20 December 2015

Liechtenstein: World's Most Curious Country or the Future?

Liechtenstein might be the most curious country in the West.

It disbanded its army in 1868 and hasn't had a military since. Then, in 2007, the Swiss army accidentally "invaded" Liechtenstein after they got lost. The Swiss infantry unit conquered nothing during their brief invasion and later sent an apology.
Andreas Kieber, last surviving soldier of Liechtenstein, posing in the Vaduz Castle in the 1930s. The country abolished its armed foces in 1868. [From reddit, found on historicaltimes]

Liechtenstein  has put its trust in corporations instead of the military and the result is a remarkable ratio. Because it offers a corporate tax rate of 12.5% and made it easy to incorporate, about 73,000 corporations have incorporated there. That's not remarkable until you realize that this works out to 2 corporations for each citizen: Liechtenstein's population is only 36,000.

By putting their trust in corporations rather than traditional armies, Liechtenstein has done well. It's per capita GDP of nearly $90,000 is the third highest in the world and its literacy rate is 100%. (Imagine the pressure you'd feel if you were raising the one child in this small country who just couldn't get the hang of reading.)

No army for nearly 150 years, 2 corporations per citizen and 3rd highest per capita GDP in the world. It's not a formula that could work for everyone, or at least not until the popularization of entrepreneurship has gone much further than I've previously imagined. For the world to do what Liechtenstein has would mean that each person is, on average, running two corporations (presumably with robots). There was a time, of course, when the idea of two cars per household was unimaginable so just maybe ....

18 December 2015

What the Universe Wants

If the universe wants for there to be tragedy or boredom in your life, there is no choice. You will have tragedy and boredom.
Fortunately, as best we can tell, the universe if a place of possibility and it doesn’t want anything. You have to bring your own desire to it.

15 December 2015

Lines I Wish I Had Heard in Tonight's GOP Debate

Moderator: Donald Trump, you say that America doesn't win at anything anymore. Have you heard of Charlie Sheen? He's winning.
Donald Trump: I have. And that's why I'm naming Charlie Sheen as my running mate.'

Moderator: Why is it you hate terrorists so much?
GOP Candidate: Because people get us confused. We are the terroizers whose job it is to assure you that you should not feel safe and should vote for us to protect you. They're the terrorists. We're the terrorizers. They make you unsafe. We make you feel unsafe. There is a very real difference.

Moderator: Speaking of foreign policy, what about the Trans-Pacific Partnership, an agreement we have with 11 other Pacific Rim countries that will, among other things, eliminate more than 18,000 taxes and trade barriers? What do you think about that?
GOP Candidate (any GOP candidate): A response (any response).

Moderator: Speaking of foreign policy, what do you think is the right policy for dealing with Climate Change?
GOP Candidate (any GOP candidate): A response (any response).

Moderator: Governor Christie, you've expressed a willingness to go to war with Russia, Iran, and Syria in just the last 49 seconds. Why are you so angry?
Christie: Honestly? I'm so hungry I could punch a cow. I've had nothing but kale and tofu in the last 2 months. I'm starving.

Moderator: Senator Cruz, is there any particular reason you opted to pose like Napoleon during the opening song?
Cruz: Like Napoleon, I do think that we should export our revolution to other countries. Also, I think that can best be done by making me emperor.

14 December 2015

The Middle Class Isn't Disappearing. They're Becoming More Affluent.


The most absurd claims are being made about the above graph, made from census data found here. Simply put, people are claiming that this is further evidence that the middle class is disappearing. It's not.

What this data actually shows is that the middle class is getting richer. A lot richer. 

This data goes back to 1967 and it clearly shows two things: more people are rich and fewer people are poor.

The percentage of households making more than $100,000 a year has tripled. Tripled. (And yes. All of this data is inflation adjusted.)  In 1967, only 8.1% of households had incomes over $100,000 a year. By 2014, another 16.6% of the population had joined them, bringing their total to 24.7%.

The percentage of households making less than $50,000 has dropped from over half to well under half, from 58.2% of the population to only 46.8%, a drop of 11.4%. That, too, is progress.

Finally, the percentage of households making $50,000 to $100,000 has also dropped, from 33.7% to 28.5%. That 5.2% of households joined the folks making more than $100,000, not the ones making less than $50,000. 

You can see in the above graph what's happened in the last half century. This graph focuses on cumulative change over time. 

The orange line - households making more than $100,000 a year - rose to include 16.6% more households than it did at the start. (And just before the Great Recession, it was up to 17.2% more.) 

The blue line - households making less than $50,000 a year - dropped by 11.4%. 

During that time, median household income rose from $44,284 to $53,657 and average income rose from $49,529 to $75.738 a year, increases of 20% and 50%. This even when the size of the average household has dropped by more than 12%. (From 1975 to 2014, household size has dropped from 2.89 persons per household to 2.54.)

I'm not sure how you misconstrue this sort of data into proof that things are getting worse but of course pundits on the right and left have done just that. I'm beginning to believe that there is no such thing as good news when your career depends on alarming the polity.

13 December 2015

In Donald Trump We Have a Great Example for the World


I don't doubt Ben Casnocha's sincerity here. In Eurasia, where multiple languages, peoples and cultures are interacting in regions smaller than some midwest states, the paranoia about anything foreign in some American circles is nearly incomprehensible. And Trump has to seem baffling to most thoughtful people around the world.

But I do think that we can make Donald a beautiful example. We can show the world that in the US we allow free speech. In fact, we're so committed to it that we don't just let people with bad ideas talk. We let them run for office. We don't shut them up. We give them a microphone and TV appearances. So in this, we're different from other countries but even better, it doesn't end there.

We don't hide bad ideas or let their owners take office by force. We put bad ideas out into the market place of ideas and reveal just how bad they are. Donald Trump's ideas have to compete with other ideas and, in the end, show themselves better. Nobody is talking about shooting or censoring or imprisoning Donald Trump. Instead, his ideas are getting air play and they are being exposed as ridiculous. He's safe in the US. His ideas aren't. They're grounded in fear not facts and this becomes more obvious to more people every day.

I know this can be confusing for people but it's hard for me to imagine a better example of how to deal with bad ideas and offensive people than this.

09 December 2015

Bernard Delights in the Trump Candidacy

My friend Bernard was chuckling even before I sat down.
"Ha! Donald Trump has won the bet!"
"What?"
"Donald! This whole campaign of his has to be based on some crazy bet. He has to have bet someone that he could enter the race and lead in the polls."
It had been a long time since I'd met Bernard for lunch and I was surprised to see him looking so animated. Apparently the Trump campaign had got his blood flowing.
"Um, so many questions Bernard. First, are you a Trump fan? Second, have you ordered?"
"Of course I'm a fan! What other country could create a Donald Trump? He's a phenomenon!"
"You think this ... this ... um, man, should be president?"
"Of course not! You didn't ask me if I was voting for him. You asked me if I was a fan." As we were talking, the waiter brought his sandwich and he hastily stuffed a bite of Reuben into his cheek and began to talk. I was partly interested in what he had to say and partly distracted by the question of whether he would manage to swallow the bite rather than spray it across the table. "Did you hear about the origins of the dada movement?"
"It was nonsense, right?"
"Sort of," Bernard answered. "They actually began as a satire of politics and it morphed into an art movement. They were attacking the rationality and nationality that had just given the world the Great War. What we call World War I. But their attempts at nonsense as an alternative to the rationality that led to the madness of war actually resulted in a somewhat coherent art movement. Their whole point was that there was no point, a point they actually made quite well."
"And .... "
"This is Trump! The man is art! He's an art movement! He's mocking American values by embodying them and taking them to their extremes. His Trump Towers, these incredibly phallic symbols that tower over their surroundings. His fear of anyone you're unlikely to see in a WalMart. His insistence on appearing in reality shows and now campaigns, the only places in American society in which it's considered appropriate to wax rhapsodic about your own virtues and denigrate everyone else. In the past, someone like Sinclair Lewis had to create a character like Elmer Gantry for us to understand American culture. Donald Trump is like Elmer Gantry and Sinclair Lewis in one! He's the author and the character. He's the dada movement personified and delivered a century after the dada movement. He's a genius!"
"Well," I hesitated, not really in the mood for a fight but still not sure whether criticizing Donald would launch Bernard into a rant against me or just make his point, "he certainly tells us often of how smart he is."
"Haha! He is! He's brilliant! I don't think that even he is smart enough to understand how brilliant he is! There are 7 billion people on this planet and he gets more coverage than any 1 billion of them. He is the idiot savant of modern culture."
"But who is supporting him?"
"Well, everyone has that one crazy uncle at Thanksgiving who says such outrageous things that no one quite knows how to respond. Now, thanks to polling, we know how many crazy uncles there are."
"Enough to win an election?"
"No! Of course not! But the fact that he's doing so much better than anyone thought is enough to make everyone alarmed. He's like a one-man voting awareness campaign. At this point, the odds that he wins the Oval Office and that he admits that all of this was the most elaborate prank ever played on American voters are about equal."
"You think that he's going to jump out and say, 'Candid Camera!'?"
"You think he's going to win," Bernard rebutted.
"Er, no," I responded.
"That's it! That's the beauty of it! Everyone on the right is running around scared to death that they'll die in a terrorist attack. There's a nearly zero probability that you - or any one American - will die in a terrorist attack. In 2011, about as many Americans were killed by terrorists as were killed by their own furniture. Someone will likely die in a terrorist attack in the next few months but it won't be you or the guy worked up about it at a Trump rally. "
"But it could happen."
"Sure! Could.  Few events have a zero percent probability. Which brings us to Trump."
"You think there is a zero percent chance that he'll win?"
"No! And the fact that there's a non-zero chance terrifies everyone on the left in the same way that being killed by terrorists terrifies those on the right. The whole chattering class of pundits and voters is terrified. Political discourse is now driven by two near-zero probability fears: being killed by a terrorist and living under a Trump presidency. It's better than the plot for a Marx Brothers film."
"You find all this amusing?"
"What's the alternative?"
"Find it alarming," I asked. He shook his head.
"You think that my being alarmed is going to make any difference to anything but my blood pressure? At my age I can't afford to be alarmed by improbable events. I could keel over at any minute and I should worry that a reality-TV star is going to win votes? No! I'll just enjoy this spectacle."
"So Donald is now your favorite show?"
"Donald is a show for the ages. I can hardly wait for the musical to come out. Donald singing, 'Donald! I love ya!'"
"There's a musical coming out?"
"Oh! That! That is a high-probability hope of mine and that trumps two near-zero probability fears." He paused. "Trumps! Get it?"
I still didn't but it made Bernard happy so I decided to just follow his lead and order a sandwich, shake my head at the improbability of so much energy going into such low-probability events, and join Bernard in brainstorming about the lyrics for the Trump musical.

2016 Economic Prediction

I will start with three certain predictions for 2016: the year will have 366 days and it will include a summer Olympics and presidential election. Now for things less certain.

2016 is going to be a great year for the American economy.

There are a number of reasons why. One reason is that Paul Ryan negotiated a deal with Obama to avoid another October standoff on the budget. It's good for everyone to know that 20% of the economy (roughly the size of the federal government) is not going to suddenly grind to a halt.

On a related note, spending at every level of government - federal, state, and local - should rise the most it has since the start of this decade. This is going to help with GDP growth rather than hinder it, as it did in the beginning of the recovery. Not since the Great Depression has a recovery relied less on government spending and starting now, the private sector won't be the only engine that needs to pull this train.

Another positive is that the largest age group in the population is 20 to 24 year olds (see Bill McBride's great post here on this and other reasons to optimistic). That age group is making the transition from college to work now and will be one reason that the decline in labor participation rate will start to rise again.

This will help to drive up household income. By the end of 2016, household income should be back up to its 2008 level of $55k, perhaps even $57k, where it was in 2007 and in the late 1990s. (One rarely mentioned reason it has fallen in this century is simply that household sizes are trending downwards.)



The birthrate rose in 2014 for the first time since 2007. That's good for the economy for a number of reasons. It shows optimism and babies drive new purchases of clothes, cars and homes.

That's one of the reasons that residential construction spending will continue to rise, going up by double-digits (10% to 15%). This drives the purchase of furniture and household appliances and so many other things. That is, it drives up consumption.


Personal consumption will go up by at least 5%. The debt service costs for households is at a record low. People are quitting jobs about 2X faster than they are losing them, showing growing confidence in the job market. More confidence about future income and less worry about old debt will contribute to consumer spending rising at the rate that it did before the Great Recession (which is to say, above 5% rather than below it). This is going to help GDP growth and company profits.



Speaking of job growth, there is a great chance that the American economy will create more than 2 million jobs and a decent chance that it will create more than 3 million. In either case, the years 2014-2016 will mark the best three year total for job creation since 1997-1999. Oh, and this absurd streak of uninterrupted job growth might even extend from 63 months (what it'll be at the end of this year) to 75 months. Again, the old record was 48 months of consecutive job growth.

This job growth will do two things. There is a very good chance that it will bring down the unemployment rate to 4.5%. It will also will raise wages, as demand for new employees does once unemployment drops below 5%. (When unemployment is above 5%, it is easier to hire out of the ranks of the unemployed and there is little reason to offer high wages. Once unemployment drops below 5%, job offers more often have to entice employees away from current jobs, driving wages up.)

Wages are a little tricky, though. As you can see in the graph below, wage growth has been considerably lower than it was before the turn of the century but it is also true that inflation is much lower. So, nominal wage growth hasn't been too impressive but after-inflation wage growth is actually pretty strong. If wage growth rises a bit more even as inflation stays low, households will experience real increases in spending power, one more reason that consumption is likely to rise.


Finally, I think there is a great chance that the S&P 500 will rise over 10% and perhaps even over 20%. Why? For a host of reasons. There are still trillions of dollars in search of returns and there are not a great number of options for good returns. People have paid down debt and as they continue to make money their concern will shift from near term financial issues to longer-term issues (like retirement accounts). The US will continue to standout in the global economy. Also, it's been a really weak century for stocks for all of the talk about a bubble. From 1975 to 2000, the S&P 500 rose nearly 14% per year on average. From 2000 to 2015, it has been up less than 4% per year on average. The zero percent return of 2015 will turn positive in 2016, and rarely is market movement tepid in any one year. A correction like we had in the summer is pretty normal in a bull market that goes on this long but given the underlying economy will be strong, there is no reason to believe the market will stall or fall a second year in a row. Extended bull markets are typically the product of economic downturns.

Finally, the driver that is hardest to predict but that looks so positive is the uptick in early stage entrepreneurial activity. This may well be the biggest reason to be optimistic about 2016. This early stage activity is the ultimate in leading indicators. Why? It takes years to make business plans real. If it takes a few years for early stage entrepreneurial activity to translate into significant growth in GDP and jobs, this indicator looks promising for 2016 - 2018. Between 2010 and 2014, early stage entrepreneurial activity nearly doubled. Even if it leveled off in 2015, this sort of activity is the most promising indicator of all; successful entrepreneurs are the ones who create new jobs and wealth.


Painful memories of the Great Recession may have receded far enough into the past that people are less reluctant to use their credit cards to shop and their savings to invest. Gallup forecasts Christmas spending will rise significantly this year and that may well put everyone - from manufacturers and retailers to households and employers - in a more generous, positive mood from the very first week of the new year.

Happy (about to be) new year everyone!

07 December 2015

You Can't Fault Pro-Life Protesters. They Have No Choice

At the moment of conception, the microscopic life that will become a bawling infant is only 2 cells. You cannot see it with the naked eye.

The two people who made this little zygote are composed of about 15 to 70 trillion cells each. That's trillions.

The difference between 2 cells and 40 trillion cells is fairly significant.

When does life begin?
The first choice is at the moment of conception.
The second choice is at some arbitrary point in time and development after that moment of conception.

The first choice is clean. It doesn't involve any judgment in terms of starting point. It is simple.

It is also absurd because it suggests that two microscopic cells deserve legal rights. Surprisingly, the folks protesting abortion are supporting a life that they can't see and that can't see them. Unsurprisingly, the folks who protest abortion tend to have religious objections; it is this group that is used to advocating on behalf of the unseen.But if you're going to protect life from the moment of conception, why not make contraception illegal? Why not protect the sanctity of "human" life at the instant before conception as well as the moment after?

The second choice is reasonable. It acknowledges the silliness of arguing that two microscopic cells are human in the same way that a baby in a high chair is human.

It is also just as bad. It involves all sorts of judgments about a starting point. At what point might this life be viable? When might a mother first realize that she's pregnant? When is the fetus conscious? Conscious by what standard? Are you just going to pick some day at random out of this string of 266 days? Why day 112 but not 113? Or day 199 instead of 200? This is unconscionably murky about the starting point for something as important as life. Get it wrong by even a day and we are killing human beings rather than terminating a pregnancy.

I find the notion that life begins at conception emotionally appealing. It is clean. It's almost romantic, certainly spiritual to imagine "life" begins in an instant, an instant when it is scarcely corporeal.

I also think that it is more rational to acknowledge that "life" at the moment of conception is not really different from the "life" of living egg and sperm cells. There is nothing human about sperm or eggs except for the DNA, DNA that can be found in skin cells or saliva. Again, you can't even see it. It makes more sense to refrain from equating mere cells with a human being until some development threshold has been reached.

It is a choice between the heart and head, the romantic or rational.

So what to believe? Whatever you'd like. At least with current laws.

The beauty of current laws is that a person can go with the rational decision that "life" is something we'll never precisely time and the visceral decision that "life" is something that transcends our normal powers of perception. We're not forced to live by someone else's indefensible standards. And this is fitting because the only thing more absurd than having to defend either of these choices is having one of them forced on you.

If the Beginning of the End Times Marks the End Then Would the End of the End Times Mark a Beginning?

I've been surprised lately that so many people I know are convinced that the shootings in San Bernardino and Colorado Springs are proof that these are awful times to be alive. I don't question that these events are tragedies. I do challenge the notion that these events make today a worse time to be alive than in the past. 

Every 50 to 100 years, life gets remarkably better. And the rate at which it gets better is improving.

50 years ago, in 1965, people on the left were convinced that the world was being ruined by the military industrial complex and people on the right were convinced that it was being ruined by hippies and communists. Everyone had his reasons to believe that the world was getting worse and plenty of good data to prove it was bad.
  • Civil Rights demonstrations included hundreds of Alabama State Troopers attacking demonstrators, and the KKK killing activists. 
  • US involvement in Vietnam escalated. The rate at which men were drafted doubled. The rate  at which soldiers were dying quadrupled. This, too, triggered demonstrations that included LBJ being hung in effigy at Berkeley and at least one man lighting himself on fire.
  • In terms of social progress, in most states, a woman could not open a checking account without her husband's signature and segregation was still common throughout the south.

100 years ago was much worse. In 1915, World War I was well under way. 

  • Before it was over, WWI killed 17 million people and wounded another 20 million. If you couldn't find reason to suppose this "Great War" marked the last days, you probably didn't have much of an imagination.
  • Life expectancy for men in the US was 52 and for women was 57, about 2 decades less than it would be at the close of the century
  • In terms of social progress, there were no federal laws banning child labor and the six day workweek was still the norm
The simplest measure of whether things really are getting worse is this: would you rather live in those earlier times when lives were shorter and work weeks were longer, when we were at war with countries and not concepts? I'll let you discuss that among yourselves.


05 December 2015

Comparing the Surprisingly Similar Recoveries of the 1980s and 2010s

As it turns out, the recovery since 2010 is fairly similar to the recovery between 1982 and 1989.

In 2010 and 1982, unemployment rates were nearly identical (9.6% and 9.7% respectively). Those years represented the peak unemployment rate for that recession. During this decade's recovery, it took 5 years for unemployment to drop from its peak to 5.3%.  During the 1980s, it took 7 years for unemployment to hit 5.3%.

It is true, though, that this recovery is lowering the unemployment rate faster than it is creating jobs. Five years in, the 1980s and 2010s recovery had created roughly the same number of jobs: 12.9 million in the 1980s and 13.3 million in this decade.


This suggests that as people come back into the job market during the next couple of years, unemployment won't drop at the same rate that it has for the first five years of this recovery. That is, even if we keep creating 2 to 3 million jobs a year, the unemployment rate is unlikely to keep dropping by more than 0.5 percentage point a year.

The stock market did better in the 1980s. Through the first five years of that recovery, stocks were up 114%, and rose a total of 186% by 1989. By contrast, five years in the S&P 500 is up 95% (and of course that could change by 1 to 6% in either direction before December 31). The suggestion from this (simplistic comparison) is that markets still have room to rise over the next couple of years.


These simple measures suggest that this recovery is not so very different from the recovery of the 1980s, playing out over roughly the same time frame to largely the same effect. We've lowered unemployment faster than in the 1980s but because people are dropping out of the job market faster, not because we're creating jobs faster. 

And on that note, for whatever reason, people seem to be leaving work more rapidly than they're losing work, as can be seen in this graph below. It could be as simple as baby boomers retiring. It might be the rise of "free agents," folks like Uber drivers and Makers who don't count as entrepreneurs or employees. It might be a rise in education levels (people leaving the work force for degrees) or stay-at-home parents. In any case, people are still leaving the workforce even as layoffs are slowing.



Finally, the great news is that this recovery still shows no signs of stalling. Not yet. Our streak of uninterrupted months of job creation is now at 62 months and counting (the old record was 48 months). Next year could be the best year yet of this recovery and in 1989, unemployment of 5.3% represented the best it would get until 1997. By contrast, unemployment will likely stay below 5.0% all of next year. At year 7, the recovery of the 1980s was stalling. At year 5, this recovery still has steam left. Or, to update to a more contemporary metaphor, there is still charge left in this battery. 

04 December 2015

As a country, we really are vindictive towards children stupid enough to be born into poverty.


03 December 2015

An Immodest Proposal for Reducing Gun-Related Violence

17th Century Dutch guns in Rijksmuseum, Amsterdam
I've recently heard conservative friends make the point that these mass shooters never attack folks who are armed. "You don't see them going into gun shows," they say.

There is so much about this reasoning that is mis-guided. My first response is, "Yeah. If American history has taught us anything, it is that no one was shot at the OK Corral." There was a time when everyone was armed and ready to shoot to defend themselves. As it turns out, the folks who are best at shooting and / or most ready to pull the trigger are not necessarily the best human beings, most committed to creating a world safe for women and children. As it turns out, they are violent and a world that depends on the victors being more violent than those they defeat will be violent and so will the world they "protect."

And of course if it was right that more guns made us more safe, we wouldn't have 40X the number of gun-related deaths as the UK or 175X as many as Japan. We have more guns than the UK and Japan and we have more gun-related deaths. Since Obama has taken office, the paranoid right has bought guns at record numbers. According to their logic, that should make us safer. It has not.

Death dominates the news. Not, of course, the main causes of death like old age, heart attacks and cancer. Instead, we get a litany of violent tales, from bombs dropped in the middle east to guns fired here at home.

Perhaps the closest thing I have to magical thinking is this: what we focus on, what we meditate on, what we obsess over comes to define us. It might be mystical, the result of meditations manifest as our reality, the power of imagination to - for good or bad - shape reality. More likely it is akin to a child learning to ride a bike who can't help but steer in the direction he's looking. As a society, we stare at these mass shootings and all of us gravitate towards them. The mentally ill imagine themselves as Rambo, with the power to get everyone's attention. The fearful imagine themselves as victims and make their guns easy to grab, putting them in places where they turn out to be just as convenient for toddlers and their depressed selves in their darkest moments as they are for stopping mass killers.

So we obsess over this virus of mass killings, seeming to spread it with our obsession. Perhaps the starting point in bringing these numbers down is to simply look away, to stop giving it so much of our energy and attention. Let it go out of style like zoot suits and bell bottoms, its popularity diffusing as attention moves on to something new.

And maybe we could help this along by leaking reports that one shocking revelation about the shooters has come to light. As it turns out, this group of massassins that includes atheists and Muslims, Christians and satanists have only one thing in common: each one had an incredibly small penis.

01 December 2015

Bertrand Russell on Fools and Fanatics

Bertrand Russell once said that, "The whole problem with the world is that fools and fanatics are always so certain of themselves and wiser people so full of doubts."

Maybe.

Or maybe the real problem is that fools and fanatics aren't afraid to use guns to win an argument.


26 November 2015

Among the Things to Thankful For: So Much of What is Alarming is Either Improbable or Unimportant

Exactly one year ago, the media was alarmed at the prospect of an Ebola outbreak here in the US. One of the many reasons for this alarm is that experts could NOT guarantee that an outbreak would not occur. We've now moved on to worry about WWIII, a conflict some think is doomed to start because Turkey just shot down a Russian jet. Again, experts cannot guarantee that this won't escalate. They can only say it is unlikely.

The probability of bad events - events like an ISIS attack in the US, Ebola spreading from Texas into 47 other states, oil prices spiking high enough to cripple the economy - are rarely zero. They could happen and any expert who predicts they are unlikely to happen has to acknowledge that they might. In that sliver of possibility lies so much in the way of ratings potential. What alarms us demands our attention. 

We know what is alarming. Probability and importance are harder to gauge. 

We're notoriously bad at predicting events because causation is so complex. This makes it hard to know what is important. Imagine that 18 months ago, when gas prices in the US were about $3.70, that I told you that by late November of 2015 Obama would have vetoed the Keystone Pipeline and that the US and Russia would be sending troops into Syria where a civil war had spread into surrounding regions and the ISIS fight had even been taken into Paris. If I could accurately predict all of that - something that of course I could not have done 18 months ago - what then would you predict for gas prices? Higher or lower by November of 2015? And by how much? 

It's unlikely that you would have predicted prices would fall from $3.70 to $2,18, a drop of 40%. If prices fall as much in the next two months as they did in the last two months, gas prices will be below $2,00 for the first time since the depth of the Great Recession. Nothing about the scenario I explained - vetoing more gas supply and turmoil in the Middle East - would suggest this.


As it turns out, so much of what demands our attention is either improbable or unimportant. 

Keystone Pipeline never represented more than a small fraction of oil supply and was never going to make any real difference to carbon emissions or gas prices. It was just a symbol of those things, a symbol taken seriously in many quarters in spite of the fact that it was a rounding error in the global market. We focused on it but it lacked importance. It made for good news but it didn't make much difference.

Ebola, by contrast, was important. There is a very real chance of a pandemic that kills millions in this century. But Ebola spreading across the US last year was improbable.

An ISIS attack in the US is possible but it is wildly improbable that you will die in a terrorist attack. In 2011, nearly as many Americans were killed by their own furniture as were killed by terrorists. 

It is important to remember that it is what is alarming that drives ratings, not what is probable or important. And given we experience so little of the world directly, we depend on the media to explain what is going on outside of our house or neighborhood. So what we know about the world beyond our immediate sphere is alarming but it is only occasionally important or even probable, much less real.

So among the things that you have to be thankful for today, be thankful that the world is never as bad as the media makes it out to be. Walk out into the streets or roads around your home and experience the peace there. That's reality. Be thankful for that and remember that with 7 billion people on this planet, there will always be a tragedy playing out somewhere but for now, it is not in your front yard and it is not happening to you. That might seem self-centered and selfish to some of you but if we have to wait for everyone to be happy before anyone can be happy, it'll be an impossibly long wait. Compassion doesn't have to be driven by fear and alarm. 

Rather than focus on what is alarming, focus on what is probable and important. So what's important?  You're alive now. What probable? You won't be in 50 years. You just have a relatively short amount of time to enjoy life and to make a difference. Don't get distracted from that.

25 November 2015

Consolation - a Poem by Billy Collins

After spending 22 of 44 days traveling, trips that included the Netherlands and Belgium, D.C. and Orange County, business, tourism and seeing friends, I am reveling in being home and turning off the work computer for a few days. This poem of Billy Collins' resonates.


How agreeable it is not to be touring Italy this summer,
wandering her cities and ascending her torrid hilltowns.
How much better to cruise these local, familiar streets,
fully grasping the meaning of every road sign and billboard
and all the sudden hand gestures of my compatriots.

There are no abbeys here, no crumbling frescoes or famous
domes and there is no need to memorize a succession
of kings or tour the dripping corners of a dungeon.
No need to stand around a sarcophagus, see Napoleon's
little bed on Elba, or view the bones of a saint under glass.

How much better to command the simple precinct of home
than be dwarfed by pillar, arch, and basilica.
Why hide my head in phrase books and wrinkled maps?
Why feed scenery into a hungry, one-eyes camera
eager to eat the world one monument at a time?

Instead of slouching in a café ignorant of the word for ice,
I will head down to the coffee shop and the waitress
known as Dot. I will slide into the flow of the morning
paper, all language barriers down,
rivers of idiom running freely, eggs over easy on the way.

And after breakfast, I will not have to find someone
willing to photograph me with my arm around the owner.
I will not puzzle over the bill or record in a journal
what I had to eat and how the sun came in the window.
It is enough to climb back into the car

as if it were the great car of English itself
and sounding my loud vernacular horn, speed off
down a road that will never lead to Rome, not even Bologna.

24 November 2015

Rebates - What a Concept

I would have loved to be there when they first dreamed up rebates.
"How are we going to price this?"
"We can sell it for $1,000."
"Hmm. Our market research suggests that a lot of people will back off from that. It's a little steep."
"How about $800?"
"We can make a profit on $800 but I don't know ... It would make our margins tight."
Long silence.
"What if .... and I'm just brainstorming here, so consider this before you say no .... what if we charge them $1,000 and then give them back $200?"
"You mean give them change?"
"No! Nobody has a $1,000 bill. No. We actually charge them $1,000. And then we give them $200 back."
"Why?"
"That way we're not just giving them a product. We're giving them MONEY!"
"Change! We're making change!"
"No! When they pay us $1,000, that's the price of the product. It's OUR money. Later, when we give back $200, it's like WE are giving THEM money. They'll love us. It's like we're paying them to buy our product. It's brilliant."
"It's change. We're making change."
"No. Listen, you're missing the point. They buy from us and we give them product AND money. Nobody else is doing this."
"Of course not. It's ridiculous."
"Is it? What if it's brilliant? What if it works?"
"You really think this will work?"
"Yeah."
"Well, we can give it a try but I don't see how customers are going to fall for it. What will you call it?"
"Bait? You know, like when you put a little fish on the hook in order to get a big fish? We offer a little money to get more money?"
"Bait! No. That's far too obvious."
Silence.
"What about rebate?"

17 November 2015

Imagine Secular Europeans Are Bombing the KKK (Possible Complications from Bombing ISIS)

In a parallel universe ....

For reasons too convoluted to recap, the KKK had captured the attention of Northern Europeans who were appalled at this terrorist organization and also saw it as an outgrowth of the culture of the American south. It wasn't just the systemic racism they saw manifest in differences in income, employment, life expectancy and incarceration rates for minorities. Compared to countries that gave generous maternity leave and offered comprehensive sex education and family planning options, the south's apparent disregard for women was offensive to these Northern Europeans.  For them, the KKK was not just a terrorist organization: it represented a natural outcome of a flawed culture.

So, the Europeans began to speak out against the barbarity of the American south, criticizing their televangelists and traditions. They sent advisers to "help" young girls to be aware of their sexual rights and to provide contraceptives and even abortions. They empowered blacks to speak out more, to protest and began to offer legal representation for poor minorities. All of this activity seemed more like agitation than progress. Southerners were a little unsettled by this. There is perhaps a Newtonian equivalent of "for every action there is an equal and opposite reaction," because the campaign from secular humanists from Northern Europe actually fueled a resurgence in "southern values." The KKK very deftly turned this energy into larger donations and more members.

Of course, the growth of the KKK made the Northern Europeans work even harder to limit them. Things escalated until finally, KKK members coming in as American tourists coordinated an attack on city centers in Brussels, Stockholm, and Copenhagen. It was tragic.

Politicians in Northern Europe debated about how best to respond to this terrorist act. To many, all of the south looked alike. Others tried to point out that wonderfully progressive and humane people lived in the American South. And even some of the people whose values seemed more aligned with the KKK than the secular humanists were still good and decent people. Not only that but the victims - the minorities and women  oppressed by the KKK -  lived there. However, to many Northern Europeans the distinction between KKK, racists, rednecks and Bubbas was unclear. Angrier angrier voices prevailed and the promise that resonated the most was to "bomb the crap out of them."

As it turns out, the bombs dropped by the Northern Europeans did, indeed, kill KKK members. And their families. And their neighbors, many of whom had once been as offended by the KKK as were the Northern Europeans.

The bombs fell on a diverse group of people. The group that rose out of the rubble, though, was quite unified in its hatred of the Northern Europeans. The bombing incensed them. The "boots on the ground" sent later in this campaign to eradicate the KKK made the Southerners feel even more threatened. Foreigners on their soil was a threat to their way of life, an invasion that offended even the most reasonable and moderate southerners.

In ways that most Americans would not have predicted before the Europeans intervened, the KKK saw a resurgence. The confederate flag, which had fallen out of favor in the last decade, became fashionable again. Even Americans from outside the south began to fly the flag as a show of solidarity with the poor folks who'd seen their homes, schools, hospitals and even children destoryed by bombs. The racism and sexism that had been losing favor became an expression of rebellion against the Northern European troops.

The Northern Europeans were a little surprised that their bombing campaign actually galvanized support for the KKK. Or, more precisely, it galvanized opposition to meddling secular socialists who had gone from threatening a way of life to threatening actual lives. Thoughtful Europeans were confused.  Sadly, it just gave more fuel to the voices who grouped all southerners - all Americans even - into the same group of incalcitrant hillbillies, terrorists who were undeserving of sympathy or negotiation.

And the fighting escalated. Who could have predicted that so much grief could follow from a sloppy definition of "them?"

13 November 2015

Facts and Furious: The Allure of the Apocalypse and Post Recession Angst

At fivethirtyeight, Ben Casselman asks what may prove this election's most important question: The Economy is Better - Why Don't Voters Believe It?

He starts with Cyndi Diercks, a 54 year old small business owner who is the leader of a local tea party group, is a multimillionaire whose business is thriving and yet angry and convinced that the federal government is making up the numbers that suggest that the Great Recession is over.

I have seen this reaction more than once on Facebook. I post a simple fact about job creation and it inspires as much vitriol as if I'd said something racist or critical of Christians. I don't even post opinion about these facts - just lay them out there like a Rorschach test. At this point, I'm curious to see what it inspires next. (I saw a quip from some comedian the other day: Who is this Rorschach and why does he keep drawing pictures of my parents fighting?)

For instance, initial unemployment claims are the lowest they've been in 40 years (save for one week in 2000).


All indications are that this economy is getting better and yet a substantial number of people remain convinced that it is not. The ability to thread the needle between the reality of the economy and the perception of the economy might determine who wins the next election. At least within the GOP primary, it doesn't seem possible to over-state the magnitude of the catastrophe that is this current recovery but even the Democrats have to be careful not to sound too pleased with economic progress.

There are so many reasons this might be so.

  • 24-7 news and the internet magnifies every injustice, outrage and bit of bad news. Even if it is imagined.
  • The Great Recession left us in a hole that has taken years to climb out of. We've mostly repaired the economy but it still has visible damage. This from the White House
    • U.S. households saw their net worth decline by more in 2008-2009 than they had in the first year of the Great Depression.  The U.S. economy lost $13 trillion in wealth, 19 percent of total wealth – about five times the percentage reduction in wealth experienced at the onset of the Great Depression.  Employment in the United States declined by 4 percent from 2008 to 2009, the same rate as from 1929 to 1930.  Fears that we were heading into a global depression were not hyperbole: all available data suggested that this was the trajectory we were on. 
      • You don't recover quickly or unscathed from something of that magnitude.
  • Also, it simply isn't expedient to admit that things are better. For the right to admit that things are better is to confess that their dire warnings about Obama's policies were wrong. For the left to admit that things are better is to confess that their dire warnings about Congress's polices and intransigence were wrong.

Or maybe it has to do with the lure of the apocalypse. The brilliant Dictionary of Obscure Sorrow has proposed a new word: Lachesism they define as the longing for the clarify of disaster.



If indeed these are the worst of times, life has a certainty clarity. Catastrophe gives us license, purpose, and the sort of nobility that the magic of boring compound interest does not. Progress is rarely made in one fell swoop. Instead, it accumulates slowly over time, making our lives 2%, 5%, 7% better every year in ways that are imperceptible any given day but are undeniable and profound over the course of a lifetime. Progress is boring in the moment. The apocalypse, by contrast, makes for great drama. Also, if things are catastrophic, what is to lose? We don't have to be careful or thoughtful. We just have to do something. Anything. And in an apocalypse, there are no experts: every opinion about the unprecedented is of equal weight, which seems the epitome of democratic thought.

Why no acknowledgement of progress? Perhaps it is because the narrative of decline is so much more captivating, and has been since medieval times when folks were convinced that life had only grown worse - was destined to grow worse - since Adam and Eve were chased out of the Garden. Catastrophe drives ratings, rallies the base, and makes the individual feel big. Take that away from people with your cold facts and risk their fury.

12 November 2015

The Four Quadrants of Politics (or, The Ratio That Makes a Political Candidate Dangerous)

There are two dimensions to a politician. One is her politics and the other is her policies. The ratio of those two determines whether she is ineffectual or beloved, dangerous or harmless.

Policies are the wonky stuff. What sort of educational reforms do the most for inner-city kids? Which educational reforms are the hardest to sell to parents? What are the best ways to lower commute times? What sort of training programs give workers the most flexibility in a dynamic economy? When should we intervene in foreign affairs and when should we stand back and watch?

If you get policy wrong, people notice. Our troops get stuck in quagmires on foreign continents. Wages stagnate. Banks need bailing out. Drug addictions rates rise.

Get policies right and everyone is convinced that they've worked magic. Home prices go up even as homelessness goes down. Businesses are more likely to form and thrive. Suicide rates drop. 401(k) accounts rise. Unemployment is low. People even make more babies.

Politics can be judged in the short-term. Your performance in a debate. The way that audiences applaud when you make a point or laugh when you crack a joke. Your poll numbers in swing states.

If you get politics wrong, you aren't much of a politician. You might get hired to work in someone's cabinet or back office but you won't be elected.

If you get politics right, you win. You head off to the state capitol or city hall or to Congress. These politicians - the ones who get politics right - are the only ones we hear from. The only way you impact policy is to be good at politics.

So with that in mind, here are the four quadrants of politicians: the dangerous and beloved, the harmless and ineffectual. Imagine a scale of one to ten for politics (ten, you win any election you enter, 1, even your own mother hesitates to endorse you) and a scale of one to ten for policy (ten, your initiatives improve prosperity and quality of life even for people they are not intended for and one, your initiatives ruin the lives of people you hadn't even considered).
If your ratio of political skill to policy skill is 10 (10 / 1 = 10), you are dangerous. You know how to win. You know how to rally a nation. Yet your actual policy ideas are disastrous.

If your ratio of political skill to policy skill is 0.1 (1 / 10 = 0.1), you are ineffectual. You'll never get into office and no one much knows your name.

The trick for voters is to make sure that the ratio is close to 1. If you are bad at politics and policy (1 / 1 = 1), you are harmless, expounding on your political philosophy to some patient waitress who certainly hopes there is tip waiting at the end of your rant. If you are great at politics AND policy (10 / 10 = 1), you get into office and make magic happen.

Of course the problem is that there is no policy equivalent to polls. We can tell at a glance that Donald Trump is more electable than Bobby Jindal. It's harder to tell that Donald's policies are less credible than John Kasich's.

Still, this is not an impossible problem. It would be fascinating to have the equivalent to a poll number for policy: scores from policy experts for various policy proposals. Almost like a Consumer Report to evaluate policies.

Meanwhile, we'll have to plot the candidates on our own and just hope that this year we don't let the politics to policy ratio drift too far above one.

10 November 2015

Ted Cruz Promises a Country of Prosperity, Hope, and Freedom from Math

 What new ideas did we bring? I always give a one-word answer: arithmetic.
- Bill Clinton, only president since 1949 to preside over a budget surplus

Evidence is not all that compelling. - Daniel Kahneman

In tonight's debate, we heard Rand Paul, Marco Rubio, Ted Cruz, and Ben Carson make promises to radically cut taxes. And balance the budget.

Ted Cruz's promised tax cut might be the most interesting to examine. Cruz promises a flat tax of 10%, but only on income over the first $36,000. So what does that mean for tax revenue and what does that imply about budget cuts?

Well, social security reported that nearly 100,000,00 people made $39,999 or less a year in 2014. That's nearly $1.7 trillion in wages - or GDP - that Cruz would not tax at all. Additionally, there are another 58,750,986 wage earners who earn more than $40,000. They, too, would get to deduct the first $36,000 in income before they started counting the amount that would need to be taxed at 10%. So that's another $2.1 trillion in wages that would be tax exempt.

So, only $3.3 trillion of the $7 trillion in wages would be taxed. At 10%. That makes for $330 billion in revenue.

Now, let's assume that all the rest of GDP - the other $10 trillion made up of profits, rental incomes, dividends, etc.  - were also taxed at Ted Cruz's 10%, offering no deductions for businesses or investors. So, that yields $1 trillion more in revenues.

With Cruz's tax plan, total federal revenue would total $1.3 trillion. 

This suggests a problem. Federal spending was roughly $3.5 trillion in 2014. 

So, if Cruz will balance the budget, he's going to cut $2.2 trillion from the budget. That's 63%. Let's put aside the fact that he'd instantly reduce GDP by 13%. Let's just focus on how a person might cut the budget enough to make this math work.





One approach is just to cut from the bottom up. 

"All other" includes silly things like federal courts, FBI, Treasury Department, IRS, Secret Service, etc. We could try living without money or courts. That's $63 billion and we need to cut another $2.137 trillion.

So let's close all of our foreign embassies. Those governments can email us.

Cut all research into cures for cancer and heart disease and ... well, any research at all.

Then we cut all education funding, federal grants that help with student aid and student loans.

We will stop spending on infrastructure. No need for airports, roads, bridges, or docks.

We can cut all retirement pay to all military and federal employees. They can move in with family.

Interest we'll have to pay in order to keep our credit rating but we can cut all welfare and job subsidies. People in this country have already proven that they can live on the streets.

This leaves only three items on the list: social security, medicare, and defense.

In order to make the numbers work, we'd only have to cut each of those by 54%. More than half.

One beauty of this is that we'd have no impact on the economy (the folks who collect data on economic growth and revenue would be laid off), no complaints to Congress (no money to pay Congress or their staff or perform maintenance on the building or the grounds in DC), and no silly complaints about veteran's healthcare (again, no one on staff to handle complaints about the lack of staff to treat veterans). 

Maybe you have a different way to make the math work. $2.2 trillion out of $3.5 trillion doesn't leave you many options, though.

Of course candidates know that they get far more applause promising huge tax cuts than they do by itemizing what actual cuts they'll make. Still, the degree to which these GOP candidates are allowed freedom from math is unprecedented.

06 November 2015

Officially the Best First Half Decade of Job Creation in History

At 5%, unemployment is now exactly half of what it was exactly 6 years ago at the very peak of the Great Recession. That is cause for celebration. Additionally, today's strong number means that 2015 still could become the second best year in the last decade.

But it gets better.

During this last week, Congress finally agreed to a budget plan that will keep the government open for two more years. Next October, there will be no anxiety about whether this government that comprises roughly 20% of the economy might suddenly lurch to a stop. Further, defense and domestic spending alike are going to increase over the next couple of years. For the first time since the height of the Great Recession, the federal government will be stimulating rather than dampening the recovery. This alone could be good for an extra half a million jobs next year.

2016 is poised to be a record year for the decade. As previously mentioned, I think that we'll look back at 2010 to 2015 as the years in which the American economy recovered in terms of jobs created (it will be more than 13 million jobs created in the first five years); and 2016 to 2020 as the years in which the American economy recovered in terms of wage growth and household income. Now that unemployment is at 5.0% (it will drop below 5% before year end), the labor market will put steady upwards pressure on wages.

Not only does this month's jobs number mean that we're now at 61 months in row of uninterrupted job growth and counting, but it means this is easily the best first half a decade in history.

Jobs created in first half of decade
1980s 7.9 million
1990s 9.5 million
2000s 4.3 million
2010s 12.9 million (and with November and December's numbers, this is like to finish at  ~13.3)

Just to make sure you got that, this first half is roughly 9 million more jobs - about 3X - as many as last decade's first half and 3 million more than the 90s's first half.

Finally, a common rebuttal is "Yes, but the broader measure of unemployed is higher than this." That's true and it always is true. During the first year of the recovery, the narrow unemployment measures began to drop before the broader measure (which includes the discouraged workers and folks working part-time when they'd rather work full-time). But the gap between these two measures is beginning to narrow, coming closer to its pre-recession numbers, as you can see in this graph.

All that is good news.

04 November 2015

Those Democrats Are Such Incompetent Communists that They're Actually Good for Capitalism

Here are interesting statistics that compare stock market performance under Democrat and Republican presidents.

This is hugely simplistic. It doesn't account for global recessions, wartime spending, demographic changes, the fact of a legislature that opposes everything or willingly goes along. And causation of today's economic conditions is often the function of variables tweaked years - maybe even decades - earlier and there is no attempt at time lag that traces back to specific policies or events.

All of that said, it is a fun way to examine the claims that Republicans are better capitalists than Democrats. The performance of capital markets is one pretty simple measure of whether a government is good or bad at this capitalism thing.






















This table starts at the bottom with Teddy Roosevelt (Republican - and a great one) in 1901. At that point the Dow Jones was at 73.27 and it rose 20% during his administration. 

Now imagine that you have two investors. One investor is a rabid Republican and every time a Democrat gets into office, his puts his money under his mattress. Every time a Republican gets into the Oval Office, he puts all of his money into an index fund that tracks the Dow. The other investor is a rabid Democrat and he moves in the opposite direction of the Republican investor: he goes to the mattress every time a Republican is sworn into office and bets everything on the Dow index fund every time a Democrat moves his paperweights into the Oval Office.

So, during Teddy Roosevelt's time in office, the Republican gets this 20% gain and the Democrat sits on the sidelines, completely missing out on the gain. And so it goes. Whoever is sitting it out misses the boom or bust that happens when their money is under the mattress.

So, over the last 114 years, how have these two investors done? You can see the numbers through yesterday's close. Our Republican investor who started with $100,000 would now have $504,951. By contrast, the Democratic investor would have $4,843,040, nearly 10X as much.

At best, Republican defenders faced with this data could say that it makes no difference who is in the White House. These results might be random. At worst, Republican defenders would have to admit that investors prefer Democratic presidents. After a century of data, it might be possible to start drawing conclusions. In any case, if Democratic presidents are anti-capitalists, they're not very good anti-capitalists, so maybe the staunch Republicans could still argue that this is further proof of Democratic incompetency. "Obama is a communist! He's just such an incompetent communist that his attempts to bring down capitalism drive the market up!"

Refugees Could Make Europe Stronger

The stream of refugees coming into Europe could be the boost it needs.

In 2003, the average age in Europe was about 37 years. By 2050, some analysts predict it'll rise to 52 years. This puts a huge burden on a population. The ratio of workers to retired people may drop to 2 to 1. Each worker will not only have their own costs but 50% of the cost of a retired person. That's tough.

The refugees streaming into Europe are younger and more fertile than the Europeans. Given there are millions of them, they might even be able to significantly lower the average age and to raise (albeit slightly) the ratio of workers to retired people.

European nations might look back at this as a lucky break, however harsh it seems now.

31 October 2015

The Bush Brand and Jeb's Fall from Grace

The liberal media (and us liberals) like to point out how Republicans can be irrational. In the this GOP primary, they're disproving that claim.

Count me among the many who thought that Jeb Bush was a sure deal for the Republican primary. And yet he trails four candidates and while it is certainly not impossible for him to gain against those four, it seems unlikely. (Cruz and Carson seem highly unlikely to sustain their strong place in the polls: Trump and Rubio could.) Yet here he is in fifth place, cutting staff, and in the most recent debate in which he needed to perform strong, he actually spoke less than any other candidate. Things don't look good for him.

Meanwhile, Clinton looks more probable every week.

So why the big difference? Why is it that Bush - a brand name that has been hugely popular in the Republican Party for decades - has fallen out of favor and Clinton - another brand that has been popular for decades - is going strong?

It might be that the Republican Party is becoming more rational.

During Bill Clinton's time in office, the economy created 22.9 million jobs, the Dow rose 230%, and unemployment averaged 3.9% in his last full year in office. In his 8 years in office, he helped to turn a $290 billion deficit into a $236 billion surplus.Unsurprisingly, he left office with a 66% approval rating. That brand - the Clinton name - is pretty good.

During George W. Bush's time in office, the economy created 2.6 million jobs (around 1/10th the number created during Clinton's administration), the Dow fell 26%, and unemployment averaged 7.3% his last year in office. (It averaged 9.9% the year he left office in January.) In his 8 years in office, he turned a $236 billion surplus into a $458 billion deficit. And this litany of issues doesn't even include the two wars funded with a tax cut that resulted in thousands dead and millions displaced. Unsurprisingly, he left office with a 34% approval rating, a rating about half what Clinton had. That brand - the Bush brand - is pretty tarnished.

Shocked that the country re-elected George W., I just assumed that Republicans were irrational enough to try this Bush brand one more time. Turns out, they deserve more credit than that. It looks like Jeb's sure thing no longer is. And that, it seems to me - for whatever you think of Trump or Rubio, is progress. Jeb's fall is not really his ... it is a natural consequence of his big brother's fall.

The Truth About the Lie About Out of Control Deficits

Talking with a conservative friend the other day, he mentioned how unrealistic it was to think that the federal government can continue to borrow so much.
"It's not that different from the past," I said.
"40 cents of every dollar we spend is borrowed," he said.
"Ah. Well, yeah, at the height of the Great Recession that was probably right. The economy has recovered now and borrowing is about at a level that it has been for decades.
"Hmmm."

He sounded dubious.  And, the story that we have to slash government spending because it is out of control is a story that persists, like the notion that we had to bleed patients at a particular point in medical history.

So, here are the facts. (Federal receipts are mostly taxes.)

Average between 1980 and 2014, as a percentage of GDP
Federal Spending:   20.6%
Federal Receipts:    17.3%
Deficit:                      3.2%

(Note that spending as a percentage of GDP has averaged over 20% during the last 34 years. This might be a good time to point out that Ben Carson's plan to finance the federal government with 15% tax rate suggests cutting federal spending by over 25%, which he could almost get by completely eliminating either medicare, social security or the defense department. It's not impossible to lower federal spending that much but it won't happen. In fact, if you're convinced that he can do it, I'll bet you any amount up to a million that he won't. Seriously.)

In 2014,
Federal Spending:   20.3%
Federal Receipts:     17.5%
Deficit:                      2.8%

Last year, spending as a percentage of GDP was lower than its average since 1980 (a period that included the Clinton surpluses) and federal receipts were higher than their average. The result? In 2014, our deficit was lower than what it has averaged over the last 34 years, a time when the American economy has created 52 million jobs and increased GDP from $2.8 trillion to $17.2 trillion.

Oh, and if you go back another 20 years, to 1960, the averages don't change that much. In fact, federal receipts are still exactly 17.3% of GDP.. Government spending drops to 19.9% of GDP, which is not that surprising given this is a time that precedes the Vietnam War and Johnson's initiatives on social spending. The deficit as percentage of GDP in this period is 2.6% of GDP, not much different from last year's 2.8%.

Is it sustainable?

Bond markets continue to scoop up low-risk, low-return bonds that finance this debt. And voters continue to refuse to give up their social security or defense spending or to pay for them in real time. So yes, the debt is sustainable, as is the ability of politicians to alarm good people with talk of unsustainable debts. Like the Rolling Stones playing Satisfaction, this tune continues to get a great crowd response and will continue to be played by politicians who know better but hope that you don't.

29 October 2015

CNBC & the GOP - The Press Loses Debate

The Republicans in Wednesday's debate turned on the moderators, largely refusing to answer any question they found uncomfortable. Their disdain for the media was applauded by an obviously partisan audience who seemed to see the moderators' challenges as proof that "the liberal media" was biased against their candidates.

The clearest evidence that you're operating in a developed nation is the relationship between the media and government. In less developed countries with more oppressive governments, the media is cowed into submission, forced to simply echo government positions or risk bullying, arrest, or even death. In more developed, more open governments, politicians are forced to account for their decisions and actions to a media that keeps the polity informed and holds politicians accountable.

GOP candidates showed no interest in being held accountable for explaining their policies, responsible to explain numbers that didn't add up or policies that clashed with earlier statements or reality.

If they get away with it during campaigning, no one can act surprised when they are elected if they put in place an opaque administration that refuses to answer the questions of a media that would dare to challenge them. If they're this outraged when interviewing for the job of commander in chief, think how imperial they'll act once they've landed the job. and have tanks behind them to fully intimidate those silly reporters.

More about why the Republicans were so intent to discredit the journalists here.

19 October 2015

"You Take Your Fancy Facts Off to Some Other Party, Sir. We Don't Need Them Here."

It says volumes about the current state of the Republican Party that Donald Trump's simple statement of fact about George W. Bush being the president on the day of 9-11 would be wildly controversial.

07 October 2015

The Exciting Possibility of Joe Biden

There is a very different bar for "would you marry this man?" and "I do!" The list of people we might consider as spouses is much longer than the list of people we actually do marry. Dating often puts an end to exciting possibilities. Going to the polls is different than having someone query you for a poll.

Which brings me to this odd clamor for Joe Biden to run. He's at the stage of candidacy akin to your aunt telling you that you should date this guy because he's really nice. You're open to this possibility but given we're talking about meeting for coffee, it's hard to say "no." Later, before you actually begin shopping for a wedding dress, it'll be harder to say "yes." 

There are real issues in this campaign. By far the biggest and most urgent is 24/7 news agencies' need to run stories that drive ratings and click-throughs. As it turns out, we're less interested in politics than politicians, and it doesn't take us long to go through the entire cycle of intrigue, approval, skepticism, and dismissal with a candidate. The process from intrigue to dismissal has never been quicker and the period of serious campaigning has never been longer. So, there is a lot of demand for shiny new objects in the form of candidates. And while we aren't really sure that we want Joe for president, we are sure that we want him in that candidate parade. "We need you to run, Joe, if only for ratings bump."

05 October 2015

Mass Killing - What if it Has Nothing To Do With Mental Health?

If we legalized bombs and every time a crazy person detonated a bomb it killed 200 people, we wouldn't say that we've never had more problems with mental health.

If we legalized atomic bombs and every time a crazy person detonated an atomic bomb it killed a million people in a city, we wouldn't say that we have unprecedented levels of mental health problems.

If "More than half of the mass killers of the last 30 years possessed assault weapons or high- capacity magazines, [that] allow a gun to fire without the need to reload, maximizing damage, increasing body count and minimizing risk to the shooter," we might not have any more health problems than we had half a century ago. 

If mass killers can double the number of victims even if we could reduce the number of mass killers by half, maybe it is time to give some consideration to the technology we include under the umbrella of right to bear arms.