Tuesday, July 31, 2012

SEC Loses Jury Trial Securities Fraud Lawsuit Against Citigroup Director For Shorting Against Mortgages Sold To Investors

From Bloomberg, "SEC Loses Lawsuit Against Ex-Citigroup Official Stoker" by Bob Van Voris and Emily Grannis:
The Securities and Exchange Commission lost a jury verdict in its lawsuit against former Citigroup Inc. official Brian Stoker over a deal at the center of the bank’s proposed $285 million settlement with regulators over subprime residential mortgage securities.

The jury reached its verdict today in Manhattan federal court. The SEC had accused Stoker, the former director of Citigroup’s collateralized debt obligation structuring group, of violating securities law in putting together the assets underlying a $1 billion CDO.

The SEC claimed New York-based Citigroup structured and sold the CDO without telling investors that it helped pick about half the underlying assets and was betting they would decline in value by taking a short position.
The SEC complaint, US SEC v Brian H Stoker, basis for the allegation of securities fraud stated:
Undisclosed in the marketing materials and unbeknownst to investors, Citigroup exercised significant influence over the asset selection process for the purpose of creating a tailored, proprietary bet against the collateral of Class V III. Through its influence on the selection of the investment portfolio, Citigroup was able to short a set of assets it hand-picked by entering into CDS to buy protection on those assets from Class V III. The CDS assets on which Citigroup bought protection had a notional value of approximately $500 million, representing half of Class V III’s investment portfolio. The marketing materials Citigroup prepared and distributed to investors did not disclose Citigroup’s role in selecting assets for Class V III and did not accurately disclose to investors Citigroup’s short position on those assets.
Selling sophisticated investors a portfolio of mortgages, while simultaneously shorting against those mortgages without disclosing the short, is not fraud according to a jury.

If Goldman Sachs had gone to trial over similar SEC allegations instead of settling, it likely would have also won.

The SEC complaint against Stoker is available here.

Sunday, July 29, 2012

One Simple Chart That Shows ObamaCare Is A Mirage: ObamaCare Will Fail: Will Not Provide Medical Services To The Uninsured: Will Not Lower Costs: Will Not Provide Care To Those With Pre-Existing Conditions

Chart from The New York Times article, "Doctor Shortage Likely to Worsen With Health Law" by Annie Lowrey and Robert Pear:

Source: The New York Times
ObamaCare makes promises about medical services and care without putting into place anything that will allow those promises to be kept. The law extends health insurance coverage to the uninsured. The law also eliminates pre-existing medical conditions as a reason for the denial of health insurance coverage. President Obama has misled the public into believing that having insurance means the same as getting needed medical care.

Insurance is just a means to pay for a service or product. It is not a mechanism for making that service or product available to the public.

As the above chart shows, there is a projected shortage of doctors in the US that will be made worse by ObamaCare.

In the coming years, the US public will find it has medical insurance to pay for needed medical services, but there will not be enough medical providers to meet the demand to give those services to all those in need.

People with their new medical insurance courtesy of ObamaCare will find that their situation will be the same as if they had no insurance. They will not get the care they need in a timely fashion.

ObamaCare is like a parents' holiday promise to their child that Santa will deliver the hottest, most sought after, new toy. The problem is the toy is sold out and the parents did not buy it yet.

ObamaCare is false hope to those who most desperately will need care. Because Obama's name will be forever linked with the law that is commonly known as ObamaCare instead of its legal name, The Patient Protection and Affordable Care Act, Obama's name will be forever associated with a law that does not deliver on its promises and that gives false hope to those in need.

Friday, July 27, 2012

US In Second Slowest Post Recession Recovery Since WWII: 1980-81 Recovery Slower

From The Wall Street Journal Real Time Economics, "Current Recovery Second Slowest Postwar Rebound" by Eric Morath and Sarah Portlock:
From the second quarter of 2009, when the recession ended, through 2011, the economy grew a total of 5.8%, a downward revision from a 6.2% gain, the recasting of the past three years’ gross domestic product figures found. Only the brief 4-quarter recovery in 1980 and 1981, when the economy grew a total of 4.4%, was weaker in the past 60 years.

Growth in the early part of 2010 wasn’t nearly as strong as previously thought, with GDP advancing 2.3% and 2.2% in the first and second quarter, respectively. That’s down from prior readings of near 4.0% annualized growth. Business investments in the first half of 2010 are now seen as being much weaker.

Conversely, the data showed the most recent recession was milder than prior readings – though still the largest downturn since the Great Depression. During the recession, which began in the fourth quarter of 2007, GDP declined 4.7%, compared to a previous reading of down 5.1%.

Thursday, July 26, 2012

Illuminating Unintended Consequences Figure Mankiw Mentions

Harvard Economics Professor Greg Mankiw, in his blog, mentions a book he is currently reading, Unintended Consequences by Edward Conard. He says he found Figure 1-6 on page 22 quite illuminating. I have reprinted that figure below.

Source: Unintended Consequences by Edward Conard,
Published by Penguin Portfolio, 2012.

The chart is another example of how a single summary statistic, real median income, can hide underlying positive trends. In this case, white and non-white, male and female, full-time and part-time workers have seen substantial real median income growth from 15 to 75 percent, before including the value of benefits, over the 25 years from 1980 to 2005, while the overall real median income growth for the entire combined group was only 3 percent over the same time frame.

A free excerpt of the book is available here, including the page with the mentioned figure.

The book is also available for purchase from Amazon:Unintended Consequences: Why Everything You've Been Told About the Economy Is Wrong

Monday, July 23, 2012

Comment To Leonhardt's New York Times Article On Middle Class Decline

My comment to David Leonhardt's misleading article, "A Closer Look at Middle-Class Decline" in The New York Times:
When you look at inflation adjusted US GDP per capita, there has been a continued growth from the 1870s on with occasional dips during recessions, which were surpassed during the following recoveries.

The recent recession set per capita GDP back to 2005 levels.

Using per family and per household income data is misleading as Leonhardt knows.

Family and household size are not constant over time. Anything that shrinks the size of the family or household, such as divorce, tendency for single and married adults to want their own place, and delayed marriage age will increase the number of families and households and shrink the income per family and household without any change in their economic well being.

Likewise, the tendency for women to work and be in two wage earner families means that there will be more marriages with two high earning spouses.

The household and family income data showing a decline in income is a product of social changes over the last 50 years. There are more divorces, more setting out on one's own, and more two high wage earner families.

It is not a reflection of the failure of the US economic engine and that engine does not need more government intervention to fix it.

The lower family and household numbers are a symptom of the success of the US, in that economic growth allows more people to live on their own, to seek divorce and not be dependent on their spouse and more people can be married to someone of either sex who earns a high income.
See the chart in my earlier post, "Per Capita Real GDP At 2005 Levels" which shows inflation adjusted per capita GDP from the 1950s until the recent recession.

Also see the following chart from VisualizingEconomics Blog, which shows inflation adjusted US per capita GDP since the 1870s.

Source: VisualizingEconomics

CBO Shows The Rich Pay Too Much In Taxes

From The Wall Street Journal "Ari Fleischer: The Latest News on Tax Fairness: A new Congressional Budget Office reports shows the share of taxes paid by the top 20% has gone up over the last 30 years, while the share of taxes paid by everyone else has gone down" by Ari Fleischer:
If fairness in paying taxes means the amount you pay is based on the amount you make, then the only group in America paying at least a "fair share" is the top 20%—people who make more than $74,000. For everyone else, the tax code is a bargain.
The top 1% of income earners pay an average federal tax rate of 28.9%. The average federal tax rate on the top 20% is 23.2%. The 20% of taxpayers earning between $50,100 and $73,999 pay an average 15.1%, and so on down the line. The CBO report includes payroll as well as income taxes paid.

There's also another way of looking at fairness, and that's the tax burden. Here, consider the top 20% of income earners (over $74,000). They make 50% of the nation's income but pay nearly 70% of all federal taxes.

The remaining 30% of the tax burden is borne by 80% of the taxpayers, those who make less than $74,000. In short, this group's share of taxes paid, 30%, is lower than the share of income they earn, 50%.

Obama's "You Did Not Build That" Speech Is A Confession Of His Insecurities About His 2008 Presidential Election Win

We are all products of our pasts. Our perceptions of the world and people are shaped by our personal histories, our family relationships and interactions, our genetically determined physical and emotional health and life's random good and bad fortunes that befall us all.

If we grow up seeing the adults around us face the inevitable problems of life with a mature understanding that all people face hardships and setbacks at some time; that life can be both fair and unfair; that the world owes us nothing; that the best approach is not to wallow in self-pity, but to attempt to plow through the bad times, find solutions that will help us through the harsh winters, while reaching out for and seeking the support and help from family, friends and others around us that care, then we realize we are responsible for our own lives, and there are others who will help us if they can when we are in need.

If our upbringing and family are competitive, unfair and unsupportive, we will grow up jealous of others' successes and feel that there is nothing we can do to win because the cards are stacked against us and we are alone in our battles with life.

Obama is a smart, well-educated individual with weaknesses, like all of us, in some critical intellectual areas. He is particularly weak in economics, and I am sure there are other areas, but that knowledge lack does not limit his ability to be a good president.

He, and his 2008 presidential election team, ran a masterful election campaign that won him the Democratic party nomination over Hillary Clinton, the presumptive party candidate at the time. Obama also surpassed McCain who was leading in the polls until just a few weeks before the 2008 election.

Despite his tour de force 2008 presidential win, his previous Illinois State Senate and Illinois US Senate seat wins, it is clear, at least to me, that Obama's "You Did Not Build That Speech" is a statement that he feels he did not win based on his merits.

Some of his feelings are normal. Some successful individuals will feel their success is undeserved and only due to good luck. It is the common "pinch me so I wake up from this dream" response to something good, or the feeling that some have that good times must be followed by bad times.

Obama not only feels his personal success is undeserved, but he sees the government, may be as part of his childhood or as part of his admissions to a private preparatory school and then Occidental and Columbia Colleges, as responsible for his political success.

Obama's upbringing is unusual for an American. His rearing included an early childhood education in Jakarta, an absentee father, long periods of separation from his mother, little contact with his paternal relatives and a mixed race parentage when it was much less common than it is today.

When Obama talks of society's fairness, the need for government intervention, his resentment and jealousy of those more economically successful on their own merit than himself, he is reacting to his insecurities and his somewhat unique past. Without strong and supportive parental relationships and family support, government becomes your family, your protector and your provider.

Obama's "You Did Not Build That" speech reflects the world he knew growing up. It is his perception of the world and how people and families deal with life's successes and failures and who they can turn to in times of need.

Friday, July 20, 2012

Store Bought CFLs Emit Significant Amounts Of Skin Damaging Ultraviolet Radiation

Researchers at Stony Brook found that store bought compact fluorescent light bulbs (CFLs) emit skin damaging amounts of ultraviolet radiation. Isn't it great when Congress and the environmentalists decide what is best for us and take away our right to choose and buy old fashioned incandescent bulbs. Energy saving can never be a bad thing to them even if it harms us in other ways. May be the public is not so irrational after all. The public understands that newer technologies present new risks as it reduces an older problem. In addition to the studied radiation, CFLs also contain toxic mercury which is released if the bulbs are broken.

The public should be free to make its own choices and the public should not be treated as children that are told what to do by a paternalistic environmental lobby and Congress. If something is really better, economically and health-wise, the public will choose it without legislative or regulatory mandates.

From "New Light Bulbs May Be Harmful To Skin" on ScienceBlog:
Stony Brook researchers [led by Miriam Rafailovich, PhD, Professor of Materials Science and Engineering and the Director of the Garcia Center for Polymers at Engineered Interfaces at Stony Brook] collected CFL bulbs purchased from different locations across Suffolk and Nassau counties, and then measured the amount of UV emissions and the integrity of each bulb’s phosphor coatings. Results revealed significant levels of UVC and UVA, which appeared to originate from cracks in the phosphor coatings, present in all CFL bulbs studied.

At Stony Brook’s Advanced Energy Research and Technology Center (AERTC), the team took the same bulbs and studied the effects of exposure on healthy human skin tissue cells, including: fibroblasts, a type of cell found in connective tissue that produces collagen; and keratinocytes, an epidermal cell that produces keratin, the key structural material in the outer layer of human skin. Tests were repeated with incandescent light bulbs of the same intensity....

"Our study revealed that the response of healthy skin cells to UV emitted from CFL bulbs is consistent with damage from ultraviolet radiation," said Professor Rafailovich....Rafailovich added that incandescent light of the same intensity had no effect on healthy skin cells....

"Despite their large energy savings, consumers should be careful when using compact fluorescent light bulbs," said Professor Rafailovich. "Our research shows that it is best to avoid using them at close distances and that they are safest when placed behind an additional glass cover." [Emphasis added.]
Read more at http://scienceblog.com/55704/new-light-bulbs-may-be-harmful-to-skin/#DV91qrRfX5MEiyo7.99

Everyone Knows Obama Has Not Worked Out As A President But People Will Vote For Him Anyway

From The Wall Street Journal, "Noonan: A Remedial Communication Class: Lessons from three recent failures, at the Olympics and on the campaign trail" by Peggy Noonan:
The American people tell you the narrative. They look at the facts produced by your leadership, make a judgment and sum it up. The summation is spoken—the story told—at a million barbecues in a million back yards.

The narrative on the president right now is: He's not a bad guy, but it hasn't worked.

Some people will vote for him anyway, some won't. But all, actually, know it hasn't worked. That's the narrative.

Thursday, July 19, 2012

Obama Is Stalling US Engine Of Growth By Delaying Free Trade Agreements: Obama Far Behind Predecessors And Other Countries In Opening Trade

From The Washington Times, "Obama administration stalls economic engine of new free-trade pacts" by Ben Wolfgang:
"The U.S. isn’t going to make progress on trade until we get another president. I don’t know if Mitt Romney is the answer, but Obama clearly is not," said Peter Morici, a professor and international trade scholar at the University of Maryland.

Mr. Obama’s lackluster record on trade, an increasing target of the Romney campaign, stands in stark contrast to those of his predecessors.

Mr. Bush signed free-trade agreements with more than a dozen countries, including Australia, Peru, Singapore and Bahrain. President Clinton’s first term included the signing of the North American Free Trade Agreement with Canada and Mexico, the establishment of permanent normal trade relations with China and the birth of the World Trade Organization.
While the Obama administration has failed to achieve any new deals, he says, the rest of the world is moving full steam ahead. Since 2007, the European Union has finalized or negotiated more than 20 deals. China has signed or negotiated nearly 20. [Emphasis added.]

About Two-Thirds Of Likely Voters Favor Economic Growth Over Fairness

From Rasmussen Reports, "62% Put Economic Growth Ahead of Economic Fairness:"
Sixty-two percent (62%) of Likely U.S. Voters consider encouraging economic growth as a more important role for the government than ensuring economic fairness.

Building A Company That Fails Is Easy: Building A Company That Lasts Is Hard: Obama Is Wrong In Thinking Government Schools, Roads And Other Government Infrastructure And Services Are Responsible For Successful Companies: Romney Did Build Bain Without The Government

Anyone with enough cash; a valuable asset to sell or put up as collateral; with family and friends who will lend them money; or with the ability to borrow from a bank can start a company.

A thousand times everyday in the US, somebody decides they want to be in business for themselves. They think of an idea that will make them money. They make room in the den, garage, attic. They rent space, sign a lease, incorporate, sign partnership papers, file doing business as papers, pay necessary governmental fees, print business cards, think of logos, trademarks, advertisement slogans, create a company Facebook page and twitter account.

New businesses in the hundreds, if not thousands, start in someone's mind every day. Accountants, lawyers and bankers are contacted.

All it takes to start a business in the US is some money and an idea. Money allows an entrepreneur to lease space, hire workers, salesmen, accountants, lawyers. Money allows advertising, sample products, etc. Money allows a business to start. Money allows anyone to build a business.

What happens to most of these ideas, embryonic businesses, start-ups and future McDonald's, Microsoft, Google, GM, WalMart, etc? They die a quick death.

All the entrepreneurs' businesses that start and disappear used government services and infrastructure. The failed businesses hired people who used government schools, roads, and other government services and infrastructure.

Obama and the Democrats say government services and infrastructure are responsible for the business success of Romney and other entrepreneurs. By the same logic, government services and infrastructure are responsible for the business failures.

Romney's and other entrepreneurs' success is not at all due to anything supplied by government. New business success is due to the entrepreneurs' willingness to take more risk than the average individual, along with some unique innate entrepreneurial ability that is not learned in schools or we would not see the high failure rate of new businesses that we do. Of course, a little luck helps, but luck cannot turn a lousy business into a success.

Biil Gates, Mark Zuckerberg, Ray Kroc, Sam Walton, Larry Page, Sergey Brin and the thousands of other successful entrepreneurs are responsible for the success of their companies. They owe nothing to the government, government services and infrastructure for the success of their companies. Other entrepreneurs and start up companies in the same field doing the same thing, with the same government services and infrastructure as the successful business start-ups, failed and died prematurely.

Government provided services and support are not the essential ingredients for business success.

Wednesday, July 18, 2012

Real World Innovation At Work: iPhone 5 Touchscreen Example: Government Would Never Promote Or Invest In This Kind Of Innovation

The current and all the earlier versions of the Apple iPhone have come with working touchscreens. For the next iPhone, the iPhone 5, Apple will use a new touchscreen technology. The new screen combines two parts into one. The glass screen and the touch sensitive layer will be in a single, thinner glass screen.

Screen manufacturing companies invested millions of dollars into this new technology to replace the existing successful touchscreens. The new screens will have two benefits. They are cheaper to make and they are thinner, by about 5 millimeters or 5 percent, than the two replaced parts combined.

Thinner screens weigh less, allow for a larger size with the same weight, and create additional space for the phone to have new components and functions or for a larger battery with a longer time before recharging.

New iPhone 5 Screen Would Be A US Government Innovation Embarrassment

Imagine a government bureaucrat in charge of innovation investment having to explain to a politician that he invested millions of dollars of government funds into an successfully working technology just to make it a little thinner and slightly lighter. Governments do not have any conception of real world innovation. Innovation is usually incremental small steps and process improvements to make the product manufacturing easier, quicker and cheaper. Often it is about finding ways to do things with fewer steps, parts or resources. It is not so much that the end function changes as much as it is about the way the product part is made. Product innovations are often small manufacturing process improvements and often invisible to the consumer. These innovations allow products to become easier and cheaper to make.

Additionally, the companies making the new screens are not the same companies making the older versions of the screens. Likely, the older companies will see their orders decline. Their revenues will also fall and there maybe a need to layoff workers from those factories. Of course, the new factories making the new screens will need to hire more people. Imagine a government investment arm having to explain to Congress why it invested in a technology that did basically the same thing as the old technology but caused company X to lay off its workers.

From The Wall Street Journal, "Next iPhone to Slim Down: New Touch Technology for the Apple Smartphone Will Make Screen Thinner" by Juro Osawa and Lorraine Luk:
The technology integrates touch sensors into the LCD, making it unnecessary to have a separate touch-screen layer. The absence of the layer, usually about half-a-millimeter thick, not only makes the whole screen thinner, but improves the quality of displayed images, said DisplaySearch analyst Hiroshi Hayase.
For Apple, the new technology would also simplify the supply chain and help cut costs as it would no longer need to buy touch panels and LCD panels from separate suppliers.
A thinner screen in the next iPhone could make the whole device slimmer, or make extra room available for other components such as batteries.
At the same time, the adoption of in-cell technology is bad news for makers of conventional touch panels used in many smartphone screens now. Taiwan's Wintek Corp. and TPK Holding Co., which supplied the touch-panel layer of the iPhone 4S screen, didn't get orders for the next iPhone, people familiar with the situation said.

Tuesday, July 17, 2012

US Attorney And Federal Judge Believe Making Money Is A Crime In Itself: US Federal System Treats Capitalism As A Crime

Levy Izhak Rosenbaum was sentenced to 2 1/2 years in federal prison by US District Judge Anne Thompson for buying human kidneys from people who were willing to sell one of their kidneys and then selling the human kidneys to people who needed kidney transplants. It is a crime under federal law to buy and sell human kidneys for use as transplants. There is a shortage of available kidneys from organ donors to people who need kidney transplants. Consequently, there is a long waiting period for kidney organ donations and some people die before they receive a new kidney. Offering monetary compensation to potential donors is a way to increase the supply of available kidneys for use as transplants and shorten the waiting time. Payment increases the number of people who become organ donors.

Unlike other crimes involving contraband, such as illegal drugs like heroin and meth, where the growing, manufacturing, selling, buying, possession and use is a crime, it is not illegal to use human kidneys for transplants. It is not illegal to possess another human donor's kidney. It is not illegal to use another human donor's kidney in one's body. It is not illegal to request a donor to give you his/her kidney for your own or someone else's transplant. It is not illegal to give up your own kidney for use as someone else's transplant. It is not illegal for hospitals, doctors, nurses and other medical staff to make money doing a transplant.

It is only illegal for the person who needs the transplant to pay a donor for the kidney.

Crime Of Using Free Market Capitalistic System

So Rosenbaum's crime is that he used the free market system to make a profit by paying organ donors for their kidneys and by receiving money from people who needed kidneys. His crime is he was a capitalist meeting the legal needs of two willing people, one who needed a kidney to live and one who wanted money and was willing to sell his/her kidney.

Just as easily, the courts could have found legal doctrine to invalidate the law against buying and selling organs for transplants. A willing court could have used property rights, privacy rights, limitations of the commerce clause, etc to invalidate a law that does not prohibit the transaction but only prohibits the profiteering from the transaction. Making a profit should not be a crime, especially when payment increases the supply of available kidneys for use as transplants, shortens the waiting time and saves lives.

From Bloomberg, "Kidney Broker Sentenced To Prison As Donor Recalls Doubts" by David Glovin and David Voreacos:
After hearing [Elahn] Quick’s account of how [Levy Izhak] Rosenbaum paid him $25,000 for a kidney, US District Judge Anne Thompson sentenced Rosenbaum to 2 1/2 years in prison.

"It’s a kind of trading in human misery," Thompson said of the black-market kidney trade. Rosenbaum "charged a fee" for kidneys....
Rosenbaum, an Israeli immigrant, pleaded guilty last year to violating a 1984 U.S. law banning the sale of human organs. He admitted that he charged sick Americans as much as $160,000 for a kidney. Prosecutors said he’d been selling kidneys since 1999.

Defense lawyers yesterday urged Thompson to sentence Rosenbaum to probation and community service. They and a former Rosenbaum client who bought a kidney told the judge that he was “an angel” who helped save the lives of people close to death from kidney disease. They said he earned little from his decade- long kidney scheme.

"Saving a life should not end up in a jail sentence," Richard Finkel, an attorney for Rosenbaum, told the judge.

Prosecutors called for a stiff prison term.

"Rosenbaum is a profiteer who saw an opportunity in the black-market of kidney sales," Assistant U.S. Attorney Mark McCarren said in court. Rosenbaum probably earned "hundreds and hundreds of thousands of dollars" in profit while "exploiting" the poor whose desperate need for cash forced them to sell their kidneys, he said. [Emphasis Added.]
Sadly, the court and the prosecutor had to resort to penalizing the capitalistic motive because that is the only part of the kidney organ transaction between the willing parties that is illegal.

Monday, July 16, 2012

Alcohol Use In High School Is The Gateway Drug To Illegal Harder Drugs: HS Students Who Drink Alcohol Are 16 Times More Likely To Use Illegal Drugs

From "Study Shows Long-Term Drug Abuse Starts With Alcohol" on ScienceBlog:
The study appears in the August issue of the Journal of School Health.

[Adam] Barry, [an assistant professor and researcher in the University of Florida College of Health and Human Performance] used a nationally representative sample of high school seniors, evaluating data collected through the annual Monitoring the Future study. The study, conducted by the Institute for Social Research at the University of Michigan
Barry’s study focused on data collected from 14,577 high school seniors from 120 public and private schools in the United States.
In addition, the drug use documented found that substance use typically begins with the most socially acceptable drugs, such as alcohol and cigarettes, then proceeds to marijuana use and finally to other illegal, harder drugs. Moreover, the study showed that students who used alcohol exhibited a significantly greater likelihood — up to 16 times — of licit and illicit substance use.

“These findings add further credence to the literature identifying alcohol as the gateway drug to other substance use,” he said. [Emphasis Added.]

Overweight And Obesity Not Linked To Increased Risk Of Death: Previous Studies Of Increased Risk of Death From Obesity Done Before Obesity Was Widespread

From "Above-Normal Weight Alone Does Not Increase The Short-Term Risk Of Death" on ScienceBlog:
An evaluation of national data by UC Davis researchers has found that extra weight is not necessarily linked with a higher risk of death.

When compared to those with normal weight, people who were overweight or obese had no increased risk of death during a follow-up period of six years. People who were severely obese did have a higher risk, but only if they also had diabetes or hypertension.

The findings, which appear in the July-August issue of The Journal of the American Board of Family Medicine, call into question previous studies – using data collected when obesity was less common – linking higher short-term mortality with any amount of extra weight.

Friday, July 13, 2012

US Companies Would Outsource Jobs To Be Near Suppliers, New Markets, Talent And Knowledge Of Local Tastes Even If Wages Were Not Lower

From Bloomberg Opinion, "Obama-Romney Debate Over Offshoring Is Phony and Harmful" by the Editors:
Virtually all U.S. companies and consumers have benefited from the lower cost of clothing, cars and computers made overseas. At the same time, hundreds of millions of people in emerging markets -- more than the entire population of the U.S. -- have climbed out of poverty because of the free flow of goods and services across borders. Globalization is transforming people in Asia and elsewhere into consumers of U.S. products. Eventually, some jobs will flow back to the U.S. because of rising wages abroad, a stronger Chinese currency and inexpensive natural gas. Such “inshoring” is already happening.

For U.S. corporations, globalization isn’t just about cheaper wages. Companies create jobs outside the U.S. to pursue sales opportunities in new markets, get closer to suppliers in fast-growing regions and employ people who understand local tastes. Even if labor costs were equal, companies would still hire abroad because that’s where the talent pool is. India, for example, has an abundance of young, college-educated IT workers. Companies that don’t do any of this for patriotic reasons will be at a disadvantage to European and Asian competitors, probably resulting in lost market share and more U.S. layoffs.

As millions of Americans who have seen their living standards diminished can attest, there are brutal downsides to globalization. U.S. institutions have done a poor job of cushioning the blows to workers compared with some other advanced economies such as Germany. But it’s a little late now for Obama, or any other politician, to pretend that offshoring is somehow unethical or un-American. [Emphasis Added.]

Thursday, July 12, 2012

BLS And The Fed Are Ignoring The Variance Of The State Unemployment Numbers: Looking At Policy Effects On State Unemployment Variance Will Aid Policy Choices: Variance Would Help In Deciding The Natural Rate Of Unemployment

With North Dakota showing a 3.0 percent unemployment rate, Nevada a 11.6 percent unemployment and the entire US around 8.2 percent unemployment rate, a single unemployment number of the national average masks what is happening across the US and hinders the analysis of the proper policy response.

The Bureau of Labor Statistics needs to release on a monthly basis the statistical variance of the state and metropolitan area unemployment rates that make up the national average unemployment rate.

Policies that lower the national unemployment rate without lowering the variance means that government policies are helping the part of the US that is already doing well. Likewise, if the variances of the state and metropolitan area unemployment rates are increasing, it means that government policies are hurting some states and hindering their employment recovery while benefiting other states that are already successful in lowering unemployment.

Furthermore, a historical base of the variance of state and metropolitan area unemployment might give the Fed additional insight into what is happening and help in choosing the correct policy response.

For example, one would expect a tightening of credit to affect all employment fairly equally across the 50 states. If unemployment is increasing nationally because of tight money, one should not expect to see an increase in the variance of the unemployment rates, i.e. some states experience an increase in unemployment while other states see a decrease or no change in unemployment rates.

If the variance is increasing then, it is likely other factors are also at work that are increasing unemployment in some areas of the US while not affecting other areas. It means that action by the Fed to increase the money supply and lower borrowing rates will not be as effective as expected.

Variance numbers would also give the Fed insight into the natural rate of unemployment in the US. If there is a large variance, then the average is not near the natural rate because there are areas with much lower and higher unemployment than the average indicates. Similarly, a small variance means the entire US is close to the national unemployment rate and if there were no common factor affecting the entire US unemployment rate then the national unemployment rate is much more likely a natural rate of unemployment.

Wednesday, July 11, 2012

Most US Workers Need Cars To Get To Work: Mass Transit Is Not An Option For Most Of The Employed

From The Wall Street Journal Real Time Economics Blog, "Most Urban Jobs Are Near Transit, but Most Workers Aren’t" by Conor Dougherty:
Some three quarters of all jobs in the nation’s 100 largest metropolitan areas are in neighborhoods with transit service, but only about a quarter of the workforce is able to get to their jobs in less than 90 minutes via mass transit. Why the disconnect? Despite the popular image of office workers in tall downtown buildings, most Americans both live and work in the suburbs.
On average, the nation’s 100 largest metropolitan areas have 63% of their jobs — 64.6 million total positions — located outside the central city. And while most of those jobs are in near some sort of bus or rail line, the patchwork of suburban transportation systems makes it hard for their workers — most of which also live in the suburbs — to get there without driving.

Hooray For The Ever Increasing US Standard Of Living: The Lower 20 Percent In Income Today Have The Same Inflation Adjusted Income As 1950's Middle Class Families And Better Than The Top 1% In 1790

From The Wall Street Journal, "Air Jordan and the 1%: There was a lot more income inequality on the Chicago Bulls roster after Michael Jordan's years with the team, but everyone was better off." by Matthew Schoenfeld:
"From the time of Pericles until the end of the 18th century in London—2,300 years," notes Harvard Prof. Lawrence Summers, "standards of living on Earth increased perhaps 100%." In the U.S. since 1790, by contrast, real per capita gross domestic product has increased nearly 4,000%. Quality of life, in other words, increased 40 times more in 220 years of American history than it had globally over two millennia. In 2012, a typical American in the bottom fifth of the income distribution has a far higher quality of life—and life expectancy—than the average member of the top 1% in 1790.
But in 1959, more than 20% of families fell below the poverty line. In 2010 that figure was just over 13%. Real per capita GDP today is 270% higher than it was in 1959. A family in the bottom fifth of the income distribution today makes the same amount in real terms as a family earning the median income in 1950. So inequality might have increased, but so too—dramatically—has quality of life.

Even over the last two decades, while real income has essentially stagnated for the bottom fifth of earners, basic conveniences have become far more affordable. In 1992, only 20% of American families below the poverty line had a dishwasher—50% had air conditioning and 60% owned a microwave. When the Census Bureau last surveyed these figures in 2005, those figures were 37%, 79% and 91%, respectively. Critics who minimize the importance of these conveniences likely have never had to do without them.
Certainly there are reasons for concern if lower-income Americans aren't able to save or acquire sufficient capital to pursue innovative ideas, or to see their children attend decent schools. They will suffer, and the country will lose out on significant intellectual capital and growth opportunities. But this should not be confused with inequality. [Emphasis Added.]

Tuesday, July 10, 2012

Environmental Policy That Slows Growth Is Brown, Not Green

From "Growth is Green" on The Percolator, The Free Market Environmentalism Blog:
"Economic growth is green,” says Dino Falaschetti, PERC’s new executive director. Growth occurs only when markets are allowed to work to move goods and services from low-productivity uses to high-productivity uses. "Making more with less is conservation. Making more with less is sustainable," adds Falaschetti. "When environmental policy puts growth at risk, it is brown, not green."

One Nation Under God, Indivisible, Except For The Rich

From Bloomberg, "Democrats To Risk Fiscal Cliff By Targeting Top Earners" by Heidi Przybyla:
Congressional Democrats have developed a get-tough strategy to try to force Republicans to go along with President Barack Obama’s call for higher taxes for the wealthiest Americans.

Monday, July 9, 2012

Featherbedding In US Public Schools: Since 1970, Schools Doubled Teaching Staff While Enrollment Remained Basically Unchanged: In The 40 Years, US Students Show No Improvement In Math, Science Or English Test Scores Or HS Graduation Rates: $210 Billion Per Year Taxed And Spent Unnecessarily On Ineffective Additional Teachers

From The Wall Street Journal, "America Has Too Many Teachers: Public-school employees have doubled in 40 years while student enrollment has increased by only 8.5%—and academic results have stagnated." by Andrew J Coulson:
Since 1970, the public school workforce has roughly doubled—to 6.4 million from 3.3 million—and two-thirds of those new hires are teachers or teachers' aides. Over the same period, enrollment rose by a tepid 8.5%. Employment has thus grown 11 times faster than enrollment. If we returned to the student-to-staff ratio of 1970, American taxpayers would save about $210 billion annually in personnel costs.
we can look at the "long-term trends" of 17-year-olds on the federal National Assessment of Educational Progress. These tests, first administered four decades ago, show stagnation in reading and math and a decline in science. Scores for black and Hispanic students have improved somewhat, but the scores of white students (still the majority) are flat overall, and large demographic gaps persist. Graduation rates have also stagnated or fallen. So a doubling in staff size and more than a doubling in cost have done little to improve academic outcomes.

Nor can the explosive growth in public-school hiring be attributed to federal spending on special education. According to the latest Census Bureau data, special ed teachers make up barely 5% of the K-12 work force.

The implication of these facts is clear: America's public schools have warehoused three million people in jobs that do little to improve student achievement—people who would be working productively in the private sector if that extra $210 billion were not taxed out of the economy each year.

Comment To "Why US Economic Policy Is Paralyzed" On Real Clear Markets

My short comment to Real Clear Markets, "Why U.S. Economic Policy Is Paralyzed" by Robert Samuelson:
Deficit government financing in recent times is used to redirect money to taxpayers as opposed to previous times when it was used for wars or major capital projects.

Payments and subsidies to citizens and and companies changes their incentives and it is the change in incentives that distorts private investments and work efforts. The taxpayer payments and subsidies also distort market based priced signals.

Unintended incentives along with distorted price signals have created economic inefficiencies, slowed the US economy and are keeping the economy and employment below long term trend.

CBO to Release New Budgetary Assessment Of ObamaCare in Two Weeks, The Week of July 23

The Congressional Budget Office expects to have updated budgetary projections and assessment of the Affordable Care Act (aka ObamaCare) in the week of July 23, 2012, two weeks from now.

The 10-year time window used by CBO to analyze legislation is now two years later than when the law was signed by Obama in March 2010 and the analysis will include costs that were originally scheduled by the legislation to occur after the original 10 year period to make the law look deficit neutral. The CBO analysis will also consider the budgetary effects of the US Supreme Court health care decision.

From "Update on CBO's Response to the Supreme Court's Decision Regarding the Affordable Care Act" july 9, 2012:
CBO is still assessing the effects of the Supreme Court’s decision related to the Affordable Care Act (ACA) on the agency’s projections of federal spending and revenue under current law. We expect to complete that assessment and release updated projections of the budgetary effects of the ACA’s coverage provisions during the week of July 23rd. Because such updated projections are the base against which CBO will estimate the budgetary effects of changes in the ACA, CBO cannot provide estimates of the effects of such changes—including the effects of repealing the ACA—until that assessment is completed during the week of July 23rd.

Successful Proof Of Concept Trial Of Weight Loss Vaccine

From "Overweight? There's A Vaccine For That" on ScienceBlog:
A new study, published in BioMed Central’s open access journal, Journal of Animal Science and Biotechnology, assesses the effectiveness of two somatostatin vaccinations, JH17 and JH18, in reducing weight gain and increasing weight loss in mice.
Keith Haffer from Braasch Biotech LLC, tested the vaccinations in two groups of ten diet-induced obese male mice compared with a control group of ten mice which received saline injections.
Four days after the first injection of modified somatostatin, the vaccinated mice had a 10% drop in body weight (not seen in the control mice). At the end of the study, results showed that both vaccines ... significantly reduced body weight, sustaining a 10% lower body weight,....

Saturday, July 7, 2012

Small Percentage Of Medicare Patients, Often The Young On Disability, Account For Most Of Costs

From The Wall Street Journal "The Crushing Cost of Care: A small percentage of challenging cases, often at the end of life, make up the great bulk of Medicare spending on hospital care. Are we anywhere close to containing the costs?" by Janet Adamy and Tom McGinty:
In 2009, the top 10% of Medicare beneficiaries who received hospital care accounted for 64% of the program's hospital spending, the Journal's analysis found.
Notably, the costliest patients aren't necessarily the oldest, even though Medicare mainly cares for people 65 or older. Of the top 10 costliest people on Medicare in 2009, eight were on disability, including Mr. Crawford. Disability is the main way people under 65 qualify for Medicare.

See my April 22, 2011 post, "Small Percentage Of Medicare Beneficiaries Account For Most Of Its Costs: Maybe Medicare Needs To Be Split Into Two."

Thursday, July 5, 2012

Clean Water Act Has Been Ineffective In Improving Water Quality In Fresh Water Lakes: Water Today At Same Quality As In 1975

From the abstract to "Has Surface Water Quality Improved Since the Clean Water Act?" by V. Kerry Smith and Carlos Valcarcel Wolloh, NBER Working Paper No. 18192, June 2012:
On the fortieth anniversary of the Clean Water Act this paper reports the first quantitative assessment of the aggregate trends in water quality in the U.S. using a single standard over the years 1975 to 2011. The analysis suggests that fresh water lakes for the nation as a whole are about at the same quality levels as they were in 1975. In short, viewed in the aggregate, nothing has changed.

Tuesday, July 3, 2012

25 Percent Of Teens Electronically Sent (Sext) A Nude Photo Of Themselves

From Bloomberg, "Nude Photo ‘Sexts’ Sent By One In Four Teens, Study Finds" by Jeanna Smialek
More than a quarter of American teenagers sent nude photos of themselves electronically, and those who engaged in ‘sexting’ were almost twice as likely as their peers to have had sex, researchers found.

About half of almost 1,000 students ages 14 to 19 from seven public high schools in Texas said they had been asked to send a naked photo electronically, according to a study published today in the Archives of Pediatric and Adolescent Medicine. Another third reported asking someone else to send them a nude picture.
More boys asked for a ‘sext,’ though the same percentage of boys and girls had sent one, according to the study.
Possession of a nude photo of a minor can be considered possession of child pornography and a criminal offense under federal and state laws.

South Korea's Low Female Workforce Participation Rate Hurting Future Economic Growth

From Bloomberg, "South Korea Shuns Moms At Peril A Workforce Shrinks" by Eunkyung Seo:
The failure of South Korea, one of the world’s fastest- aging societies, to tackle a shrinking labor pool threatens to undermine growth and lessen the nation’s odds of producing the next Samsung Electronics Co. or Hyundai Motor Co. Only half of women aged 15 years or older were working last year and the participation of females with higher education is the lowest among the 34 members of the Organization for Cooperation and Economic Development.

"The choice for women between a job and family is still stark," said Kim Tae Hong, research director at the state-run Korea Women’s Development Institute in Seoul. "Policies alone can’t change the people’s long-held belief that mom is fully responsible for child care."

South Korea’s working-age population will begin to contract by 2016, curbing growth by as much as 1.7 percentage points to 2.5 percent by 2050, Royal Bank of Scotland Group Plc said in a June 13 report.

Getting mothers back into the workforce would help offset the declines, RBS said. If South Korea could reach the same level as the U.K. in employing women, potential growth and GDP per capita growth could be boosted by 0.3 percentage points by 2050, the bank said.