Tuesday, August 18, 2009

And You Thought Medical Care Costs Were High

College tuition and fees in the U.S. have risen 7.74% annually since 1978, which is about twice the inflation rate for all goods and services (3.9% per year), and even higher than the average annual increase in the cost of medical care (6% per year), see chart above.

Originally posted at Carpe Diem.

Gallup Economic Weekly: Spending Hits 2009 High

Click arrow to start video.

PRINCETON, NJ -- Back-to-school spending seemed to show up during the week ending Aug. 16, as self-reported average daily spending hit a new high for the year. At the same time, consumer confidence maintained its new high of the prior week and job creation eased, but only slightly.

Originally posted at Carpe Diem.

Asian Economies On The Rebound

THE ECONOMIST -- More green shoots have appeared in America in recent weeks, but they are nothing by comparison with the lush jungle sprouting in the East. Asia’s emerging economies probably grew at an average annualised rate of over 10% in the second quarter, while America’s GDP fell by 1%. In 2009 as a whole, recent forecasts suggest that emerging Asia could grow by at least 5%, while the G7 economies contract by 3.5%. The growth gap between the two has never been wider. How have these export-dependent economies managed to decouple from the developed world? And can their recovery last?

The countries that have so far published second-quarter GDP figures show an impressive bounce. Comparing the second quarter with the first at an annualised rate, China’s GDP grew by 15%, South Korea’s by almost 10%, Singapore’s soared by 21% and Indonesia’s managed a respectable 5%. Other countries in the region are also likely to show a rebound. It is true that output in South Korea and Singapore was still lower than a year earlier, but quarterly changes are more useful for spotting turning points—and this is how growth rates are most commonly measured in America.

The revival in emerging Asia’s industrial production is even more impressive, jumping by an annualised rate of 36% in the second quarter. According to Barclays Capital, emerging Asia is the only region in the world where output has regained its level before the crisis (see chart above). This is largely due to China, where industrial production rose by 11% in the 12 months to July, but all the Asian countries have seen a strong pick-up. In contrast, up to June, America’s production continued to fall.

HT: Benny
Originally posted at Carpe Diem.

Zimbabwe's Inflation Was #2: Prices Doubled Daily

A new paper in The Cato Journal "On the Measurement of Zimbabwe’s Hyperinflation" by Steve H. Hanke and Alex K. F. Kwok, documents Zimbabwe's hyperinflation:

The 20th century witnessed 28 hyperinflations (Bernholz 2003: 8). Most were associated with the monetary chaos that followed the two World Wars and the collapse of communism. Zimbabwe’s hyperinflation of 2007–08 represents the first episode in the 21st century and the world’s 30th hyperinflation. As incredible as Zimbabwe’s November 2008 inflation rate was (see Table 1 above), it failed to push Zimbabwe to the top of the world’s hyperinflation league table. That spot is held by Hungary (see Table 2 above).

MP: Note in Table 2 above that at the height of Zimbabwe's inflation in November 2008, prices were doubling every day, which didn't quite reach the record in Hungary of prices doubling every 15 hours.

Reminds me of a story I heard once about how drinking warm beer was one of the "costs of hyperinflation" in either Hungary or Germany. Because all retail prices were supposedly rising by the hour, beer drinkers at taverns would order and pay for all of their beer at the beginning of the evening when prices were low and then drink warm beer all night, instead of buying one cold beer at a time at increasingly higher prices. It's probably an example of a story that is "too good to check out" but why let the facts get in the way of a good story (as Benny points out they probably didn't have refrigeration for beer back then)?

Originally posted at Carpe Diem.

Rose Friedman, R.I.P.

Rose Director Friedman passed away today in her home in Davis, California, of heart failure. While the exact date of her birth is uncertain, she is believed to have been 98 years old.

She will be remembered both as a talented economist and an influential advocate of freedom. Her economic work helped to discredit the idea of government management of the economy, rolling back policies that were hindering wealth creation and thus helping extend the blessings of prosperity to millions around the world. And as a standard-bearer for human liberty, she contributed to the galvanizing of public opinion – especially in the 1980s – against the growing encroachments of intrusive government. She will also be remembered as both the professional partner and beloved wife and friend of her late husband of 68 years, Milton Friedman.

Her most important contribution was the 1980 book Free to Choose, which she co-wrote with her husband, and the accompanying ten-part PBS series. Both were highly successful – the book topped the bestseller list for five weeks – and had a profound impact on the public understanding of freedom. At a time when the nation's confidence in its founding ideas was at an all-time low, Free to Choose played a decisive role in restoring America's faith in liberty.

The family has asked that in lieu of flowers or gifts, contributions be made in her honor to the Milton and Rose D. Friedman Foundation for Educational Choice.

Originally posted at Carpe Diem.

Correct Way To Peel Banana, Even Monkeys Know

HT: Mary Subialka

Here's another video on the correct way to peel a banana. Who knew?

Originally posted at Carpe Diem.

First Time in Six Years: Single-Family Building Permits Increase for the 4th Straight Month

According to today's report from the Census Bureau, single family building permits increased in July for the fourth consecutive month, the first time since 2003 that permits have increased four months in a row (see chart above).

Originally posted at Carpe Diem.

New Car Prices Have Been Falling for 13 Years

Using BLS price data, the chart above shows the CPI for all items vs. the CPI for new cars from January 1953 to July 2009, both series are equal to 100 in January 1953. Over this period, general inflation for all prices has averaged 3.78% per year, compared to new car prices, which have increased by less than 2% annually. If new car prices had increased since 1953 at the same rate as prices in general over that period, new car prices today would be more than 2.5 times their current prices.

The chart below focuses on the period from July 1996 to July 2009, which is a period during which the CPI for new cars has actually fallen by .22% per year, compared to prices in general, which have increased by 2.43% annually over the last 13 years.

Bottom Line: New car prices have actually been falling over the last 13 years, and new cars are more affordable today than ever before.

Originally posted at Carpe Diem.

New Cars More Affordable Than Ever in US History?

DALLAS/August 17, 2009The purchase of an average-priced new vehicle took 22.1 weeks of median family income in the second quarter 2009, according to Comerica Bank’s Auto Affordability Index (see chart above). This reading is up 0.3 of a week, thereby representing a slight deterioration in affordability compared to the prior quarter. Median family income was essentially unchanged in the second quarter. The total cost of buying and financing a new car rose, however, due entirely to the fact that consumers chose to buy more expensive cars on average. The average price of a light vehicle purchased in the second quarter rose by $300 to $26,300.

MP: Isn't it interesting that new cars have become increasingly affordable over time? In 1995 it took almost 31 weeks of family income to purchase a new car, compared to only 22 weeks of family income today, a whopping 29% reduction in the price of a new car, measured in weeks of income. Or we could say that it takes 9 fewer weeks of income today to buy a new car compared to 14 years ago. Imagine what 9 additional weeks of income could buy for a typical family purchasing a new car today, now that that amount of their income doesn't go towards the purchase of the car.

Why have new cars become increasingly so much more affordable over time? It's most likely a combination of: a) falling new car prices (even as quality and standard options have increased), b) lower interest rates for auto loans, and c) rising income. Although Comerica's series here only goes back to 1995, it's probably true that new cars have never been more affordable in U.S. history than today, which translates into a rising standard of living for all Americans.

And yet as economist Stephen Rose wrote in the Washington Post
in 2007:

The American middle class is fighting for its life -- or at least that's what Lou Dobbs would have you believe. The CNN anchor's rants about "the war on the middle class" are probably the most prominent examples of such economic doom-saying, but he isn't alone. Democratic presidential candidates pepper their debates with references to the assault; leading liberal thinkers argue that supply-side conservatives captured the Republican Party during the Reagan administration and implemented policies that continue to privilege the super rich today. They tell a compelling tale of middle-class decline. Pity it isn't true.

Bottom Line: Increasing auto affordability is just one of many examples that illustrate the reality that the standard of living of the average, middle-class American is getting better all the time, not worse.
Originally posted at Carpe Diem.

Best and Worst Cities To Look For a Job

The two best places in the country to find a job are Washington, D.C. (6 job postings per unemployed person) and Jacksonville, FL (3 job openings per unemployed person), according to a new Job Market Competition index put together by job search engine Indeed (see chart above).

The worst place to find a job is Detroit, with 18 unemployed persons for every job posting (see chart below).

Via TechCrunch
Originally posted at Carpe Diem.

Private Farms in Cuba Are Key to Food Shortages

St. Petersburg Times -- Despite being an agricultural nation with plentiful sun, soil and rain, Cuba produces barely 30% of the food it needs, due to an acute lack of resources and the inefficiency of its state farm sector. About 250,000 small family farms and 1,100 cooperatives till only about one-quarter of the land, yet still manage to outperform the state farms, producing almost 60% of crops and livestock, according to official figures.

The Cuban government recently began handing out idle state land to private farmers across the island in an effort to boost food production. Cuba is hoping that private farmers can literally plow the island out of a huge $11 billion trade deficit this year caused by rising food import costs and falling exports. The policy marks a major shift away from inefficient state farms that once occupied the lion's share of the island's agricultural land.

Originally posted at Carpe Diem.

Monday, August 17, 2009

Bloated University Administrations

RALEIGH NEWS AND OBSERVER -- This decade has been good for associate vice chancellors at UNC-Chapel Hill. Their numbers have nearly doubled, from 10 to 19, and the money paid to them has more than tripled, to a total of nearly $4 million a year. The university now admits that some of these people were in jobs that were not vital. They represent the rapid management growth in the 16-campus UNC system that has added tens of millions of dollars to annual payrolls.

Now, with a tough economy and sinking tax revenues, UNC officials and state lawmakers say these jobs need cutting first.

Systemwide over the past five years, the administrative ranks have grown by 28%, from 1,269 administrative jobs to 1,623 last year, UNC-system data show. That's faster than the growth of faculty and other teaching positions -- 24% -- and faster than student enrollment at 14%. The number of people with provost or chancellor in their titles alone has increased by 34% the past five years, from 312 in 2004 to 418 last year. The cost was $61.1 million, up $25 million from five years before.

MP: What is going on in the UNC-system represents a national trend of administrative "bureaucracy run amok." The chart below shows what has happened at the University of Michigan-Flint over the last 7 years: full-time professional administrative positions have grown by 67% during a period when student enrollment grew by only 13.5% and the full-time "core faculty" (mostly tenure-track faculty) decreased by 2.3%.

Two Former Cops: "It's Time to Legalize Drugs"

From today's Washington Post, two former Baltimore police officers argue that "It's Time to Legalize Drugs":

Nationwide, a police officer dies on duty nearly every other day. Too often a flag-draped casket is followed by miles of flashing red and blue lights. Even more officers are shot and wounded, too many fighting the war on drugs. The prohibition on drugs leads to unregulated, and often violent, public drug dealing. Perhaps counterintuitively, better police training and bigger guns are not the answer.

Drug users generally aren't violent. Most simply want to be left alone to enjoy their high. It's the corner slinger who terrifies neighbors and invites rivals to attack. Public drug dealing creates an environment where disputes about money or respect are settled with guns.

We simply urge the federal government to retreat. Let cities and states (and, while we're at it, other countries) decide their own drug policies. Many would continue prohibition, but some would try something new. California and its medical marijuana dispensaries provide a good working example, warts and all, that legalized drug distribution does not cause the sky to fall.

Having fought the war on drugs, we know that ending the drug war is the right thing to do -- for all of us, especially taxpayers. While the financial benefits of drug legalization are not our main concern, they are substantial. In a July referendum, Oakland, Calif., voted to tax drug sales by a 4-to-1 margin. Harvard economist Jeffrey Miron estimates that ending the drug war would save $44 billion annually, with taxes bringing in an additional $33 billion.

Without the drug war, America's most decimated neighborhoods would have a chance to recover. Working people could sit on stoops, misguided youths wouldn't look up to criminals as role models, our overflowing prisons could hold real criminals, and -- most important to us -- more police officers wouldn't have to die.

MP: Simply put, the "War on Drugs" isn't really a war against illegal drugs like marijuana, it's a war against typically non-violent Americans who happen to choose to use drugs that are arbitrarily declared to be illegal, and innocent police officers who are too often victims of this "war." As the two officers say, let's "Legalize It."

Originally posted at Carpe Diem.

Obamanopoly: Gov't. Tentacles Choking Consumers

Intro: A few years ago, while vacationing in New Hampshire, I stopped in one of its state-owned liquor stores to buy kosher wine for the upcoming Jewish holidays. I could not find any. But right across the state line, a privately owned Massachusetts liquor store that served the same communities had lots of choices.

Are the people who run the New Hampshire liquor stores prejudiced? No. They are bureaucrats. The difference between a bureaucrat and a retailer is profound: Retailers maximize profit by giving people better value for the money. A McKinsey Global Institute study credited retailing with 34% of the 1995-99 surge in U.S. labor productivity and for much of its growth through 2002. Consider the retailing innovations of convenient outlets such as eBay, Amazon, and Netflix, or the availability of inexpensive, stylish goods from the likes of Ikea and Target. U.S. retailers offer more than 170,000 book titles, 211 car models, and countless custom-designed PCs.

But maximizing consumers' choices and lowering prices are not among the incentives of the government employees who run state-owned liquor stores. Despite the power of monopoly retailers to extract volume discounts from wholesalers, researchers found no difference in prices between state and private liquor stores. Consumers were also slighted by the state stores' shorter operating hours, inconvenient locations, limited product availability, and restricted advertising. Some who wished to see lower rates of alcohol consumption had claimed that state ownership would achieve that, but it has not. Consumers instead adjusted their shopping habits, which meant they paid higher prices in the form of lost time and fewer alternatives.

In short, state-run stores don't work very well. So why do almost all the current plans to reform health care include a monopoly health-insurance store operated by the federal or state governments?

Conclusion: The government's proper role in health insurance is to help subsidize those who cannot afford it, to ensure transparency so that people can shop intelligently, and to prosecute fraud, abuse, and anti-competitive behavior. But the government should not create a state-run market that inevitably will limit competition, inflate costs, and prevent innovation. As in the rest of the economy, the American public should shop for itself.

~"Obamanopoly, by Regina Herzlinger, professor of business at Harvard University, in the National Review

Thanks to Tom Hemphill.

Originally posted at Carpe Diem.

From 45% to 15% in 10 Days: Healthcare Odds

Ten days ago there was a 45% chance of a government health care plan passing by December 2009, according to contracts trading on Intrade. Now those odds have fallen to 15% (see chart above).

Originally posted at Carpe Diem.

Markets in Everything: Bartering for Health Care

MSNBC -- No cash for medical bills? Recession revives old-fashioned exchanges for health care. A nationwide trend is developing as more providers offer patients the option of paying for the non-covered costs of medical and dental care without a direct exchange of cash.

Originally posted at Carpe Diem.

8 Reasons Why Big Gov't. Hurts Economic Growth

In this new video, Dan Mitchell (Cato Institute) explains how and why excessive government spending undermines economic growth.

The chart below displays empirical evidence that confirms the material presented in the video, it's reprinted from the 1998 study
The Size and Functions of Government and Economic Growth by James Gwartney, Robert Lawson and Randy Holcombe. The graph shows that as the size of government (share of GDP) increases for OECD countries, economic growth (real GDP) suffers. Economic growth is more than 4 times greater (6.6% vs. 1.6%) in the countries with the lowest government spending (<>60%).

Originally posted at Carpe Diem.

We Should Spend More, Not Less, On Health Care; Resilient Health Care Sector is Engine of Growth

In today's Wall Street Journal article "We Don't Spend Enough on Health Care," Craig Karpel argues that increased spending on health care is actually desirable, and suggests that we don't spend too much on health care (currently 20% of GDP), we spend too little - 30% of GDP by the middle of the century would be optimal. Further, he points out the benefits of health care employment to the U.S. economy:

Mr. Obama has said that "the cost of health care has weighed down our economy." No one thinks the 20% of our GDP that's attributable to manufacturing is weighing down the economy, because it's intuitively clear that one person's expenditure on widgets is another person's income. But the same is true of the health-care industry. The $2.4 trillion Americans spend each year for health care doesn't go up in smoke. It's paid to other Americans.

A little-noticed feature of the current recession is the role of the health-care industry as a resilient driver of the general economy. Health-care now accounts for 10.4% of nonfarm employment. Health-care employment grew by 19,600 jobs in July 2009, on a par with the average monthly gain for the first half of 2009, which was down from an average monthly increase of 30,000 in 2008. Remarkably, these gains occurred in a period during which total employment shrank by 6.7 million.

The U.S. health-care economy should be viewed not as a burden but as an engine of growth. Medical and orthopedic equipment exports increased by 65.1% from 2004 through 2008. Pharmaceutical exports were up 74.6%. The unprecedented advances expected to come out of American stem cell, nanotechnology and human genome research—which other countries' constricted health sectors cannot support—will send these already impressive figures skyward.

A study by Deloitte LLP has found that more than 400,000 non-U.S. residents obtained medical care in the U.S. in 2008, and it forecasts an annual increase of 3%. Some 3.5% of inpatient procedures at U.S. hospitals were performed on international patients, many of them escaping from Canada's supposedly superior health system.

"Inbound medical tourism," Deloitte stated, "is primarily driven by the search for high-quality care without extensive waiting periods. Foreign patients are willing to pay more for care within the United States if these two factors play a large role." The deficiencies of the foreign health-care systems the Obama administration wishes to emulate can be counted on to generate ever-increasing revenues for U.S. providers and employment for Americans.

MP: The top chart above of employment in the overall economy vs. health care employment shows that during a time (Jan. 2007 to July 2009) when the U.S. economy lost almost 6 million jobs, the recession-proof health care sector increased employment by almost 1 million jobs.

The chart below (sorry for the color quality) of the monthly change in health care employment reveals an amazing statistic. Since January of 1990, health care employment has increased in every single month except one (July 2003), or in 234 months out of the last 235 months.

Originally posted at Carpe Diem.

"The Prius Effect": Light Rail is Becoming Obsolete, And Falling Gas Tax Revenue Threatens Road Repair

1. DENVER POST EDITORIAL -- Light rail — useful from the gritty-aired 1970s to not so long ago, when cars drank gasoline like frat boys drink beer — is now obsolete, and a transportation option that our environment can no longer afford. That's right. Unless we change energy sources or greatly increase light-rail ridership, we should just drive our cars to work instead.

Automobiles are becoming more fuel efficient at a much faster rate than light rail, which gets its power largely from carbon-spewing power plants. That regrettable, counter-intuitive fact is an unintended consequence of "the Prius Effect," as the rise of hybrids and increasingly fuel-efficient cars outstrips the environmental benefits of light rail.

MARKETPLACE -- Road repairs are funded though taxes on gas, but as more people buy hybrids and plug-in cars, some are worried about what's going to happen to that revenue.

Originally posted at Carpe Diem.

Quote of the Day: Cunning, Hypocritical Moral Pork

In 2006, Congress, cloaking cunning with moralizing, effectively outlawed Internet gambling by making it illegal for banks or credit-card companies to process payments to online gambling operations. This was more than moral pork for social conservatives. It also blocked online competitors from poaching gamblers from the nation's most aggressive promoters of gambling -- state governments. They are increasingly addicted to revenues raised by lotteries -- the 42 states that have lotteries spent $520 million in 2007 promoting them -- and from taxation of other legal gambling. The law exempted Internet state lotteries and two powerful and vocal interests -- online betting on horse racing and some fantasy sports betting online.

Having turned gambling, which once was treated as a sin, into a social policy, government looks unusually silly criminalizing online forms of it.

~George Will
Originally posted at Carpe Diem.

Empire State Survey Suggests Recession is Over

NEW YORK FED - In August, after more than a year of negative readings, the Empire State general business conditions index rose into positive territory and reached its highest level since November 2007 - a clear indication that, on balance, business conditions had improved for New York State manufacturers. The Empire State general business conditions index increased 13 points, to 12.1, its highest level since November of 2007 (see chart above). Future indexes generally rose from last month and conveyed optimism about the six-month outlook; the capital expenditures index rose to its highest level in over a year.

Future indexes rose significantly in August, conveying an expectation that conditions would continue to improve in the months ahead. The Empire State future general business conditions index advanced 14 points to 48.2 (see chart above), with 62% of respondents expecting conditions to be better in six months.

MP: Comparing the Empire State indexes in the graph above for future and current conditions over the last several months to the levels of those two indexes at the end of the 2001 recession, the Empire State Manufacturing Survey suggests that the recession probably ended in either June or July of this year.

Originally posted at Carpe Diem.

Japan Emerges From Recession

FT.com -- Japan has climbed out of recession after the economy returned to growth in the second quarter, raising hopes that the worst of the financial crisis is over in the world’s second-largest economy. Data released on Monday showed that gross domestic product expanded 0.9% quarter-on-quarter on a seasonally adjusted basis, following four quarters of contraction. On an annualised basis, the economy grew 3.7%.

Originally posted at Carpe Diem.

Sunday, August 16, 2009

Obsolete Technology: 40 Big Losers

PC World -- Old tech friends we used for years are now deceased or on life support. We've compiled a list of 40 once-commonplace activities that are rapidly approaching extinction. Some are in danger of disappearing, while others have already vanished. So join us for a spirited send-off.

Examples include: playing video games at an arcade, going on a "blind" first date, running out of hard-drive space, needing to be 18 to have access to porn, paying for long distance, storing data on a floppy disk, sending documents via fax, and getting a new car with a cigarette lighter, and using a public phone booth.

Originally posted at Carpe Diem.

Markets in Everything: $29 Physicals By Monday

LONGMONT, CO (Denver suburb)In-store retail health clinics, where folks can get health care in the same store where they’re buying a package of toilet paper or an eyeglass cleaning kit, are a relatively new concept in retail. This year, the trend hit Longmont in February when the Take Care Clinic opened in the Walgreens at 1041 Main St.

Last month, The Little Clinic opened in the King Soopers store at 1611 Pace St. It’s one of four that opened recently in Denver-area King Soopers, bringing the total number of metro-area clinics to eight. The Longmont location is the farthest north.

Originally posted at Carpe Diem.

Government's Huge Cancer Funding Gender Gap

The chart above shows the estimated number of new cancer cases in 2008 for gender-specific cancers, using data from the American Cancer Society. For men most of the cases were for prostate cancer, and for women it was mostly new cases of breast cancer, but also cervical and ovarian cancer. The ratio of new gender-specific cancers in 2008 was 1.32 new female cases of cancer for every one male case.

What about government funding for gender-specific cancers? The National Institutes of Health (NIH) estimate that they will spend $4,446,000,000 in 2009 for female-specific cancers (breast cancer, cervical cancer, ovarian cancer, and “women’s health”) and $299,000,000 for men’s cancer (prostate cancer), which is a ratio of almost 15:1 in favor of women (see chart below). For spending in 2009 by the Centers for Disease Control and Prevention Cancer Programs, the gap is even greater: they will spend $218 million on female-specific cancers (breast, cervical, ovarian and gynecologic cancer) and $13.245 million on prostate cancer, which is a ratio of 16.5 to 1 in favor of women (see chart below).

Even adjusting for the greater rate of new cancer cases affecting women (1:32 to 1), and the fact that female cancers are deadlier than male cancers by a ratio of about 2:35 to 1, there still seems to be a significant gender gap in favor of women for federal spending on cancer research and prevention.
Originally posted at Carpe Diem.

Les Paul, R.I.P.

Check out the amazing guitar solo starting about 1:04.

Originally posted at Carpe Diem.

US vs. Europe: Life Expectancy and Cancer Survival

Is the U.S. system inferior to those in other developed countries based on life expectancy and cancer survival rates? Not according to economists Robert L. Ohsfeldt (Texas A&M) and John E. Schneider (University of Iowa), who argued in their 2006 book, The Business of Health: The Role of Competition, Markets and Regulation (AEI Press), that the U.S. system actually compares very favorably to the health-care systems of other nations.

1. The top chart above (data here) shows both: a) unadjusted life expectancies for the U.S. and other OECD countries, and b) standardized life expectancies which are adjusted for the effects of premature death resulting from non-health-related fatal injuries. For unadjusted life expectancy, the U.S. ranks #14 out of 16 countries, but for the adjusted standardized life expectancy the U.S. ranks #1.

2. The bottom chart displays five-year age-adjusted cancer survival rates for the U.S. and selected European countries, showing that the U.S. has the best record for five-year survival rates for six different cancers. In some cases the differences are huge: 81.2% in the U.S. for prostate cancer vs. 41% in Denmark and 47.4% in Italy; 61.7% in the U.S. for colon cancer vs. 39.2% in Denmark; 12% in the U.S. for lung cancer vs. 5.6% in Denmark.

Also interesting is the fact that there is often a significant difference between white and black cancer survival rates in the U.S., e.g. prostate cancer - 82.7% for whites vs. 69.2% for blacks (see red circled data in bottom chart). But even in that case, the five-year survival rate for blacks (69.2%) is still higher than for all European countries except Switzerland.

See recent
related CD post on five-year cancer survival rates.

Originally posted at Carpe Diem.

Donald Duck Tax Propoganda Cartoons from WWII

In this 1941 propaganda cartoon produced by the Treasury Department, Donald Duck is told that it's not just his duty to pay his income taxes, it's a "privilege." This was right before mandatory income tax withholding was legislated, so I guess the government had to use propaganda to help convince Americans that they needed to save money to pay their income taxes.

Although it might have been slightly exaggerated in the cartoon, notice that Donald Duck fills out a simple one-page income tax form that could easily be completed in several minutes. Also, notice that because it was in the pre-withholding era, he actually writes out a personal check for $13, payable to the Internal Revenue Service. Ahhhhhhhh.....the good old days.

Here's a longer Donald Duck tax propaganda cartoon from the same era, encouraging Americans to be sure to save enough money to pay their taxes "gladly and proudly" in quarterly tax payments due on March 15, June 15, September 15 and December 15. Earlier this week, Charles Murray made the case for ending income tax withholding.

Originally posted at Carpe Diem.

Saturday, August 15, 2009

How Gov't. Turned American Dream Into Nightmare

Excerpts below from an excellent WSJ article "The New American Dream: Renting: It's Time to Accept that Home Ownership is Not a Realistic Goal for Many People and To Curtail the Enormous Government Programs Fueling This Ambition," by Thomas Sugrue, professor at the University of Pennsylvania.

Excellent analysis of how government policy turned the American Dream into the American Nightmare for many homeowners, because of public policy that encouraged excessive home ownership and in the process turned good renters into bad homeowners.

For most Americans, until the recent past, home ownership was a dream and the pile of rent receipts was the reality. From 1900, when the census first started gathering data on home ownership, through 1940, fewer than half of all Americans owned their own homes. Home ownership rates actually fell in three of the first four decades of the 20th century. But from that point on forward (with the exception of the 1980s, when interest rates were staggeringly high), the percentage of Americans living in owner-occupied homes marched steadily upward. Today more than two-thirds of Americans own their own homes (see chart above). Among whites, more than 75% are homeowners today.

Yet the story of how the dream became a reality is not one of independence, self-sufficiency, and entrepreneurial pluck. It's not the story of the inexorable march of the free market. It's a different kind of American story, of government, financial regulation, and taxation. We are a nation of homeowners and home-speculators because of Uncle Sam.

Herbert Hoover signed the Federal Home Loan Bank Act in 1932, laying the groundwork for massive federal intervention in the housing market. In 1933, as one of the signature programs of his first 100 days, Franklin Roosevelt created the Home Owners' Loan Corporation to provide low interest loans to help out foreclosed home owners. In 1934, F.D.R. created the Federal Housing Administration, which set standards for home construction, instituted 25- and 30-year mortgages, and cut interest rates. And in 1938, his administration created the Federal National Mortgage Association (Fannie Mae) which created the secondary market in mortgages. In 1944, the federal government extended generous mortgage assistance to returning veterans, most of whom could not have otherwise afforded a house. Together, these innovations had epochal consequences.

Easy credit, underwritten by federal housing programs, boosted the rates of home ownership quickly. By 1950, 55% of Americans had a place they could call their own. By 1970, the figure had risen to 63%. It was now cheaper to buy than to rent.

It's a story riddled with irony—for at the same time that Uncle Sam brought the dream of home ownership to reality—he kept his role mostly hidden, except to the army of banking, real-estate and construction lobbyists who rose to protect their industries' newfound gains. Tens of millions of Americans owned their own homes because of government programs, but they had no reason to doubt that their home ownership was a result of their own virtue and hard work, their own grit and determination—not because they were the beneficiaries of one of the grandest government programs ever.

But by the 1960s and 1970s, those who had been excluded from the postwar housing boom demanded their own piece of the action—and slowly got it. The newly created Department of Housing and Urban Development expanded home ownership programs for excluded minorities; the 1976 Community Reinvestment Act forced banks to channel resources to underserved neighborhoods; and activists successfully pushed Fannie Mae to underwrite loans to home buyers once considered too risky for conventional loans. Minority home ownership rates crept upward—though they still remained far behind whites. Even at the peak of the most recent real-estate bubble, just under 50% of blacks and Latinos owned their own homes. It's unlikely that minority home ownership rates will rise again for a while. In the last boom year, 2006, almost 53% of blacks and more than 47% of Hispanics assumed subprime mortgages, compared to only 26% of whites. One in 10 black homeowners is likely to face foreclosure proceedings, compared to only one in 25 whites.

During the wild late 1990s and the first years of the new century, the dream of home ownership turned hallucinogenic. The home financing industry—at the impetus of the Clinton and Bush administrations—engaged in the biggest promotion of home ownership in decades. Both pushed for public-private partnerships, with HUD and the government-supported financiers like Fannie Mae serving as the mostly silent partners in a rapidly metastasizing mortgage market. New tools, including the securitization of mortgages and subprime lending, made it possible for more Americans than ever to live the dream or to gamble that someone else would pay them more to make their own dream come true. Anyone could be an investor, anyone could get rich. The notion of home-as-haven, already weak, grew even more and more removed from the notion of home-as-jackpot.

Bottom Line: More support for the high likelihood that the global financial crisis, mortgage tsunami, and housing bubble can all be traced to federal government intervention to create affordable housing, see previous CD post here.

Importing BB Talent: A Home Run for Globalization

WSJ article "Foreign Talent Loads the Bases in Minor Leagues":

Recent changes in U.S. immigration law and growing competition in baseball for raw talent have allowed the minor-league farm system to flourish with imported players. It has been a home run for globalization, but bad news for U.S.-born players, who suddenly have much more competition. Across the minor and major leagues, the total number of foreign-born players is growing fast, to almost 3,500 of the 8,532 players under contract this summer, from 2,964 three years ago.

Originally posted at Carpe Diem, not for re-posting on Death and Taxes.

Inflation Fears? Let's Check the Historical Record

There are some economists who are concerned about future inflation because of the loose, expansionary monetary policy in 2008, e.g. see Brian Wesbury and Bob Stein here, here and here. I don't think inflation will be a problem, and here's why:

The chart above shows the annual growth rate in the M2 money supply (percent change from the same month in the previous year, data here) monthly from January 1960 to July 2009. Notice that:

1. There was sustained double-digit money growth in two periods in the 1970s, and that is what generated the high double-digit inflation in that decade. There was double-digit M2 growth for 29 consecutive months from March 1971 to July 1973 (and nine straight months above 13%), and then again for 30 consecutive months from July 1975 to December 1977, with a high of almost 14% growth in early 1972 (see chart above).

2. There was double-digit M2 growth in 1983, but only for 12 months from January to December of 1983, and this monetary expansion wasn't enough to cause inflation (see chart below). Inflation never rose above 5% for many years after the double-digit money growth of 1983.

3. There was double-digit money growth in September, November and December of 2001, but inflation in subsequent years never got above 5% (see chart below).

4. The peak monetary expansion of M2 in 2008 was below the peaks in 1971-1972, 1976-1977, 1983 and 2001 (see chart above), and during the recent monetary expansion there has been only one month of double-digit money growth, and that was the peak of 10% in January 2009.

Bottom Line: Without sustained double-digit M2 growth, we won't have anything close to double-digit inflation. And the historical evidence during the two most recent experiences of double-digit money growth in 1983 and 2001 demonstrates that short periods of double-digit money growth aren't enough to bring about inflationary pressures. And since recent M2 growth during the "loose" monetary policy of 2008 is actually lower than in 1983 and 2001, there probably can't be any inflationary pressures that will lead to problems with future inflation. In other words, a single month of double-digit M2 growth in January 2009 isn't expansionary enough to create inflation.

Originally posted at Carpe Diem, not to be re-posted at Death and Taxes without permission.


By IBD's Michael Ramirez.

Broadbands: Thanks, But No Thanks for Stimulus $$

Washington Post -- The Obama administration made a national priority of spreading high-speed Internet access to every American home and offered stimulus money to help companies pay for it, but the biggest network operators are staying away from the program. As the Aug. 20 deadline nears to apply for $4.7 billion in broadband grants, AT&T, Verizon and Comcast are unlikely to go for the stimulus money, sources close to the companies said.

Some say taking money could draw unwanted scrutiny of business practices and compensation, as seen with automakers and banks that have taken government bailouts. And privately, some companies are griping about conditions attached to the money, including a net-neutrality rule that they say would prevent them from managing traffic on their networks in the way they want.

Lesson: There ain't no such thing as free stimulus money (TANSTAFSM).

Originally posted at Carpe Diem, not for re-posting on Death and Taxes.

Recovery May Be Strongest Since Early 1980s

NEW YORK, Aug 14 (Reuters) - A U.S. future economic growth gauge rose in the latest week, as its yearly growth rate surged to a 26-year high, suggesting that recovery will commence at the briskest pace in decades, a research group said on Friday.

The Economic Cycle Research Institute
, a New York-based independent forecasting group, said its Weekly Leading Index rose to a 47-week high of 123.9 in the week to Aug. 7 from 121.7 the prior week. Meanwhile, the index's annualized growth rate leapt to a 26-year high of 13.4% from last week's five-year high of 10.4%. It was the index's highest yearly growth rate reading since the week to Aug. 26, 1983, when it stood at 13.9% (see chart above).

"With WLI growth surging, the odds are rising that the early stage of this economic recovery will be stronger than any since the early 1980s," said Lakshman Achuthan, Managing Director at ECRI. Achuthan recently told Reuters that the national recovery would be stronger than many expect, though signs of such strong growth will not be apparent until sometime next year. "Next year, looking back you'll see that GDP, industrial production, sales, and even non-manufacturing jobs growth -- where 91% of Americans work -- began rising as recovery took hold," Achuthan said.

Originally posted at Carpe Diem, not for re-posting on Death and Taxes.

Big Sugar and The Sugar Racket

Wall Street Journal -- Some of America's biggest food companies say the U.S. could "virtually run out of sugar" if the Obama administration doesn't ease import restrictions amid soaring prices for the key commodity. In a letter to Agriculture Secretary Thomas Vilsack, the big brands -- including Kraft Foods, General Mills, Hershey Co. and Mars -- bluntly raised the prospect of a severe shortage of sugar used in chocolate bars, breakfast cereal, cookies, chewing gum and thousands of other products.

The companies threatened to jack up consumer prices and lay off workers if the Agriculture Department doesn't allow them to import more tariff-free sugar. Current import quotas limit the amount of tariff-free sugar the food companies can import in a given year, except from Mexico, suppressing supplies from major producers such as Brazil.

The letter is the latest salvo fired in a long-simmering dispute between U.S. food companies and the sugar industry over federal policy that artificially inflates the domestic price of U.S.-produced sugar in order to support the incomes of politically savvy sugar-beet farmers on the Northern Plains and cane-sugar farmers in the South. Most years, the price food companies pay for U.S. sugar is twice the world level (bold added).

Phillip Hayes, a spokesman for the American Sugar Alliance (
MP: aka "Big Sugar"), a trade group of cane and sugar-beet farmers, said farmers are "absolutely opposed" to expanding the sugar-import quota in part because it would cause the prices received by U.S. growers to sink.

MP: There's another possibility - Kraft, General Mills, Hershey and Mars will simply move their production of sugar-based products out of the U.S. into countries like Canada that don't restrict foreign sugar, which will result in a loss of Amercian jobs.

Exhibit A: In 2003, Kraft moved its LifeSavers production from Holland, Michigan to Canada, resulting in the loss of 600 jobs in Michigan. The reason?

According to the
Mackinac Center for Public Policy:

Sugar is cheaper in Canada, which imports it at the lower, freely traded world price. The U.S., on the other hand, has protected its sugar industry with tariffs or quotas since 1922. The LifeSavers case provides an unusually vivid example of how the impulse to "protect jobs" with tariffs can backfire, actually costing some Americans their jobs. In this instance, sugar protection has put LifeSavers and all U.S. sugar-using industries (like cereals) at a serious disadvantage due to tariffs that raise the cost of sugar 2-to-2.5 times the world price. As a result, U.S. candy producers are exporting less than they could, closing plants, and relocating production to other countries.

Legislators who support protectionist measures portray themselves as sympathetic to workers, rarely admitting to the high costs that trade restrictions impose on consumers, taxpayers, and the industries that use the "protected" product (in this case, companies like Kraft). The ratio of jobs in the U.S. food-processing industry, which uses large amounts of sugar, to jobs in sugar production is at least 7 to 1. The best way to keep LifeSavers and other candy jobs in the United States is to end sugar protection, pure and simple.

Originally posted at Carpe Diem, not for re-posting on Death and Taxes.

Falling Odds for Health Care: From 46% to 35.5%

Over the last ten days, the Intrade odds for health care reform by December have fallen from 46% to 35.5%.

Originally posted at Carpe Diem, not for reposting on Death and Taxes.

Friday, August 14, 2009

Median and Core CPI Inflation Show Price Stability

The BLS reported today that annual standard CPI inflation (deflation) from July 2008 to July 2009 was -2.10% (see chart above, blue line), mostly because of a -28.1% decrease in energy prices and a -14.1% decrease in transportation prices from a year ago (when gas was $4 per gallon and oil was $130 per barrel).

In contrast, the
Cleveland Fed reported today that its adjusted, Median CPI increased by +1.8% year-to-year through July 2009 (see chart above, red line), similar to the BLS' +1.5% annual "core inflation rate" for July based on the "CPI less food and energy."

The Cleveland Fed has been studying and reporting median CPI for a long time, here is a paper from 1991 on "
Median Price Changes: An Alternative Approach to Measuring Current Monetary Inflation," which concluded that:

Differences between changes in the CPI and the median consumer price change underscore the impact of the distribution of price movements on our monthly interpretation of inflation. The median price change is a potentially useful indicator of current monetary inflation because it minimizes, in a nonsubjective way, the influence of these transitory relative price movements.

Greg Mankiw reported on his blog several months ago:

The average of any data set can be thrown off by a few extreme outliers; the median is a more robust statistic to estimate the central tendency in the data. Right now, the two measures of inflation are diverging substantially. The standard CPI shows deflation over the past year, but that average is due to a few anomalous sectors, such as energy. If you look at the median CPI, which shows what a more typical price is doing, the inflation rate does not look very unusual.

MP: There are some concerns about future inflation from the expansionary monetary policy in 2008 that
doubled the monetary base, but that loose monetary policy certainly hasn't yet started showing up in the median CPI inflation, or CPI inflation less energy and food. Unless and until median CPI inflation and core CPI inflation start to show inflationary signs, we really won't have any real inflationary pressures to worry about.

Originally posted at Carpe Diem.

NHS: Long Waits and Putting the Patient Last

1. TELEGRAPH -- A quarter of a million people are waiting more than 18 weeks for treatment on the NHS, new figures show. The figures, published by the Lib Dems, show that 236,316 people are currently waiting more than 18 weeks for a range of treatments including oral surgery, rheumatology and geriatric medicine. This means that nearly 10% of patients are not being treated within the government's waiting list target.

2. TELEGRAPH -- Civitas, the think tank, blames the monolithic nature of the National Health Service for “putting the patient last”. It argues that the “customer” of the NHS business model introduced by Tony Blair and continued by Gordon Brown is the health secretary rather than the patient.

Originally posted at Carpe Diem.

Record Real Wage Increase of 5.15% in July

According to today's BLS Real Earnings report, average hourly earnings for workers in private industries, measured in real dollars (constant 1982 dollars), increased in July by 5.1% compared to July of last year, and this is the largest percentage increase in real hourly earnings in BLS history (back to 1965, see chart above). The 5.1% increase marks the first time ever that real hourly earnings have increased more than 5% in a single month (vs. the same month in the previous year).
Originally posted at Carpe Diem.

Anesthetizing Effect of Tax Withholding:Let's End It

What's your monthly mortgage or rent payment? What's your monthly car payment? What's your monthly payment for your student loan, cell phone or cable TV? Most of us have a pretty good idea of these monthly payments, because we typically write checks every month, or pay online. Now, what's your monthly or quarterly tax liability for federal income taxes?

Most of us have no idea, because most us never write a monthly or quarterly check for income taxes. If you have an adjustable mortgage and your monthly payment adjusts upward, you would be fully aware of the increase in your monthly housing expense. But if your monthly or quarterly tax liability increases, you'd probably have no idea that your tax burden has changed. That insulation from feeling the full impact of our increases in our personal tax burden is probably one of the reasons that government has grown so dramatically over the last 50 years.

Solution? End the practice of employers' withholding taxes from our paychecks, as
Charles Murray suggests in today's Wall Street Journal:

The finishing touch is to make sure that people understand how much they are paying, which is presently obscured by withholding at the workplace. End withholding, and require everybody to do what millions of Americans already do: write checks for estimated taxes four times a year.

Tax withholding has a wonderfully anesthetizing effect on people whose only income is a paycheck, leaving many of them actually feeling grateful for their tax refund check every year, not noticing how much the government has taken from them.

MP: Another advantage of ending withholding is that it would remove the significant financial burden on employers who are currently forced to act as tax collectors for the government.

Originally posted at Carpe Diem.

July Retail Sales

Wall Street Journal -- U.S. retail sales fell 0.1% in July even with a boost from the government's cash-for-clunkers subsidy, the Commerce Department reported, marking the first decline in seasonally adjusted sales in three months.

MP: Actually, the seasonally-adjusted decline in retail sales was only -.055% (from $342.497 billion in June to $342.309 billion in July), so by rounding to only one decimal place the reported percentage decline (-0.10%) was almost twice the actual percentage decline (-0.055%).

Additionally, the Census Bureau reports shows a +1.11% increase in July retail sales without seasonal adjustment ($355.243 billion in July from $351.360 billion in June). And the BLS reported today that the Consumer Price Index (CPI-U) decreased 0.2% in July before seasonal adjustment. Therefore, real retail sales in July, adjusted for the 0.2% deflation in July, actually increased by 1.16% before seasonal adjustment.

Originally posted at Carpe Diem.