Category: Data Source
Reihan Salam summarizes Charles Blahous
Roughly 49% of the fiscal deterioration relative to the expectations of the CBO circa its 2001 projections can be attributed to increased spending, 27% to the failure to predict the less-than-smooth business cycle perturbations of the decade, and 24% to tax cuts.
Here is more. I have not myself worked through this calculation, but if you know of any good rebuttal to it, I will be happy to take a closer look and report back. I believe it also does not include increases in state and local spending, which ultimately do tie back into the consolidated fiscal position of all U.S. governments as a whole.
A look at U.S. income growth
Hat tip from @JustinWolfers.
By the way, Robert Gordon has a new paper pessimistic about future economic growth, using this tagline at the end of the abstract: “A provocative “exercise in subtraction” suggests that future growth in consumption per capita for the bottom 99 percent of the income distribution could fall below 0.5 percent per year for an extended period of decades.” Mark P. Mills is more optimistic.
Chris Hayes responds
In this segment Chris Hayes gives a gracious and interesting response to my post Racism by Political Party.
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A new RCT look at educational vouchers
From Matthew M. Chingos and Paul E. Peterson (pdf):
In the first study using a randomized experiment to measure the impact of school vouchers on college enrollment, we examine the college-going behavior through 2011 of students who participated in a voucher experiment as elementary school students in the late 1990s. We find no overall impacts on college enrollments but we do find large, statistically significant positive impacts on the college going of African American students who participated in the study. Our estimates indicate that using a voucher to attend private school increased the overall college enrollment rate among African Americans by 24 percent.
Hat tip goes to Michael Petrilli, via ModeledBehavior.
Recent figures on capacity utilization
Industrial production picked up in July after two months of slight growth, the Federal Reserve said Wednesday in the latest reading that shows the economy in the third quarter got off to a decent start. Industrial production picked up 0.6% in July after slender 0.1% monthly gains in May and June, the Fed said. The Fed had previously reported a 0.4% gain in June and a 0.2% drop in May. The 0.6% gain was as expected in a MarketWatch-compiled poll of economists. Capacity utilization rose to 79.3% in July from 78.9% in May – the highest level since April 2008. Even so, it’s still 1% below its average from 1972 to 2011.
The link is here. It suggests there is excess capacity, but not in wild amounts. Elsewhere, in China:
Capacity utilisation has dropped from about 80% before the crisis to a mere 60% in 2011. That compares with about 78.9% for the US currently for total industry (which is not very high by US’s historical average), and 66.8% at the financial crisis trough according to the Federal Reserve. In other words, current capacity utilisation in China appears to be even lower than that of the US during the 2008/09 financial crisis.
Beware all Chinese numbers, but still that cannot be taken as a good sign. Note that the real estate bubble probably is not fundamental to the Chinese economic crisis (though it is a problem), but excess capacity is.
Racism by Political Party
It is undeniably the case that racist Americans are almost entirely in one political coalition and not the other.
Chris Hayes, Up w/ Chris Hayes, August 18, 2012.
Here is data asking whites the question Do you Favor Laws Against Interracial Marriage (this is from 2002, the latest year available for this question).
| Favor Laws Against Interracial Marriage | |||||
| Democrat | Ind | Repub | Other | TOTAL | |
| YES | 11.9 | 9.6 | 11.5 | 5 | 10.8 |
| NO | 88.1 | 90.4 | 88.5 | 95 | 89.2 |
Here is data asking whites whether they agree with the sentiment that Blacks Shouldn’t be Pushy.
| Blacks Shouldn’t Be Pushy | |||
| Democrat | Ind | Republican | |
| AGREE STRONGLY | 14.9 | 14.2 | 15.8 |
| AGREE SLIGHTLY | 20.4 | 20.6 | 26.6 |
| DISAGREE SLIGHTLY | 30.2 | 28 | 25.9 |
| DISAGREE STRONGLY | 34.5 | 37.2 | 31.7 |
Finally from 2008 here is data asking whites whether they would vote for a black for President. (Row: racpres, column partyid, filter: race(1) year(2008)).
| Would Vote for Black President | |||||
| STRONG DEMOCRAT | NOT STR DEMOCRAT | NOT STR REPUBLICAN | STRONG REPUBLICAN | ||
| YES | 92.4 | 94 | 93.9 | 94.7 | |
| No | 7.6 | 6 | 6.1 | 5.3 | |
It is true that there are more differences across party lines on policy questions such as on affirmative action, again with a mix in both parties but with more Republicans than Democrats opposing. I don’t consider these types of policy preferences to be grounds for calling someone a racist, however.
It is undeniable that some Americans are racist but racists split about evenly across the parties. No party has a monopoly on racists.
Addendum: John Sides, Reihan Salam and Razib Khan offer further comment.
Who gained the most from the euro?
Looking at the growth of real incomes over the first few years of the Euro’s existence, it is hard to argue against the idea that the peripheral countries should be taking more pain now. Core countries have had to accept a decline in real living standards, and it seems unrealistic to expect them to finance an increase in living standards for others.
Here is much more. I don’t agree with all of their methods of assessment, but the piece makes some important (and valid) points.
For all the talk about how much German has benefited from the euro, we learn:
What Donovan and co found is that the lowest-income sections of the more “core” countries saw negative real disposable income growth, while those at the other end of the income scale saw incomes rise still further. In other words, in the core countries, the rich got richer, the poor got poorer.
In other contexts, this pattern is not usually considered a benefit at all. Brad Plumer adds comment, as does Angus.
A Simple Strategy for High Returns?
Morgan Housel presents some interesting data at The Motley Fool but draws the wrong conclusion:
…the single best stock to own from the 1950s to the early 2000s had nothing to do with computers, or technology in even the loosest sense. It was Altria (NYSE: MO ) , the maker of Marlboro cigarettes, which returned nearly 20% a year for 50 years. During a period when new industries transformed the lives of nearly everyone in the developed world, the most money was made in a company that stuffed tobacco into paper tubes the way it had for more than a century.
…Microsoft’s profits have grown 16-fold since 1995. Yet once again, the best stock returns may surprise you. With dividends, Microsoft has returned 511% since mid-year 1995. But Clorox (NYSE: CLX ) returned 560% during that time — so bleach actually bested the last leg of the computer revolution. Colgate-Palmolive (NYSE: CL ) returned 651% over the same period, so toothpaste did, too. As did garlic powder: McCormick returned 642%. Ditto for hamburgers, with McDonald’s (NYSE: MCD ) adding a 540% gain. Hormel Foods produced a 544% gain over the same period, so Spam was actually more profitable than computers during the big boom. Our old friend Altria scored a 1,300% gain, nearly trebling Microsoft’s return.
Admittedly, I’ve cherry-picked the dates to make my point. Back up a year or two, and Microsoft wins. But the fact that any period — a 17-year period no less — can be found during which a company with a virtual monopoly on a booming industry underperforms the dullest of products is extraordinary. It also underlines two important investing lessons…
One lesson Housel draws is that “simple products that rarely change often make better investments than those undergoing breakthroughs.” Rubbish. (Did Housel even compare simple products with breakthrough products? No. He just found some winners over a particular time frame.) The real lesson is that expectations, good and bad, are baked into prices so winners and losers are always unexpected. Unless your name is Warren Buffett, you should index.
Hat tip: Newmark’s Door.
Some raw numbers on health care costs
During the past months, a number of important articles have appeared in the healthcare literature on the subject of the recent slowing of health-spending growth in the U.S. In an article in January’s Health Affairs, economists at the Centers for Medicare and Medicaid Services suggest that the recession, even though officially ending in mid-2009, was the major factor in “extraordinarily slow” spending growth of 4.7 percent in 2008 and 3.9 percent in 2010, down from 7.5 percent in 2007 and double-digit growth in the 1980s and 1990s. Also citing recessionary causes, a report from the McKinsey Center for U.S. Health System Reform specifies declines in the rate of overall spending growth for eight consecutive years, from 9.2 percent in 2002 to 4.0 percent in 2009.
As I’ve already mentioned, “too soon to tell” is the correct response. Still, we should be raising our probability that the health care cost curve is (somewhat) being bent.
There is much more at the link. You can read Suderman and Lowrey here.
The Font of Wisdom
More data on survival during maritime disasters
From Mikael Elinder and Oscar Erixson (pdf, final PNAS gated version here):
It’s a widespread notion that women and children are saved first in maritime disasters. The systematic evidence of this comes primarily from the sinking of RMS Titanic. By analyzing individual level data from MS Estonia – one of the largest maritime disaster in the Northern hemisphere since World War II – a different picture emerges. Estonia sunk in the Baltic Sea with 137 survivors and 852 casualties. Despite equal gender rates on Estonia, 111 men, but only 26 women survived. This striking observation, as well as econometric analyses of survival probabilities, shows that the behavior among passengers and crew was clearly inconsistent with the norm that women should be saved before men. We show that the survival patterns from several maritime disasters, including Titanic, can be explained by the behavior of the captain. Women have a survival advantage only when the captain orders that women should be given priority and threatens disobedience with violence. Otherwise women will have lower survival chances.
What predicts when an Olympic record will fall?
It turns out that if the current holder also set the record in the past, the record is more likely to be broken at the next games.
If the current Olympic record is also the world record, it is less likely to be broken in the next games.
A change in the number of countries competing in an event is also an important indicator of whether the record will fall.
And most surprising of all, the percentage by which the existing record improved on the first Olympic record, is also a significant indicator.
There is more here, and the original paper is here. For the pointer I thank Michelle Dawson.
Investment vs. the Warfare-Welfare State
In Launching the Innovation Renaissance and my Atlantic article The Innovation Nation vs. the Warfare-Welfare State I showed that the Warfare-Welfare state has crowded out federal investment in research in development.
In a short report titled Collision Course: Why Democrats Must Back Entitlement Reform, Jessica Perez, Gabe Horwitz, and David Kendall cut the data in a slightly different way but come to the same conclusion:
Entitlements are squeezing out public investments. In 1962, spending on investments was two and a half times that of entitlements. But today, as a result of this Great Inversion, entitlement spending is three times that of investments. And this trend will only accelerate in time as the Baby Boomers retire and their benefits grow faster than inflation and wages.
…The fact that entitlement spending is crushing investments is bad news for U.S. growth.
Hat tip: Arnold Kling.
Pharmaceutical innovation is very, very good
We examine the impact of pharmaceutical innovation, as measured by the vintage of prescription drugs used, on longevity, using longitudinal, country-level data on 30 developing and high-income countries during the period 2000-2009. We control for fixed country and year effects, real per capita income, the unemployment rate, mean years of schooling, the urbanization rate, real per capita health expenditure (public and private), the DPT immunization rate, HIV prevalence and tuberculosis incidence. Life expectancy at all ages and survival rates above age 25 increased faster in countries with larger increases in drug vintage. The increase in drug vintage was the only variable that was significantly related to all of these measures of longevity growth. Controlling for all of the other potential determinants of longevity did not reduce the vintage coefficient by more than 20%. Pharmaceutical innovation is estimated to have accounted for almost three-fourths of the 1.74-year increase in life expectancy at birth in the 30 countries in our sample between 2000 and 2009, and for about one third of the 9.1-year difference in life expectancy at birth in 2009 between the top 5 countries (ranked by drug vintage in 2009) and the bottom 5 countries (ranked by the same criterion).
A short lesson about the history of U.S. employment
The wages of less educated men—which had been in decline since the 1970s—also enjoyed a brief reprieve in the late 1990s and into the following decade. Working with University of Chicago colleagues Kerwin Charles and Matthew Notowidigdo, Hurst found that these aggregate statistics for the United States as a whole have played out in miniature across the country (PDF), as one would expect if the housing boom were really behind the short-lived uptick in the employment and salaries for the bottom 20 percent. In regions where the housing booms were greatest, the employment prospects of low-skilled workers fared the best, while in places that the housing bubble passed by, the job prospects of such workers continued their inexorable decline. (The researchers also found that the increase in construction employment was only part of the explanation: Low-skilled service employment also went up in places with housing booms as local residents, feeling wealthier as a result of the increased value of their homes, spent more at restaurants, barber shops, and local retail establishments.)
Overall, Hurst and his co-authors estimate that roughly 40 percent of the increase in nonemployment (those who are unemployed but still looking for jobs, as well as those who have given up and exited the labor force entirely) since 2007 involves manufacturing jobs that were already lost during the earlier part of the decade. But the loss of these jobs was temporarily obscured by the housing boom that allowed low-skilled individuals to find work. (For the college-educated, there was at most a modest connection between the housing booms and employment.)
Once again, we are not as wealthy as we thought we were. And there really is a significant structural component behind today’s sluggish labor market.