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Thursday, May 31, 2012

Government:  Florida's Open Government Practices

Here's Florida's latest transparency coup: Gov. Rick Scott has made his top aides' email accounts available on the Internet for all to see. The public can go online and peek into inbox and sent email folders at any time: no public record requests, no long waits, no government lawyers trying to scrub everything clean.

For more, see Thomas Peele: Florida's Open Government Practices Put California to Shame by Thomas Peele, May 26, 2012 at Contra Costa Times.

Economics:  1950s thru 1970s

Once upon a time, this fairy tale tells us, America was a land of lazy managers and slacker workers. Productivity languished, and American industry was fading away in the face of foreign competition.

Then square-jawed, tough-minded buyout kings like Mitt Romney and the fictional Gordon Gekko came to the rescue, imposing financial and work discipline. Sure, some people didn't like it, and, sure, they made a lot of money for themselves along the way. But the result was a great economic revival, whose benefits trickled down to everyone.

You can see why Wall Street likes this story. But none of it -- except the bit about the Gekkos and the Romneys making lots of money -- is true.

For the alleged productivity surge never actually happened. In fact, overall business productivity in America grew faster in the postwar generation, an era in which banks were tightly regulated and private equity barely existed, than it has since our political system decided that greed was good.

What about international competition? We now think of America as a nation doomed to perpetual trade deficits, but it was not always thus. From the 1950s through the 1970s, we generally had more or less balanced trade, exporting about as much as we imported. The big trade deficits only started in the Reagan years, that is, during the era of runaway finance.

And what about that trickle-down? It never took place. There have been significant productivity gains these past three decades, although not on the scale that Wall Street's self-serving legend would have you believe. However, only a small part of those gains got passed on to American workers.

For more, see Egos and Immorality by Paul Krugman, May 24, 2012 at NYTimes.com.

Tuesday, May 29, 2012

Europe:  The Difference Between the U.S. And Europe in 1 Graph

The difference between the U.S. and Europe is that when the Greek economy "pulls a Mississippi" (or perhaps I should say, when Mississippi "pulls a Greece"), the EU and the U.S. have 180-degree opposite reactions. Over here, we calmly write checks to Mississippi in the form of Medicaid and unemployment insurance, no questions asked. Europe has no comparable "Peripheraid" for its weak peripheral states. Instead, it has chaos.

For more, see The Difference Between the U.S. And Europe in 1 Graph by Derek Thompson, May 8, 2012 at The Atlantic.

Government:  Investing in Julia

From an interesting article how much the government should help individuals ...

Sure, we could move toward an every-man-for-himself economy. But private insurers typically have a financial incentive to exclude those most at risk. And choosing to invest only in your own human capital is a lot like choosing to invest all your resources in one small company.

For much more, see Investing in Julia by Nancy Folbre, May 21, 2012 at Economix.

Economics:  How Change Happens

As Reihan Salam noted in a fair-minded review of the literature in National Review, in any industry there is an astonishing difference in the productivity levels of leading companies and the lagging companies. Private equity firms like Bain acquire bad companies and often replace management, compel executives to own more stock in their own company and reform company operations.

Most of the time they succeed. Research from around the world clearly confirms that companies that have been acquired by private equity firms are more productive than comparable firms.

This process involves a great deal of churn and creative destruction. It does not, on net, lead to fewer jobs. A giant study by economists from the University of Chicago, Harvard, the University of Maryland and the Census Bureau found that when private equity firms acquire a company, jobs are lost in old operations. Jobs are created in new, promising operations. The overall effect on employment is modest.

While American companies operate in radically different ways than they did 40 years ago, the sheltered, government-dominated sectors of the economy -- especially education, health care and the welfare state -- operate in astonishingly similar ways.

For more, see How Change Happens by David Brooks, May 21, 2012 at NYTimes.com.

Monday, May 28, 2012

Economics:  Federal Spending, Taxes, and Deficits Are Lower Today than When Obama Took Office

For more, see Federal Spending, Taxes, and Deficits Are Lower Today than When Obama Took Office by Derek Thompson, May 16, 2012 at The Atlantic.

Health:  New Data on Harms of Prostate Cancer Screening

The recommendations, from the United States Preventive Services Task Force, offer the most detailed breakdown to date of the potential risks and benefits of the prostate specific antigen blood test, commonly known as the P.S.A. test. Most important, the task force found that, at best, one man in every 1,000 given the P.S.A. test may avoid death as a result of the screening, while another man for every 3,000 tested will die prematurely as a result of complications from prostate cancer treatment and dozens more will be seriously harmed.
Prostate biopsies can cause pain, infection and emotional distress, while a cancer diagnosis typically leads to surgery or radiation treatment that can render a man impotent or incontinent, or both. In rare cases, a man can die from complications of treatment. Although "watchful waiting" is an option for men with prostate cancer, the vast majority of patients who learn they have prostate cancer choose more aggressive treatment.
The task force found that up to 43 men per 1,000 tested will face serious harms. Thirty to 40 men will develop incontinence or erectile dysfunction, or both, as a result of treatment. Two more men will have a serious cardiovascular event, like a heart attack, due to treatment, and one man will develop a life-threatening blood clot in his legs or lungs.
Even so, the American Urological Association issued a statement saying the group was "outraged" by the task force decision to finalize the recommendations. The group said the findings did not adequately reflect the benefits of P.S.A. testing and that it was "inappropriate and irresponsible" to issue a blanket statement against the testing.

For more, see New Data on Harms of Prostate Cancer Screening by Tara Parker-Pope, May 21, 2012 at NYTimes.com.

Politics:  What the Public Knows About the Political Parties

Republicans fare substantially better than Democrats on several questions in the survey, as is typically the case in surveys about political knowledge.
The partisan gaps in knowledge are at least partly a consequence of demographic differences. On average, Republicans are older and more affluent than either Democrats or independents, and both of these are associated with knowledge about the parties' positions and leaders.

For more, see What the Public Knows About the Political Parties, April 11, 2012 at Pew Research Center for the People & the Press.

Saturday, May 26, 2012

Tax:  Will Rich People Desert the U.S. If Their Taxes Are Raised?

According to the international tax lawyer, Andrew Mitchel, the number of Americans renouncing their citizenship rose to 1,781 in 2011 from 231 in 2008.

For more, see Will Rich People Desert the U.S. If Their Taxes Are Raised? by Bruce Bartlett, May 8, 2012 at Economix.

California:  Republican Santa Barbara -- Sort'a

Santa Barbara's registered voters are more Republican and less Democratic than all of California's ...

Of [California's registered voters], 43.5% are registered Democrats, the same share as in 2008, while the segment of Republicans has continued to decline steadily, with GOP voters now just 30.3% of the electorate. By contrast, the number of independents not aligned with any party has kept growing, as so-called "decline to states" now measure more than one-fifth (21.3%) of voters statewide. The balance is registered with smaller parties.

Who votes in S.B.? Statewide trends are mirrored in Santa Barbara County, where the number of those registered (187,799) has increased only slightly, the percentage of Democrats (41.5) has remained steady, while Republicans have slipped to 32.2% and independents have grown to 21.2% of the electorate.

For more, see Political Arithmetic by Jerry Roberts, April 26, 2012 at Santa Barbara Independent.

Europe:  What History Can Explain About Greek Crisis

Oh, dear!

If Greece makes it through the current political crisis and stays in the euro zone, one useful case study is Germany's reunification, which suggests that the adjustment could take decades, not years, and involve mass emigration, billions of euros more in fiscal transfers and the rise of fringe parties in Greece as well as in the countries that have to foot the bill.

Like the former East Germany, Greece suffers from a crippling competitiveness gap and is locked into the euro. East Germans were priced out of the labor market because the value of the Deutsche mark reflected Western, not Eastern, productivity levels. About 14,000 businesses were shut down and four million jobs lost in the first five years after formal reunification, in 1990. Unemployment eventually peaked at more than 20% in 2005.

Since the fall of the Berlin Wall, in 1989, more than 2 million of the 16 million people living in the East have moved West. Long-term unemployment and wage depression bolstered xenophobic parties and the Left Party, which grew from the former East German Communist Party and hopes to reach the national government in 2013.

More than two decades later, living standards have converged, although they remain about 20% lower in the East with unemployment in the Eastern part at nearly twice the Western average.

And this was within one nation with the same language, perfect mobility and the fiscal transfers missing in the euro zone: German taxpayers financed more than €1.7 trillion, or about $2.17 trillion, at current exchange rates, with the "solidarity surcharge" to pay for modernizing the former East Germany.

But ...

... if it does not and Greece leaves the euro zone, the diplomat added, the cost could be even higher.

For more, see What History Can Explain About Greek Crisis by Katrin Bennhold, May 21, 2012 at NYTimes.com.

Tuesday, May 22, 2012

Law:  House OKs Indefinite Definition of Terror Suspects

The House has backed indefinite detention without trial of terrorist suspects, even for U.S. citizens seized on American soil.

For more, see House OKs Indefinite Definition of Terror Suspects, May 18, 2012 at NYTimes.com.

Government:  Behind the Burden of Regulation

... why, if regulations are usually a legitimate response to mischievous games played by some parties in the private sector, these regulations are often so inchoate, if not outright silly.

Lack of competence among the rule writers — especially unfamiliarity with the operations of those they seek to regulate — may be part of the answer, but probably not a large part.

More important, in my view, is the gantlet that legislation and rule-making must run under our system of governance.

Before an original bill passes Congress, it has been worked over ("marked up"), in each of the two chambers, by sundry committee fiefs whose members may be beholden to a variety of moneyed interest groups, each eager to steer the legislators' hands.

The specific regulations called for in a bill, once passed, must also survive the scrutiny and influence of special interest groups, which typically work through members of Congress or the upper levels of the executive branch, whose affection they have acquired.

Even the best-written original bill cannot emerge from that process in the form of a coherent set of rules. Many a rule may appear puzzling to straight-thinking people, and some even silly. Chances are they make sense to some interest group that had purchased it, so to speak.

For more, see Behind the Burden of Regulation by Uwe E. Reinhardt, May 11, 2012 at Economix.

Sunday, May 20, 2012

Health:  Heart Attacks: If You're Stricken, Minutes Matter

A reminder ...

The advice sounds very simple. The best way to survive a heart attack is:

1. Recognize the symptoms.

2. Call 911.

3. Chew an aspirin while waiting for emergency personnel to arrive.

But every year, 133,000 Americans die of heart attacks, and another 300,000 die of sudden cardiac arrest—largely because they didn't get help in time.

With most heart attacks, victims do have some warning—but the symptoms can be confusing. The stereotypical "Hollywood heart attack," clutching the chest in agony, is only one scenario. The feeling in the chest may be more squeezing, tightening or heavy pressure. It may radiate down the left arm or up to the jaw or around the back between the shoulder blades, particularly in women. One study found that 71% of women experience flulike symptoms with no chest pain at all.

Both men and women may have indigestion, nausea, lightheadedness, profuse sweating, shortness of breath with little exertion and overwhelming fatigue.

"People whose heart muscle is shutting down often feel really tired, so they lie down and take a nap," says Dr. Alonzo. "That's not a good idea. They may not wake up."

... a study in the New England Journal of Medicine [shows] that women are seven times more likely than men to be misdiagnosed in mid-heart attack and sent home from the hospital, and a 2005 poll from the American Heart Association that found that only 8% of family-care physicians and 17% of cardiologists were aware that more women have died from heart disease than men every year since 1984.

For much more, see If You're Stricken, Minutes Matter, Yet Many Ignore Signs, Delay Treatment by Melinda Beck, April 16, 2012 at WSJ.com.

Europe:  A Greek Exit's Impact on the U.S.

... the [U.S.] domestic economy remains vulnerable to disruptions in Europe. Roughly one-quarter of American exports go to Europe, and Americans held $1.4 trillion in the securities of euro zone companies and countries at the end of 2010, according to the most recent available federal data.

"If there is a major financial problem in Europe," Mr. Bernanke told Congress in February, "there will be so many different channels on which that will affect our financial system that I would not want to take too much comfort from" the fact that the financial system has little direct exposure to Greece.

For more, see A Greek Exit? Euro Zone May Be Ready by Binyamin Appelbaum, May 17, 2012 at NYTimes.com.

Saturday, May 19, 2012

Investing:  In New Funds, Old Flaws

... you shouldn't confuse ETFs with a newer mutation called "exchange-traded notes," or ETNs. These instruments, 284 at last count, have gathered $133 billion in assets, nearly all in the past three years; by comparison, 1,154 ETFs hold $1.1 trillion in total assets. The ETNs often track currencies, commodities and other assets rarely held by traditional ETFs—and can surprise unwary investors with high costs, quirky taxation and prices that may wander far from their asset value.

Dave Nadig, director of research at IndexUniverse, a firm that follows the industry, says many of these "outlier products are antithetical to the original core mission of ETFs."

My advice: Don't even try that unless you have a couple of hours, a magnifying glass, a financial calculator and a few pints of strong coffee. If a financial adviser tries to sell you an ETN, say simply: "Tell me what page 43 of the prospectus means."

There is a buyer for every Frankenfund—but it doesn't have to be you.

For why, see In New Funds, Old Flaws by Jason Zweig, April 13, 2012 at WSJ.com.

Tax:  How "Taxmageddon" Would Affect the U.S. Economy

What will the economy look like in 2013? A great deal depends on what Congress decides to do at the end of this year. Remember, the Bush tax cuts are expiring, the payroll tax holiday will sunset, and a bunch of new spending cuts under the debt-deal "sequester" are scheduled to kick in. Coming all at once, that's a potentially big drag on growth.

Jared Bernstein passes along a chart from Goldman Sachs that tries to map out a couple of different scenarios here. The dotted line shows what could happen if Congress can't reach an agreement and lets all tax cuts expire and spending cuts kick in. If that happened, the U.S. economy would grow at least 3 percentage points less than its potential for each of the first three quarters of 2013:

For more, see How Taxmageddon Would Affect the U.S. Economy by Brad Plumer, May 17, 2012 at Wonkblog.

Thursday, May 17, 2012

Mind:  Big Incentives Can Hinder, Rather than Help

Financial incentives can spur us to success--up to a point. When the stakes get too high, performance can suffer, according to a new paper from researchers at California Institute of Technology. By studying brain-scan data of volunteers performing a basic motor task (controlling an object on a screen) for money, the Caltech team found that once the incentive for successfully completing the task hit a certain threshold, the brain's reward center began to shut down, a response tied to loss aversion.

Previous studies have suggested that success rates decline with high incentives because people can be too motivated, but the newest research suggests otherwise, finding positive responses in the reward-response area only when the incentive was first introduced. In other words, participants responded well to the initial incentive but grew distracted once the task was under way.

For more, see Big Incentives Can Hinder, Rather than Help by Melissa Korn, May 15, 2012 at WSJ.com.

International:  Causes of Greek Economic Crisis are Complex

Richard Parker says:

  1. About 1/3 of the Greek GDP is paid in taxes every year by Greeks (more than Americans).
  2. Greeks have the highest number of entrepreners per capita of any government in Europe.
  3. The number of government employees per capita in Greece is about average for Europe.
  4. Greece's government deficit as a percent of it's total budget is no bigger than the US or UK's today.
For more, see the video at Richard Parker: Causes of Greek Economic Crisis More Complex than Many People Think (Video) by Richard Parker, May 17, 2012 at The Huffington Post.