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Saturday
Feb092013

Education, the False God of Economic Recovery

No matter how much education your group has, or how little, your group's money income has been declining for 12 years, not just since the start of the Great Recession.

Yes, you need a good education to get a good job, but in the 21st Century you also need a good education to get a bad job. A recent study found that 46.3% of the projected beneficiaries of an increase in the Maryland minimum wage from $7.25 to $10.00 per hour have at least some college education. Yes, college educated people working for minimum wage, many of them full time. See the comments on Mark Thoma's post What's the Cost and Financial Value of College.

For plutocrats and employers, declining wages is a feature, not a bug. They want taxpayers to train their workers so they don't have to, and they want labor costs to keep going down. They are apparently not even embarrassed by this assault on American workers. Lumina Foundation and the Bill and Melinda Gates Foundation funded a study at Georgetown University's Center on Education and the Workforce to calculate how many more college graduates the US would need to turn out in order to drive down the college-versus-high-school wage premium from 74% to 46%! That's the goal—reduce the value of a college education by churning out an even bigger glut of degree holders. Even the study's authors question whether it will be feasible to get more Americans to complete college when they have to pay/borrow more as the incremental value of the degree is declining.

So here's my modest proposal: Declare a moratorium on hand-wringing about how to improve our educational system and instead focus serious national attention on creating tens of millions of jobs. Then we'll have the money to pay for more education for more people and a rising financial incentive for people to pursue higher education.

Why have we had for 12 years a chronic shortage of jobs up and down the education scale? Recently there has been a spate of punditry to the effect that American workers are being displaced by robots (shorthand for all sorts of automation). Well of course they are, and have been since the beginning of the industrial revolution, but I'm willing to bet that in the last 12 years many more American workers have been displaced by ill-treated Chinese teenagers than by robots.

Hat tip to Anne for the link to Census data. 

Monday
Jan072013

Obama’s Legacy—If Any

With President Obama's second inauguration just two weeks away, the pundits are talking about Obama's legacy. In an MSNBC interview with Michael Beschloss, for example, Alex Witt posts this list of Obama's first term accomplishments and calls them significant.

Lilly Ledbetter Act

Student Loan Reform

Auto Industry Rescue

Stimulus Bill

Healthcare Reform

Financial Reform Bill

Repealing DADT

Killing Osama bin Laden

To that we could add withdrawing troops from Iraq (pursuant to an agreement between his predecessor and the Iraqi government) and, of course, the facts that he is our first non-white President and was reelected. Are there other significant accomplishments that will impress historians a few decades hence? I don't think so, and if he had died yesterday in a prosaic, non-political way, such as by choking on a pretzel, he would be remembered 25 years from how for just one thing—being black.

Some might argue that he will be remembered for "Obamacare," officially the Affordable Care Act, but we don't seem to be remembering George W. Bush for the Medicare prescription drug plan, which is about as significant and a great deal more popular. Maybe the auto industry rescue will be remembered by some, but does anybody remember that President Carter rescued Chrysler in 1979, that President Ford bailed out New York City in 1975, or that President Nixon rescued Lockheed in 1971? (Other government bailouts are listed here.) No? Didn't think so.

It seems to me that none of the other accomplishments on the MSNBC list (or any others to date) are going to be remembered for long, let alone thought of as legacy material. So, if Obama is going to be remembered as other than a seat-filler, it's going to have to be for something he does in his second term.

Others have noticed this, of course, and describe Obama as having been so far a "transactional" President who would like to be a "transformative" President but isn't doing what he would need to do to get there. Tom Friedman nails the problem in yesterday's NYT op ed, More Risk-Taking, Less Poll-Taking: Obama is not articulating a vision of what America should and could be in five or ten years or a generation. He has been content to advocate for what he judges can be achieved under current political realities. He is not attempting to change how voters think about themselves and America. He's going with the flow. Friedman says this (emphasis added):

Maybe Obama has a strategy: First raise taxes on the wealthy, which gives him the credibility with his base to then make big spending cuts in the next round of negotiations. Could be. But raising taxes on the wealthy is easy. Now we're at the hard part: comprehensive tax reform, entitlement cuts, radical cost-saving approaches to health care and new investments in our growth engines. This will require taking things away from people — to both save and invest. A lot of lobbies will fight it. The president will need to rally the center of the country and the business community to overcome them. He'll have to change the polls, not just read the polls. He will have to take on his own base and the G.O.P.'s.

I'm sympathetic to the argument that transforming the American mindset is very difficult and perhaps impossible, but if Obama thinks that's reason enough not to try, then he's giving up the possibility of having a transformative position in history. I hoped for more, but I didn't really expect it. By the way, my agenda for transforming the nation would not be the same as Friedman's; in my opinion the transformational changes we most need are getting money out of politics and restoring full employment.

Monday
Jan072013

While Some Cities Conquer Economic Issues with High Tech Masters Programs, Others Struggle. (Guest Post)

[Realitybase has posted about the grim job prospects for recent college graduates and the failure of a trained labor force to cause the creation of jobs. Education researcher Bree Hernandez brings some new numbers and subtlety to these issues in this guest post. According to Bree, jobs are growing in certain sectors and in certain places, but the shift is by no means universal. Bree most often compiles statistics on accredited graduate education for interested students, and has a comprehensive knowledge of higher education today.]

In recent years, analysts have noted a connection between universities that offer cutting-edge, technology-oriented academic programs and thriving economic activity within the surrounding community. Likewise, universities that emphasize traditional industries often correspond to cities that are not conducive to tech-savvy businesses and organizations.

A 2011 report published by the Brookings Institute highlighted the long-standing relationship between economic prosperity and technological innovation. According to a recent survey of 120 countries over a 26-year period, each broadband penetration increase of 10-percent contributed to a 1.3-percent increase in a country's GDP. Additional studies have shown a strong link between "telecommunication investment and economic growth," particularly during post-recession periods. Many of today's industrial sectors are heavily reliant on technology. Physicians and nurses use telemedicine to exchange ideas and information with one another, energy companies supply power using smart grids; and higher learning institutions allow students to enroll in e-courses, among other things. "Technology fosters innovation, creates jobs, and boosts long-term economic prosperity," the report states. "By improving communication and creating opportunities for data-sharing and collaboration, information technology represents an infrastructure issue as important as bridges, highways, dams, and buildings."

According to an April 2012 report by IBISWorld, the U.S. GDP is expected to increase annually by 3.3 percent over the next five years; comparatively, the GDP grew by an average of 0.6 percent between 2007 and 2012. Much of this projected growth is attributed to industrial sectors that are concentrated in the fields of science, technology, engineering and mathematics (or STEM). One burgeoning field is 3-D printing technology, which grew 8.8 percent between 2007 and 2012, and is expected to increase 14 percent over the next five years.

Online technology and social media is another sector expected to grow considerably between now and 2017; this is especially true of the social network game development sector, which grew 128 percent in the last decade and is projected to increase another 22 percent in the next five years. Other STEM-related fields with high projected growth include pharmaceutical manufacturing, green construction, and solar panel development/manufacturing.

In order to succeed in the tech sector, Forbes contributor Jacquelyn Smith urges college and graduate students to choose programs that correspond to fields with high levels of projected job growth. Computer science majors, for example, earn a median mid-level salary of $109,000, while the sector is expected to grow 22.3 percent over the next eight years. A similar field, information systems, awards a median mid-career wage of $95,000, and is expected to grow 23.3 percent between now and 2020. Other lucrative programs include electrical engineering, mathematics and physics. "In a technology driven world, the need for those who not only understand, but can improve upon technology is high," said Katie Bardaro, a lead economist for Payscale.

However, the college or university a student chooses to attend can be just as crucial as the major he or she chooses. Academic experts advise students to choose their campus based on the strength of the local tech sector. A July 2012 report by Simply Hired found that two established tech hubs – Seattle and Portland, Ore. – were among the best cities in which to find a job related to the field of technology. Other cities, such as Newark and Birmingham, Ala., were listed among the "worst cities to find a tech job," due to a low ratio of available technology positions to workers who are currently employed in that field. Not surprisingly, the local economies of these cities reflect the strength of their tech sector. The unemployment rates of Seattle and Portland average around 7.1 percent, while the averaged unemployment rate of Newark and Birmingham exceed 12 percent. Furthermore, businesses in Seattle generated taxable income worth $58.6 billion in 2011, while Portland's job market grew by more than 10,000 jobs between September 2011 and September 2012. Meanwhile, the Newark labor force has been in decline each month since July and the Birmingham job market has lost roughly 2,700 jobs over the previous year.

A recent report by Rick Mattoon highlights the role that colleges and universities play in local economic development and prosperity. He notes that academic institutions are often the catalyst for regional economic shift. In some cases, a local school is the genesis point for a form of technology that evolves into an emerging industry. Other times, academic research and development aid an existing industry and enable it to further expand. In recent years, the University of Washington has exemplified this latter point within the city of Seattle; cutting-edge technology and engineering programs have yielded graduates who are able to contribute to the existing local workforce, while software development and business management programs have allowed graduates to thrive within the city's expansive startup sector. In Newark and Birmingham, on the other hand, academic programs are more geared toward traditional industries because the respective local economies have such weak tech sectors.

In order to bolster the local economy through technological innovation, city officials should encourage colleges and universities under their jurisdiction to adopt cutting-edge tech programs. Not only will these programs yield skilled graduates who are able to productively contribute to the city's workforce, but these institutions can also aid local industries through research and development, as the University of Washington has done in Seattle. Technology is a standard of modern business – no longer a mere luxury – and the varying economic strength between American cities effectively reflects this shift.

Monday
Jan072013

Offshoring manufacturing was a critical strategic blunder by the US.

When manufacturing is offshored, related technical talent, R&D spending, and innovative success tend to go with it. I've written about that unfortunate process here. Annie Lowrey reports the same story with additional examples in this NYT piece.

A growing chorus of economists, engineers and business leaders are warning that the evisceration of the manufacturing work force over the last 30 years might not have scarred just Detroit and the Rust Belt. It might have dimmed the country's capacity to innovate and stunted the prospects for long-term growth. "In sector after sector, we've lost our innovation edge because we don't produce goods here anymore," said Mitzi Montoya, dean of the college of technology and innovation at Arizona State University.

GE is trying to reverse that loss in advanced battery production.

The idea is to knit together manufacturing, design, prototyping and production, said Michael Idelchik, vice president for advanced technologies, who holds a dozen patents himself. "We believe that rather than a sequential process where you look at product design and then how to manufacture it, there is a simultaneous process," Mr. Idelchik said. "We think it is key for sustaining our long-term competitive advantage."

MIT Professor Susan Berger, a founder of the Production in Innovation Economy project was interviewed by Lowrey.

Thus far, she said, the anecdotal evidence from about 200 companies has proved striking, with company after company detailing the advantages of keeping makers and thinkers together. That does not mean every business, she stressed. Companies with products early in their life cycle seemed to benefit more than ones with products on the market for years. So did companies making especially complicated or advanced goods, from new medicines to new machines.

Wednesday
Jan022013

Most read Realitybase posts in December

The Dysfunction and Corruption of Our Healthcare System, Its Damage to the National Economy and other Basic Healthcare Matters (Guest Post) Describing a system that is destroying global competitiveness of American business, that violates fundamental insurance risk principles, and that has inherent conflicts of interest preventing quality national health care delivery and cost efficiency; and proposing a solution.

The American Dream died in February 1973. With graphs showing stagnation of inflation-adjusted middle class incomes since the 1970s after strong and steady post-WWII growth

The Citigroup Plutonomy Memos With key quotations from documents that are being disappeared. This post has been the #1 response to a Google search for "plutonomy memo."

Comparative Advantage—The Unicorn of Free Trade Collection of sources and analyses demonstrating that the assumptions of classic Ricardian trade theory rarely if ever align with real-world conditions.

The history of US per-capita petroleum consumption will surprise you.  A graph and other data show US per-capita consumption of petroleum is down substantially from the 1970s, has been very stable since 1983 because of CAFE standards, and has fluctuated only slightly with retail price changes.

The Recession is Coming! The Recession is Coming! December 2007 post with charts showing America's middle class had been in recession for 7 years and asking if we really care.

Two hypotheses for why US CEO pay is so high Charts show that US CEO pay is about double that in other advanced countries, meaning there is either a shortage of talent in the US or the US CEO pay market is broken.

U.S. aircraft carrier and 15 other Navy ships sunk in the Strait of Hormuz in 5-10 minutes Results of US war games when attacked by large numbers of speed boats and missiles such as Iran has in the hands of Revolutionary Guards reputed to be "cowboys," and suggesting still other ways we might accidentally get into a war with Iran.

US health care efficiency did not go off the rails until about 30 years ago. Updates to this post show that the rate of increase in US life expectancy at birth, especially for females, abruptly slowed in 1982 and that this was apparently unrelated to healthcare spending which continued rising at a very steady rate.

One chart refutes three myths about US foreign trade. About Smoot-Hawley, the post-WWII export "boom," and "self-balancing" trade.

Friday
Nov302012

Most read Realitybase posts in November

The American Dream died in February 1973. With graphs showing stagnation of inflation-adjusted middle class incomes since the 1970s after strong and steady post-WWII growth

The Dysfunction and Corruption of Our Healthcare System, Its Damage to the National Economy and other Basic Healthcare Matters (Guest Post) Describing a system that is destroying global competitiveness of American business, that violates fundamental insurance risk principles, and that has inherent conflicts of interest preventing quality national health care delivery and cost efficiency; and proposing a solution.

The Citigroup Plutonomy Memos With key quotations from documents that are being disappeared. This post has been the #1 response to a Google search for "plutonomy memo."

Comparative Advantage—The Unicorn of Free Trade Collection of sources and analyses demonstrating that the assumptions of classic Ricardian trade theory rarely if ever align with real-world conditions.

The history of US per-capita petroleum consumption will surprise you.  A graph and other data show US per-capita consumption of petroleum is down substantially from the 1970s, has been very stable since 1983 because of CAFE standards, and has fluctuated only slightly with retail price changes.

California has the highest paid K-12 teachers in the nation and the largest classes. Just publishing some data without discussing policy implications.

Wages for college graduates in the cross hairs of US business. How US employers are driving down domestic wages by offshoring, importing guest workers, and deliberately creating an oversupply of American college grads.

One chart refutes three myths about US foreign trade. About Smoot-Hawley, the post-WWII export "boom," and "self-balancing" trade.

US job creation has been declining since April 2000 and is now in freefall. Discussion around a dramatic graph showing the US employment-to-population ratio strongly increasing until 2000 followed by the devastating loss in 10 years of all gains made in the previous 20 years.  

Two hypotheses for why US CEO pay is so high Charts show that US CEO pay is about double that in other advanced countries, meaning there is either a shortage of talent in the US or the US CEO pay market is broken.

Thursday
Nov152012

Those greedy bastards!

The recent Presidential election campaign involved much rhetoric from the right about "makers" and "takers." A paper published in February by UC Berkeley researchers gives us another way to think about who the "takers" are. The reported studies found that upper-class individuals had more favorable attitudes toward greed and were observed to be more likely to take what isn't theirs according to broadly accepted norms.

From the press release:

In seven separate studies conducted on the UC Berkeley campus, in the San Francisco Bay Area and nationwide, UC Berkeley researchers consistently found that upper-class participants were more likely to lie and cheat when gambling or negotiating; cut people off when driving, and endorse unethical behavior in the workplace.

The increased unethical tendencies of upper-class individuals are driven, in part, by their more favorable attitudes toward greed," said Paul Piff, a doctoral student in psychology at UC Berkeley and lead author of the paper published today (Monday, Feb. 27) in the journalProceedings of the National Academy of Sciences.

The abstract of the paper published in the Proceedings of the National Academy of Sciences:

Seven studies using experimental and naturalistic methods reveal that upper-class individuals behave more unethically than lower-class individuals. In studies 1 and 2, upper-class individuals were more likely to break the law while driving, relative to lower-class individuals. In follow-up laboratory studies, upper-class individuals were more likely to exhibit unethical decision-making tendencies (study 3), take valued goods from others (study 4), lie in a negotiation (study 5), cheat to increase their chances of winning a prize (study 6), and endorse unethical behavior at work (study 7) than were lower-class individuals. Mediator and moderator data demonstrated that upper-class individuals' unethical tendencies are accounted for, in part, by their more favorable attitudes toward greed.

So, it seems the rich really are different from you and me, not in the way F. Scott Fitzgerald imagined, but in the way Oliver Stone presented Gordon Gekko and, of course, in Ayn Rand's Atlas Shrugged hero John Galt and in her The Virtue of Selfishness. George Monbiot discusses Rand's poisonous and currently fashionable ideas in a Manifesto for Psychopaths.

Excessive greed and lack of empathy bordering on psychopathy could explain much of what goes on in the world of high finance and in public company CEO compensation, could it not? Clive R. Boddy develops that idea in The Corporate Psychopaths Theory of the Global Financial Crisis in the Journal of Business Ethics. About 1% of the population consists of psychopaths (20% in the prison population) and it could be that Wall Street traders are selected in part for their remorseless greed, likely making the population of these types in leadership positions atypically large in some organizations, instead of being weeded out as one might hope.

From an earlier paper by Boddy, Ladyshewsky, and Galvin, The Influence of Corporate Psychopaths on Corporate Social Responsibility and Organizational Commitment to Employees:

Leaders who are Corporate Psychopaths often create the illusion of being successful leaders. However, they are attracted to these positions of leadership because of the access to rewards and power that are vested in these senior management positions.

One implication of these ideas is that the rest of us may be at the mercy of powerful people who can only be controlled by strict laws and vigorous enforcement, and not, as Alan Greenspan erroneously thought, trusted to police themselves or subjected to subtle adjustment of incentives.

Hat tip to Yasmin Anwar at Real-World Economics Review Blog, where most of the Berkeley press release is quoted.

Thursday
Nov012012

Most read Realitybase posts in October

The Dysfunction and Corruption of Our Healthcare System, Its Damage to the National Economy and other Basic Healthcare Matters (Guest Post) Describing a system that is destroying global competitiveness of American business, that violates fundamental insurance risk principles, and that has inherent conflicts of interest preventing quality national health care delivery and cost efficiency; and proposing a solution.

The history of US per-capita petroleum consumption will surprise you.  A graph and other data show US per-capita consumption of petroleum is down substantially from the 1970s, has been very stable since 1983 because of CAFE standards, and has fluctuated only slightly with retail price changes.

The American Dream died in February 1973. With graphs showing stagnation of inflation-adjusted middle class incomes since the 1970s after strong and steady post-WWII growth

The Citigroup Plutonomy Memos With key quotations from documents that are being disappeared. This post has been the #1 response to a Google search for "plutonomy memo."

Comparative Advantage—The Unicorn of Free Trade Collection of sources and analyses demonstrating that the assumptions of classic Ricardian trade theory rarely if ever align with real-world conditions.

U.S. aircraft carrier and 15 other Navy ships sunk in the Strait of Hormuz in 5-10 minutes Results of US war games when attacked by large numbers of speed boats and missiles such as Iran has in the hands of Revolutionary Guards reputed to be "cowboys," and suggesting still other ways we might accidentally get into a war with Iran.

Two hypotheses for why US CEO pay is so high Charts show that US CEO pay is about double that in other advanced countries, meaning there is either a shortage of talent in the US or the US CEO pay market is broken.

Crony Capitalism is the common enemy of the Tea Party and the Occupy Movement. Excerpts from a Chicago business school prof's op ed and a link to an earlier Realitybase post making a similar point.

Wages for college graduates in the cross hairs of US business. How US employers are driving down domestic wages by offshoring, importing guest workers, and deliberately creating an oversupply of American college grads.

US job creation has been declining since April 2000 and is now in freefall. Discussion around a dramatic graph showing the US employment-to-population ratio strongly increasing until 2000 followed by the devastating loss in 10 years of all gains made in the previous 20 years.  

Sunday
Oct072012

Mitt Romney loves Big Bird.

Sunday
Sep302012

Most read Realitybase posts in September

The American Dream died in February 1973. With graphs showing stagnation of inflation-adjusted middle class incomes since the 1970s after strong and steady post-WWII growth

The Citigroup Plutonomy Memos With key quotations from documents that are being disappeared. This post has been the #1 response to a Google search for "plutonomy memo."

The history of US per-capita petroleum consumption will surprise you.  A graph and other data show US per-capita consumption of petroleum is down substantially from the 1970s, has been very stable since 1983 because of CAFE standards, and has fluctuated only slightly with retail price changes.

US job creation has been declining since April 2000 and is now in freefall. Discussion around a dramatic graph showing the US employment-to-population ratio strongly increasing until 2000 followed by a devastating loss in 10 years of all the gains made in the previous 20 years.  

Comparative Advantage—The Unicorn of Free Trade Collection of sources and analyses demonstrating that the assumptions of classic Ricardian trade theory rarely if ever align with real-world conditions.

The Dysfunction and Corruption of Our Healthcare System, Its Damage to the National Economy and other Basic Healthcare Matters (Guest Post) Describing a system that is destroying global competitiveness of American business, that violates fundamental insurance risk principles, and that has inherent conflicts of interest preventing quality national health care delivery and cost efficiency; and proposing a solution.

U.S. aircraft carrier and 15 other Navy ships sunk in the Strait of Hormuz in 5-10 minutes Results of US war games when attacked by large numbers of speed boats and missiles such as Iran has in the hands of Revolutionary Guards reputed to be "cowboys," and suggesting still other ways we might accidentally get into a war with Iran.

Two hypotheses for why US CEO pay is so high Charts show that US CEO pay is about double that in other advanced countries, meaning there is either a shortage of talent in the US or the US CEO pay market is broken.

One chart refutes three myths about US foreign trade. About Smoot-Hawley, the post-WWII export "boom," and "self-balancing" trade.

The US trade deficit is tribute paid to foreigners. And it's big. Nobel laureates Paul Samuelson, Joseph Stiglitz, and Paul Krugman and other prominent economists including Dani Rodrik, Alan Blinder, Martin Wolf, Larry Summers, Dean Baker, and even Alan Greenspan have said that the US middle class is net worse off as a result of persistent trade deficits averaging 3% of GDP.

Friday
Aug312012

Most read Realitybase posts in August

The Dysfunction and Corruption of Our Healthcare System, Its Damage to the National Economy and other Basic Healthcare Matters (Guest Post) Describing a system that is destroying global competitiveness of American business, that violates fundamental insurance risk principles, and that has inherent conflicts of interest preventing quality national health care delivery and cost efficiency; and proposing a solution.

The Citigroup Plutonomy Memos With key quotations from documents that are being disappeared. This post has been the #1 response to a Google search for "plutonomy memo."

U.S. aircraft carrier and 15 other Navy ships sunk in the Strait of Hormuz in 5-10 minutes Results of US war games when attacked by large numbers of speed boats and missiles such as Iran has in the hands of Revolutionary Guards reputed to be "cowboys," and suggesting still other ways we might accidentally get into a war with Iran.

The American Dream died in February 1973. With graphs showing stagnation of inflation-adjusted middle class incomes since the 1970s after strong and steady post-WWII growth

The history of US per-capita petroleum consumption will surprise you.  A graph and other data show US per-capita consumption of petroleum is down substantially from the 1970s, has been very stable since 1983 because of CAFE standards, and has fluctuated only slightly with retail price changes.

US job creation has been declining since April 2000 and is now in freefall. Discussion around a dramatic graph showing the US employment-to-population ratio strongly increasing until 2000 followed by a devastating loss in 10 years of all the gains made in the previous 20 years.  

The US trade deficit is tribute paid to foreigners. And it's big. Nobel laureates Paul Samuelson and Paul Krugman and other prominent economists including Dani Rodrik, Alan Blinder, Martin Wolf, Larry Summers, Joseph Stiglitz, Dean Baker, and even Alan Greenspan have said that the US middle class is net worse off as a result of persistent trade deficits averaging 3% of GDP.

Wages for college graduates in the cross hairs of US business. How US employers are driving down domestic wages by offshoring, importing guest workers, and deliberately creating an oversupply of American college grads.

Comparative Advantage—The Unicorn of Free Trade Collection of sources and analyses demonstrating that the assumptions of classic Ricardian trade theory rarely if ever align with real-world conditions.

American Exceptionalism, shake hands with Inconvenient Facts. Presenting data, and links to other data, showing USA ranks near the bottom of 30 OECD nations by a wide variety of middle class metrics including health, family, education, income, wealth, leisure, freedom and democracy, public order and safety, generosity, and access to internet and wireless technology.

Sunday
Aug122012

If the Ryan plan had been in effect in 2010, Romney’s tax rate would have been 0.82% instead of 13.9%. 

Paul Ryan's budget plan, which Mitt Romney has endorsed and now fully embraced by putting Ryan on the ticket, would eliminate all taxes on capital gains, dividends, and interest and lower the top marginal rate on earned income from 35% to 25%. Romney's 2010 income included over $21 million from capital, and he would pay no taxes on that. He had $0.6 million income from author and speaking fees that would have been taxed, but at a rate lower than his actual 2010 rate. Altogether his effective federal tax rate would have been 0.82%. Matthew O'Brien has the story at The Atlantic. Hat tip Mark Thoma. Can Romney/Ryan possibly win the November election without publicly disowning this tax proposal?

Thursday
Aug022012

Wages for college graduates in the cross hairs of US business

Nancy Folbre reports at Economix that fewer than half of recent college graduates are employed in jobs that require college degrees and that their real entry level wages are lower now than they were in 2000.  US college graduates are facing stiff competition from foreign workers here under H-1b visas, as well as by offshoring, keeping wages for these jobs depressed.

Further, he [Professor Matloff] observes that high-tech companies insisting that there is a shortage of STEM workers with advanced degrees in the United States don't seem willing to invest much in increased financial support for graduate education.

Maybe college students should seek jobs that seem less vulnerable to global competition, in fields like health sciences. But I just read an article about health care companies sending jobs overseas that gave me palpitations.

The economist Alan Blinder asserts that high educational requirements can make a job more rather than less "offshorable." Most large American companies have already figured this out – but it's not clear how many college students have.

Not only have large American companies figured this out, but Lumina Foundation and the Bill and Melinda Gates Foundation funded a study at Georgetown University's Center on Education and the Workforce to calculate how many more college graduates the US would need to turn out in order to drive down the college-versus-high-school wage premium from 74% to 46%! Yep, that's the plan. Your college education, even in STEM—perhaps especially in STEM—may not be your ticket to a well-paying domestic job.

Wednesday
Aug012012

Most read Realitybase posts in July

The American Dream died in February 1973. With graphs showing stagnation of inflation-adjusted middle class incomes since the 1970s after strong and steady post-WWII growth

The Citigroup Plutonomy Memos With key quotations from documents that are being disappeared. This post has been the #1 response to a Google search for "plutonomy memo."

The Dysfunction and Corruption of Our Healthcare System, Its Damage to the National Economy and other Basic Healthcare Matters (Guest Post) Describing a system that is destroying American business global competitiveness, that violates fundamental insurance risk principles, and that has inherent conflicts of interest preventing quality national health care delivery and cost efficiency, and proposing a solution.

The history of US per-capita petroleum consumption will surprise you.  A graph and other data show US per-capita consumption of petroleum is down substantially from the 1970s, has been very stable since 1983 because of CAFE standards, and has fluctuated only slightly with retail price changes.

Still time for another not-Romney to enter the race? Campaign video promoting Wal-Mart for President.

U.S. aircraft carrier and 15 other Navy ships sunk in the Strait of Hormuz in 5-10 minutes Results of US war games when attacked by large numbers of speed boats and missiles such as Iran has in the hands of Revolutionary Guards reputed to be "cowboys," and suggesting still other ways we might accidentally get into a war with Iran.

Two hypotheses for why US CEO pay is so high Charts show that US CEO pay is about double that in other advanced countries, meaning there is either a shortage of talent in the US or the US CEO pay market is broken.

US job creation has been declining since April 2000 and is now in freefall. Discussion around a dramatic graph showing the US employment-to-population ratio strongly increasing until 2000 followed by a devastating loss in 10 years of all the gains made in the previous 20 years.  

Executives inflate their own compensation with stock repurchase programs. How corporations drive up stock prices by buying back stock instead of investing in the business, triggering a Warren Buffett rant quoted here.

American Exceptionalism, shake hands with Inconvenient Facts. Presenting data, and links to other data, showing USA ranks near the bottom of 30 OECD nations by a wide variety of middle class metrics including health, family, education, income, wealth, leisure, freedom and democracy, public order and safety, generosity, and access to internet and wireless technology.

Monday
Jul092012

American Exceptionalism, shake hands with Inconvenient Facts.

A big reason why America keeps drifting ever deeper into mediocrity is a misperception about how far we have already declined, how determined and effective our foreign competition is, and how ineffective minor tweaks to current policies are likely to be. I documented some measures of our decline, to which most Americans and apparently all politicians are oblivious, in Yeah! We're Number 40, 11, 16, 22, 24, 27, 48, and 29! and the updates to it.  Recently, Ed Fullbrook has published an e-book, Decline of the USA, which contains almost no text but shows in charts our ranking among 30 OECD nations in 56 indicators in seven categories. Overall USA ranked 29th, ahead of only Mexico. Recall that before its expansion to 34 nations in 2010 OECD members included not only all the prosperous nations of western Europe, Canada, and Japan, but also unenviable nations like Portugal, Turkey, Poland, Greece, Hungary, Czech Republic, and Slovak Republic. USA ranked behind all of them.

Out of 56 rankings, USA was in the top ten only once (labor productivity in GDP per hour worked). USA was in the second ten only 11 times and was in the bottom ten 44 times. In the seven larger categories, USA was in the middle of the pack on education and last or near last in all other categories:

Health                              28/30

Family                              30/30

Education                         18/30

Income and Leisure            27/30

Freedom and Democracy    28/30

Public Order and Safety      30/30

Generosity                         24/24 (data not available for all 30)

Thursday
Jul052012

Crony Capitalism is the common enemy of the Tea Party and the Occupy Movement.

Before the Occupy Movement appeared, I suggested in Common Ground for Tea Partiers and Liberals that both "feel that their lives are getting worse, not better, and that, rather than having control over their own lives, they are being dictated to and victimized by powerful people and institutions." Professor Luigi Zingales of the University of Chicago Booth School of Business concurs in an LAT op ed today, where he specifically identifies crony capitalism as the common enemy of the Tea Party and the Occupy Movement:

[Both major parties are ignoring] what unites the two movements: their fundamentally anti-elite, anti-establishment attitude.

The tea party and the Occupy movement both arose in response to pervasive frustration. As we've grown accustomed to hearing in recent years, Americans are angry. They're angry at bankers, who helped cause the financial crisis but paid no price for it. They're angry at Washington, which blamed the bankers but deserved as much blame, if not more, for failing to rein them in. And they're angry at an economy that seems to enrich the wealthy while leaving most everyone else standing still or falling behind.

This anger manifests itself in a strong anti-elite bias and a determination to resist an oppressive leviathan — though the monster takes different forms in the two movements. For the tea party, it's the federal government in Washington; for Occupy, it's bailout-addicted big business.

The difference is more apparent than real. The problem is not big business per se but monopolistic and politically powerful business. It is not government per se but intrusive and corrupt government. Is Fannie Mae inefficient, for example, because it is a large monopolistic company or because it is a state-sponsored enterprise? The answer is both.

Does the blame lie with the government or with the private sector? Neither. Their failures are the result of an increasingly corrupt system of crony capitalism, in which businesses succeed not through competitive merit but through government connections and favoritism such as tax breaks, subsidies and other preferential treatment.

For many people, the way big banks escaped the financial crisis with their profits intact (and often enhanced) epitomized American-style crony capitalism. Neither party has had the courage to confront it, for fear of losing campaign contributions and political power.

. . . .

The battle against crony capitalism is foremost a battle against anti-competitive, monopolistic corporations. Antitrust regulation should thus be extended to the political consequences of mergers. When companies become disproportionately big, they become disproportionately powerful, and as we have seen, their influence distorts the political system.

In no sector is this truer than in finance, where consolidation has made banks "too big to fail" and too powerful to combat. A reinstitution of the separation between commercial and investment banking, along the lines of the old Glass-Steagall Act (repealed in 1999), would help contain this excessive power.

It's worth keeping in mind that the patriots who threw English tea into Boston Harbor in 1773 were not revolting against higher taxes (the Tea Act, in fact, lowered the price of tea legally imported in America) but against the privileges granted to the British East India Co.. The American Revolution was a battle for political rights, but it was also a battle for economic freedom — and against an 18th century form of crony capitalism.

Corrupt arrangements of this kind have unfortunately endured to the present day, and their abuses finally sparked protest movements from the right and the left. The two political parties ignore these movements at their peril.

I agree.

Monday
Jul022012

Most read Realitybase posts in June

The Citigroup Plutonomy Memos With key quotations from documents that are being disappeared. This post has been the #1 response to a Google search for "plutonomy memo."

The American Dream died in February 1973. With graphs showing stagnation of inflation-adjusted middle class incomes since the 1970s after strong and steady post-WWII growth

The history of US per-capita petroleum consumption will surprise you.  A graph and other data show US per-capita consumption of petroleum is down substantially from the 1970s, has been very stable since 1983 because of CAFE standards, and has fluctuated only slightly with retail price changes.

Two hypotheses for why US CEO pay is so high Charts show that US CEO pay is about double that in other advanced countries, meaning there is either a shortage of talent in the US or the US CEO pay market is broken.

The Dysfunction and Corruption of Our Healthcare System, Its Damage to the National Economy and other Basic Healthcare Matters (Guest Post) Describing a system that is destroying American business global competitiveness, that violates fundamental insurance risk principles, and that has inherent conflicts of interest preventing quality national health care delivery and cost efficiency, and proposing a solution.

Still time for another not-Romney to enter the race? Campaign video promoting Wal-Mart for President.

Executives inflate their own compensation with stock repurchase programs. How corporations drive up stock prices by buying back stock instead of investing in the business, triggering a Warren Buffett rant quoted here.

One chart refutes three myths about US foreign trade. About Smoot-Hawley, the post-WWII export "boom," and "self-balancing" trade.

Comparative Advantage—The Unicorn of Free Trade Collection of sources and analyses demonstrating that the assumptions of classic Ricardian trade theory rarely if ever align with real-world conditions.

US job creation has been declining since April 2000 and is now in freefall. Discussion around a dramatic graph showing the US employment-to-population ratio strongly increasing until 2000 followed by a devastating loss in 10 years of all the gains made in the previous 20 years.  

Thursday
May312012

Most read Realitybase posts in May

"The American Dream died in February 1973 With graphs showing stagnation of inflation-adjusted middle class incomes since the 1970s after strong and steady post-WWII growth

The Citigroup Plutonomy Memos With key quotations from documents that are being disappeared. This post has been the #1 response to a Google search for "plutonomy memo."

The Dysfunction and Corruption of Our Healthcare System, Its Damage to the National Economy and other Basic Healthcare Matters (Guest Post) Describing a system that is destroying American business global competitiveness, that violates fundamental insurance risk principles, and that has inherent conflicts of interest preventing quality national health care delivery and cost efficiency, and proposing a solution.

The history of US per-capita petroleum consumption will surprise you.  A graph and other data show US per-capita consumption of petroleum is down substantially from the 1970s, has been very stable since 1983 because of CAFE standards, and has fluctuated only slightly with retail price changes.

Comparative Advantage—The Unicorn of Free Trade Collection of sources and analyses demonstrating that the assumptions of classic Ricardian trade theory rarely if ever align with real-world conditions.

One chart refutes three myths about US foreign trade. About Smoot-Hawley, the post-WWII export "boom," and "self-balancing" trade.

US job creation has been declining since April 2000 and is now in freefall. Discussion around a dramatic graph showing the US employment-to-population ratio strongly increasing until 2000 followed by a devastating loss in 10 years of all the gains made in the previous 20 years.

Two hypotheses for why US CEO pay is so high Charts show that US CEO pay is about double that in other advanced countries, meaning there is either a shortage of talent in the US or the US CEO pay market is broken.

U.S. aircraft carrier and 15 other Navy ships sunk in the Strait of Hormuz in 5-10 minutes Results of US war games when attacked by large numbers of speed boats and missiles such as Iran has in the hands of Revolutionary Guards reputed to be "cowboys," and suggesting still other ways we might accidentally get into a war with Iran.

The US trade deficit is tribute paid to foreigners. And it's big. Nobel laureates Paul Samuelson and Paul Krugman and other prominent economists including Dani Rodrik, Alan Blinder, Martin Wolf, Larry Summers, Joseph Stiglitz, Dean Baker, and even Alan Greenspan have said that the US middle class is net worse off as a result of persistent trade deficits averaging 3% of GDP.

Wednesday
May022012

Most read Realitybase posts in April

The Citigroup Plutonomy Memos With key quotations from documents that are being disappeared. This post has been the #1 response to a Google search for "plutonomy memo."

The history of US per-capita petroleum consumption will surprise you.  A graph and other data show US per-capita consumption of petroleum is down substantially from the 1970s, has been very stable since 1983 because of CAFE standards, and has fluctuated only slightly with retail price changes.

"The American Dream died in February 1973 With graphs showing stagnation of inflation-adjusted middle class incomes since the 1970s after strong and steady post-WWII growth

The Dysfunction and Corruption of Our Healthcare System, Its Damage to the National Economy and other Basic Healthcare Matters (Guest Post) Describing a system that is destroying American business global competitiveness, that violates fundamental insurance risk principles, and that has inherent conflicts of interest preventing quality national health care delivery and cost efficiency, and proposing a solution.

Comparative Advantage—The Unicorn of Free Trade Collection of sources and analyses demonstrating that the assumptions of classic Ricardian trade theory rarely if ever align with real-world conditions.

Two hypotheses for why US CEO pay is so high Charts show that US CEO pay is about double that in other advanced countries, meaning there is either a shortage of talent in the US or the US CEO pay market is broken.

One chart refutes three myths about US foreign trade. About Smoot-Hawley, the post-WWII export "boom," and "self-balancing" trade.

US job creation has been declining since April 2000 and is now in freefall. Discussion around a dramatic graph showing the US employment-to-population ratio strongly increasing until 2000 followed by a devastating loss in 10 years of all the gains made in the previous 20 years.

What's the market alternative to this big government program? On a per-vehicle-mile-traveled basis, conventional command-and-control regulations have reduced deaths by 85%, tailpipe pollutants by 89%, and fuel consumption by 40%.

The Prius fallacy fallacy Data refute the claim that when people have more fuel efficient vehicles they tend to drive substantially more miles.

Tuesday
Apr032012

The Prius fallacy fallacy

In the never-ending attack on vehicle fuel efficiency regulations, "the Prius fallacy" has become shorthand for the argument that when one replaces his gas guzzler with a fuel efficient vehicle his gasoline consumption does not go down, or goes down only a little bit, because he will decide to use the lower cost per mile to drive many more miles. (Some economists refer to this more generally as the "rebound effect.") Although it's plausible to think this could happen, it turns out it doesn't. Afsah and Salcito at CO2 Scorecard, using data compiled by Yale professor Ken Gillingham for his doctoral research at Stanford, show that the distribution of vehicle miles traveled ("VMT") by Prius drivers is essentially the same as the average of all other vehicle owners in California.

After driving a series of Audi A4s for 11 years, last year I bought a Prius. Now, instead of 23 MPG, I get 46 MPG actual road mileage. So, do I drive more miles now? No. In fact, I drive fewer long distance miles because the Prius is a less comfortable road car. In our first trip of about 250 miles with three people in the car, we learned that the back seat has inadequate head room. On a 1,100 mile trip with two people, we learned that the seats are way less comfortable than the Audi seats. Also, the Prius has fewer features and a generally lower level of luxury and comfort, and is not, compared to the Audi, at all peppy, responsive, or "fun to drive." Since we still have an Audi in the family, we use it for long trips and trips with three or more adults. Bottom line: The differences that make the Prius more fuel efficient also make me drive it less—the Prius fallacy is a fallacy.

There's another factor countering the Prius fallacy—economy cars do not raise ones social status. The most conspicuous form of discretionary driving is "cruising," and it's really hard to imagine hundreds of Prius owners driving Woodward Avenue in Detroit or Whittier Boulevard in East LA to show off their rides. I don't think that could even happen on Wilshire Boulevard in the Peoples Republic of Santa Monica. Auto industry journalist, Jamie Lincoln Kitman, responds to the Prius fallacy proponents this way:

Although their math is often specious, these critics lose sight of the fact that for more than a century, the automobile industry has been based on selling people dreams to go with their mobility. We're used to drivers who want an S.U.V. or a sports car so they'll look virile, sporty or capable.

The Kitman link is to a forum where others espouse the Prius fallacy. The argument seems to arise out of an unexamined conviction that the only proper—and effective—way to influence social outcomes is by manipulating prices. The truth is sometimes that works, and sometimes it doesn't. As a result of government command-and-control regulations, tailpipe emissions of HC, NOx, and CO from new cars are down 89% since the early 1950s, fuel consumption per VMT is down 40% from 1975, and each VMT is 85% less likely to result in a fatality than it was in 1949. Take the challenge: What's the market alternative to this big government program?