Professor Mark J. Perry's Blog for Economics and Finance
Saturday, July 26, 2008
The Campaign for Gender Parity Infantilizes Women
The members of Congress and women’s groups who have pushed for science to be “Title Nined” say there is evidence that women face discrimination in certain sciences, but the quality of that evidence is disputed. Critics say there is far better research showing that on average, women’s interest in some fields isn’t the same as men’s.
Women now constitute about half of medical students, 60 percent of biology majors and 70 percent of psychology Ph.D.s. They earn the majority of doctorates in both the life sciences and the social sciences. They remain a minority in the physical sciences and engineering. Even though their annual share of doctorates in physics has tripled in recent decades, it’s less than 20%. Only 10% of physics faculty members are women, a ratio that helped prompt an investigation in 2005 by the American Institute of Physics into the possibility of bias.
Clinical psychologist Susan Pinker argues that the campaign for gender parity infantilizes women by assuming they don’t know what they want. She interviewed women who abandoned successful careers in science and engineering to work in fields like architecture, law and education — and not because they had faced discrimination in science.
Instead, they complained of being pushed so hard to be scientists and engineers that they ended up in jobs they didn’t enjoy. “The irony was that talent in a male-typical pursuit limited their choices,” Ms. Pinker says. “Once they showed aptitude for math or physical science, there was an assumption that they’d pursue it as a career even if they had other interests or aspirations. And because these women went along with the program and were perceived by parents and teachers as torch bearers, it was so much more difficult for them to come to terms with the fact that the work made them unhappy.”
Ms. Pinker says that universities and employers should do a better job helping women combine family responsibilities with careers in fields like physics. But she also points out that female physicists are a distinct minority even in Western European countries that offer day care and generous benefits to women.
“Creating equal opportunities for women does not mean that they’ll choose what men choose in equal numbers,” Ms. Pinker says. “The freedom to act on one’s preferences can create a more exaggerated gender split in some fields.”
~John Tierney in the NY Times
Home Price Maps
Below is a Trulia Map of the average list price for San Francisco homes by area; dark green area homes are $599k and below, dark brown area homes are $1.4m and above:
Trulia map of average list price for Sioux Falls SD homes; dark green area homes are $116k and below, dark brown area homes are $271k and above (brown):
Here's a Florida map: For more Trulia interactive maps by state or city, by average list price, by median sales price, go here.
Detroit: Cheaper To Buy A House Than A New Car
The good news is that home sales in the city of Detroit through June are up by a whopping +46.56% (YTD) compared to last year (5,389 homes sold in 2008 YTD vs. 3,677 last year), but the bad news is that the average price for a home sold in Detroit has fallen by 56% to only $19,448 so far this this year, compared to an average price last year of $44,346 for the January-June period! Compared to the peak of $97,850 for the average Detroit home price in 2003, prices have fallen by 80% (see chart above, values are annual except for 2008, which is YTD, data available here).
Bottom Line: The average priced house in Detroit ($19,448) is cheaper than the average price new car ($22,650).
Homeownership Rate in Second Quarter 2008 Rebounds By Largest Increase in Four Years
The chart above is based on the Census Bureau's latest release on home ownership rates, and shows the following:
1. The howeownership rate fell below 68% in the last quarter of 2007 (67.8%) and first quarter of 2008 (67.8%) for the first time since early 2002, as part of a four-year downward trend since the 69.2% peak level of homeownership in 2004.
2. The .30% increase in homeownship for the second quarter of 2008 to 68.1% was the first quarterly increase in almost two years (since third quarter 2006), and was the largest quarterly increase in four years (since second quarter 2004).
Bottom Line: If this rebound in homeownership rates continues to reverse the four-year downward trend, it could provide further evidence that we are finally experiencing a bottom to the housing market problems, as suggested by Larry Kudlow (The Media Are Missing the Housing Bottom) and Brian Wesbury ("Pace of existing home sales is very close to a bottom," and "Pace of new home sales has either already hit bottom or is getting very close to the bottom.")
Friday, July 25, 2008
Big Mac Index
The Big Mac Index is The Economist's light-hearted guide to exchange rates. The index is based on the theory of purchasing-power parity, which says that exchange rates should move to make the price of a basket of goods the same in each country. Our basket contains just one item, a Big Mac hamburger. The exchange rate that leaves a Big Mac costing the same everywhere is our fair-value yardstick.
Many of the currencies in the Fed's major-currency index, including the euro, the British pound, Swiss franc and Canadian dollar, are overvalued and trading higher than last year's burger benchmark. Only the Japanese yen could be considered a snip. The dollar still buys a lot of burger in the rest of Asia too. China's currency is among the most undervalued, but a little bit less so than a year ago.
Gas Prices Fall Below $3.50 Per Gallon in Kansas
Want A World Full of Reckless Idiots? A Culture of Bailouts Will Work Pretty Well
The Federal Reserve and government regulators are largely propping up the lifestyles not of the middle class in general, but of various individuals who made choices that turned out badly and prefer not to live with the consequences. These include people who bought houses they now can't afford, executives at banks such as Bear Stearns and people who invested in reckless institutions like Fannie Mae.
Only a small number of these people are blameworthy.
Most simply made reasonable choices that didn't turn out very well. But people make reasonable choices that don't turn out very well all the time, and we don't bail them out. What about the people who bought SUVs just before the prices of those vehicles fell? Should they get bailouts? Should the government reimburse everyone who made the mistake of "upgrading" to Microsoft's Windows Vista?
When you shield people from great risks, you deny them the opportunity to earn great rewards. The culture of bailouts raises the price of risky assets, which makes it harder to get rich by buying them. We all have different risk tolerances, so it's a good thing that the market offers a great range of options.
When you make the riskiest assets less risky (and simultaneously less lucrative), you reduce that range of options. At the same time, you dilute the incentive for shareholder oversight, which leads to lower productivity, lower incomes and lower wages. In the long run, that's no favor to anybody.
~Steven Landsburg in today's LA Times
MP: If you make the world safe for idiots (and reckless borrowers, investors and executives), you'll create a world full of idiots (reckless borrowers, investors and executives).
The Global Warming Sleight of Hand
From greenhouse scientist Dr. David Evans, consultant to the Australian Greenhouse Office from 1999 to 2005, about global warming:
We scientists had political support, the ear of government, big budgets, and we felt fairly important and useful (well, I did anyway). It was great. We were working to save the planet.
But since 1999 new evidence has seriously weakened the case that carbon emissions are the main cause of global warming, and by 2007 the evidence was pretty conclusive that carbon played only a minor role and was not the main cause of the recent global warming. As Lord Keynes famously said, "When the facts change, I change my mind. What do you do, sir?"
1. The greenhouse signature is missing. We have been looking and measuring for years, and cannot find it.
2. There is no evidence to support the idea that carbon emissions cause significant global warming. None. There is plenty of evidence that global warming has occurred, and theory suggests that carbon emissions should raise temperatures (though by how much is hotly disputed), but there are no observations by anyone that implicate carbon emissions as a significant cause of the recent global warming.
3. The satellites that measure the world's temperature all say that the warming trend ended in 2001, and that the temperature has dropped about 0.6C in the past year (to the temperature of 1980).
4. The new ice cores show that in the past six global warmings over the past half a million years, the temperature rises occurred on average 800 years before the accompanying rise in atmospheric carbon. Which says something important about which was cause and which was effect.
None of these points are controversial. The alarmist scientists agree with them, though they would dispute their relevance.
So far that debate has just consisted of a simple sleight of hand: show evidence of global warming, and while the audience is stunned at the implications, simply assert that it is due to carbon emissions.
In the minds of the audience, the evidence that global warming has occurred becomes conflated with the alleged cause, and the audience hasn't noticed that the cause was merely asserted, not proved.
HT: Ben Cunningham
MP: Dr. Evans joins this long list of skeptical scientists who are questioning the global warming hysteria.
The Economy as A Beehive, NOT A House of Cards
At the micro level, the failure of an institution is often a disaster to those with a personal stake. But from an overall perspective, when one institution becomes insolvent, another can be relied on to pick up its functions.
It's widely assumed that a large enough wave of bankruptcies will bring the economy down. Little or no credit is given to the ability of the economic system to heal itself and find its way back to vitality.
What's excessive now is fear, not debt: Fears of insolvency and private-sector indebtedness are misplaced and harmful. They place obstacles in the way of ill-used capital that seeks to move toward safer and more profitable employment. They plunge the stock market into turbulence. They push government into hasty actions that intrude more aggressively into private choices and decisions. They undercut the market-price system, without which the economy cannot allocate resources productively. Last but not least, these fears trigger the proverbial false alarm in a crowded theater, sending everyone stampeding for the exits.
Editorial in today's WSJ by David Ranson
MP: We operate under a "profit AND LOSS" system, and as painful as they are for some people, business losses and bankruptcies are an important part of the economy - they reallocate resources that are being used unwisely towards productive uses that are more highly valued by the economy at the macro level. When there are business failures, resources (property, plant, equipment, capital, human capital, labor, real estate, land etc.) don't ever disappear, they just get reallocated.
The New Big Three: Entitlements
This "locked in" spending is steadily undermining the economic future of younger generations who face a debt burden of $175,000 per person. The moral and ethical challenge from the entitlement tsunami is undermining our democratic system as more Americans become dependent on the government and other priorities are automatically preempted.
Thursday, July 24, 2008
Howard Stern on the XM-Siruis Merger
Satellite radio talk show star cites 'gangsterism,' 'communism' for holding up the XM-Sirius merger.
I don’t care if God becomes a Democrat.’ I said, ‘I backed Hillary Clinton, I backed Al Gore, I backed John Kerry. I am done with them.’”
America's 12 Cheapest Cars, Where is the Big 3?
From Forbes, America's 12 cheapest cars (#1 is the Kia Rio, pictured above, base price $10,890). Note that there is only one Big Three vehicles among the 12 cheapest cars, the Chevy Aveo, which is actually built in S. Korea by GM Daewoo.
As consumers switch to cheaper, smaller, more fuel-efficient vehicles, it seems like the Big Three is "missing the boat".... again.... See cartoon below:
HT: Juandos and Spencer.
Retail Health Care Clinic Updates
1. One of the nation's leading retail health clinics, Take Care Health Systems, recently informed the American Academy of Family Physicians that it would not renew its commitment to the Academy's list of Desired Attributes of Retail Health Clinics. The action fueled AAFP's already heightened concerns about retail health clinics expanding their scope of practice beyond the treatment of simple acute health concerns. Link.
Translation: The family doc cartel is worried about increased competition.
2. Boston Globe -- Some of the state's largest health insurers say they will cover visits to the retail health clinics expected to open in CVS and Walgreens drugstores later this year, making the clinics attractive options for the treatment of everyday ailments.
The endorsement by insurers is likely to turn retail clinics into major healthcare providers in the state because, for many patients, they will be less expensive than hospital emergency rooms, with less waiting time. Under the contracts signed and being negotiated, retail clinic copayments range from $10 to $25, compared with the $50 to $150 copays most insurers assess for emergency room care.
The state's powerful physicians' group, the Massachusetts Medical Society, opposed the clinics when they were proposed by CVS last year, saying they raised concerns about safety, oversight of caregivers, and spread of germs.
Translation: The MMS cartel was actually most concerned about competition.
Wednesday, July 23, 2008
Speculators Are Doing Our Children A Service
It's very hard to guess what the price of oil would be in the absence of speculation, but it's also impossible to imagine what a world without speculation would look like. I certainly agree that we have no good explanation of these prices. Certainly as an explanation by itself, "speculation" makes little sense. Speculators drive up prices only when they believe that future prices will be even higher. Why they'd believe that, I'm not sure.
I do think we should pause to note that if that's what's happening, then the speculators are doing our children a service by conserving oil for a time when it will be very scarce. In other words (if in fact that's what's happening), there are two reasons to applaud higher oil prices -- conservation and environmental issues. But speculators are unlikely to care about the latter. So no matter how high speculators push the price, they're unlikely to push it far enough.
~Steven Landsburg in yesterday's LA Times
Shady Accounting: It's Not Just the Private Sector
In 1938, when Fannie Mae got started, it was originally a government agency endowed with the authority to buy mortgages, in the hope that this would expand the supply of credit to homeowners. It wasn’t until 1968 that Fannie was privatized. (Freddie Mac was created two years later, and was private from the start.) The main reason for the change was surprisingly mundane: accounting. At the time, Lyndon Johnson was concerned about the effect of the Vietnam War on the federal budget. Making Fannie Mae private moved its liabilities off the government’s books, even if, as the recent crisis made clear, the U.S. was still responsible for those debts. It was a bit like what Enron did thirty years later, when it used “special-purpose entities” to move liabilities off its balance sheet.
From The New Yorker, via Greg Mankiw.
For Some Products, Prices Have Been Falling
Rising food and energy prices have received a lot of media attention lately, along with concerns about the threat of inflation. The chart above (using BLS data via Economagic) shows a sample of products that have experienced significant deflation in the last ten years (as well as deflation in the last few years in almost all cases), double-digit percentage decreases in all cases except for new cars (-3.4%).
Then considering that average hourly earnings have increased by almolst 40% over the last ten years, the real prices of those products have fallen by an even greater amount, a HUGE amount. In other words, there are many, many products like computers, cameras, new cars, clothing, TVs, appliances, electronics, software, etc. that are significantly cheaper today than ten years ago, especially after adjusting for increases in earnings.
One reason we don't pay much attention to these price decreases is probably that they happen so gradually and consistently over time, so we either a) don't notice the savings, or b) take it for granted and don't appreciate the incredible savings over time in many of the products that we all buy.
Or maybe it's also because we buy computers, TVs, appliances, new cars INFREQUENTLY (every 5 year or more in some cases), and don't notice or appreciate the price decreases the same way we notice price changes for food and fuel that we purchase FREQUENTLY?
But there does seem to be a certain degree of misperception among the general public and media that ALL prices are going up, which is clearly not the case.
Fierce Competition Is Usually The Best Regulator
Yes, the Sirius-XM merger would create a “monopoly” in satellite radio, but a merged Sirius-XM will still face fierce competition. AM and FM radio, podcasts, mp3 players, and cell phone programming all compete against satellite radio for listeners. In the future, mobile Internet radio with programmable stations could easily threaten satellite radio, which is not programmable.
“Regulation” by competition, not by the FCC and DoJ, is what is needed.
From Competitive Enterprise Institute, via Cafe Hayek.
MP: Remember that "competition breeds competence."
Private Taxis, Invisible Hand Coming to Cuba
From David Theroux at the Independent Institute:
Is there now a light ahead in Cuba after decades of repressive communist rule? With his brother Fidel now on the sidelines, Cuban President Raúl Castro has recently lifted a nine-year-old ban on private taxis, “potentially legalizing thousands of unauthorized cabbies who cruise its cities in classic American cars (see photo above).”
As the AP reports, Fidel Castro, who imposed the previous ban, had opposed private cabbies as “enriching themselves at the expense of egalitarian goals.” I gather that for Fidel, only a massive, crushing, incompetent, and inherently corrupt State transportation monopoly/bureaucracy would do.
MP: The gradual transition from the clumsy, oppressive visible foot of the government in Cuba to the invisible hand of the market........
How Government Created the Mortgage Mess, II
How did the government help create the current financial mess? Let me count the ways.
In addition to federal laws that pressure lenders to lend to people they would not otherwise lend to, and in places where they would otherwise not invest, state and local governments have in various parts of the country so severely restricted building as to lead to skyrocketing housing prices, which in turn have led many people to resort to "creative financing" in order to buy these artificially more expensive homes.
Meanwhile, the Federal Reserve System brought interest rates down to such low levels that "creative financing" with interest-only mortgage loans enabled people to buy houses that they could not otherwise afford.
But there is no free lunch. Interest-only loans do not continue indefinitely. After a few years, such mortgage loans typically require the borrower to begin paying back some of the principal, which means that the monthly mortgage payments will begin to rise.
Since everyone knew that the Federal Reserve System's extremely low interest rates were not going to last forever, much "creative financing" also involved adjustable-rate mortgages, where the interest charged by the lender would rise when interest rates in the economy as a whole rose.
In the housing market, a difference of a couple of percentage points in the interest rate can make a big difference in the monthly mortgage payment. For someone who buys a house costing half a million dollars— which can be a very small house in many parts of coastal California— the difference between paying 4 percent and 6 percent interest would amount to more than $7,000 a year. For people who have had to stretch to the limit to buy a house, an increase of $7,000 a year in their mortgage payments can be enough to push them over the edge financially.
In other words, government laws and policies at federal, state and local levels have had the net effect of putting both borrowers and lenders way out on a limb.
Misery Index: It's NOTHING Like the 1930s or 1970s
We hear a lot of comparisons of today's economic conditions to the inflationary 1970s (see shaded area above) and even the Great Depression and the 1930s (see shaded area). The chart above shows the annual Misery Index from 1930 to 2008, calculated as the sum of a) the CPI inflation rate and b) the unemployment rate. Notice that today's single-digit Misery Index of 9.7% isn't anywhere near to the double-digit levels througout both the 1930s and the 1970s, with peaks around 20% in both decades. The Misery Index is also lower today than during most of the 1980s.
Bottom Line: Cheer up, these are the good old days, says Jeff Jacoby in today's Boston Globe.
Tuesday, July 22, 2008
IMF Loans Lead to Higher Rates of Tuberculosis
From an interesting paper "International Monetary Fund Programs and Tuberculosis Outcomes in Post-Communist Countries":
The International Monetary Fund (IMF) is a major source of capital for resource-deprived countries, but it is unclear whether its economic reform programs have positive or negative effects on health and health infrastructures in recipient countries. There are indications, for example, that recipient countries sometimes reduce their public-health spending to meet the economic targets set by the IMF as conditions for its loans.
Our results show that IMF economic reform programs are strongly associated with rises in tuberculosis mortality rates in 21 post-communist Eastern European and Former Soviet Union countries, even after correcting for potential selection bias, tuberculosis surveillance infrastructure, levels of economic development, urbanization, and HIV/AIDS. We estimated an increase in tuberculosis mortality rates when countries participate in an IMF program, which was much greater than the reduction that would have been expected had the countries not participated in an IMF program (see chart above). On the other hand, we estimated a decrease in tuberculosis mortality rates associated with exiting an IMF program. For now, these results challenge the proposition that the forms of economic development promoted by the IMF necessarily improve public health.
Consistent with these results, IMF (but not non-IMF) programs were associated with reductions in government expenditures, tuberculosis program coverage, and the number of doctors per capita in each country.
Bottom Line: Maybe the IMF's bitter pill of strict fiscal responsibility is not just what the doctor ordered, from Slate.com.
Blogging: A New Approach to Exec Recruiting
Harvard Business via BusinessWeek.
HT: Greg Allar
Monday, July 21, 2008
How Government Created the Mortgage Mess
It was government intervention in the financial markets, which is now supposed to save the situation, that created the problem in the first place.
Laws and regulations pressured lending institutions to lend to people that they were not lending to, given the economic realities. The Community Reinvestment Act forced them to lend in places where they did not want to send their money, and where neither they nor the politicians wanted to walk.
Now that this whole situation has blown up in everybody's face, the government intervention that brought on this disaster in is supposed to save the day.
Politics is largely the process of taking credit and putting the blame on others— regardless of what the facts may be. Politicians get away with this to the extent that we gullibly accept their words and look to them as political messiahs.
Bottom Half of Taxpayers' Share Now Less Than 3%
According to the Joint Economic Committee, the share of total federal income taxes paid by the top 1% of tax filers increased to 39.89% in 2006, while the tax share of the top 5% climbed to 60.14%. The income tax share of the top half rose to 97.01%, according to recent Internal Revenue Service (IRS) data (see chart above, click to enlarge). The tax shares are the highest on record for these groups based on comparable IRS data going back to 1986.
"The latest IRS data show that the share of the income tax burden borne by the top half of tax filers continues to rise and now stands at 97.01%," Congressman Jim Saxton said. "The tax shares of the top 1, 5, and 10 percent of taxpayers ranked by income are the highest in many years. The share of the bottom half of tax filers has fallen to a level of 2.99%.
2008 Recession Odds Plummet On Intrade to 17.4%
Second Quarter Real GDP = +3%
So predicts First Trust Advisors.
"Eventually, those forecasting recession are going to run out of time. The clock is already ticking and the economy remains resilient."
Cancer Survival Rates
THE ECONOMIST -- A study in the Lancet Oncology journal compares cancer survival rates across five continents for the first time. Afer adjusting country data from the 1990s, for differences in both age and death rates in the general population, Americans were found to have the best chance of survival for two of the five cancers that the reasearchers considered: breast cancer in women and prostate cancer. (Cuba had impressive survival rates, but these were probably over-estimated, say researchers). Europe lags behind America, with wide differences in survival rates, ranging from 10% for breast cancer to 34% for prostate cancer. Money appears to be an important factor: America spends a greater proportion of national income on health than the other countries.
Freedom and Consumer Greed Are The Keys to Wal-Mart's Success
There was some lively discussion on this recent CD post (featuring the chart above showing a positive relationship between Wal-Mart stores and small businesses) about Cato's Wal-Mart study. Cato's study showed that overall, there was no stasticially significant relationship between the number of Wal-Mart stores per 100,000 residents in a state and the number of small businesses per 100,000 residents. Some of the discussion focused on the statistics of the study and the graph above, the issues of outliers, linear vs. non-linear methods of estimation, etc.
Long-time CD reader Bob Wright offers the following insightful comment:
Statistics is a red herring. Freedom is the issue, not math. Wal-Mart should be free to conduct its business just as mom and pop proprietors are free to conduct their business.
One more thought. The anti-Wal-Mart crowd seem to be arguing that it is acceptable for a mom and pop business to charge high prices - but not the cable company and the oil company. Exactly how small does a business have to be in order to price gouge? I want to keep my business just under this limit. Is there a small business exception to windfall profits?
MP: As Bob points out, freedom is the real issue. Wal-Mart should be free to open stores, and free to compete with other retailers, both large and small. Consumers should be free to shop at retailers of their choice. Small businesses should be free to compete with big box retailers.
If consumers overwhelmingly prefer the low prices of Wal-Mart on the outskirts of small towns to the high prices of mom-and-pop stores downtown and the mom-and-pops go out of business, it's the consumers who ultimately make that decision, not Wal-Mart. Wal-Mart can't force anybody to shop at its stores, it can only open stores and offer consumers a low-priced alternative to the high-priced downtown merchants. "Greedy" consumers do the rest.
Sunday, July 20, 2008
Demand Curves Slope Downward
WASHINGTON – U.S. oil demand was significantly down for the first six months of 2008, the API reported Friday in its Monthly Statistical Report. While U.S. refiners churned out record and near-record amounts of oil products, imports – especially product imports -- fell substantially.
Deliveries of all oil products – a measure of demand – fell 3% compared with the same first-half-year period in 2007. For the preceding three years, oil demand had essentially held steady.
API statistics manager Ron Planting said, “At 20.08 million barrels per day, total demand was the lowest in five years. And the decline in gasoline demand was the first significant one recorded in 17 years. Higher pump prices and a slowing economy were undoubtedly factors.”
MP: The three most important solutions to high energy prices: conservation (see above), substitution and innovation.
Russia Becomes #1 Car Market in Europe
Russia has become Europe's largest automotive market after year on year sales grew 41% in the first six months of 2008, according to a survey by PriceWaterhouseCoopers (PWC.) In this period, 1.65 million cars were bought in Russia compared to 1.63 million in Germany, which was previously Europe's largest market.
HT: Greg Allar
U.S. Exports More Than China or Japan
The U.S. exports more ($1.024 trillion) than any country in the world except Germany ($1.133 trillion), and more than China ($974 billion) or Japan ($590 billion). Data available here.
Zimbabwe Introduces $100 Billion Banknotes
HARARE, Zimbabwe (CNN) -- Zimbabwe's troubled central bank introduced $100 billion banknotes Saturday in a desperate bid to ease the recurrent cash shortages plaguing the inflation-ravaged economy.
As high as they are, though, the bills still aren't enough to buy a loaf of bread. They can buy only four oranges. The new note is equal to just one U.S. dollar.
Once-prosperous Zimbabwe has seen an unprecedented economic meltdown since it gained independence in 1980, with the official inflation rate now at 2.2 million percent.
MP: The entire U.S. money supply of currency is $770 billion.
HT: Ben Cunningham
Renegade Parents Teach Old Math on the Sly
NEW YORK (AP) — On an occasional evening at the kitchen table in Brooklyn, N.Y., Victoria Morey has been known to sit down with her 9-year-old son and do something she's not supposed to.
"I am a rebel," confesses this mother of two. And just what is this subversive act in which Morey engages — with a child, yet?
HT: Taxing Tennessee
Citizens More Taxed Now Than Under King George
According to Americans for Tax Reform, the Cost of Government Day for 2008 is July 16. Working people must toil on average 197 days out of the year just to meet all costs imposed by government. In other words, the cost of government consumes 53.9% of national income.
The Cost of Government Day falls four days later in 2008 than last year’s revised date of July 12. In 2008, the average American will have to work an additional 17 days out of the year to pay off his or her cost of government compared to 2000, when the COGD was June 29.
In fact, since 1977, COGD has fallen later than July 16 in only four of those 32 years - in 1982 and 1983, and in 1992 and 1993 (see chart above). The driving factor for this development is the fact that all components of the cost of government – federal spending, state and local spending, and regulation – are now increasing faster than national income.
Contributing even more to rapidly rising government burdens right now is soaring state and local government spending. The average American worker must labor 50.5 days this year, approaching two months, just to pay for state and local government spending. That compares to 48.9 days just last year, and 44.3 days in 2003. That means in the last five years alone, state and local spending has grown by almost 12% relative to national income (see chart below).
Isn't it ironic that we celebrate Independence Day on July 4 to recognize our rejection of oppressive British regulation, mercantilism and taxation, and yet the typical American now works until the middle of July to pay for Big Government? In other words, we celebrate our declaration of independence from the British government in early July before we are even free from the burden of our current government!