tag:blogger.com,1999:blog-99079002024-03-13T22:32:25.868-05:00Figures Don't LieMany years ago, my Uncle Wes was listening to a political commentary on the evening news. About halfway through the piece he got up, turned the TV off and told me: "Figures don't lie but liars sure can figure"
This Blog is dedicated to setting things right about a few of the numbers tossed around in today's political discussions.
T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.comBlogger27125tag:blogger.com,1999:blog-9907900.post-86110621384218426522011-09-16T08:28:00.000-05:002011-09-16T08:28:36.569-05:00Just One Month To Go!<a href="http://figuresdontlie.blogspot.com/2011/05/government-forecasts-decrease-in.html">A post a bit further down on this blog</a>
describes the risible and naive reporting by our local Minneapolis
newspaper on next January's COLA increase in social security benefits.
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Readers of this blog know that the actual increase will be determined by the <a href="http://www.ssa.gov/oact/STATS/cpiw.html">Bureau of Labor Statistics CPI-W</a> for July August and September of this year in relation to the "baseline" number of 215.495
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July's number was 222.686<br />
August's number was just released and it is: 223.326 <br />
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If the CPI-W holds steady for the next month, that will give us an increase of 3.49%
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What do you think? Expecting a big decrease in the next month? Stay tuned!
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Now, do you remember the numbers that we found in <a href="http://news.yahoo.com/s/ap/20110327/ap_on_go_ot/us_social_security_cola">this March 27 Associated Press article</a> that makes two guesses in one sentence!
<br />
<blockquote>
... the trustees who oversee the Social Security
project a 1.2 percent COLA. President Barack Obama, in his spending
proposal for the budget year that begins Oct. 1, projects a COLA of 0.9
percent.</blockquote>
When the actual figure is announced, it is
supposed to be a surprise. So, don't tell anyone! Pretend you are as
surprised as the Associated Press and the Star-Tribune will be.
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<br />T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com48tag:blogger.com,1999:blog-9907900.post-58510341523681001092011-08-31T12:23:00.004-05:002011-08-31T12:49:27.161-05:00Your Home Has Not Increased in ValueI frequently argue with folks who say, "My home has doubled (tripled, quadrupled - you pick it!) since I bought it back in xxxx."
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<br />I always ask, "How many bedrooms does it have?" They might say, "four." Then, I say, "And if you sold your home today, you could buy a how-many bedroom home in the same neighborhood?"
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<br />Of course, the answer is the same as they now have. Their home has not increased in value. The dollar has decreased in value. And don't forget that they would lose 6% to the Real Estate industry in the process!
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<br />O sure, there have been some periods of time when lots of people believed they were experiencing an increase in value. This happened briefly in the 1980s and to an extreme in the early 2000s. But the market settled down both times.
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<br />There was a recent "Chart of the Day" that illustrates the return to normalcy:
<br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiluRO_plnfF_3QRkogpzai9I-xYnp1cLOUPtjoaNopmdNzkUxMdbuUGa5AW1qViLxO-QK05q9ROFcbkOFiGZeWQFeKtLfbOPSq0d1U7YpQ-oEnzxqTBNeWxifGEVB5ZXzBtaEv/s1600/HousingPrice_InflationAdjusted.gif"><img style="cursor: pointer; width: 400px; height: 225px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiluRO_plnfF_3QRkogpzai9I-xYnp1cLOUPtjoaNopmdNzkUxMdbuUGa5AW1qViLxO-QK05q9ROFcbkOFiGZeWQFeKtLfbOPSq0d1U7YpQ-oEnzxqTBNeWxifGEVB5ZXzBtaEv/s400/HousingPrice_InflationAdjusted.gif" alt="" id="BLOGGER_PHOTO_ID_5647074865453597858" border="0" /></a>
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<br />Ah, but you may ask, "what if I had bought and held." My 1970s home would be worth a lot more!
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<br />Nope. That just reflects <a href="http://www.moyak.com/papers/house-sizes.html">the increase in home size</a> from around 1000 square feet in 1900 to 1500 square feet in the mid-1970s to over 2000 square feet in the 2000s.
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<br />You could probably have made some money in the 2000's swapping Treasuries for homes and back if your timing was good. Hence, TV programs like "Flip This House." But your timing had better be pretty good. Suggestion if you visit <a href="http://en.wikipedia.org/wiki/Flip_This_House">the Wikipedia entry for Flip This House</a> - search for the word "fraud."
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<br />T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com1tag:blogger.com,1999:blog-9907900.post-28177286398294506132011-07-19T21:20:00.003-05:002011-08-18T21:31:52.242-05:00Social Security Cost of Living Increase for 2012<a href="http://figuresdontlie.blogspot.com/2011/05/government-forecasts-decrease-in.html">A post a bit further down on this blog</a> describes the risible and naive reporting by our local Minneapolis newspaper on next January's COLA increase in social security benefits.
<br />
<br />Readers of this blog know that the actual increase will be determined by the <a href="http://www.ssa.gov/oact/STATS/cpiw.html">Bureau of Labor Statistics CPI-W</a> for July August and September of this year in relation to the "baseline" number of 215.495
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<br />July's number was just released and it is: 222.686
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<br />If the CPI-W holds steady for the next two months, that will give us an increase of 3.37%
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<br />What do you think? Expecting a big decrease in the next two months? Stay tuned!
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<br />Now, do you remember the numbers that we found in <a href="http://news.yahoo.com/s/ap/20110327/ap_on_go_ot/us_social_security_cola">this March 27 Associated Press article</a> that makes two guesses in one sentence!
<br /><blockquote>... the trustees who oversee the Social Security project a 1.2 percent COLA. President Barack Obama, in his spending proposal for the budget year that begins Oct. 1, projects a COLA of 0.9 percent.</blockquote>When the actual figure is announced, it is supposed to be a surprise. So, don't tell anyone! Pretend you are as surprised as the Associated Press will be.
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<br />T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-83370066277389233302011-05-14T10:53:00.004-05:002011-07-19T21:39:14.393-05:00Government Forecasts Decrease In Consumer PricesWell, that's what the headline should be on <a href="http://m.startribune.com/topic/4193-Most%20Popular%20Stories/articles/206996283">this article from this morning's Minneapolis Star Tribune</a> that includes the phrase:<br /><blockquote>"... the report projected that the millions of Social Security recipients would receive a small - 0.7 percent - cost of living increase in their benefit checks in 2012."<br /></blockquote>0.7 percent, thus, is the forecast from the Trustees of the Social Security Funds.<br /><br />Any other guesses?<br /><br />Well, let's go back about six weeks to <a href="http://news.yahoo.com/s/ap/20110327/ap_on_go_ot/us_social_security_cola">this March 27 Associated Press article</a> that makes two guesses in one sentence!<br /><blockquote>... the trustees who oversee the Social Security project a 1.2 percent COLA. President Barack Obama, in his spending proposal for the budget year that begins Oct. 1, projects a COLA of 0.9 percent.</blockquote>Wow! Those trustees change their minds quickly, don't they?<br /><br />Maybe we should take a look at how the COLA is calculated and then take our own guess. Let's start by looking at an analysis that doesn't come from the payers of the COLA. Let's ask some of the recipients. <a href="http://www.narfe.org/departments/home/articles.cfm?ID=942"> Here is an analysis from the National Active and Retired Federal Employees Association.</a> They are taking a conservative view and are projecting a number around 2.9% at the moment. But they give us the tools we need to calculate and project the number ourselves. (Social Security COLAs and other Federal pension COLAs are calculated the same way.)<br /><br />The key to the calculation is the "Consumer Price Index for Urban Wage Earners and Clerical Workers." You can find a table of <a href="http://www.ssa.gov/oact/STATS/cpiw.html">values for that arcane index right here</a>. It is calculated and updated monthly. For obscure <a href="http://www.ssa.gov/oact/cola/latestCOLA.html">reasons that I won't go into here</a>, the base period is the average of July, August and September of 2008. That number is 215.495<br /><br />At the end of April, the index was 221.743, an increase of 2.9% Hey, looks like the union got it right!<br /><br />But let's look at the past few months' performance of the CPI-W:<br /><table width="640" border="0" cellpadding="0" cellspacing="0"><col style="width: 48pt;" width="64" span="10"> <tbody><tr style="height: 15pt;" height="20"> <td class="xl65" style="height: 15pt; width: 48pt; text-align: center;" width="64" height="20">Year</td> <td class="xl65" style="width: 48pt; text-align: center;" width="64">Jan</td> <td class="xl65" style="width: 48pt; text-align: center;" width="64">Feb</td> <td class="xl65" style="width: 48pt; text-align: center;" width="64">Mar</td> <td class="xl65" style="width: 48pt; text-align: center;" width="64">Apr</td> <td class="xl65" style="width: 48pt; text-align: center;" width="64">May</td> <td class="xl65" style="width: 48pt; text-align: center;" width="64">Jun</td> <td class="xl65" style="width: 48pt; text-align: center;" width="64">Jul</td> <td class="xl65" style="width: 48pt; text-align: center;" width="64">Aug</td> <td class="xl65" style="width: 48pt; text-align: center;" width="64">Sep</td> </tr> <tr style="height: 15pt;" height="20"> <td style="height: 15pt; text-align: center;" height="20">2011</td> <td style="text-align: center;" class="xl66">216.4</td> <td style="text-align: center;" class="xl66">217.5</td> <td style="text-align: center;" class="xl66">220.0</td> <td style="text-align: center;" class="xl66">221.7</td> <td style="text-align: center;" class="xl66"><br /></td> <td style="text-align: center;" class="xl66"><br /></td> <td style="text-align: center;" class="xl67"><br /></td> <td style="text-align: center;" class="xl67"><br /></td> <td style="text-align: center;" class="xl67"><br /></td> </tr> </tbody></table><br />The number that is going to be used to be compared to 215.495 to calculate the COLA is the average of July, August and September. Looking at the trend for the first four months of the year, what is your guess? I'd say we will probably be looking at 225. That would give us 225/215.495 and there would be a 4.4% COLA increase coming in 2012. What is your guess? Whatever it is, it is bound to better than the StarTribune's. Any number between 2.9 and 5.0 should be in the ballpark.<br /><br />Will some/most/all of it get eaten up by an increase in Medicare Part B premiums? Sure, but that's an entirely different story.<br /><br />Look for an update on this post in the Fall, when the actual COLA number is announced. And you can be 100% certain that the word, "unexpected" will appear prominently in both the AP and Star Tribune stories that will accompany the announcement.<br /><br />UPDATE: June 17<br />Yesterday's release of the May CPI figures gave us:<br />May 222.954 - that puts us a bit ahead of the game for my forecast. Stay tuned!<br /><br />Update: July 19<br />The June CPI figure gave us:<br />June 222.522 - a slight decrease from May. Steady at that number would result in a 3.3% COLA adjustment. The next three month's values for the CPI-W are the actual numbers that will be used. I'll start a new post for those.T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-87366008939096488352010-07-21T10:30:00.006-05:002010-07-21T10:54:49.870-05:00Unemployment NumbersI recently received a "chain" e-mail encouraging me to tell the evil Republicans to quit opposing the extension of unemployment benefits. I hastened to point out to the sender that <a href="http://themoderatevoice.com/78521/political-blame-game-on-unemployment-benefits/">Republicans weren't opposed to extending the benefits</a> - they just thought that maybe they should be made out of something other than thin air.<br /><br />Even <a href="http://www.rushlimbaugh.com/home/daily/site_071910/content/01125109.guest.html">Rush Limbaugh didn't oppose</a> the concept:<br /><blockquote><div><span id="Par_4584" style="font-size: 12px; color: rgb(0, 0, 0); font-family: arial;">RUSH: Right, but you look around and you don't see the ruling class showing even any concern about the people of Arizona and what they're going through. They don't show any concern for the people who are unemployed. They continue, in fact, to attack Republicans for not extending unemployment compensation benefits. And Scott Brown, God bless him. Scott Brown, Ted Kennedy's replacement in the Senate, the guy that won from the Republican Party in January, has come up with an alternative plan, as a Republican, to extend unemployment compensation benefits. And the Senate Democrats won't hear of it. They won't even talk to him about it. And poor old Scott Brown is saying, "Why is it that I'm always the one that has to vote with the Democrats?" I'm not making this up. ...</span></div></blockquote><br />But I though it might be time for another look at the numbers. A little "<a href="http://michaelscomments.wordpress.com/2010/07/02/june-2010-unemployment-numbers-theyre-real-and-theyre-spectacular/">forecast vs. actual</a>" exercise:<br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgk5fMW7uAX-mz9qsrr-5opOBrwC8FTn8KGXACoiGsIl29xfTJzpa-jjXjbKE9BlllmxSZP2oLdCgrLYkEQba1BxqyG0_Kv4Q38XXFi54498MdGLRBARRwitkzHE2alHHeqy0JX/s1600/UnemploymentJune2010.htm"><img style="cursor: pointer; width: 400px; height: 253px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgk5fMW7uAX-mz9qsrr-5opOBrwC8FTn8KGXACoiGsIl29xfTJzpa-jjXjbKE9BlllmxSZP2oLdCgrLYkEQba1BxqyG0_Kv4Q38XXFi54498MdGLRBARRwitkzHE2alHHeqy0JX/s400/UnemploymentJune2010.htm" alt="" id="BLOGGER_PHOTO_ID_5496384516866643458" border="0" /></a><br /><br />But a look at this chart shows us a much greater concern.<br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgOVPC3lyHT6JoRzec3tpYFhdRogsDdFBTzI_cXz83W-W2hFOabW0OL6NGU5XuVVH-HH2eC99k_0Bnrt4g6fQERsrWMgooTFt23PsdtKMF4rYV6yzPZa9qAfO5Quev5qG6Clyil/s1600/median+longterm+unemployment.png"><img style="cursor: pointer; width: 400px; height: 242px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgOVPC3lyHT6JoRzec3tpYFhdRogsDdFBTzI_cXz83W-W2hFOabW0OL6NGU5XuVVH-HH2eC99k_0Bnrt4g6fQERsrWMgooTFt23PsdtKMF4rYV6yzPZa9qAfO5Quev5qG6Clyil/s400/median+longterm+unemployment.png" alt="" id="BLOGGER_PHOTO_ID_5496385587725298130" border="0" /></a><br /><br />Extending unemployment benefits and longer unemployment. Cause and Effect or Effect and Cause? <a href="http://www.theatlantic.com/business/archive/2010/07/the-scariest-unemployment-graph-ive-seen-yet/60086/">You make the call!</a><br /><br />Can't decide? Maybe this cartoon <a href="http://www.investors.com/EditorialCartoons/Cartoon.aspx?id=541013">from Michael Ramirez</a> will help.<br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgrGd5QknMQy_z_ccnT9Nnn9P4wNfp29w1rAL-aO2dZhtps3-1gtzVPvDqkJLYqdwxjv55f1-fGQf10lv_QHbKZRi3YWKR8eIPcy5Eh0FtmeYp2lkQcmWFI02IprdU-7vof0fiM/s1600/toon_072010_FULL.gif"><img style="cursor: pointer; width: 400px; height: 279px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgrGd5QknMQy_z_ccnT9Nnn9P4wNfp29w1rAL-aO2dZhtps3-1gtzVPvDqkJLYqdwxjv55f1-fGQf10lv_QHbKZRi3YWKR8eIPcy5Eh0FtmeYp2lkQcmWFI02IprdU-7vof0fiM/s400/toon_072010_FULL.gif" alt="" id="BLOGGER_PHOTO_ID_5496387507907181698" border="0" /></a>T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-50404569603835944542010-07-21T10:09:00.002-05:002010-07-21T10:29:48.981-05:00600 Is The NumberYes, that's right. If you own a small business (or maybe you patronize one) <a href="http://news.coinupdate.com/prediction-obamacare-provisions-will-lead-to-identity-theft-explosion-0357/">expect a flurry of new paperwork</a> starting after January 1, 2012.<br /><span style="font-family:Arial;font-size:100%;"><br />Now, if I sell my lone Krugerand <a href="http://www.accountingweb.com/blogs/scotth/exuberant-accountant/get-ready-onerous-new-1099-reporting-rules">to a coin dealer</a> after 1/1/2012, he is going to send me a 1099. I'd better sell before then. </span> <div><span style="font-size:100%;"> </span></div> <div><span style="font-family:Arial;font-size:100%;">Expect a gold price decline in late 2011!</span></div> <div><span style="font-size:100%;"> </span></div> <div><span style="font-family:Arial;font-size:100%;">Same for stamps and other collectibles. And shorting eBay might be a good strategy too! And going long on Unemployment Futures and shorting Small Business could be other moneymakers!</span></div> <div><span style="font-size:100%;"><br /><br /></span></div>T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-51603628584496974662010-07-17T18:30:00.003-05:002010-07-17T18:54:52.157-05:00Creative Lying at The AtlanticMichael Kinsley <a href="http://www.theatlanticwire.com/editor-at-large/view/article/Restore-the-Estate-Tax-37">published an article on the Estate Tax yesterday</a>. His final sentence certainly gives us his mindset: "Obviously, though, a rate of zero is insufficient."<br /><br />Well, then. Let's look at a bit of his facts.<br /><br />Kinsley states:<br /><blockquote>In 2001, before the Bush tax cut, a married couple could pass on $1.35 million tax-free--plus ...</blockquote>And just how would they do that? Well they would simply insure that all their assets were divided neatly into two piles, one in each of their names and each pile totaled exactly $675,000. Then, they each need a will that passes along all of their pile to their designated heirs. Simple, yes?<br /><br />How often do you re-juggle the piles? Each time the market rises? And Dad's stamp collection? And mom's jewelry?<br /><br />O, and if the one with the home in their pile inconveniently dies first, do the heirs just sell and divide and have the sheriff evict the other parent?<br /><br />My, real life is more complicated than Kinsley knows isn't it? Face it, no couple could pass on $1.3 million to their heirs tax free without all of their assets in cash in two bank accounts.<br /><br />These kinds of problems came into play at levels well below total assets of $1.3 million. More than $675,000 but not much more. And just how huge a home did one have to own in California in 2001 before its value alone exceeded $675,000 and put people in this position? The San Francisco Bay Area had <a href="http://www.bankrate.com/brm/news/mtg/20020715a.asp">a median home price of $484,000.<br /></a><br />And why is a zero rate insufficient? Because Kinsley has need of the money for better purposes than Joe the Plumber's children?T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-65063448112618107462010-01-07T07:19:00.000-06:002010-01-07T07:19:09.309-06:00The Cost of Health CareMuch of the concern with our present healthcare / healthinsurance system seems to center around cost. "Bend the curve" of cost increases says the president - without much evidence that the bill before congress will do any such thing.<br />
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But why are the cost rising? <a href="http://mjperry.blogspot.com/2010/01/if-you-think-healthcare-is-expensive.html">Carpe Diem, one of my favorite econ-blogs notes</a> the increased use of <a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhB414rPBaduvn3pw4snO-5oFriaqEtB8yKRolFA4oxWc0qow7EAKyPJqSIniVJ35V3JVb82r9rmobJBgE5SxmZKAn2h4QO7RlhtlT9S-kuWE2X_U3CNfngxmms4MGe8dVA068J/s1600-h/health2.jpg">"other people's money"</a> as a cause. And it probably is part of the problem. But there are two fundamental issues that are easily overlooked.<br />
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First, there are a lot more older Americans than there used to be. Frankly, it's us "old farts" that use the expensive parts of health care. Treating my heart attack is more expensive than setting my son's broken leg. And let's not forget the mom-in-law's hip replacement.<br />
<div class="separator" style="clear: both; text-align: left;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjAtyMR0xPwynMbTPl2zFcbEiktDJCQ1Gvno4H2xQKy6W-eP67IXvlbULTAK2dbc7ywjcPSdpKaSmsk4-Vqs5ac2Ioz4h_K3ZDcG-OylUorcA0MVLGLzzEcqJrtUC8qV3paUb4tcA/s1600-h/Age65.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjAtyMR0xPwynMbTPl2zFcbEiktDJCQ1Gvno4H2xQKy6W-eP67IXvlbULTAK2dbc7ywjcPSdpKaSmsk4-Vqs5ac2Ioz4h_K3ZDcG-OylUorcA0MVLGLzzEcqJrtUC8qV3paUb4tcA/s400/Age65.jpg" /></a><br />
</div><div class="separator" style="clear: both; text-align: left;"><br />
</div><div class="separator" style="clear: both; text-align: left;">Remember that image of the babyboomers dominating the market for consumer goods twenty years ago? Guess where they are now?<br />
</div><div class="separator" style="clear: both; text-align: left;"> <br />
</div><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFLY3aebfvygun-ouX6RgwrVOcg-OKEas2ntpcwlp7OjwEMAlZXbac8yL57ma6s4dMHQfdqwl-nhyphenhyphenwkxB_gMBDXkj-0sV3r9HGlmmK2IyrxF_R1prwduNF-iRSh8pnI0reGkWypg/s1600-h/usbrate.gif" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgFLY3aebfvygun-ouX6RgwrVOcg-OKEas2ntpcwlp7OjwEMAlZXbac8yL57ma6s4dMHQfdqwl-nhyphenhyphenwkxB_gMBDXkj-0sV3r9HGlmmK2IyrxF_R1prwduNF-iRSh8pnI0reGkWypg/s320/usbrate.gif" /></a><br />
<div class="separator" style="clear: both; text-align: left;"><br />
</div><div class="separator" style="clear: both; text-align: left;">And the second reason for increased costs? Well, we now can do something for the old folks. Remember grandpa's treatment for a bad hip? He got a cane. Mom-in-law got a hip replacement.<br />
</div><div class="separator" style="clear: both; text-align: left;"><br />
</div><div class="separator" style="clear: both; text-align: left;">When president Eisenhower suffered a heart attack in 1955, the standard treatment was <a href="http://www.doctorzebra.com/prez/z_x34mirx_g.htm">six months of bed rest</a>. I believe that Mamie was instructed to cuddle up and "keep him warm!" Today, we would have seen a stent inserted at a minimum but more likely a triple or quadruple bypass.<br />
</div><div class="separator" style="clear: both; text-align: left;"><br />
</div><div class="separator" style="clear: both; text-align: left;">The reason we spend more money on healthcare is because:<br />
</div><ul><li>It's possible</li>
<li>It's effective</li>
<li>We have the money</li>
</ul><div class="separator" style="clear: both; text-align: left;">The only real question is should I pay for my own stent or should I charge it to your children and grandchildren? That's what the debate is really about. And that's where professor Perry's "Other Peopl's Money" chart comes in.<br />
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</div><div class="separator" style="clear: both; text-align: left;">(Note cross-posted at my Tom's Rants blog)<br />
</div>T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com8tag:blogger.com,1999:blog-9907900.post-44173264286522922902009-12-28T01:24:00.002-06:002010-04-22T20:48:16.274-05:00Google's Slow ResponseWhen the "climategate" e-mails were first leaked from the Climate Research Unit at East Anglia, I was following the story closely and sharing with a number of friends. I was preparing an e-mail on the subject and thought I would try Googling the term "climategate". Darned if I didn't get 6000 hits on the term on the evening of November 20th. The next morning yielded 9000, November 24 saw 158,000 and by November 30th we had 13,000,000 hits.<br /><br />Soon, stories started to show up in the Blogosphere (right side only) about a mysterious conspiracy at Google, however. It seems that the "auto-suggest" feature of Google was being pretty shy about helping out with the "climate-gate" idea when you started keying into the Google search engine. For example, <a href="http://wattsupwiththat.com/2009/11/28/climategate-surpasses-global-warming-on-google-autosuggest-still-blocked/">this story</a> at <a href="http://wattsupwiththat.com/">Wattsupwiththat</a> describes the frustration many people had when typing "climateg..." into the Google search engine. By this date, late in December, Google is happy to suggest "climategate" with as little prompting as "clim"<br /><br />Well, it may just be that Google is s-l-o-o-o-o-o-w to bring new terms into its auto-suggest world.<br /><br />This is being posted very late in the evening of December 27. After much discussion during the 26th and 27th of the unsuccessful bombing of a Northwest Airlines flight from Amsterdam to Detroit. The result of the discussion suggested to me that "crotchbomber" might be an interesting Google term. Sure enough, "crotchbomber" gets 6,170 hits this evening. But no auto suggestions. "crotch bom" gets no auto-suggest either but, Google does get the idea - <span id="main" style="visibility: visible;"><span id="topstuff" style="visibility: visible;"><span style="color: rgb(204, 0, 0);">Did you mean: </span><a class="spell" href="http://www.google.com/search?hl=en&ei=aFk4S4Qvhdw2_oGBigk&sa=X&oi=spell&resnum=0&ct=result&cd=1&ved=0CAYQBSgA&q=crotch+bomber&spell=1"><b><i>crotch bomber</i></b></a><br /><br />Well, yes, I did.</span></span><br /><span id="main" style="visibility: visible;"><span id="topstuff" style="visibility: visible;"><br /></span></span><br /><span id="main" style="visibility: visible;"><span id="topstuff" style="visibility: visible;">And "crotch bomber" gets us 1,300,000 hits - but no auto-suggestions beyond "crotch bo" which does yield the ever-popular "crotch boils" and "crotch body odor" along with four other unpleasant suggestions.</span></span><br /><span id="main" style="visibility: visible;"><span id="topstuff" style="visibility: visible;"><br /></span></span><br /><span id="main" style="visibility: visible;"><span id="topstuff" style="visibility: visible;">Microsoft's Bing, in this case, doesn't even know what a "crotch" is! And only finds 84,900 hits for the full term.</span></span><br /><span id="main" style="visibility: visible;"><span id="topstuff" style="visibility: visible;"><br /></span></span><br /><span id="main" style="visibility: visible;"><span id="topstuff" style="visibility: visible;">Let's keep our eyes on this!</span></span><br /><span id="main" style="visibility: visible;"><span id="topstuff" style="visibility: visible;"><br /></span></span><br /><span id="main" style="visibility: visible;"><span id="topstuff" style="visibility: visible;">UPDATE 1:<br />About noon on 12/29 and still no auto-suggest beyond the six stinky suggestions for "crotch bo". 1.3 million hits for "crotch bomber" and 1,240,000 for <a href="http://althouse.blogspot.com/2009/12/10-reasons-why-christmas-day-pants.html">Ann Althouse's thoughtful "pants bomber"</a>. "crotchbomber" now nets us 7,910. And Bing? 88,800 hits for "crotch bomber" but still no suggestions for a plain old "crotch".<br /><br />UPDATE 2:<br />April the 22nd. Type as little as "crotc" into the Google search field and you will find "crotch bomber" as the seventh suggested completion. And what about Climategate? Well, "cli" will bring up this list:<br /></span></span><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1AcqogrK0nGuxN1mfLtOPIBZQ1GW1GBHU_9m0h5nhO0w3RdOqYOGySGD9TaWyxpdSdDrdn9uUc5wBcVeFWneWWlJnIMTTwdcHkZyhZHHdOn6g_oLmo5qIccYMB-dVFK9nhQ6u/s1600/Climate.jpg"><img style="cursor: pointer; width: 400px; height: 208px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh1AcqogrK0nGuxN1mfLtOPIBZQ1GW1GBHU_9m0h5nhO0w3RdOqYOGySGD9TaWyxpdSdDrdn9uUc5wBcVeFWneWWlJnIMTTwdcHkZyhZHHdOn6g_oLmo5qIccYMB-dVFK9nhQ6u/s400/Climate.jpg" alt="" id="BLOGGER_PHOTO_ID_5463143506613848146" border="0" /></a><br />Notice that puts it ahead of climate change or even climate.T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-30634761679019543122009-08-23T12:59:00.002-05:002009-08-23T14:02:23.672-05:00Reasonable Voices in the Health Care DiscussionThe anger and "<a href="http://www.swamppolitics.com/news/politics/blog/2009/08/weeweed_up_white_house_explain.html">wee-wee</a>" present in Health Care reform discussions taking place this month has begun to lead to some interesting proposals. Not in Congress, of course, but in the Idea Marketplace.<br /><br />Two thoughtful pieces have emerged in major publications. The ideas don't fit in thirty-second sound bites, however, so you won't get them on the evening news. Set aside a block of time to read <a href="http://www.theatlantic.com/doc/200909/health-care">this lengthy piece</a> in the Atlantic by David Goldhill. Goldhill is a business man who has actually paid for health care coverage for his employees as well as seen all the warts in the current system. This is a long piece, but well worth the read!<br /><br />He pitches some excellent numbers into the debate including the fact that<br /><blockquote><p>Let’s say you’re a 22-year-old single employee at my company today, starting out at a $30,000 annual salary. Let’s assume you’ll get married in six years, support two children for 20 years, retire at 65, and die at 80. Now let’s make a crazy assumption: insurance premiums, Medicare taxes and premiums, and out-of-pocket costs will grow no faster than your earnings—say, 3 percent a year. By the end of your working days, your annual salary will be up to $107,000. And over your lifetime, you and your employer together will have paid $1.77 million for your family’s health care. $1.77 million! And that’s only after assuming the taming of costs! In recent years, health-care costs have actually grown 2 to 3 percent faster than the economy. If that continues, your 22-year-old self is looking at an additional $2 million or so in expenses over your lifetime—roughly $4 million in total.</p></blockquote><p></p><br /><p>He also contributes some worthy thoughts on the volume of profits involved in our present system:</p><blockquote>For fun, let’s imagine confiscating all the profits of all the famously greedy health-insurance companies. That would pay for four days of health care for all Americans. Let’s add in the profits of the 10 biggest rapacious U.S. drug companies. Another 7 days. Indeed, confiscating all the profits of all American companies, in every industry, wouldn’t cover even five months of our health-care expenses. </blockquote><p>Ah, those evil profits. Have you ever noticed that people who disparage profits always quote a number? For example, "x billion dollars!" Never a percentage such as 2% of sales. For most businesses (yes, even the oil companies) consumers would be hard pressed to find the difference in their prices if profits vanished or doubled. In fact, most companies' profits are less than the payroll tax levies they pay on their employees wages. Virtually all are far less than the toll of employee withholding confiscated from the workers in the company. Profits come in volume similar to lubricants versus ink in a printing press - and serve the same function.</p><p>For a shorter piece that covers some of the same areas, read Whole Foods' CEO John Mackey in this <a href="http://online.wsj.com/article/SB10001424052970204251404574342170072865070.html">very informative opinion piece</a> in the Wall Street Journal. Mackey presents eight reforms that would greatly lower the cost of health care for everyone. Once again, the thoughts come from someone who pays the bills for health-care.</p><p>For venturing forth with reasonable thoughts, of course, Mackey gets <a href="http://abcnews.go.com/Business/story?id=8322658&page=1">threatened with a boycott</a>. It seems like there is a lot of "wee-wee" to go around.</p><p><br /></p>T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-6737114290293221992009-07-16T22:35:00.005-05:002009-07-16T22:58:28.118-05:00Spending Other Than That for Medicare, Medicaid, Social Security, and Net Interest, 1962 to 2080 (Percentage of GDP)Oh, my. I don't know whether to post this here on my "numbers blog" or put it into "Tom's Rants!"<br /><br />I was just looking at the Congressional Budget Office Director's Blog. He has <a href="http://cboblog.cbo.gov/?p=328">a wonderful post on the unsustainability of current government spending trends.</a> Unfortunately, he blathers on about the results of continuing present trends through the year 2080. Here's his big picture graph:<br /><br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhZu37mqvKIoX7S78rpQQhCAVkWHYzL0_08NYBu2LBZUuAOHHhgwZy3n0tEudKoeZ9jPQJwuHTH3x01lk2mWKmfEbCts4-v79GB5Sxa7UtgYennUISfIElBVlQeocz00vu6xB6q/s1600-h/slide2.jpg"><img style="WIDTH: 400px; HEIGHT: 152px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5359272456138359506" border="0" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhZu37mqvKIoX7S78rpQQhCAVkWHYzL0_08NYBu2LBZUuAOHHhgwZy3n0tEudKoeZ9jPQJwuHTH3x01lk2mWKmfEbCts4-v79GB5Sxa7UtgYennUISfIElBVlQeocz00vu6xB6q/s400/slide2.jpg" /></a><br /><br /><br />Let's be serious. The best way to lie with numbers is to project something seventy years into the future. Think about it. Picture a presentation made to congress in 1940 about what would be happening in 2010. Let's project General Motor's market share. Better yet, project the Japanese share of the U.S. auto market. Shall we revise that in 1942?<br /><br />Of course government "experts" really did project trends like that back around 1940. The most famous one being when Social Security was shifted into a "pay as you go" mode. But not to worry - the taxes were low and people didn't live much past retirement age anyway! Now we are starting to live with the reality of that projection.T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-62920866483084524112009-06-06T14:34:00.003-05:002009-06-06T15:17:10.155-05:00Are You Feeling Stimulated Yet?So, you were probably wondering: "How's our financial stimulus plan working out?"<br /><br />When it was sold to us back in January, the administration was nice enough to provide a chart showing what would happen to unemployment rates with the Simulus versus not having the Stimulus. The blog, Innocent Bystanders has <a href="http://michaelscomments.wordpress.com/2009/06/05/the-may-unemployment-numbers-are-here-and-worse-than-predicted/">kept the chart and been tracking actual</a> results:<br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSxw17XOkTvEzt-PBzjLNl4lZzLGbiB5uT4Tq_IOSa2uGl33ccVBm4fcQRb6AAffAZc93MEeSkxEy1OFOnfDcPx-2divHND5alTlqZxFySNmx-O35QvbqOrQYjaggyvmf-QD7o/s1600-h/RecoveryMay09.bmp"><img style="WIDTH: 400px; HEIGHT: 243px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5344301890413361954" border="0" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgSxw17XOkTvEzt-PBzjLNl4lZzLGbiB5uT4Tq_IOSa2uGl33ccVBm4fcQRb6AAffAZc93MEeSkxEy1OFOnfDcPx-2divHND5alTlqZxFySNmx-O35QvbqOrQYjaggyvmf-QD7o/s400/RecoveryMay09.bmp" /></a><br /><br /><br />Not surprising, since a spending stimulus takes much longer to have any impact than a tax-cut stimulus. And <a href="http://gregmankiw.blogspot.com/2009/01/cbo-on-fiscal-policy-lags.html">much of the "Stimulus" spending wasn't even planned to take place this year</a>. (Just 8% of it during the current fiscal year ending Sept 30!)<br /><br />However, the <a href="http://www.washingtonpost.com/wp-dyn/content/graphic/2009/03/21/GR2009032100104.html">projected budget deficts</a> as reported in the Washington Post:<br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEirWRqkdWTK9hBGrdtSSNiWkZKx0ogjsj6yG9GyPl95YNQJlhyphenhyphentGC-4aGKszzackBX6UZ9HOMPimBO9OkE5W0Ad-JlLoHNlNSbl1cf7wMRWZxwefz9zQyxiArNRjjYciU0N0IcR/s1600-h/obamadebt.jpg"><img style="WIDTH: 400px; HEIGHT: 330px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5344301888708298386" border="0" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEirWRqkdWTK9hBGrdtSSNiWkZKx0ogjsj6yG9GyPl95YNQJlhyphenhyphentGC-4aGKszzackBX6UZ9HOMPimBO9OkE5W0Ad-JlLoHNlNSbl1cf7wMRWZxwefz9zQyxiArNRjjYciU0N0IcR/s400/obamadebt.jpg" /></a><br /><br />Are <a href="http://www.bloomberg.com/apps/quote?ticker=USGG10YR%3AIND">beginning to have the expected results</a> on interest rates:<br /><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgNS5MT5dFIN2Cg1cJWKIqDgMfjvyBlBDagW_cqawbZyrI9Vt25eDhpWF52wQ2HsbmqY03unRfNNbWap_4l3TXeuMZMDjKCXvEB_Qf_RDiJFL1gY6Ap7GizJDOon2RB04REI1Bs/s1600-h/10YearRates.gif"><img style="WIDTH: 240px; HEIGHT: 152px; CURSOR: hand" id="BLOGGER_PHOTO_ID_5344301883026659554" border="0" alt="" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgNS5MT5dFIN2Cg1cJWKIqDgMfjvyBlBDagW_cqawbZyrI9Vt25eDhpWF52wQ2HsbmqY03unRfNNbWap_4l3TXeuMZMDjKCXvEB_Qf_RDiJFL1gY6Ap7GizJDOon2RB04REI1Bs/s400/10YearRates.gif" /></a>T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-60591214470878154152009-05-15T09:18:00.003-05:002009-05-15T11:17:22.987-05:00NYT Economics Reporter Successfully Times the MarketThe New York Times economic reporter, Ed Andrews, paints a grim picture of his own economic situation in <a href="http://www.nytimes.com/2009/05/17/magazine/17foreclosure-t.html?pagewanted=1&_r=1">this article</a> in the May 14th edition of The New York Times Magazine. We learn <a href="http://gregmankiw.blogspot.com/2009/05/personal-side-of-credit-crisis.html">from Greg Mankiw</a> that Andrews is a "diligent Washington reporter," so he is probably not making this story up.<br /><br />In the article, Andrews describes his purchase of a $460,000 home with $414,000 worth of mortgages and $2,500 in monthly mortgage payments. What makes this worthy of a news story is that Andrews only had $2,777 in monthly take home pay. Plus his new wife's income from a new job selling clothing that brought in another $2,500 a month. If you suspect that two adults, three full time and two part-time children are going to have trouble living on $33,000 a year in the New York and Washington area you are so right. The $33,000 is what our economic reporter and wife have left after the mortgage payment. But read the whole article to see just how badly it plays out.<br /><br />But. Let's look at the bright, unstated, side of the story. It appears that $45,000 of Andrews home purchase came from his sale of New York Times stock early in the story - possibly around 2004. As the chart shows:<br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiNE2i1BN1mbGSl28k0_qLMVVtFfjH802XHZA8dDSOiHk3-wkh0FSnVzHEaJQ__tbrZhRWvXilF9tP_aIeR6kGLdee_7z1BQCOOYPGfCZKL8OC59hzUa4sFJ7aJ2I3AkOgrYHJd/s1600-h/NYT.jpg"><img style="cursor: pointer; width: 400px; height: 248px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiNE2i1BN1mbGSl28k0_qLMVVtFfjH802XHZA8dDSOiHk3-wkh0FSnVzHEaJQ__tbrZhRWvXilF9tP_aIeR6kGLdee_7z1BQCOOYPGfCZKL8OC59hzUa4sFJ7aJ2I3AkOgrYHJd/s400/NYT.jpg" alt="" id="BLOGGER_PHOTO_ID_5336077968244821922" border="0" /></a><br />this means Andrews sold his stock at around $40 a share versus current prices around $7 or even less earlier this year.<br /><br />Read the article and you will see that Andrews turned his $45,000 worth of NYT stock into home equity and then into consumer spending of perhaps $100,000. Not a bad performance versus seeing it shrink to about $5,000 in the market. Not wise, certainly, but not a bad investment performance.<br /><br />The story is certainly a tragedy. But self-inflicted by someone who ought to have had a clue if not a budget. We can only hope Andrews' sake that <a href="http://www.amazon.com/Busted-Inside-Great-Mortgage-Meltdown/dp/0393067947/ref=sr_1_1?ie=UTF8&s=books&qid=1242404044&sr=8-1">people buy the book</a> but no one follows his example.T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-52804265654693385402009-04-19T22:26:00.003-05:002009-04-19T23:07:43.069-05:00Joe Biden Finds New Funding For CharityGreat news! Our esteemed vice-president, Joe Biden, has found a new source of funds to cover his magnanimous charitable contributions.<br /><br /><span class="headlinelink3">Walter F. Roche Jr.</span>, of the Pittsburgh TRIBUNE-REVIEW, <a href="http://www.pittsburghlive.com/x/pittsburghtrib/news/s_621292.html">reports that the vice-president has begun collecting social security payments</a>. Of course, there is no mandatory requirement to accept those payments, but I guess Biden must have some pressing financial burdens.<br /><br />Not enough to make you angry yet? Well, this makes him eligible for the $250 "stimulus payment" to be sent to all social security recipients!<br /><br />What might he do with the $250? Perhaps he could use it for his charitable contributions for the year. As <a href="http://taxprof.typepad.com/taxprof_blog/2009/04/obama-and-biden-release-tax-returns.html">the Tax Prof Blog revealed</a> a couple of days ago, Biden contributed a grand total of $120 to charity in 1999, $195 in 1998 and $260 in each of 2002 and 2003.<br /><br />In fact, for the eleven years from 1998-2009, Joe coughed up a total of $5,575. That is a remarkable $9.75 per week. I say remarkable since Joe goes to church on a regular basis. Couldn't he have at leased tossed a ten dollar bill into the collection basket while he was there?<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgmlgunLx5Ig5wy39cAbOr6O1QejcIaKyli-3TMAURr_xU-OZsX8yTIRo-QoGu-4zSy-ijy7w8nYzVd8dmzcu6UlgrGgirV-kIO_mYIm0rZLk91iwe0jiwmRXsmmuL6flpNGTgD/s1600-h/BidenTaxes.jpg"><img style="cursor: pointer; width: 400px; height: 216px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgmlgunLx5Ig5wy39cAbOr6O1QejcIaKyli-3TMAURr_xU-OZsX8yTIRo-QoGu-4zSy-ijy7w8nYzVd8dmzcu6UlgrGgirV-kIO_mYIm0rZLk91iwe0jiwmRXsmmuL6flpNGTgD/s400/BidenTaxes.jpg" alt="" id="BLOGGER_PHOTO_ID_5326618523085883730" border="0" /></a><br /><br />Come on Joe.<br /><blockquote><a href="http://www.nypost.com/seven/09192008/postopinion/editorials/obama_v__new_york_129858.htm">It's time to be patriotic. It's time to jump in; it's time to be part of the deal; it's time to get America out of the rut.</a></blockquote>Let's see you give the whole $250 to charity all at once. I know it'll hurt, but just try it once.<br /><br />Or better yet, lets try this. Just refuse the money, Joe. You do that, and someone in the country will be $250 ahead. I'll assume it is me and I'll then give $250 to someone living well below the poverty line who actually needs it! Deal? Get in the game!T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-841665592005631392009-04-11T08:23:00.004-05:002009-04-11T09:05:39.939-05:0046 Million Americans Lack Health InsuranceGoogle that phrase and you will get over 2.5 million hits!<br /><br />If someone repeats it to you at dinner or in a bar, insisting that "we must <span style="font-weight: bold;">do</span> something!" just do this. Say "You're right, we should provide help. For $20 apiece, we can insure ten million of them in the next two minutes. Would you be willing to join me?" as you place a $20 bill on the table.<br /><br />Now point out that of the 46 million people under discussion:<br /><ul><li>6.4 million are the <em>Medicaid undercount</em>. These are people who are on one of two government health insurance programs, Medicaid or S-CHIP, but mistakenly (intentionally or not) tell the Census taker that they are uninsured.</li></ul><ul><li>Another 4.3 million are eligible for free or heavily subsidized government health insurance (again, either Medicaid or SCHIP), but have not yet signed up. While these people are not pre-enrolled in a health insurance program and are therefore counted as uninsured, if they were to go to an emergency room (or a free clinic), they would be automatically enrolled in that program by the provider after receiving medical care.</li></ul>Now pick up the two twenties and say, I can eliminate nine million more for another twenty! Want to have a go at it?<br /><br />You eliminate that 9 million because they aren't U.S. citizens. They are (legal or illegal) immigrants. If you were working in Mexico, would you expect the Mexican people to provide health insurance for you? Would you want it? How about Canada? <a href="http://www.waittimes.net/waittimes/en/wt_proximity.aspx?city=toronto&pc=&dist=0&site=8">The wait time for heart bypass surgery in Toronto is only 48 days</a>.<br /><br />Economist and former senior White House economic advisor, Keith Hennessey, provides the breakdown of the 46 million at <a href="http://keithhennessey.com/2009/04/09/how-many-uninsured-people-need-additional-help-from-taxpayers/">this blog post</a>. He also has dandy graphics of total insured and the breakdown of uninsured.<br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjSW9MtsBmz0mYIz-yhKSgf2GISmTIio4wsMezsycCKQXB8DYUN3EvGSwoqJ-OPO7EpvQgasE7zptyDn25MayuIk86Ghy41499Bi06pNUg7IqxKKdU-Pkvvqw1sUVGe1jXbFzL0/s1600-h/insured-v-uninsured-thumb.png"><img style="cursor: pointer; width: 400px; height: 300px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjSW9MtsBmz0mYIz-yhKSgf2GISmTIio4wsMezsycCKQXB8DYUN3EvGSwoqJ-OPO7EpvQgasE7zptyDn25MayuIk86Ghy41499Bi06pNUg7IqxKKdU-Pkvvqw1sUVGe1jXbFzL0/s400/insured-v-uninsured-thumb.png" alt="" id="BLOGGER_PHOTO_ID_5323433283747439298" border="0" /></a><br /><br /><br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjQN_nJwPhLgdawLoDeLB3OFmqLO3aIeRhzoY9_ux1hamzabLsl7CaQjK-HI3oefgv_VDih8cgSS-eQen5ni2SMIIhKqjGMhOz12E2c2xWoSnjUynHP2hAxwPm1s5L4M9xpiTvN/s1600-h/uninsuredsubpopulations-thumb.png"><img style="cursor: pointer; width: 400px; height: 300px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjQN_nJwPhLgdawLoDeLB3OFmqLO3aIeRhzoY9_ux1hamzabLsl7CaQjK-HI3oefgv_VDih8cgSS-eQen5ni2SMIIhKqjGMhOz12E2c2xWoSnjUynHP2hAxwPm1s5L4M9xpiTvN/s400/uninsuredsubpopulations-thumb.png" alt="" id="BLOGGER_PHOTO_ID_5323433285103794514" border="0" /></a>T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-71430715553251867322009-04-02T23:50:00.003-05:002009-04-03T00:07:41.925-05:00Correlate This!The next time someone shows you a graph that purports to explain carbon dioxide as the causes of "Global Warming" or gender discrimination as a cause of salary inequity, just pull out this chart and show them some real correlation. 97%, in fact!<br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjitkiV0wCSNh8MFQ92DixiFbkkyDtGDP7SQWhK3LKMiFMrcVNA6WeZAZs3gag6KYQg40jx5ZFvHWbHmWWaSjUcKv-TYzd5Q0-s_Ovpo7yKpun6mq34jGz1VloZx6tg4X7R-3oa/s1600-h/Lemongraph.jpg"><img style="cursor: pointer; width: 400px; height: 260px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjitkiV0wCSNh8MFQ92DixiFbkkyDtGDP7SQWhK3LKMiFMrcVNA6WeZAZs3gag6KYQg40jx5ZFvHWbHmWWaSjUcKv-TYzd5Q0-s_Ovpo7yKpun6mq34jGz1VloZx6tg4X7R-3oa/s400/Lemongraph.jpg" alt="" id="BLOGGER_PHOTO_ID_5320324080557289634" border="0" /></a><br /><br />Kudos to <a href="http://meganmcardle.theatlantic.com/archives/2009/04/department_of_awful_statistics_6.php">Megan McArdle</a> for demonstrating that <a href="http://en.wikipedia.org/wiki/Correlation_does_not_imply_causation">correlation is not causation</a>.<br /><br />Or, as we used to say when high schools taught real content: "Oh, that's just a case of the <i><b>cum hoc ergo propter hoc</b></i> fallacy."T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-74816284648952062082009-03-30T21:04:00.003-05:002009-03-30T22:24:06.125-05:00How Much Money Does Your Employer Pay You?Sounds like a simple question? Well, let's take a look.<br /><br />We'll assume that you make $1,000.00 a week. That is, your boss has hired you at a $1000.00 per week salary. What amount of money do you receive on your weekly paycheck?<br /><br />We'll assume you are married, and are claiming two exemptions on your W-4. Let's also assume you don't have to deal with state taxes because you live and work in <a href="http://en.wikipedia.org/wiki/State_income_tax">say, Florida or Texas as an example</a>. You will then find that your employer deducts $76 in Federal Income Tax. Not too bad a hit. Of course he also deducts those two FICA Taxes: FICA-SS for $62 and FICA-MED for $14.50.<br /><br />This Leaves you with a paycheck stub that reads like this:<br /><br /><div style="text-align: right;">Gross Pay $1,000.00<br /><br />Taxes<br /> Federal Withholding - $76.00<br /> FICA-SS - $62.00<br /> FICA-MED - $14.50<br /> -------<br />Total Taxes $152.50<br /><br />Net Pay $847.50<br /></div><br /><br />So on payday, your employer sends $847.50 to the bank for you and $152.50 to the U.S. treasury for the Federal Government to spend as they like, right? Oh don't you wish!<br /><br />And doesn't your employer wish! Because the only place your employer ever puts those $62.00 and $14.50 FICA amounts is on your paycheck. <a href="http://www.irs.gov/pub/irs-pdf/p15.pdf">On the calculation he does for Uncle Sugar</a>, he has to double them. The actual tax rate that your employer is charged for FICA-SS on your $1000.00 is 12.4% not 6.2% And for the FICA-MED, he is charged 2.9%, not 1.45%.<br /><br />So on payday, your employer sends $847.50 to the bank for you and $229.00 (in your name and social security number) to Uncle Sugar. So each pay day, He pays out $1076.50 And you receive $847.50 of it.<br /><br />So how much do you earn? There are a couple of different numbers it might be, but $1000.00 a week never enters into anyone's thinking. You think, "I'm getting $847.50" and your employer thinks, "Damn, he costs me $1076.50!" But nobody thinks about that $1000!<br /><br />And notice that if you live in a state with income tax the discrepancy gets wider. Do you have health insurance coverage through your employer? Your employer is likely paying, on your behalf, 4 or 5 times what you are paying and complaining about. It's pretty easy to get to around $700 for you and $1400 for your boss when he looks at your desk. No wonder people get laid off in tough economic times.<br /><br />I didn't even mention Unemployment Taxes, Worker's Compensation or various other fees that might be charged based directly on your salary. Let's just say you are one expensive employee!T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-77244391718972630032009-03-24T20:10:00.004-05:002009-03-24T20:24:02.019-05:00Watch the Magician's Other Hand<style></style><div><span style=";font-family:Arial;font-size:85%;" >I'm sure you have <a href="http://abcnews.go.com/Business/Politics/story?id=7147961&page=1">heard this from the Obama administration </a>many times. Maybe even from the previous administration especially via former Goldman Sachs CEO, Hank Paulson.</span></div> <div><span style=";font-family:Arial;font-size:85%;" ></span> </div> <blockquote style="margin-right: 0px;" dir="ltr"> <div><span style=";font-family:Arial;font-size:85%;" >"The banks are not lending"</span></div></blockquote> <div><span style=";font-family:Arial;font-size:85%;" ></span> </div> <div><span style=";font-family:Arial;font-size:85%;" >Here are two recent charts from the Federal Reserve:<br /><br /></span></div> <div><span style=";font-family:Arial;font-size:85%;" ></span> </div> <div><span style=";font-family:Arial;font-size:85%;" ><a href="http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&s%5B1%5D%5Bid%5D=BUSLOANS&s%5B1%5D%5Brange%5D=10yrs">Business Loans</a></span></div> <div><span style=";font-family:Arial;font-size:85%;" ></span> </div> <div><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhhtIVeK-QgKqX71wArkJ2YTvfeYudnNcohmU5v6HNJ2FOBqCXvxtPpaGrQywhEr1LK77NAKKkE3jlzzrj82l-BYn64eIt_G-h_WbsZnSchcSpAUS9Joaj9C-dU3gePTPuqsH8j/s1600-h/fredgraph.png"><img style="cursor: pointer; width: 400px; height: 240px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhhtIVeK-QgKqX71wArkJ2YTvfeYudnNcohmU5v6HNJ2FOBqCXvxtPpaGrQywhEr1LK77NAKKkE3jlzzrj82l-BYn64eIt_G-h_WbsZnSchcSpAUS9Joaj9C-dU3gePTPuqsH8j/s400/fredgraph.png" alt="" id="BLOGGER_PHOTO_ID_5316927220866054962" border="0" /></a><br /></div> <div><span style=";font-family:Arial;font-size:85%;" ></span> </div> <div><span style=";font-family:Arial;font-size:85%;" ></span> </div> <div><span style=";font-family:Arial;font-size:85%;" ><br /><br />and <a href="http://research.stlouisfed.org/fred2/fredgraph?chart_type=line&s%5B1%5D%5Bid%5D=CONSUMER&s%5B1%5D%5Brange%5D=10yrs">consumer loans</a><br /></span><span style=";font-family:Arial;font-size:85%;" ><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgvcoPj9EnO3equzt-kyc8bjY1DH-3MmMwFcTrEB1gSstOMiIdDEbNYfyl1FvUaSMs34HaZiUenSwdjkYxZriwIjAS-sFZaadWp72NdS_u0coFQ1MbSPz-u8VeRTjNdP55LgsDu/s1600-h/fredgraph2.png"><img style="cursor: pointer; width: 400px; height: 240px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgvcoPj9EnO3equzt-kyc8bjY1DH-3MmMwFcTrEB1gSstOMiIdDEbNYfyl1FvUaSMs34HaZiUenSwdjkYxZriwIjAS-sFZaadWp72NdS_u0coFQ1MbSPz-u8VeRTjNdP55LgsDu/s400/fredgraph2.png" alt="" id="BLOGGER_PHOTO_ID_5316927227025883986" border="0" /></a></span><br /></div> <div> </div> <div><img alt="" src="cid:005501c9ac14$20511d40$6801a8c0@D8V9WPD1" align="baseline" border="0" hspace="0" /></div> <div> </div> <div><span style=";font-family:Arial;font-size:85%;" ><br /><br />It looks to me like they have been lending.<br /><br />Ask around. Try friends and business owners. Heck, call your bank!<br /><br /></span></div> <div> </div> <div> </div> <div> </div> <div> </div> <div><span style=";font-family:Arial;font-size:85%;" >You and I and our friends, relatives, and most especially, our children recently gave 173,300 million dollars to A.I.G., once a nice, quiet insurance company. Where did that 173,300 million dollars go? Well congress and the president have got a lot of people stirred up about 165 million of it going to "bonuses". <br /><br />What about the other 172,135 million? Where did that go? Here is a picture of the cash flow:<br /><a onblur="try {parent.deselectBloggerImageGracefully();} catch(e) {}" href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi6pAGee4miruxvq2vA2HAHO442moFsbmmPT4VCjOHox5Rfk-2SNaw73FQtq0YqASPk1oeWaNfLGL0LuIcmYvIkn4B2zz8Kt3sEPAfhoLPjsvPbmFJLiHPKq9L1QbY0zLS0sHCL/s1600-h/aigbailout.jpg"><img style="cursor: pointer; width: 400px; height: 219px;" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi6pAGee4miruxvq2vA2HAHO442moFsbmmPT4VCjOHox5Rfk-2SNaw73FQtq0YqASPk1oeWaNfLGL0LuIcmYvIkn4B2zz8Kt3sEPAfhoLPjsvPbmFJLiHPKq9L1QbY0zLS0sHCL/s400/aigbailout.jpg" alt="" id="BLOGGER_PHOTO_ID_5316927233457560722" border="0" /></a><br />(Click on the image to enlarge)<br /><br /></span></div> <div><img alt="" src="cid:005601c9ac14$20511d40$6801a8c0@D8V9WPD1" align="baseline" border="0" hspace="0" /></div> <div><span style=";font-family:Arial;font-size:85%;" ></span> </div> <div><span style=";font-family:Arial;font-size:85%;" >Thats right! Most of it went to foreign banks including 12,900 million to Goldman Sachs and 11,900 million to the fine French bank, Societe Generale and 11,800 million to the fine German bank, Deutsche Bank<br />.</span></div> <div><span style=";font-family:Arial;font-size:85%;" ></span> </div> <div><span style=";font-family:Arial;font-size:85%;" ></span> </div> <div><span style=";font-family:Arial;font-size:85%;" >So ask yourself, why is your attention being focused on 165 million while 172,175 million moves around to foreign banks and former secretary Paulson's old company? Well, why does a magician have you follow the bright colored kerchief while his other hand moves behind his back?<br /><br /></span></div> <div><span style=";font-family:Arial;font-size:85%;" ></span> </div> <div><span style=";font-family:Arial;font-size:85%;" >How bad is the deception? Most newspaper and television stories round the 173,300 million in bailout money down to 170,000. (They call it "170 billion in TARP funds). That's right, they round 3,300 million off the number and then want you to get excited about 165 million. David Copperfield couldn't do this sleight of hand any better.<br /><br /></span></div> <div><span style=";font-family:Arial;font-size:85%;" ></span> </div> <div><span style=";font-family:Arial;font-size:85%;" >Tell your friends and relatives to watch the magician's other hand. He's picking their pocket with it.</span></div> <div><span style=";font-family:Arial;font-size:85%;" ></span> </div> <div><span style=";font-family:Arial;font-size:85%;" ></span> </div> <div><span style=";font-family:Arial;font-size:85%;" ></span> </div> <div><span style=";font-family:Arial;font-size:85%;" ></span> </div> <div><span style=";font-family:Arial;font-size:85%;" ></span> </div>T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-210557188790985342009-03-14T00:53:00.002-05:002009-03-14T01:30:46.215-05:00Relax, Your Wealth Was Not DestroyedLarry Summers, Director of the National Economic Council, is known for venturing into areas <a href="http://www.boston.com/news/local/articles/2005/01/17/summers_remarks_on_women_draw_fire/">where angels fear to tread</a>. But perhaps he fell off the cliff today! In his <a href="http://www.brookings.edu/%7E/media/Files/events/2009/0313_summers/0313_summers_remarks.pdf">remarks describing causes of the recession</a> he said:<br /><blockquote>On a global basis, $50 trillion dollars in global wealth has been erased over the last 18 months. This includes $7 trillion dollars in US stock market wealth which has vanished, and $6 trillion dollars in housing wealth that has been destroyed.</blockquote><br />Now let's take a look at some of that destruction. How has housing wealth been destroyed? Presumably by the inevitable drop in housing prices that had climbed to unreasonable and unsustainable levels. <br /><br />But consider the value of my home. I bought it about fifteen years ago for around $170,000. Some people (like the local tax assessor) say it was worth $400,000 a couple of years ago. If I had sold it for that amount, what could I do with the money? Why, I could buy a comparable home in the same neighborhood! <br /><br />And some people say it is worth $300,000 today. And if I sell it for that amount, what could I do with the money? Why, I could buy a comparable home in the same neighborhood!<br /><br />So where did I lose any wealth? I didn't.<br /><br />Better example. I bought a cabin on a lake in 1979 for $25,000. I sold it three years ago for $225,000. Some people would say I made $200,000. Nope! I used the money to buy a comparable cabin on another lake with quieter neighbors. There was no gain in wealth whatsoever. Just a little more peace and quiet. In fact, I lost money. The federal and state governments truly believe that I gained wealth and made me pay a capital gains tax on the increase so I ended up having to shell out money to the government in order to make my even trade.<br /><br />I'm sorry, Larry, but housing does not increase in value. Ever. The only people who believe that it does used to work on Wall Street and invented clever ways to sell securities based on the fictional increase to investors. You'll find them in the unemployment line now.T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-12877534815441405942009-02-27T02:59:00.004-06:002009-02-27T03:56:16.798-06:00Computer Models and Financial DisastersOnce in a while, someone writes a remarkably clear explanation of a complex mathematical subject. Felix Salmon has done just that in an article titled, "<span style="font-size:100%;"><a href="http://www.wired.com/techbiz/it/magazine/17-03/wp_quant">Recipe for Disaster: The Formula That Killed Wall Street</a>" in Wired Magazine.<br /><br />Salmon describes the <a href="http://math.bu.edu/people/murad/MarkWhitehouseSlicesofRisk.txt">elegant method that math wizard, David X. Li, published</a> for simply evaluating risk in the bond (and bond derivatives) markets without having to actually look at the underlying securities.<br /><br />This method, known as the <a href="http://en.wikipedia.org/wiki/Copula_%28statistics%29">Gaussian copula function</a>, allowed Wall Street to take the $11 trillion worth of mortgages outstanding in the U.S. and build much larger markets of securities "derived" from the mortgages:<br /><blockquote>The <span class="blsp-spelling-error" id="SPELLING_ERROR_0">CDS</span> and <span class="blsp-spelling-error" id="SPELLING_ERROR_1">CDO</span> markets grew together, feeding on each other. At the end of 2001, there was $920 billion in credit default swaps outstanding. By the end of 2007, that number had skyrocketed to more than $62 <em>trillion</em>. The <span class="blsp-spelling-error" id="SPELLING_ERROR_2">CDO</span> market, which stood at $275 billion in 2000, grew to $4.7 trillion by 2006.</blockquote>Now that is some serious leverage! And all based on the well known fact that home prices only move in one direction, up.<br /><br />The article is worth reading because it illustrates the fact that even with plenty of warnings, "herd mentality" will drive otherwise reasonable people to believe and act on computer models. How could it be otherwise? Experts build them and the computer says...<br /><br /><br /><br /></span>T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-31075116410144688332009-02-10T11:31:00.002-06:002009-02-10T11:44:17.040-06:00More Opinions on MultipliersSo here we have the opinions of two more economists about the multipliers in the Stimulus Plan. GARY S. BECKER and KEVIN M. MURPHY from the University of Chicago weigh in <a href="http://online.wsj.com/article/SB123423402552366409.html">via this article.</a> Now <a href="http://en.wikipedia.org/wiki/Gary_S._Becker">Becker is not just "any economist."</a> He holds a Nobel Prize. Becker and Murphy conclude:<br /><br /><blockquote>So our conclusion is that the net stimulus to short-term GDP will not be zero, and will be positive, but the stimulus is likely to be modest in magnitude. Some economists have assumed that every $1 billion spent by the government through the stimulus package would raise short-term GDP by $1.5 billion. Or, in economics jargon, that the multiplier is 1.5.<br /><br />That seems too optimistic given the nature of the spending programs being proposed. We believe a multiplier well below one seems much more likely.</blockquote><br />For something so important, it seems like there ought to be a lot more agreement that the multiplier is greater than 1 before we hop on this train!T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-84914371454168587902009-02-02T05:19:00.004-06:002009-02-02T05:35:13.656-06:00More on Christy Romer's MultipliersI referenced Christy Romer's "research" multipliers versus her "now I'm in government" multipliers in this post - via <a href="http://gregmankiw.blogspot.com/">Greg Mankiew's blog</a>. Now Mankiew has a post up with this Q and A from a mysteriously hard to find set of talking points:<br /><blockquote>Question: But doesn’t Dr. Romer’s research show that the economic impact of tax cuts is higher than even the Administration is assuming?<br /><br />Answer: Dr. Romer’s research suggests that all types of fiscal stimulus, both spending and tax cuts, might well have a larger impact than is typically assumed and is assumed in the CEA's analysis. ...<br /><br /></blockquote>Mankiew calls Romer on this slight of hand.<br /><blockquote><p>It is also consistent with the hypothesis that tax changes are more potent than spending changes.</p></blockquote><p>But <a href="http://gregmankiw.blogspot.com/2009/02/white-house-talking-points.html">read the whole thing</a>.</p>T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-14773138199605827792009-01-29T05:00:00.003-06:002009-01-29T05:22:14.242-06:00Explaining the Banking BailoutI was going through my morning exercise routine <a href="http://sawyertravel.blogspot.com/2009/01/orientation-to-cairo.html">here in Cairo, Egypt</a> this morning and was watching CNN International. A caller had a question for the "financial experts" who promptly blew it!<br /><br />The question, approximately, was: "I have a mortgage with Bank of America. They have received bailout money - how does this help me?"<br /><br />The answer, of course, is "it doesn't, directly." But then, the "experts" could have easily explained the whole problem and the bailout like this:<br /><br /><blockquote>Suppose that a hundred people are lined up out in front of B of A to apply for a mortgage loan like yours. A couple of years ago, all one hundred would have likely been given a loan. The expression was, "If you can fog a mirror, they'll give you a mortgage."<br /><br />Right now, maybe five or ten of the hundred would get a loan. These would be the people who already have enough money to just pay cash for their house. That's' why this is called a credit crisis.<br /><br />After receiving the bailout assistance, maybe forty or fifty would get loans from B of A. Credit would be granted more readily.<br /><br />If the caller has children or friends in the line, this is a big deal.<br /><br />We hope that not all one hundred would receive a loan - that would just put us back into the problem that got us here.<br /></blockquote><br />See? Financial issues are not difficult to explain, you just have to make a little effort. Of course, I left out a lot of control, monitoring and supervision issues. But, I'll just bet the government left them out too.<br /><br />And those numbers, I used - five, ten, thirty, forty? Those are just wild guesses when a blogger like me states them. In a financial model (a bunch of formulas used in a spreadsheet - see, for example, the Congressional Budget Office) those are called planning assumptions.T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-71463300951862608802009-01-11T13:05:00.003-06:002009-01-12T03:36:26.574-06:00No Wonder They Call It The Dismal Science!Economics is sometimes know as "The Dismal Science." Some people who have had to endure introductory university courses taught in a huge auditorium interspersed with lectures from barely coherent teaching assistants think they know why.<br /><br />But the real reason is demonstrated by the incoherence of the practitioners at the highest levels of government.<br /><br /><a href="http://en.wikipedia.org/wiki/Greg_Mankiw">Greg Mankiw</a> has held the position of Chairman of the Council of Economic Advisers (CEA). On his excellent blog, the professor today <a href="http://gregmankiw.blogspot.com/2009/01/obamas-multipliers.html">comments on the proposed stimulus package</a> of the incoming administration as analyzed by CEA Chair-designate Christina Romer. The stimulus package is going to be made up of both tax cuts and government spending.<br /><br />Now I don't want your eyes to glaze over, but these tax cuts and spending proposals have impact on the economy beyond their immediate value. For example, if you cut my taxes by a dollar, I'll probably go spend that dollar at, say, a restaurant. The dollar then gets utilized by the restaurant to purchase more food (raw materials) and if enough people like me decide to go to the restaurant, the owner has to hire an extra cook. That additional spending and hiring results in additional economic activity The initial dollar "multiplies"!<br /><br />In fact, economists call the amount of the multiplication a "<a href="http://en.wikipedia.org/wiki/Spending_multiplier">Spending Multiplier</a>." The benefits that you read about in analyses of government programs are all based on "models" (those are just a bunch of formulas) that use assumptions (those are just guesses) about a lot of things including these multipliers.<br /><br />Now no one really knows what the values are for the multipliers. The models all involve a lot of simplifications and guesses about how the economy works. But, the formulas are calculated by a computer and the results are published by very sober authorities like the Congressional Budget Office so a lot of people (think reporters) believe them and think they are very accurate!<br /><br />So what is the point of all this? Well, Obama's CEA Chair-designate Christina Romer has used some multipliers in her analysis of the stimulus plan. What are they? <a href="http://gregmankiw.blogspot.com/2009/01/obamas-multipliers.html">Greg Mankiw skips to the penultimate page</a> and discovers that the fiscal policy mutlipliers are:<br /><ul><li>For government purchases, their multiplier is 1.57</li><li>For taxes, 0.99</li></ul>Reasonable? Perhaps. But Mankiw goes on to note:<br /><blockquote>the <a href="http://www.econ.berkeley.edu/%7Ecromer/RomerDraft307.pdf">recent research of Christina and David Romer</a>, who conclude:<br /><span style="font-family: arial;"><blockquote><span style="font-family: arial;">tax changes have very large effects on output. Our baseline specification suggests that an exogenous tax increase of one percent of GDP lowers real GDP by roughly three percent. Our many robustness checks for the most part point to a slightly smaller decline, but one that is still well over two percent.</span></blockquote></span>That is, Team Obama assumes that tax changes are less than half as potent in influencing the economy as the new CEA Chair estimated them to be in her own research.</blockquote>Mankiw's best advice?<br /><blockquote>...it is prudent to take any research, including that of the very careful, very sensible Romers, with a grain or two of salt. The same can be said of the mainstream models on which Team Obama is relying.<br /></blockquote>T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0tag:blogger.com,1999:blog-9907900.post-9556711319170932462009-01-11T13:00:00.003-06:002009-01-11T13:05:38.360-06:00It May be Time to Resume PostingI never became active on this blog, but I think the time has come to resume posting. So if you are looking for some history over the past three years - it isn't there!T J Sawyerhttp://www.blogger.com/profile/09260687428823173972noreply@blogger.com0