Monday, January 28, 2013

Is Life Expectancy Falling for One Group of Americans?

Americans. Harold Meyerson is agog: "Clearly, they missed the recent study in Health Affairs which found that the life expectancy of white working class men fell by three years from 1990 to 2008, and that of white working class women

It looks like disturbing data but there is a simple huge flaw.  It looks from the chart like life expectancy for some group of Americans is falling, but since the group shrunk rapidly over the period of the study it is not showing what the bloggers say it shows.  

It may come as a bit of shock to some that people at the bottom of society by any of the usual measures (education, wealth, income) have lower life expectancy than those at the top but social scientist have known this for a long time (and note that correlation is not causation). So since so many fewer people fail to graduate high school today those who still do not graduate are from a lower group than than in the past.  To clarify what he is actually saying is: Since the bottom 5% today are living less long than the bottom 25% lived 25 years ago life expectancy is not increasing for all groups.

Now I would bat that Kevin Drum knows all this but you can shock people with stuff like this and sells ads and changes people's political positions.  

BTW One reason that someone would not gradate high school today would be very poor health (social science is not easy).

Friday, January 25, 2013

State Universities and Taxpayer Interest

Arnold Kling has a post about cutting administration to make college more affordable. 
Which lead me to post the following thoughts:

In the University world athletics teams are marking, incredibly schools get more applications after a good football season, so that leads to the question why does a state school subsidized by the taxpayers need to market! 

Also a personal issue:

I live in the city where the University of Florida is and son got 3 B’s in high school and all the rest were A’s and he scored 1380 on the Math and English SAT portions he was reject by the University of Florida (UF) but was accepted by the University of Central Florida (UCF). Since he needed to move and get an apartment to go to UCF, were he could have lived at home had he gotten in to UF, it will cost me $50,000 extra to send him to college. He is also further away which weakens family bonds. So I ask how does it benefit the Florida taxpayers to have a difference in who UF and UCF will accept? My thought is that it benefits the administration of UF to become a prestigious school but does not benefit the tax payers.

Wednesday, January 23, 2013

Why the High and Growing Level of Social Securty Spending is a Problem

It has been a mantra on the left that the phrase “Social Security and Medicare” is sophistry that attempts to put a tiny long-range problem, Social Security, next to an enormous one

If you believe that you can only tax people so much (that is without adding a new tax like a VAT and a VAT is problematic under the constitution), the fact that SS absorbs the whole FICA tax is a problem. A sensible reform like paying the same amount (say $800/month) to all retirees could save a lot of money without hurting the needy. SS reform is needed because it is too expensive not because it spends much more that the FICA tax brings in. There is really just one big bucket not separate buckets for separate programs. 

Now we elected a CEO of SS and he set the tax and the payout that would be different but we don't.

Tuesday, January 15, 2013

Whenever They Run Out of Money, Politicians Claim It'll Cause the Most Popular Programs (Teachers, Police, Fire) to not Get Paid

If all the administration does is pay debt interest and make already committed payments and pay salaries without making new purchases/commitments for payment, then they can stay under the debt ceiling indefinitely. All of that committed spending doesn't add up to the tax receipts and other income the federal government has coming in. What's already contracted with individuals and companies is covered. New spending is what would have to go. If the federal government starting selling their accumulated gold, that would give them a $200,000,000,000 cushion to work with. If they started selling federal land that's not currently in use for a park/military base/etc... they could raise another few trillion or so. At the very minimum, the department of the Interior could stop blocking oil and gas leases that bring in revenue and make a "mint" from that. Lots of options out there for additional revenue besides taxes.

Thomas Sewell is a little more partisan strident than I am. I think that almost all politicians act in this way. Considering the incentives that politicians face they act logically.  If they took higher moral ground they would greatly lower their chances of getting elected.

If we could unbundle Government programs it might help but we can't.  

Tuesday, January 8, 2013

The Upside of Government Default

There is a good chance that the U.S. government will be forced to default on its explicit and implicit promises within the next few decades. Fortunately, the state government experience of the 1840s suggests that this may provide the best and most durable long-run solution.
Considering the incentives that politicians are faced with and the ease of demagoging a rational ignorant electorate some kind of federal Government default might be the best option.  It would make it much more difficult for Governments to borrow money forcing balanced budgets.

Monday, January 7, 2013

The Debt Ceiling and Trillion Dollar Coins

I was asked by a friend about the trillion dollar coin scheme is a scheme and here is my answer:

The trillion dollar coin scheme is a scheme to get around the debt ceiling.  The constitution allows the treasury to mint coins, so the idea is to mint a trillion dollar coin which lowers that federal government’s indebtedness by a trillion dollars thus avoid another debt ceiling fight.  

It is my opinion considering the incentives that politicians will borrow and spend money as long as they can do so without major short term negative consequences.  That is why I think an eventual default might be the best thing, because then no one would lend them money and so they would have to run balanced budgets.  As Jeffrey Hummel has said default would be a balanced budget amendment with teeth.  I do not invest based on such things, the way I see it is that companies can do fine even while the Fed Government defaults not only that but we do not know when the real problems will start or will be the best investment at that time.  Also I am holding an appropriate amount of stock in companies outside the USA which seems prudent at al times.

Further IMHO the government does not need all the money that takes in now, I think that they could cut defense spending in half and not endanger the country’s defense, cut SS by 40% and not hurt needy retirees and cut Medicare 30% without hurt the health of the elderly and cut education (mostly not the federal Government but state and local but still) by about 50% with hurting education.   

Friday, January 4, 2013

Taxes USA vs Canada

Alexei Sadeski on Effective AND nominal rates USA vs Canada.
Income: 38
State Income: 10
Cap Gains: 36
Corporate: 46
Estate: 40

Income: 29
Provincial Income: 15
Cap Gains: 22
Corporate: 27
Estate: 22

Because Canada has such low Capital Gain and Corporate rates, high net worth individuals are able to lower their tax liability dramatically by funneling income through corporations. In the US, this is not as useful – the US has one of the highest corporate tax rates in both the world and OECD.

Thursday, January 3, 2013

More Reasons to Tax Consumption Rather that Income.

Income is complicated.  Imagine 2 people earn $100,000 both are taxed the same amount and one guy spends the full net amount, the other invests half of the net.  Over 20 years the invested money doubles but inflation eroded the final value of the money.  Why is the second guy taxed so much more even on the part that is inflation.  It is better to spend your money earlier. there is dis-utility to waiting. It gets very complicated to tax income because of things like inflation capital gains, dividends and interest.  Consumption is easier to define.

Imagine 2 people one who earns $40,000/year right out of college with modest income growth and one (like me BTW) who earns close to minimum wage but then has one big year where he earns 250,000 in one year why should the latter pay more in taxes.  A progressive consumption tax would make this less likely.