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Tuesday, August 31, 2010

Economics: Worries About Tomorrow Hold Back Economic Growth Today

The missing element in this recovery is confidence. Lacking a clear picture of what's ahead, business managers are reluctant to commit to new hires, to build, buy or lease more space and to beef up inventories. Average consumers are loath to open their wallets for much more than necessities. And investors startle and sell at every negative bit of news.
Most other components needed for growth are there -- in spades. In fact, there's enough dry tinder around to suggest that when businesses and consumers do feel secure enough to loosen the purse strings, the resulting upswing could spread like wildfire.

Big banks have oodles of funds to lend to qualified buyers. Thanks to shrinking loan losses combined with strong earnings, they have rebuilt their capital base to a record level. Big corporations are rolling in cash they can spend: $275 billion in excess liquidity as of the first quarter. What's more, profits for S&P 500 companies were up 46% from second quarter 2009 to second quarter 2010.

Postrecession productivity gains must eventually give way to hiring -- employers simply can't continue to wring more out of the workers they already have. At some point, they will hit a wall, and when they do, businesses have the money to hire. And consumers are getting their budgets in order. Nineteen percent of household income went to servicing financial obligations in 2007. Today, that share is 17%, the lowest since 1998.

In addition, government policies remain supportive. Most of the spending slated for infrastructure under the 2009 stimulus package is still in the works, and the Federal Reserve is keeping its foot on the accelerator. Interest rates are sure to remain at rock bottom for a long time, and the Fed stands ready to buy Treasuries if needed to pump even more cash to banks and encourage a freer hand with credit.

With time -- probably a matter of months -- the fear and uncertainty will fade, and a pattern of stronger growth will reemerge. Meanwhile, it's a nerve-racking waiting game.

For more, see Worries About Tomorrow Hold Back Economic Growth Today by Richard Dekaser, August 23, 2010, at Kiplinger.

Mind: Moochers and Do-Gooders Both Shunned, Study Finds

The fact that groups of people typically choose to expel selfish individuals is no surprise. But new research suggests such troops often want to kick out generous members as well.

This counterintuitive behavior could be rooted in how such giving people make others feel bad, or simply in how they stand out from the crowd, researchers suggest.

... the researchers conducted the experiment once more, this time asking volunteers why they wanted to kick out members who gave to the public good while asking little in return.

Nearly two-thirds of the time, the students essentially said such generosity made them feel as if they fell short by comparison. They said, "He makes us all look bad," for instance, or "People would ask why we can't be like him."

About one-third of the time, the volunteers wanted to kick selfless members out apparently because they just deviated from the norm. They said, "This would be OK if someone else in the group was being like this, but no one is so it's wrong," for instance, or "I probably would have been OK with him if I hadn't seen everyone else's choices and saw that he was so different. He's too different from the rest of us."

A few of the remaining miscellaneous reasons students gave suggested suspicion of some ulterior motive. They said, "I'll bet later on she or he would stop giving so much and would start taking more," for instance, or "This person probably wants us all to start taking less so they can come in and take a lot more and get more than us."

These new findings fit in with past studies revealing that people often dislike exceptional competence or offers of help.

For more, see Moochers and Do-Gooders Both Shunned, Study Finds by Charles Q. Choi, August 24, 2010, at Live Science.

Diversion: A Tornado Made of Fire. Seriously.

If you want to see a buring tornado, check out A Tornado Made of Fire. Seriously. by Phil Plait, August 25, 2010, at Discover Magazine blogs.

Society: Mosque Debate Tops Coverage, but Not News Interest

From Mosque Debate Tops Coverage, but Not News Interest, August 25, 2010, at The Pew Research Center for the People and the Press.

Economics: Government Motors No More

Unlike, say, France's President Nicolas Sarkozy, who used public funds to support Renault and Peugeot-Citroën on condition that they did not close factories in France, Mr Obama has been tough from the start. GM had to promise to slim down dramatically—cutting jobs, shuttering factories and shedding brands—to win its lifeline. The firm was forced to declare bankruptcy. Shareholders were wiped out. Top managers were swept aside. Unions did win some special favours: when Chrysler was divided among its creditors, for example, a union health fund did far better than secured bondholders whose claims should have been senior. Congress has put pressure on GM to build new models in America rather than Asia, and to keep open dealerships in certain electoral districts. But by and large Mr Obama has not used his stakes in GM and Chrysler for political ends. On the contrary, his goal has been to restore both firms to health and then get out as quickly as possible. GM is now profitable again and Chrysler, managed by Fiat, is making progress. Taxpayers might even turn a profit when GM is sold.

So was the auto bail-out a success? It is hard to be sure. Had the government not stepped in, GM might have restructured under normal bankruptcy procedures, without putting public money at risk. Many observers think this unlikely, however. Given the panic that gripped private purse-strings last year, it is more likely that GM would have been liquidated, sending a cascade of destruction through the supply chain on which its rivals, too, depended. As for moral hazard, the expectation of future bail-outs may prompt managers and unions in other industries to behave rashly. But all the stakeholders suffered during GM's bankruptcy, so this effect may be small.

For more, see Government Motors No More, August 19, 2010, at The Economist.

Sunday, August 29, 2010

Economics: How the Fight over Tax Breaks Affects Your Bottom Line

How the Fight over Tax Breaks Affects Your Bottom Line, August 18, 2010, at The Washington Post provides a way to compare the impacts of three different proposals on how the expiring Bush tax cuts should be handled. Note it is not a graph -- each column shows what happens to a different tax-related source.

Mind: Westerners vs. the World: We Are the Weird Ones

The Ultimatum Game works like this: You are given $100 and asked to share it with someone else. You can offer that person any amount and if he accepts the offer, you each get to keep your share. If he rejects your offer, you both walk away empty-handed.

How much would you offer? If it's close to half the loot, you're a typical North American. Studies show educated Americans will make an average offer of $48, whether in the interest of fairness or in the knowledge that too low an offer to their counterpart could be rejected as unfair. If you're on the other side of the table, you're likely to reject offers right up to $40.

It seems most of humanity would play the game differently. Joseph Henrich of the University of British Columbia took the Ultimatum Game into the Peruvian Amazon as part of his work on understanding human co-operation in the mid-1990s and found that the Machiguenga considered the idea of offering half your money downright weird — and rejecting an insultingly low offer even weirder.

"If you're a Westerner, your intuitions about human psychology are probably wrong or at least there's good reason to believe they're wrong," Dr. Henrich says.

After analyzing reams of data from earlier studies, the UBC team found that WEIRD people [Westerners] reacted differently from others in experiment after experiment involving measures of fairness, anti-social punishment and co-operation, as well as visual illusions and questions of individualism and conformity.

Others punish participants perceived as too altruistic in co-operation games, but very few in the English-speaking West would ever dream of penalizing the generous. Westerners tend to group objects based on resemblance (notebooks and magazines go together, for example) while Chinese test subjects prefer function (grouping, say, a notebook with a pencil). Privileged Westerners, uniquely, define themselves by their personal characteristics as opposed to their roles in society.

Moreover, WEIRD people do not simply react to the world differently, according to the paper, they perceive it differently to begin with.

WEIRD people, the UBC researchers argue, have unusual ideas of fairness, are more individualistic and less conformist than other people. In many of these respects, Americans are the most "extreme" Westerners, especially young ones. And educated Americans are even more extremely WEIRD than uneducated ones.

"The fact that WEIRD people are the outliers in so many key domains of the behavioral sciences may render them one of the worst subpopulations one could study for generalizing about Homo sapiens," the authors conclude. "If the goal of the research program is to shed light on the human condition, then this narrow, unrepresentative sample may lead to an uneven and incomplete understanding."

For more, see Westerners vs. the World: We Are the Weird Ones by Adam Mcdowell, August 21, 2010, at National Post.

Science: Video Showing Half A Million Asteroid Discoveries

Since 1980 over a half million asteroids have been discovered, mostly between the orbits of Mars and Jupiter, now thanks to this video you can see this activity condensed into a few minutes. At full resolution it's a mesmerizing experience as new discoveries are added and the video makes it possible to see patterns in the discovery positions, for example a large number appear in line between Earth and Jupiter as astronomers started looking for smaller jovian moons after Voyagers visit to the system.

For a cool simulated video of part of the solar system, watch this at full screen ...

From Video Showing Half A Million Asteroid Discoveries August 26, 2010, at Slashdot.

Economics: SEC Votes to Allow Proxy Access

A step toward ending the biggest problem in American corporate governance: the disconnect between corporate boards and corporate owners (shareholders) ...

The Securities and Exchange Commission voted 3 to 2 on Wednesday to make it easier for shareholders to nominate directors to sit on corporate boards, addressing concerns that boards often fail to conduct effective oversight of executives' decisions.

For more, see SEC Votes to Allow Proxy Access by Zachary Goldfarb, August 25, 2010, at The Washington Post.

Health: The Longer You Sit, the Earlier You Die

Some of us may not like to hear this ...
Unlike most bad news, this one is best heard standing up: people who sit more than 6 hours a day are more likely to die earlier.

That's even for people who exercise regularly after long sit-a-thons at the office and aren't obese.

Even after adjusting for body mass index (BMI) and smoking, the researchers found that women who sit more than 6 hours a day were 37 percent more likely to die than those who sit less than 3 hours; for men, long-sitters were 17 percent more likely to die.

People who exercise regularly had a lower risk, but still significant, risk of dying. Those who sat a lot and moved less than three and a half hours per day are the most likely to die early: researchers found a 94 percent increased risk for women and 48 percent increase for men, they announced recently in the American Journal of Epidemiology.

From The Longer You Sit, the Earlier You Die by Marissa Cevallos, August 25, 2010, at Chicago Tribune.

Saturday, August 28, 2010

Mind: Ewwwwwwwww!

What if our moral judgments are driven instead by more visceral human considerations? And what if one of those is not divine commandment or inductive reasoning, but simply whether a situation, in some small way, makes us feel like throwing up?

This is the argument that some behavioral scientists have begun to make: That a significant slice of morality can be explained by our innate feelings of disgust. A growing number of provocative and clever studies appear to show that disgust has the power to shape our moral judgments. Research has shown that people who are more easily disgusted by bugs are more likely to see gay marriage and abortion as wrong. Putting people in a foul-smelling room makes them stricter judges of a controversial film or of a person who doesn't return a lost wallet. Washing their hands makes people feel less guilty about their own moral transgressions, and hypnotically priming them to feel disgust reliably induces them to see wrongdoing in utterly innocuous stories.

... even doing the research in the first place is a radical step. The agnosticism central to scientific inquiry is part of what feels so dangerous to philosophers and theologians. By telling a story in which morality grows out of the vagaries of human evolution, the new moral psychologists threaten the claim of universality on which most moral systems depend — the idea that certain things are simply right, others simply wrong. If the evolutionary story about the moral emotions is correct, then human beings, by being a less social species or even having a significantly different prehistoric diet, might have ended up today with an entirely different set of religions and ethical codes.
Human beings are uniquely squeamish creatures. Even if we eat meat, we're willing to ingest only a minuscule proportion of the world's edible animal species. We're repelled by unfamiliar grooming habits, physical contact with strangers, and even our own bodies — their odor and hair, their adipose tissue and shed skin cells, and every bodily fluid except tears. Not to mention the quease-tinged aversion many people feel toward manipulating genes or cross-dressing or whole categories of sexual activity.
More recent work has turned to the role disgust plays in attitudes about right and wrong. For example, Bloom, working with the psychologists David Pizarro and Yoel Inbar at Cornell University, found that people who score higher on a disgust sensitivity scale (sample question: “I try to avoid letting any part of my body touch the toilet seat in a public restroom, even when it appears clean”) also tend to be more likely, all else being equal, to believe that gay marriage and abortion are wrong.

Studies by other psychologists suggest an unconscious mental link between immorality and actual dirt and infection. In a much-noted 2006 study, Chen-Bo Zhong and Katie Liljenquist found that thinking of a past immoral deed made people want to clean their hands with a disinfectant wipe, and that doing so actually made them feel better afterward about their transgression. Zhong and Liljenquist called it the “Macbeth effect,” after the guilt-stricken hand washing of Lady Macbeth.

Issues like abortion and gay marriage, of course, intimately implicate the body, so it's less surprising that disgust would play a role. But other researchers have found the emotion at work in more abstract moral judgments.

In a study published early last year in the journal Science, a team led by Hanah Chapman, a psychology PhD student at the University of Toronto, looked at disgust and unfairness. Test subjects who played a game and considered the results unfair, the researchers found, reacted with the exact same instinctive facial expression as those exposed to more straightforwardly disgusting stimuli. Unfairness, it seems, can disgust us.

“People don't make that facial expression in anger,” Chapman says, “It's really limited to disgust.”

Haidt has done studies in which he primed people to feel disgusted and then asked them to judge the morality of certain actions. In one study, he had some of his unfortunate test subjects respond to four vignettes related to moral judgment while sitting in a room that had been infused with an ammonium sulfide “fart spray.” The stink, he found, made them harsher judges, not only of body-related questions like whether first cousins should be able to have sex and marry, but whether people should drive to work when they could walk or whether a movie studio should release a morally controversial film.
In another study, Haidt found an even more dramatic result. Using posthypnotic suggestion, he got his subjects to experience a flash of disgust at neutral words (“take” for half of the experimental group, “often” for the others). They then read a short description of a thoughtful, open-minded student council president named Dan. If the description contained their disgust word, however, the subjects took a deep dislike to Dan, and found reasons to condemn his behavior and justify their aversion, reasons that had no connection to the description they had read — “Dan is a popularity-seeking snob,” one said. “It just seems like he's up to something,” said another.
To Haidt, all of these results buttress his belief that moral reasoning is simply an after-the-fact story we create to explain our instinctive emotional reactions, in this case a strongly held but arbitrary feeling of disgust. “Moral reasoning is often like the press secretary for a secretive administration — constantly generating the most persuasive arguments it can muster for policies whose true origins and goals are unknown,” he wrote in a 2007 paper in Science.

Plenty of psychologists and philosophers are not yet willing to consign moral reasoning to press-secretary status, however. Developmental psychologists in particular have long studied how children and adolescents learn moral behavior, and they tend to be skeptical of claims that behavior is driven by emotions like disgust. To them, arguments like Haidt's wildly overgeneralize from a few suggestive studies.

For more, see Ewwwwwwwww! by Drake Bennett, August 15, 2010, at The Boston Globe.

Science: The Strange Case of Solar Flares and Radioactive Elements

Neutrinos may affect the rate of radioactive decay.

The radioactive decay of some elements sitting quietly in laboratories on Earth seemed to be influenced by activities inside the sun, 93 million miles away.

For more, see The Strange Case of Solar Flares and Radioactive Elements by Dan Stober, August 23, 2010, at Stanford University News.

Economics: How We Get Through This Mess

Bottom line? It is going to be a tough environment for the next 6-8 years. That is just what happens when you have a deleveraging / balance sheet / deflationary / end of the Debt Supercycle recession. It is what it is, and no amount of wishing or finger pointing can change the facts.

Let me take a moment and offer some sympathy to President Obama. This recession/slow period is not his fault. Obamacare? A now-trillion-dollar stimulus? Those he owns. But the recession/credit crisis would have happened if McCain had been elected.

And it is not Bush's fault. Did he make some mistakes? Oh yes. Squandering those surpluses is huge in my book. Not vetoing all that excess spending is at his feet. And there are other issues, but that is not my point.

We Have Met the Enemy, and He Is Us

There is a great line from the old cartoon strip Pogo: "We have met the enemy, and he is us." (Ah, I miss Walt Kelly and Pogo. But I show my age!)

Neither Clinton nor Bush forced people to borrow money against their homes. Yes, some of the laws made it easier. Yes, Greenspan pushed rates lower than they should have been. Allowing banks to go to 30:1 leverage was stupid (courtesy of the Bush administration). Repealing Glass-Steagall in hindsight was not wise (Clinton era).

But we the people borrowed and spent. Congress taxed and spent and we voted for the SOBs and collectively asked for more goodies. Maybe not you, gentle reader, because all my readers too smart to have engaged in such reckless activity, but those other guys sure did. Probably the readers of Paul Krugman. (Did I say that?!?)

So, the current problems are not Obama's fault. But how he deals with them is. Raising taxes in what can only be called a soft environment gives him ownership of the consequences. And it is more than just the Bush tax cuts going away. Obamacare gives us a host of new taxes. (If you want to see more, read http://www.atr.org/six-months-untilbr-largest-tax-hikes-a5171)

For much more, see How We Get Through This Mess by John Mauldin , August 20, 2010, at Thoughts from the Frontline.

Politics: Effects of Candidate Characteristics on the Vote

From Earmarks Could Help Candidates in Midterms; Palin and Tea Party Connections Could Hurt, August 2, 2010, at The Pew Research Center for the People and the Press.

Thursday, August 26, 2010

Education: Who's Teaching L.A.'S Kids?

This is what professional reporters are needed for ...

The students study the same lessons. They are often on the same chapter of the same book.

Yet year after year, one fifth-grade class learns far more than the other down the hall. The difference has almost nothing to do with the size of the class, the students or their parents.

It's their teachers.

In Los Angeles and across the country, education officials have long known of the often huge disparities among teachers. They've seen the indelible effects, for good and ill, on children. But rather than analyze and address these disparities, they have opted mostly to ignore them.

Most districts act as though one teacher is about as good as another. As a result, the most effective teachers often go unrecognized, the keys to their success rarely studied. Ineffective teachers often face no consequences and get no extra help.

Seeking to shed light on the problem, The Times obtained seven years of math and English test scores from the Los Angeles Unified School District and used the information to estimate the effectiveness of L.A. teachers — something the district could do but has not.

In coming months, The Times will publish a series of articles and a database analyzing individual teachers' effectiveness in the nation's second-largest school district — the first time, experts say, such information has been made public anywhere in the country.

This article examines the performance of more than 6,000 third- through fifth-grade teachers for whom reliable data were available.

Among the findings:

• Highly effective teachers routinely propel students from below grade level to advanced in a single year. There is a substantial gap at year's end between students whose teachers were in the top 10% in effectiveness and the bottom 10%. The fortunate students ranked 17 percentile points higher in English and 25 points higher in math.

• Some students landed in the classrooms of the poorest-performing instructors year after year — a potentially devastating setback that the district could have avoided. Over the period analyzed, more than 8,000 students got such a math or English teacher at least twice in a row.

• Contrary to popular belief, the best teachers were not concentrated in schools in the most affluent neighborhoods, nor were the weakest instructors bunched in poor areas. Rather, these teachers were scattered throughout the district. The quality of instruction typically varied far more within a school than between schools.

• Although many parents fixate on picking the right school for their child, it matters far more which teacher the child gets. Teachers had three times as much influence on students' academic development as the school they attend. Yet parents have no access to objective information about individual instructors, and they often have little say in which teacher their child gets.

• Many of the factors commonly assumed to be important to teachers' effectiveness were not. Although teachers are paid more for experience, education and training, none of this had much bearing on whether they improved their students' performance.

Other studies of the district have found that students' race, wealth, English proficiency or previous achievement level played little role in whether their teacher was effective.

Value-added analysis offers a rigorous approach. In essence, a student's past performance on tests is used to project his or her future results. The difference between the prediction and the student's actual performance after a year is the "value" that the teacher added or subtracted.
A small number of states and districts already use value-added scores to determine which teachers should be rewarded and which need help. This summer, one district took a harder line: Washington, D.C., schools Chancellor Michelle Rhee fired 26 teachers based in significant part on their poor value-added scores.

Prompted by federal education grants, California and several other states are now proposing to make value-added a significant component of teacher evaluations. If the money comes through, Los Angeles schools will have to rely on the data for at least 30% of a teacher's evaluation by 2013.

For much more, see the 9 pages of Who's Teaching L.A.'S Kids? by Jason Felch, Jason Song and Doug Smith, August 14, 2010, at Los Angeles Times.

Politics: 0.1% of the People May Get 50+% of a Tax Cut

According to the nonpartisan Tax Policy Center, making all of the Bush tax cuts permanent, as opposed to following the Obama proposal, would cost the federal government $680 billion in revenue over the next 10 years. For the sake of comparison, it took months of hard negotiations to get Congressional approval for a mere $26 billion in desperately needed aid to state and local governments.

And where would this $680 billion go? Nearly all of it would go to the richest 1 percent of Americans, people with incomes of more than $500,000 a year. But that's the least of it: the policy center's estimates say that the majority of the tax cuts would go to the richest one-tenth of 1 percent. Take a group of 1,000 randomly selected Americans, and pick the one with the highest income; he's going to get the majority of that group's tax break. And the average tax break for those lucky few — the poorest members of the group have annual incomes of more than $2 million, and the average member makes more than $7 million a year — would be $3 million over the course of the next decade.

... we're told that it's all about helping small business; but only a tiny fraction of small-business owners would receive any tax break at all. And how many small-business owners do you know making several million a year?

Or we're told that it's about helping the economy recover. But it's hard to think of a less cost-effective way to help the economy than giving money to people who already have plenty, and aren't likely to spend a windfall.

For more, see Now That's Rich by Paul Krugman, August 22, 2010, at The New York Times.

Mind: What Doesn't Kill You Makes You Weaker

Friedrich Nietzsche, the German philosopher, famously said: "That which does not kill us makes us stronger." This notion found life beyond Nietzsche's--which is ironic, his having been rather short and miserable--and it continues to resonate within American culture.
... the bulk of psychological research on the topic shows that, as a rule, if you are stronger after hardship, it is probably despite, not because of the hardship. The school of hard knocks does little more than knock you down, hard. Nietzschian--and country song--wisdom notwithstanding, we are not stronger in the broken places. What doesn't kill us in fact makes us weaker.

Developmental research has shown convincingly that traumatized children are more, not less, likely to be traumatized again. Kids who grow up in a tough neighborhood become weaker, not stronger. They are more, not less likely to struggle in the world.

And the effect on adults is generally similar.

For more, see What Doesn't Kill You Makes You Weaker by Noam Shpancer, PH.D., August 21, 2010, at Psychology Today.

Society: On the Scale of Evil, Where Do Murderers Rate?

This'd be very interesting if it'd weren't restricted to murderers.

Inspired by the structure of Dante's circles of hell, Stone has created his own 22-point "Gradations of Evil" scale, made up of murderers in the 20th century. "I thought it would be an interesting thing to do," he says.

His scale is loosely divided into three tiers. First are impulsive evil-doers: driven to a single act of murder in a moment of rage or jealousy. Next are people who lack extreme psychopathic features, but may be psychotic — that is, clinically delusional or out of touch with reality. Last are the profoundly psychopathic, or "those who possess superficial charm, glib speech, grandiosity, but most importantly cunning and manipulativeness," Stone says. "They have no remorse for what they've done to other people."

For much more, see On the Scale of Evil, Where Do Murderers Rate? by NPR staff, August 21, 2010, at National Public Radio.

Technology: Canon Signals End of the Road for SED TV Dreams

Bummer ...

Work is expected to continue on SED for use in specialist displays but its days as a living-room technology appear over.

For more, see Canon Signals End of the Road for SED TV Dreams by Martyn Williams, August 19, 2010, at Good Gear Guide.

Monday, August 23, 2010

Politics: Fox vs Heston on the "Ground Zero Mosque"

This includes the last 24 hours of Fox saying how awful Islam is and includes Charleton Heston saying we shouldn't blame an entire group for the actions of a few believers.

From Extremist Makeover - Homeland Edition by Jon Stewart, August 19, 2010, at The Daily Show.

Politics: Mandela Surprises; Other Leaders Do Not

I just saw the movie “Invictus” — the story of how Nelson Mandela, in his first term as president of South Africa, enlists the country's famed rugby team, the Springboks, on a mission to win the 1995 Rugby World Cup and, through that, to start the healing of that apartheid-torn land. The almost all-white Springboks had been a symbol of white domination, and blacks routinely rooted against them. When the post-apartheid, black-led South African sports committee moved to change the team's name and colors, President Mandela stopped them. He explained that part of making whites feel at home in a black-led South Africa was not uprooting all their cherished symbols. “That is selfish thinking,” Mandela, played by Morgan Freeman, says in the movie. “It does not serve the nation.” Then speaking of South Africa's whites, Mandela adds, “We have to surprise them with restraint and generosity.”

I love that line: “We have to surprise them.” I was watching the movie on an airplane and scribbled that line down on my napkin because it summarizes what is missing today in so many places: leaders who surprise us by rising above their histories, their constituencies, their pollsters, their circumstances — and just do the right things for their countries.

I tried to recall the last time a leader of importance surprised me on the upside by doing something positive, courageous and against the popular will of his country or party. I can think of a few: Yitzhak Rabin in signing onto the Oslo peace process. Anwar Sadat in going to Jerusalem. And, of course, Mandela in the way he led South Africa.

But these are such exceptions.

As one of Mandela's guards, watching the new president engage with South African whites, asks in the movie, “How do you spend 30 years in a tiny cell and come out ready to forgive the people who put you there?” It takes a very special leader.

For more, see Surprise, Surprise, Surprise by Thomas L. Friedman, August 21, 2010, at The New York Times.

Mind: Brains of Introverts Reveal Why They Prefer Being Alone

Human faces may hold more meaning for socially outgoing individuals than for their more introverted counterparts, a new study suggests.

The results show the brains of extroverts pay more attention to human faces than do introverts. In fact, introverts' brains didn't seem to distinguish between inanimate objects and human faces.

The findings might partly explain why extroverts are more motivated to seek the company of others than are introverts, or why a particularly shy person might rather hang out with a good book than a group of friends.

For more, see Brains of Introverts Reveal Why They Prefer Being Alone by Rachael Rettner, August 18, 2010, at Live Science.

Security: Barclays Bank Settles for $298 Million

Barclays Bank will pay $298 million to settle criminal charges that it violated U.S. sanctions and New York laws by processing hundreds of millions of dollars in transactions from Cuba, Iran, Sudan and Myanmar. Barclays transferred $500 million in illegal payments through the U.S. financial system from the mid-1990s through 2006, state and federal prosecutors said.
Following instructions from bankers in Cuba, Iran, Libya, Sudan and Myanmar, Barclays withheld the countries' names when conducting transactions, and moved money through an internal account to hide the payments' origin.
Barclays, one of the largest banks in the world, reported a net income of more than $14 billion in 2009.

From Barclays Bank Settles for $298 Million by Jonathan Perlow, August 19, 2010, at Courthouse News Service.

Saturday, August 21, 2010

Mind: Blind Men Prefer the Hourglass Figure

In a recent paper published in Evolution and Human Behavior, Johan C. Karremans, Willem, E. Frankenhuis, and Sander Arons explored men's WHR [women's waist-hip ratio] preferences with one twist: the men in question were congenitally blind! Needless to say, this largely removes the possibility that these men were taught via media images to prefer a particular female body type. You might wonder how one would go about eliciting such preferences from blind men...via touch of course! The researchers had two mannequins dressed in exactly the same way but who varied in terms of their WHR (0.70 or 0.84). The blind men touched both mannequins subsequent to which they provided attractiveness scores on a 1-10 attractiveness scale (higher meant more attractive). This task is quite reasonable in terms of its mundane realism, as we know that blind people use their haptic sense to evaluate numerous stimuli (e.g., facial features).

I should add that the researchers also conducted the study with sighted men, as well as blindfolded men (who otherwise had vision). The goal here was to gauge the strength of the preference across the three groups, namely blind, sighted, and blindfolded men. For all three groups, the mannequin with the 0.70 WHR was preferred to the one with a WHR of 0.84 (p < .02, p < .001, and p < .05 for the blind, sighted, and blindfolded groups respectively). That said, the strength of the effect, which is captured by a metric known as Cohen's d, was strongest for the sighted group (d = 1.33) followed by the blind group (d = 0.68), and finally the blindfolded group (d = 0.54). In other words, whereas all three groups displayed the preference for the hourglass figure, sighted individuals exhibited the preference most staunchly. In this sense, it is conceivable that media images could serve to accentuate an otherwise innate preference (I am being charitable to the social constructivist position here!).

For more, see Congenitally Blind Men Prefer the Female Hourglass Figure (Literally) by Gad Saad, Ph.D., June 20, 2010, at Psychology Today.

Health: Hearing Loss in Teens Spikes Mysteriously

Hearing loss among adolescents has increased by over 30 percent since around 1990, and now nearly 1-in-5 teenagers shows some degree of significant hearing loss, according to a study published this week in the Journal of the American Medical Association (JAMA). More disturbing, doctors are at a loss to explain the reason for the dramatic increase.

Don't music players with ear-buds seem like the obvious reason?

From Hearing Loss in Teens Spikes Mysteriously by Christopher Wanjek, August 17, 2010, at Live Science.

Politics: News Corp. Gives Money to Republicans

Jon Stewart as Glenn Beck ...

From News Corp. Gives Money to Republicans, August 18, 2010, at The Daily Show.

Science: Parasite-Infested Zombie Ants

A parasitic fungus called Ophiocordyceps unilateralis ... infects a plain old carpenter ant and takes over its brain, leading the ant to bite into the vein that runs down the center of a leaf on the underside. The ant dies shortly thereafter, but the fungus gains the nutrients it needs to grow this crazy stalk out of the ant's body and release spores to create the next generation of ant-controlling fungi.

For more, see Parasite-Infested Zombie Ants Walked the Earth 48 Million Years Ago by Andrew Moseman, August 18, 2010, at Discover Magazine blogs.

Society: Leery of Washington, Alaska Feasts on Its Dollars

Alaska has budget woes, and, more perilously, oil production is slumping. But its problems are not mortal; the ax falls on new police headquarters and replacement Zamboni blades rather than on teachers and libraries. The state avoided the unemployment devastation visited on the Lower 48 in part because federal dollars support a third of Alaskan jobs, according to a university study. [Emphasis added].

For more, see Leery of Washington, Alaska Feasts on Its Dollars by Michael Powell, August 18, 2010, at The New York Times. Thanks to Martha L.

Economics: Soak the Very, Very Rich

An annual income of two hundred and fifty thousand dollars puts you in the top three per cent of American households, and is more than four times the national median. You're rich, and a small tax increase isn't going to rock your world.

Good luck convincing people of this, though. Judging from surveys of how Americans describe themselves, most of the privileged don't feel all that privileged. Why is that? One reason is the American mythology of middle-classness. Another is geography: in a place like Manhattan, where the average apartment sells for nine hundred thousand dollars, your money doesn't go as far. And then there's a larger truth about how wealth is getting concentrated in this country. As the economists Thomas Piketty and Emmanuel Saez have documented, people who earn a few hundred thousand dollars a year have done much worse than people at the very top of the ladder.

Between 2002 and 2007, for instance,

  • the bottom 99% of incomes grew 1.3% a year in real terms
  • while the incomes of the top 1% grew 10% a year.
  • That 1% accounted for 2/3 of all income growth in those years.

People in the 95th to the 99th percentiles of income have represented a fairly constant share of the national income for 25 years now.

  • But in that period the top 1% has seen its share of national income double;
  • in 2007, it captured 23% of the nation's total income.

Even within the top 1%, income is getting more concentrated:

  • the top 0.1% of earners have seen their share of national income triple over the same period.
  • All by themselves, they now earn as much as the bottom 120,000,000 people.

So at the same time that the rich have been pulling away from the middle class, the very rich have been pulling away from the pretty rich, and the very, very rich have been pulling away from the very rich.

[Reformatted and emphasis added].

This is one case where simpler isn't better. In a society that's becoming more stratified, a sensible tax system should draw more distinctions, not fewer. The U.S. is now a place where the rich and the ultra-rich really inhabit different worlds. (A couple of years ago, Barron's declared, “Yes, it takes more than $10 million to be seen as rich these days.”) They should probably inhabit different tax brackets, too.

For more, see Soak the Very, Very Rich by James Surowiecki, August 16, 2010, at The New Yorker.

Thursday, August 19, 2010

Politics: Growing Number of Americans Say Obama Is a Muslim

A substantial and growing number of Americans say that Barack Obama is a Muslim, while the proportion saying he is a Christian has declined. More than a year and a half into his presidency, a plurality of the public says they do not know what religion Obama follows. [Emphasis added].

A new national survey by the Pew Research Center finds that nearly one-in-five Americans (18%) now say Obama is a Muslim, up from 11% in March 2009. Only about one-third of adults (34%) say Obama is a Christian, down sharply from 48% in 2009. Fully 43% say they do not know what Obama's religion is.

The belief that Obama is a Muslim has increased most sharply among Republicans (up 14 points since 2009), especially conservative Republicans (up 16 points). But the number of independents who say Obama is a Muslim has also increased significantly (up eight points). There has been little change in the number of Democrats who say Obama is a Muslim, but fewer Democrats today say he is a Christian (down nine points since 2009).

When asked how they learned about Obama's religion in an open-ended question, 60% of those who say Obama is a Muslim cite the media. Among specific media sources, television (at 16%) is mentioned most frequently. About one-in-ten (11%) of those who say Obama is a Muslim say they learned of this through Obama's own words and behavior.

For more, see Growing Number of Americans Say Obama Is a Muslim, August 19, 2010, at The Pew Research Center for the People and the Press.

Health: Predicting How Nanoparticles Affect the Human Body

Almost exactly one year ago, two Chinese women earned the distinction of becoming the first humans to be killed by nanotechnology, after nanoparticles in a paint used in their poorly ventilated factory took residence in their lungs, causing respiratory failure. Now a team of researchers at North Carolina State have developed a method of modeling the way nanoparticles interact with biological systems, giving medical and nanotech researchers their first means to predict how a given particle will move through a human body. When nanoparticles enter the body, they almost immediately begin binding with proteins and amino acids, and what molecules the nanoparticles tend to bind to dictates where they will end up in the body. Which molecules they bind to is determined by size and surface characteristics of the particles.

For more, see System for Predicting How Nanoparticles Affect the Human Body Could Save Us from Our Tech by Clay Dillow, August 16, 2010, at Popular Science.

Economics: Banks Ease Small Business Lending Standards

Banks have eased lending standards for small businesses for the first time in nearly four years, the Federal Reserve said Monday. Separately, financial firms said consumers continue to better manage their credit card payments, with fewer customers defaulting or making late payments.

In its new survey of bank lending practices, the Fed found that the loosening of loan standards was occurring primarily at the country's largest domestic banks.

The Fed said it was the first time it had found relaxed lending standards being imposed on small businesses since late 2006.

For more, see Banks Ease Small Business Lending Standards August 16, 2010, at National Public Radio.

Government: Too Much Money Going to State Court Races

Special interests are flooding state Supreme Court races with millions of dollars to try to tip the courts in their direction.

A study being released Monday documents an arms race that's escalating among business groups, trial lawyers and unions. They're all competing to raise money to put their favorite candidates on the bench.

The report from the nonpartisan Brennan Center for Justice, Justice at Stake, and the National Institute on Money in State Politics, says that so much money is pouring into state judicial races from outside groups that it's beginning to undermine public confidence in the courts.

Who's spending all that money? The U.S. Chamber of Commerce, trial lawyers and unions — groups that Skaggs calls superspenders, and he says they're drowning out small individual donors.

For more, see Report: Too Much Money Going to State Court Races by Carrie Johnson, August 16, 2010, at National Public Radio.

Economics: Britain Has Embarked on a Great Gamble

It'll be interesting to watch ...

... within its first 100 days the Con-Lib coalition has emerged as a radical force. For the first time since Margaret Thatcher handbagged the world in 1979, Britain looks like the West's test-tube (see article). It is daring again—not always in a good way but in one that is likely to be instructive to more timid souls, not least Mr Obama and his Republican foes.

The most obvious audacity of hope lies in the budget, unveiled by George Osborne, the new chancellor of the exchequer, in June. To balance the books, he raised some taxes, notably VAT, but three-quarters of the savings will come from spending cuts. Most government departments will shrink by a quarter, though Mr Osborne excluded the National Health Service from his savagery.

... for some time Mr Cameron, prompted by his closest domestic adviser, Steve Hilton, has talked about creating a Big Society, with more citizen volunteers taking on the state's work. In office this vague idea has formalised into radical decentralisation: handing power to parents to run schools, to general practitioners to run the NHS, to local voters to pick police commissioners. In many cases, rather than just reduce the supply of the state, the Tories want to reduce the demand for it, changing a culture in which Britons have looked to government for services and answers they could provide themselves.

For more, see Britain Has Embarked on a Great Gamble. Sooner or Later, Many Other Rich-World Countries Will Have to Take It Too, August 12, 2010, at The Economist. Thanks to Dave S.

Tuesday, August 17, 2010

Entertainment: How a Magician Held His Breath for 17 Minutes

The video is long and interesting, especially the second half.

David Blaine likes to challenge himself to do things that doctors say are not possible. He was buried alive in a coffin for a week in April 1999, living on nothing but water. This magician has frozen himself in a block of ice for three days, and stood on top of a 100-foot pillar for 36 hours.

Determined to break the world record for holding one's breath, Blaine embarked on "the most amazing journey of my life." In the video [below], from TEDMED, he details all of the ideas he had for how to go about this, as well as how he actually made it past 17 minutes without breathing.

From How a Magician Held His Breath for 17 Minutes by David Blaine, August 12, 2010, at CNN. Thank you, Martha L.

Politics: How Partisanship Hurts Conservatism

Obama-loving liberals are goofy. Despite their once fierce — and warranted — hatred for George W. Bush, Democrats now make every excuse in the book for a president who behaves just like him. Obama first burst on the national scene promising to reverse the Bush policies most unpopular with the Left — quagmire wars, warrantless wiretapping, extraordinary rendition, torture — yet he has not only continued each, but expanded them. Leftist Noam Chomsky noted, at the beginning of this president's first term, “As Obama came into office, [former Secretary of State] Condoleezza Rice predicted he would follow the policies of Bush's second term, and that is pretty much what happened, apart from a different rhetorical style.” Obama Democrats continue to confuse that style for substantive difference, exemplifying the same sort of mindless partisanship that characterized the Bush Republicans they once abhorred.
... regardless of which party is in control, when was the last time a president departed office, leaving behind a federal government smaller than he found it? Not even Ronald Reagan did this, as each successive administration piles on new and massive bureaucracy. Imagine this — what if there had never been a George W. Bush, and America went straight from Bill Clinton to Obama in 2000. Now imagine Obama did exactly everything Bush did, in terms of policy, programs, the whole works. Would the Right be beating up a Democratic president for doing exactly what they either defended or ignored Bush doing? Of course they would. “Why is President Obama on vacation down at the Crawford Ranch in Texas?” an angry talk radio caller might ask. Limbaugh would have probably asked the same, incessantly. “Barack Hussein Obama” would have been accused by conservatives of bankrupting the country with his Medicare expansion, and “riots” might have been predicted over No Child Left Behind. It would certainly not go unnoticed by Republicans that Obama had doubled the national debt. And the GOP would be promising voters they would never do any of this stuff — and a vote for them come November would be the surest way to stop it.

For more, see How Partisanship Hurts Conservatism by Jack Hunter, August 12, 2010, at The American Conservative.

Misc: GM CEO Steps down; Company Posts $1.33b Profit

General Motors Co. said Thursday it made $1.33 billion in the second quarter, a sign it's getting healthier as it prepares to sell stock to the public. The results were strong enough that CEO Ed Whitacre announced he will step down next month, saying his job was done.

It was the second straight quarterly profit for the Detroit automaker, which made $865 million in the first quarter, and sets the stage for GM to file paperwork soon to start the public stock sale process.

Whitacre said last week that the company is eager to sell shares in an initial public offering so it can end its dependence on the government and pay off $43.3 billion in bailout funds that were converted into a majority stake in the company. Whitacre wants the company to shed its "Government Motors" moniker because it's hurting sales and the company's image.

For more, see GM CEO Steps down; Company Posts $1.33b Profit by Ap, August 12, 2010, at National Public Radio.

Health: Prevent Prostate Cancer

A generic drug called finasteride reduces the risk of prostate cancer by 25 percent, according to a 2003 study of 18,000 men.

But doctors apparently don't believe it, misunderstand the findings, or just don't know about it.

When researchers asked them why, half said they didn't know the drug could prevent prostate cancer. And more than half said they were worried that men taking finasteride had a higher risk of developing more aggressive tumors.

That second concern arises from the first results of that 2003 study, called the Prostate Cancer Prevention Trial. It seemed to show that finasteride, which blocks the cancer-stimulating effects of testosterone, lowered the overall rate of prostate cancer by 25 percent but increased the risk of more dangerous tumors by 27 percent.

But in 2008, the researchers refuted from that finding, after looking more closely at the data along with biopsies of the tumors that occurred during the study. The new analysis showed finasteride didn't really raise the risk of high-grade tumors, it just makes tests for tumor grade more sensitive.

From Doctors Are Slow to Prescribe Pill to Prevent Prostate Cancer by Richard Knox, August 11, 2010, at National Public Radio.

Sunday, August 15, 2010

Economics: The Geography of a Recession

To see a nice visualization of how the unemployment rate has changed recently county by county, see The Decline: The Geography of a Recession by LaToya Egwuekwe, July 15, 2010, at American Observer. Thank you Scott B.

Health: Predicting Alzheimer's Disease

Researchers report that a spinal fluid test can be 100 percent accurate in identifying patients with significant memory loss who are on their way to developing Alzheimer's disease.
Although the latest PET scans for Alzheimer's are not commercially available, the spinal fluid tests are.

So the new results also give rise to a difficult question: Should doctors offer, or patients accept, commercially available spinal tap tests to find a disease that is yet untreatable?

And when — researchers optimistically are saying “when” these days — drugs are shown to slow or prevent the disease, the thought is that people will start having brain scans or spinal taps for Alzheimer's as routinely as they might have colonoscopies or mammograms today.

For more, see Spinal-Fluid Test Is Found to Predict Alzheimer's by Gina Kolata, August 9, 2010, at The New York Times.

Politics: A First Mcconnell & Obama One-on-One

[Senate Minority Leader] McConnell confirmed ... that one day earlier, he had had his first ever one-on-one private meeting with Obama at the White House. And he fleshed out what I had gathered from my own earlier visit to the White House and reported in another column, namely, an active interest developing on the part of the president in reaching out to congressional Republicans for help on the 2011-12 agenda.

McConnell said he could foresee alliances with Obama on trade issues, on development of nuclear power and electric vehicles, and, most important, on disciplining the federal budget.

For more, see Mitch Mcconnell Comes to the Senate's Defense by David S. Broder, August 8, 2010, at , at The Washington Post.

Government: Corporations Donate in Honor of Lawmakers to Win Favors

Though scrutiny of ethics violations and conflicts of interest would seem to be at a high in Washington right now, nearly a dozen current or former lawmakers have university endowments that are financed with help from corporations seeking to win their favor, reported The New York Times.

It's not the same thing as a direct campaign requirement — or, for that matter, a Caribbean vacation — but critics and watchdog groups told the Times it's just another, “less visible” way for corporations to curry favor with lawmakers.

For instance, as we've noted, Rep. Charles Rangel, the New York Democrat and former head of the House Ways and Means Committee, had one such endowment in his honor and sent letters on Congressional letterhead to companies with business before his committee in order to solicit donations in his honor. Rangel will soon face a public trial before the House Ethics Committee.

The Times pointed out that Rangel was more explicit about linking his Congressional office to the endowments, while other lawmakers have been more careful. But they'll still make occasional mention of the endowments — announcing their creation or thanking donors — while in office.

For more, see Corporations Donate in Honor of Lawmakers to Win Favors: More in Money and Politics by Marian Wang, August 6, 2010, at ProPublica.

Religion: Thinking About God Calms Believers, Stresses Atheists

Researchers have determined that thinking about God can help relieve anxiety associated with making mistakes. However, the finding only holds for people who believe in a God.

The researchers measured brain waves for a particular kind of distress response while participants made mistakes on a test.

Those who had been prepared with religious thoughts had a less prominent response to mistakes than those who hadn't.

“Thinking about religion makes you calm under fire. It makes you less distressed when you've made an error,” says Inzlicht.

“We think this can help us understand some of the really interesting findings about people who are religious. Although not unequivocal, there is some evidence that religious people live longer and they tend to be happier and healthier.”

Atheists shouldn't despair, though. “We think this can occur with any meaning system that provides structure and helps people understand their world.” Maybe atheists would do better if they were primed to think about their own beliefs, he says.

From Thinking About God Calms Believers, Stresses Atheists by Rick Nauert Phd, August 5, 2010, at Live Science.

Thursday, August 12, 2010

Economics: Try Balancing the Federal Budget

Try your hand at "balancing" the Federal budget. The questions are at a high level so it takes only 10-15 minutes, but unfortunately that also means you can't really tell whether the choices you make would help or ruin people's lives.

At the end you can submit your results to contribute to the discussion, but this didn't work in my version of FireFox. Perhaps another browser?

Try it at Budget Simulator by The Committee for a Responsible Federal Budget.

Mind: Popular Opinion? Bah!

People often become more confident in their beliefs when they find out the majority of others disagree with them, a new study finds.

"It may be that you feel proud, because you were able to disprove, in your own mind, an opinion that most people have accepted," said study author Richard Petty, professor of psychology at Ohio State University. "You actually become doubly sure you were right."

The results suggest how a person or organization could strategically reveal the majority or minority status of a proposal to achieve the maximum persuasive effect.

If you feel you have a weak argument, it should be best to suggest right away that a lot of people support your issue, before you make your case. The thinking goes, before people have a chance to ponder the decision they'll just "follow the crowd."

If you tell people you have majority support after you make your weak arguments, according to the new findings, it's too late — it will only serve to give people confidence in the negative thoughts they have generated about your cause, Petty said.

But for those with a strong argument, it can be helpful to reveal wide support for your proposal after explaining it, as this gives people confidence in their own positive thoughts, Petty said.

For more, see Popular Opinion? Bah! by Livescience Staff, August 4, 2010, at Live Science.

Politics: Professor Newt's Distorted History Lesson

There are any number of reasons why an American might oppose the Cordoba House, the planned $100 million Muslim-financed community center that has come to be known in the press as the "Ground Zero mosque." I don't think any of them are particularly good reasons, but the universe of potential justification is much broader than the narrow scope of this humble blog. There is one justification being floated around, however, that is both within this blog's purview and completely and totally bogus. Indeed, this particular justification is such an egregious and purposeful misreading of medieval history that I feel I must speak up.

Last week, Newt Gingrich released a Newt Direct statement at Newt.org concerning the project. As you may have heard, he's somewhat opposed to it. And to explain why, he offered this history lesson:

The proposed "Cordoba House" overlooking the World Trade Center site — where a group of jihadists killed over 3000 Americans and destroyed one of our most famous landmarks - is a test of the timidity, passivity and historic ignorance of American elites. For example, most of them don't understand that “Cordoba House” is a deliberately insulting term. It refers to Cordoba, Spain — the capital of Muslim conquerors who symbolized their victory over the Christian Spaniards by transforming a church there into the world's third-largest mosque complex. [...I]n fact, every Islamist in the world recognizes Cordoba as a symbol of Islamic conquest. It is a sign of their contempt for Americans and their confidence in our historic ignorance that they would deliberately insult us this way.
Notice how carefully he's phrased his claim to give the impression that during the medieval conquest of Spain the Muslims charged into Cordoba and declared it the capital of a new Muslim empire, and in order to add insult to injury seized control of a Christian church and built the biggest mosque they could, right there in front of the Christians they'd just conquered, a big Muslim middle finger in the heart of medieval Christendom. Essentially, they've done it before, they'll do it again, right there at Ground Zero, if all good Christians don't band together to stop them.

The problem is, in order to give that impression of immediacy, Newt elides three hundred years of Christian and Muslim history. Three hundred years. The Muslims conquered Cordoba in 712. The Christian church that was later transformed into the Great Mosque of Cordoba apparently** continued hosting Christian worship for at least a generation after that. Work on the Mosque didn't actually begin until seventy-odd years later in 784, and the mosque only became "the world's third-largest" late in the tenth century, after a series of expansions by much later rulers, probably around 987 or so.

Then there's the matter of the two odd verbs in Newt's summation of Cordoba's history: "transformed" and "symbolized". Surely, a mosque as great as The Great Mosque of Cordoba has symbolized a lot of things to a lot of people over the years. But Muslim historians writing about the Great Mosque don't point to it as a symbol of Muslim triumph over Christians; rather, they treat it primarily as a symbol of Muslim victory over other Muslims.

The mosque was indeed begun in the wake of a Muslim conquest--just not the conquest of the Christians. Rather, it was ordered built by the Umayyad emir Abd-ar-Ramman I, probably in part to commemorate his successful conquest of Cordoba in the 750's, fought against other Muslim chieftains loyal to the rival Abbasid Caliphate, and his successful repulsion of subsequent Abbasid attempts to dislodge him by force throughout the 760's.

For much more, see Professor Newt's Distorted History Lesson by Got Medieval, August 2, 2010, at Got Medieval. Thank you, Andrew Sullivan.

Economics: Four Deformations of the Apocalypse

The director of the Office of Management and Budget under President Ronald Reagan says ...

IF there were such a thing as Chapter 11 for politicians, the Republican push to extend the unaffordable Bush tax cuts would amount to a bankruptcy filing. The nation's public debt — if honestly reckoned to include municipal bonds and the $7 trillion of new deficits baked into the cake through 2015 — will soon reach $18 trillion. That's a Greece-scale 120 percent of gross domestic product, and fairly screams out for austerity and sacrifice. It is therefore unseemly for the Senate minority leader, Mitch McConnell, to insist that the nation's wealthiest taxpayers be spared even a three-percentage-point rate increase.
The first [deformation of the national economy] started when the Nixon administration defaulted on American obligations under the 1944 Bretton Woods agreement to balance our accounts with the world. Now, since we have lived beyond our means as a nation for nearly 40 years, our cumulative current-account deficit — the combined shortfall on our trade in goods, services and income — has reached nearly $8 trillion. That's borrowed prosperity on an epic scale.
The second unhappy change in the American economy has been the extraordinary growth of our public debt. In 1970 it was just 40 percent of gross domestic product, or about $425 billion. When it reaches $18 trillion, it will be 40 times greater than in 1970. This debt explosion has resulted not from big spending by the Democrats, but instead the Republican Party's embrace, about three decades ago, of the insidious doctrine that deficits don't matter if they result from tax cuts.
Through the 1984 election, the old guard earnestly tried to control the deficit, rolling back about 40 percent of the original Reagan tax cuts. But when, in the following years, the Federal Reserve chairman, Paul Volcker, finally crushed inflation, enabling a solid economic rebound, the new tax-cutters not only claimed victory for their supply-side strategy but hooked Republicans for good on the delusion that the economy will outgrow the deficit if plied with enough tax cuts.

By fiscal year 2009, the tax-cutters had reduced federal revenues to 15 percent of gross domestic product, lower than they had been since the 1940s. Then, after rarely vetoing a budget bill and engaging in two unfinanced foreign military adventures, George W. Bush surrendered on domestic spending cuts, too — signing into law $420 billion in non-defense appropriations, a 65 percent gain from the $260 billion he had inherited eight years earlier. Republicans thus joined the Democrats in a shameless embrace of a free-lunch fiscal policy.

The third ominous change in the American economy has been the vast, unproductive expansion of our financial sector. Here, Republicans have been oblivious to the grave danger of flooding financial markets with freely printed money and, at the same time, removing traditional restrictions on leverage and speculation. As a result, the combined assets of conventional banks and the so-called shadow banking system (including investment banks and finance companies) grew from a mere $500 billion in 1970 to $30 trillion by September 2008.
The fourth destructive change has been the hollowing out of the larger American economy. Having lived beyond our means for decades by borrowing heavily from abroad, we have steadily sent jobs and production offshore. In the past decade, the number of high-value jobs in goods production and in service categories like trade, transportation, information technology and the professions has shrunk by 12 percent, to 68 million from 77 million. The only reason we have not experienced a severe reduction in nonfarm payrolls since 2000 is that there has been a gain in low-paying, often part-time positions in places like bars, hotels and nursing homes.

It is not surprising, then, that during the last bubble (from 2002 to 2006) the top 1 percent of Americans — paid mainly from the Wall Street casino — received two-thirds of the gain in national income, while the bottom 90 percent — mainly dependent on Main Street's shrinking economy — got only 12 percent. This growing wealth gap is not the market's fault. It's the decaying fruit of bad economic policy.

For more, see Four Deformations of the Apocalypse by David Stockman, July 31, 2010, at The New York Times.

Economics: Rep. Ryan Responds to CBPP's Analysis of "a Roadmap for America's Future"

Here is Paul Ryan's old reply to an older criticism which is similar to that in Economics: The Flimflam Man.

Claim: CBO was directed not to score revenues for the Roadmap by staff. (pg. 2 - http://www.cbpp.org/files/3-10-10bud.pdf)

Reality: False. In fact, Congressman Ryan and his staff did ask CBO to analyze both the revenue and spending provisions in the Roadmap. However, CBO declined to do a revenue analysis of the tax plan, citing that it did not want to infringe on the jurisdiction of the Joint Committee on Taxation (JCT). The JCT is responsible for providing the official revenue score of legislation before Congress. JCT, however, does not have the capability at this time to provide longer-term revenue estimates (i.e. beyond 10 years) that Ryan's long-term solution requires.

Given these functional constraints for an official JCT cost estimate, Ryan relied on its original work with U.S. Treasury Department tax experts to formulate a reasonable expected path for long-term revenues given the tax policies in the Roadmap combined with long-term expectations for economic growth.

Claim: The Roadmap does not bring in the amount of revenue specified to the CBO according to the Tax Policy Center, and therefore it does not reduce the deficit as is claimed. (pg. 2)

Reality: The Tax Policy Center does not give official revenue estimates, and in their analysis admit to significant uncertainty and unfamiliarity with a proposal of this size and scope. The tax reforms proposed and the rates specified were designed to maintain approximately our historic levels of revenue as a share of GDP, based on consultation with the Treasury Department.

Congressman Ryan stands by his numbers, and of course would be open to adjustments in the specified rates under his tax reforms if in fact TPC's estimates are closer to reality than Ryan's estimates. We clearly cannot chase our unsustainable growth in spending with ever-higher levels of taxes — and the purpose of the Roadmap is to get spending in line with revenue — not the other way around.

For more, see Rep. Ryan Responds to CBPP's Analysis of "A Roadmap for America's Future" by Paul Ryan, March 11, 2010, at A Roadmap for America's Future.

Sunday, August 8, 2010

Government: The Empty Chamber

From a long, good article ...

[During the debate on the healthcare resolution bill in March] the chamber became the stage of a theatrical whose ending, like almost everything that happens on the Senate floor, was known in advance to all. The Republican goal in Vote-O-Rama was to embarrass the Democrats while appearing to suggest useful changes; the Democratic goal was to prevent any change to the bill, so that it wouldn't have to return to the House, where it might be voted down. Several of the Republican amendments had been designed to make Democrats look hypocritical, by forcing them to vote against policies that the Party typically supports. One amendment, for example, declared that the health-care bill could not be linked to a tax hike on individuals making less than two hundred thousand dollars a year. Other amendments were more nakedly partisan, and outlandish. David Vitter, a Louisiana Republican, proposed an amendment that repealed the entire law. Senator Tom Coburn, a Republican obstetrician from Oklahoma, introduced an amendment to insure that veterans diagnosed with mental illness would not be denied the right to own firearms, and another to prevent “convicted child molesters, rapists, and sex offenders” from buying erectile-dysfunction drugs with taxpayer funds. Coburn got through the minute he was allotted to explain his Viagra amendment without cracking a smile. “This is not a game amendment,” he insisted. “It actually saves money.”

So many senators snickered that the presiding officer banged his gavel for order.

Nothing dominates the life of a senator more than raising money. Tom Harkin, the Iowa Democrat, said, “Of any free time you have, I would say fifty per cent, maybe even more,” is spent on fund-raising. In addition to financing their own campaigns, senators participate at least once a week in the Power Hour, during which they make obligatory calls on behalf of the Party (in the Democrats' case, from a three-story town house across Constitution Avenue from the Senate office buildings, since they're barred from using their own offices to raise money). Lamar Alexander, the Tennessee Republican, insisted that the donations are never sufficient to actually buy a vote, but he added, “It sucks up time that a senator ought to be spending getting to know other senators, working on issues.”
There are five dailies—Politico, The Hill, Roll Call, CongressDaily, and CQ Today—all of which emphasize insider conflict. The senators, who like to complain about the trivializing effect of the “24/7 media,” provide no end of fodder for it. ... Bloggers carry so much influence that many senators have a young press aide dedicated to the care and feeding of online media. News about, by, and for a tiny kingdom of political obsessives dominates the attention of senators and staff, while stories that might affect their constituents go unreported because their home-state papers can no longer afford to have bureaus in Washington.
When I asked Chris Dodd how well he knew, for example, Jim DeMint, Dodd said, “Not at all. Whereas Jesse Helms and I knew each other pretty well.” He repeated something that Jon Kyl, the Republican whip, from Arizona, had recently said to him: “There's no trust.”
Many of the Senate's antique rules and precedents have been warped beyond recognition by the modern pressures of partisanship. The hold, for example, was a courtesy extended to senators in the days of horse travel, when they needed time to get back to Washington and read a bill or question an appointee before casting their vote. Sarah Binder, who co-authored a book on the filibuster, calls the procedure a historical accident: in 1806, the Senate got rid of a little-used rule that allowed the “previous question” to be called to a vote. Suddenly, there was no inherent limit on debate, and by the eighteen-thirties senators had begun taking advantage of this loophole, derailing the proceedings by getting up and talking until their voice, legs, or bladder gave out. (The word “filibuster” comes from vrijbuiter—old Dutch for “looter.”)
The two lasting achievements of this Senate, financial regulation and health care, required a year and a half of legislative warfare that nearly destroyed the body. They depended on a set of circumstances—a large majority of Democrats, a charismatic President with an electoral mandate, and a national crisis—that will not last long or be repeated anytime soon. Two days after financial reform became law, Harry Reid announced that the Senate would not take up comprehensive energy-reform legislation for the rest of the year. And so climate change joined immigration, job creation, food safety, pilot training, veterans' care, campaign finance, transportation security, labor law, mine safety, wildfire management, and scores of executive and judicial appointments on the list of matters that the world's greatest deliberative body is incapable of addressing. Already, you can feel the Senate slipping back into stagnant waters.

For much, much more, see The Empty Chamber by George Packer, August 9, 2010, at The New Yorker.

Economics: The Flimflam Man

[Representative Paul] Ryan has become the Republican Party's poster child for new ideas thanks to his “Roadmap for America's Future,” a plan for a major overhaul of federal spending and taxes.
At Mr. Ryan's request, [the Congressional Budget Office] produced an estimate of the budget effects of his proposed spending cuts — period. It didn't address the revenue losses from his tax cuts.

The nonpartisan Tax Policy Center has, however, stepped into the breach. Its numbers indicate that the Ryan plan would reduce revenue by almost $4 trillion over the next decade. If you add these revenue losses to the numbers The Post cites, you get a much larger deficit in 2020, roughly $1.3 trillion.

And that's about the same as the budget office's estimate of the 2020 deficit under the Obama administration's plans. That is, Mr. Ryan may speak about the deficit in apocalyptic terms, but even if you believe that his proposed spending cuts are feasible — which you shouldn't — the Roadmap wouldn't reduce the deficit. All it would do is cut benefits for the middle class while slashing taxes on the rich.

The Tax Policy Center finds that the Ryan plan would cut taxes on the richest 1 percent of the population in half, giving them 117 percent of the plan's total tax cuts. That's not a misprint. Even as it slashed taxes at the top, the plan would raise taxes for 95 percent of the population.

For more, see The Flimflam Man by Paul Krugman, August 5, 2010, at The New York Times.

In How To Read A CBO Report on August 6, 2010, Krugman quotes the CBO report as saying ...

The proposal would make significant changes to the tax system. However, as specified by [Paul Ryan's] staff, for this analysis total federal tax revenues are assumed to equal those under CBO's alternative fiscal scenario (which is one interpretation of what it would mean to continue current fiscal policy) until they reach 19 percent of gross domestic product (GDP) in 2030, and to remain at that share of GDP thereafter.

Science: Scientists Watch Electrons Move in Real Time

How can they do this? 0.000000000000000001 of a second laser pulses, of course.

For the first time, scientists have been able to watch electrons move in an atom's outer shell, in a breakthrough with major implications for our understanding of chemical processes.
"(It will) allow us to unravel processes within and among atoms, molecules, and crystals on the electronic timescale."

For more, see For the First Time, Scientists Watch Electrons Move in Real Time by Rebecca Boyle, August 4, 2010, at Popular Science.

Economics: The Next Sovereign Debt Crisis

Europe's PIIGs are in a poke, but U.S. states and municipalities risk their own sovereign debt crisis, with a huge liquidity risk from short-term debt. According to the Federal Reserve, at the end of the first quarter of 2010, state and local governments had $2.8 trillion in outstanding debt. This massive figure doesn't count unfunded pension liabilities (which, except for a few governments in immediate distress, face a longer-term solvency crisis), but does include $465 billion of debt issued on behalf of nonprofits and private industrial revenue bond borrowers, many of whom are politically connected. Of the $2.8 trillion, perhaps 25 percent effectively consists of short-term obligations, much of which was purchased based on questionable ratings resting on doubtful guarantees. Even if only a few financially stressed municipal debt issuers default, anxious short-term debt holders could suddenly demand cash and trigger a liquidity crunch.

For more, see The Next Sovereign Debt Crisis by Jay Weiser, August 3, 2010, at The American Enterprise Institute.

Security: Pakistanis Unaware of Drone Program

Just over one-in-three Pakistanis (35 percent) have heard about the drone strikes.

For more, see Pew: Pakistanis Unaware of Drone Program, August 2, 2010, at Frum Forum.

Technology: China to Build Ginormous Buses That Cars Can Drive Under

For more, see China to Build Ginormous Buses That Cars Can Drive Under (Video) by Richard Lai, August 2, 2010, at engadget.

Economics: Second Quarter GDP Overview

Second Quarter GDP Overview by Hale "Bonddad" Stewart, August 1, 2010, at FiveThirtyEight is a good overview of the GDP, including a comparison with previous recessions ...

Friday, August 6, 2010

Economics: The Growth Imperative

Paul Ryan, the most intellectually ambitious Republican in Congress, lavishly cites Brooks's book. Over the past few years, Ryan has been promoting a roadmap to comprehensively reform the nation's tax and welfare system. On the tax side, he would sweep away most of the special-interest-favoring tax credits and subsidies and give people a chance to join a simple tax system with only two rates.

On the welfare-state side, he'd sweep away most subsidies to the middle and upper classes, like the tax exemption on employee health plans. He'd essentially voucherize federal benefits, like health care and Social Security, and increase federal subsidies for people down the income scale.

The idea would be to end the complex and sclerotic arrangements and solve the fiscal crisis. The effect would be to radically reduce the power of federal policy makers and shift discretion (and risks) onto individuals.

Both the Democratic and Republican approaches have problems. The Moon Shot Approach relies on omniscient experts to pick out the engines of future growth and on public-spirited legislators to pass bills that maximize productivity instead of special-interest favors. The weakness of the Brooks and Ryan approach is that their sociology is off a bit. America is not a nation of risk — embracing pioneers. It is a nation of heroic bourgeois families who want to thrive within a secure social order. The economic debate is not as Manichaean as the culture war since most people are split down the middle and because it's easier to compromise on money than on life.

Still, these two visions are better than the nativist and antiglobalist visions that will be arising. And despite the tough battle talk, they are combinable. At his best, Ryan wants to cleanse and rejuvenate the nation — to sweep away the special-interest sclerosis that strangles flexibility and growth. At his best, Obama wants to create a context for innovation — to employ blue-collar workers and to spur growth clusters like Silicon Valley, which, let us remember, was a magical cocktail of federal research subsidies, hippie culture, entrepreneurial daring and university settings.

The two projects are in tension, but in a sane political culture they are not mutually exclusive. It should be possible to simplify the tax code, target welfare spending and also build strong infrastructure at the same time.

For more, see The Growth Imperative by David Brooks, July 29, 2010, at The New York Times.