Saturday, April 30, 2011

The U.S. Energy Mix in 2035: The Future is Gassy

Black and Veatch have put out a report forecasting the U.S. energy mix in 2035 (specifically, electricity generation). Here's the chart they produce, if you believe their assumptions and modeling:

So, they think we'll increase renewable energy production rather substantially, but the big story is about our future energy use is the substitution of natural gas for coal. On the plus side, natural gas burns far cleaner than conventional coal; on the negative side, much of the new natural gas sources will be pumped out of the ground via the controversial method of fracking. When it comes to energy, there's no such thing as a free lunch, it seems.

Via Grist, where you can get more commentary on the report.

Friday, April 29, 2011

Americans Think the Feds Give Public Broadcasting 424 Times More Money Than They Actually Do

"B" is for Budget Cluelessness!
I'm thinking of launching a whole new subsection of my blog entitled something like, "Things Americans Think that Are so Incorrect that They Make Me Question Whether Americans Are too Ignorant to Participate in Democracy Anymore."

As reported by Talking Points Memo:
In a CNN poll of American adults released Friday, the median guess on what percentage of the federal budget goes to public broadcasting was 5%. With a $3.55 trillion budget last year, that would put funding for the CBP at approximately $178 billion.
In reality though, that's not even close.
The CPB received about $420 million last year from the federal government, making it roughly one one-hundredth of one percent, of the overall budget. That means that the median response was about 424 times higher than the actual amount of federal funding that went to public broadcasting last year.
Further, 20% of respondents thought CPB funding made up over 10% of the entire budget, including 5% who said it made up at least half.
The same CNN poll also highlights that, after YEARS of news reports that state otherwise, Americans STILL think that foreign aid makes up between 10-25% of the U.S. federal budget, when the actual number hovers around 1%, depending on exactly how you count it.

Furthermore, the poll shows that Americans suck at basic arithmetic, as the average American gave answers that totaled up to 137% of the federal budget.

Just another example of how Americans are profoundly misinformed about almost every important issue facing the U.S. today. I find myself wondering - at what level of public ignorance does democracy stop functioning? I worry that we may be approaching that point in this country ....

Thursday, April 28, 2011

(Local) Government Run Amok: Home Gardens (Practically) Illegal in California, Perhaps Elsewhere

From the San Francisco Chronicle, via Reason, we have a story about local government permitting run amok.

I won't quote much of the story here, since you can read it via the links if you want the details, but essentially, the city is requiring a small-scale ($2,500/year in revenue) farmer to pay several thousand dollars for a permit or be shut down, all because she sells a small amount of her excess produce for this substance called "money," rather than giving away her excess produce. The city said that the same would apply to any gardener that sold any produce, period.

Now, I am a staunch supporter of government efforts to protect consumers from harm - for example, requiring government regulation and oversight of food processing plants that produce food for hundreds of thousands or millions of people, since a single contamination in one of these plants can cause major public health problems in the form of thousands of sick people.

However, a small-scale urban farmer poses practically no risk to public health - their scale is too small, and dangerous contamination of food is far likelier to happen during food processing rather than food growing.

I see this as just another part of a larger trend that started in the 1950s - a steady increase in the percentage of workers who need a state license to have permission to perform their job:

From the WSJ.

The WSJ has an amusing piece on the increase in state and local licensing requirements, with some excellent anecdotes:
Texas, for instance, requires hair-salon "shampoo specialists" to take 150 hours of classes, 100 of them on the "theory and practice" of shampooing, before they can sit for a licensing exam. That consists of a written test and a 45-minute demonstration of skills such as draping the client with a clean cape and evenly distributing conditioner. Glass installers, or glaziers, in Connecticut—the only state that requires such workers to be licensed—take two exams, at $52 apiece, pay $300 in initial fees and $150 annually thereafter.
California requires barbers to study full-time for nearly a year, a curriculum that costs $12,000 at Arthur Borner's Barber College in Los Angeles. Mr. Borner says his graduates earn more than enough to recoup their tuition, though he questions the need for such a lengthy program. "Barbering is not rocket science," he said. "I don't think it takes 1,500 hours to learn. But that's what the state says."
It's harder to measure quality in more subjective fields such as interior design or hair styling. But a look at consumer complaints about manicurists suggests licensing doesn't necessarily correlate with quality.
Alabama has perhaps the strictest licensing requirements in the nation: 750 hours of schooling and a written and practical exam. The state gets, on average, four public complaints a year about poor service, according to the Alabama Board of Cosmetology.
Connecticut, which doesn't require manicurists to get licenses, has averaged just six complaints a year to the state over the past five years. Two-thirds of those complaints are about gift certificates that aren't honored, according to data from the consumer protection division of the state attorney general's office.
Licensing is surely important in a number of professions, since inept or unqualified electricians, plumbers, doctors, etc. could put consumers at serious risk. However, I think it's relatively difficult to justify requiring 750 hours of study and a license for manicurists - I'm pretty sure the free market regulates the quality of manicurists just fine, with word getting around pretty quickly as to who is a good manicurist and who isn't. The same goes with small-scale farmers - it's hard to justify requiring hobbyists to pay $1,000s in licensing fees just to sell their extra tomatoes, cucumbers, and chard.

In my government agency, we have to do a rigorous cost-benefit analysis of any regulation or rule we think about implementing; do states have to do the same with their licensing laws?

For a thoughtful analysis on the economic impacts of poorly conceived licensing laws, from an increase in inequality to encouragement of black markets, see this great post from Modeled Behavior.

Wednesday, April 27, 2011


I received this piece of spam email the other day, and it struck me because it is so wildly different than any spam I've received in the past. Instead of trying to entice me to action through some positive benefit ("You Won the Lottery!", "A Dead Relative in [Nigeria, England, Ghana, etc.] You Never Knew About Left You Lots of Money!", "Enlarge Your P3N1S!", etc.), it's trying to compel me to action through fear of loss ("YOU WILL BE ARRESTED, INTERROGATED AND PROSECUTED").

Have spammers been studying behavioral economics, and have they decided to try their hand at implementing prospect theory in their spam emails? Perhaps so - since most people value losses about twice as much as gains (i.e. losing $100 you have now would make you twice as sad as finding an extra $100 on the street today would make you happy), people might respond better to threats in spam rather than promises of riches, even if those threats are as transparently fake as the below letter. Any maybe it is more effective - it got me to read the below, rather amusing letter, at least. But, it's been more than 72 hours since I received the letter, and I am very much not arrested.

Oh, and if anyone is wondering - if you're ever going to be arrested, subpoenaed, interrogated, etc. by any government agency, they'll either deliver the summons or come arrest you in person - you won't get an email about it beforehand.

So, for your reading pleasure, here's the email the "FBI" sent me the other day.

My favorite part is the reference to "SECTION 229 SUBSECTION 31 OF THE 1991 CONSTITUTION IN MONEY LAUNDERING" - where can I find that provision, exactly? My high school government class must have skipped the 1991 Money Laundering Constitution of the United States.

Federal Bureau of Investigation
Intelligence Field Unit J. Edgar Hoover Building
935 Pennsylvania Avenue, NW Washington, D.C.









Tuesday, April 26, 2011

What Dr. Seuss Books Were Really About

I also considered titling this post, "How My Conservative Mother Raised a Liberal Son," but more on that below.

Brilliant and true. My personal favorite is the transformation of "How the Grinch Stole Christmas" into "The Psychological Implications of Holiday-Motivated Materialism."

I'd also considered titling this post, "How My Conservative Mother Raised a Liberal Son." After all, by most accounts, I should have grown up to be a conservative - for most people, their parents' political ideology and the ideology of the community they grew up in are (the?) two main factors that determine their own political beliefs - and I grew up in a conservative Southern town with a conservative Southern mother.

Well, to that possible list of culprits, we can add another potentially culpable party - Dr. Seuss. And the cruelest irony is that my mother, unbeknownst to her, willingly fed me this left-wing ideology through a sinister practice known as "bedtime reading." Sorry, Mom ....

Monday, April 25, 2011

Mapping Happiness in the U.S. - Happiness by Congressional District

The NYTimes put together a fascinating interactive infographic that maps well-being (which I've chosen to call happiness, though they're not necessarily identical) across the entire U.S., by Congressional district:

Click the image or here to see the original, interactive version, which lets you break down the composite score into a wide range of individual indicators, such as learning, stress, self-reported happiness, depression, health indicators, job satisfaction, etc.

What can we learn from this map? In general, it apparently sucks to live in rural areas in the U.S., except if you live in the upper Midwest. It also helps to live near the ocean, unless your stretch of ocean is in a Southeastern state (except for South Carolina). From the interactive version, we learn that the Southeast continues to be at the bottom of a number of important happiness indicators - ongoing learning, stress, self-reported happiness, depression, self-reported health problems, smoking, diabetes, obesity, exercise, access to health insurance and dental care, and food insecurity.

I don't claim causation, but it's interesting to compare this map of well-being with the map of state taxes that I posted a while ago. Lower tax burdens generally seem to correlate with lower happiness and well-being (and higher tax burdens with higher happiness and well-being), with some notable exceptions: Ohio, Georgia, and Arkansas (where people are unhappy and have high taxes), much of the upper Midwest (is there something in the water there that just makes everyone happy?), and Alaska (I can see that being able to pay for much of your state's services with oil revenue rather than through taxes would increase happiness).

So, seriously, what is it about the upper Midwest that makes people so happy? It can't be the winters ....

Sunday, April 24, 2011

Irrational Decision-Making: People Would Rather Get Cancer than Be Pale

According to a new study by BMC Public Health:

Even a higher risk of skin cancer isn't enough to coax some sunbathers to lather on sunscreen, a new survey found.
Many people with a family history of melanoma said they shunned sunscreen and embraced tanning, according to a survey of 500 people released today by BMC Public Health.
To me, this smacks of irrational decision making, though perhaps these folks have seriously weighed the trade-offs between tanning and maybe getting cancer on the one hand and being pale on the other. After all, people risk death all the time to undergo plastic surgery, so perhaps this is no different.

Or, perhaps consumers' discount rates are so high that the present value of being tan now is really greater than the present value of the future increase in probability of getting cancer.

Either way, it seems to me that we aren't educating people very well in the art of cost-benefit analysis (either in the actual art of cost-benefit analysis or in the appropriate discount rate to apply to their own lives) if they decide that being tan is worth risking skin cancer, even if they have a family history of skin cancer. To me, that just seems dumb.

Saturday, April 23, 2011

The U.S. Has Been Eating Its Infrastructure Seed Corn for Decades

The Atlantic has a series of graphs (taken from "analyst Mary Meeker's treatment of the U.S. government as a corporation in need of restructuring") that starkly illustrate the decline of U.S. investment in our own infrastructure over the past several decades, to the point that our infrastructure, once the wonder of the entire world, is now in relative disrepair.

Here's what we have sown:

And here's what we have reaped:

The Atlantic's Derek Thompson puts it bluntly:
In the last 40 years, we've pumped the breaks on productivity-enhancing investments in infrastructure, education and technology, while health care and income security costs have accelerated dramatically. Like an aging couple shifting its spending away from the kids' clothes and tuition toward pills and doctor visits, the U.S. government has transformed itself from a defense-technology-infrastructure investor to a national insurance conglomerate for its aging population.

Below is a chart that breaks down U.S. spending into (probably oversimplified) categories of productive spending -- like defense and infrastructure that tries to build things -- and less-productive spending like entitlements and interest payments that try to preserve things. Entitlements and interest have doubled their share of the budget since 1970s. (To be clear: Entitlements are important and humane. But they're not investments in our future capacity to produce things. Instead, they preserve the health and dignity of the sick and retired.)

Meeker sees three kinds of investment as productivity-enhancing: 1) infrastructure, 2) education, and 3) research and development. Similar to infrastructure, federal government spending on research and development has fallen dramatically, as a % of GDP:

Education spending has not fallen as a % of GDP, but it has certainly not risen as fast as less-productive spending:

So, yes, the U.S. has been eating its infrastructure seed corn for decades - the Baby Boomers have been living off of the investments made by their parents, the Greatest Generation, without contributing much in return, and the Boomers are only set to demand and consume more and more as they enter retirement. But, there's still hope - more on the coming, but avoidable, Boomerpocalypse in a later post.

Friday, April 22, 2011

Predicting Political Revolutions with Data: "The Shoe-Thrower's Index"

From the Atlantic:
First Tunisia, then Egypt, Bahrain, Yemen, Algeria, and Morocco seemingly spontaneously combusted from the bottom up. Last weekend there were online calls for mass protests in Beijing, Shanghai, and other major Chinese cities; Libya is in a full-blown state of revolution as of this writing, with much of the country in the hands of rebels and government security forces firing on demonstrators in Tripoli. 
Clearly, 2011 already ranks as one of history's great revolutionary epochs alongside 1848, 1918, 1949, and 1968. Something powerful and seemingly irresistible is being unleashed. But what is it exactly?
The Economist, with its "Shoe-Thrower's Index," attempts to quantify all of the various factors that feed into political unrest and discontent - a government's years in power, youth population, GDP per capita, and rankings of democracy, corruption, and press freedom - and produce a relative ranking instability in the Middle East:

Richard Florida from the Atlantic took this idea and expanded it to most countries in the world, calling naming their new scheme the "Index of Political Unrest":

Click the image to be taken to a HUGE version.
As he explains:
The IPU does reasonably well in predicting the unrest and revolutionary activism that are spreading across the Middle East today. Among the highest-scorers are the West Bank/Gaza Strip (.75), Yemen (.75), Egypt (.74), and Iraq (.72).  Seven more Middle Eastern and North African nations have relatively high IPU scores:  Morocco (.68), Lebanon (.64), Syria (.61), Jordan (.61), Algeria (.6), Tunisia (.57), and Libya (.51), while Saudi Arabia (.4) and Bahrain (.4) show more moderate levels.  On the other hand, Kuwait (.23), Qatar (.22), and the United Arab Emirates (.21) score in the same range as Luxemburg, Hong Kong, Singapore and Canada. Obviously this metric is not infallible--things are much less stable in Bahrain than its moderate score (.4) would suggest; Libya's score fails to reflect the outsized role of its insane dictator. 
That said, it's interesting to note that the real powder kegs are not even in the Middle East. The nation with the highest ranking on the IPU is Togo (.93), followed by Mongolia (0.83), Armenia (.81), Haiti (.8), and the Ukraine (.79). China's IPU score of .51 is on par with Libya's. 
On the other side of the ledger, the world's most stable nations are the Netherlands (.15), Norway (.15), Australia (.17), Finland (.18) and Canada (.19). The United States is in 20th place (.3).
I was interested to see how high China's relative ranking is - though it's not a "powder keg" by any stretch of the imagination, it still manages to rank rather highly, and a revolution in China would really change the world.

I was not surprised but still sad to see that the U.S. came it as only the 20th most stable country in the world, behind Canada, Australia, and much of Western and Northern Europe.

Disclaimer: I recognize that neither of these indices are scholarly or exhaustive, nor do they demonstrate causality - but they're still interesting.

Thursday, April 21, 2011

When Economic Efficiency and Irrationality Collide: The Debate Over Raising the Gasoline Tax

Recently, in the face of the turmoil in the Middle East, Thomas Friedman renewed his call for a substantial increase in the gasoline tax in the U.S. If there was ever an easy policy decision to make - from the perspective of increasing economic efficiency, increasing overall societal welfare, and supporting good public policy - then raising the gasoline tax is it.

Martin Wachs gives a dozen reasons to raise the gas tax (his reasons are phrased in rather wonkish language, so I'll elaborate in parentheses where I think it would be helpful):
  1. Motor Fuel Taxes Are Lower Now Than In The Past (the gas tax hasn't changed in nominal terms since 1993, so inflation has decreased the effective [real] gas tax by 1/3)
  2. Fuel Taxes Are Well Below Levels In Other [Advanced] Countries:
  3. Fuel Taxes Are Well Below Their Theoretical Optimum (cf. Parry and Small)
  4. Drivers Show Remarkable Tolerance For Fuel Price Changes (though people talk about gas prices a lot, people don't rebel because of gas prices, even when they increase sharply in a short period of time)
  5. The Cost Of Transportation Projects Continues To Rise Faster Than Revenue (construction costs are rising)
  6. Congestion Is Growing In Part Because We Are Not Spending Enough On New Capacity (people are driving more, but there aren't many new roads, and the roads we already have aren't maintained well - which costs the average driver several hundred dollars a year in extra car repairs)
  7. Relative Declines In Fuel Tax Revenues Increase Reliance On Non-Transportation Related Taxes To Support Transportation Projects (roads are being paid by for by non-drivers, which does not make economic sense)
  8. The Relative Decline In Fuel Tax Revenues Is Increasing Borrowing For Transportation Projects And Programs (we are borrowing to pay for roads, which does not make economic sense)
  9. Fuel Taxes Have Low Collection Costs And Are Relatively Fraud Proof (as opposed to, say income taxes)
  10. Fuel Taxes Are User Fees That Send “Price Signals” To Motorists To Use The Transportation System More Efficiently (if driving is more expensive, people will do it less)
  11. Fuel Taxes Are Fairer Toward The Poor Than The Alternatives Currently Available (even though the poor spend a higher percentage of their income on gas, they spend far fewer dollars on gas than wealthier people, and the tax is only paid by poor people who drive)
  12. Fuel Taxes Make It Easier To Transition To Better User Fees In Coming Years (with gas-less electric cars coming, we've got to figure out some way to pay for transportation other than gas taxes)
I'll add some less tangible reasons why raising the gas tax would be beneficial:
  1. We capture some of the rising price of gas as tax revenue, rather than giving it all to oil-exporting countries (there is a more nuanced argument behind this, but I'll leave it at this simplification for now).
  2. It provides economic incentives to use more fuel-efficient cars, decreasing our dependency on foreign oil sources and increasing our energy security.
  3. We decrease emissions of carbon monoxide, carbon dioxide, and other pollutants from cars.
  4. The revenue from the increased tax can be used to improve transportation, decrease the deficit, etc.
In spite of all these reasons to increase the gas tax, I don't think it will happen any time soon, for the simple reason that 71% of Americans don't support raising the gas tax to improve transportation, and 75% of Americans don't support to raise the gas tax to reduce the deficit.

From these poll numbers, it might appear that raising the gas tax is tantamount to political suicide - it may be, I'm not sure. It seems strange to me that consumers are only OK with paying higher gas prices if that money goes to oil companies. As you can see above, there are several extremely strong arguments for raising the gas tax, but people may not be willing to listen, since Americans seem to have an irrational relationship with gasoline prices.

I'm from the South - I grew up with this same irrational relationship with gas prices. My dad would drive (and probably still does - I'll have to ask him) 10-15 minutes across town to save a few cents per gallon on the price of gasoline, saving him perhaps $1-2 per fill-up - however, a rational cost-benefit analysis should say that the $1-2 he saved was not worth the 20-30 minutes he spent to save the money (and he probably burned up much, if not all, of the $1-2 savings by driving 20-30 minutes in the car anyway). I cannot think of any other product that a large segment of Americans will readily use 20-30 minutes of their time in order to save less than $1-2.

One of the things I can see out of my office window is a sign with gas prices on it. In the week from Feb 22-March 1, the gas price at this station rose from $3.13/gal to $3.34 per gal (a 6.7% increase). My (irrational) brain thought, "woah, what a huge increase!" - even though the actual difference to me is only about $2 when I fill up my car (granted, my car is a small Toyota Corolla), which I only do about once a month. But internally, I wanted to flip out, as my coworkers were doing, because we Americans seem to have an irrational understanding of and relationship with gas prices. And I can't do anything about the price of gas anyway - the best I could do is purchase the lowest price gas in my area (usually the gas station next door), but the different per gallon between that station and the most expensive one nearby is $0.20 - so at the most, I'm saving $2 a tank (generally $2 per month) by finding the cheapest gas.

The difference between the cheapest and most expensive gas in small Southern towns like the one I grew up in, where people flip out even more over gas prices, is probably smaller than $0.20 - more on the order of $0.10, if I remember correctly, or $1-3 per tank, depending on whether you have a 10 or 30 gallon tank.

Therefore, I have decided that I am going to give up "shopping around" for gas prices - the extra time that I will spend trying to find the lowest price, driving to get it, and driving back is not worth the $1-2 per tank I'd save (and with the extra fuel burned to seek out the extra gas, I might not end up saving anything at all). And you should probably give up "shopping around" for the cheapest gas too.

And since the cost is relatively small, compared to things like housing and food, I'd gladly be willing to pay a higher gas tax - it's the rational thing to do. Who's with me?

(.... Grant listens to the crickets chirping ....)

P.S. After writing the first draft of this post, I found that actually has a calculator that will show you how much you'll save by driving to get that cheaper gas - my guess is that in practically all cases, the extra time spent will not be worth the savings.

Wednesday, April 20, 2011

Should Parents Go to Jail for Lying to Get Their Kids Into Better Schools?

From the Christian Science Monitor:
Kelley Williams-Bolar served nine days in jail, with three years of probation and community service. She was found guilty in Akron, Ohio, on Jan. 18 of two third-degree felonies for having her children attend school in a city in which she did not live.
So, this woman falsely claimed that her children lived with their grandparents, so they could go to a good public school, instead of the drop-out factory that their neighborhood was zoned into. Some people are outraged at her prosecution for what they see as civil disobedience against an arbitrary, unfair education system. Critics say that she was a liar who stole education from a district in which she didn't pay taxes.

I'm not terribly surprised that she was prosecuted and went to jail; she did break the law, after all. As a D.C. resident, however, I can appreciate her predicament. I currently have no children, but given how much the quality of education varies by school here in D.C., I understand the temptation to try to cheat the system in order to get your child into a school that doesn't doom their chance to excel later in life.

This case demonstrates how broken the U.S. education system is - that whether or not you receive a good education is (largely though not exclusively) a function of where you live; where you live is (largely though not exclusively) a function of how much money you make; and how much money you make is (largely though not exclusively) a function of the family you were born into. This is particularly true in education since local taxes pay for most public education costs; if there's no tax base to pay for good schools in a community, the schools will often be poor. So, harsh zoning and hyper-local financing and administration of schools can actually perpetuate poverty and inequality, instead of promoting education as a means for people to move up the social ladder.

It's beyond the scope of this post to describe potential fixes for the U.S. education system, but it's been on my mind lately (I finally saw Waiting for Superman not too long ago).  I don't agree with absolutely everything in the film, but that film and this case demonstrate the extent to which the system is broken, and that the poor are the ones who continually get the short end of the stick when it comes to public education in the U.S.

Tuesday, April 19, 2011

Why Do State and Local Governments Continue to Give Welfare Checks to Corporations and Millionaires?

In the LA Times, Michael Kinsley laments the growing practice of state and local governments fighting each other tooth and nail to give tax abatements (read: "subsidies," or even "corporate welfare checks") to TV and movie production companies who make shows or films in their jurisdictions:
New Mexico under [Governor Bill] Richardson was a pioneer in this field. In 2002, it began offering a credit of 15% — later raised to 25% — toward the cost of making a movie in New Mexico (not counting star salaries and the mite paid to writers). Now, 42 states have followed its lead. New York has gone as high as 30%. These credits are generally transferable, savable and usable for other things, so it's no problem if the particular movie doesn't make money.

In less than a decade, the absurd notion of welfare for movie producers has evolved from the kind of weird thing they do in France to an unshakable American tradition. "I'm proud that New Mexico has been a leader in this effort," Richardson says.
Richardson says that the film and TV subsidy has brought "nearly $4 billion into our economy over eight years" and has created 10,000 jobs. By "our," he means New Mexico. He says every state should emulate this success. 
I find it bizarrely un-American to brag about and compete for cutting the largest corporate welfare checks to a particular industry.

Kinsley goes on to point out that much of these subsidies are pure waste, since many of the movies would have been made in New Mexico anyway, and that many of the numbers used to "justify" doling out these welfare checks are probably bogus:
But of course every state cannot do that because it essentially is a "beggar thy neighbor" strategy. Some of the movies that have been bribed to locate in New Mexico would have been made in New Mexico anyway. That part of the subsidy is a total waste. Most of the movies that have come to New Mexico for the subsidy would otherwise have been made in other states. New Mexicans may not care if the citizens of those states lose out, but inevitably those other states respond with subsidies of their own and New Mexico gets beggared along with everybody else.

In any event, Richardson's statistical claims are suspect, to say the least. He would not win an Oscarfor math. He says that 10,000 jobs and $4 billion "are huge numbers for a state with a population of only about 2.1 million." You can say that again. If Richardson's figures were correct — if every state had a similar program and every program achieved the same alleged success on a per capita basis — that would mean film subsidies would be adding $600 billion to the economy over eight years and would create 1.5 million jobs. Given that the entire movie production and distribution industry generates about $55 billion a year, it seems unlikely that this subsidy alone generates $75 billion a year (one-eighth of $600 billion) in new business. Similarly, it's hard to see how the subsidy could add 1.5 million jobs to an industry that employs, according to the Bureau of Labor Statistics, about 362,000 people.
I fancy myself a scholar, so whenever a controversy like this arises, I always ask, "what do the data say?"

The research is not completely conclusive, but much evidence exists that suggests that much of this kind of corporate welfare (usually called "tax abatements" by policy people and scholars) goes to projects that would have been located in a particular jurisdiction anyway, regardless of the abatement. A separate literature review concludes much the same.

In fact, if you think about tax abatements in economic terms, it is impossible for tax abatements to be worth the money they cost.

If we think of a simple model of a simple town (CorporateWelfareVille), let's assume that in the long run, taxes paid = services consumed, for both people and businesses, i.e. that both people and businesses receive in services the exact value of taxes they pay (hey, this is just a simple model, after all).

The purpose of a tax abatement is to get a business (say, MovieMasters) to locate in CorporateWelfareVille that would otherwise not have located there, meaning that in absence of the tax abatement, it is more profitable for MovieMasters to locate somewhere else. With the tax abatement, however, it is more profitable for MovieMasters to locate in CorporateWelfareVille, since it is receiving more services than it's paying for, while conversely, CorporateWelfareVille is providing more services than it's receiving in tax revenue.

You should see where this is headed.

As soon as the tax abatement expires, MovieMasters should relocate to the jurisdiction in which it's most profitable to operate, which we assume is not CorporateWelfareVille. If MovieMasters stays in CorporateWelfareVille after the tax abatement expires, then that demonstrates that the tax abatement wasn't necessary to attract MovieMasters to locate there in the first place.

Therefore, from the town's perspective, it is economically rational to never grant tax abatements at all, since they do not change the long-run outcome of MovieMasters's decisions. I realize the real world is more complicated and politicized than this, but at its core, this kind of corporate welfare is an unsustainable, dumb policy.

P.S. Washington, D.C. is apparently having a similar (but not identical) debate over allowing Wal-Mart into D.C., though the debate in D.C. revolves not around direct tax subsidies, but all of the indirect tax subsidies local jurisdictions tend to give Wal-Mart (such as providing health care to Wal-Mart's underpaid associates).

Monday, April 18, 2011

The Data Say that America is the Hungriest, Most Imprisoned, Most Unequal Rich Country on Earth

From the NYT's Charles M. Blow:
It’s time for us to stop lying to ourselves about this country. 
America is great in many ways, but on a whole host of measures — some of which are shown in the accompanying chart — we have become the laggards of the industrialized world. Not only are we not No. 1 — “U.S.A.! U.S.A.!” — we are among the worst of the worst.
Yet this reality and the urgency that it ushers in is too hard for many Americans to digest. They would prefer to continue to bathe in platitudes about America’s greatness, to view our eroding empire through the gauzy vapors of past grandeur.
And here's the rather distressing graphic he has to prove it, which compares U.S. outcomes on a host of social indicators against the outcomes in most other advanced countries. The number of times the U.S. comes in among the "worst" or "worst of the worst" is distressing, and the U.S. does not lead on a single metric:

Seriously, people / Congress / businesses / police / schools / students / hospitals / press / everyone, we can (and must) do better than this.

Sunday, April 17, 2011

Reminder of Earth's Fragility: We're One Nuclear War Away From Total Extinction

An extremely uplifting article from Wired Science:
Even a small nuclear exchange could ignite mega-firestorms and wreck the planet’s atmosphere.
New climatological simulations show 100 Hiroshima-sized nuclear bombs — relatively small warheads, compared to the arsenals military superpowers stow today — detonated by neighboring countries would destroy more than a quarter of the Earth’s ozone layer in about two years.
“This is tremendously dangerous,” said environmental scientist Alan Robock of Rutgers University, one of the climate scientists presenting at the meeting. “The climate change would be unprecedented in human history, and you can imagine the world … would just shut down.”
 Great ... so ... can we get to work on that nuclear weapon-free world, please?

Saturday, April 16, 2011

A Stark Reminder of My Own Privilege: "Many Americans have poor health literacy"

From the Washington Post:
An elderly woman sent home from the hospital develops a life-threatening infection because she doesn't understand the warning signs listed in the discharge instructions. A man flummoxed by an intake form in a doctor's office reflexively writes "no" to every question because he doesn't understand what is being asked. A young mother pours a drug that is supposed to be taken by mouth into her baby's ear, perforating the eardrum. And a man in his 70s preparing for his first colonoscopy uses a suppository as directed, but without first removing it from the foil packet. 
Each of these examples provided by health-care workers or patient advocates illustrates one of the most pervasive and under-recognized problems in medicine: Americans' alarmingly low levels of health literacy - the ability to obtain, understand and use health information. 
A 2006 study by the U.S. Department of Education found that 36 percent of adults have only basic or below-basic skills for dealing with health material. This means that 90 million Americans can understand discharge instructions written only at a fifth-grade level or lower. About 52 percent had intermediate skills: They could figure out what time a medication should be taken if the label says "take two hours after eating," while the remaining 12 percent were deemed proficient because they could search a complex document and find the information necessary to define a medical term.
For some reason, this rather depressing article reminded me how amazingly privileged I am - that I have been able to go to a great college, to live abroad for several years doing work I loved, to get a graduate degree at Harvard, and to have my current job.

Though I am always aware of the extent to which I have been blessed, I often subconsciously assume (though my conscious self knows better) that everyone more or less knows what I know and can understand what I understand - the cognitive bias behind this is known as the Dunning-Kruger effect:
The Dunning–Kruger effect is a cognitive bias in which unskilled people make poor decisions and reach erroneous conclusions, but their incompetence denies them the metacognitive ability to appreciate their mistakes.[1] The unskilled therefore suffer from illusory superiority, rating their ability as above average, much higher than it actually is, while the highly skilled underrate their own abilities, suffering from illusory inferiority. This leads to the situation in which less competent people rate their own ability higher than more competent people. It also explains why actual competence may weaken self-confidence. Competent individuals falsely assume that others have an equivalent understanding. "Thus, the miscalibration of the incompetent stems from an error about the self, whereas the miscalibration of the highly competent stems from an error about others."[2]
Most people who know me probably wouldn't say that I suffer from a sense of "illusory inferiority," but I do often subconsciously assume that others understand everything that I understand. Sometimes, it's shocking to be reminded that this isn't so - and this WaPo article did that for me.

As a government employee who deals with huge amounts of money and dabbles daily in the lives of millions of people, I mostly avoid the Dunning-Kruger effect by letting data drive my decision-making.

Largely because of the Dunning-Kruger effect (coupled with the status quo bias), I am a huge proponent of what Thaler and Sunstein call "paternalistic libertarianism" in their excellent book Nudge: Improving Decisions About Health, Wealth, and Happiness (a must read for anyone who ever has to make any decisions that affect the lives of others).

They point out that a lot of people A) make bad decisions and B) will stick with whatever the default is, no matter what the default is. Therefore, wise public policy should 1) always set a default and 2) should always set the default that leads to the best long-term outcome for most people (these are the "paternalistic" aspects of their approach), while 3) leaving plenty of room for people to change the default to what they think is best, if they want to change it - even if this leads to a worse outcome for them than the default would (this is the "libertarian" part of their approach).

Given how bad people's choices about diet, health, and other matters are, public policy, especially in the area of health, could definitely use more nudging.

Friday, April 15, 2011

Awesome Leaked Palin Emails: "this is the type of b*llsh*t lie about family that WILL keep me from running for Governor"

I rarely copy stuff wholesale, but this post from the Atlantic's Joshua Green is just too awesome to summarize, and there's really no need to comment on it further. Here it is in its entirety - if you see this, Mr. Green, and it upsets you, let me know and I'll take it down:
I've been reading a leaked copy of "Blind Allegiance to Sarah Palin: A Memoir of our Tumultuous Years," the tell-all memoir from Frank Bailey, once a member of Palin's inner circle. The book reminds me of the memoir by Scott McClellan, George W. Bush's former press secretary: the author's sudden and belated conversion to political adversary and portrayal of himself as a misguided innocent duped by a powerful charismatic figure is completely unconvincing and obviously self-serving. Bailey comes across as pathetic, a total sad sack. But he does supply dozens of emails from Sarah Palin and Todd Palin, which, if they're real, provide some insight into the couple's paranoid mindset. I never followed the particulars of the Palin story as closely and enthusiastically of some of my colleagues, but this email from Palin, raging against anonymous political operatives who were apparently spreading rumors about her son Track (not Trig) did surprise me, and it's representative of the odd stuff in the book:

From: Sarah
To: Scott Heyworth Cc: Todd Palin
Sent: Friday, January 06, 2006 10:19 AM
Subject: Todd's son
Todd just told me you had spoken with him awhile back and reported that some law enforcement friends of yours claimed some dumbass lie about Track not being Todd's son? This really, really disgusts me and ticks me off.
I want to know right now who said it, who would ever lie about such a thing... this is the type of bullshit lie about family that WILL keep me from running for Governor. I hate this kind of crap. I thought it was bad enough that my kids have been lied about recently regarding illegal activities that they had NO part in whatsoever. But a stupid claim like one of our kids isn't fathered by Todd?
I want to know NOW what this latest b.s. is all about because I want to get to the bottom of this garbage rumor mill. People who lie like this may know me well enough to KNOW THAT I WILL ALWAYS PUT FAMILY FIRST, AND IF UGLY LIES LIKE THIS ARE BELIEVED BY ANYONE AND ADVERSELY AFFECT MY HUSBAND AND KIDS... I WILL PULL OUT OF THE RACE BECAUSE IT'S NOT WORTH IT - AT ALL - TO LET MY FAMILY BE VICTIMS OF DARK, UGLY POLITICS LIKE THIS.
Oh yeah, you tell them, Sarah!

Thursday, April 14, 2011

NYTimes, Washington Post Trying Hard to Get Me to Stop Reading Their News

Recently, two of my most important news sources went through site redesigns that have me questioning whether I'm going to keep reading them at all, or whether I'm going to shift my reading towards more blogs and news aggregators.

The New York Times - apparently convinced that it could resurrect a tweaked version of the utter failure that was TimesSelect, has decided to launch a paywall, limiting readers to 20 free articles a month (though not all reading counts towards that limit). The price: $15 for 4 weeks, for web and smartphone or tablet access (though the first 4 weeks are $0.99). This price is too high. I'm just not going to pay that much for online news; there are too many places and ways to get it for free, and I don't want to pay extra for smartphone or tablet access, which I will never use. I think the magic number for a website-only subscription is $5/month; I'd pay that. I'm curious to see how this Paywall 2.0 works out for NYTimes (early reports say that their post-paywall traffic has fallen between 11 and 30 percent, though whether this is a bad thing depends on the kind of revenue they've gained from paying digital subscribers), and whether they tweak the subscription options for Paywall 2.1.

The Washington Post - if's pseudo-redesign is annoying, then's redesign is criminally bad. I never spent much time on WaPo's front page, so I can't comment on it in-depth, but people generally find the new layout confusing and unappealing. They've stuffed their columnists into either left- or right-leaning boxes, so you can browse the opinion page without ever encountering an opinion contrary to your own, and though I'm sure they don't mean this, this layout implies that political opinions should never be bipartisan.

But the worst part of the WaPo redesign has been the RSS feed system - OMG, such a catastrophe, I don't even know where to begin.

I know RSS feeds aren't quite as popular as they used to be, but for those of us who regularly get our news from more than a handful of websites, RSS feeds let us consume ten times the information in 20% of the time, compared to visiting the websites. In fact, if you don't have an RSS feed, I probably won't bother to try to keep up with your website on a regular basis - it's just takes too much time.

When WaPo launched its redesign, it screwed up its RSS system to such an extent that I'm probably going to stop reading everything WaPo reports except for local D.C. news and a couple of select bloggers.

First, it changed the address of ALL its RSS feeds, for no apparent reason - making me and all other serious readers spend lots of time hunting down the new feed addresses. (Bizarrely, this did not happen with ALL feeds - Ezra Klein's old feed address kept working, for some reason I can't fathom, but all my other RSS feeds broke.)

Second, the RSS feeds now publish WAY too much content, and much of that content is duplicated from or in other RSS feeds. Whereas the old National, Local, Politics, and World RSS feeds each published 10-20 select stories a day, the new versions of the feeds publish 30-100+ stories a day - I can't read that many titles, let alone actual stories. And why does one story get published in three separate places: the Local and Political sections, as well as the "All Opinions Are Local" blog?

I realize that WaPo wants to get as much content to readers as possible, but those of us who use RSS feeds are sophisticated readers - I (and most other RSS readers, I'd guess) subscribe only to those RSS feeds I want to read, and it is a big time-waster if the same story to pop up multiple times in my feed subscriptions. So, WaPo, please figure out how to make the content in each feed more or less exclusive, so I don't have to wade through 300 articles (may of which are duplicates) to find the 5 I might want to read.

WaPo, seriously - please sort out these RSS issues; otherwise, you can add me to your statistics of readers you (mostly) lost because of the site redesign.

Tuesday, April 12, 2011

Republicans Propose Massive Tax Increases on All Non-Millionaires, Hope Nobody Notices

In a rare post about the politics of the day (regular readers will note that I usually stick to broader economic and political themes rather than discussing the political story du jour), I want to take a few moments to talk about the current federal budget-making process, since I think it might have long-lasting implications.

Before I get into the heart of the matter, I just want to say that as a D.C. resident AND a federal employee, I am seriously pissed that the Democrats traded away my rights as a D.C. resident just to get a deal with the Republicans to prevent the government from shutting down last week and pass a FY 2011 budget. The Dems should have shut the government down, and I would have been happy to go without a paycheck for a few days / a couple of weeks, rather than see a further erosion of the rights of the already second-class U.S. citizens who live in D.C.

That issue is largely separate from the FY 2012 budget, however, which (together with the debt ceiling) will probably be the center of attention for the next few months in Washington.

Obama laid out his FY 2012 proposal back in January - the entire document is available online, though for a quick analysis, I don't think you can beat the NYTimes' interactive infographic that shows the percent changes for all the various departments from FY 2010 levels, allows you to isolate discretionary and mandatory spending, and highlights areas that Obama proposes to increase or decrease dramatically:

Click for large, interactive version at

Up until now, the entire fight has been about discretionary spending. Here's the same infographic, with only the discretionary areas highlighted:

Obviously, the largest chunk of discretionary spending is defense-related - if take away the gigantic square that is defense spending, you're only left with about 15% of the federal budget. Seeing as how the U.S. government borrows about 40% of what it currently spends, you obviously can't balance the budget by only cutting non-defense discretionary spending, particularly since I don't think there's much left in non-defense discretionary spending to cut, unless you want to stop investing in transportation, education, and basic research completely.

So, to start decreasing the deficit in any meaningful way, you have to increase revenue (i.e. taxes) and/or decrease defense spending, Social Security, and/or Medicare/Medicaid. Obama's FY 2012 budget proposes modest tax increases (i.e. letting the Bush tax cuts expire) for households making over $200,000/year, as well as increased revenue from coal, oil, and gas producers.

A week ago or so, Paul Ryan (R-WI), chairman of the House Budget Committee, released the Republican's FY 2012 budget proposal, and it's since been impossible to read a single newspaper, news website, or blog without seeing at least a dozen posts about Ryan's proposal. I'll link to what I think is some of the best analysis of Ryan's plan at the end of this post, but I want to focus on what I put in my headline:

The Ryan plan (i.e. the Republicans' budget proposal for FY 2012) would raise taxes on all non-millionaires (lower class, middle class, and non-rich elderly), in order to give a big tax break to corporations and the rich.

"Wow," you say, "that's a strange agenda to pursue - how can they hope to sell that to the U.S. public?"

Well, the Republicans are simply hoping that nobody notices. So what's going on here?

First off, the Republicans are making blatantly phony economic assumptions about how America is going to grow in the next decade - every serious economist, conservative and liberal, who has looked at the numbers in the proposal thinks that the numbers are laughably, ridiculously optimistic. For example, they estimate that the U.S. unemployment rate will be 2.8% in 2020 under this budget. The unemployment rate in the U.S. hasn't been that low since the early 1950s, and most economists put the absolute floor for the U.S. unemployment rate at somewhere between 4.5 and 6.5 percent, so unless the Republicans are planning on another World War and post-World War boom (which I suppose they might be), there's nothing to suggest that the U.S. will achieve this level of growth.

It's perhaps useful to remember that the Republicans had similarly optimistic (and just as made-up) numbers to justify the Bush tax cuts, which were supposed to pay for themselves by setting off an unprecedented economic boom in the U.S. Let's check out their predictions v. reality as it happened, shall we?

Can we please stop pretending that supply-side economics has any basis in reality?

But, Ryan's made-up numbers in this plan allows him to say that the government is going to get more money in taxes, since everyone's going to be richer and employed.

Second, the Ryan plan proposes to:
  • keep the Bush tax cuts, and further decrease the top marginal tax rate on the wealthiest Americans from 35% to 25% (read: tax cut for the rich);
  • consolidate the number of tax brackets (read: tax increase for the poor and middle class);
  • keep overall revenue levels the same (read: have to get more money from poor and middle class to pay for tax cuts for the rich);
  • pay for the tax cut at the top by eliminating some unspecified tax expenditures (read: weasel-phrase so they can pretend to do something other than raise taxes on the poor and middle class).
It doesn't take a rocket scientist to see that, if you massively cut taxes for the richest Americans by another 30% and keep revenues the same, then you're going to replace that lost revenue by massively increasing taxes on the poor and middle class.

So, yes, the Republican budget plan calls for a massive tax increase on the poor and middle class in order to pay for additional tax cuts for the richest.

Ryan's avoids utter fiscal catastrophe by gutting Medicare and Medicaid (and shifting much of the cost from the government to seniors), which produces all of the savings in the plan's outer years - another way of raising taxes on the poor and elderly. In fact, fully two-thirds of Ryan's proposed budget cuts fall on the poor and elderly. Furthermore, it's hard to believe that a future Congress wouldn't undo the proposed Medicare austerity when voters start complaining in 10 years or so, reversing the only part of Ryan's plan that would save any real money.

That's it for me on the Ryan plan / the Republicans' FY 2012 budget, and I hope not to have to blog about it again, since I hope that people will soon come to realize what it actually contains - huge tax increases for the poor, middle class, and elderly to pay for huge tax cuts for corporations and the rich. I hope we can stop talking about this unfair, unrealistic plan and talk about balancing the budget in a way that doesn't cause irreparable harm to the most vulnerable Americans among us.

Below is the best of the rest when it comes to commentary on Ryan's plan over the past week or so:

James Fallows points out a number of reasons why Ryan's plan is neither brave nor serious, as many pundits and Republicans are claiming. Most importantly, the plan says nothing about military spending, and while it (correctly) identifies health care costs as the main problem in increasing public spending, it entirely avoids the question of how to contain rising health care costs.

Lawrence Lewis dissects what Ryan's plan shows about Republican values: namely, that they don't really care about deficits, just that they care about class warfare in favor of the rich over the poor and middle class. ThinkProgress also thinks that the Republicans don't really care about deficits. ThinkProgress also points out that while services for Main Street are being slashed and the median family is paying more in taxes than they have in 50 years, the richest 400 taxpayers are paying the lowest level of taxes they've paid since the Great Depression:

Even NYTimes conservative columnist Ross Douthat think that the poor bear too much of the economic pain doled out by the Ryan plan.

Karl Smith muses that the Ryan plan is implicitly proposing a repeal of all U.S. immigration restrictions, as that is the only way to make Ryan's projected numbers fit a possible future.

Paul Krugman finds the plan both ludicrous (for the made-up numbers referenced above) and cruel, since 2/3's of Ryan's proposed spending cuts fall on the backs of the poorest Americans.

Andrew Sullivan think that Ryan's plan's biggest problem is that it is deeply, profoundly unfair:

Ezra Klein has lots of thoughts on Ryan's plan. I'll highlight Klein's comments that 1) seniors would pay much, much more for their healthcare under Ryan's plan even as healthcare becomes more expensive overall - it both increases overall healthcare costs and shifts more of those costs to seniors, making healthcare unaffordable for many; and 2) the plan is extremely regressive, doling the most harm out to the most vulnerable Americans.

In separate blog posts, Krugman also points out that, as pointed out above, the Republicans' unemployment projections are ridiculous, and that the Republicans assume two impossible things: 1) that U.S. government spending on healthcare will decrease as a percentage of GDP while the population both grows and ages, and 2) that U.S. discretionary spending (which includes all defense spending) will fall from 12% of GDP today to 6% of GDP by 2022, even as we maintain the ability to wage multiple wars at once.

Kevin Drum points out that the biggest winners under the current system are current retirees, who receive far more in Medicare benefits than they paid into Medicare, and he wonders why Ryan isn't asking current retirees to share some of the pain.

Ezra Klein points out the budget is already balanced, if we do nothing - but we're not going to do nothing, since that would involve allowing all the Bush tax cuts to expire, and even Obama wants to extend them for American households earning less than $200,000/year.

Michael Linden also sees a hidden middle class tax hike.

TPM reports that even Ronald Reagan's old OMB director thinks the Ryan plan is a joke: "It is simply unrealistic to say that raising revenue isn't part of the solution. It's a measure of how far off the deep end Republicans have gone with this religious catechism about taxes." He approves of Ryan's entitlement proposals but breaks faith over taxes and the GOP's unwillingness to slash defense spending. And he laughs off the notion that the plan will do anything about unemployment, let alone dramatically reduce it, which Ryan and his plan claim it will.