Tidbits Quotations
To Accompany the April 28, 2011 edition of Tidbits
Bob Jensen at Trinity University

  • "The New Face of 'Poverty'," by James Taranto, The Wall Street Journal Best of the Web Newsletter, April 22, 2011

    Among "the persons whom the Census Bureau identifies as 'poor,' " 38% were homeowners. Among "poor" households, 62% owned a car, 14% two or more cars, nearly half had air-conditioning, and 31% had microwave ovens. "Nationwide, some 22,000 'poor' households have heated swimming pools or Jacuzzis." [botwt0422] Apple.com

    One thing only rich people had back in 1990, though, was portable telephones. That's changed, hasn't it? If you're reading this column, you very likely have a cellular phone. You may even be reading this column on your cellular phone.

    But cellphones aren't just ubiquitous. In what the New York Times calls "a strange twist," they've become symbols of poverty. Arkansas and Mississippi, those perennial economic laggards, "find themselves at the top of a new state ranking: They have the highest concentrations of people in the nation who have abandoned landlines in favor of cellular phones."

    Continued in article

    "In Praise of Marx," by Terry Eagleton, Chronicle of Higher Education's The Chronicle Review, April 10, 2011 ---

    "A Requiem for Marx," by Frank E. Manuel, university professor emeritus at Brandeis University, in the spring issue of Daedalus

    For the suffering of Karl Marx the exile, we can feel compassion; for his elaborate theoretical system, benign doubt and perhaps selective approval; for the abominable practices instituted in his name, loathing. A requiem for Marx cannot ignore the iniquities of his offspring -- prophets and messiahs must share the blame for the excesses of their followers -- but the banner that he unfurled need not be interred with his bones. Even a skeptical utopian like myself can still believe in the worth of the guiding principle: from each according to his abilities, to each according to his needs

    "Academic Rot," by Walter E. Williams, Townhall, April 23, 2011 ---

    Jensen Comment
    Sometimes Professor Williams is a bit over the top, but I still admire his academic honesty in a world of political correctness. I respect him more than I respect David Horowitz.

    Bob Jensen's threads on political correctness are at

    "The White House Wants a List Want a federal contract? Show politicians the money," The Wall Street Journal, April 25, 2011 ---

    "Professor Cornpone Inc.:  A Gingrich ethanol update," The Wall Street Journal, April 27, 2011 ---

    What an interesting turn in our running debate over ethanol with Newt Gingrich, the former GOP Speaker who wants to be President. Professor Gingrich says his ethanol support is grounded in his lifetime of studying history and intellectual problems, but what about that $312,500 from the ethanol lobby?

    The Center for Public Integrity has examined IRS records and reports that Mr. Gingrich's shop earned that sum for his role as a "consultant" in 2009 for Growth Energy, one of the ethanol lobbies. The center cites documents listing his duties as speaking "positively on ethanol related topics to media," plus giving advice on "strategy and communication issues." Mr. Gingrich's salvos against us came in a lecture to the Renewable Fuels Association, a separate ethanol lobby, so we have to admit the Speaker is ecumenical in his salesmanship.

    Rick Tyler, Mr. Gingrich's spokesman, notes his boss has long supported ethanol, including during his time in Congress. We've never suggested Mr. Gingrich has been bought off, though of course there wouldn't be an ethanol lobby to hire Mr. Gingrich if there weren't politicians like Mr. Gingrich willing to prop it up with taxpayer dollars, tariffs and mandates.

    In a letter responding to our January 31 editorial "Professor Cornpone," he wrote—in what we'd call a Clintonian construction—that "I am not a lobbyist for ethanol, not for anyone." Mr. Tyler reiterates that Mr. Gingrich "has never been a lobbyist and had never lobbied," though in our view the Beltway distinction between "consultant" and "lobbyist" is nominal.

    Continued in article

    Why tax attorneys and CPAs and government employee unions despise guys like Art Laffer
    "The 30-Cent Tax Premium Tax compliance employs more workers than Wal-Mart, UPS, McDonald's, IBM and Citigroup combined," by Arthur B. Laffer, The Wall Street Journal, April 18, 2011 ---

    Simplifying the tax code should be a top priority. Regardless of the reform approach taken, the U.S. economy will be enhanced greatly by significantly reducing the complexity of the current tax code. In a time of global economic competition, we cannot afford the luxury of a Byzantine tax system.

    Jensen Comment
    To this we might add half of the U.S. households (rich and poor alike) who pay no income taxes but take full advantage of government services funded by the other half.---


    The fact is, some schools represent terrific investments. At Caltech, financial aid recipients can expect to spend $91,250 for a degree that over 30 years will allow them to repay that investment and out-earn a high school graduate by more than $2 million. But schools like Caltech are the exception that proves the rule: most students would be better off investing their college nest eggs in the S&P 500 rather than a college education. So if you are going to choose college, it pays to choose wisely.
    Louis Lavelle, Business Schools Editor Bloomberg Business Week, April 14, 2011

    "The New Math: College Return on Investment," Bloomberg Business Week Special Report, April 2011 ---

    Jensen Comment
    Unlike in Germany, what is lacking in the United States is a status, prestige, and in some instances high earnings in the skilled trades. Our best and brightest high school students want to go to college rather than trade schools schools and apprenticeships like those skilled workers that thrive in Germany. As a result we get high school graduates that are wiping out the retirement savings of their parents and putting themselves deep in debt just for college degrees so they can stand in unemployment lines four to seven years later, some with PhDs in hand who are seeking to sell Big Macs and fries.

    Last week a television news program featured a woman who graduated from Columbia University with an $80,000 government loan to pay back. She got a relatively low paying job that required a college degree, but her scheduled loan repayments will run on for 20 more years until she is about 50 years old.

    We're bombarded with statistics about how much more the "average college graduate" makes than a mere high school graduate. However, nobody's exactly average at the mean. Means suffer from things like kurtosis, heteroscedasticity, nonstationarities, Black Swans, and 50% or more of the sampling population that's below the earned income means. Many naive people think they are assured of higher earnings if they get a college degree. How little they understand if they believe that fallacy and along with the legend of Santa Claus. Until it's too late, they just don't realize how many law school graduates. MBA graduates, and even nursing graduates are now collecting unemployment benefits or working jobs that require no college education. Times have now changed for women who must think of supporting themselves and their families rather than just marry high income husbands that have become much less likely to be "high income" husbands.

    Of course there's much more to education than a career. But in this age it's possible to become superbly educated on your own if you have the drive to take advantage of all the free offerings that are available for an education that is not necessarily encumbered by career aspirations. You can be a licensed plumber and a literary scholar if being a literary scholar is an aspiration in life ---

    The Case Against College Education ---


    The author (Ayn Rand)  of "Atlas Shrugged" was an individualist, not a conservative, and she knew big business was as much a threat to capitalism as government bureaucrats.
    Donald L. Luskin


    "Remembering the Real Ayn Rand," by Donald L. Luskin, The Wall Street Journal, April 14, 2011 ---

    Tomorrow's release of the movie version of "Atlas Shrugged" is focusing attention on Ayn Rand's 1957 opus and the free-market ideas it espouses. Book sales for "Atlas" have always been brisk—and all the more so in the past few years, as actual events have mirrored Rand's nightmare vision of economic collapse amid massive government expansion. Conservatives are now hailing Rand as a tea party Nostradamus, hence the timing of the movie's premiere on tax day.

    When Rand created the character of Wesley Mouch, it's as though she was anticipating Barney Frank (D., Mass). Mouch is the economic czar in "Atlas Shrugged" whose every move weakens the economy, which in turn gives him the excuse to demand broader powers. Mr. Frank steered Fannie Mae and Freddie Mac to disaster with mandates for more lending to low-income borrowers. After Fannie and Freddie collapsed under the weight of their subprime mortgage books, Mr. Frank proclaimed last year: "The way to cure that is to give us more authority." Mouch couldn't have said it better himself.

    But it's a misreading of "Atlas" to claim that it is simply an antigovernment tract or an uncritical celebration of big business. In fact, the real villain of "Atlas" is a big businessman, railroad CEO James Taggart, whose crony capitalism does more to bring down the economy than all of Mouch's regulations. With Taggart, Rand was anticipating figures like Angelo Mozilo, the CEO of Countrywide Financial, the subprime lender that proved to be a toxic mortgage factory. Like Taggart, Mr. Mozilo engineered government subsidies for his company in the name of noble-sounding virtues like home ownership for all.

    Still, most of the heroes of "Atlas" are big businessmen who are unfairly persecuted by government. The struggle of Rand's fictional steel magnate Henry Rearden against confiscatory regulation is a perfect anticipation of the antitrust travails of Microsoft CEO Bill Gates. In both cases, the government's depredations were inspired by behind-the-scenes maneuverings of business rivals. And now Microsoft is maneuvering against Google with an antitrust complaint in the European Union.

    The reality is that in Rand's novel, as in life, self-described capitalists can be the worst enemies of capitalism. But that doesn't fit in easily with the simple pro-business narrative about Rand now being retailed.

    Today, Rand is celebrated among conservatives: Rep. Paul Ryan (R., Wis.) insists that all his staffers read "Atlas Shrugged." It wasn't always this way. During Rand's lifetime—she died in 1982—she was loathed by the mainstream conservative movement.

    Rand was a devout atheist, which set her against the movement's Christian bent. She got off on the wrong foot with the movement's founder, William F. Buckley Jr., when she introduced herself to him in her thick Russian accent, saying "You are too intelligent to believe in God!" The subsequent review of "Atlas Shrugged" by Whittaker Chambers in Buckley's "National Review" was nothing short of a smear, and it set the tone for her relationship with the movement ever since—at least until now.

    Rand rankled conservatives by living her life as an exemplary feminist, even as she denied it by calling herself a "male chauvinist." She was the breadwinner throughout her lifelong marriage. The most sharply drawn hero in "Atlas" is the extraordinarily capable female railroad executive Dagny Taggart, who is set in contrast with her boss, her incompetent brother James. She's the woman who deserves the man's job but doesn't have it; he's the man who has the job but doesn't deserve it.

    Rand was strongly pro-choice, speaking out for abortion rights even before Roe v. Wade. In late middle age, she became enamored of a much younger man and made up her mind to have an affair with him, having duly informed her husband and the younger man's wife in advance. Conservatives don't do things like that—or at least they say they don't.

    These weren't the only times Rand took positions that didn't ingratiate her to the right. She was an early opponent of the Vietnam war, once saying, "I am against the war in Vietnam and have been for years. . . . In my view we should fight fascism and communism when they come to this country." During the '60s she declared, "I am an enemy of racism," and advised opponents of school busing, "If you object to sending your children to school with black children, you'll lose for sure because right is on the other side."

    If anything, Rand's life ought to ingratiate her to the left. An immigrant woman, she arrived alone and penniless in the United States in 1925. Had she shown up today with the same tale, liberals would give her a driver's license and register her to vote.

    Continued in article

    Movie Review
    "Atlas Shrugged Part I:  Where is John Galt?" by Kurt Loder, Reason Magazine, April 14, 2011 ---
    With video clips

    It’s a blessing, I suppose, that Ayn Rand, who loved the movies, and actually worked extensively in the industry, isn’t alive to see what’s been made of her most influential novel. The new, long-awaited film version of Atlas Shrugged is a mess, full of embalmed talk, enervated performances, impoverished effects, and cinematography that would barely pass muster in a TV show. Sitting through this picture is like watching early rehearsals of a stage play that’s clearly doomed.   

    The movie is especially disappointing because Rand’s 1957 book, while centrally concerned with ethical philosophy (and inevitably quite talky), has a juicy plot that, in more capable hands, might have made a sensational film. (That possibility, alas, may now be closed off.) As anyone reading this will probably know, the story concerns strong-willed Dagny Taggart, who’s fighting to save her family railroad, Taggart Transcontinental, from the inept leadership of her brother, James, a moral weakling, and from the metastasizing reach of government regulation. Dagny finds a kindred spirit in Henry Rearden, a principled industrialist who has formulated a new kind of steel that Dagny intends to use in upgrading Transcontinental’s decaying tracks. She and Rearden are opposed at every turn by collectivist politicians and corporate titans corrupted by their addiction to the government teat. Meanwhile, the nation’s most productive businessmen, demoralized by rampant political interference, are vanishing one by one from the public scene. And a mysterious figure named John Galt appears to have something to do with this.     

    The film was obviously a labor of love for producer John Aglialoro, a multimillionaire Randian who held movie rights to the book for 18 years, and made every effort to set it up as a professional production. (Angelina Jolie was famously attached at one point.) Then, last year, with his option running out, Aglialoro decided he had no choice but to make the movie himself. He quickly hired Brian Patrick O’Toole, a writer of low-budget horror films, to work with him on the script, and an actor, Paul Johannson (of TV’s One Tree Hill) to direct. He also managed to sign some seasoned professionals for the cast: Graham Beckel (Brokeback Mountain) in the role of oil magnate Ellis Wyatt; Edi Gathegi (from the Twilight movies) in the part of Dagny’s loyal lieutenant Eddie Willers; and two veterans of Coen brothers films, Michael Lerner and Jon Polito, to play political fixer Wesley Mouch and the collusive corporate sleaze Orren Boyle.  

    Unfortunately, Aglialoro then cast a pair of TV actors in the key roles of Dagny and Rearden. Taylor Schilling (Mercy) is an appealing performer, but she’s not really equipped to project Dagny’s passionate determination; and Grant Bowler (True Blood), an actor of low-key warmth, is too unassertive to hold the screen as the uncompromising Rearden. It may be unfair to judge these two on their work here—they don’t seem to have been given much in the way of useful direction, and they’ve been set adrift in a succession of poorly blocked and shot scenes. Because of budget constraints, presumably, the whole movie seems underpopulated; and the one big party sequence is so low on energy that it resembles a casting call for which the auditioning actors have turned up already in costume. There’s quite a bit of narrative padding and a woeful lack of action. We see rather too much footage of sleek trains speeding through countryside (assisted at times by surprisingly crude computer generation), and there are lingering shots of hilly, verdant landscapes shoehorned into the proceedings to no purpose. (At one point there’s even a close-up of a flower.)

    Anyone not familiar with Rand’s novel will likely be baffled by the goings-on here. Characters spend much time hunkered around tables and desks nattering about rail transport, copper-mining, and the oil business. A few of these people are stiffly virtuous (“I’m simply cultivating a society that values individual achievement”), but most are contemptible (“We must act to benefit society”…“a committee has decided”…“We rely on public funding.”) These latter creeps should set our blood boiling, but they’re so cartoonishly one-dimensional that any prospective interest soon slumps. We are initially intrigued by the recurring question, “Who is John Galt?” But since the movie covers only the first third of the novel (a crippling miscalculation), we never really find out, apart from noticing an anonymous figure lurking around the edges of the action, togged out in a trench coat and a rain-soaked fedora like a film-noir flatfoot who’s wandered into an epoch far away from his own.      

    Rand’s book is set in an unspecified future that bears a startling resemblance to our own here-and-now. There’s a stock-market collapse, much populist demagoguery and union thuggery, and chaos in the Middle East that has driven gas prices to $37 a gallon (which purportedly explains the resuscitation of railroads as the only affordable transport for passengers and freight). The book is set in an unspecified future; the movie relocates the story to the year 2016, but it might as easily have been next week. These sociopolitical similarities might have been more rousing if they had been punched home more boldly. The occasional bursts of TV news footage employed here don’t really do the job.

    Although Rand’s novel is well over a thousand pages long, one can’t help wondering if, with a radically compressed script, it couldn’t have been turned into a tightly edited two-and-a-half-hour film—into a real movie, in other words, not just a limply illustrated literary classic. Now we may never know. But this picture is too lusterless to stir much indignation. Instead, it leaves us feeling, in Rand’s words, “the merciless zero of indifference.”            

    Continued in article

    Also see http://reason.com/blog/2011/04/11/reasontv-who-is-john-galt

    "Obama's Permanent Spending Binge:  If government got by with 20% of GDP in 2007, why not in 2021, when GDP will be substantially higher?" by John B. Taylor, The Wall Street Journal, April 21, 2011 ---

  • Americans are clamoring for a fact-based debate about the budget, but the numbers they're hearing from Washington are terribly confusing. Here's an example: Speaking at a Facebook town hall meeting here on Wednesday, President Obama sometimes talked about saving $4 trillion, at other times $2 trillion, and he varied whether it was over 10 years or 12 years, never mentioning any one year.

    A simple chart, like the one nearby, would greatly clarify the debate. It shows total federal government spending year-by-year for the two decades starting in the year 2000. Spending is shown as a percentage of GDP, which is a sensible and quite common way to assess trends: When the percentage rises, government spending rises relative to total income or total goods and services produced in our economy.

    For the past decade, the chart shows the recent history of government spending. For the next decade—the window for the current budget—it shows three different spending visions for the future.

    The uppermost line shows outlays under the official budget submitted by Mr. Obama to Congress on Feb. 14. The lowest line shows the House Budget Resolution submitted by House Budget Committee Chairman Paul Ryan on April 5, while the third line shows year-by-year outlays I estimated from the 12-year totals in the new budget proposed by the president on April 13.

    The chart clearly reveals a number of important facts that are not coming up in town hall meetings. Most obvious is the huge bulge in spending in the past few years. In 2000 spending was 18.2% of GDP. In 2007 it was 19.6%. But in the three years since 2009 it's jumped to an average of 24.4%.

    Second, and perhaps even more striking, the chart shows that Mr. Obama, in his budget submitted in February, proposed to make that spending binge permanent. Spending would still be more than 24% of GDP at the end of the budget window in 2021. The administration revealed its preference in the February budget for a much higher level of government spending than the 18.2% of GDP in 2000 or the 19.6% in 2007.

    Third, the House budget plan proposed by Rep. Paul Ryan (R., Wis.) simply removes that spending binge—it gradually returns spending as a share of GDP back to a level seen only three years ago.

    When I show people this chart they ask why Washington is even having the debate. They say: If government agencies and programs functioned with 19% to 20% of GDP in 2007, why is it so hard for them to function with that percentage in 2021, when GDP will be substantially higher and with many opportunities for reforms and increased efficiencies? And if GDP and employment grow more quickly, as they would if private investment increased as a result of lower government spending and debt, then that 19% to 20% share of GDP could provide much more in the way of public goods.

    Fourth, the chart shows that the second Obama administration budget, submitted a week after the Ryan House budget, is substantially different from the first administration budget. It is highly unusual for an administration to decide to submit a second budget, and the effect of this revision is to move the administration's spending vision closer to that of the House. But it still leaves a big chunk of the spending binge in place.

    Fifth, and perhaps most important for economic growth, the chart shows that the House budget effectively deals with the deficit and brings the debt down as a share of GDP without a tax increase. Under the current tax system, revenues as a share of GDP were 18.5% in 2007, so that the budget deficit was only 1.1% of GDP that year. With higher real incomes moving people into higher tax brackets, it is quite likely that under the current tax system revenues will be higher as a share of GDP when the economy fully recovers, perhaps in the 19% to 20% range.

    This means that the House budget plan, with spending in the same range, approximately balances the budget with no increase in taxes. This is good news for economic growth. In contrast, balancing the first or even the second Obama budget requires substantial tax increases—more than the administration has yet to propose.

    Mr. Taylor, a professor of economics at Stanford and a senior fellow at the Hoover Institution, is the author of "Getting Off Track: How Government Actions and Interventions Caused, Prolonged and Worsened the Financial Crisis" (Hoover Press, 2009).


  • "Fertilizing Farms with Tax Dollars:  The case against farm welfare," by Steve Chapman, Reason Magazine, April 14, 2011 ---

  • If you don't mind sweat, dirt, or the smell of manure, this is a great time to be a farmer. Incomes are up, land values are high, and global demand is growing. Oh, and if you're one of the lucky farmers, there's a bonus: a tap on the federal treasury.

    Farm subsidies are an oddity in a competitive, capitalist economy. In what other business can you expect continuing government support, whether you need it or not? But by now, they are as American as kudzu, and about as hard to get rid of.

    It was not exactly a surprise, then, that farm groups and their allies reacted badly when House Budget Committee Chairman Paul Ryan (R-Wis.), unveiled a list of spending cuts that includes paring $30 billion from agriculture programs over the next decade.

    "We are concerned about cuts that might impact the safety net that supports our farmers," protested the American Farm Bureau Federation. The National Farmers Union warned the cuts would "do irreparable harm to American agriculture."

    But the obvious question is not why Ryan proposes to trim farm subsidies by 20 percent or so. The question is why he doesn't cut them by 100 percent.

    After all, they are at odds with everything conservatives believe in. They inflate the federal budget, they require bureaucrats, and they invite the federal government to meddle in areas where it is not needed.

    The old rationale for these programs was that they redistributed income from affluent city slickers to struggling rural folks. But that excuse has about as much contemporary relevance as a horse-drawn plow.

    In recent years, the average farm family has enjoyed an income about 20 percent higher than the average for all families, not to mention five times more net worth. In 2010, net farm income jumped by an estimated 20 percent, according to the Department of Agriculture, and net equity rose nearly 7 percent. The average farm family now makes $86,352 a year.

    Being well-to-do will keep you off Medicaid and food stamps, but that rule doesn't apply when it comes to farm subsidies. Just the opposite: The more you have, the more you get.

    "From 1995-2009," reports Environmental Working Group, "the largest and wealthiest top 10 percent of farm program recipients received 74 percent of all farm subsidies, with an average total payment over 15 years of $445,127 per recipient."

    Farm groups insist these programs are the reason Americans enjoy an abundance of inexpensive food. But the real reason is that American agriculture is so productive, steadily producing more and more crops with fewer workers. Cheap meals are a tribute to the ingenuity and resourcefulness of our farmers, not the brilliance of our politicians.

    Most farmers, in fact, manage with a minimum of federal help because they raise commodities that don't get subsidies. The great majority of government payments go to producers of just five crops: corn, wheat, soybean, rice, and cotton. Yet if you go to the grocery store, you will find racks filled with potatoes, strawberries, broccoli, tomatoes, lettuce, nuts, and carrots, grown without being heavily fertilized with tax dollars.

    Here's how the market in those items works: Farmers plant the crops, harvest the crops, and sell the crops. If things go well, they earn a profit. If not, they don't.

    Those farmers with a knack for making money stay in business and prosper. Those who lose money go bust. It resembles most of the other businesses in America—with the notable exception of the rest of agriculture.

    We really have two agriculture systems in this country. One is based on generous federal subsidies (as with corn and wheat) or strict federal control of production and imports to keep prices high (as with sugar and dairy products). The other relies on open markets, the free interplay of supply and demand, the usual "creative destruction" of a capitalist economy, and the absence of guarantees.

    Continued in article

    "Paul Ryan's Reverse Robin Hood Budget His plan for reducing the deficit isn't 'the only game in town.' It's only the worst," by Alan Blinder," The Wall Street Journal, April 19, 2011 ---

    Professor Alan Blinder from Princeton University today says there's a better solution than the Ryan Plan, but he's keeping it a secret. When can we see a realistic deficit reduction plan from progressives? Tax increases just aren't going to go very far unless we want to kill that 55% of the households that now pay 100% of the personal Federal income taxes.
    "Paul Ryan's Reverse Robin Hood Budget His plan for reducing the deficit isn't 'the only game in town.' It's only the worst," by Alan Blinder," The Wall Street Journal, April 19, 2011 ---


    Jensen Comment
    Professor Blinder's main criticism is that the Ryan Plan is too long term and does not do enough to reduce the trillions in deficits over the next decade. But like most progressives he offers zero hints as to what will be a "better game in town" to reduce deficits now. Presumably he wants to confiscate the incomes of people now making over $250,000 per year, but he really doesn't want to discuss a proposed game plan for tax increases because he secretly knows this will not be enough to make much difference on the deficits and probably will be highly dysfunctional in terms of unemployment. Secretly he most likely supports his Princeton colleague's, Krazy Krugman's, solution of printing dollars to reduce deficits and pay for  my wife's forthcoming very expensive surgery.

    Zimbabwe showed Ben Bernanke, Alan Blinder, and Paul Krugman the way to reduce government deficits. Why can't they convince the rest of us that printing presses are the answer to deficit reduction?

    And, if we keep redefining inflation by taking more and more commodities and services out of the calculation, things won't look so bad while were printing $15 trillion dollars for starters.

    Eventually, the "Core" CPI might only include empty houses and vacant yachts.



    Is it possible to eliminate a $1.5 trillion deficit by increasing rates for taxpayers earning more than $250,000 per year?
    Is it possible to eliminate the above deficit by increasing tax rates for all taxpayers?

    In theory no to Question 1 and yes to Question 2, but in reality, closing the Federal spending gap with tax rate increases would be a total disaster on the economy to a point where the government might take in less rather than more tax revenue.

    Firstly the answer is no unless you more than double what the poor and middle class pay in taxes. And since nearly half the households in the U.S. do not pay any Federal income tax, Congress would probably have to figure how to squeeze blood out of turnips. This would have an extremely adverse impact on middle and lower income families already deep in debt to to pay medical, housing, and education expenses.

    Secondly, the answer is no if you anticipate that most taxpayers that have any form of savings would probably stampede to invest in tax free alternatives such as tax free municipal bonds and bond funds. This coupled with the fact that most savings would be confiscated by the government with such tax increases that business cost of capital and unemployment would soar out of sight. This would be a disaster for business firms seeking capital. But this is what the progressives really want all along. They prefer that most of the jobs move from the private to the public sector. But the Great Depression proved that with all the New Deal efforts to employ workers in the government, the unemployment rate never dipped below 14% until World War II came along to save the U.S. economy at the expense of the European treasuries of our allies in the war.

    The option for raiding European treasuries is not on the table with respect to the Obama and Princeton University (read that Professors Blinder and Krugman tax increase) plans for this forthcoming decade.

    Thirdly, many taxpayers now paying something into the U.S. Treasury would be thrown out of work and impact on the economy would be far worse than the Great Depression of the 1930s.

    But if we could wave a magic wand and prevent all the dynamic reactions to tax rate increases, one solution would look something like this --- keeping in mind that all of this is pure fantasy since the dynamic reactions really cannot be prevented. From Paul Caron's TaxProf Blog on April 18, 2011 ---

    Now what really is your plan, Professor Blinder, that is so superior to the Ryan Plan for reducing the trillions in deficits over the next decade?

    Oh, I see! It's still a secret. But it's bound to be better. Yeah right!

    "Why Aren't The Rich Paying 50 Percent in Income Taxes?" by Nick Gillespie and Meredith Bragg, Reason Magazine, April 8, 2011 ---

    Tax Day (April 18) is fast approaching, which means anxiety and night sweats for about 99 percent of us.

    And bitching and moaning by those at the top of the income pyramid about how they aren't forced to pay even more in taxes. (The top 1 percent of filers pay about 40 percent of income taxes.)

    Secretary of state and cattle-futures queen Hillary Clinton, super-investor Warren Buffett, and best-selling author Stephen King have all recently carped about how rich folks like them should be paying more in taxes. King recently told a Florida rally, "As a rich person, I'm paying 28 percent in taxes. What I want to ask you is, why am I not paying 50?"

    But when it comes to the country's balance sheet, the U.S. doesn't have a revenue problem or a tax-rate problem. We've got a spending problem. Since 1950, revenue from all sources has averaged around 18 percent of Gross Domestic Product, despite top tax rates that have fluctuated from over 90 percent to the high 20-percent range. Regardless of all efforts to jack up revenue (or reduce it), that's what the government can expect to work with.

    Yet spending has averaged about 20 percent of GDP - and is currently at a whopping 25 percent of GDP, a figure not seen since World War II. President Obama's budget plan forecasts spending at 23 percent of GDP over the next decade while Rep. Paul Ryan's GOP plan calls for 20.5 percent. There's your deficit right there, folks.

    But King, Clinton, and Buffett - and you, too - can always pay more to retire federal debt held by the public. Just go to Treasury Direct and make a voluntary donation to reduce the national debt held by the public. So far in calender 2011, Treasury has pulled in an $125,000! Which means there's only about $8.99 trillion to go.

    Watch the video

    "America Is Bankrupt (But Not the Way You Think)," by Umair Haque, Harvard Business Review Blog, April 20, 2011 --- Click Here

    Jensen Comment
    This article has a misleading title and is not really a good reference for how to get us out of our budget deficits mess. It's more about omissions in the GDP calculation. The concluding paragraph reads as follows:

    You might be wondering: "Hey! What happened to Mama Jones?". Well, the answer's simple. She's spent her life toiling to raise the kids and keep the household together — and it was never easy. But just as the industrial age contraption of GDP leaves out "voluntary" and "household" work from our so-called economy pretty much entirely, so too, in my little allegory, do Mama Jones' contributions go largely unrecognized and unrewarded.

    It's interesting how one of the side effects of China's effort to control population and discourage having children is the rise in the tendency for married couples in China to live far apart for employment opportunities for both spouses and to enjoy each others' company at occasional meeting sites. This of course would not be possible for Mama Jones whose life is devoted to raising a family.

    Don't forget to read the comments at the end of this article!

    Bob Jensen's threads on the entitlements mess are at

    "Paul Ryan's Reverse Robin Hood Budget His plan for reducing the deficit isn't 'the only game in town.' It's only the worst," by Alan Blinder," The Wall Street Journal, April 19, 2011 ---

    April 20, 2011 reply from Bob Jensen

    Hi Louis and Linda,
    I probably would never do research on privileged budget items because it is so complicated and confounded with externalities.

    When it comes to government spending, one has to first distinguish those budget items that are discretionary versus non-discretionary. To do this we need some type of criterion. One criterion to consider is whether or not a contract would make the item binding in court. As I mentioned previously many retirement contracts allow beneficiaries to take breaches of contract to court, which is why Congress does not mess with cutting military pensions.

    There are, of course, gray zones. Presumably Congress can choose to add surtaxes to all pensions that it pays, including military pensions and Social Security. Or it can choose to tax medical benefits that it pays such as taxes on usage of Veterans Hospitals or taxes and higher deductibles on Medicare claims.

    Another gray area that makes non-discretionary budget items somewhat discretionary is already being practiced in Medicare. You can keep allowing less and less for medical  services such that claimants can only get cheap and inferior doctors. For example, the surgeon who performed my wife's surgeries three and four under Medicare would not do surgery Number 5 because he stopped accepting any Medicare patients. This means by law that he cannot accept patients who are eligible for Medicare even if they are willing to pay his fees from private funds. May wife had to find another surgeon in another state.

    Under the Romney Care "universal" health insurance plan in Massachusetts, some hospitals discovered the plan was not paying enough to cover out-of-pocket expenses, especially malpractice insurance premiums. So those hospitals dropped the services that had the highest malpractice insurance premiums. Read that as meaning that those hospitals dropped obstetrics departments and refused obstetrics services to all women. These women can still find hospitals that offer such services but the distances are further and the lines are longer and the services are not nearly as good in many instances.

    Also the outstanding orthopaedic hospital in Boston where my wife now has spinal surgeries dropped its emergency room services. An externality of Romney care was reduced medical services for all patients, including those that have premium medical insurance plans from employers. Those on premium plans have fewer choices for emergency rooms and trauma centers because of Romney Care.

    There's a huge difference between General Motors and the government when it comes to budget cutting. General Motors cannot print money and reached a point where it was impossible to meet pension and health care contracts with retirees. In that case the bankruptcy court modified the contracts. In the case of government pensions and medical benefits for retirees, rather than declare bankruptcy our Federal government will probably just print the money needed to honor the contracts. Welcome to Zimbabwe.

    Our state governments like California are in more of a bind. State governments might have to declare bankruptcy and have the bankruptcy courts restructure retirement contracts. At one time Canada came close to losing its national government in favor of provincial governments that would, among other things, print their own currencies. This is no longer entirely out of the question for our 50 states in the United States who would like an option to print their own currencies.

    As far as "privileges" within government budget items deemed discretionary, the top privileges typically go to public safety. Police, fire, and National Guard budgets are being cut somewhat but they are protected from enormous cuts by fears in the minds of voters.  As far as Federal government military budgets are concerned, an extremely expensive item in budgets is for advanced warfare and defense technology. However, not many voters are willing to fall behind our enemies on warfare technology, including technology for blocking communications --- such as when an unnamed advanced-technology nation allegedly shut down the nuclear centrifuges in Iran.

    Another extremely expensive budget item is our CIA, but not many voters will accept CIA budget cuts on the premise that "ignorance is bliss."

    It's one thing to point out research about tax increases and spending cuts on a very broad scale, but when it comes to specifics it becomes an explosive debate that can be political suicide. We now have two choices with trillions in budget deficits. We can raise taxes and make huge spending cuts. Or we keep putting off remedies like we've done for the past two decades at reach a point where it's no longer possible to save the patient.

    Some professors in ivory towers might think it is possible to totally eliminate our international fighting force in favor of a beefed up domestic police force. But the unfunded expenses of past wars will continue to linger over our heads. And it's questionable how many terror attacks this nation is willing to experience with an impotent international fighting force for prevention of future attacks.

    But I really don't want to get into the question of line item budget cuts. This is also probably too explosive for the AECM in terms of politics. We can, however, debate broad issues like whether it's possible to tax ourselves out of trillion dollar deficits with very little serious budget cutting.

    Bob Jensen

    "Here’s Why Health Care Costs Are Outpacing Health Care Efficacy," by Stephen J. Dubner, Freakonomics.com, April 18, 2011 ---

    In a new working paper called “Technology Growth and Expenditure Growth in Health Care” (abstract here, PDF here), Amitabh Chandra and Jonathan S. Skinner offer an explanation:

    In the United States, health care technology has contributed to rising survival rates, yet health care spending relative to GDP has also grown more rapidly than in any other country.  We develop a model of patient demand and supplier behavior to explain these parallel trends in technology growth and cost growth.  We show that health care productivity depends on the heterogeneity of treatment effects across patients, the shape of the health production function, and the cost structure of procedures such as MRIs with high fixed costs and low marginal costs.  The model implies a typology of medical technology productivity:  (I) highly cost-effective “home run” innovations with little chance of overuse, such as anti-retroviral therapy for HIV, (II) treatments highly effective for some but not for all (e.g.  stents), and (III) “gray area” treatments with uncertain clinical value such as ICU days among chronically ill patients.  Not surprisingly, countries adopting Category I and effective Category II treatments gain the greatest health improvements, while countries adopting ineffective Category II and Category III treatments experience the most rapid cost growth. Ultimately, economic and political resistance in the U.S. to ever-rising tax rates will likely slow cost growth, with uncertain effects on technology growth.

    This paper strikes me as sensible, explanatory, and non-ideological to the max. It would be nifty if the people who work in Washington read it, and thought about it, and maybe even acted on it. (And it would be nifty if the Knicks beat the Celtics too, but I’m not holding my breath for either outcome …)

    Here’s a very good paragraph from the paper:

    The science section of a U.S. newspaper routinely features articles on new surgical and pharmaceutical treatments for cancer, obesity, aging, and cardiovascular diseases, with rosy predictions of expanded longevity and improved health functioning (Wade, 2009). The business section, on the other hand, features gloomy reports of galloping health insurance premiums (Claxton et al., 2010), declining insurance coverage, and unsustainable Medicare and Medicaid growth leading to higher taxes (Leonhardt, 2009) and downgraded U.S. debt (Stein, 2006). Not surprisingly, there is some ambiguity as to whether these two trends, in outcomes and in expenditures, are a cause for celebration or concern.

    And the authors offer good specific examples of what they built their argument on, noting the …

    Continued in article

    Bob Jensen's threads on health care are at

    "Why Do We Keep Choosing Ineffective Urban Interventions?" by Charles Ogletree, Harvard Business School Blog, April 15, 2011 --- Click Here

    This post is part of a three-week series exploring the re-invention of the social infrastructure of cities, published in partnership with the Advanced Leadership Initiative at Harvard University.

    Last week, the NAACP released a report with a blunt, but sadly accurate, title Misplaced Priorities. I could not help but think about this title in terms of the House of Representatives' proposed zeroing out of YouthBuild. YouthBuild has been rigorously evaluated and justifiably acclaimed for its success in turning around the lives of troubled youths, many court-involved, most of color, living in urban centers across the country.

    The program keeps them out of prison, provides them with an education, work skills, and a supportive network. By building affordable housing units, it gives them the chance to invest in their communities and become leaders there. This is exactly the type of rethinking our Think Tank is designed to encourage/embrace as we gather in two weeks to contemplate/figure out ways to revitalize our cities.

    All for $16,000 per youth — what we might call a bargain. Even before any cuts, almost 20,000 youths are turned away from YouthBuild each year because of lack of funding. If the House gets its way, YouthBuild programs across the country will be decimated. The result: more crime, more poverty, more joblessness, more substance abuse, more fractured families, less state revenue, more despair. Misplaced Priorities hardly captures the astonishing myopia of the House's proposal. As Woody Guthrie once sang, "Some rob you with a sixgun, some with a fountain pen."

    At the Charles Hamilton Houston Institute for Race and Justice, we examine these types of investment choices, and the trade-offs that are made, regularly, when we choose the most expensive and least effective interventions, such as prisons, juvenile halls, and death penalty prosecutions, over programs like YouthBuild, that actually promote public safety and improve quality of life in communities hardest hit by crime and violence.

    As an example, let's consider North Carolina. Last year, Philip Cook, an economics professor at Duke University, released findings that the continued use of the death penalty (link PDF) costs North Carolina taxpayers almost $11 million more than they would spend if the state replaced capital punishment with life sentences without the possibility of parole. These costs include additional attorneys, resources demanded by the District Attorney and courts for capital prosecutions, and the lengthy appeal process. These costs continue to be incurred by the state each year, even though death sentences have declined considerably and no one has been executed there since 2007.

    What might that $11 million buy if it were reinvested? Well, for starters, it could provide almost 700 slots to youths who wanted to join YouthBuild. Another choice? The Alliance for Excellent Education estimates that a 5% increase in male high school graduates in North Carolina would generate annual savings of approximately $152 million. In addition to these increased savings, this rise in graduation rates would also yield $80 million in annual earnings.

    So, why not invest that $11 million in implementing the Talent Development program in more high schools in the state? Talent Development provides structured support to struggling students during the critical ninth grade year, a year when many students opt to drop out. Like YouthBuild, it has been subject to rigorous independent evaluations. At an average cost of $200,000 per school, an additional $11 million could provide 55 schools in the state with an intervention that will prevent early dropouts. By any objective measure, an investment in either of these programs will yield far greater public safety returns — not to mention actual revenue — than capital prosecutions.

    The fundamental question that we at the Houston Institute are trying to illuminate with this type of analysis is this one: In an era of drastically shrinking public resources, is the choice to continue to lavish public dollars on the most expensive and least effective interventions, even as entire communities of color are starved for the resources and opportunities they need to thrive, a deliberate one? Or, if given more complete information about the public safety returns of alternative strategies and investments, would lawmakers and the public choose differently?

    Continued in article

    "California Dreamin'—of Jobs in Texas:  Hounded by taxes and regulations, employers in the once-Golden State are moving East," by John Fund, The Wall Street Journal, April 22, 2011 ---

    It wasn't your usual legislative hearing. A group of largely Republican California lawmakers and Democratic Lt. Gov. Gavin Newsom traveled here last week to hear from businesses that have left their state to set up shop in Texas.

    "We came to learn why they would pick up their roots and move in order to grow their businesses," says GOP Assemblyman Dan Logue, who organized the trip. "Why does Chief Executive magazine rate California the worst state for job and business growth and Texas the best state?"

    The contrast is undeniable. Texas has added 165,000 jobs during the last three years while California has lost 1.2 million. California's jobless rate is 12% compared to 8% in Texas.

    "I don't see this as a partisan issue," Mr. Newsom told reporters before the group met with Texas Republican Gov. Rick Perry. The former San Francisco mayor has many philosophical disagreements with Mr. Perry, but he admitted he was "sick and tired" of hearing about the governor's success luring businesses to Texas.

    Hours after the legislators met with Mr. Perry, another business, Fujitsu Frontech, announced that it is abandoning California. "It's the 70th business to leave this year," says California business relocation expert Joe Vranich. "That's an average of 4.7 per week, up from 3.9 a week last year." The Lone Star State was the top destination, with 14 of the 70 moving there.

    Andy Puzder, the CEO of Hardee's Restaurants, was one of many witnesses to bemoan California's hostile regulatory climate. He said it takes six months to two years to secure permits to build a new Carl's Jr. restaurant in the Golden State, versus the six weeks it takes in Texas. California is also one of only three states that demands overtime pay after an eight-hour day, rather than after a 40-hour week. Such rules wreak havoc on flexible work schedules based on actual need. If there's a line out the door at a Carl's Jr. while employees are seen resting, it's because they aren't allowed to help: Break time is mandatory.

    "You can't build in California, you can't manage in California and you have to pay a big tax," Mr. Puzder told the legislators. "In Texas, it's the opposite—which is why we're building 300 new stores there this year."

    Continued in article

    "Of the 1%, by the 1%, for the 1%," by Nobel Lauriate Joseph E. Stiglitz, Vanity Fair, May 2011 ---

    Alexis de Tocqueville once described what he saw as a chief part of the peculiar genius of American society—something he called “self-interest properly understood.” The last two words were the key. Everyone possesses self-interest in a narrow sense: I want what’s good for me right now! Self-interest “properly understood” is different. It means appreciating that paying attention to everyone else’s self-interest—in other words, the common welfare—is in fact a precondition for one’s own ultimate well-being. Tocqueville was not suggesting that there was anything noble or idealistic about this outlook—in fact, he was suggesting the opposite. It was a mark of American pragmatism. Those canny Americans understood a basic fact: looking out for the other guy isn’t just good for the soul—it’s good for business.

    The top 1 percent have the best houses, the best educations, the best doctors, and the best lifestyles, but there is one thing that money doesn’t seem to have bought: an understanding that their fate is bound up with how the other 99 percent live. Throughout history, this is something that the top 1 percent eventually do learn. Too late.

    Continued in article

    April 15, 2011 message from

    The Economist "Democracy in America" commentator who appears to be
    classical liberal


    The other Economist commentator in "Democracy in America", who appears
    to a modern day "liberal."


    Ramesh Fernando
    CMA (Canada) Candidate
    Ottawa, Canada


    "Who Do You Trust? Obama and Ryan agree: This is a "defining moment," by Daniel Henninger, The Wall Street Journal, April 14, 2011 ---

    They say America is politically divided. But in the days following the appearance of Paul Ryan's GOP budget in the firmament last week, the planets of political debate finally aligned. We were all agreed: The issues before us were the future of federal spending, the future of federal entitlement programs, and the future of federal taxes. The terms set, the debate would proceed—after the president of the United States addressed the subject in a major speech on the nation's fiscal future.

    Instead, Barack Obama at George Washington University poisoned the well. Where is Rahm Emanuel when we need him?

    Continued in article

    "The Presidential Divider:  Obama's toxic speech and even worse plan for deficits and debt," The Wall Street Journal, April 14, 2011 ---

    Did someone move the 2012 election to June 1? We ask because President Obama's extraordinary response to Paul Ryan's budget yesterday—with its blistering partisanship and multiple distortions—was the kind Presidents usually outsource to some junior lieutenant. Mr. Obama's fundamentally political document would have been unusual even for a Vice President in the fervor of a campaign.

    The immediate political goal was to inoculate the White House from criticism that it is not serious about the fiscal crisis, after ignoring its own deficit commission last year and tossing off a $3.73 trillion budget in February that increased spending amid a record deficit of $1.65 trillion. Mr. Obama was chased to George Washington University yesterday because Mr. Ryan and the Republicans outflanked him on fiscal discipline and are now setting the national political agenda.

    Mr. Obama did not deign to propose an alternative to rival Mr. Ryan's plan, even as he categorically rejected all its reform ideas, repeatedly vilifying them as essentially un-American. "Their vision is less about reducing the deficit than it is about changing the basic social compact in America," he said, supposedly pitting "children with autism or Down's syndrome" against "every millionaire and billionaire in our society." The President was not attempting to join the debate Mr. Ryan has started, but to close it off just as it begins and banish House GOP ideas to political Siberia.

    Mr. Obama then packaged his poison in the rhetoric of bipartisanship—which "starts," he said, "by being honest about what's causing our deficit." The speech he chose to deliver was dishonest even by modern political standards. ***

    The great political challenge of the moment is how to update the 20th-century entitlement state so that it is affordable. With incremental change, Mr. Ryan is trying maintain a social safety net and the economic growth necessary to finance it. Mr. Obama presented what some might call the false choice of merely preserving the government we have with no realistic plan for doing so, aside from proposing $4 trillion in phantom deficit reduction over a gimmicky 12-year budget window that makes that reduction seem larger than it would be over the normal 10-year window.

    Mr. Obama said that the typical political proposal to rationalize Medicare's gargantuan liabilities is that it is "just a matter of eliminating waste and abuse." His own plan is to double down on the program's price controls and central planning. All Medicare decisions will be turned over to and routed through an unelected commission created by ObamaCare—which will supposedly ferret out "unnecessary spending." Is that the same as "waste and abuse"?

    Fifteen members will serve on the Independent Payment Advisory Board, all appointed by the President and confirmed by the Senate. If per capita costs grow by more than GDP plus 0.5%, this board would get more power, including an automatic budget sequester to enforce its rulings. So 15 sages sitting in a room with the power of the purse will evidently find ways to control Medicare spending that no one has ever thought of before and that supposedly won't harm seniors' care, even as the largest cohort of the baby boom generation retires and starts to collect benefits.

    Mr. Obama really went off on Mr. Ryan's plan to increase health-care competition and give consumers more control, barely stopping short of calling it murderous. It's hardly beyond criticism or debate, but the Ryan plan is neither Big Rock Candy Mountain nor some radical departure from American norms.

    Mr. Obama came out for further cuts in the defense budget, but where? His plan is to ask Defense Secretary Bob Gates and Joint Chiefs Chairman Mike Mullen "to find additional savings," whatever those might be, after a "fundamental review." These mystery cuts would follow two separate, recent rounds of deep cuts that were supposed to stave off further Pentagon triage amid several wars and escalating national security threats.

    Mr. Obama rallied the left with a summons for major tax increases on "the rich." Every U.S. fiscal trouble, he claimed, flows from the Bush tax cuts "for the wealthiest 2%," conveniently passing over what he euphemistically called his own "series of emergency steps that saved millions of jobs." Apparently he means the $814 billion stimulus that failed and a new multitrillion-dollar entitlement in ObamaCare that harmed job creation.

    Under the Obama tax plan, the Bush rates would be repealed for the top brackets. Yet the "cost" of extending all the Bush rates in 2011 over 10 years was about $3.7 trillion. Some $3 trillion of that was for everything but the top brackets—and Mr. Obama says he wants to extend those rates forever. According to Internal Revenue Service data, the entire taxable income of everyone earning over $100,000 in 2008 was about $1.582 trillion. Even if all these Americans—most of whom are far from wealthy—were taxed at 100%, it wouldn't cover Mr. Obama's deficit for this year.

    Mr. Obama sought more tax-hike cover under his deficit commission, seeming to embrace its proposal to limit tax deductions and other loopholes. But the commission wanted to do so in order to lower rates for a more efficient and competitive code with a broader base. Mr. Obama wants to pocket the tax increase and devote the revenues to deficit reduction and therefore more spending. So that's three significant tax increases—via higher top brackets, the tax hikes in ObamaCare and fewer tax deductions.

    Continued in article

    "There Is No Male-Female Wage Gap A study of single, childless urban workers between the ages of 22 and 30 found that women earned 8% more than men," by Carrie Lucas, The Wall Street Journal, April 12, 2011 ---

    Tuesday is Equal Pay Day—so dubbed by the National Committee for Pay Equity, which represents feminist groups including the National Organization for Women, Feminist Majority, the National Council of Women's Organizations and others. The day falls on April 12 because, according to feminist logic, women have to work that far into a calendar year before they earn what men already earned the year before.

    In years past, feminist leaders marked the occasion by rallying outside the U.S. Capitol to decry the pernicious wage gap and call for government action to address systematic discrimination against women. This year will be relatively quiet. Perhaps feminists feel awkward protesting a liberal-dominated government—or perhaps they know that the recent economic downturn has exposed as ridiculous their claims that our economy is ruled by a sexist patriarchy.

    The unemployment rate is consistently higher among men than among women. The Bureau of Labor Statistics reports that 9.3% of men over the age of 16 are currently out of work. The figure for women is 8.3%. Unemployment fell for both sexes over the past year, but labor force participation (the percentage of working age people employed) also dropped. The participation rate fell more among men (to 70.4% today from 71.4% in March 2010) than women (to 58.3% from 58.8%). That means much of the improvement in unemployment numbers comes from discouraged workers—particularly male ones—giving up their job searches entirely.

    Men have been hit harder by this recession because they tend to work in fields like construction, manufacturing and trucking, which are disproportionately affected by bad economic conditions. Women cluster in more insulated occupations, such as teaching, health care and service industries.

    Yet if you can accept that the job choices of men and women lead to different unemployment rates, then you shouldn't be surprised by other differences—like differences in average pay.

    Feminist hand-wringing about the wage gap relies on the assumption that the differences in average earnings stem from discrimination. Thus the mantra that women make only 77% of what men earn for equal work. But even a cursory review of the data proves this assumption false.

    The Department of Labor's Time Use survey shows that full-time working women spend an average of 8.01 hours per day on the job, compared to 8.75 hours for full-time working men. One would expect that someone who works 9% more would also earn more. This one fact alone accounts for more than a third of the wage gap.

    Choice of occupation also plays an important role in earnings. While feminists suggest that women are coerced into lower-paying job sectors, most women know that something else is often at work. Women gravitate toward jobs with fewer risks, more comfortable conditions, regular hours, more personal fulfillment and greater flexibility. Simply put, many women—not all, but enough to have a big impact on the statistics—are willing to trade higher pay for other desirable job characteristics.

    Men, by contrast, often take on jobs that involve physical labor, outdoor work, overnight shifts and dangerous conditions (which is also why men suffer the overwhelming majority of injuries and deaths at the workplace). They put up with these unpleasant factors so that they can earn more.

    Recent studies have shown that the wage gap shrinks—or even reverses—when relevant factors are taken into account and comparisons are made between men and women in similar circumstances. In a 2010 study of single, childless urban workers between the ages of 22 and 30, the research firm Reach Advisors found that women earned an average of 8% more than their male counterparts. Given that women are outpacing men in educational attainment, and that our economy is increasingly geared toward knowledge-based jobs, it makes sense that women's earnings are going up compared to men's.

    Continued in article



    Will England's big banks leave the U.K.?

    "Grading Britain's Independent Banking Commission Report," by David Champion, Harvard Business Review Blog, April 13, 2011 --- Click Here

    Britain's Independent Banking Commission came out with an interim report Monday that identified the broad outline of the country's future banking regulation. The report's findings had been the subject of a fair amount of media speculation, fanned by reports that two of Britain's biggest Banks, HSBC and Barclays, would decamp (respectively) to Hong Kong and New York. Many commentators saw this as a not-so-veiled threat to the Commission that draconian recommendations would compromise London's competitiveness as a center for international banking.

    The report has probably laid those fears to rest. If its recommendations were implemented, it would, if anything, bring British regulation closer to the post-Glass-Steagal US model, which largely ring-fences without actually separating retail and investment banking. Depositors would also have to forego state insurance on deposits held with bank groups without a UK head office. Since British depositors lost a fair amount of money in the collapse of Iceland's banks in 2008 and would presumably be sensitive on this issue, the absence of a guarantee should give pause to any bank considering relocation.

    More generally, how do the proposals stack up? Some components make intuitive sense. Putting depositors ahead of lenders, for instance, could reduce the likelihood that the politicians would have to bail out banks in the future. Bondholders and wholesale lenders are much better placed than retail depositors to deal with banking crises and their fallouts. As long as a collapsed bank could cover retail depositors, the government could stay on the sidelines.

    Continued in article

    Bob Jensen's threads on the banking crisis are at

    "The Truth About Health Care Reform and the Economy:  Separating economic fact from economic myth," by Veronique de Rugy, Reason Magazine, April 15, 2011 --- http://reason.com/archives/2011/04/15/the-truth-about-health-care-re

    Myth 1: Health care reform will reduce the deficit.

    Fact 1: Health care reform will increase the deficit.

    The Patient Protection and Affordable Care Act includes many provisions that have nothing to do with health care: the CLASS act, a student loan overhaul, and many new taxes. These provisions don't change the health care system. They just raise money to pay for the new law. Strip them away and the law’s actual health care provisions don't lower the deficit—they increase it!

    The chart below uses data from Congressional Budget Office (CBO) to clarify the fiscal consequences of health care reform.

    . . .

    As you can see, from 2012 to 2021, the Congressional Budget Office estimates that the health care act will reduce deficits by $210 billion (note that this estimate differs from the widely cited $143 billion figure used during the lead-up to the passage of the act). During this same time period, however, the actual health care reform provisions of the law will increase deficits by $464 billion.

    Of course, one should not evaluate the health care legislation on its fiscal impacts alone. In theory we should get some fiscal benefits. But the key question is how they net out. Still, no matter what you think about the benefits of the health care legislation, it is incorrect to claim that health care reform will save money. It won’t.

    Myth 2: The U.S. health care system is a free-market system.

    Fact 2: Roughly half of all U.S. health care is currently paid for by the government.

    . . .

    Even in the absence of the health care reform law, government programs including Medicare and Medicaid already fund almost half of American health care. Roughly a third of the remaining expenditures are funded by private insurers—mainly through subsidized and highly regulated employee plans. Not exactly a free market.

    As this chart shows, state and federal entities make up over half of the health insurance market. Of course, the Patient Protection and Affordable Care Act will only increase the share of government involvement in the health care market.

    Myth 3: Medicare spending increases life expectancy for seniors. Reductions in Medicare spending will therefore reduce their life expectancy.

    Fact 3: Increases in life expectancy for seniors are due to increased access to health care, not to Medicare.

    While Medicare spending has certainly decreased seniors’ out of pocket health care expenses (by 1970, Medicare reduced out of pocket expenses by an estimated 40 percent relative to pre-Medicare levels), the program’s effect on mortality is much less clear.

    . . .

    Continued in article

    Bob Jensen's threads on healthcare reform are at

    Looking back at the events leading up to the 2008 crisis by Michael Burry
    Vanderbilt University Chancellor's Lecture
    April 5, 2011
    Thank you Jim Mahar for the heads up

    Jensen Comment
    Michael Burry is the physician who anticipated the subprime scandal and made a fortune on short positions.

    Bob Jensen's threads on the subprime scandals ---

    "Inflation Actually Near 10% Using Older Measure," by John Melloy, CNBC, April 12, 2011 ---

    After former Federal Reserve Chairman Paul Volcker was appointed in 1979, the consumer price index surged into the double digits, causing the now revered Fed Chief to double the benchmark interest rate in order to break the back of inflation. Using the methodology in place at that time puts the CPI back near those levels.

    Inflation, using the reporting methodologies in place before 1980, hit an annual rate of 9.6 percent in February, according to the Shadow Government Statistics newsletter.

    Since 1980, the Bureau of Labor Statistics has changed the way it calculates the CPI in order to account for the substitution of products, improvements in quality (i.e. iPad 2 costing the same as original iPad) and other things. Backing out more methods implemented in 1990 by the BLS still puts inflation at a 5.5 percent rate and getting worse, according to the calculations by the newsletter’s web site, Shadowstats.com.

    “Near-term circumstances generally have continued to deteriorate,” said John Williams, creator of the site, in a new note out Tuesday. “Though not yet commonly recognized, there is both an intensifying double-dip recession and a rapidly escalating inflation problem. Until such time as financial-market expectations catch up with underlying reality, reporting generally will continue to show higher-than-expected inflation and weaker-than-expected economic results in the month and months ahead.”

    The pay-site and newsletter by Williams, an economic consultant for the last 30 years to companies, has gained a cult following among bloggers hungry to criticize Bernanke these days. The mission statement of the newsletter, according to the site, is to expose and analyze “flaws in current U.S. government economic data and reporting…net of financial-market and political hype.”

    Investors are anxiously awaiting the release of March’s CPI reading on Friday. The consensus estimate from economists is for an annual inflation rate of 2.6 percent.

    “Given ongoing inflation problems with food and the spreading impact of higher oil-related costs in the broad economy, reporting risk is to the upside of consensus expectation,” said Williams, citing a 10 percent jump in gasoline prices in March, in the note.

    “While the federal government would have us believe the numbers are rather tame, our own personal gauge leads us to believe inflation is running between 5 percent to 6 percent annually,” wrote Alan Newman in his latest Crosscurrents newsletter that refers to Williams’ statistics.

    Continued in article

    "Markets Aren't the Education Solution Top-performing countries revere and respect teachers. They don't demonize them.," by Randi Weingarten, The Wall Street Journal, April 25, 2011 ---

  • A month ago, education ministers and teachers union presidents from the 16 top-performing and improving countries—including Finland, South Korea, Singapore, Brazil and Canada—came to New York to participate in an international conference on public education sponsored by the Organization for Economic Cooperation and Development and the U.S. Department of Education. The education leaders of these countries presented with impressive clarity all the methods they are using to improve student learning and strengthen teacher quality.

    During the conference, it became abundantly clear that market-based reforms promoted by the so-called reformers in the United States have little in common with the education policies in these leading nations. And well before the conference, it was increasingly clear that there has been little or no evidence in the last 20 years to show that market-based reforms have transformed schools and increased student learning.

    With supreme certainty and blind zeal, market-based reformers are doubling down on an agenda that has failed to produce the transforming gains they promised. They disparage and delegitimize any gains that traditional public schools as well as their teachers (and their unions) have delivered for kids.

    Market-based reformers advocate using student test scores to evaluate and compensate teachers, increasing the number of charter schools, firing teachers in low-performing schools, and relying on corporate executives and business practices to run school districts. This ideological approach has generated a great deal of media attention, and it has been sold aggressively by its advocates. But there is increasing evidence it doesn't work.

    A 2009 Stanford University study found 17% of charter schools provide a superior education to that which students receive in traditional public schools, but that nearly half of charter schools have results that are no better than neighborhood schools. Over a third deliver results that are worse. A 2010 Vanderbilt University study was the third consecutive national study to show that rewarding teachers with bonus pay does not raise student test scores. And we need look no further than the recent resignation of New York City Schools Chancellor Cathie Black, after being on the job for only three months, to conclude that experience in education matters should be valued—not diminished.

    Nor do these self-styled reformers pay much credence to what leading countries like Finland, Singapore and South Korea have done and are doing to transform their school systems. These countries emphasize teacher preparation, mentoring and collaboration. They revere and respect their teachers; they don't demonize them. Virtually all of them are unionized. In fact, school leaders in these countries work very closely with their unions, and most said they would never introduce changes or legislation without union collaboration.

    . . .

    Continued in article

    Ms. Weingarten is the president of the American Federation of Teachers.

  • Jensen Comment
    The makes us wonder about what the nations of Finland, South Korea, Singapore, Brazil and Canada do to rid themselves of bad teachers (including chronic absentee teachers). It makes us wonder whether any of these nations are like NYC where the bad teachers are paid full time to do nothing when they're taken out of the classroom.

    This makes us wonder how many hours a day are spent in a Chicago school versus a school in Finland, South Korea, Singapore, Brazil and Canada. It would also be interesting to compare the teaching work rules and yearly classroom time of these various nations.

    I don't know that the education system in Brazil is better than that in the United States. And comparing the United States with Finland, South Korea, and Singapore is like comparing apples with oranges. The United States has an enormous problem with urban drug crime, street gangs, and minority ghettos. These greatly complicate public education when children and teachers are unsafe inside and outside of their schools. Providing a safe environment may solve over half of the problem with K-12 education in the United States.


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    Shielding Against Validity Challenges in Plato's Cave ---

    ·     With a Rejoinder from the 2010 Senior Editor of The Accounting Review (TAR), Steven J. Kachelmeier

    ·     With Replies in Appendix 4 to Professor Kachemeier by Professors Jagdish Gangolly and Paul Williams

    ·     With Added Conjectures in Appendix 1 as to Why the Profession of Accountancy Ignores TAR

    ·     With Suggestions in Appendix 2 for Incorporating Accounting Research into Undergraduate Accounting Courses

    Shielding Against Validity Challenges in Plato's Cave  --- http://www.trinity.edu/rjensen/TheoryTAR.htm
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