A couple of weeks back, Federal Reserve Chair Janet Yellen raised the topic of economic inequality during her speech to the Federal Reserve Bank of Boston. The money quote:
The past several decades have seen the most sustained rise in inequality
since the 19th century after more than 40 years of narrowing inequality
following the Great Depression.
Of course, President Obama and the mainstream media jumped on the Fed Chair's observation, claimg that income inequality is a blight to the nation and irrefutable evidence of the failure of its capitalistic economic system. If only socialism--no, better yet, communism--would rule the economic realm! This despite the Chinese Communist Party's embrace of market reforms to propel Chinese economic growth.
It's bad enough that liberals actually believe what they're touting. But, for a Fed Chair to trumpet their message? Where's the Fed's independence? And, worse yet, doing so based upon phoney-baloney data?
Over at MarketWatch, the Director of Economics21 at the Manhattan Institue, Diana Furchtgott-Roth, takes Ms. Yellen on, offering five reasons that explain the rise in income inequality since 1970 and why it should not be the Fed's concern:
- With more women working outside the home today--a trend that began in the 1980s)--more families have two wage earners. To wit: In 2013, households in the top 25% had an average of 2 wage earners/household while the bottom 25% averaged 0.5% workers/household. What Ms. Yellen conveniently overlooked: Households with more earners are going to have higher incomes than households with one or fewer earners. Well, duh!
- For the past 30 years, households have changed in size. To wit: Households in the bottom 25% average fewer than two members, while households in the top 25% average three members. What Ms. Yellen conveniently overlooked: Income inequality statistics do not account for the higher costs that households with more members must pay. Well, duh!
- In 1987, the U.S tax code was changed to make the top individual income tax rate lower than the top corporate tax rate. Consequently, more businesses filed as individuals. What Ms. Yellen conveniently overlooked: The income bump that appears to have taken place after 1987 reflects these tax changes, increasing individual income and exacerbating income inequality. Well, duh!
- Income inequality statistics rarely factor in government transfer payments or taxes paid. Instead, they examine incomes before taxes and before individuals have received welfare payments. What Ms. Yellen conveniently overlooked, according to professors Bruce Meyer (University of Chicago) and Richard Burkhauser (Cornell University):Inequality has not increased. Ouch!
- Individuals often start poor and move up the income ladder over time. Yet, Ms. Yellen conveniently overlooked this movement--either up or down--the income ladder. Instead, she used official but misleading inequality statistics.
Someone workin in Obamaville must have written the Fed Chief's speech. Testing the waters of social policy, however, Ms. Yellen "got it wrong."
What's next for Ms. Yellen? Income redistribution? Fed economic "social justice"
Perhaps the Fed Chair should direct her focus upon improving economic growth. "Enlarging the pie" not "dividing it up in new ways" will enable more Americans in the lower 25% of wage earners to share in the nation's bounty.
Let the discussion begin...
To read Diana Furchtgott-Roth article at MarketWatch, click on the following link:
"5 reasons Janet Yellen shouldn\'t focus on income inequality."
President Obama has been touting the latest unemployment numbers which suggest there was a 2.6M job gain in 2013. Despite the fact that those potted plants seated on the dais behind the President applaud wildly, the majority of Americans aren't being fooled any longer by the promises of "hopiuim and changeum."
Why? It's all a bunch of "hypium."
The stark economic truth isn't found anywhere in those particular numbers. The simple truth is:
- the labor force participation rate is declining; and,
- wage growth is weak.
To wit: Inflation-adjusted wages between July 2009 and August 2014 rose a meager 1.4% during the President's so-called post-2009 "recovery" (or, .28%/year).
Has the changeum met the hypium of the hopium?
According to a Heritage Foundation study, these five years of wage stagnation can be due to a poor economy:
- The poor economy during the 2009-2014 period provided little incentive for business.
- The drop in demand for labor created a drop in price, which, in the case of labor, meant wages.
- While the demand for labor has improved recently and 2014 job openings continue to be at levels not seen since before the Great Recession (let's not forget the kind/types of jobs those are), wages have remained low.
This wage stagnation can also be due to the expiration at the end of 2013 of long-term unemployment benefits. The loss of this "entitlement" has caused the nation's labor supply to increase which, in turn, has exerted downward pressure on wages.
Or, gasp, could it possibly be that this wage stagnation is due to Obamacare?
- Obamacare has made hiring new workers more expensive (and some would say "prohibitive").
- To offset those costs, employers have reduced hours worked and wages.
The outcome? What used to be full-time, good-paying jobs have been transformed through market forces into part-time, low-paying jobs that are are available practically for the asking. There's plenty of jobs that plenty of people don't want.
While the Heritage Foundation study argues it will take more time and additional data before it is clear which of these three reasons is the primary culprit behind these five years of wage stagnation, The Motley Monk believes the answer is as obvious as is the nose on his face.
Let the discussion begin...
To read the Heritage Foundation study, click on the following link:
"Why Has Wage Growth Stagnated?"
Do the math: in 2013, the federal government took in $111B but spent $143B for one program.
Now the question: How long is that trajectory sustainable?
That's the fiscal situation confronting the Social Security Disability Insurance (SSDI) program and SSDI is projected to out of $$$s entirely in 2016.
Of course, Congress created SSDI with the very best of intentions: To provide a safety net for individuals unable to work. Here's how SSDI is currently structured: After exhausting unemployment benefits to individuals who are unable to work, SSDI provides financial assistance.
It's all about "caring" for one's fellow citizens who, due to circumstances beyond their control, are down and out. Who could possibly disagree with that?
But, here's how SSDI actually works because Congress larded the program with work disincentives. According a Cato Institute study:
- One study comparing identical SSDI applicants--some of whom were admitted to the program while the rest were rejected from the program--found that many of the rejected applicants did return to the work force. However, 25%+ of current SSDI beneficiaries possess the capacity to work and don't work.
So, there's a substantial number of SSDI enrollees who are entirely capable of working but aren't. Furthermore, SSDI isn't encouraging them to work. Why?
SSDI's benefit structure induces enrollees to remain in SSDI--outside of the labor force--for fear of losing benefits. The logic of those beneficiaries that they'd work if they could keep their SSDI benefits and earn a salary. Faced with having to earn a salary only, those 25% of SSDI beneficiaries are electing remain on the dole.
A second study found the likelihood of a rejected SSDI applicant returning to work to be 35%. That is, 65% do not return to work. So, where's their entitlement $$$s going to come from? Some magical "hopium and changeum" fund?
There are many ways to encourage rather than discourage SSDI beneficaries to return to the work force. However, the program is currrently structured to foster a whole new class of welfare queens who should be participating in the nation's work force rather than living off of the largese of the federal government.
When the nation's $17T deficit comes due and there won't be any largese, how's the federal government going to funnel $$$s to those people?
Let the discussion begin...
To read the Cato Institute study, click on the following link:
"SSDI Reform: Promoting Gainful Employment while Preserving Economic Security."
The smells associated with this hors d'oeuvre are reminiscent of a fantastic breakfast consisting of waffles, bacon, and maple syrup. But, it's not breakfast; it's dinner time. Here, dates are stuffed with a feta cheese and honey mixture, rolled in bacon, and topped with a maple syrup glaze.
Included with this recipe is a lesson about how to use plastic lunch bags to pipe frosting onto cupcakes, but in this instance, it was to pipe the filling into the dates.
Be sure to give The Motley Monk's very good "Bacon-Feta Stuffed Dates with a Maple Syrup Glaze" a try. It's a real taste treat!
If one was to believe the rhetoric, public education is in very big trouble because, since 2008, state-level K-12 spending has fallen dramatically in 29 states. The effect of these cuts has falled to local school districts and, in many instances, schools have been forced to cut not only costs but also teachers.
"Omigosh! The sky is falling, Chicken Little!"
The rhetoric is based upon a 2014 report prepared by the Center for Budget and Policy Priorities (CBPP).
No doubt about it, school budgets are being slashed in 29 states, on average about 12%.
"Wow, Chicken Little, doesn't any care about the children any more?"
But, guess what?
Check out the nation's report card for 2013 (the most recent year for which data are available): The data suggest that students aren't being negatively impacted by the cuts!
In fact, 25 of the nation's 52 states/jurisdictions had higher average scores in 2013 than in 2011 in at least one subject and grade. The District of Columbia, Tennessee, and the Department of Defense schools were the only states/jurisdictions to score higher than in 2011 in both subjects at both the 4th and 8th grades. Scoring lower were 5 states (Massachusetts, Montana, North Dakota, Oklahoma, and South Dakota) in at least one subject and grade.
The sky isn't falling, Chicken Little. States are cutting out the fat and the public school teachers' unions and their bosses are screaming to high heaven!
Now, if only the federal government could learn from the states!
Let the discussion begin...
Lest anyone be in doubt, Louisiana's Republican Governor, Bobby Jindal, is "testing the waters" for a 2016 run for President. What's interesting this early on in the race is that Jindal is taking direct aim at Hillary Clinton for her statements concerning the Centers for Disease Control (CDC) and the Ebola oubreak. Jindal is using those statements to burnish his conservative bona fides.
According to Politico, Clinton blames the United States for failing to fund the fight against Ebola at sufficient levels. The target of her blame? Those evil Republicans who orchestrated the sequestration. Clinton maintains those cuts specifically hurt the CDC and the fight against Ebola, as the CDC lacks the fiscal resources they once had. Hillary's solution? Give CDC more money, even though the federal goverment is already $17T+ in debt.
What Mrs. Clinton has conveniently overlooked is the fact that Congress passed those spending cuts and President Obama signed them into law. Apparently for Mrs. Clinton, that's not relevant when the issue is a potential national health crisis.
More substantively, Governor Jindal chides Mrs. Clinton for another, more important budgetary principle. In fact, the CDC is being funded at higher levels than prior to the sequestration. But, the CDC has been misallocating its budget. To wit, the Governor highlights how during the past 5 years:
- Obamacare created the Prevention and Public Health Fund (PPHF) which sent CDC an additional $3B. However, only 6% of that $3B ($180M) has been directed towards epidemiology and laboratory capacity to protect the public from infectious diseases.
- The CDC's "Community Transformation Grant Program" (CTGP)--which supports local farmers, increases access to grocery stores, and improve sidewalk quality for walkers and bikers--received $517.3M.
Do the math: CTGP was funded at a rate of ~288% greater than PPHF.
Jindal contends that community transformation efforts are better undertaken by private charities or local governments, while the federal government's job is to protect its citizens' safety by prioritizing what it can do within a budget. Those are solid, conservance fiscal principles.
In this case, the Obama admininstration's minions in the CDC have traded improvements to public health for handouts to local farmers (the "organic" lobby), supermarket chains (the "food desert" lobby), and local governents to hire political hacks to improve the quality of sidewalks (the union bosses' lobby).
Welcome to Obamaville! How's that "hopium and changium" treating you?
Let the discussion begin...
To read the Politico article, click on the following link:
"The Facts About Ebola Funding."
Let's start with the positive: There are PreK programs that work with evidence from rigorous evaluations supporting this assertion. To wit:
- North Carolina's Abecedarian Program (AP) conducted in the 1970s found significant gains for the preschoolers up to the age of 21. AP was an intensive program providing children with 40 hours/week of education and care for 50 weeks.
- Michigan's Perry Preschool Program (PPP) produced positive economic outcomes and low crime rates for participants. PPP consisted of 2 years of preschool, weekly parent-teacher home visits, and child-teacher ratios of 5-6:1.
Wonderful for those children! But neither AP nor PPP are like the universal PreK programs President Obama and his minions over at the U.S. Department of Education are pushing and are expected to cost $50B.
According to a Cato Institute report, studies inquiring into the value of preschool programs are not providing data to support the Administration's rhetoric. PreK studies generally indicate few gains for attendees and any gains that might have accrued to students in the PreK classes are very short-term in nature. For example:
- The Head Start Impact Study: Assessed 4.5k Head Start students through the 3rd grade. Although statistically significant (though modest) effects were found among students during the PreK year, the positive impact did not last beyond kindergarten.
- Tennessee's Voluntary Pre-K Program: The statistically significant gains that 3k Pre-K students achieved diminished greatly by the end of kindergarten and disappeared entirely by 1st grade. The only statistically significant difference between participants and nonparticipants at the end of the first grade favored the control group, not students who participated in the PreK program.
Other studies find longer-term benefits but oftentimes utilize flawed methodologies, including failing to take into account children that dropped out of the programs and therefore positively biased the results. For example:
- One highly-touted, allegedly high-quality Pre-K program (Tulsa, Oklahoma's) results did not account for the the high number of dropouts in the program.
Before falling for the rhetoric and wasting more public education $$$s "for the children," voters should demand honest research identifying whether federal spending and, in this instance, another $50B for universal PreK, warrants the expenditure.
Based soley on the evidence, it's pretty clear that universal PreK isn't "for the children." No, it's another form of crony socialism that represents nothing more than a big-time payoff to the public school teachers' unions and their bosses.
Let the discussion begin...
To read the Cato Institute report, click on the following link:
"The Evidence on Universal Preschool."
Paul Rosenberg published a post yesterday that's well worth considering, as the mid-term election season is upon us. Complain about the politicians as many do, the simple fact is...well, the simple fact. It's up to the voters to stop blaming the politicians for delivering what the voters really want.
********** ********** ********** ********** ********** ********** ********** A FREE-MAN's TAKEwith Paul Rosenberg | October 24, 2014
Sympathy for the Devil… Or at Least for a Politician
Last Thursday didn’t begin pleasantly; I had to attend the funeral of an old friend. But the day did at least turn interesting when I saw a mutual acquaintance at the funeral service: a man who ended up as a long-term congressman. This guy was from the West Coast and didn’t know anyone in the church except me, so we sat together. After the ceremony, I offered to give him a ride back to his hotel.
As we drove, the congressman, spurred by thoughts of life, death, and meaning, opened up and began talking from his heart, not from behind the usual “politician” screen. I suggested that we stop at Jay’s Bar, which had been my old cypherpunk hangout in the ‘90s. Robert (the congressman) agreed. We found a quiet spot (it was midday and the bar was nearly empty) and asked Jaime, the daytime bartender, to get us a couple of sandwiches from the Italian place next door.
Robert and I talked for a couple of hours, and I have to admit that I’ve never before felt the level of sympathy for a politician that I did for him. I knew he had started as a “Goldwater kid” back in the ‘60s, and our mutual friend (the deceased) had assured me that Robert went to Washington with the very best of intentions, wanting to make life in America better. But as we talked, I could see that Robert was worn out and dejected by his life in Washington.
After our sandwiches and a drink or two, Robert made a comment about his constituents not really wanting him to fix things. I might normally have interpreted that as some kind of excuse, but he seemed especially open at that moment, so I asked him what he meant. He sighed and told me a story…
Several years ago, he and some other congressmen realized that it wouldn’t be easy, but they had an opportunity to actually deliver on most of the things they had campaigned for so many times. (Reduced government meddling in people’s lives, primarily.) So Robert set up a meeting with his core constituents and explained the plan to them.
These were all donors, by the way, and fairly well off at a minimum.
The plan was that they would make their demands, knowing that their political adversaries couldn’t defeat them, but that they could create a lot of pain before they gave in. So Robert told his donors this:
We can get almost everything we want in the next session of Congress, but the other side will make a massive fight over it. So, what I want to know from you is this: if the price of this is that you miss your Social Security checks for a month or two, will you stand with me?
Then Robert stopped talking and lowered his gaze to his beer.
“And?” I asked.
He looked up at me sadly and said, “None of them raised their hand to agree. Not one.”
“But these were all people with money, Robert; a couple of delayed checks couldn’t hurt them very much.”
“Yeah,” he said. “That’s what I thought. But not one of them would pay even a small price to get what they said they wanted.”
“Damn, I’m sorry.” He nodded in a sort of mournful “thank you” and went back to work on his beer.
As we sat quietly for a few minutes, I heard an old Sheryl Crow song playing on the radio. The lyrics I noticed were these:
Lie to me,
I promise, I’ll believe.
Lie to me,
But please don’t leave.
That brought me to another subject, but I was hesitant to bring it up. Politician or not, this man was feeling a lot of sadness and I didn’t want to pile on. But he always was a tough guy, and he got there himself.
“You know what that means, don’t you, Paul?”
“Yeah, I do, Robert. It means that no matter what they say, they don’t really want freedom… they’re not willing to suffer for it. All their slogans are just brave-sounding words.”
He nodded his head.
“And it means something else,” he said.
I was pretty sure that I knew what he meant. “You mean they need politicians, so that there’s always someone to blame?”
“That's exactly what I mean,” he said.
Like I say, it’s not often that I feel sorry for a politician, but on this occasion I had to. This man had started with good intentions. And regardless of how badly Washington had let him down (which it had, in spades), what really pierced his heart was learning that his voters didn’t really want what they said they wanted. That made everything he had done in DC almost meaningless. It’s tough to watch that kind of realization spreading over the face of a guy you know.
I ended up giving Robert a ride back to his hotel and thanked him for coming all the way to our friend’s funeral. And I still felt sorry for him as I made my way back home. Realizing that several decades of your life were mostly for naught has to be an awfully rough thing.
And politicians really do serve as “icons of blame” for a huge number of people. Regardless of which political party you love or hate, there’s always someone to blame for your troubles: The Blues are ruining the world, the Reds are ruining the world, the “establishment” is ruining the world, and so on, without end.
The truth of the matter is that the productive people of the world—those of us who create and supply products and services—have the ultimate say over what happens on this planet. If any serious number of us decided that we really didn’t like what politicians were doing, we could simply withdraw our support and the political systems would crash, and quickly.
The problem is that productive people have been trained to fear responsibility and to believe that they have no right to insert their will into the world. Until that changes, blaming politicians is almost meaningless. Yes, they lie, steal, and cause lots of harm, but they persist because people want them to persist. All their complaints come up shallow.
The rightful controllers of this world are the producers, and they can get whatever they want, as soon as they’re ready to assert their will and to take responsibility for it.