Deinonychus antirrhopus

Questions on Social Security

In the comments to this post, cj asked a number of questions about Social Security. I'll list them here then go through them as best I can.

• Can cutting Spending and economic growth solve the long term budget imbalance?
• Increasing the qualifying age for Social Security/Medicare and effects on certain groups.
• What about means testing for Social Security/Medicare.
• Will Social Security be available to cj and her husband?

Well the last one isn't a question, but given she has listed her age it should be a question for many people her age.

Okay the first one, ill spending cuts and economic growth and solving the long term budget imbalance? In a word, no. Economic growth is projected to decline in the future and if one were to plot GDP they'd see the decline has already started. Second, spending cuts in terms of discretionary spending will be nowhere sufficient. What needs to be done is an over-haul of the Social Security and Medicare systems. Note I said overhaul. The idea of getting rid of these two systems just isn't in the cards. Only a small minority would favor this approach, so its pretty much a forgone conclusion these programs are here to stay. The question is what form do they take.

The current system has the problem that it is susceptible to large scale demographic shifts. This is the problem that is coming down the road right now.

So what are some of the ideas for SS/Medicare reform? There is Bush's carve out plan where, I believe it is 2%, is carved out and diverted to a personal account. That is if I opted into the program 2% of my SS payments would go into this account with my name on it. The money would then be invested and when I reach the qualifying age I can withdraw the money. The problem is that this will not solve the problem, and will hasten the day when things go belly-up for Social Security. Since I am "opting out" my taxes are no longer going into paying current recipients or going into the surplus.

Other plans are things like where part of the trust fund is invested in the hopes of cashing in on the higher rate of return. The problem with this though is that the higher rate of return on the market is due in part to the start and end points. Returns early on were quite high, but are now coming down. IIRC the market rate of return is something like 6-7%, not 12% (or whatever--I think Arnold Kling has a Tech Central Station article on this). The surplus SS money is currently invested in government bonds which, IIRC pay 6% interest. So not much of a big gain there.

The best plan that I can see is the forced savings plan administered by the government. Instead of paying a SS tax, the money goes into a private account with your name on it. The money is then invested in a maret weighted index fund (to prevent crazy uncle Eddie from trying to time the market and winding up broke). The problem here is that current retirees and near retirees will still be expecting their Social Security benefits. So these will have to be paid for either by a new tax (ouch) or issuing debt (ouch for our grandkids). The details on one plan can be found here.

As for increasing the qualifying age and various sub-groups of the population, cj, notes that some people suffer from certain conditions and hence it could be unfair for these groups. Good point, but please cj don't talk about them too loud. The politicians wont like you pointing these things out. You see, those people who pay into the system, but die early (especially when they are around say 55 years old) are a net benefit to Social Security. They paid in and unless they are married, they wont be withdrawing anything. So we certainly don't want to do anything about that. Yes, sounds cavalier, I know, but welcome to the wonderful world of perverse incentives. Perverse incentives is where a policy is put into place that induces perverse behavior. Basically the government has an incentive to push the qualifying age higher precisely because these kinds of ethnic health problems. If the black male has a life expectancy of 69, and the qualifying age is set to 72, then all the better, from the perspective of trying to solve the Social Security problem.

Note however, there is no such incentive with the forced savings account. Since the money you are going to using for your retirement comes from your account and your account alone (well unless your married), there is no incentive to raise the retirement age.

As for means testing I tend to take a less than positive view of it. Basically what means testing does is reward the spendthrift and punish the thrifty. For example, suppose we have benefits set up to work as follows,

Savings	Benefit	Total
0	100	100
10	95	105
20	90	110
30	85	115
40	80	120
50	75	125
60	70	130
70	65	135
80	60	140
90	55	145
100	50	150

Notice that savings always pays. But suppose we have two people who earn exactly the same income. Bob though spends it all and saves none. He gets $100. Joe saves and he gets his savings ($100) plus the $50 for a total of $150. Both paid in the same money, but part of Joe's payments go to Bob. That is for this example to be fully funded both Bob and Joe must pay $75 into the system. Bob gets his $75 back plus $25 of Joe's. In other words, Joe subsidized Bob's spendthrift behavior.

As for the availability of Social Security for CJ and here husband, they'll start receiveing SS benefits about 20 or so years before the system keels over and gives up the ghost (assuming nothing changes from now till then). So they'll get at least part of it. Finally let me say, I don't want to "toss anybody overboard" here when it comes to the "social safety net". The problem as I see it is our current net is rotting away and soon nothing will be left and fixing such a net latter rather than sooner will just be all the more costly.

Ahhh, Saturdays Are Great

Waking up late, not rushing around...basically taking it slow and easy.

As you can see Julian has the right idea.

These pictures aren't from Saturday, but what the heck.

Kevin's Continuing (Mis)Adventures in Economics, Part 7

This is an older post of Kevin's, but what the heck. Kevin is responding to a reader who writes,

After the SOTU, you ran a post on Bush's claim that by holding discretionary spending increases to 4 percent, the deficit will be cut in half in 5 years, showing this is highly unlikely.

Last night on the Newshour Margaret Warner asked [CBO Director] Douglas Holtz-Eakin about this claim and he said (approximately) "in 2009 the deficit will be 2% of GDP, it is now 4%, so it is cut in half". So apparently it boils down to what the definition of "half" is.

Many Bush supporters cite "percent of GDP" as a meaningful statistic in assessing the deficit, but is it?

Kevin's response is captured by this quote (I strongly recommend reading the whole post to make sure you have the complete picture here),

But wait! A better question is, "Will Bush's policies actually lead to the deficit being reduced to 2% of GDP?" Answer: No. Not even close. Here are the numbers from the latest CBO report:

• This year's deficit: $477 billion. As percent of GDP: 4.2%

• 2009 "baseline" deficit: $268 billion.
  As percent of GDP: 1.8%

• 2009 real deficit: $552 billion.
  As percent of GDP: 3.8%

So using real numbers the deficit is reduced by a whopping .4% even when calculated as a percentage of GDP. This number is based on the CBO's own estimates of three things: (1) making the tax cuts permanent, a stated Bush policy, (2) reform of the Alternative Minimum Tax, and (3) discretionary spending rising at 4% per year.

What is the problem? I can't find the $552 billion dollars Kevin is talking about in either report.

Well okay, I did find $552 billion mentioned in the second report in the following quote,

Net Medicare outlays for the Part D drug program will total about $640 billion through 2013, CBO estimates--$771 billion in payments to prescription drug plans offset by $131 billion in premium receipts (see the table below). Of that $640 billion cost, $552 billion is estimated to come from the general fund of the Treasury.

But that isn't talking about the deficit per se, "real" or otherwise.

Kevin does claims the following,

Note: the CBO report itself includes one deficit projection based on 2.5% growth in discretionary spending and another based on 4.8% growth in discretionary spending. My figure above is an interpolation that estimates the deficit if we assume Bush's goal of 4% growth.

Now, the problem is I can't find the budget numbers based on the 4.8% growth in discretionary spending numbers anywhere. There is a scenario with discretionary spending of 4.6% (i.e., the expected rate of economic growth--details found here), but even with this case the deficit is $387 billion not $552 billion. This means the deficit would be 2.7% of GDP so not half either, but...where is Kevin getting his numbers?

Now there are a couple of points here. First, we can have all sorts of fun with projections. You make your assumptions, I'll make mine and we'll then argue over which assumptions are right. The bottom line though is that unless we do something about this kind of profligate spending it will entail not just a repeal of Bush's tax cuts, but additional tax increases on top of that. Neat, huh? Of course, Kevin doesn't tell you that.

Update: I thought it might be helpful to show where some of these numbers broken down a bit. The baseline projection for the deficit according to the CBO in 2009 is $268 billion dollars. Here are some of the alternative growth scenarios.

Alternate Growth Scenarios		Amount Added to Deficit	Total Deficit
Discretionary Spending Increases with Growth in GDP	Increased Spending	-119	-402
	Increased Interest	-15
Discretionary Spending Increases at 6.9%	Increased Spending	-219	-513
	Increased Interest	-26
Amounts in billions of dollars, Source (Table 1-3)

Update II: Still curious as to how Kevin got his "real" deficit numbers I once again tried my hand at it, and I think I got it.

1. First you have $268 billion baseline deficit.
2. Add to that the $48 billion for making permanent the tax cuts.
3. Add $40 billion for partial expensing.
4. Add $24 billion for additional debt service.
5. Add $51 billion for Reforming the Alternative Minimum Tax and $7 billion for additional debt service.
6. Now comes the somewhat more difficult part.
   1. Divide 4% by 4.7% to get (about 85%).
   2. Now the additional amount added to the deficit if Discretionary spending increases to match growth in GDP is $134 billion (including debt service).
   3. Now multiply $134 by 85% to get $114 billion.
   4. This is the amount added to the deficit if discretionary spending increases by 4%.
7. Now add them all up and you get $552 billion.

So the numbers aren't completely made up, just a fairly complicated way to get to them. Why 4% growth vs. the 4.7% (or there abouts)? Beats me. But lets note a few things here

1. The Bush tax cuts being made permanent with cost, in 2009, about $59 billion.
2. Reforming the Alternative Minimum Tax will cost about $58 billion.
3. In looking at Table 1-3 we see that Partial Expensing, "Other" and debt service for these two will cost $73 Billion. (Strangely enough Kevin omits Other, but includes the interest for Other...go figure.)

What does this tell us? It tells us that if we let the parts of the Bush Tax cuts expire we will reduce Kevin's "real" deficit by only $59 billlion. We'll go from $552 billion to $493 billion dollars. So Kevin isn't saying, "Lets just get rid of the Bush tax cuts." Oh my no. No. No. No. Kevin is saying we'll let those things expire, plus we'll raise taxes a whole shit load more (that's a technical term in economics by the way--it's when you raise people's taxes so much that they think their lives have gone to shit).

Don't forget that Kevin also wants some sort of government provided health care. In the short run he'll settle for a partial provision vs. universal, but universal is something he'd ultimately like to see. That'll cost alot too. And this does not address the tax increases to cover things like Social Security and Medicare. Remember we need about a 13% increase in taxes right now today to make the system solvent through 2077.

Howard Kurtz Gets it Wrong

In regards to Howard Stern, Howard Kurtz gets it wrong.

So Clear Channel drops the Stern show from six stations (along with Bubba the Love Sponge). A Stern caller (the man who taped himself going at it with Paris Hilton, who nonetheless has a reality show on Fox) had said something ugly and racial on the air and it wasn't deleted the way it should have been. What a perfect time to ax the program, what with the company's CEO heading up to the Hill to testify.

Actaully the guest Kurtz is referring to is Rick Salomon, and he didn't say anything ugly or racial, it was a caller. Such racial statements are rarely bleeped on the Howard Stern show. I know, I happened to be listening to that day and heard the exchange.

Link via InstaPundit.

Update: Clay Ranck has a very good post on this as well. Read the whole thing.

Blaming all this on Bush, Powell and the FCC is stupid. It is stupid because it exonerates Janet Jackson, Justin Timberlake, and CBS for their behavior. They violated the rules, and now they are over-reacting to the consequences and guys like Howard Stern should stop whining so much.

The Department of Amazing Contradictions

I love Kevin Drum. Where can anybody find somebody so clueless as Kevin? I was searching through his site on economic posts and found this one, and this one. There is a stunning contradiction in there.

Second, although problems with Social Security and Medicare funding are serious, especially given George Bush's insane economic policies, they aren't that serious.

What policies are this? The ones that have lead to a budget deficit that according to the CBO will be between 4.2% of GDP and 3.7% (depnends on whether you adjust for cyclical influences or not).

But in the second post we have this statement,

4% of GDP is not a huge sum, and neither is 7%. As a country, we could afford to spend 7% of GDP on our retirees today if we needed to, and in 30 years we'll be able to afford it even more easily.

Suddenly not only is 4% of GDP year-in-and-year out not a huge sum, but neither is 7%. The last part about how we'll be able to afford it even more easily in the future is truely bizzare. Since the percentage is a relative measure the burden doesn't decrease, it stays the same.

I know, I know, 4% when it is debt is insane, but a permanent 3% increase in expenditures in Social Security is different dammit!

The guy is a veritable gold mine of sloppy thinking, internal contradictions, and outright nonsense.

Long Term Government Budget Woes

Alex Tarbarrok just discovered Laurence Kotlikoff. There was a report done by Kent Smetters and Jagadessh Gokhale that noted that the U.S. government was facing a long run deficit of $44 trillion dollars (here is Kotlikoff's Boston Globe article on this.).

Suppose the government could, today, get its hands on all the revenue it can expect to collect in the future, but had to use it, today, to pay off all its future expenditure commitments, including debt service net of any asset income. Would the present value (the value today) of the future revenues cover the present value of the future expenditures?

The answer is no, and the fiscal gap is the $44 trillion. Now, that is big bucks by anyone's definition. It's four times current GNP and 12 times official debt. Imagine everyone in the country working for four years and handing over every penny earned to pay this bill, and you'll grasp its size.

One way out of this is by raising taxes dramatically and cutting discretionary expenditures to nothing if there are no changes to policies such as Social Security and Medicare. Of course, such a solution is economic suicide, IMO.

I was aware that things were not going to be all sweetness and roses about 2 years ago (more or less) when I was at UCLA's Anderson School of Management's forecasting seminar. Kotlikoff was one of the guest speakers and that is where I ran across his, The Coming Generational Storm.

Now some object to the method of analysis that Kotlikoff, et. al. use. They point out that there is an assumption that government spending is completely fallow. While this may not be true, the analysis does provide us with a worst case scenario. So now the question is: do we want to risk it and see if government spending is going to produce enough growth to offset the deficit?

Its funny how people will ridicule a conservative who'll suggest inducing economic growth to solve budgetary problems, but will with a straight face suggest government spending can accomplish this task that economic growth cannot. Maybe it can, in conjunction with economic growth, solve the problem, but I'm not sure that is a risk I want to take.

The bottom line though is that there is a serious imbalance in the government's budget over the long term. Correcting this imbalance won't be painless, but it should be done. However, I predict that nothing will be done. Neither candidate will discuss this issue this election. To do so will risk attack by the other. The reason for this is that the way out of this mess (without raising taxes) is fixing the long term imbalances in Social Security and Medicare. Both programs are going to end up being trillions of dollars in the red. It is doubtful that taxing wage and salary income currently not covered will solve the problem. Further, I am not sure the Social Security Trustees Report correctly factors in the rate of growth in Medicare spending. Add on top of that the current prescription drug program and its inevitable expansions and revisions and the $44-$45 trillion Kotlikoff, et. al. are talking about is probably an underestimate.

Homo Reciprocans

In the post about the ultimatum game I noted that according to the concept of Homo economicus we should not see any rejections along the equilibrium path of play, but in reality we do see rejections. This presents a problem for Homo Economicus in that we'd like a theory that has predictive power. So a new concept maybe needed, one such concept is Homo reciprocans.

When in situations where retaliation is costly and/or impossible Homo reciprocans behaves just like Homo economicus--i.e., self-interested behavior that does not exhibit the behavior we saw in the ultimatum game.¹ But in strategic situations in general Homo reciprocans will retaliate even if it is costly to do so. In short, Homo reciprocans will tend to cooperate in situations where Homo economicus wont, but when confronted with "cheating" will retaliate even to the point of incurring costs to do so.

With Homo reciprocans you get all the outcomes of Homo economicus in certain situations (i.e., situations with a large number of players), but in other situations you get more nuanced results that fit some of the experimental observations.
_____
¹For example when playing the ultimatum game where player 1 is a computer, and player 2 knows this the number of rejections drops dramatically.

News Flash: Earth Not Destroyed By Meteor

Just having some fun with the fact that people tend to over estimate probabilities for rare events.

Update: I swear I had no knowledge of this news story until 1:25 PM Pacific time.

Some scientists believed on 13 January that a 30m object, later designated 2004 AS1, had a one-in-four chance of hitting the planet within 36 hours.

Of course near the bottom of the article we have this,

"I find it incredible that such action was contemplated on the basis of just four observations. That is just not enough to yield a sensible orbit."--Brian Marsden

Whoops.

And 2004 AS1? It turned out to be bigger than anyone had thought - about 500m wide. It eventually passed the Earth at a distance of about 12 million km - 32 times the Earth-Moon distance, posing no danger to us whatsoever.

The Passion of the Christ

I just got back from seeing this movie. Others have covered the movie adequately -- I just wanted to point out some of the audience reaction.

The theatre was pretty full, even for a 9:15 PM show. There were quite a few teenagers there, yukking it up for about 2 minutes into the film. Then silence enveloped the theatre.

Lots of "UGH!" reactions during the flogging scene, particularly when one of the Romans picked up a spiked club.

After a while, though, the sheer brutality of the Romans had numbed the audience. The incredibly graphic nailing to the cross scene was greeted with silence. (I and several others did verbally flinch when a crow flew on screen).

The audience left the theatre slowly. About 1/3 of the patrons were still seated when I left, a lot of them with shocked looks on their faces. Not a lot of talking on the way out either -- my companion said "this is the most sober crowd I've ever seen."

My conclusion: definitely NOT a movie to go see frivilously.

PS -- I would be remiss if I didn't ask: can anyone explain what the Mini-Me thing was in Satan's arms during the scourging scene? The best we could figure was it was supposed to be an negative of the Madonna & Child.

PPS -- I liked Gibson's treatment of Pontius Pilate as the very reluctant governor caught in an impossible situation.

Spastic Monkeys

You gotta at least check out a blog titled Spastic Monkeys. Plus they have a picture of Homer Simpson in a recent post, what more could you want?

What Do You Call...

...a candidate who takes money from the equivalent of modern day "Benedict Arnolds"?

John Kerry.

John Kerry uses that very language to describe those CEOs and executives at firms that move jobs overseas, and yet he takes money from these people as well. Yes, yes I know John Kerry served in Viet Nam.

Executives and employees at such companies have contributed more than $140,000 to Kerry's presidential campaign, a review of his donor records shows. Additionally, two of Kerry's biggest fundraisers, who together have raised more than $400,000 for the candidate, are top executives at investment firms that helped set up companies in the world's best-known offshore tax havens, federal records show. Kerry has raised nearly $30 million overall for his White House run.

It makes me wonder when Kerry uses rhetoric with workers at various plants and factories that he wont promise them the impossible. Is he signalling that if he becomes President he'll sell them down the river to keep his big dollar donors happy?

This is just another example of how John Kerry, yes he served Viet Nam, and no I did not (probably because I was born in 1968), can manage to straddle both sides of an issue.

Kerry has come under attack from President Bush, as well as some Democrats, for criticizing laws he voted for and lambasting special interests after accepting more money from paid lobbyists than any other senator over the past 15 years. Some Democrats worry that Kerry is leaving himself open to similar attacks on the latest issue.

This quote is also revealing,

On Monday, Kerry was asked why two of his biggest fundraisers were involved with "Benedict Arnold" companies. "If they have done that, it's not to my knowledge and I would oppose it," Kerry told a New York television station. "I think it's wrong to do [it] solely to avoid taxes."

So is Kerry demonstrating his own cluelessness or his own disingenuousness.

Thanks to Henry Hanks for the link.

Update: Prof. Bainbridge has more, and its good stuff. Namely Prof. Bainbridge askes the following quesiton,

If Kerry is so upset with these firms, why not send their money back?

A moral failing on Kerry's part?

Prof. Bainbridge also notes why these guys donate to Kerry,

Conversely, why do such firms give to a guy who bashes them? Access, of course. They want to have access to the policymaking process in the event Kerry wins. Yet, there is something odd about the way business thus ends up funding the anti-business left. Wouldn't it be easier to just keep the business bashers out of positions to which business needs access?

As to the last question I'd point out that maybe this is an example of "covering all the bases". Sure donate to Bush, or the Republicans, but also donate to Kerry just in case. Another alternative, is that their own probability assessment has Kerry winning in November, so its best to get in with the winning team now, and if they lose no worries as Kerry's policies fall with him.

The Ultimatum Game

The Ultimatum Game is one of those interesting games in game theory that underscores the limitations of homo economicus and is prompting economists to look for a new "model" of man. Here is how the game works.

1. Player 1 is given $10.
2. Player one has to make an offer to player 2 in whole dollar amounts that are between $1 and $10.
3. Player 2 then either accepts or rejects the offer.
4. If the offer is rejected neither player gets any money.
5. If the offer is accepted then both players keep the money, player 2 gets the money from the offer, and player 1 keeps whatever is left.

Standard economic theory (and basic game theory) holds that the "best" strategy for player 1 is to offer player 2 $1. Since $1 is better than zero, Player 2 will accept, and player 1 gets $9 and player 2 gets $1.

Now, in actuality the modal offer from player 1 is $5 and with there being quite a few rejections for offers at $3. What is going on? Well, the typical response by player 1 is that they are worried about rejection in which case they get nothing. By the same token those in player 2's position want to punish those making such niggardly offers. Standard economic theory has failed in that it has not predicted accurately.

Update: See this post for more discussion on an alternative to Homo economicus.

Kevin's Continuing (Mis)Adventures in Economics: Part 6

I think this is the sixth post, but if it isn't, what the Hell its a good enough number to start at.

Anyhow in this post, Kevin spots something Greenspan noted about the deficit,

admitted that the size of the deficit made it unlikely that spending cuts alone would be sufficient to accomplish the task. And he said it was unlikely that the United States could "grow its way" out of its budget deficits solely with an expanding economy, a solution often promoted by conservatives.

Kevin then with penetrating insight then asks,

Hmmm, let's see. Spending cuts won't do it. Economic growth won't do it. So what's left?

Kevin then answers his own question,

Oh yeah, repealing Bush's tax cuts. Funny how he just hates to admit that even though he's left no other mathematical alternative, isn't it?

Apparently the idea of economic growth and cutting spending didn't occur to Kevin.

Another interesting problem. I can't seem to find the quote Kevin has highlighted in the article he links too. Maybe Kevin meant to link to this article instead.

I gotta tell ya' its pretty scary how people will take the word of guy who can't get the right link, or see another answer that is rather obvious.

Furthermore, Kevin is also misleading in that he doesn't provide much of the context for what Greenspan's comments apply too. It isn't just the current deficit. Sure its pretty big, and yeah it isn't going to go away anytime soon. However, what really has Greenspan worried is 2008. That is when the Baby Boomers hit age 62, and will probably start leaving the economy. In the few years later the Social Security Trust Fund will stop running a surplus and drawing down on its bonds. This will automatically trigger an increase in the deficit or an increase in taxes...a big increase.

And why is Greenspan reluctant to raise taxes? Increasing taxes tend to reduce economic activity. Reduced economic activity means that you'll have a smaller tax base, and could end up decreasing taxes. The Laffer curve is indeed real no matter how much those on the Left wish it weren't. Simply raising taxes willy-nilly runs the very real risk of reducing tax revenue and putting you back right back were you were or even worse.

Look at the linked graph of the Laffer curve. Notice that save for the peak you there are two tax rates (one high and one low) that yield the very same tax revenue. If we are currently on the left hand side of the curve, raising taxes will at first increase revenues. But if you keep raising taxes, you will start down the right hand side of the graph and eventually get right back to the revenues you had when you had the deficit. Factor in the largely accepted projections that we will face dramatically increasing Social Security and Medicare costs, if you keep raising taxes you'll eventually be worse off.

Now it may not happen right away, but these Baby Boomers aren't going anywhere, except to leisure world. Some of our most skilled workers will be leaving the work force in large numbers soon and replaced by a smaller number of workers. Further, they will be drawing down on their savings. Factor in the fact that economic booms have been decreasing in their magnitude (i.e., the peaks have been declining while the troughs have been holding steady meaning average economic growth is declining) and you get a recipe for decreasing economic growth for the future.

So, you have an economy whose growth rate appears to be slowing, the prospect of dramatically increasing costs due to massive demographic shifts (for which we can do little about save change the policies--which I might add guys like Kevin Drum will immediately demonize people for suggesting), and possibly increasing taxes and you've got a pretty grim looking future ahead.

Greenspan, whose knowledge of economics undoubtedly runs much deeper than Kevin's knows this too,

"I'm just basically saying we are overcommitted at this stage," Mr. Greenspan added. "To the extent we try to resolve the overcommittment on the government side by raising taxes, we are risking lowering the rate of growth in the revenue base."

In short, Mr. Greenspan realizes something Kevin doesn't. The U.S. economy is not a bottomless well form which to get more and more money for the programs he so cherishes. Increasing taxes may work in the short run, but with the long term projected budgetary short falls it is not a long term solution.

Robert Samuelson on the Jobs Situation

Robert Samuelson in his column notes the following,

The jobs rhetoric captures politics' casual cynicism. John Kerry and John Edwards must grasp a president's modest job-creating powers; otherwise, they wouldn't be fit for the White House. Their jobs obsession is dishonest expediency. They know President Bush is vulnerable. To be fair, the deceit is bipartisan. The Bush administration is ready to claim credit for almost any good economic news.

This is exactly right, IMO. If there was a sure fire way to lower unemployment/increase employment the President (any President) would use. Especially now during an election year. The truth is that the policy tools available to the President are imprecise and clumsy at best. There isn't much that Democrats could do that would be different.

For example, one claim is to put more money in that hands of those with lower incomes. Okay fine, then what? They spend it right? Fine. But how come the guy in the upper portion of the income distribution wont "spend" it. By spend I mean in very broad sense. Sure he might not go out and buy a loaf of bread and a bag of chips, but he might buy new equipement for his company. He might invest it. Or he might go out and redecorate his house (which employes people). All of these things are generally speaking, good for the economy. Unless the money is being stuffed in a matress alot of it is probably filtering back into the economy. So would simply transferring money have made such a big difference that we'd have 2,000,000 more jobs now? I seriously doubt it. This is why you wont find serious alternative proposals from the Democrats on this. There aren't any. Everybody is wondering why unemployment is seemingly stuck above 5%.

But of course, since unemployment is stuck above 5% the loyal opposition is going to use it as an issue. Bush sucks because unemployment sucks (well not really by historical standards, but lets ignore that). Elect us and well fix the problem (nevermind that they don't have a viable plan). And completely ignore the question of why is unemployment remaining "so high" despite all the efforts to reduce it. I mean actually getting to the bottom of such a problem is not good politics.

Update: This animated gif from John Kerry's web site is a perfect example.

"Bush sends jobs over seas..."? Sure, that has been Bush's secret agenda all along, to send jobs overseas.

Update II: More lies from the Kerry Campaign,

Under President Bush’s watch, this country has lost 3 million jobs and our manufacturing workforce is at a more than fifty year low. We've gone from the biggest surpluses to the biggest deficits in our history. He inherited the strongest economy in the world - and brought it to its knees. --emphasis added

Actually, Bush inherited an economy that by many indicators was weak and getting weaker. Another version of blame the recession on Bush.

And then there is this part,

This President promised that his tax cuts would create 3.9 million new jobs. So far he’s lost 3 million. Now, after promising to create 2.6 million jobs this year, even his own Cabinet is telling us not to believe him.--emphasis added

Yes, Bush lost those 3 million jobs. Don't you see that was his grand master plan all along.

It is regretable that the Administration keeps cranking out these employment gain numbers that are so large, but that doesn't mean that Bush is purposefully sending jobs overseas or trying to destroy jobs.

"Interview" with John Kerry

Alphecca has a mock-interview with John Kerry who-by-the-way-served-in-Vietnam.

Brice: Thanks for taking a few moments to talk with us, Senator Kerry.

Kerry: My pleasure Brice. You probably didn't know this but I served in Viet Nam. One of my men was named Brice. I think he was gay. Not that there's anything wrong with that mind you as long as they don't try to get married or something.

Brice: Yes well-

Kerry: Did you serve in Viet Nam? Or "Nam" as we patriotic Democrats called it?

Brice: I was born in 1981.

Kerry: Yes but did you serve there?

Gay Marriage and the FMA

Okay, I want to first preface this by saying I am in favor of gay marriage. In the past I have said I don't care, but I hope that it was clear I don't care what people want to do in terms of marrying another person. The implication being I'd support gay marriage. In other words, I'd support it at the ballot box. I'd support the candidate who favors gay marriage (all other things being equal--i.e., I probably couldn't bring myself to support Al Sharpton even if he was strongly in support of gay marriage).

However, I think those who are objecting to the Mass. Sp. Ct.'s behavior and Bush's support for the FMA are missing part of the argument. Robin Roberts has argued rather convincingly that the antics is MA are judicial activism. I'm not sure I agree with him 100% yet, but he has put forward some strong arguments.

The problem with judicial activism is that it has the potential to re-shape the Constitution not to suit the beliefs of the people, but to the beliefs of a handful of judges and attorneys. Granted it could be that the beliefs of these judges and attorneys are shared by every single person in the U.S. (although this is extremely unlikely...especially given the adversarial nature of our courts, i.e., there has to be somebody arguing the other side who disagrees). So even though the gay marriage issue is a just one (in my view at least), obtaining that goal via judicial activism circumvents the democratic process and denies a voice to those who are not the judges and lawyers involved in the case. This can be bad for a society, IMO. Think of the Roe v. Wade decision decades ago. This decision has had a lasting impact (for the worse, IMO) on our society. Our society is divided on this issue, and it is used ot hold up legal appointments and add additional stresses on the legal system. For a country that has as one of its central pillars the rule of law the latter is not good.

So when Jeff Jarvis writes,

Good God, you harp against those who would extend the Constitution to mold it to their beliefs and here you vow to amend it to do just that. You say you want less involvement and interference from government and yet you bring government into the bedroom. You talk about bringing the people together and yet you will set upon a long war to drive us apart.

This misses the above point. It isn't simply the molding of the Constitution, but how the Constitution is molded. By supporting judicial activism now (if it is indeed judicial activism) this opens the way for future judicial activism that may be much more onerous. Further, it leaves the molding and shaping of the Constitution to our beliefs up to a handful of judges and lawyers. We do have a way of changing the Constitution, it is the Amendment process as laid out in the Constitution. This process encourages public debate on the change and can help change people's minds on a topic. Forcing a change down their throats via the legal system will lead to a hardening of positions, animosity, and resentment.

I think it is also worth while to remember that while people can be strongly in favor of gay marriage they can also strenuously oppose judicial activism. This does not make them fascists or homophobes. The above is not an unreasonable stance to take, IMO. It is basically a stance that says, "The ends don't always justify the means." Think of it this way. Rounding up everybody who is HIV positive and executing them would be one way to stop the spread of the disease and save countless lives. Does that end justify the horrific means? Granted the current issue is far removed from this extreme example, but perhaps the overall point that the ends don't always justify the means is lost in the less extreme nature of the current issue.

Now all that being said, I oppose a Constitutional amendment to ban gay marriage. I think placing that kind of bigotry into the Constituion is quite bad. I don't support it at all.

Link to Jeff Jarvis via Michael Demmons.

Republican Stupidity

John Cole has a great example of over the top political rhetoric from the Right. There isn't much I can add that John hasn't captured with the pictures he has put up. Just check it out.

Clueless or Disingenuous?

And Prof. Bainbridge finds another good one,

Democratic front-runner John Kerry yesterday claimed he's unfamiliar with the much-publicized gay marriages being conducted by the mayor of San Francisco, so he can't express an opinion about whether they're right or wrong. "I haven't made any judgment about it. I haven't really kept up with exactly what he is doing," Kerry told a press conference at York College in Queens.

Prof. Bainbridge asks if Kerry is clueless or disingenuous. I'm going with the latter, my guess is his aids have told him to avoid this issue till they get a better handle on how it is playing with the rest of the country.

Bush Comes Out Swinging

This is via Prof. Bainbridge, who got it via Poliblog.

Without using Mr. Kerry's name, the president mocked him as a politician whose positions changed with the wind. The Democratic field, Mr. Bush said, is "for tax cuts and against them. For Nafta and against Nafta. For the Patriot Act and against the Patriot Act. In favor of liberating Iraq and opposed to it. And that's just one senator from Massachusetts."

And lands a good one.

Update: Actually there are several good solid hits in that article,

Alluding to Democrats who have criticized the war but agreed that the world is better of with Saddam Hussein out of power, Mr. Bush said, "Maybe they were hoping he'd lose the next Iraqi election."

Ouch that's another good one.

In an indirect slap at Mr. Kerry, who in a 1970 interview suggested that the United States military should be deployed only under the auspices of the United Nations, Mr. Bush said he would never "outsource" national security to other governments. Mr. Kerry has since said his views have changed.

And yet another. This is going to be an interesting election.

Kerry of course hits back, but they just seem to lack the sarcastic humor of Bush's comments,

Even before Mr. Bush delivered his speech, Mr. Kerry tried to pre-empt him. In an appearance in New York, the Massachusetts Democrat said he had Mr. Bush "on the run" even before Democrats settled for certain on their nominee. He said the president had failed on the economy, had pursued a "reckless" foreign policy and was practicing "crony capitalism and crony government."

In a statement issued after Mr. Bush's speech, Mr. Kerry said: "George Bush's credibility is running out with the American people. They want change in America and I'm running because I am determined to bring that change and put America back on track."

Ho hum.

Limbaugh's Legal Problems

I meant to blog about this last week when the brief was filed, but I forgot.

PDF file of Limbaugh's brief filed with the Florda 4th Circuit Court of Appeals.. It's interesring reading. I realize that it's one-sided, and should be taken with a grain of salt when stating the "facts" of the case.

One part jumped out at me, and I wanted to get the opinions of any lawyers in the audience [he typed while looking in Robin Roberts' general direction].

The normal procedure for getting someone's medical records in Florida is to subpoena the records. The target of the subpoena can then have a hearing where the state has to provide evidence as to why they need the records.

According to Roy Black, Limbaugh's attorney, the state didn't follow this procedure, but instead got search warrants and seized the medical records without Limbaugh's knowledge. Again, according to Black, the state used the following rationale for not following the usual procedure:

According to the prosecutors, they were concered that if they complied with the statute and provided Mr. Limbaugh with the required pre-seizure notice, the state risked losing the medical records.... The contend that they had attempted to seize legal files from Mr. Limbaugh's prior attorney, but found that the records had been transferred to undersigned counsel when counsel took over Mr. Limbaugh's defense.

This is the argument that the prosecutors used to a judge when they finally got a hearing.

Is it me, or is this a very silly justification? Limbaugh transferred his files from his old attorney to his new one -- wouldn't it have been incredibly stupid on his part (and malpractice on Black's part) not to do that?

There must have been more to the prosecutors' argument than that, since the judge didn't order the files returned.

The state has until the second week of March to respond. Maybe sseing both sides of the story will shed some light on this.

Goddammit

Bush came out in favor of the FMA.

"Today I call upon the Congress to promptly pass and to send to the states for ratification an amendment to our Constitution defining and protecting marriage as the union of a man and woman as husband and wife," Bush said.

"The amendment should fully protect marriage while leaving state legislatures free to make their own choices in defining legal arrangements other than marriage," Bush said.

So the amendment should protect "marriage" but presumably allow states to define "civil unions". What's the point? "Individual states can allow you to have the form of a marriage; just don't use that word (you icky faggots)".

Sorry, I'm a little pissed at the moment. Bush seems to be doing all he can to drive away my vote. The only things keeping me on his side right now are foreign affairs and tax policy.

"Our government should respect every person and respect the institution of marriage," he said

Please provide concrete evidence of how allowing my friends Ron and CLint (together for 14 years, one child) to get married harms the institution of marriage, especially in light of what heterosexual couples have done to the institution in the past four decades.

Update

Ok, I've had a shot of Dr. Pepper and calmed down a bit. I realize that this is an election year ploy, comparable to the 1992 flag-burning issue. But still, it irritates me when politicians pander like this, even when they're pandering to the supposed majority of Americans.

The chances of it's passing 2/3 of both houses of congress and 38 states is still fairly low (IMHO), but the odds are increased with a presidential endorsement. I understand that this is part of the backlash against judicial activism (and the backlash against the actions of the mayor of San Fransisco), but do we really need to have political backlash ensconced in the Constitution?

I think I need some more Dr. Pepper.

Kevin's Continuing (Mis)Adventures in Economics

This is a truly amazing display of ignorance. This post about the recession, unemployment, and taxes. I love it when Kevin makes these posts as it is like shooting fish in a barrel.

First off, it is the NBER that is thinking of moving the start date of the recession. There are some who think the recession may have started in the last three months of 2000. It isn't clear when or if the dating committee will be moving the start date. Further, the reason for the change has nothing to do with politics or the Bush Administration, but has everything to do with updated economic data from the government (which ironically Kevin holds up as the best we've got...but apparently isn't so good here...go figure).

NBER is a private, nonprofit economic research group. Zarnowitz, an economist with the Conference Board, another private research group, said the dating decision will be nonpolitical, based solely on recently revised government economic data.

"Presidents don't have so much to do, in my opinion, with when recessions start," Zarnowitz said. "Clearly the boom happened under Clinton, and the boom generates the bust. And no administration has the power to change that."

And to pre-empt the typical idiot response that the recession will be changed to benefit the Bush Administration; answer this: How come the NBER waited until after the election in 1992 to declare the recession over? It was clearly the issue Clinton won on. Yet, the recession was dated in December 22nd of 1992.

This Orwellian phrase is based on an absurd attempt to retroactively declare that the recession started in December 2000 (Clinton) instead of March 2001 (Bush), a 12-week change that obviously makes no difference to anything. But the interesting thing here isn't so much the technical arguments over the starting date of the recession as the fact that Republicans are now tacitly acknowledging that the economy isn't in great shape and are flinging some mud against the wall to see if they can blame it on somebody else.

The problem with this is just about every forecasting agency, group, company is forecasting strong growth for the next few years. The only problem is the "jobless" recovery. But as noted in this post, there are some reasons for this that are probably outside of any Presidents or policymakers hands.

Up until now, you see, their favored storyline has been to deny that there's really anything wrong. For months conservative commenters have been peddling an endless supply of theories designed to demonstrate that the official employment figures are wrong and the economy is really doing much better than anyone thinks. The official numbers, they said, don't pick up job gains from small firms; don't pick up job gains from the self-employed; don't pick up job gains from outsourcing; don't pick up job gains from aesthetic professions; don't pick up something. Two themes are common to most of these explanations: (a) goverment statisticians are idiots who haven't thought of any of this and (b) the authors provide exactly zero evidence for their pet theories aside from a bit of surface plausibility and a few anecdotes.

The problem with this is that Kevin is making exactly the same argument the Republicans are, but in the opposite direction. The "Truth" is probably somewhere in the middle. That is, the criticisms the people in the Bush Administration are bringing up are indeed valid, but they undoubtedly wont explain the poor performance of the labor market when compared to historically to previous recessions. This recovery just doesn't have much job growth. There might be more when the survey samples are updated, but not a whole lot more.

Folks like Brad DeLong and the EPI have been doing yeoman work demonstrating that none of these explanations hold water, and even Alan Greenspan, who has previously shown a convincing willingness to shill for the Bush administration, has thrown cold water on the notion that official statistics aren't picking up the wonders of a tax-cut driven Bush recovery.

As already noted in this post this recession seems to have had a much larger structural unemployment component and smaller cyclical component than in the past. This means two things,

1. With a small cyclical component when the business cycle moves into an expansionary phase there wont be a big decrease in unemployment.
2. With a small cyclical component there wont be as large an increase in unemployment.

With this last recession that is precisely what we have seen. This chart shows quite clearly that by historical standards unemployment did not rise all that much during the recession,

Now is it possible that one reason why the cyclical component was small was the fortuitous outcome that the Bush Administration enacted tax cuts shortly after the recession began? I think an honest person would have to say that this is indeed a possibility.

As for the idea that the economy is doing badly, just about every forecast out there has the economy booming along with solid growth for several years. Now they could all be wrong, but that doesn't sound like a "weak" economy. The only remaining issue is why is unemployment seemingly stuck in the mid 5% range? Maybe because there isn't much more room for a decrease. The picture above also shows that the unemployment situation during Clinton's last few years in office were extremely low. Even Brad DeLong has noted that is setting the bar too high,

But I do have one complaint. Asking that Bush leave "the job market no worse than he found it" is setting the bar too high by perhaps 2 million jobs or so. It would have been very hard for any set of economic policies to have sustainably kept the economy at the high-pressure state it was in in 2000.

Not that I expect any of these bits of information to change Kevin's mind. Kevin is the epitome of stone deaf.

Structural Change and the Jobless Recovery

This article from the Federal Reserve Bank of New York by Erica Groshen and Simon Potter looks at whether structural changes in the economy are the reason for the jobless recovery. That is, the permanent relocation of workers from one industry to another might explain part of the problem.

A surge in payroll jobs used to be a reliable sign of the end of a recession—but not any longer. When the National Bureau of Economic Research (NBER), the accepted arbiter of business cycle dating, recently designated November 2001 as the end of the nation’s latest recession, it based its decision largely on the growth of output (GDP).1 By the end of June 2003, GDP had risen 4.5 percent from its low in the third quarter of 2001 and significantly exceeded its pre-recession peak. While the members of the Bureau’s dating committee saw the strong growth of this indicator as persuasive evidence that the downturn was over, they acknowledged that their decision was made very difficult by the “divergent behavior of employment.” What troubled the committee was that payroll employment, which would normally rise in tandem with output, had shown no sign of recovery. Indeed, the payroll numbers fell almost 0.4 percent in 2002 and another 0.3 percent through July 2003.

The idea here is that unemployment is not simply cyclical (i.e., due to the recession), but that workers and capital are moving from one industry to another. With cyclical unemployment workers who were laid off are recalled to work and the employment level rebounds. In other words, the jobs that have been lost are not going to be coming back anytime soon.

The authors argue that this could explain the long lag in rebounding employment. Since creating new jobs entails risks employers wait longer to hire for new positions,

By contrast, a permanent layoff severs the relationship between the employer and the employee. The employer eliminates the job for any of a variety of reasons, including a permanent fall in demand, technological change, reorganization of production, and local or international outsourcing. Even an employer that ultimately decides to fill the job again will need to search for a new employee. Meanwhile, the laid-off worker must find a new job and the employer that hires him or her must create a new position and conduct a search to fill it. Thus, when layoffs are permanent, job recovery is slower.

The authors have this nifty chart that has data on cyclical vs. structural changes in employment for the last four recessions. There was an increase in structural changes in employment in 1990-91, and the change during the 2001 recession is even more pronounced.

The authors come up with three "stories" for a structural change. The first one is the idea that industries that were over-invested must not "pay it back" during the recession and this means a reduction (permanently) in the work force. The authors look at fast growing industries during the 1990's and look to see what state they are in now with respect to job loss. The evidence suggests there might be some validity to this hypothesis.

The other story is that fiscal and monetary policy have gotten better at dampening the cyclical aspect of recessions. This would prevent recessions from being as deep as they previously were, but at the same time it would likely minimize cyclical job loss leaving only the structural changes. Here is what Groshen and Potter write about this hypothesis,

The behavior of housing investment and consumer durable goods expenditures in the 2001 recession supports this contention. Normally very susceptible to cyclical changes, these two sectors showed unusual vigor in both jobs and output during the downturn. This display of strength in sectors heavily influenced by monetary policy actions suggests that sound policy may have averted some of the usual cyclical job losses.

So there could be some truth to this hypothesis as well. Some additional support for this theory is that the number of initial unemployment insurance claims for December have been low during and since the recession in 2001 compared to past recessions. For example, compared to December of 1981, the initial unemployment claims is lower by more than 100,000.

The third story is that management is utilizing new strategies and that recessions are now seen as opportunities. Opportunities such as shutting down that marginal plant (permanently), or to outsource jobs (either to another firm domestically, or over seas). The recent hand wringing over the latter indicates that this hypothesis might have some truth to it as well.

Clearly all three hypotheses could be working at the same time. Further, it is not at all clear that the Democrats could have done much if anything to have driven the unemployment rate below 5% let alone back towards the 4% under the final years of the Clinton Administration. Structural unemployment is, as has been noted, not something that goes away when the recession ends. And it is not clear that other policies could have induced firms to hire new workers faster. As the article notes part of the problem is that there is the search time involved in filling a new position, as well as the uncertainty about simply hiring a new position to begin with. Of course, I expect none of these considerations to matter to the Democrats (well okay, except maybe Brad DeLong who did note that using the unemployment numbers from the last year of the Clinton Administration probably sets the bar too high).

Link via Drezner.
_____
¹Unless of course, there is an over-reaction during the recessin in which case we'd see oscillating behavior or even "orbiting" behavior--i.e., where the unemployment periodically shrinks and expands.

Well, Well, Well

Looks like there was a site attack. In two days, in five visits and with only two IP addresses over 64% of my bandwidth was sucked up. The listed IP address is IANA or theplanet.com.

The amazing thing was trying to convince the people at my hosting service something was amiss. Apparently if one of their cars accelerated from 40 mph to 800 mph they wouldn't be alarmed.

Site Going Down and Up

I've been having a strange problem with my bandwidth the last three days. Saturday was my second highest day of bandwidth ever. It exceeds previous highs by about an order of magnitude. Today was even worse. Despite the fact that traffic to my site remains around 300-400 visits per day, my bandwidth for Saturday is up by over 30 times. So if this site goes down again in the next few days it may not be back up till I can get to another hosting service.

The guys at my hosting service seem to think that nothing is amiss when 60% of my bandwidth is sucked up on 2 days. Considering that I increased my bandwidth recently and typically use about 40% of that over the course of a month this is just unacceptable.

From having worked with data sets for the last 10 years, when you see a data point that is suddenly 10 times the maximum of any historical value, and 30 times the value of similar observations (i.e., Saturdays), the technical term for this is: something is seriously fucking wrong.

So, my apologies if anybody was annoyed by this.

Carrot and Stick Policy

Much of the policy of today is what I like to call "carrot-stick policy". Carrot-stick policy is where the policy in effect dangles a carrot in front of the person (or more accurately a group of people) and tries to get that person to do something.

One problem, people--despite what many might think--are not stupid mules who'll follow that carrot mindlessly. Instead, what they will do is spend an inordinate amount of time trying to figure out how to get the carrot and not go where they are supposed to/or do what they are supposed to.

Some possible examples of how things can be abused. How about trying to reclassify the type of industry you are in to recieve preferential tax treatement. John Kerry has put forward a policy with lots of carrots on the end of a stick for businesses. The idea is to retain manufacturing jobs. The problem is custom tailors are considered a manufacturing job. So are bakeries. Could someplace like McDonalds try to get their industry re-classified as manufacturing? Maybe.

Some other examples are found in this post.

Scully: I think the DRG system works pretty well for what it is designed to do. But we had about 300 hospitals chronically "gaming" the system for $2 billion a year for four years in a row, and we did not catch it. That is right -- $2 billion a year for four years, or $8 billion total -- and the system did not catch it (nor is it designed to catch it). That is over 2 percent of inpatient hospital spending a year "out the door and unaccounted for." We pay claims quickly and efficiently, but we have no clue what is actually going on in the system. What is the chance that Blue Cross of New Jersey or Independence Blue Cross in Pennsylvania would have missed that if their money were at risk? I can tell you: zero.

Instead of using its resources to provide health care, these 300 hospitals diverted resources to gaming the system. This is not productive in that it is a re-arrangment of the economic "pie", not contributing to the economic "pie".

I think it was Howard Dean who had a plan to help subsidize tuition for people who were going to college. Sounds like a good thing right? After all an educated person will have a higher earning potential, which means fewer people putting demands of government programs, paying more taxes, etc. Well, what if they go to college for art history? How much does somebody with a degree in art history earn? My guess is less than somebody with a degree in computer science, engineering, or mathematics. But hey, those are hard majors and you'll be less likely to get laid while in college is you always have your nose stuck in a complex analysis text. Never mind the people who go to college for a couple of semesters, and then drop out. Is this what we want to subsidize?

I agree with Arnold Kling, I too am a bleeding-heart libertarian. The quote at the top of the essay says it pretty damn well,

"I am a bleeding heart libertarian. Because I'm a nice guy and want to address society's problems and I want disadvantaged people to become better advantaged. By instincts and experience I believe that government seldom delivers the benefits the "bleeding heart liberals" and "big government conservatives" always seem to hope for. In many cases government only makes things worse. As with technology and prose, less is often more. I'm not one of those doctrinaire Big-L Libertarians who want to eliminate government. My aim is to improve government by making it smaller. The most important part of this process is to persuade our fellow citizens to demand less of our government." -- Stefan Sharkansky

Precisely right. I don't want people to suffer, in fact I want them to flourish and do well. I want them to have a nice life. I don't want people to sleep on the streets, eat out of trash cans, or have to go without certain goods and services they need. However, I am also far from convinced that government is the vehicle to ensure that people have these things that they need.

In fact, I see getting government out of people's lives as a better solution. Add in the idea that Arnold Kling puts forward of a negative income tax, and you could very well be a good ways towards solving many problems. Of course, along with this negative income tax you'd need to completely dismantle the welfare state. No more medicare, no more medicaid, no more housing support, no more farm subsidies, no more food stamps, etc. Now, people have money and they'll have to make the best choices they can given their budgets. If you are making $14,000 a year and recieving a tax return of $16,000 (i.e., total income is $30,000) then having six kids is probably not a good idea. Don't look to the government for anymore support. Also, I'd like to see this put into the Constitution to prevent people from "voting themselves pay raises" (with a mechanism for adjusting for changes in prices).

Of course, this kind of an idea is impossible to implement. The politics of special interests is the law of the jungle these days. Kerry's plan to revitalize American manufacturing is pandering to those interestes (manufacturing firms, labor unions, manufacturing laborers, people living in communities dependent on manufacturing, etc.). Bush has tried pandering to the elderly, drug companies, and other health are interests with his prescription drug plan. And these are just two examples among many. Such a change in government is not possible so long as politicians are able to divide various groups of people.

Carnival of the Capitalists

This weeks Carnival is at Forgotten Fronts. Lots of capitalistic goodness there. So check it out.

Next weeks host will be the NanoPundit, and send your entries to capitalists - at - elhide.com. To see future hosts, and how to become a host and/or just more info, go here.

Junk Science: MMR/Autism Study Retracted by Lancet

A 1998 study suggested that children getting the MMR shot could be an elevated risk of developing autism. Now it is learned that the two authors, Dr. Richard Horton said Dr. Andrew Wakefield, were also getting paid by legal-aid service looking into whether parents who had children with autism and who recieved the shot could sue.

The Lancet called this conflict of interest, "fatal". Also, the study has been discredited on scientific grounds.

Thanks to Debunkers for the link.

Who Pays Taxes--2001

The table below shows who pays federal income taxes (on individuals and households) in this country. It highlights once again that in terms of federal taxes it is those in the upper brackets who pay the taxes.

Income Percentile	Number of Returns	AGI ($000,000s)	Total Income Taxes Paid ($000,000s)	Groups % of AGI	Groups % of Taxes Paid	Income Split	Average Tax Rate
Top 1%	1,288	$1,094,296	$300,898	17.5%	33.9%	Above $292,913	27.5%
Top 5%	6,441	$1,996,492	$472,823	32.0%	53.3%	Above $127,904	23.7%
Top 10%	12,882	$2,690,589	$576,163	43.1%	64.9%	Above $92,754	21.4%
Top 25%	32,204	$4,071,034	$736,053	65.2%	82.9%	Above $56,085	18.1%
Top 50%	64,409	$5,379,286	$852,642	86.2%	96.1%	Above $28,528	15.9%
Bottom 50%	64,409	$861,750	$35,040	13.8%	3.9%	Below $28,528	4.1%

--Source

Now, it should be obvious that when federal taxes are cut then those at the top are going to the majority of the benefit because they pay the majority of the taxes.

Now, it is indeed the case that when things like Social Security, sales taxes and other types of state, local and city taxes are factored in the total tax burden becomes much less progressive. However, one big reason for this is that these additional taxes are themselves regressive. Adding more progressivity to the federal tax code wont help with the regressivity of say the sales tax. That undue burden will still be there even if you tax every last cent the people in the top 1% make.

What I find amazing of those on the Left is that while they think the tax code should be more progressive, they consistently refuse to consider removing those elements of the tax code that makes the total tax burden much less progressive. It is kind of like hitting your left foot with a hammer because you have a tooth ache. The idea being that the sudden and greater pain in your foot will make your tooth feel better by comparison.

Also, note that those in the top 1% pay, in percentage terms, almost twice their share of adjusted gross income (AGI). Now, one can argue that the rich have access to more ways to lower their AGI, and that is true. However, some of these methods are designed to induce the people in that income percentile to "share the wealth" such as making charitable contributions.

Also, there is this fact to consider about income inequality/mobility. There is no upper bound on income for the top percentile. That is suppose you are in the 25% and your income goes from $50,000/year to $65,000/year (say you got a big promotion). Instead of moving up the income of the 25th percentile group, you move into the next group up, those who have 10% of the income. When you are in the 1% group, if your income goes from say $50,000,000 to $100,000,000 you are still in that group. this will have somewhat of a distorting impact on income inequality.

Just some observations to keep in mind when there is a discussion of taxes.

Bush & the Politicization of Science

I've read more of the report by the Union of Concerned Scientists (the full report is available here, although I recommend downloading via the link as I've had some problems opening this document in a browser). One of the problems I have is the casual use of the term "objectivity" in science. Scientists are not objective by any stretch of the imagination. The best we can hope for is objectivity in their methods--i.e., the methods are similar and reproducible whenever possible.

A simple example will highlight what I mean. Suppose we have a coin and we wish to test the hypothesis of the fairness of the coin. I have the prior belief that the coin is likely to be fair, while another, say Kevin at Lean Left, is more skeptical (we'll simplify the problem by assuming the unfair coin will come up tails with probability 0.75). Clearly each of us has our preconceived biases as to the hypothesis that the coin is fair. But how do we incorporate our views in a straight forward and rigorous manner into any research we do on this hypothesis? Typically scientists will not talk about their preconceived notions and biases. However, such personal beliefs can be incorporated into the research using the tools of probability.

Since I am fairly sure the coin is fair I might suggest the following probabilities:

P(F) = 0.75, P(U) = 0.25.

Where F = the coin is fair, and U = the coin is unfair. Kevin might suggest the probabilities,

P(F) = 0.15, P(U) = 0.85.

Now note that our subjective beliefs are not explicitly part of any analysis we do. Suppose we flip the coin and get tails. Using the Bayes Theorem Calculator we can get our revised probabilities based on this initial observation. My probabilities (from now on denoted by a subscript 'S', with Kevin's with a subscript 'K') are,

P_S(F|T) = 0.667, P_S(U|T) = 0.333.

And Kevin's are,

P_K(F|T) = 0.105, P_K(U|T) = 0.895.

Note that for both of us, the probability that the coin is fair has decreased. My revised probability is still higher, but that is due to two reasons,

1. I had a higher prior probability that the coin was fair.
2. We only have one observation so far.

Suppose we flip the coin 3 more times and it comes up {H,H,T}. Now the probabilities are,

P_S(F|T,H,H,T) = 0.842, P_S(U|T,H,H,T) = 0.158,

P_K(F|T,H,H,T) = 0.238,
P_K(U|T,H,H,T) = 0.762.

Now things have moved back in favor of the fair hypothesis. Kevin and I are still far apart in our views, but we both agree that the likelihood the coin is fair has increased. Suppose we flip the coin ten more times so that the total outcomes are {T,H,H,T,T,H,T,H,T,H,H,H,T,T} the new probabilities are,

P_S(F|I) = 0.959, P_S(U|I) = 0.041,

P_K(F|I) = 0.724,
P_K(U|I) = 0.276.

Where I = {T,H,H,T,T,H,T,H,T,H,H,H,T,T}. Now Kevin and I are in much closer agreement. We are both going to say the coin is probably fair. In short, even though we have started with different starting points we have agreed to let the data take us wherever it takes us.

Also, our subjective beliefs have been included explicitly into the analysis. Even if Kevin selected an initial probability of P(F) = 0.001 he'd still be dragged towards the notion that the coin is fair (assuming it is fair) given enough data. So the idea that the initial probability will be selected to ensure a given result is not really a factor provided there is sufficient data.

The idea that scientists don't have any preconceived notion about what they expect their experiments, tests, and researches to turn up is scientific naivete in the extreme. Given that this paper by the Union for Concerned Scientists writes,

But there is little disagreement about the need for elected and appointed officials to have access to rigorous, objective scientific research and analysis, and to fully understand its implications for addressing the problems they are trying to solve.--page 4 of the report

a little alarm goes off. What exactly do they mean by "objective scientific research and analysis"? For example, is the research that is done on second hand smoke "objective" or are those who think second smoke (a.k.a. environmental tobacco smoke--ETS for short) working towards an agenda? I have seen instances where those who usually come out against ETS have argued that when setting policy only the upper end of a confidence interval should be looked at. The problem with this is that confidence intervals say nothing about where the parameter of interest lies (in this case relative risk). It could just as easily be at the bottom, and if the bottom of the interval is below 1, then there is no increased risk. Objective? Hardly. Clearly such researchers have a political agenda and it is strongly present in their "research".

Similarly with the claims of the number of deaths form ETS. Theoretically speaking the actual number is totally unknown. You can't look at a person who died of a heart attack and also lived with a smoker and conclusively say it was the ETS that killed the person. In some cases that may very well be the case, but when a person dies of ETS a sign does not magically appear on their forehead with the letters "ETS".

Similarly with the claims about the number of lives saved due to clean air legislation. The report makes the following claim,

The Clean Air Act, which passed during the Nixon administration and was strengthened in 1990 during the first Bush administration, has saved American lives. For the period up to 1990, the EPA found that, without the act, “an additional 205,000 Americans would have died prematurely and millions more would have suffered illnesses ranging from mild respiratory symptoms to heart disease, chronic bronchitis, asthma attacks, and other severe respiratory problems. In addition, the lack of the Clean Air Act controls on the use of leaded gasoline would have resulted in major increases in child IQ loss and adult hypertension, heart disease and stroke.”--page 9 of the report

This passage is itself a complete distortion of the facts. The numbers above are stated as if they are facts--i.e., known with certainty--when in fact these numbers are estimates. Granted 205,000 lives might have been saved, or it might have been 102,500, 410,000, or even none at all. These numbers are the result of statistical analyses of data which itself may or may not have quality problems (the same problem with the ETS deaths noted above). The report then shifts gears and notes that for the year 2010, the numbers are projections. I guess they decided it'd be a bit much to claim those numbers as facts as well. However, both the projected numbers and the numbers up to 1990 are basically the same, estimates.

If you are going to write a report that takes the President to task for distorting science, I think it is incumbent on those writing the report to not distort scientific information themselves. At the very least this weakens their argument against the legitimate instances where science has been ignored, distorted, or suppressed for political purposes. You'd think that a group comprised of scientists would know better than to let these kinds of errors go into a document that is going out to the public.

Another Kevin's (Mis)Adventures in Economics

This time it is Kevin at Lean Left who doesn't have a frigging clue what he is talking about. Kevin spotted this atrocious article at the New York Times. The article strongly implies that Bush and his economic team are considering changing the classifications for manufacturing workers. The article is based on a boxed comment in the Economic report of the President. Here is the boxed comment in its entirety,

Box 2-2: What Is Manufacturing? The value of the output of the U.S. manufacturing sector as defined in official U.S. statistics is larger than the economies of all but a handful of other countries. The definition of a manufactured product, however, is not straightforward. When a fast-food restaurant sells a hamburger, for example, is it providing a “service” or is it combining inputs to “manufacture” a product?

The official definition of manufacturing comes from the Census Bureau’s North American Industry Classification System, or NAICS. NAICS classifies all business establishments in the United States into categories based on how their output is produced. One such category is “manufacturing.” NAICS classifies an establishment as in the manufacturing sector if it is “engaged in the mechanical, physical, or chemical transformation of materials, substances, or components into new products.”

This definition is somewhat unspecific, as the Census Bureau has recognized: “The boundaries of manufacturing and other sectors… can be somewhat blurry.” Some (perhaps surprising) examples of manufacturers listed by the Bureau of Labor Statistics are: bakeries, candy stores, custom tailors, milk bottling and pasteurizing, fresh fish packaging (oyster shucking, fish filleting), and tire retreading. Sometimes, seemingly subtle differences can determine whether an industry is classified as manufacturing. For example, mixing water and concentrate to produce soft drinks is classified as manufacturing. However, if that activity is performed at a snack bar, it is considered a service.

The distinction between non-manufacturing and manufacturing industries may seem somewhat arbitrary but it can play an important role in developing policy and assessing its effects. Suppose it was decided to offer tax relief to manufacturing firms. Because the manufacturing category is not well defined, firms would have an incentive to characterize themselves as in manufacturing. Administering the tax relief could be difficult, and the tax relief may not extend to the firms for which it was enacted.

For policy makers, the blurriness of the definition of manufacturing means that policy aimed at manufacturing may inadvertently distort production and have unintended and harmful results. Whenever possible, policy making should not be based upon this type of arbitrary statistical delineation.

There is nothing there about re-classifying the guy at McDonalds from being a service job to being in a manufacturing job. The whole point of that comment is summarized in the last two paragraphs. The line separating manufacturing from non-manufacturing is imprecise and blurry and basing policy on such a classification could lead to unusual and perhaps bad outcomes.

Even if one were to look at the section of the report that Box 2-2 applies too it again says nothing about re-classifying jobs. It was noting that the decline in manufacturing is overstated due to a variety of reasons. These reasons include outsourcing. Whereas a firm 20 years ago might have had various functions done "in-house", functions that by themselves would be classified as service jobs, were outsourced. This could have shown up in the official statistics as a decline in manufacturing jobs. Also, the use of temporary workers during times of increased economic uncertainty.

Kevin at Lean Left completely distorted the meaning of that passage based on some horrendous reporting once again by the NY Times.

Update: The comments at Lean Left are even better. I pointed out that there was nothing in the Economic Report of the President to support this assertion, and here is the first reponse,

If a Presidential Report floats an idea, then that is the way the White House thinks things should be. Unless, of course, you thik the WHite House is channleing the voices in its collective head, but what ever.

Which of course completely misses the point. There was nothing about reclassifying workers in the report to begin with. When this is pointed out to them here is the new response,

So, in your world, talking about the problems of a classification system isnt done because they think the classification system needs changing? That when someone says

properly classifying such workers was "an important consideration" in setting economic policy.

That doesn't mean they actually think the classification should be changed? They do it becasue its fun? Becasue the voices in their heads tell them too? Becaseu they haven't killed the requisite number fo trees for a Republican produced reports?

What, exactly, is the definition of is in your little world?

In other words, Kevin sticks with his orginal story based on one sentence noting the importance of correctly classifying manufacturing jobs. Naturally, to the those on the Left, this means that not only are they going to redo the classifications they are going to classify short-order cook as a manufacturing job.

We have seen this kind of thing from the Left before. When the Bureau of Economic Analysis came out and adjusted their way of measuring GDP and used additional data it resulted in the third quarter of 2000 going negative. This prompted some to speculate that perhaps the last recession may have started earlier. Naturally the response form some on the Left was, "They changed things to take the heat of shrub." Nevermind that they do this kind of thing ever 3 years or so. Nevermind, that for all we know the guy in charge, Brent Moulton, might actually be a Democrat. No wonder the Left is in such disarray.

Kevin's Continuing (Mis)Adventures in Economics

I found this quote in this post,

As for progressive taxation, I'm a fan of that, but mainly because the rich have all the money. If the top 20% of the population has half the income then those are the guys you have to tax. Even aside from moral concerns, trying to get a bunch of tax revenue out of the poor schmoes making $30,000 a year is like getting blood from a stone. It's just not going to work.

Then again, maybe I'm just kidding myself. Is it time for some therapy?

Wow! What an amazing admission from Kevin. Does anybody here think he understands the corollary to what he has written above about taxes? If the top 20% are the ones with the money and the ones you have to tax, then they are also the ones who are going to get the benefits of a tax cut?

Nope.

Kerry to Tour U.S. on Yacht

According to this article Sen. John Kerry will be conducting his Presidential campaign via his yacht.

"Bush has the worst jobs record of the last 11 presidents," said Kerry, his hand draped over the flagpole halyard. "Landing an aircraft carrier doesn't make up for failed economic policy. The American people need jobs to buy food for their families, to secure health insurance for their children, and to pay the mortgages on their houses."

I'm sure this will be a great way to connect with the people...for Kerry to show the rest of us, that he is indeed just like the rest of us. That John F. Kerry is an "everyman" candidate, and not some spoiled rich guy, who went to private schools, and lives in a huge house...oh...wait...nevermind.

I'm sure that the message of getting ahead by marrying a rich heiress will resonate with the voters. Do you think he has a plasma screen television in that thing?

Prognosis Negative

I got this from Cox & Forkum,

While I admit I find the cartoon quite humorous in a macabre way, I don't think it would sway many who believes in animal rights. Many of these people have very...ahhh...shall we say strong views on the subject? So strong that I think many of them would be willing to face a horrifying diseases like Alzheimer's, Parkinson's, and Huntington's disease.

Bush Administration Accused of Politicizing Science

A panel, including Nobel Prize winning scientists, has concluded that the Bush Administration has been politicizing science.

"When scientific knowledge has been found to be in conflict with its political goals, the administration has often manipulated the process through which science enters into its decisions," charges a document signed by 60 scientists in an unprecedented joint effort by the leaders of the nation's science establishment.

The report is from the Union of Concerned Scientists and can be found here (the full report is available here and the executive summary is available here). My first reaction upon reading the statement on the linked site is that this part is a bit misleading as well as naive,

However, at a time when one might expect the federal government to increasingly rely on impartial researchers for the critical role they play in gathering and analyzing specialized data, there are numerous indications that the opposite is occurring.

Personally I think the notion of impartiality is misleading. All scientists have their own views on the issues and particularly the area they are researching. For more on this see this essay by Robert Matthews on the biases in science and how they can impede scientific research as well as policy making. Of course, the fact that scientists and researchers themselves have their own views and biases does not let the Bush Administration off the hook when it comes to possibly distorting science. However, it cannot be ignored that the Union of Concerned Scientists can also be said to have an agenda and that this agenda may be playing a role as well in this report when that agenda diverges from the agenda of the Bush Administration.

Spinsanity on Mankiw's Outsourcing Quote

Spinsanity has looked at the flap over N. Gregory Mankiw's comment on outsourcing and have decided it is yet another example of a quote being distorted for political gain, and one of the people doing the distorting is...gasp John F. Kerry (who served in Vietnam by the way).

Here is the Mankiw statement that got so many people's panties in a knot,

The controversy was sparked by Mankiw's Feb. 9 comments calling outsourcing "just a new way of doing international trade" and stating: "More things are tradeable than were tradeable in the past, and that's a good thing. That doesn't mean there's not dislocations; trade always means there's dislocations. And we need to help workers find jobs and make sure to create jobs here."

Looks pretty reasonable to me, but of course when the political jackals smell blood they move in to take advantage of the situation.

"They've delivered a double blow to America's workers, three million jobs destroyed on their watch, and now they want to export more of our jobs overseas."--Sen. John "Ketchup" Kerry

"I don't think losing American jobs is a good thing. The folks at the other end of Pennsylvania Avenue apparently do." Sen. Hillary "What My Billing Records?" Clinton

"This is actually now the position of the White House that they support outsourcing of jobs, jobs going abroad, saying that that's good for our country." Sen. Tom "Doorknob" Daschle

There are problems here. First, it ignored that general thrust that free trade is a good thing economically. Free trade allows countries to focus on producing those goods they have a comparative advantage in producing. Hillary wasn't out making her shrill statements when her Husband and Al Gore were in favor of NAFTA.

Second, there is a whiff of protectionism/mercantilism here. That is we must keep these jobs here even if the output that these jobs produce can be made cheaper/better in other countries. The problem with this though is that it basically gives benefits to a few while imposing costs on many. Further, the history of protectionism is highly dubious in terms of retaining jobs here. For example, if these jobs are retained, as Kerry is planning on doing, via tax subsidies this imposes deadweight losses on the economy. This in turn can cost jobs. The net effect is at best ambiguous in terms of jobs, and my intuition on social welfare is that there would be a decrease.

Further, while outsourcing is currently the scare du jour, it is far from clear what the magnitude of this scare is. We have seen such overwrought doom and gloom predictions before. NAFTA would result in a giant sucking sound that would end the U.S. manufacturing industry and destroy the U.S. economy. The Japanese are going to end up conquering the U.S. via economics. OPEC was going to rule the world. We are going to run out of oil and soon we'll all be driving around in modified V8s fighting mutant gangs in the barren wastelands.

Now that is some Bush Hatred

From Eric Sheie's site,

I don't know who I'm going to vote for, then. Right now, I hate (yes, hate) Bush, that psalm-singing, sanctiminious, hypocritical bastard with all his "fag"-and-"dyke"-hating "Sanctimony of Marriage" crap. Gutless, finger-to-the-wind, caving in to the most rancid rats and putrid scum that ever crawled on the surface of this planet. Big phony, lying, cowardly draft-dodging, coke-snorting, drunk-driving, pampered daddy's boy, posturing in his fake flight suit as a "war hero" while betraying everything our Flag stands for and every word of his oath of office to protect and defend the Constitution of the United States AGAINST ALL ENEMIES foreign AND DOMESTIC. Sorry, but I'm in a really, really, _really_, _really!_ pissy mood today about that FUCKing Federal Anti-Marriage Amendment and its supporters.--Steven Malcolm Anderson

Isn't it breath taking in its sheer visciousness?

Update on Bill Burkett

One of the things I am looking for is information about the disease meningoencephalitis. This will go towards the credibility of Burkett as a witness. For example if the disease is usually fatal if left untreated for an extended period of time then it strikes me that Burkett is lying about the 154 days he was denied medical care. Since one of the things Drum is using to conclude that Burkett is believable is that Burkett hasn't lied in the past, this does mattter.

Also, wouldn't this kind of thing leave a paper trail? Wouldn't he be submitting paper work to get treatment and wouldn't their be documentation of a denial. Couldn't this be taken to some authority/agency to see if anything improper was done?

Frankly I doubt very seriously the 154 day claim. This would be highly unusual. Even if you are a homeless person and show up at an emergency room needing assistance you will get it. The claim doesn't even pass the giggle test here.

Fruther in comments to the initial post on this, Dean writes the following,

One of the biggest problems I have w/ the Left: utter credulity for the military.

Not ALL the time, of course. If the military says it's winning a war, or defeating the enemy, or even trying to avoid civilian casualties, I fully expect the Left to decry, declaim, and deny any of the above.

But have a person who wore the uniform make any kind of counter-intuitive claim, be it that American troops regularly commit atrocities, that nuclear weapons are unnecessary, or that they've somehow been persecuted by (Republican) authorities, and, lo!, utter credibility and credulity.

Which means that, given the right circumstances, the Left will support a "man on horseback," no matter how dangerous, so long as s/he makes the right noises.

The last part of it pretty much sums it up for me. Burkett is whistling the right tune so Kevin Drum is dancing. When it comes to Calhoun, he is not whistling the right tune so he must be a liar. How about this:

1. Perhaps Calhoun's memory isn't perfect.
2. Perhaps paper work has been lost form Bush's file.
3. Burkett is also possibly a liar.

Oddly enough we don't see much of this by those who want to push the Bush was AWOL story with all of its variants.

Update: Okay, here is what I have learned from a source that wishes to remain anonymous (take it for what you will). The idea of a governor of a state being able to pull strings to d