Scary statistic of the day

From the FCIC

From 1999 to 2008, the financial sector expended $2.7 billion in reported federal lobbying expenses; individuals and political action committees in the sector made more than $1 billion in campaign contributions.

Innovation Is Doing Little for Incomes

From Tyler Cowen

MY grandmother, who was born in 1905, spoke often about the immense changes she had seen, including the widespread adoption of electricity, the automobile, flush toilets, antibiotics and convenient household appliances. Since my birth in 1962, it seems to me, there have not been comparable improvements.

Of course, the personal computer and its cousin, the smartphone, have brought about some big changes. And many goods and services are now more plentiful and of better quality. But compared with what my grandmother witnessed, the basic accouterments of life have remained broadly the same.

The income numbers for Americans reflect this slowdown in growth. From 1947 to 1973 — a period of just 26 years — inflation-adjusted median income in the United States more than doubled. But in the 31 years from 1973 to 2004, it rose only 22 percent. And, over the last decade, it actually declined.

Most well-off countries have experienced income growth slowdowns since the early 1970s, so it would seem that a single cause is transcending national borders: the reaching of a technological plateau. The numbers suggest that for almost 40 years, we’ve had near-universal dissemination of the major innovations stemming from the Industrial Revolution, many of which combined efficient machines with potent fossil fuels. Today, no huge improvement for the automobile or airplane is in sight, and the major struggle is to limit their pollution, not to vastly improve their capabilities.

Although America produces plenty of innovations, most are not geared toward significantly raising the average standard of living. It seems that we are coming up with ideas that benefit relatively small numbers of people, compared with the broad-based advances of earlier decades, when the modern world was put into place. If pre-1973 growth rates had continued, for example, median family income in the United States would now be more than $90,000, as opposed to its current range of around $50,000. 

Education and race

An excellent op-ed in the Washington Post

As Dan Domenech of the American Association of School Administrators told NPR last week, "The correlation between student achievement and Zip code is 100 percent. The quality of education you receive is entirely predictable based on where you live." And where you live in America today depends largely on income and race.

Consider the recent results from a test of 15-year-olds around the world. Headlines noted the embarrassing American mediocrity (31st out of 65 countries in math, with scores below the international average). Even worse, our results are profoundly segregated by race. White and Asian Americans are still in the upper echelon. But African American and Latino students lag near the bottom quartile of world standards. As we think about our game plan to "win the future," our black and Latino students won't be competing with China and Finland - they're on track to scrap it out with Bulgaria and Mexico.

Some on the left will say this is the pernicious result of poverty. Solve poverty, and you solve the Zip-code-equals-outcomes issue. Some on the right will blame culture. Stop teenage pregnancy and crime, and the outcomes look different.

Like millions of parents hoping to do right by their kids, Kelley Williams-Bolar thought that schools were the answer. She didn't have the luxury of waiting a generation while intellectuals argue about poverty or culture. She looked at her options, she looked at the law and she looked at her children. Then she made a choice.

What would you have done?

Is this imbalance sustainable or do we have a bubble in the healthcare industry?

From here.

This first chart shows the change in wage and salary payments by major industry from 2000-2009, adjusted for inflation, using BEA data. We see that healthcare and social assistance generated $210 billion in real wage gains from 2000 to 2009 (all in 2009 dollars). Next biggest was state and local government, which generated $151 billion in real wage gains. (The exact numbers change a lot if I change the end dates, but the pattern stays the same).

On the other hand, the big losers were manufacturing (-$245 billion), information (-$56 billion), retail trade (-$24 billion), and transportation and warehousing (-$6 billion). It’s interesting that the industries in the global supply chain were the big losers in real wages, but I’m not sure quite what to make of it.

Now we get to the third chart (having fun with 3D pie charts–like it?). What we see is that health and education (public and private) accounted for an amazing 75% of real wage and salary gains between 2000 and 2009. The rest of the economy–only 25%. Make that what you will.

China update

Yet Another Sign Of How China Is Twisting Itself In Knots To Beat Inflation

At some point the Chinese economy will go bust, but before that happens something else will happen: Beijing will go further and further down the rabbit hole of trying to stamp out inflation, and adjust tiny imbalances, in a failing effort to continue the success of a planned economy with an artificially cheap currency.

We just got another sign of that.

According to WSJ, the country is implementing all kinds of new anti-monopoly, anti-collusion, and price-setting regulations in the vain hope that it can beat inflation by fiat.

Multiplying Drivers Run Over Beijing Traffic Plan

Part of the problem is poor planning. Curiously, a city of more than six million drivers has virtually no stop signs, turning intersections into playing fields for games of vehicular chicken. Freeway entrance ramps appear just before exit ramps, guaranteeing multilane disarray as cars seeking to get off try to punch through lines of cars seeking to get on.

Beijing drivers do not help. The city’s driving style is best likened to a post-holiday sale in which dozens of shoppers mill about a single bin, elbowing for advantage — in this case, entry to a single lane of traffic that is probably blocked by a taxi anyway.

Mr. Duan, the taxi driver, recalls a jam last February that left him and his passengers stalled for nearly three hours. “It was a combination of rain and everyone going on vacation before Spring Festival,” he said.

In September, another vacation exodus — this time for Autumn Festival — gridlocked the entire city, leading to 140 traffic backups in the evening rush hour.

China Might Force Visits to Mom and Dad

Concerns about how to care for China’s older people are growing as the nation’s population rapidly gets older, wealthier and more urbanized. China has the world’s third highest elderly suicide rate, trailing only South Korea and Taiwan, according to Mr. Jing, who compiled figures from the World Health Organization and Taiwan. The figures show a disturbing increase in suicides among the urban elderly in the past decade, a trend Mr. Jing blames partly on urbanization.

Once ensconced in intimate neighborhoods of courtyard houses and small lanes and surrounded by relatives and acquaintances, older people in China are increasingly moving into lonely high-rises and feeling forgotten, he said.

The average suicide rate among people 70 to 74 living in cities nearly tripled between 2002 and 2009, compared with the average rate for the 1990s, his research shows. On the plus side, government-provided insurance covering basic medical care has eased stress, possibly contributing to the decline in the suicide rate for the elderly in cities after 2006.

In rural areas, the rate of suicides among the same age group fell compared with the 1990s, Mr. Jing said, but still remains far higher than the rate in urban areas.

Reminder: Americans are still irrational and don't want to cut the budget

From the New York Times

A CNN poll this month found that just one American in five regards deficit reduction as pressing enough to justify cuts to Social Security and Medicare. Only one in four would choose balancing the budget if it meant reducing education programs. Indeed, a new Gallup poll reveals that there’s exactly one category of government spending that a majority of voters favors slicing — foreign aid (which amounts to some 1 percent of the budget). Incredible as it sounds, even current government outlays to science, the arts, farmers and antipoverty programs still enjoy 50 percent-plus support.

A comparison between automobiles and guns

From Nicholas Kristof at the New York Times

In reality, of course, we have taken a deadly product — motor vehicles — and systematically made them quite safe. Scientists have figured out how to build roads so as to reduce accidents and have engineered innovations such as air bags to reduce injuries. Public campaigns and improved law enforcement have reduced drunken driving, and graduated licenses for young people have reduced accident rates as well. The death rate per 100 million vehicle miles traveled has fallen by almost three-quarters since the early 1970s, according to the National Highway Traffic Safety Administration.

The trade-off is that we have modestly curbed individual freedom, but we save tens of thousands of lives a year. That’s a model for how we should approach guns as a public health concern.

Granted, the Second Amendment complicates gun regulation (I accept that the framers intended for state militias, and possibly individuals, to have the right to bear flintlocks). But even among those favoring a broader interpretation, the Second Amendment hasn’t prevented bans on machine guns. There are still lines to be drawn, and a prohibition on 33-bullet magazines would be a useful place to start.

If we treat guns as we do cars and build a public health system to address them, here’s what we might do: finance more research so that we have a better sense of which gun safety policies are effective (for example, do gun safes or trigger locks save lives?); crack down on gun retailers who break laws the way we punish stores that sell cigarettes to kids; make serial numbers harder to erase; make gun trafficking a law enforcement priority; limit gun purchases to one per person per month; build a solid database of people who are mentally ill and cannot buy firearms; ban assault weapons; and invest in new technologies to see if we can design “smart guns” that require input of a code or fingerprint to reduce accidents and curb theft.

Particularly after a tragedy like Tucson, why can’t we show the same maturity toward firearms that we show toward vehicles — and save some of the 80 lives a day that we lose to guns?

Climate change and energy update

Richard Sears: Planning for the end of oil



The Will to Drill

Scientist proves conservatism and belief in climate change aren't incompatible

According to the conventional wisdom that liberals accept climate change and conservatives don't, Kerry Emanuel is an oxymoron.

Emanuel sees himself as a conservative. He believes marriage is between a man and a woman. He backs a strong military. He almost always votes Republican and admires Ronald Reagan.

Emanuel is also a highly regarded professor of atmospheric science at MIT. And based on his work on hurricanes and the research of his peers, Emanuel has concluded that the scientific data show a powerful link between greenhouse gas emissions and climate change.

"There was never a light-bulb moment but a gradual realization based on the evidence," Emanuel said. "I became convinced by the basic physics and by the better and better observation of the climate that it was changing and it was a risk that had to be considered."

As a politically conservative climatologist who accepts the broad scientific consensus on global warming, Emanuel occupies a position shared by only a few scientists.

In much the same role that marriage and abortion played in previous election cycles, denial of climate change has now become a litmus test for the right.

The vast majority of Republicans elected to Congress during the midterm election doubt climate science, and senior congressional conservatives — Republican and Democrat — have vowed to fight Obama administration efforts to curtail greenhouse gas emissions.

That's why scientists such as Emanuel rattle the political pigeonholes. Some are speaking out, using their expertise and conservative credentials to challenge what many researchers consider widespread distortions about climate change.

Texas Tech atmospheric scientist Katharine Hayhoe is an evangelical Christian who travels widely talking to conservative audiences and wrote a book with her husband, a pastor and former climate change denier, explaining climate change to skeptics.

A physicist by training, John Cook is an evangelical Christian who runs the website skepticalscience.com, which seeks to debunk climate change deniers' arguments. Barry Bickmore is a Mormon, a professor of geochemistry at Brigham Young University and the blogger behind Anti-Climate Change Extremism in Utah, where he recently rebuked Sen. Orrin G. Hatch (R-Utah) for his climate views and posted editorials mentioning his Republican affiliation.

Emanuel waded into the fray early last year. He wrote a letter to the Wall Street Journal criticizing a friend and colleague for dismissing the evidence of climate change and clinging "to the agenda of denial." Then Emanuel added his name to the Climate Science Rapid Response Team, a website run by scientists to provide accurate information from top researchers in climate-related fields.

"I've always rebelled against the thinking that ideology can trump fact," said Emanuel, 55. "The people who call themselves conservative these days aren't conservative by my definition. I think they're quite radical."

To be a Paine patriot

From the LAT

Paine believed, the chief measure of Americans' patriotism was their willingness to sacrifice in proportion to their means and abilities. A patriot would forgo maximizing profits — even forgo profits altogether — if they came at the expense of the soldiery, the poor or the national debt. Paine was adamant that propertied men should contribute a fair share of their wealth to keep the government solvent. "Those who expect to reap the blessings of freedom, must, like men, undergo the fatigues of supporting it," he wrote in 1777. It was vital to counter the imminent danger that Americans might lose faith in one another.

Is it hard to remember that patriotism used to mean putting a collective good before private profit? That it meant refusing to leave the burden to those who served in arms, or to other states or to those who were most defenseless in hard times?

Today, some Americans call themselves patriots even as they offer a paltry unity, declining a connection with any they deem unqualified as "real Americans." Some spread disinformation to divide the nation, believing that their partisan purposes outweigh the goal of solving our country's actual, substantial problems. With America at war, private interests again grow wealthy on the taxpayers' dime. And, while many Americans are without jobs, homes or health insurance, the richest are excused the burdens of even trivial patriotic sacrifice.

Paine's "Crisis" papers echoed the vision of 1776, urging Americans to make the sustained commitment called patriotism. "I call not upon a few, but upon all: not on this state or that state, but on every state: up and help us; lay your shoulders to the wheel.... Let it be told to the future world, that in the depth of winter, when nothing but hope and virtue could survive, that the city and the country, alarmed at one common danger, came forth to meet and to repulse it."

Paine's generation rose to that challenge. Will ours?

Afghanistan update

U.S. Risks Wasting Billions In Afghan Security Aid Given 'Inadequate Planning'

The United States is at risk of wasting roughly $11.4 billion unless it comes up with a plan for constructing and maintaining nearly 900 Afghan National Security Forces facilities, according to a new report by a top federal watchdog. The news comes as U.S. President Barack Obama considers a military-backed proposal significantly boost the size of those forces.

The audit by the Special Inspector General for Afghanistan Reconstruction concluded that the money is "at risk" because of "inadequate planning" and the lack of a "long-range construction plan" for the facilities. SIGAR began its investigation when the NATO mission in Afghanistan was unable to provide documents "describing the size, location or use of Afghan National Security Force facilities, such as Afghan National Army garrisons."

Since 2002, the international community has funded both the construction and ongoing maintenance of these facilities. According to the SIGAR report, "the government of Afghanistan does not have the financial or technical capacity to sustain ANSF facilities once they are completed."

A Year in Iraq and Afghanistan

David Stockman tells it like it is

From the Austerity Files

For Governors, Medicaid Looks Ripe for Slashing

Hamstrung by federal prohibitions against lowering Medicaid eligibility, governors from both parties are exercising their remaining options in proposing bone-deep cuts to the program during the fourth consecutive year of brutal economic conditions.

Because states confront budget gaps estimated at $125 billion, few essential services — schools, roads, parks — are likely to escape the ax. But the election of tough-minded governors, the evaporation of federal aid, the relentless growth of Medicaid rolls and the exhaustion of alternatives have made the program, which primarily covers low-income children and disabled adults, an outsize target.

In Arizona, which last year ended Medicaid payments for some organ transplants, Gov. Jan Brewer, a Republican, is asking the Obama administration to waive a provision of the new health care law so that the state can remove 280,000 adults from the program’s rolls. In California, the newly elected governor, Jerry Brown, a Democrat, proposes cutting Medicaid by $1.7 billion, in part by limiting the beneficiaries to 10 doctor visits a year and six prescriptions a month.

In the budget he will unveil on Tuesday, Gov. Andrew M. Cuomo of New York is expected to propose cutting even more — at least $2 billion from projected state spending on Medicaid, which totaled about $14 billion this year.

And Gov. Nathan Deal, the new Republican leader of Georgia, proposed this month to end Medicaid coverage of dental, vision and podiatry treatments for adults. South Carolina is considering going a step further by also eliminating hospice care.

An interesting question

From the NYT

Or take the vexed question of who constitutes an enemy combatant. The Obama administration has used drone strikes to assassinate Taliban officials in their homes, far from the battlefield. It has accepted that an American citizen in Yemen who incites terrorist attacks can be targeted for assassination. By this reasoning, Carter asserts, the president can target anyone in the world. And why not? Are we to wait until terrorists actually attack Americans before moving against them? But Carter reminds us that the laws of war apply to both sides. And he proposes a thought experiment: How would we feel if the Taliban launched a Predator attack on the White House?

That would be despicable, we answer. But why is it O.K. if we do it, but not if they do? Because we’re the good guys, of course. We implicitly accept what Carter calls, only semi-ironically, the American Proviso — that “attacking America is morally different from being attacked by America.” This is, of course, a more or less universal belief, but it makes a mockery of both international law and moral philosophy. Is there some way out of it? Is the war on terror so categorically different from conventional warfare that the usual principles don’t apply?

Cool graphic showing population distribution in the USA

Random Links

Dog Frozen In Block Of Ice Found On Man's Lawn In Canada

Lightning and fire: Japan on alert after volcano's biggest eruption in 50 years

Peaked performance: The case that human athletes have reached their limits

How Egypt Turned Off the Internet

The Massively Intimidating Size of the Internet Visualized

Suicide Bomber Blown Up by Happy New Year Text

Airport Security Decides 3-Inch Toy Gun Is a Weapon

Rise of the eBooks: Kindle Books Now Outsell Paperbacks

Could using less cash drive down crime?

China update

Want to Live With 42 Million People in a Megacity the Size of Switzerland?

The "Turn The Pearl River Delta Into One" scheme will create a 16,000 sq mile urban area that is 26 times larger geographically than Greater London, or twice the size of Wales.

The new mega-city will cover a large part of China's manufacturing heartland, stretching from Guangzhou to Shenzhen and including Foshan, Dongguan, Zhongshan, Zhuhai, Jiangmen, Huizhou and Zhaoqing. Together, they account for nearly a tenth of the Chinese economy.

Over the next six years, around 150 major infrastructure projects will mesh the transport, energy, water and telecommunications networks of the nine cities together, at a cost of some 2 trillion yuan (£190 billion). An express rail line will also connect the hub with nearby Hong Kong.

Beijing Intensifies Effort to Curb Rising Home Prices

China released several government measures on Wednesday aimed at curbing the growth of housing prices and preventing a property bubble from threatening its fast-growing economy.

The State Council, China’s cabinet, ordered cities to better manage the supply of land, raise tax rates on the sale of apartments or houses held for less than five years and set price control goals for new homes.

The government also said it would raise the minimum down payment for buyers of second homes to 60 percent from 50 percent.

We won't always be the biggest

This bugged me last night, and it's worth talking about today: One of the first big applause lines of the speech came when Barack Obama said, "For all the hits we’ve taken these last few years, for all the naysayers predicting our decline, America still has the largest, most prosperous economy in the world." But as Matt Yglesias notes, soon, we won't.China will. And that's okay.

A decent future includes China's GDP passing ours. They have many, many more people than we do. It's bad for both us and them if the country stays poor. A world in which China becomes rich enough to buy from us and educated enough to invent things that improve our lives is a better world than one in which they merely become competitive enough to take low-wage jobs from us -- and that's to say nothing of the welfare of the Chinese themselves.

But perhaps it's better to think of it in terms of Britain rather than China. Was the economic rise of the United States, in the end, bad for Britain? Or France? I don't think so. We've invented a host of products, medicines and technologies that have made their lives immeasurably better, not to mention measurably longer. We're a huge and important trading partner for all of those countries. They're no longer even arguably No. 1, it's true. But they're better off for it.

In the best global economy we can imagine, the countries with the largest GDP are the countries with the most people. That's not America. And that's okay. We want America to have the most innovative and dynamic economy in the world, and we want living in America to be better than living anywhere else. But we don't want everywhere else to remain poor. We can't want that.

China Builds a Ghost Town

The Economist put together a tool enabling readers to determine when China will overtake America as the world's largest economy

Did China Try To Pass Off Top Gun As Air Force Footage?

A few days ago, China Central Television showed footage of what they claimed was an air force training exercise conducted on January 23. From the looks of things, they were actually just playing clips from Top Gun.

The clips in question were reportedly aired during the News Broadcast program on China Central Television, the major state television broadcast company. They supposedly showed a J-10 fighter firing a missile at another aircraft during a practice exercise.

But an internet commenter quickly pointed out that the aircraft the J-10 was shown shooting down was an F-5, an American aircraft, and the very one Tom Cruise guns down in a scene from Top Gun. Comparing frames from the CCTV broadcast (left) and Top Gun (right), well, they're lookin' pretty much identical.

Economics and finance links

Inflation Is So Much Worse Than We're Told It Is

If Someone Tells You Inflation Is Good For Stocks, Respond Like This

Corporate Taxes: More Winners and Losers

Obama's call for innovation follows slowdown in most sectors, scholars say

Intelligent Economic Design

As Stephen Cohen, with whom I wrote The End of Influence: What Happens When Other Countries Have the Money, likes to say, economies do not evolve; they are, rather, intelligently designed. He also likes to say that, though there is an intelligence behind their design, this does not mean that the design is in any sense wise.

The first claim is, I think, incontrovertible. Since long before Croesus, King of Lydia, came up with the game-changing idea of standardized “coinage,” what governments have done and not done to structure, nudge, and put their thumbs on the scales has been decisively important for economic development.

Just look around you. Notice the hundred-fold divergence across political jurisdictions in relative levels of economic productivity and prosperity? I dare anyone to claim that the overwhelming bulk of that disparity springs from causes other than history and the current state of governance.

The second claim is also, I think, true. To say that economies are the products of intelligent design means only that some human intelligence or intelligences lies behind the design. It does not mean that the design is smart or optimal.

Climate change and energy update

Obama's clean-energy goals have industry questioning feasibility

President Obama has grand plans for a green nation — 1 million electric vehicles on the road within four years and clean power sources providing 80% of the nation's energy by 2035.

But a day after getting a surprisingly extensive shout-out in Obama's State of the Union address — he sees clean tech as the country's best chance to seize its "Sputnik moment" — industry officials were less than enthused and questioned whether the ambitious targets were even attainable.

"It's a lofty goal, but it's like the race to the moon in that it's generally achievable," said John Cheney, chief executive of solar project developer Silverado Power. "The issue is whether we have the political will and ability to pull together and actually do it."

Obama’s 80 percent clean energy goal: Who’s he kidding?

Let's quickly evaluate the 80 percent electrical generation goal. To achieve 80 percent clean energy generation essentially means replacing at least 500 gigawatts of conventional coal-fired generation with cleaner alternatives. In essence, the U.S. would have to nearly completely rebuild its electrical generating infrastructure, which last year had about 940 gigawatts of electricial generating capacity. By 2035, according to Department of Energy projections, electrical generating demand in the U.S. could grow to 1,200 gigawatts. Today, less than a quarter of electrical generating capacity is supplied by nuclear power, hydro, wind, and geothermal in the U.S -- roughly 225 gigawatts.

To date, the nation has indicated no proclivity to launch a crash program for clean energy investment. The $100 billion provided in the 2009 American Recovery and Reinvestment Act, now threatened by the Republican House majority, is merely a down payment. In fact, the largest energy investment in the nation is being made to drill, mine, process, and transport the unconventional oil and gas reserves being tapped in the middle part of the country.

Moreover, while the right discounts the science of climate change and expresses skepticism about the costs of clean energy subsidies, the grassroots left is digging in to fight clean energy projects of scale.Opposition campaigns are occurring in at least 35 states and focus on every available alternative -- wind, solar, geothermal, biomass, and nuclear. Here in Benzie and Manistee counties where I live in northern Michigan, a $330 million proposal by Duke Energy to build 112 wind turbines is the focus of a fear-based opposition campaign that includes scientifically unfounded assertions that the turbine blades generate dangerous sound waves that can cause farm animals to spontaneously abort.

Big breaks for Big Oil

Analysts are expecting a bonanza when Exxon Mobil Corp.announces its fourth-quarter earnings on Monday; the company's stock has jumped by nearly 20% during the last year, and in the first three quarters of 2010, its profit was$21.2 billion — not a bad haul during a worldwide recession. Other oil companies have had similar success, thanks to growing demand in India and China. Yet U.S. taxpayers subsidize this industry to the tune of $4 billion a year.

This kind of largesse toward a hugely profitable business seems bizarre, especially at a time when the federal deficit is reaching alarming proportions, yet efforts to end the tax deductions and credits for companies that don't need them have gone nowhere. That isn't stopping President Obamafrom trying. In his State of the Union address, he proposed an uptick in federal spending on clean-energy research and development, to be paid for by ending subsidies for oil companies. "I don't know if you've noticed, but they're doing just fine on their own. So instead of subsidizing yesterday's energy, let's invest in tomorrow's," Obama said.

Doyle McManus: The upward mobility gap

From The Dallas Morning News

Here's a familiar fact: Economic inequality is rising in the United States. The rich have gotten richer, the poor have stayed poor, and families in the middle have seen their incomes stagnate.

Here's a less-familiar fact: Opportunity in America isn't what it used to be either. Among children born into low-income households, more than two-thirds grow up to earn a below-average income, and only 6 percent make it all the way up the ladder into the affluent top one-fifth of income earners, according to a study by economists at Washington's Brookings Institution.

Thanks to globalization, the economy is producing high-income jobs for the educated and low-income jobs for the uneducated - but few middle-income jobs for workers with high school diplomas. Thanks to the decline of public schools, it's harder for poor kids to get a good education. And Harvard sociologist Robert Putnam argues that thanks partly to the rise of two-income households, intermarriage between rich and poor has declined, choking off another historical upward path for the underprivileged.

Increasingly, college-educated Americans live in a different country from those who never made it out of high school. As a group, adults with college degrees have an unemployment rate of 5 percent, steady or rising incomes, relatively stable families (their divorce rate declined over the last 10 years) and few children out of wedlock. Adults without a high school education face an unemployment rate over 15 percent, declining incomes, a higher divorce rate and have lots of kids out of wedlock. (Among black women who didn't finish high school, 96 percent of childbirths are outside marriage; among white women who didn't finish high school, 43 percent.)

Excellent column explaining the fiscal difficulties facing states right now

What Sent States' Fiscal Picture Into a Tailspin?

Amid all the debate about bankruptcy and bailouts and all the headlines about local-government layoffs, benefit cuts, reduced services and tax increases, ponder one simple question:

How the heck did state and local governments get in such trouble?

It's no small matter. State and local governments are a big and growing part of the U.S. economy. They account for 15% of all economic output, up from less than 12% two decades ago. They employ one in every seven workers, more than manufacturing.

Here are four of the big causes of today's fiscal woes:

The truth is becoming more and more obvious every day

How humans are 97% the same as orangutans: New research shows how DNA matches

Orangutans may be more closely related to humans than scientists previously thought, a new genetic study has shown.

The first blueprint of the orangutan genetic code has confirmed that they share 97 per cent of their DNA with people.

Although that makes the red-haired apes less closely related to us than chimps - who have 99 per cent of DNA in common - a small portion of orangutan DNA is a closer match to human DNA, the international team of researchers found.

Staggering education statistics

From The Washington Post

"Since 1995 the average mathematics score for fourth-graders jumped 11 points. At this rate we catch up with Singapore in a little over 80 years . . . assuming they don't improve."

- Norman R. Augustine, retired CEO of Lockheed Martin

Too many American parents, Duncan says, have "cognitive dissonance" concerning primary and secondary schools: They think their children's schools are fine, and that schools that are not fine are irredeemable. This, Duncan says, is a recipe for "stasis" and "insidious paralysis." He attempts to impart motion by puncturing complacency and picturing the payoff from excellence.

He notes that 75 percent of young Americans would be unable to enlist in the military for reasons physical (usually obesity), moral (criminal records) or academic (no high school diploma). A quarter of all ninth-graders will not graduate in four years. Among the 34Organization for Economic Cooperation and Development nations, only four (Mexico, Spain, Turkey and New Zealand) have dropout rates higher than America's, whose 15-year-olds ranked 23rd in math and 25th in science in 2006. Canadians that age were more than a school year ahead of their American counterparts; Koreans and Finns were up to two years ahead. Within America, the achievement gaps separating white students from blacks and Hispanics portend (according to a McKinsey & Co. study) "the economic equivalent of a permanent national recession."

If Lockheed MartinAnother study suggests that a modest improvement (from a current average of about 500 to 525) over 20 years in an international student assessment of 15-year-olds in the OECD nations - improvement in reading, math and science literacy - would mean a $115 trillion increase in these nations' aggregate GDP. Of that, $41 trillion would accrue to America. McKinsey calculated that if American students matched those in Finland, America's economy would have been 9 to 16 percent larger in 2008 - between $1.3 trillion and $2.3 trillion.

Is Gil Meche the man with the most integrity in the world?

From here:

Okay, Gil Meche hasn't been great since signing a big contract with the Kansas City Royals. But not many players would feel so badly about their performance that they would walk away from a guaranteed $12 million.

Meche announced last week he will retire, giving up the payday due on the last year of his deal. Meche has always been known for his integrity, according to The New York Times, but this move left the baseball world stunned. Meche said he just didn't like the idea of not earning his keep.

“When I signed my contract, my main goal was to earn it,” Meche told the paper from his temporary home in Lafayette, La. “Once I started to realize I wasn’t earning my money, I felt bad. I was making a crazy amount of money for not even pitching. Honestly, I didn’t feel like I deserved it. I didn’t want to have those feelings again.”

The question is: would you do what he did?

Healthcare update

Americans do not want repeal

When it comes to what lawmakers should do next on health reform, Americans' views are all over the map: 28 percent want to expand the law, 19 percent leave it as is, 23 percent repeal it and replace it with a Republican-sponsored alternative, and 20 percent repeal it and not replace it.

Support for a "Republican-sponsored alternative" is considerably lower than support for "expand the law," and the inclusion of "Republican-sponsored alternative" means that "expand the law" actually means something akin to expanding the law. And so there you have it: 47 percent want to keep or expand health-care reform, and 43 percent want to repeal and/or replace. The "repeals" do not have it.

And that's not the only interesting part of the poll: As Greg Sargentnotes, "when asked what they want done with the law if repeal fails, only 33 percent of Americans support cutting off funding to gut the law, versus 62 percent who disapprove of this course of action."

Thomas Goetz: It's time to redesign medical data



The people who will really decide whether health-care reform succeeds or fails

The New Yorker isn't allowing Atul Gawande's latest article out from behind the paywall, but you can read the abstract here. The basic point is well worth keeping in mind amid all the arguments over the Affordable Care Act: Health-care costs -- and thus our paychecks, and the federal budget -- won't be decided by how we deliver and structure health-care insurance. They'll be decided by how we deliver and structure health care. And though national policy has a role in that, it's not always a huge role, and it's not usually a controversial one.

Gawande relates a series of stories showing innovation in the toughest corners of the care-delivery system. The most inspiring is about Jeffrey Brenner, a Camden-based physician who began playing with his city's hospital claims data and making maps of where the money was being spent. It turned out that there were two city blocks, containing two particular buildings, where 900 people were responsible for "more than four thousand hospital visits and about two hundred million dollars in health-care bills" over the past seven years. So that's where he focused.

Insurers try to run from the costliest patients. They try to kick them out for having preexisting conditions, or they rescind their coverage, or they price coverage beyond their reach. That just makes them costlier, of course. Inconsistent access to medical care means more medical emergencies, and more medical emergencies mean higher medical costs. Brenner, by contrast, is lavishing them with attention. He's calling them daily. He's checking up on their medications, their lifestyles, their habits. He wants to open a doctor's office in their building. His patients averaged "sixty-two hospital and E.R. visits per month before joining the program and thirty-seven visits after — a forty-per-cent reduction. Their hospital bills averaged $1.2 million per month before and just over half a million after — a fifty-six-percent reduction."

We don't really know if his success can be replicated. But somebody'scan be. And that'll be where policy -- in particular, where Medicare -- comes in. The administration's vision sees things running something like this: A promising experiment or pilot program will come to the attention of the newly established Center for Medicare and Medicaid Innovation. The center will fund it on a larger scale and study it more intensely if. If it proves promising, the Independent Payment Advisory Board will force Medicare to implement it fairly quickly. And history shows that if something works in Medicare -- and, quite often, even if it doesn't -- it's soon adopted by private insurers.

How bad is the unemployment hole we are in?

Ezra Klein

Tonight's State of the Union will be about the future, mostly. What the American economy should look like in five, 10 and 20 years. The major policy initiatives are expected to span that timetable: Infrastructure investment, R&D, education and deficit reduction all tend to be multi-year endeavors, not policies we wrap up by June.

The address won't forget the unemployed, who number nearly 15 million, and many more than that if you count the under-employed and those who've given up on looking for work. They'll be mentioned, and their distress lamented. The president will gravely remind us that the status quo is not good enough, and the recovery has been agonizingly slow. But the truth is that the political system is moving on, both in rhetoric and in policy: The Democrats don't have the votes to do much more for the unemployed, and the Republicans aren't interested in doing much more in the unemployed.

Which is a shame, because unemployment remains the country's No. 1 problem over the next few years: The high rate of joblessness is a drag on both short-term growth and long-term human capital, as time out of work tends to degrade skills. The economy is recovering, but not quick enough: If we doubled the 103,000 jobs the economy created in December, it'd still take more than five years to return to full employment. The country needs to address our long-term challenges, but doing so isn't a substitute for solving the crisis we're facing right now. And I fear that the situation is even a bit worse than that: Both parties, for different reasons, are using action on long-term challenges to distract from inaction on unemployment.

The revolving door between politics and big money business

Evan Bayh walks through the revolving door

In 2010, Sen. Evan Bayh retired. Part of the reason, he told me, was that the corrosive effect of money in politics had left his profession looking corrupt. "You want to be engaged in an honorable line of work," Bayh said, "but they look at us like we're worse than used-car salesmen."

On Friday, Bayh announced that he was joining Apollo Global Management, a private-equity megafirm, as "a senior adviser with responsibility for public policy." Something tells me that this isn't going to vastly improve the way Americans think about their politicians.

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What is your state worst at?

How bad is California's budget deficit?

From the Los Angeles Times

Speaking at a conference at UC Berkeley over the weekend, state Treasurer Bill Lockyer went further than some of his counterparts have been willing to go in explaining the crisis that confronts California. Without quick action to shore up the state's balance sheet, he said, California could soon be forced to issue IOUs or defer tax refunds. Then he dropped a bomb: Unless voters agree to the extension of temporary car, income and sales taxes, the state would be so short of money that it might have to whack more than six weeks off the K-12 school year.

That pronouncement got shockingly little attention. Ignored by television, relegated to the back pages — if any — in the state's newspapers, it faded softly into the complicated debate over how bad this situation really is. In fact, even among Californians suffering budget-crisis fatigue, Lockyer's prediction should strike fear.

To be clear, he wasn't saying it would have to happen that way; that's just one scenario. If revenues aren't raised, he told The Times, it would take 31% in across-the-board spending cuts to balance the state budget. That would mean an $11-billion cut for schools, which could be achieved in many ways — by increasing class sizes, for example, or cutting administrative or custodial employees, or revising the calendar, or some combination. But if it were done solely by shortening the school year, it would mean a loss of six to eight weeks.

Stephen Pearlstein tells it like it is

From the Washington Post

When talking about the federal government and its budget deficit, Republican politicians love to score points by noting that "you'd never run your household or your business that way."

Then again, you'd never run your household or your business by ignoring investment. Yet now that President Obama has proposed stepped-up public investment in infrastructure, energy, education and basic research, Republicans have suddenly decided their favorite analogy no longer applies.

Asked about investment on the television talk shows Sunday, House Republican leader Eric Cantor (R-Va.) and Senate Republican leader Mitch McConnell (R-Ky.) each declared it was just another Democratic ploy to spend more money. Instead of Obama's "invest-and-grow," Republicans now offer "cut-and-grow," which will take its place beside "government ownership of the means of production" and "tax cuts that pay for themselves" in the Pantheon of Economic Nonsense.

Republicans, it turns out, have no public investment strategy, just as they have no health-care strategy and no agreed-upon blueprint for reducing federal spending. What they have are poll-tested talking points, economic delusions and an overwhelming partisan instinct to say "no" to anything Barack Obama proposes. In their response to the president's State of the Union message, they remind us once again that they are not serious about economic policy and not ready to govern.

An excellent observation by Ross Douthat

From The New York Times

But it was still striking that in an address organized around the theme of American competitiveness, which ran to almost 7,000 words and lasted for an hour, the president spent almost as much time talking about solar power as he did about the roots of the nation’s fiscal crisis.

Rape of the Union: Corporate Profits and Lost Jobs

Link is here:

Looking ahead to tonight's economically-themed State of the Union address from Barack Obama, one encounters conflicting numbers. In some significant ways, the US economy has appeared to recover, returning to non-recession levels in many measurements, and exhibiting growth as well. Corporate profits have soared, with major corporations and businesses posting their highest third quarter ever in fall of 2010 and increasing their share of the total economic output at the same time. Halliburton--can't forget about them--just reported the doubling of theirprofits. What's all this downer talk about a recession anyway?

Yet for most of the country, the economy seems to be in more of a hobble than a gallop, with unemployment--one of the more palpable measurements of economic viability--still above 9 percent, more than double the roughly 4 percent joblessness in 2000. 47 million people currently live below the poverty line, and we're not talking about a high bar here: $22,400 for a family of four. What on earth is going on? Much has been made about rising inequality in the United States--a recent statistic showed that 44 percent of the wealth in New York City was owned by the top 1 percent. Obama himself has come under fire for being beholden to big business and the interests on Wall Street repeatedly since the bailout, and many considered his appointment of Jeffrey Immelt yet another sign of his alliance with the big guys. Is the job market merely lagging behind big business's earnings? Or is part of the reason for the windfall profits the shedding of American jobs? There was once a quaint idea called the American dream, with the small business as its corner stone. Is it now just a dream? A few economic commentators weigh in, addressing the issue of big corporations shifting jobs overseas:

This Is the Closest You Will Ever Get to Fly Hanging From an Helicopter

If you have never been suspended from an helicopter as it swooshed through mountains and rivers at low altitude, this fun interactive panorama video will give you a good idea of how it feels without having to stain your underpants:

Remember to click and move your mouse around as the video plays. Really neat.

A Perfect Portrait of New York City In Three Minutes

Two interesting columns from David Brooks

Mr. Brooks argues that in order for the US to compete in the next century, the federal government must act like a university

So it is with government in an innovation economy. Entrepreneurs, corporate executives, line workers and store managers handle the substance of the economy. Government tries to nurture settings where brilliance can happen.

First, government establishes an overall climate, with competitive tax rates and predictable regulations and fiscal balance. Tax rates don’t have to be rock bottom. Companies will pay more if there are other amenities to compensate. But everything should be structured to nurture new business formation.

Then government actively concentrates talent. City governments are used to thinking in this way, while national governments lag. For example, Robert Steel, the deputy mayor of New York City, gave an excellent speech on Dec. 16 on how to build a bioscience center in Brooklyn and how to build an engineering center on Staten Island or Roosevelt Island. The speech was about using government to build hubs.

Finally, the government has to work aggressively to reduce the human capital inequalities that open up in an innovation economy. That means early and constant interventions so everybody has a chance to participate.

President Obama exists because his father was drawn to study in the United States. Obama embodies America’s nascent role as the crossroads nation. Let’s see if he can describe the next phase of American greatness.

Mr. Brooks argues that the federal government needs an achievement test

The best way to measure government is not by volume, but by what you might call the Achievement Test. Does a given policy arouse energy, foster skills, spur social mobility and help people transform their lives? Over the years, America has benefited from policies that passed this test, like the Homestead Act and the G.I. Bill. Occasionally, the U.S. government has initiated programs that failed it. The welfare policies of the 1960s gave people money without asking for work and personal responsibility in return, and these had to be replaced. The welfare reforms of the 1990s involved big and intrusive government, but they did the job because they were in line with American values, linking effort to reward.

Over the past few decades, Americans have waged political war as if all that matters is the amount of money going into federal coffers. The fights have been about “cutting government” or “raising revenue.” But amid this season of distraction the entire society suffered a loss of values and almost nobody noticed until it was too late. Both business and government started favoring consumption and short-term comfort and neglecting investment and long-term growth.

This hasn’t been a case of government corrupting capitalism or vice versa. The two have worked hand-in-hand. The government has erected a welfare state that, as Matthew Continetti of The Weekly Standard has pointed out, spends vast amounts on consumption (Medicare, Medicaid, Social Security, interest on the debt) and much less on investment (education, research, infrastructure), while pushing the costs on future generations. Meanwhile, the private sector has encouraged a huge increase in personal debt to fuel a consumption bubble. The geniuses flock to finance, not industry.

Watch IBM's Jeopardy-Playing Computer Obliterate Humanity's Champions

Link is here.

This is amazing technology

Google Translate Android App Translates Real-Time Speech

New BBC Series Show How Amazing Humans Can Be

This TV series looks awesome

China update

GM's China sales pass US for first time in history

General Motors Co. sold more cars and trucks in China last year than it did in the U.S., for the first time in the company's 102-year history.

But despite GM's gains in China, Toyota Motor Corp. managed to hold onto the title of world's largest automaker. The Japanese company reported 8.42 million sales worldwide last year. That's 30,000 more than GM's 8.39 million in global sales for 2010.

Appeasement is the proper policy towards Confucian China

Factions in Beijing appear to think that China will win a trade war if Washington ever imposes sanctions to counter Chinese mercantilism. That is a fatal misjudgement. The lesson of Smoot-Hawley and the 1930s is that surplus states suffer crippling depressions when the guillotine comes down on free trade; while deficit states can muddle through, reviving their industries behind barriers. Demand is the most precious commodity of all in a world of excess supply.

The political reality is that China’s export of manufacturing over-capacity is hollowing out the US industrial core, and a plethora of tricks to stop Western firms competing in the Chinese market rubs salt in the wound. It is preventing full recovery in the US, where half the population is falling out of the bottom of the Affluent Society. Some 43.2m people are now on food stamps. The US labour force participation rate has fallen to 64.3pc, worse than a year ago. Only the richer half is recovering.

The roots of this imbalance lie in the structure of globalisation and East-West capital flows – and no doubt the deficiencies of US school education – but China plays a central role, and this will not tolerated for much longer if Beijing is also perceived to be a strategic enemy. China’s economic and military goals are in conflict. One defeats the other.

Don't Believe The Numbers: Chinese Inflation Is Getting Worse And A Crisis Is Coming

China released a slew of important economic data on the evening of Wednesday, Jan. 19, and markets were paying particular attention to China’s inflation. In order to put out the wild fire of inflation, China's central bank raised interest rates twice, and increased the reserve ratio for lenders four times in the span of just last two months.

Those tightening measures have prompted great concerns about the major growth engine of the world. Partly on speculation (based on leaked information) that China’s inflation eased last month, emerging market stocks and the MSCI EM index climbed to its highest level in two and a half years just before the official data release.

Why China Thinks Hu Jintao's Visit Was A Success

Happy Australia Day, January 26

Australia Day, January 26: Learn About The Country's Incredible Animals

Bad news for privacy

Domestic use of aerial drones by law enforcement likely to prompt privacy debate

The drone technology that has revolutionized warfare in Iraq, Afghanistan and Pakistan is entering the national airspace: Unmanned aircraft are patrolling the border with Mexico, searching for missing persons over difficult terrain, flying into hurricanes to collect weather data, photographing traffic accident scenes and tracking the spread of forest fires.

But the operation outside Austin presaged what could prove to be one of the most far-reaching and potentially controversial uses of drones: as a new and relatively cheap surveillance tool in domestic law enforcement.

For now, the use of drones for high-risk operations is exceedingly rare. The Federal Aviation Administration - which controls the national airspace - requires the few police departments with drones to seek emergency authorization if they want to deploy one in an actual operation. Because of concerns about safety, it only occasionally grants permission.

But by 2013, the FAA expects to have formulated new rules that would allow police across the country to routinely fly lightweight, unarmed drones up to 400 feet above the ground - high enough for them to be largely invisible eyes in the sky.

Google Comes Under Fire for 'Secret' Relationship with NSA

In a letter sent Monday, Consumer Watchdog asked Representative Darrell Issa, the new chairman of the House Oversight and Government Reform Committee, to investigate the relationship between Google and several government agencies.

The group asked Issa to investigate contracts at several U.S. agencies for Google technology and services, the "secretive" relationship between Google and the U.S. National Security Agency, and the company's use of a U.S. National Aeronautics and Space Administration airfield in California.

Federal agencies have also taken "insufficient" action in response to revelations last year that Google StreetView cars were collecting data from open Wi-Fi connections they passed, Consumer Watchdog said in the letter.

Obama Administration National Internet ID Program

Prepare yourselves, my fellow Americans, for the coming age of the National Internet ID.

What's that oppressive-sounding thing, you ask? Why, ask the President Obama, who has moved forward with plans to give each American an online ID as part of an ambitious—and currently ambiguous—cybersecurity initiative that will be headed up by the U.S. Commerce Department.

Now, before you panic about national ID cards or huge, expanding governments, Commerce Sec. Gary Locke wants to assure everyone that this program won't encompass any of those slippery slope ideas whatsoever.

What it will do, he said, is more akin to providing each U.S. citizen with a single online ID with which to sign into multiple sites, pages and platforms. Confused? Great, because this is governing we're talking about here, and that's the idea.

Officially called the National Strategy for Trusted Identities in Cyberspace, the program is expected to solidify over the next few months so hopefully there will be more to report in the spring.

Again, ambiguity is currently the word surrounding this simplified online ID program, which isn't ironic at all and shouldn't be feared by anyone.

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