicago Board of Trade told him "we will make sure Goldman Sachs never trades another future on the C.B.O.T. if this went ahead."
Succeeding in the upper echelons of a Wall Street firm is as much a matter of nuanced power politics as anything else. You need to be good at the actual job, to be sure. But you also need to be good at favor-trading, strategic maneuvering, and convincing the board of directors that you’re good at your job. If Cruz had loved the black-and-white objectivity of being a trader, she was now stumbling into gray territory.
“If you ask a woman now if it’s different than it used to be, they say it’s the same or worse,” says Linda Bialecki, who runs a Wall Street search firm. “It’s worse because it’s gotten so much more subtle. It’s hard to argue about subtle. But it’s a thousand cuts.”
What was happening to Cruz didn’t seem all that subtle. She was seen as a ballbuster: “We understand that she is very fierce and enjoys shredding inflated reputations into small packets of confetti,” wrote a financial-gossip columnist around the same time that the pejorative “Cruz Missile” first appeared in the press. She was seen as overly emotional, her voice sometimes cracking in contentious meetings. (“Having an emotional reaction to things is where I’ve made most of my mistakes,” she told a group of students at Harvard.) Much like Hillary Clinton, she was accused of crying for the purposes of manipulation. “She wanted to compete with the guys, but she was not beyond crying when it was useful,” says a onetime male colleague.
The real problem is that the proverbial glass ceiling is self-reinforcing. The traits that a woman must develop to duke it out on the trading floor will come back to haunt her as she ascends the ranks of management. As a current Morgan Stanley woman puts it, “He gets ‘Mack the Knife’ and that’s cool, and she gets ‘Cruz Missile’ and that’s bad?”
The real surprise is when the record was set. Our analysis reveals that 1941 was one of the least likely seasons for such an epic streak to occur.
Figure 2 shows the number of times, out of 10,000 simulations, that the longest streak occurred in a particular year. The likeliest time for the longest streak to have occurred was in the 19th century, back in the misty beginnings of baseball. Or maybe in the 1920s or ’30s.
But not in 1941, or afterward. That season was the miracle year in only 19 of our alternate major-league histories. By comparison, in 1,290 of our baseball universes, or more than a tenth, the record was set in a single year: 1894.
And Joe DiMaggio is nowhere near the likeliest player to hold the record for longest hitting streak in baseball history. He is No. 56 on the list. (Fifty-six? Cue “The Twilight Zone” music.) Two old-timers, Hugh Duffy and Willie Keeler, are the most probable record holders. Between them, they set the record in more than a thousand of the parallel baseball universes. Ty Cobb did it nearly 300 times.
DiMaggio held the record 28 times. Plus once more, when it counted.
I attack ideas. I don't attack people. And some very good people have some very bad ideas.--Antonin Scalia
The government takes over 40 cents a gallon in taxes for gasoline, far more than the profit per gallon made by oil refiners like Exxon. And the government doesn’t make any gas for you.--Bill Dunkleberg
Friday, April 25, 2008
Turns out this whole campaign-finance thingy hasn't turned out to be the clean-politics, leveled-playing-field he envisioned. All it has done is handicap Mr. McCain.--Kim StrasselConstraining your donors' First Amendment rights doesn't feel so convicting now, Mr. Maverick?
Also, check out Strassel's great article on Danicka Patrick and women in the history of racing.
I suggested something similar last September. Taylor Rule context here.
"We must look first to the foreign drain, and raise the rate of interest as high as may be necessary. Unless you can stop the foreign export, you cannot allay the domestic alarm. . . . And at the rate of interest so raised, the holders – one or more – of the final bank reserve must lend freely."Very large (domestic) loans at very high rates," Bagehot advised, "are the best remedy for the worst malady of the money market when a foreign drain is added to a domestic drain. Any notion that money is not to be had, or that it may not be had at any price, only raises alarm to panic and enhances panic to madness.
... it isn't going to be sufficient for Senator McCain to simply tout these tax cuts without offering a strong rationale. The standard trap the left sets whenever tax cuts are mooted is to wave the "deficit" that will result. Absent a counterargument, Mr. McCain will spend the campaign playing on this liberal ground. In particular, he has to make the case that tax cuts do not lose as much revenue as the static, dollar-for-dollar revenuers claim. He has tax-cut history on his side. The threats of revenue catastrophe did not happen in the 1960s (the Kennedy tax cuts), the 1980s (Reagan) or after 2003 (Bush). See the nearby table.
How many favors has Mr. Clinton done for foreign donors? There's no way of knowing. The former President insists he's aware of no conflicts. Notably, however, donations to the Clinton Foundation soared as Mrs. Clinton neared a presidential run – to $135 million in 2006, 70% more than the year before. Somebody seems to think there is value in being generous to the Clintons.
Mrs. Clinton says the foundation is her husband's business, not hers. But as she has said in the past, a Clinton Presidency is two for the price of one. Americans deserve to know who has been donating to the Clinton Foundation.
While the Clintons' charitable donations far outweigh the Obamas', it should be noted that most of the former donations went to this foundation which Bill controls.
The genetic study examined for the first time the evolution of our species from its origins with "mitochondrial Eve," a female hominid who lived some 200,000 years ago, to the point of near extinction 70,000 years ago, when the human population dwindled to as little as 2,000.I can't help but think about the Bible stories from Genesis, namely:
Adam & EveOf course, given one's respective bias/faith, the takeaways on this genetic study will affirm opposite positions. Earlier animated juxtaposition of creation and evolution theories here.
The Tower of Babel and resulting diaspora, and
Thursday, April 24, 2008
• “...civilization will end within 15 or 30 years unless immediate action is taken against problems facing mankind,” biologist George Wald, Harvard University, April 19, 1970.
• By 1995, “...somewhere between 75 and 85 percent of all the species of living animals will be extinct.” Sen. Gaylord Nelson, quoting Dr. S. Dillon Ripley, Look magazine, April 1970.
• Because of increased dust, cloud cover and water vapor “...the planet will cool, the water vapor will fall and freeze, and a new Ice Age will be born,” Newsweek magazine, January 26, 1970.
• The world will be “...eleven degrees colder in the year 2000. This is about twice what it would take to put us into an ice age,” Kenneth Watt, speaking at Swarthmore University, April 19, 1970.
• “Man must stop pollution and conserve his resources, not merely to enhance existence but to save the race from the intolerable deteriorations and possible extinction,” The New York Times editorial, April 20, 1970.
• “By 1985, air pollution will have reduced the amount of sunlight reaching earth by one half...” Life magazine, January 1970.
• “Population will inevitably and completely outstrip whatever small increases in food supplies we make,” Paul Ehrlich, interview in Mademoiselle magazine, April 1970.
• “...air pollution...is certainly going to take hundreds of thousands of lives in the next few years alone,” Paul Ehrlich, interview in Mademoiselle magazine, April 1970.
• Ehrlich also predicted that in 1973, 200,000 Americans would die from air pollution, and that by 1980 the life expectancy of Americans would be 42 years.
... for the past century technological progress has been a steady force not only increasing average living standards, but also increasing the demand for skilled workers relative to unskilled workers. Skilled workers are needed to apply and manage new technologies, while less skilled workers are more likely to become obsolete.
For much of the 20th century, however, skill-biased technological change was outpaced by advances in educational attainment. In other words, while technological progress increased the demand for skilled workers, our educational system increased the supply of them even faster. As a result, skilled workers did not benefit disproportionately from economic growth.
But recently things have changed. Over the last several decades, technology has kept up its pace, while educational advancement has slowed down.
Because growth in the supply of skilled workers has slowed, their wages have grown relative to those of the unskilled. This shows up in the estimates of the financial return to education made by Professors Goldin and Katz. In 1980, each year of college raised a person’s wage by 7.6 percent. In 2005, each year of college yielded an additional 12.9 percent. The rate of return from each year of graduate school has risen even more — from 7.3 to 14.2 percent.
WHILE education is the key to understanding broad inequality trends, it is less obvious whether it can explain the incomes of the superrich. Simply going to college and graduate school is hardly enough to join the top echelons with Lloyd Blankfein and Bill and Hillary Clinton.
Maybe educational levels are like Willie Wonka’s chocolate bars. A few of them come with golden tickets that give you opportunities almost beyond imagination. But even if you aren’t lucky enough to get a golden ticket, you can still enjoy the chocolate, which by itself is well worth the price.
Over the next five years, Italy will increase its reliance on coal to 33 percent from 14 percent. Power generated by Enel from coal will rise to 50 percent.
And Italy is not alone in its return to coal. Driven by rising demand, record high oil and natural gas prices, concerns over energy security and an aversion to nuclear energy, European countries are expected to put into operation about 50 coal-fired plants over the next five years, plants that will be in use for the next five decades.
DISCLOSURE: I am short US.RECESSION.08
Israel had to risk war with Syria to destroy a nuclear facility built with the help of lying North Koreans. But no worries, the U.S. says it can still trust North Korea to tell the truth about its current programs. This makes us wonder if the unofficial U.S. nonproliferation policy is to have Israel bomb every plutonium facility that the North Koreans decide to sell.
If a Democratic President were pursuing the Bush Administration's North Korean diplomacy, Republicans would hoot him out of town. Mr. Bush should beware of diplomats dangling "legacies" before him. Otherwise, his real legacy on North Korea may be turning nuclear nonproliferation into a global farce.
We're referring to the "student loan crisis" now appearing in a media outlet near you. In September, Congress vowed to make education more affordable by passing the "College Cost Reduction and Access Act." The law reduced the interest rates borrowers pay on federally insured student loans. Backed by the Federal Family Education Loan Program, these loans account for more than 70% of education lending. Taxpayers will fork over $7 billion by 2012 to pay for the rate cuts.
But Congress didn't stop there. Convinced that the private lenders who make these loans were reaping too much profit, Congress also cut the yield on each loan. The return on the popular Stafford loan for undergrads was reduced by 70 basis points. For loan consolidations, Congress cut returns by 65 basis points. In a vibrant market, banks might have absorbed these hits and continued to lend. But the combination of legislative fiat and fewer investors willing to buy asset-backed securities amid the credit crunch has put the squeeze on lenders.
What's now clear is that Congress didn't merely wring the profits out of student lending. It's blown up the entire student loan market. Market leader Sallie Mae says it now loses money on every new federal education loan. Sallie continues to lend in hopes of a change in D.C., or increased investor demand for securitized loans.
So having raised solemn alarms when the Fed began to accept dodgy mortgage-backed securities as collateral, the Senators are now demanding that the Fed accept dodgy student-loan paper too. The Senators helpfully note in their letter that a virtue of their proposals is that they can be implemented quickly. Indeed, November is just around the corner.
Needless to say, none of this legislative history is appearing in the multiple media sob stories about students who can't get loans. But like airline passengers stranded this month due to panicky inspections, the current student loan "crisis" didn't have to happen. It is entirely a product of Congress.
Tuesday, April 22, 2008
Saturday, April 19, 2008
Friday, April 18, 2008
Zogby post here. Intrade odds here. If Clinton wins, they tie. If Obama wins, Zogby wins.
Previous showdown here.
For years, records from surface thermometers showed a global warming trend beginning in the late 1970s. But temperatures sensed by satellites and weather balloons displayed no concurrent warming.
These records have been revised a number of times, and I examined the two major revisions of these three records. They are the surface record from the United Nations' Intergovernmental Panel on Climate Change (IPCC), the satellite-sensed temperatures originally published by University of Alabama's John Christy, and the weather-balloon records originally published by James Angell of the U.S. Commerce Department.
The two revisions of the IPCC surface record each successively lowered temperatures in the 1950s and the 1960s. The result? Obviously more warming – from largely the same data.
The balloon temperatures got a similar treatment. While these originally showed no warming since the late 1970s, inclusion of all the data beginning in 1958 resulted in a slight warming trend. In 2003, some tropical balloon data, largely from poor countries, were removed because their records seemed to vary too much from year to year. This change also resulted in an increased warming trend. Another check for quality control in 2005 created further warming, doubling the initial overall rate.
Then it was discovered that our orbiting satellites have a few faults. The sensors don't last very long and are continually being supplanted by replacement orbiters. The instruments are calibrated against each other, so if one is off, so is the whole record. Frank Wentz, a consulting atmospheric scientist from California, discovered that the satellites also drift a bit in their orbits, which induces additional bias in their readings. The net result? A warming trend appears where before there was none.
There have been six major revisions in the warming figures in recent years, all in the same direction. So it's like flipping a coin six times and getting tails each time. The chance of that occurring is 0.016, or less than one in 50. That doesn't mean that these revisions are all hooey, but the probability that they would all go in one direction on the merits is pretty darned small.
... every climatologist must know that Greenland's last decade was no warmer than several decades in the early and mid-20th century. In fact, the period from 1970-1995 was the coldest one since the late 19th century, meaning that Greenland's ice anomalously expanded right about the time climate change scientists decided to look at it.
The mechanism for the Greenland disaster is that summer warming creates rivers, called moulins, that descend into the ice cap, lubricating a rapid collapse and raising sea levels by 20 feet in the next 90 years. In Al Gore's book, "An Inconvenient Truth," there's a wonderful picture of a moulin on page 193, with the text stating "These photographs from Greenland illustrate some of the dramatic changes now happening on the ice there."
Really? There's a photograph in the journal "Arctic," published in 1953 by R.H. Katz, captioned "River disappearing in 40-foot deep gorge," on Greenland's Adolf Hoels Glacier. It's all there in the open literature, but apparently that's too inconvenient to bring up. Greenland didn't shed its ice then. There was no acceleration of the rise in sea level.
Finally, no one seems to want to discuss that for millennia after the end of the last ice age, the Eurasian arctic was several degrees warmer in summer (when ice melts) than it is now. We know this because trees are buried in areas that are now too cold to support them. Back then, the forest extended all the way to the Arctic Ocean, which is now completely surrounded by tundra. If it was warmer for such a long period, why didn't Greenland shed its ice?
This prompts the ultimate question: Why is the news on global warming always bad? Perhaps because there's little incentive to look at things the other way. If you do, you're liable to be pilloried by your colleagues. If global warming isn't such a threat, who needs all that funding? Who needs the army of policy wonks crawling around the world with bold plans to stop climate change?
We thought the debate was one of the best yet, precisely because it probed the evasive rhetoric we've heard from both Democratic candidates throughout the campaign. Nowhere was this more apparent than during the exchanges between Mr. Gibson and Mr. Obama over taxes.Senator Obama was very impressive in 2004 when running for the Senate, and still impressive when he was listening to his best adviser. Now he's listening to his base, which will secure him votes, but at the price of a beneficial policy for all Americans.
Time and again, the rookie Senator has said he would not raise taxes on middle-class earners, whom he describes as people with annual income lower than between $200,000 and $250,000. On Wednesday night, he repeated the vow. "I not only have pledged not to raise their taxes," said the Senator, "I've been the first candidate in this race to specifically say I would cut their taxes."
But Mr. Obama has also said he's open to raising – indeed, nearly doubling to 28% – the current top capital gains tax rate of 15%, which would in fact be a tax hike on some 100 million Americans who own stock, including millions of people who fit Mr. Obama's definition of middle class.
Mr. Gibson dared to point out this inconsistency, which regularly goes unmentioned in Mr. Obama's fawning press coverage. But Mr. Gibson also probed a little deeper, asking the candidate why he wants to increase the capital gains tax when history shows that a higher rate brings in less revenue.
"Bill Clinton in 1997 signed legislation that dropped the capital gains tax to 20%," said Mr. Gibson. "And George Bush has taken it down to 15%. And in each instance, when the rate dropped, revenues from the tax increased. The government took in more money. And in the 1980s, when the tax was increased to 28%, the revenues went down. So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?"
Mr. Obama answered by citing rich hedge fund managers. Raising the capital gains tax is necessary, he said, "to make sure . . . that our tax system is fair and that we are able to finance health care for Americans who currently don't have it and that we're able to invest in our infrastructure and invest in our schools. And you can't do that for free."
But Mr. Gibson had noted that higher rates yield less revenue. So the news anchor tried again: "But history shows that when you drop the capital gains tax, the revenues go up?" Mr. Obama responded that this "might happen or it might not. It depends on what's happening on Wall Street and how business is going." And then he went on a riff about John McCain and the housing market.
As the nearby chart shows, when the tax rate has risen over the past half century, capital gains realizations have fallen and along with them tax revenue. The most recent such episode was in the early 1990s, when Mr. Obama was old enough to be paying attention. That's one reason Jack Kennedy proposed cutting the capital gains rate. And it's one reason Bill Clinton went along with a rate cut to 20% from 28% in 1997.
Either the young Illinois Senator is ignorant of this revenue data, or he doesn't really care because he's a true income redistributionist who prefers high tax rates as a matter of ideological dogma regardless of the revenue consequences. Neither one is a recommendation for President.
One of the most important things for individuals and families is job creation. Either Obama is going to destroy jobs as president, or else he is a combination of disingenuous and way over his head.
Thursday, April 17, 2008
Meanwhile, Ahmed Yousef, the chief political advisor to the Prime Minister of Hamas let their political endorsement out of the bag:My connection here, drawn back in February.Yousef said, "We like Mr. Obama and we hope he will win the election." Why? "He has a vision to change America."
If the US dollar had remained strong in the global economy, oil might, in theory, be around $65 per barrel. However, oil is priced in dollars, and oil prices continue to rise. The impact of increased oil prices can not be ignored in the US economy, and, in turn, can further weaken the dollar. Resource economics is a complex feedback loop where today’s resource boom is driven by many external factors. This complex system bears watching by all geoscientists.
The pattern is unmistakable. From August through the following July, there is a steady decline in the likelihood that a child born in the United States will become a major leaguer. Meanwhile, among players born outside the 50 states, there are some hints of a pattern but nothing significant enough to reach any conclusions. An analysis of the birth dates of players in baseball's minor leagues between 1984 and 2000 finds similar patterns, with American-born players far more likely to have been born in August than July. The birth-month pattern among Latin American minor leaguers is very different—if anything, they're more likely to be born toward the end of the year, in October, November, and December.
The magical date of Aug. 1 gives a strong hint as to the explanation for this phenomenon. For more than 55 years, July 31 has been the age-cutoff date used by virtually all nonschool-affiliated baseball leagues in the United States. The result: In almost every American youth league, the oldest players are the ones born in August, and the youngest are those with July birthdays. For example, someone born on July 31, 1990, would almost certainly have been the youngest player on his youth team in 2001, his first year playing in the 11-and-12-year-olds league, and of average age in 2002, his second year in the same league. Someone born on Aug. 1, 1989, by contrast, would have been of average age in 2001, his first year playing in the 11-and-12-year-olds division, and would almost certainly be the oldest player in the league in 2002.
Twelve full months of development makes a huge difference for an 11- or 12-year-old. The player who is 12 months older will, on average, be bigger, stronger, and more coordinated than his younger counterpart, not to mention more experienced. And those bigger, better players are the ones given opportunities for further advancement. Other players, who are just as skilled for their age, are less likely to be given those same opportunities simply because of when they were born. Alex Rodriguez would've been a star no matter his birth month, but a player like Juan Pierre, who has less natural aptitude for the sport, might have gotten a small leg up over similarly skilled players because he's an August baby. It's clear from the chart above that this small advantage can have an impact that lasts a lifetime.
Tomorrow Hillary Clinton, Barack Obama and John McCain should have been going toe-to-toe in a televised science debate. All three were invited by a bipartisan group of Nobel laureates and other scholars called ScienceDebate 2008 to step on stage at the Franklin Institute in Philadelphia and explain how they will ensure that America continues to dominate the sciences. Leading in scientific research and advancement is an essential element to our future prosperity, health and national defense.
Why would a system filled with people who are good at getting votes be good at paradigm shifting as well (a la Thomas Kuhn)? If only elected officials would find and listen to excellent advisors in the sciences. Still, too much to ask or hope for, I guess.
I've already talked about McCain's constitutional lacking.
A presidential candidate could of course swear devotion to the First Amendment, while declaring that the amendment's purpose is to protect sports reporting and book collecting. And that candidate could still support government lawsuits against publishers, local bans on newspapers, and draconian restrictions on political commentary.
Civil libertarians who supported such a candidate because of his alleged love for the First Amendment would be foolish. Civil libertarians who support Mr. Obama or Mrs. Clinton because of their purported fealty to the Second Amendment may be bitterly disappointed.
Capitalism without capital is nothing but an ism.--Jesse Jackson
To exist, you must have mass. Mass is equivalent to energy. Energy is nothing but a concept. Therefore, you are nothing but a concept, probably in a computer program designed by someone else. Atheists say God doesn’t exist. I say atheists don’t exist.--Scott Adams
Here's a success story with no governement intervention. If the government did, more people would probably die.
Congress is disturbed about the bailout risk from the Federal Reserve opening its discount window to borrowing from investment banks and broker-dealers. That's a reasonable concern, especially with the Fed guaranteeing $29 billion in dodgy Bear Stearns paper. But according to S&P, the "maximum potential cost" of bailing out Wall Street would be below 3% of GDP, assuming a deep and prolonged recession. That's painful, but not catastrophic.
Guess where the far greater danger comes from? If you said Fannie Mae and Freddie Mac, you are a faithful reader of these columns and we bow before you. According to the S&P study, the taxpayer risk from Fan and Fred, combined with that of other government-guaranteed agencies, "yields a potential fiscal cost to the government of up to 10% of GDP." With total U.S. GDP estimated at somewhere north of $14 trillion, that would put the Fan and Fred bailout cost at about $1.4 trillion. Yowza. This "fiscal burden" would be so large, in fact, that S&P figures it could even jeopardize the AAA credit rating of the U.S. government.
These are the same two companies, by the way, that have recently had their capital requirements reduced and their jumbo mortgage lending limits increased to a maximum of $729,750. New York Senator Chuck Schumer, among many others on Capitol Hill, had browbeaten the Bush Administration until it eased those limits. Capital is of course the only cushion taxpayers have against a bailout if Fan and Fred keep racking up losses. Better hope this recession isn't deep.
Wednesday, April 16, 2008
From 1998 to 2007, total non-farm payroll employment [in the U.S.] rose 12 million, and unemployment averaged only 4.9 percent -- despite the 4 million lost factory jobs. In that period, U.S. manufacturing output rose 22 percent.
In a development that has implications for borrowers everywhere, from Russian oil producers to homeowners in Detroit, bankers and traders are expressing concerns that the London inter-bank offered rate, known as Libor, is becoming unreliable.
Libor plays a crucial role in the global financial system. Calculated every morning in London from information supplied by banks all over the world, it's a measure of the average interest rate at which banks make short-term loans to one another. Libor provides a key indicator of their health, rising when banks are in trouble. Its influence extends far beyond banking: The interest rates on trillions of dollars in corporate debt, home mortgages and financial contracts reset according to Libor.
In recent months, the financial crisis sparked by subprime-mortgage problems has jolted banks and sent Libor sharply upward. The growing suspicions about Libor's veracity suggest that banks' troubles could be worse than they're willing to admit.
The concern: Some banks don't want to report the high rates they're paying for short-term loans because they don't want to tip off the market that they're desperate for cash. The Libor system depends on banks to tell the truth about their borrowing rates. Fibbing by banks could mean that millions of borrowers around the world are paying artificially low rates on their loans. That's good for borrowers, but could be very bad for the banks and other financial institutions that lend to them.
These bank problems are proving costly to other kinds of borrowers around the world. One way to measure the rough cost is by comparing the three-month Libor rate with an interest rate that doesn't reflect worries about banks' financial health -- such as the yield on a three-month Treasury bill, which is backed by the U.S. government. The gap between the two stood at 1.58 percentage points Tuesday, and has averaged 1.39 percentage points since the crisis began in August. In the five years before the financial crisis started, it averaged only 0.28 percentage points.
Citigroup's Mr. Peng believes banks could be understating even those abnormally high Libor rates. He notes that the Federal Reserve recently auctioned off $50 billion in one-month loans to banks for an average annualized interest rate of 2.82% -- 0.1 percentage point higher than the comparable Libor rate. Because banks put up securities as collateral for the Fed loans, they should get them for a lower rate than Libor, which is riskier because it involves no collateral. By comparing Libor with that indicator and others -- such as the rate on three-month bank deposits known as the Eurodollar rate -- Mr. Peng estimates Libor may be understated by 0.2 to 0.3 percentage points.
The 800 pound gorilla that the two sociologists are trying oh-so-hard to ignore is that an engineering degree might just be something sought after by people who are desperate to build bombs and place them where they will do the most damage. Terrorist wannabes will take classes that reveal the weak points in infrastructure and how to use explosives, as opposed to Texas Instruments turning normal college students into monsters with their mind-warping engineering calculators.DISCLOSURE: I graduated with an engineering degree. Never built a bomb; never plan to.
Or, as Mr. Devlin so pithily states, “Tough to overthrow much with an English degree.”
But I actually think there are two factors that both Mr. Devlin and the authors of the paper missed.
More than a few terrorist organizations of the Left in the 1960’s and 1970’s were started by, and heavily recruited, disgruntled college students and university professors. It worked back then, why wouldn’t it work now?
I corresponded very briefly with our fellow Chicago Boyz and resident engineer Steven den Beste about this article, and he had this to say about well educated terrorists….
“As to them being disproportionately engineers, I would suggest that observation of any large university will show that the vast majority of exchange students are to be found in departments who teach utilitarian subjects. Not too many Arabs are to be found studying postmodern literary theory or art history. And I don’t think you’ll find too many of them in the Women’s Studies department, let alone Queer Studies. Or any other “studies”, for that matter.”
Be sure to mail your return in a timely manner, because this year, filing taxpayers will receive an Economic Stimulus Payment. This is a very exciting new program that I will explain using the Q and A format:(via Glenn Reynolds)
Q. What is an Economic Stimulus Payment?
A. It is money that the federal government will send to taxpayers.
Q. Where will the government get this money?
A. From taxpayers.
Q. So the government is giving me back my own money?
A. Only a smidgen.
Q. What is the purpose of this payment?
A. The plan is that you will use the money to purchase a high-definition TV set, thus stimulating the economy.
Q. But isn't that stimulating the economy of China?
A. Shut up.
On one level, the question of whether it is morally acceptable for us to divert the food that might have fed the hungry for purposes of driving our SUVs is no different from similar questions about any of a number of other details of how the well-off dispose of their wealth. But I'm thinking that the profound inefficiencies associated with this particular disposition of resources may also be relevant. As a result of ethanol subsidies and mandates, the dollar value of what we ourselves throw away in order to produce fuel in this fashion could be 50% greater than the value of the fuel itself. In other words, we could have more food for the Haitians, more fuel for us, and still have something left over for your other favorite cause, if we were simply to use our existing resources more wisely.
We have adopted this policy not because we want to drive our cars, but because our elected officials perceive a greater reward from generating a windfall for American farmers.
But the food price increases are now biting ordinary Americans as well. That could make those political calculations change, and may present be an opportunity for a nimble politician to demonstrate a bit of real leadership. I notice, for example, that although Senator Barack Obama (D-IL) was among those who voted in favor of the monstrous 2005 Energy Bill that began these mandates, Hillary Clinton (D-NY) and John McCain (R-AZ) were among the 26 senators who bravely voted against it.
He who is unfaithful with little will be unfaithful with much, I predict.
Tuesday, April 15, 2008
Be Careful What You Wish For.
No matter how calmly you try to referee, parenting will eventually produce bizarre behavior, and I'm not talking about the kids. Their behavior is always normal.
I guess the real reason that my wife and I had children is the same reason that Napoleon had for invading Russia: it seemed like a good idea at the time.
Nothing I've ever done has given me more joys and rewards than being a father to my children.
Women don't want to hear what you think. Women want to hear what they think - in a deeper voice.
Think of Mr. Spock of Star Trek fame as someone whose Reflective System is always in control … In contrast, Homer Simpson seems to have forgotten where he put his Reflective System … One of our major goals in this book is to see how the world might be made easier, or safer for the Homers among us (and the Homers lurking somewhere in each of us).The whole interview is quite interesting to me; here's a snippet:
Q: You tout liberal paternalism as a promising foundation for bipartisanship. How, exactly, does it bring Democrats and Republicans together?
A: Democrats want to use government power to make people’s lives go better; Republicans respond that people know more than politicians do.
Republicans like to maintain free markets; Democrats respond that free markets can get people into trouble.
We think that both might be able to agree that nudging can maintain free markets, and liberty, while also inclining people in good directions.
Examples include the Save More Tomorrow plan (by which employees agree to devote some of their wage increases to savings), and automatic enrollment plans, (by which employees are assumed to want to enroll in standard savings programs).
Save More Tomorrow and automatic enrollment are helping people to have a lot more money for their retirements. Both Republicans and Democrats gave enthusiastic support to a provision in the 2006 Pension Protection Act that gave employers a small nudge to adopt these policies.
We also like the idea of a Greenhouse Gas Inventory (G.G.I.), by which major contributors to climate change would have to disclose their emissions. The G.G.I. would impose no regulatory mandate, but it would probably do some real good.
Here's an interesting point though:Mark Perry notes that 37% of tax filers pay an average tax rate of 0% or less (i.e. they receive negative taxes from the IRS).The public's attitudes about taxes have been fairly stable since at least 2003. Prior to that — particularly in the 1990s — Gallup found Americans holding much higher levels of dissatisfaction with federal taxes than are seen today.Anyone - what happened in 2003? Yes, the supposedly hated "Bush tax cuts" were passed and went into effect. What was the dissatisfaction level (i.e. the percentage of taxpayers thinking they paid too much in Federal taxes) previous to that?
As high as 68% in 1999 (65% in 2001).
Here is a breakdown of Federal expenditures.
Sometimes the observed correlations are the opposite of what one would expect on the basis of reason alone—sometimes, that is, people who hold one belief are less likely to hold other beliefs that are supported by the first one. For instance, one would naively expect that those who support animal rights would be far more likely to oppose abortion than those who reject the notion of animal rights; conversely, those who oppose abortion should be much more likely to accept animal rights. This is because to accept animal rights (or fetus rights), one must have a more expansive conception of what sorts of beings have rights than those who reject animal rights (or fetus rights)—and because fetuses and animals seem to share most of the same morally relevant properties (e.g., they are both sentient, but neither are intelligent). I am not saying that the existence of animal rights entails that fetuses have rights, or vice versa (there are some differences between fetuses and animals); I am only saying that, if animals have rights, it is much more likely that fetuses do, and vice versa. Thus, if people’s political beliefs generally have cognitive explanations, we should expect a very strong correlation between being pro-life and being pro-animal-rights. But in fact, what we observe is exactly the opposite.
Some clustering of logically unrelated beliefs could be explained cognitively—for instance, by the hypothesis that some people tend to be good, in general, at getting to the truth (because they are rational, intelligent, etc.) So suppose that it is true both that affirmative action is just and that abortion is morally permissible. These issues are logically unrelated to each other; however, if some people are in general good at getting to the truth, then those who believe one of these propositions would be more likely to believe the other.
But note that, on this hypothesis, we would not expect the existence of an opposite cluster of beliefs. That is, suppose that liberal beliefs are, in general, true, and that this explains why there are many people who generally embrace this cluster of beliefs. (Thus, affirmative action is just, abortion is permissible, welfare programs are good, capital punishment is bad, human beings are seriously damaging the environment, etc.) Why would there be a significant number of people who tend to embrace the opposite beliefs on all these issues? It is not plausible to suppose that there are some people who are in general drawn toward falsity. Even if there are people who are not very good at getting to the truth (they are stupid, or irrational, etc.), their beliefs should be, at worst, unrelated to the truth; they should not be systematically directed away from the truth. Thus, while there could be a ‘true cluster’ of political beliefs, the present consideration strongly suggests that neither the liberal nor the conservative belief-cluster is it.
Based on the level of disagreement, human beings are highly unreliable at identifying correct political claims. This is extremely unfortunate, since it means that we have little chance of solving most social problems and a good chance of causing or exacerbating them. The best explanation lies in the theory of Rational Irrationality: individuals derive psychological rewards from holding certain political beliefs, and since each individual suffers almost none of the harm caused by his own false political beliefs, it often makes sense (it gives him what he wants) to adopt those beliefs regardless of whether they are true or well-supported.
The beliefs that people want to hold are often determined by their self-interest, the social group they want to fit into, the self-image they want to maintain, and the desire to remain coherent with their past beliefs. People can deploy various mechanisms to enable them to adopt and maintain their preferred beliefs, including giving a biased weighting of evidence; focusing their attention and energy on the arguments supporting their favored beliefs; collecting evidence only from sources they already agree with; and relying on subjective, speculative, and anecdotal claims as evidence for political theories.
The irrationality hypothesis is superior to alternative explanations of political disagreement in its ability to account for several features of political beliefs and arguments: the fact that people hold their political beliefs with a high degree of confidence; the fact that discussion rarely changes political beliefs; the fact that political beliefs are correlated with race, sex, occupation, and other cognitively irrelevant traits; and the fact that numerous logically unrelated political beliefs—and even, in some cases, beliefs that rationally undermine each other—tend to go together. These features of political beliefs are not explained by the hypotheses that political issues are merely very difficult, that we just haven’t yet collected enough information regarding them, or that political disputes are primarily caused by people’s differing fundamental value systems.
It may be possible to combat political irrationality, first, by recognizing one’s own susceptibility to bias. One should recognize the cases in which one is most likely to be biased (such as issues about which one feels strongly), and one should consciously try to avoid using the mechanisms discussed above for maintaining irrational beliefs. In the light of widespread biases, one should also take a skeptical attitude towards evidence presented to one by others, recognizing that the evidence has probably been screened and otherwise distorted. Lastly, one may be able to combat others’ irrationality by identifying the sort of empirical evidence that would be required to test their claims, and by taking a fair-minded and cooperative, rather than combative, attitude towards discussion. It remains a matter of speculation whether these measures will significantly alleviate the problem of political irrationality.