Tuesday, September 27, 2011

More on Social Security

GMU economist Walter E. Williams discusses Social Security:
"During the recent GOP presidential debate, Texas Gov. Rick Perry said that Social Security is a "monstrous lie" and a "Ponzi scheme." More and more people are coming to see that Social Security is a Ponzi scheme, but is it a lie, as well? Let's look at it.

Here's what the 1936 government pamphlet on Social Security said: "After the first 3 years — that is to say, beginning in 1940 — you will pay, and your employer will pay, 1.5 cents for each dollar you earn, up to $3,000 a year. … Beginning in 1943, you will pay 2 cents, and so will your employer, for every dollar you earn for the next 3 years. … And finally, beginning in 1949, twelve years from now, you and your employer will each pay 3 cents on each dollar you earn, up to $3,000 a year." Here's Congress' lying promise: "That is the most you will ever pay."

Another lie in the Social Security pamphlet is: "Beginning November 24, 1936, the United States government will set up a Social Security account for you. … The checks will come to you as a right." Therefore, Americans were sold on the belief that Social Security is like a retirement account and money placed in it is our property. The fact of the matter is you have no property right whatsoever to your Social Security 'contributions.'"

Key Temp Employment Index Reaches YTD High

The American Staffing Association Index, a weekly barometer of temporary and contract employment, a key coincident economic indicator, and a leading indicator of U.S. payroll employment, reached a year-to-date high of 90 for the week ending September 18 (see chart above).  For comparable weeks in the last three years, the staffing index was 91 in 2008, 72 in 2009, and 90 in 2010.  During most years like 2007, 2009 and 2010, the temporary staffing activity increases towards year-end, so if that pattern prevails this year, we can expect ongoing improvements in temporary and contract employment this fall.  

Cartel-Buster Institute for Justice Goes Up Against the Milwaukee Taxi Cartel with A Legal Challenge

From the Institute for Justice (IJ):

"Milwaukee allows only 321 taxicabs on its streets—almost half of which are owned by Milwaukee County Supervisor Joe Sanfelippo. That is about one cab for every 1,850 residents, one of the highest ratios in the country. This cap on taxi permits has sent permit costs skyrocketing, from $85 to $150,000—putting the dream of owning a taxi business out of most people's reach.

Ghaleb Ibrahim is a Milwaukee entrepreneur who simply wants to own and drive his own taxicab. He has the means to operate safe and insured taxis, but the cap on the number of cabs means his dream cannot become a reality. For now if he wants to drive a cab he must do it for someone else at a hefty rental price.

It does not have to be that way. Milwaukee's taxicab cap violates Ghaleb's right to earn a living, protected by Wisconsin's Constitution. That's why on September 27, 2011, Ghaleb and two fellow drivers teamed up with the Institute for Justice to file a major civil rights lawsuit in the Milwaukee County Courthouse against the city."

Read more here at the IJ website, and read a Milwaukee Journal Sentinel article about the case here

MP: Kudos to the Institute for Justice for its ongoing "cartel busting" efforts.  There is probably no other organization anywhere in the entire world that is doing greater work defending small businesses and entrepreneurs against economic protectionism, empowering individuals to earn an honest living, and promoting economic and social justice.   

Chicago Fed Manufacturing Index Improves in Aug.

"The Chicago Fed Midwest Manufacturing Index (CFMMI) increased 0.6% in August, to a seasonally adjusted level of 85.0 (see chart). Revised data show the index increased 0.3% in July. Regional manufacturing output in August rose 7.6% from a year earlier, and national output increased 4.2%.

The Midwest’s automotive output was up 10.3% in August relative to its year-ago level, and national automotive output was up 7.2%. Regional steel output was up 17.1% from its August 2010 level, and national steel output was up 10.3%."

MP: The CFMMI increased for the fourth straight month in August, and except for April has increased in each of the last 12 months.  The August level of 85.0 was the highest monthly index in almost three years, since October 2008. 

Monday, September 26, 2011

Obama's Intrade Odds Fall to Record Low of 47.5%

Odds for Obama to be re-elected on Intrade fell to 47.5% today, the lowest odds in the history of the contract (see chart).  

Drill, Drill, Drill = Jobs, Jobs, Jobs in Michigan

From my editorial in yesterday's Detroit Free Press

Amid all of the bad economic news nationally, there is an economic bright spot: One U.S. state is booming like never before. In North Dakota, the unemployment rate was an astoundingly low 3.3% in July; it hasn’t been that low at the national level since 1953. At a time when other states are facing declining revenues and budget deficits, North Dakota’s tax revenues are soaring, and it has a $1-billion surplus. In May, the state legislature passed a bill to reduce income tax rates for individuals.

Michigan could experience a similar economic boom by producing more of its own oil and natural gas. The Michigan Basin is believed to hold more than 282 million barrels of oil, 2 trillion cubic feet of natural gas, and 83 million barrels of natural gas liquids. These vast energy resources in Michigan are now recoverable using advanced hydraulic fracturing technology. The economic benefits of a time-tested drilling technology can put thousands of Michiganders back to work, generate millions of dollars in government revenues, and improve U.S. energy security.

Ken Burns Documentary Series on Prohibition

Yesterday's Prohibition
Today's Drug War
"Prohibition is a three-part, five-and-a-half-hour documentary film series directed by Ken Burns and Lynn Novick (premieres October 2nd, 3rd & 4th, 2011 at 8 PM on PBS) that tells the story of the rise, rule, and fall of the Eighteenth Amendment to the U.S. Constitution and the entire era it encompassed."

Here's more information, with a little extra editing to maybe suggest a sequel for Ken Burns:

"Prohibition The Drug War was intended to improve, even to ennoble, the lives of all Americans, to protect individuals, families, and society at large from the devastating effects of alcohol drug abuse.  But the enshrining of a faith-driven moral code in the Constitution paradoxically caused millions of Americans to rethink their definition of morality. Thugs became celebrities, responsible authority was rendered impotent. Social mores in place for a century were obliterated. Especially among the young, liquor drug consumption rocketed.

Prohibition The Drug War turned law-abiding citizens into criminals, made a mockery of the justice system, caused illicit drinking drug use to seem glamorous and fun, encouraged neighborhood gangs to become national crime syndicates, permitted government officials to bend and sometimes even break the law, and fostered cynicism and hypocrisy that corroded the social contract all across the country. With Prohibition The Drug War in place, but ineffectively enforced, one observer noted, America had hardly freed itself from the scourge of alcohol drug abuse – instead, the "drys" drug prohibitionists had their law, while the "wets" millions of Americans had their liquor drugs

The story of Prohibition the Drug War is a compelling saga that goes far beyond the oft-told tales of drug gangsters in the U.S., Mexico and Colombia, rum marijuana runners, and cocaine smugglers, flappers, and speakeasies, to reveal a complicated and divided nation in the throes of momentous transformation. The film raises vital questions that are as relevant today as they were 100 years ago – about means and ends, individual rights and responsibilities, the proper role of government and finally, who is — and who is not — a real American."

Here's a preview:

Watch the full episode. See more Ken Burns.
HT: Mike LaFaive

Some UC-Berkeley Students Defend (Oppose) Race-Based Preferences for Admissions But Oppose (Defend) Race-Based Preferences for Bake Sale

BERKELEY -- "University of California-Berkeley student senators voted Sunday to condemn discriminatory behavior on campus - even if done in satire - in response to a Republican student group's plans for an "Increase Diversity Bake Sale," with pastries labeled according to race and gender. The 19-0 vote, with one absence, came during a special meeting of the Associated Students of the University of California, as the debate over affirmative action reignited in Berkeley.

Read more here.  

HT: Morganovich

Gas Falls Below $3 per Gallon in Michigan

Source: Michigan gas prices

Highest Prices for Domain Names

1. For 2011, the highest-priced domain name so far this year is Social.com, which sold in July for $2.6 million.

2. For 2010, the No. 1 domain name was Sex.com, which sold for $13 million last November.

Sunday, September 25, 2011

Amazing Drop in Deaths from Extreme Weather

The Reason Foundation has released a new study titled, "Wealth and Safety: The Amazing Decline in Deaths from Extreme Weather in an Era of Global Warming, 1900–2010," here's the executive summary (emphasis mine):

"Proponents of drastic curbs on greenhouse gas emissions claim that such emissions cause global warming and that this exacerbates the frequency and intensity of extreme weather events, including extreme heat, droughts, floods and storms such as hurricanes and cyclones. But what matters is not the incidence of extreme weather events per se but the impact of such events—especially the human impact. To that end, it is instructive to examine trends in global mortality (i.e. the number of people killed) and mortality rates (i.e. the proportion of people killed) associated with extreme weather events for the 111-year period from 1900 to 2010.

Aggregate mortality attributed to all extreme weather events globally has declined by more than 90% since the 1920s, in spite of a four-fold rise in population and much more complete reporting of such events. The aggregate mortality rate (per million population) declined by 98% (see chart above), largely due to decreased mortality in three main areas:
  • ·Deaths and death rates from droughts, which were responsible for approximately 60% of cumulative deaths due to extreme weather events from 1900–2010, are more than 99.9% lower than in the 1920s.
  • Deaths and death rates for floods, responsible for over 30% of cumulative extreme weather deaths, have declined by over 98% since the 1930s.
  • ·Deaths and death rates for storms (i.e. hurricanes, cyclones, tornados, typhoons), responsible for around 7% of extreme weather deaths from 1900–2008, declined by more than 55% since the 1970s.
To put the public health impact of extreme weather events into context, cumulatively they now contribute only 0.07% to global mortality. Mortality from extreme weather events has declined even as all-cause mortality has increased, indicating that humanity is coping better with extreme weather events than it is with far more important health and safety problems.

The decreases in the numbers of deaths and death rates reflect a remarkable improvement in society’s adaptive capacity, likely due to greater wealth and better technology, enabled in part by use of hydrocarbon fuels. Imposing additional restrictions on the use of hydrocarbon fuels may slow the rate of improvement of this adaptive capacity and thereby worsen any negative impact of climate change. At the very least, the potential for such an adverse outcome should be weighed against any putative benefit arising from such restrictions."

Update: Julian Morris writes on Reason.com about the study. 

Florida Housing Recovery Gains Strength in August

"Sales activity and median prices for Florida’s existing home and existing condo markets rose in August, according to the Florida Realtors. Existing home sales increased 15 percent last month with a total of 16,206 homes sold statewide compared to 15,517 in July, and 14,131 homes sold in August 2010 (see chart). The statewide median sales price for existing homes last month was $137,500, up 2 percent from the year-ago figure of $134,900. August’s statewide existing home median price was also slightly higher than July's median price of $136,500 (see chart).

“Over the past few months, it appears that home prices have been stabilizing in many local markets across the state,” said 2011 Florida Realtors President Patricia Fitzgerald. “This is another positive sign that the housing recovery is gaining strength.”

Fifteen of Florida’s metropolitan statistical areas (MSAs) reported higher existing home sales in August; 15 MSAs also had higher existing condo sales.

In Florida’s year-to-year comparison for condos, 7,098 units sold statewide last month compared to 6,041 units in August 2010 for an increase of 17 percent. The statewide existing condo median sales price last month was $91,100; in August 2010 it was $81,500 for a 12 percent increase."

MP: With a 15% overall annual gain in housing sales and a 17% gain in condo sales, along with a modest increase in median home prices of about 2%, Florida's real estate market is showing some positive signs of an ongoing housing recovery.  

Markets in Everything: Gold Vending Machines

BEIJING, September 25, 2011 - "China, already the world's second largest bullion consumer, has installed the country's first gold vending machine in a busy shopping district in Beijing. Shoppers in the popular Wangfujing Street can insert cash or use a bank card to withdraw gold bars or coins of various weights based on market prices. Each withdrawal is capped at 2.5 kilograms (5.5 pounds) or one million yuan (about $156,500) worth of gold."

Inflationary Pressures Are Wilting: Exhibits A-E

Exhibit A: MIT's Billion Price Project is showing declining monthly rates of inflation since March (red line above), and mild price deflation for the month ending August 30, see chart above and Paul Krugman's post here.

Exhibit B: Paul Krugman also points to deflationary pressures for commodity prices - the chart above for the CRB Commodity Index shows that the commodity prices are almost 20% below the early May peak.

Exhibit C: The 10-year breakeven rate (one measure of the market's expectation of inflation based on the difference in yields between regular 10-year T-notes and inflation-indexed 10-year T-notes) has been below 2% for most of the month of September and is now at the lowest level since last October (about 1.7%), see chart above.

Exhibit D: Greg Mankiw points to the chart above showing the annual percentage change in hourly earnings, and comments:  "The slack labor market has kept growth in nominal wages low, and labor represents a large fraction of a typical firm's costs.  A persistent inflation problem is unlikely to develop until labor costs start rising significantly.  Notice in the graph above that the period of stagflation during the 1970s is well apparent in the nominal wage data.  The same thing is not happening now." 

Exhibit E: Gas prices have fallen by 12% since the early May peak, and are now at $3.52 per gallon, the lowest price since last March (see chart above). 

Saturday, September 24, 2011

Household Debt Ratios Are Lowest Since 1990s

The chart above is an update of previous CD posts (most recent one here), showing the ongoing de-leveraging of U.S. households based on new data released yesterday by the Federal Reserve.

In the second quarter of 2011, household debt service for required payments on outstanding mortgage and consumer debt as a share of disposable personal income fell to 11.09%, the lowest ratio since the fourth quarter of 1994; and the ratio for all household financial obligations (adds automobile lease payments, rental payments on tenant-occupied property, homeowners' insurance and property tax payments to the debt service ratio) fell to 16.09%, the lowest ratio since the fourth quarter of 1993. 

Let that be a lesson for Congress.....

Happy Birthday Ray Charles: September 23

Ray Charles (1930-2004) was born 80 years ago yesterday on September 23, 1930. In the video above, Ray performs "Drown in My Own Tears" with full orchestra and the Raylettes at the Newport Jazz Festival in 1960 when he was 29 years old. From the comments at YouTube:

"Nobody can sing the Blues slower than the Genius. He wipes you out emotionally."

"Around the 3:30 mark.... it occurred to me that this was the heaviest thing to ever go down in the history of mankind. ....mindblown."

"This is perhaps THE greatest blues recording of the fifties and sixties. Every other artist shrinks in comparison."

Intrade Odds: Almost a 20 Point Lead for Romney

Latest odds from Intrade for Republican nominee for president. 

Leading Economic Index Increases Again in August Upward Trajectory Not Consistent With Recession

The Conference Board reported on Thursday that its Leading Economic Index (LEI) increased in August for the fourth consecutive month to its highest-ever level of 116.4 (see chart).  Starting in April 2009, the LEI has increased every month except for April of this year, for a record of 28 increases over the last 29 months.  As the graph above shows, the last six recessions have been preceded by sharp declines in the LEI, and we're not seeing any declines in the LEI that would predict a pending recession.    

As Scott Grannis commented on the Calafia Beach Pundit Blog:

"The Index of Leading Indicators continues to rise, up 6.5% over the past year. Every recession for the past 50 years has been preceded by a significant decline in the growth rate of this index; that is not the case today. To be sure, this index is not always a good leading indicator, but it is not even close to signaling impending doom or even a modest recession."

Friday, September 23, 2011

Rising Rail Traffic Suggests No Double-Dip Recession

BLOOMBERG -- "Railroads shipments are the highest in almost three years, helping to defy concerns about a double- dip recession. Total rail volumes excluding grain and coal averaged 381,831 carloads in August, the most since October 2008, according to data from the Association of American Railroads. 

These shipments represent the bulk of materials for industrial production, so rising volumes show the economy is still growing, according to Art Hatfield, a transportation analyst in Memphis, Tennessee, at Morgan Keegan & Co. “We’re not seeing declines in rail volumes that are synonymous with a recession,” Hatfield said. “We remain in a slow growth environment.” 

The order rate for Kennametal Inc. (KMT), the No. 1 supplier of cutting tools used by manufacturers including Caterpillar Inc. (CAT) and Boeing Co. (BA), increased at a 20 percent annual pace in August, excluding acquisitions, divestitures and workdays, the company said in a Sept. 15 statement. Kennametal’s end markets “continued to reflect strong demand,” and its industrial business showed “ongoing strength,” the company said. 

The Latrobe, Pennsylvania-based company is a “good barometer” for industrial production, according to Sheila Kahyaoglu, a New York-based analyst at Credit Suisse Group AG. Kahyaoglu maintains an “outperform” rating on the stock because its order rate, while poised to slow, will continue to grow at a rate faster than consensus forecasts."

MP: The chart above of intermodal containers shows that the increases in rail activity through August reported by Bloomberg for monthly rail traffic have continued into September based on more recent weekly data.  For the week ending September 17, the volume of 242,250 intermodal trailers and containers reached the highest level of the year, and the highest level since 2008.  

Chart of the Day: 15-Yr. Fixed Rates at Record Low

The 15-year fixed mortgage rate fell to a new all-time low this week of 3.29%, according to Freddie Mac.

Romney Has 10-Point Lead vs. Perry on Intrade

In the last several weeks, Romney's odds on Intrade of being the Republican nominee for president have surged to an all-time high of 42.2% while Perry's odds have fallen to 32.4%, giving Romney almost a ten-point advantage.  That reverses a 8.4% gap in favor of Perry earlier in the month.  I guess that means Romney won the debate last night?  

Interesting Fact of the Day: Obese Outnumber Hungry, "Excess Nutrition" Kills More Than Hunger.

Yahoo News -- Obese people now outnumber the hungry globally, but hardship for the undernourished is increasing amid a growing food crisis, the International Federation of the Red Cross warned Thursday. The Geneva-based humanitarian group focused on nutrition in its annual World Disasters Report, released in New Delhi, seeking to highlight the disparity between rich and poor, as well as problems caused by a recent spike in prices.

In statistics used to underline the unequal access to food, the IFRC stressed there were 1.5 billion people suffering obesity worldwide last year, while 925 million were undernourished. "If the free interplay of market political? forces has produced an outcome where 15 percent of humanity are hungry while 20 percent are overweight, something has gone wrong somewhere," secretary general Bekele Geleta said in a statement. Asia-Pacific director Jagan Chapagain called it a "double-edged political? scandal" at a press conference in the Indian capital, adding that "excess nutrition now kills more than hunger."

Update: Here's one example of how political forces (farm subsidies) contribute to the problem of "excess nutrition" and obesity in America, from a report released this week by CALPIRG:

"America is facing an obesity epidemic – one that’s hitting children especially hard.  Childhood obesity rates have tripled over the last three decades, with one in five kids aged 6 to 11 now obese.  These increases in obesity rates will translate into kids who are at greater risk for heart disease and diabetes, undermining the health of our country and driving up medical costs by hundreds of billions of dollars.

The rise in childhood obesity has many causes, but one of the most important is the increased prevalence of high-fat, heavily sweetened junk food.  And shockingly, American taxpayers are spending billions to subsidize junk food ingredients, making the problem worse.

Between 1995 and 2010, American taxpayers spent over $260 billion in agricultural subsidies. Most subsidies went to the country’s largest farming operations, mainly to grow just a few commodity crops, including corn and soybeans.  While dairy and livestock production also receive some federal support, it is these commodity crops that get the lion’s share of the subsidies.

Between 1995 and 2010, $16.9 billion in tax dollars subsidized four common food additives - corn syrup, high fructose corn syrup, corn starch, and soy oils (which are frequently processed further into hydrogenated vegetable oils. Outside of commodity crops, other agricultural products receive very little in federal subsidies. Since 1995, taxpayers spent only $262 million subsidizing apples, which is the only significant federal subsidy of fresh fruits or vegetables.

If these agricultural subsidies went directly to consumers to allow them to purchase food, each of America’s 144 million taxpayers would be given $7.36 to spend on junk food and 11 cents with which to buy apples each year – enough to buy 19 Twinkies but less than a quarter of one Red Delicious apple apiece."

HT: Fred Dent

Thursday, September 22, 2011

Women Outnumber Men for Doctoral Degrees, 142 Women Enrolled in Grad School Per 100 Men, and Women Outnumber Men in 7 Out Of 11 Fields

The Council of Graduate Schools (CGS) released its annual report today, here are links to the press release and full report.  

For the second year in a row, women earned a majority of all doctoral degrees in 2010 (51.9%), an increase from the 50.4% female share in 2009, which was the first time in history that women outnumbered men earning doctoral degrees (see top chart above).  By field of study, women earning doctoral degrees outnumbered men in seven of the eleven graduate fields tracked by the CGS: Arts and Humanities (54.4%), Biology (54.8% - isn't that a STEM field?), Education (67.6%), Health Sciences 70.4% (STEM?), Public Administration (60.9%), Social/Behavioral Studies (59.4%) and Other fields (53.5%).  Men still outnumber women earning doctoral degrees in fields like Engineering (76.8%), Math and Computer Science (74.1%) and Physical Sciences (66.9%). 

The bottom chart above shows total graduate student enrollment in 2010 by gender and field for all graduate programs (Master's and Doctoral).  By this measure, it's not even close; women enrolled in graduate programs at all levels far outnumber men.  Women represent 58.7% of all graduate students in the U.S., meaning that there are now 142.1 women enrolled in graduate school for every 100 men.  In certain fields like Education (74.8% female), Health Sciences (79.8% female) and Public Administration (75.3%), women outnumber men by a factor of 3-4 times.  Overall, women enrolled in graduate school outnumber men in 7 out of the 11 graduate fields of study, all except for business (45.9% female), engineering (22.3% female), math and computer science (29.2% female) and physical sciences (37.5% female).    

Here's a prediction: The fact that men are underrepresented in graduate school enrollment overall (100 men for every 142 women), and underrepresented in 7 out of 11 graduate fields of study will get almost no media attention at all.  Additionally, there will be no calls for government studies, or increased government funding to address the problem, and nobody will refer to this gender graduate school enrollment gap as a "crisis."  But what will get media attention is the fact that women are underrepresented in four of the 11 fields of graduate study like engineering and computer science, which can likely be traced to some kind of overt or unexamined gender discrimination.    

Interesting Fact of the Day: N.D. Income +13.3%

The BEA released data today on State Personal Income for the second quarter of 2011.  Based on data in the report (but not reported by the BEA - it only reports quarterly growth rates), the annual growth in personal income from 2010:Q2 to 2011:Q2 for the booming oil-rich state of North Dakota was a phenomenal 13.31%, which was almost twice the growth rate for No. 2 Texas at 7.27% and No. 3 Iowa at 7.17%, and more than two times the national average of 5.47%.  

Updated: The next four states for the highest annual increases in personal income were Nebraska (7.16%), South Dakota (7.03%), Oklahoma (7.03%) and Kansas (6.84%).  What do the top seven states with the greatest annual percentage growth in personal income have in common?  They are all "right-to-work" states

Related: "The Economic Miracle of North Dakota, America’s Most Successful State" on the Enterprise Blog.

Markets in Everything: The Airport Sleepbox

Moscow-based Arch Group's first Sleepbox unit has been installed at the Sherematyevo Airport in Moscow.

Thoughts on Taxes: IRS Tax Rates are Not Binding and Buffett's Tax Situation is An Extreme Outlier

Here's a thought on taxes: Perhaps it receive greater attention that the statutory IRS tax rates at any given time are not legally-binding, maximum tax rates, it's more the case that the IRS rates are the legally-required minimum tax rates enforced by the IRS.  Advocates of higher tax rates like Warren Buffett seem to feel constrained by the current tax code, as if the current tax rates are legally-binding maximum rates, when that is not the case.  Maybe the IRS should clarify that it only enforces legally-required minimum tax rates, but these rates are not binding and can be adjusted upward by any taxpayer who voluntarily chooses to pay taxes a higher rate?

Update: Another thought... I think Warren Buffett distorted and misrepresented the tax issue by using himself as an example, implying that his case as a CEO paying a lower tax rate (17.4%) than his secretary was typical, when that is not the case.  Buffett’s case is an extreme outlier and not at all typical of a CEO because: a) Buffett takes only a $100,000 salary, and b) gets about $40 million of income annually from dividends and capital gains taxed at 15%.  

That’s how Buffett reports a 17.4% tax rate, but he never explained in his NY Times article (or elsewhere) that his case is NOT typical for salaried CEOs.  The typical CEO reporting ordinary income of $1 million or more would be paying taxes at a rate of something like 29%, including payroll taxes.  The typical secretary reporting $50,000 of income would be paying something like 11% for income tax, and something like 14% including payroll taxes. 

Wednesday, September 21, 2011

Markets in Everything: GPS-Embedded Shoes

The New Web -- "Today, in recognition of  World Alzheimer’s Day, GTX Corp, a company that focuses on customizable, miniaturized GPS solutions, announced the FCC certification of its GPS Shoe and the delivery of the first 3,000 units to shoe partner Aetrex Worldwide, Inc. (see video above)."

HT: Jacob Fink

Fact-Checking Buffett: His Math Doesn't Add Up

The Washington Poat did some fact-checking on the claim made by Buffett and Obama that rich CEOs are routinely taxed at lower rates than their secretaries and here's what they found:

"President Barack Obama says he wants to make sure millionaires are taxed at higher rates than their secretaries. The data say they already are. 

"Warren Buffett's secretary shouldn't pay a higher tax rate than Warren Buffett. There is no justification for it," Obama said as he announced his deficit-reduction plan this week. "It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million."

On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.

The 10 percent of households with the highest incomes pay more than half of all federal taxes. They pay more than 70 percent of federal income taxes, according to the Congressional Budget Office.

This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes, payroll taxes and other taxes, according to the Tax Policy Center, a Washington think tank.

Households making between $50,000 and $75,000 will pay an average of 15 percent of their income in federal taxes.  Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent."

Read more here at my post today on The Enterprise Blog.

To Really Fix Social Security, Let's Privatize It

The debate about whether or not Social Security is a Ponzi scheme is probably less important of an issue than a discussion about the ultimate and real solution to the unsustainable "insecurity of Social Security": privatization.  Chile's successful transition to a privatized pension system in 1980 provides a model for the U.S. and the rest of the world.  Jose Pinera, the architect of Chile's privatization efforts explains in this article "Empowering Workers: The Privatization of Social Security in Chile":

"A specter is haunting the world. It is the specter of bankrupt state-run pension systems. The pay-as-you-go pension system that has reigned supreme through most of this century has a fundamental flaw, one rooted in a false conception of how human beings behave: it destroys, at the individual level, the essential link between effort and reward--in other words, between personal responsibilities and personal rights. Whenever that happens on a massive scale and for a long period of time, the result is disaster.

Two exogenous factors aggravate the results of that flaw: (1) the global demographic trend toward decreasing fertility rates; and, (2) medical advances that are lengthening life. As a result, fewer and fewer workers are supporting more and more retirees. Since the raising of both the retirement age and payroll taxes has an upper limit, sooner or later the system has to reduce the promised benefits, a telltale sign of a bankrupt system.

Whether this reduction of benefits is done through inflation, as in most developing countries, or through legislation, the final result for the retired worker is the same: anguish in old age created, paradoxically, by the inherent insecurity of the "social security'' system.

In 1980, the government of Chile decided to take the bull by the horns. A government-run pension system was replaced with a revolutionary innovation: a privately administered, national system of Pension Savings Accounts.  After 15 years of operation, the results speak for themselves. Pensions in the new private system already are 50 to 100 percent higher--depending on whether they are old-age, disability, or survivor pensions--than they were in the pay-as-you-go system. The resources administered by the private pension funds amount to $25 billion, or around 40 percent of GNP as of 1995. By improving the functioning of both the capital and the labor markets, pension privatization has been one of the key reforms that has pushed the growth rate of the economy upwards from the historical 3 percent a year to 6.5 percent on average during the last 12 years. It is also a fact that the Chilean savings rate has increased to 27 percent of GNP and the unemployment rate has decreased to 5.0 percent since the reform was undertaken.

More important, still, pensions have ceased to be a government issue, thus depoliticizing a huge sector of the economy and giving individuals more control over their own lives. The structural flaw has been eliminated and the future of pensions depends on individual behavior and market developments."

Interesting Fact of the Day

From the article "Got Cheap Milk?: Why Ditching Your Fancy, Organic, Locavore Lifestyle is Good for the World's Poor," in Foreign Policy (emphasis mine):

"What about [eating] "local"? Perhaps locally grown produce tastes better to some people. And perhaps it is psychologically better to have close contact with the people who grow your food. But that doesn't make it good for the environment.

For example, it is twice as energy efficient for people in Britain to eat dairy products from New Zealand than from domestic producers. It is four times more energy efficient for them to eat lamb shipped from the other side of the world than it is to eat British lamb.

That's because transporting the final product accounts for only a small part of the energy consumed in the production and delivery of food. It's far better to eat foods from places where production itself is more efficient. For example, New Zealand cattle eat clover from the fields while British livestock tend to rely on feed -- which itself is often imported."


Tuesday, September 20, 2011

Gain in Architecture Billings Index Highest in 4 Yrs.

Washington, D.C. – September 21, 2011 – "On the heels of a period of weakness in design activity, the Architecture Billings Index (ABI) took a sudden upturn in August. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lag time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the August ABI score was 51.4, following a very weak score of 45.1 in July (see chart above). This score reflects an increase in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 56.9, up sharply from a reading of 53.7 the previous month (see chart).

“Based on the poor economic conditions over the last several months, this turnaround in demand for design services is a surprise,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “Many firms are still struggling, and continue to report that clients are having difficulty getting financing for viable projects, but it’s possible we’ve reached the bottom of the down cycle.” 

MP: The increase in the August architecture billing index was the largest monthly increase for the index in four years, and forecasts an increase in construction spending by next spring.

Exports from L.A. Port Surge in August

Loaded outbound export containers leaving Los Angeles for overseas destinations surged in August, registering an increase of 11.5% compared to July, and a gain of 24.8% compared to August of last year, according to shipping data recently released by the Port of Los Angeles (see chart above).  The 184,321 outbound containers set a new record for the month of August, and indicates that the global demand for U.S. manufactured products remains strong.  Strong August shipping from the L.A. Port should translate into solid August exports when the BEA releases international trade data next month, as well as contribute to gains in third quarter GDP when those data are released around November 1.     

In a related report, the Conference Board announced today that the Leading Economic Index for China increased by 0.60% in July, following increases of 0.90% in June and 0.40% in May.  The ongoing increases in China's Leading Economic Index signals that robust economic growth will continue in China through the rest of the year, although it's likely that growth in 2011 will slow slightly from 2010.  Continued economic expansion in countries like China will help to support demand for U.S. exports.  

Happy 5th Birthday Carpe Diem!

Carpe Diem started five years ago on September 20, 2006.  Here's a link to CD post #1 (this current post is #8,254), which features a quote in the WSJ from Warren Buffett - not about taxes, but about whether business degrees from Ivy League universities matter for success in the business world (answer: No).  

Thanks for your readership and support!  And special thanks go to: a) Professor Lee Coppock at the University of Virginia for his initial encouragement to start an economics blog, b) Mike "Eagle-Eye" Carlson for his voluntary copy-editing support, and c) Ben Cunningham for his ongoing research support! 

Cartoon of the Day: Getting The Terminology Right

IBD's Michael Ramirez.

HT: Mike Carlson

If Private, Social Security Would Be Illegal

"The fundamental problem of Social Security is that the irresponsible way its finances are set up, and the changing demographics of the country, mean that there is simply not going to be enough money in its trust fund to pay today's young people what they are legally entitled to, when time comes for them to retire.

Declining birth rates and greatly increasing lifespans have created havoc with Social Security's finances, which are based on having the first generation's pensions paid with money collected from the second generation -- and the second generation's pensions paid by the next generation, etc.

Any private financial scheme set up in a similar way would be illegal. That is why Charles Ponzi went to prison."

Omaha Hokum: The Entire Buffett Rule is False

"So here we are back at the same old political stand, though even Mr. Obama concedes that today those he routinely calls "millionaires and billionaires" pay at least some tax. The President's complaint, echoing billionaire Warren Buffett, is that too many billionaires pay a lower rate than regular salary earners. So even as he endorsed tax reform in general yesterday, Mr. Obama insisted that one of his reform "principles" is that people who make more than $1 million must pay a higher tax rate than middle-class earners.

There's one small problem: The entire Buffett Rule premise is false, as the table above shows. In 2008, the last year for which such data are available, the IRS reports that those who made more than $1 million in adjusted gross income paid an average income tax rate of 23.3%. 

That's slightly lower than the 24.1% rate paid by those making between $500,000 and $1 million, probably because the richest are like Mr. Buffett and earn more from capital gains and dividends. The rate for a relative handful of the rich—400 people—fell to 18%. But nearly all millionaires still paid a rate that is more than twice the 8.9% average rate paid by those earning between $50,000 and $100,000, and more than three times the 7.2% average rate paid by those earning less than $50,000. The larger point is that the claim that CEOs are routinely paying lower tax rates than their secretaries is Omaha hokum."

~Wall Street Journal editorial (emphasis added)

MP: Using IRS data for a different year (2009), I made the same point in a CD post yesterday. 

Monday, September 19, 2011

At USD, School of Nursing and Health Science is 96.5% Female But It Got $600,000 in Taxpayer Funding To Increase Female Professors in STEM?

Among administrators and deans at the University of San Diego, females are well-represented.  For example, the president, provost and VP for Student Affairs are female (top three above) and three of the university's six academic deans are female (bottom three above).  Among chairs and faculty in science, social science and math departments, females are also well-represented including:

1. Math and Computer Science Department: Female chair and 7  out of 15 faculty.    

2. Chemistry Department: Female chair and 5 out of 14 faculty.  

3. Sociology Department: Female chair and 6 out of 8 faculty.  

4. Biology Department: 7 out of 15 faculty.

5. Chemistry Department: 5 out of 14 faculty. 

6. Environmental Studies: 3 out of 6 faculty.

Given what appears to be a pretty female-friendly academic institution headed by a woman president and provost, with gender parity in most science and math departments, you wouldn't think the University of San Diego needs any taxpayer money to "boost the ranks of female science and technology professors," would you?  Well, think again.  

The University of San Diego was just awarded $600,000 of your tax dollars via the National Science Foundation to increase the ranks of female professors, particularly those of color, in science and technology.  From the university's press release:

“We’re excited about the opportunity to become a model for undergraduate institutions that want to increase their diversity and provide a supportive environment for female faculty,” said Mary Boyd, dean of USD’s College of Arts and Sciences.

The five-year grant for $600,000 will support the project, Advancement of Female Faculty: Institutional climate, Recruitment and Mentoring (AFFIRM) to boost efforts to recruit women, especially those of color, in science, technology, engineering and mathematics (STEM) as well as the social and behavioral sciences.

Research suggests that the disparity of women in higher education can be explained “by an academic culture that provides women fewer opportunities, limited support and inequity in leadership,” Boyd said. “Too often we still see talented young female professors leave the academy because of feelings of isolation, problems with balancing career and family life and other issues. The AFFIRM project can help change the culture and provide the support to attract, retain and advance more outstanding female professors in areas of science and technology that are vital to our nation’s future.”

MP: I don't think the under-representation of males in USD's School of Education (only 3 out of 13 faculty are male) or the School of Nursing and Health Science (all 11 administrative positions are held by women, and 44 out of 46 faculty positions are female, for an overall ratio of 27.5 females per one male, or 96.5% female), will qualify for any taxpayer funding to address the gender disparities in those academic fields (I guess Nursing and Health Science is not part of STEM)? For example, I don't think USD will be applying for a grant titled:

"Advancement of Male Faculty: Institutional climate, Recruitment and Mentoring (AFFIRM) to boost efforts to recruit men, especially those of color, in education and nursing."

HT: Mike Donahue

New FBI Numbers Reveal Failure of "War on Drugs": One Drug Arrest Every 19 Seconds in the U.S.

WASHINGTON, D.C. -- "A new FBI report released today shows that there is a drug arrest every 19 seconds in the U.S. A group of police and judges who have been campaigning to legalize and regulate drugs pointed to the figures showing more than 1.6 million drug arrests in 2010 as evidence that the "war on drugs" is a failure that can never be won.

"Since the declaration of the "War on Drugs" 40 years ago we've arrested tens of millions of people in an effort to reduce drug use. The fact that cops had to spend time arresting another 1.6 million of our fellow citizens last year shows that it simply hasn't worked. In the current economy we simply cannot afford to keep arresting three people every minute in the failed 'war on drugs,'" said Neill Franklin, a retired Baltimore narcotics cop who now heads the group Law Enforcement Against Prohibition (LEAP). "If we legalized and taxed drugs, we could not only create new revenue in addition to the money we'd save from ending the cruel policy of arresting users, but we'd make society safer by bankrupting the cartels and gangs who control the currently illegal marketplace."

Today's FBI report shows that 81.9 percent of all drug arrests in 2010 were for possession only, and 45.8 percent of all drug arrests were for possession of marijuana."

Petition to Redistribute College GPA Scores

Do some students really need a 4.0 GPA? Isn't that "excessive"?  Let's make it a 3.80 and redistribute those extra GPA points to another student who's struggling to graduate.

AT&T and the Economics of Monopoly; Dept. of Justice Has Dismal Record in Fast-Moving Industries

"The Justice Department has a dismal record in bringing antitrust cases in fast-moving industries. In the 1960s, IBM had to defend its "dominant" mainframe business, which the personal computer soon rendered obsolete. Then Microsoft was accused of having monopoly power it only wishes it ever had. Today Google is in the regulatory crosshairs just as it faces many new competitors. 

"In treating technology markets as if they were fixed in size and closed to new entrants," tech author Larry Downes wrote recently for Forbes, the case against AT&T "marks a new low in Washington's appreciation for how and why the Internet economy works."

In its focus on market concentration instead of on market power or any evidence of harm to consumers, the Obama administration is a throwback to the old style of antitrust. The last thing consumers need is the government protecting some wireless providers at the expense of others, especially if this prevents cheaper and more reliable wireless service. AT&T may not be the most sympathetic underdog, but the rationale for blocking this merger could make a target of any successful tech company.

Instead of trying to pick winners and losers, the White House and Congress should let the FCC finally hold its auctions for spectrum, then let the most innovative wireless companies compete to serve growing consumer demand."

2011 Pew Research Political Typology Quiz

Where do you fit politically? To find out, take the 2011 Pew Research Political Typology Quiz.

Sunday, September 18, 2011

Amazing Illusion: The McGurk Effect

Behold, The Circle of Government Life

Investor's Business Daily -- "Ex-employees of the failed solar panel company Solyndra have applied for aid under the federal government’s Trade Adjustment Assistance program, the Labor Department has confirmed. If approved, the employees of what was once touted as a leading exemplar of the White House’s green jobs program will be eligible for more federal funds to enable them to be retrained for other jobs.

It would be an ironic coda to the saga of Solyndra, which manufactured solar panels and received $527 million in loan guarantees from the Energy Department and praise from President Obama during visits to the firm’s California headquarters. Now those green workers will be seeking the government’s help to find work again and not necessarily in the conservation jobs sector."

Scott Lincicome summarizes this "Circle of Government Life":

"So to recap: massive government subsidies created 1,100 "green jobs" that never would've existed but for those massive government subsidies.  And when those fake jobs disappeared because the subsidized employer company couldn't compete in the market, the workers blamed China (instead of what's easily one of the worst business plans ever drafted) in order to receive... wait for it... more government subsidies.

Behold, the Circle of Government Life."

U.S. Dependence on Foreign Oil Lowest Since 1996

From Daniel Yergin's WSJ article "There Will Be Oil":

"In 2003, the Bakken formation in North Dakota was producing a mere 10,000 barrels a day. Today, it is over 400,000 barrels, and North Dakota has become the fourth-largest oil-producing state in the country. Such "tight" oil could add as much as two million barrels a day to U.S. oil production after 2020—something that would not have been in any forecast five years ago. 

Overall U.S. oil production has increased more than 10% since 2008. Net oil imports reached a high point of 60% in 2005, but today, thanks to increased production and greater energy efficiency (plus the use of ethanol), imports are down to 47%."

MP: The chart above displays oil imports as a share of U.S. demand annually back to 1973 (data here), showing that dependence on foreign oil at 47% this year (average through July) is the lowest in 15 years, since the 46.4% share in 1996.   

Saturday, September 17, 2011

Racial Discrimination at UW-Madison Gets Minority Students Admitted, But Almost 50% Don't Graduate

From Linda Chavez, Chairwoman and founder of the Center for Equal Opportunity:

"The campus at the University of Wisconsin-Madison erupted this week after the release of two studies documenting the heavy use of race in deciding which students to admit to the undergraduate and law schools. The evidence of discrimination is undeniable, and the reaction by critics was undeniably dishonest and thuggish.

The Center for Equal Opportunity (CEO), which I founded in 1995 to expose and challenge misguided race-based public policies, conducted the studies based on an analysis of the university's own admissions data. But the university was none too keen on releasing the data, which CEO obtained through filing Freedom of Information Act requests only after a successful legal challenge went all the way to the state supreme court.

It's no wonder the university wanted to keep the information secret. The studies show that a black or Hispanic undergraduate applicant was more than 500 times likelier to be admitted to Wisconsin-Madison than a similarly qualified white or Asian applicant. The odds ratio favoring black law school applicants over similarly qualified white applicants was 61 to 1.

The median SAT scores of black undergraduates who were admitted were 150 points lower than whites or Asians, while the median Hispanic scores were roughly 100 points lower. And median high school rankings for both blacks and Hispanics were also lower than for either whites or Asians.

CEO has published studies of racial double standards in admissions at scores of public colleges and universities across the country with similar findings, but none has caused such a violent reaction.

Instead of addressing the findings of the study, the university's vice provost for diversity, Damon A. Williams, dishonestly told students that "CEO has one mission and one mission only: dismantle the gains that were achieved by the civil rights movement." In fact, CEO's only mission is to promote color-blind equal opportunity so that, in Martin Luther King's vision, no one will be judged by the color of his or her skin."

Here are links to the reports for undergraduate admissions and law school admissions.  

MP:  According to this article in the Journal of Blacks in Higher Education, the graduation rate for black students at UW-Madison in 2006 was only 52%, indicating that almost one-half of the black students admitted to the University of Wisconsin under special preferences, state-sponsored discrimination, and affirmative action failed to graduate.   The proponents of affirmative action always seem to focus mostly on the "front end," i.e. getting minority students admitted as freshmen, but never seem to pay as much attention to the "back end," i.e. getting minority students to successfully graduate.  In the case of UW-Madison, the "academic mismatch" that results from race-based preferences does a great disservice to many of the minority students, given that almost half of the admitees fail to graduate.  

What's Wrong with Peak Oil? It Ignores Economics

Daniel Yergin explains in today's WSJ why "peak oil" is "peak idiocy" (thank to Mike Munger for that one) - its originator completely ignored the important role economics, market forces, prices and technological change:

"The [peak oil] idea owes its inspiration, and indeed its articulation, to a geologist who, though long since passed from the scene, continues to shape the debate, M. King Hubbert. Indeed, his name is inextricably linked to that perspective—immortalized in "Hubbert's Peak."

Hubbert was imaginative and innovative," recalled Peter Rose, who was Hubbert's boss at the U.S. Geological Survey. But he had "no concept of technological change, economics or how new resource plays evolve. It was a very static view of the world." Hubbert also assumed that there could be an accurate estimate of ultimately recoverable resources, when in fact it is a constantly moving target.

Hubbert insisted that price didn't matter. Economics - the forces of supply and demand - were, he maintained, irrelevant to the finite physical cache of oil in the earth. But why would price—with all the messages that it sends to people about allocating resources and developing new technologies—apply in so many other realms but not in oil and gas production? Activity goes up when prices go up; activity goes down when prices go down. Higher prices stimulate innovation and encourage people to figure out ingenious new ways to increase supply.

The idea of "proved reserves" of oil isn't just a physical concept, accounting for a fixed amount in the "storehouse." It's also an economic concept: how much can be recovered at prevailing prices. And it's a technological concept, because advances in technology take resources that were not physically accessible and turn them into recoverable reserves.

In the oil and gas industry, technologies are constantly being developed to find new resources and to produce more—and more efficiently—from existing fields.  New technologies and approaches continue to unlock new resources. Ghana is on its way to significant oil production, and just a few days ago, a major new discovery was announced off the coast of French Guiana, north of Brazil. As proof for peak oil, its advocates argue that the discovery rate for new oil fields is declining. But this obscures a crucial point: Most of the world's supply is the result not of discoveries but of additions and extensions in existing fields.

Things don't stand still in the energy industry. With the passage of time, unconventional sources of oil, in all their variety, become a familiar part of the world's petroleum supply. They help to explain why the plateau continues to recede into the horizon—and why, on a global view, Hubbert's Peak is still not in sight."