California: State Deficit Balloons to over $25 Billion

California faces a $25.4 billion budget deficit over the next 20 months - nearly double what some leading lawmakers predicted a week ago - and a solution to this newest crisis is expected to be far more difficult than in years past, the nonpartisan Legislative Analyst's Office said Wednesday.

Declining revenue and lawmakers' past reliance on one-time budget fixes have contributed to the recurring deficit, Mac Taylor, the legislative analyst, said.

For more, see California's Deficit Balloons to over $25 Billion by Wyatt Buchanan, November 11, 2010 at SFGate.

Economics: GOP Has No Credibility on the Economy

Let's compare the last five presidents and see how they did with spending, debt, GDP, and employment.

Republicans increase spending 23% more than Democrats.
Republicans increase the debt 8.6 times more than Democrats!
Democrats increase GDP 17% more than Republicans.
Democrats increase job creation 2.3 times more than Republicans!

For more, see GOP Has No Credibility on the Economy by Fullchat, October 19, 2010 at Daily Kos.

Health: Low Life Expectancy of Physical Laborers

Is it true that life expectancy in the bottom half of the income distribution has barely inched up over the past three decades?

Let's turn next to Social Security. There were rumors beforehand that [Obama's deficit reduction] commission would recommend a rise in the retirement age, and sure enough, that's what Mr. Bowles and Mr. Simpson do. They want the age at which Social Security becomes available to rise along with average life expectancy. Is that reasonable?

The answer is no, for a number of reasons — including the point that working until you're 69, which may sound doable for people with desk jobs, is a lot harder for the many Americans who still do physical labor.

But beyond that, the proposal seemingly ignores a crucial point: while average life expectancy is indeed rising, it's doing so mainly for high earners, precisely the people who need Social Security least. Life expectancy in the bottom half of the income distribution has barely inched up over the past three decades. So the Bowles-Simpson proposal is basically saying that janitors should be forced to work longer because these days corporate lawyers live to a ripe old age. [Emphasis added].

For more, see The Hijacked Commission by Paul Krugman, November 11, 2010 at The New York Times.

Economics: Inflation Is at a Record Low

Excluding the volatile food and energy categories, the core consumer index was unchanged for the third straight month. In the past year, the core index has risen by only 0.6 percent, the smallest increase since the index began in 1957.

Many leading Republican economists said earlier this week that the Fed's actions risk triggering runaway inflation.

For more, see U.S. Consumer Prices Rise Moderately in October, Inflation Tame by Associated Press, November 17, 2010 at FoxNews.com.

Mind: Science Shows What Sexual Repression Actually Looks like

With the recent election still echoing in everyone's ears, and pundits pundificating about how conservative the country really is, this is a good time to remember the major study done about online pornography subscriptions just 18 months ago.

As reported in the Journal of Economic Perspectives,

• The rates at which people buy pornography are not wildly different from state to state;
• States where people vote for conservative candidates buy more porn than states in which people vote for progressive candidates.

And yes, this is after adjusting for factors including broadband access, income, and population.

According to credit card receipts from a national provider of adult entertainment, eight of the top ten pornography-consuming states went Republican in the 2008 election. And the trend goes beyond voting. For example, states where a majority of residents agreed with the statement "I have old-fashioned values about family and marriage" bought more subscriptions per thousand people than states where a majority disagreed. The same difference emerged for the statement "AIDS might be God's punishment for immoral sexual behavior."

And of course the state with the highest per capita purchase of online pornography is ... Utah. Of course.

For more, see Science Shows What Sexual Repression Actually Looks like by Marty Klein, November 8, 2010 at Psychology Today.

Economics: The Myth of Record-High Gold

Gold is at a record only if you fail to adjust for inflation.

The actual record was set 30 years ago, when the price of gold, in today's dollars, hit $2,318 — or 71 percent higher than it closed on Tuesday.

From The Myth of Record-High Gold by David Leonhardt, November 9, 2010 at Economix Blog, New York Times.

Economics: Five Jobless Workers per Opening in September

There were five unemployed workers available for every job opening in the United States in September ....

From Five Jobless Workers per Opening in September by Catherine Rampell, November 9, 2010 at Economix Blog, New York Times.

Mind: Your Future Happiness Depends Less on the Present than You Might Think

You make a lot of decisions based on how you think they will make you feel in the future. Car dealers ask you to think about how happy you'll be driving a beautiful new car. Ads for seafaring cruises ask you to think about how great you'll feel after a relaxing vacation. On the flip side, people work hard for a new promotion believing that if they don't advance in their career, they will be devastated.

The evidence is pretty clear, though, that big positive and negative events don't have an enormous impact on people's happiness. In a 1998 paper in the Journal of Personality and Social Psychology, Dan Gilbert, Tim Wilson, and their colleagues found that college faculty being evaluated for tenure believed they would be quite unhappy if they were denied tenure. Several months after their tenure decision, though, college faculty who had been denied tenure were no less happy than those who had gotten tenure.

... people have difficulty remembering their initial prediction for how they would feel after a positive or negative event. In one study, they asked voters in the 2008 election how they would feel a week after the election if Barack Obama won. Supporters of John McCain rated that they would be quite unhappy. A week after the election, these same voters were contacted again and asked how happy they were. They were also asked to recall how happy they said they would be before the election. These voters were significantly happier than they predicted they would be (that is the affective forecasting error). They also remembered their prediction as being less extreme than it was. That is, they did not remember predicting that they would be very unhappy.

The researchers demonstrated that this poor memory for previous predictions makes it hard for people to learn to predict better in the future.

Do these affective forecasting errors really matter? In fact, these errors may be both a blessing and a curse.

On the positive side, it can be motivating to be very concerned about a future event. College faculty approaching tenure are often quite productive in the years before their evaluation, because they believe that the outcome of this decision will hugely influence their career. Even though the actual tenure decision won't influence their future happiness much, this hard work may still lay important groundwork for their research in years to come.

On the negative side, though, these affective forecasting errors can also lead to bad decisions. If you really believe that a sports car will make you happier, you may overpay to own it. That means that you will spend a lot of money on a purchase that ultimately won't affect your happiness that much.

For more, see Your Future Happiness Depends Less on the Present than You Might Think by Art Markman, November 12, 2010 at Psychology Today.

Politics: Congressional Earmarks

On earmarks, the House GOP leadership has rallied behind a ban, and 11 of 13 newly elected Republicans in the Senate—including Marco Rubio, Pat Toomey, Ron Johnson and Rand Paul—campaigned against these special-interest spending projects that are typically dropped into bills with little debate or scrutiny. A Senate earmark moratorium is sponsored by veterans Tom Coburn (Oklahoma) and Jim DeMint (South Carolina) and newly elected Kelly Ayotte (New Hampshire).

As the nearby chart shows, the number of earmarks multiplied from nearly 1,500 in 1994 to a little under 14,000 in 2005—before voters ousted what had become the Grand Old Pork Party. It isn't easy to spend so much money so egregiously that even Nancy Pelosi could campaign as a relative fiscal conservative, but the Tom DeLay Republicans managed the feat in 2006.

For more, see The GOP's Spending Tests, November 16, 2010 at The Wall Street Journal.

Health: Your Friends Are Making You Fat and Lazy

You should befriend fit people says Your Friends Are Making You Fat and Lazy by Catherine Rampell, November 9, 2010 at Economix Blog, New York Times.

Economics: The Two Cultures

Ethan Ilzetzki of the London School of Economics and Enrique G. Mendoza and Carlos A. Vegh of the University of Maryland examined stimulus efforts in 44 countries. In a recent National Bureau of Economic Research paper, they argued that fiscal stimulus can be quite effective in low-debt countries with fixed exchange rates and closed economies.

Stimulus measures are generally not as effective, on the other hand, in countries like the U.S. with high debt and floating exchange rates. The authors of the paper pointed to a series of specific circumstances that complicate, to say the least, the effectiveness of increasing public spending: How much stimulus money ends up flowing abroad? What is the relationship between fiscal policy and monetary policy? How do investors respond to fear of future interest rate increases?

For more, see The Two Cultures by David Brooks, November 15, 2010 at The New York Times.

Politics: Deep Cover

From Deep Cover by Tim Eagan, November 4, 2010 at GoComics.

Economics: Fiscal Truths

This article has a good broad-brush discussion of what it would take to achieve sustainability without raising taxes.

Let's look at one sober analysis, from the National Academy of Sciences and the National Academy of Public Administration. Released this year, "Choosing the Nation's Fiscal Future" was produced by an all-star, bipartisan cast that included two Republican former directors of the Congressional Budget Office, President George W. Bush's former deputy director of the Office of Management and Budget, and the Cato Institute's director of tax policy.

For much more, see Fiscal Truths, November 7, 2010 at The Washington Post.

Mind: Weighing Risks, Convicts Display Blind Spots

Men imprisoned for murder and other serious offenses have a well-earned reputation for taking dangerous risks. But their problems with risk assessment go deeper than that, a new study finds.

Relative to men who haven't been incarcerated, prisoners generally have a harder time assessing the probability of big gains as well as harsh losses, says psychologist Thorsten Pachur of the University of Basel, Switzerland, who conducted the investigation with Yaniv Hanoch and Michaela Gummerum, both psychologists at the University of Plymouth in England. In experimental lotteries, prisoners display little appreciation of the benefits they stand a good chance of winning and frequently opt for smaller but sure rewards, Pachur and his colleagues conclude in the October Psychonomic Bulletin and Review.

If prisoners generally don't appreciate or consider the consequences of risky options, increasing punishment will not necessarily be successful in reducing crime, Pachur says. Former prisoners may also find it difficult to see the potential upside of taking a chance on an entry-level job or educational opportunities, the scientists suggest.

For more, see Weighing Risks, Convicts Display Blind Spots by Bruce Bower, November 20, 2010 at ScienceNews.

Healthcare: Older Americans Sicker than Brits, but Live Longer

Older Americans are less healthy than their English counterparts, according to new research. Even so, Americans live just as long, or longer, than their cousins across the pond.

And Americans can give credit to their much maligned health care system for keeping them alive, despite their higher rates of illnesses.

Americans are sicker by far than the English, the researchers report today (Nov. 4) in the journal Demography. The finding echoes a 2006 report from the same research group that found white Americans were much sicker than white English residents.

The new study found that 12 percent of the American sample had diabetes compared with 5.9 percent of the English. Cancer was 74 percent more common in the United States, with 9.6 percent of American respondents reporting a cancer diagnosis compared with 5.5 percent of English respondents. America also higher rates of lung disease, heart disease and stroke.

But despite all that extra illness, older Americans don't die earlier than their British counterparts. In the 55 to 64-year-old age group, death rates were equivalent. After age 65, Americans had a slightly greater probability of survival than the English.

The disconnect between disease and mortality is likely due to the tendency of the American health care system to aggressively diagnose and treat illness, Smith said. Americans undergo more screening for diseases such as cancer than Western Europeans and are more likely to get intensive treatment sooner.

"The route that we've chosen to go is a very expensive route," Smith said. "That's why we spend twice as much [on health care] relative to GDP [gross domestic product] as the English do. But we get a benefit from it."

"We have a system that has good outcomes at an unsustainable cost, and I'm not sure health care reform has changed that equation," he said.

One problem, Smith said, is that Americans' high rate of illness may fall outside the control of doctors and hospitals.

"Take, just for example, the fact that Americans have bigger bellies than the English," Smith said. "That wasn't done to us by our doctors ... It has a lot to do with what we eat and how much exercise we do."

For more, see Surprise: Older Americans Sicker than Brits, but Live Longer by Stephanie Pappas, November 4, 2010 at Live Science.

Science: Bubbles of Energy Are Found in Galaxy

An interesting image of our galaxy ...

For more, see Bubbles of Energy Are Found in Galaxy by Dennis Overbye, November 9, 2010 at The New York Times.

Economics: What Spending Should the GOP Cut?

Conservatives are starting to talk about where to cut the federal budget. Here are some of their suggestions which add up to cutting $51 billion, leaving $1,300 billion to go.

Some initial targets for GOP reformers, with rough annual savings, could include: community development subsidies ($15 billion), public housing subsidies ($9 billion), urban transit subsidies ($9 billion), and foreign development aid ($18 billion). On the entitlement side, initial cuts could include raising the retirement age for Social Security and introducing progressive price indexing to reduce the growth rate of future benefits.

For more, see What Spending Should the GOP Cut? by Chris Edwards, November 3, 2010 at Cato @ Liberty.

Society: The Crossroads Nation

If you are passionate about fashion, maybe you will go to Paris. If it's engineering, maybe it'll be Germany. But if you are passionate about many other spheres, I suspect you'll want to be in America.

You'll want to be in the U.S. because English has become the global language. You'll want to come because American universities lead the world in research and draw many of the best minds from all corners of the earth.

You'll want to be there because American institutions are relatively free from corruption. Intellectual property is protected. Huge venture capital funds already exist.

Moreover, the United States is a universal nation. There are already people there with connections all over the world. A nation of immigrants is more permeable than say, Chinese society.

You also observe that America hosts the right kind of networks — ones that are flexible and intense. Study after study suggests that America is one of those societies with high social trust. Americans build large, efficient organizations that are not bound by the circles of kinship and clan. Study after study finds that Americans are not hierarchical. American children are raised to challenge their parents. American underlings are relatively free to challenge their bosses. In this country you're less likely to have to submit to authority.

For more, see The Crossroads Nation by David Brooks, November 8, 2010 at The New York Times.

Politics: Obama's Trip Costs More Per Day Than the War in Afghanistan

More about the baloneysphere (after the ad) ...

From Doubtsourced November 8, 2010 at The Daily Show.

Taxes: Support Increases for Permanent Estate-Tax Repeal

More people would rather pay their taxes before they die than after ...

A recent Harris Interactive poll found two-thirds of American voters support permanent repeal [of estate taxes]. Another recent poll by Ayres, McHenry and Associates found nearly half of self-identified Democratic voters oppose the tax returning to pre-2001 levels, which it is slated to do in January.

Absent congressional action, the estate tax will be reinstated next year and slap a 55 percent tax on estates worth more than $1 million.

From Support Increases for Permanent Estate-Tax Repeal by Jay Heflin, November 4, 2010 at The Hill.