Thursday, September 24, 2009

Economists at War: A Macroeconomics Soap Opera

The macroeconomics blogosphere is daily theater few dramas can match. The world’s leading economists are engaged in a great debate, often going for the jugular, asserting who is right and who is wrong in the choice of intellectual framework (Keynesian, classical, behavioral, Austrian, hybrid) that best explains the "Great Recession," and how to resolve the financial crisis and its aftermath.

Those at war include leading professors at Harvard, Columbia, Princeton, Chicago, Berkeley, Stanford, George Mason, Oxford (apologies to those not specifically listed), along with numerous commentators in business and the financial media. There is a strong tone of partisanship in the debate.

Among the issues: How many jobs could a stimulus stimulate...? Harvard’s Robert Barro says none, Stanford’s John Taylor says some, Princeton’s Paul Krugman, Columbia’s Joe Stiglitz, and Berkeley’s Christina Romer (head of the Council of Economic Advisers) say a lot. All use data and argument to buttress their claims.

What is the proper mix of fiscal and monetary policies? Are today’s deficits the cure or tomorrow’s problem?

Considering the following proposition. Have the students completing intermediate macroeconomics from any of the combatants take their final exams from any of their professor’s antagonists. The results should be very interesting.

Monday, September 21, 2009

Racism and the Race Card

Political debate is increasingly supercharged with claims of racism (Obama supporters) and playing the race card (anti-Obamians). Immigration reform, which is coming back to life, is being cast as anti-Hispanic by its proponents, largely Democrats, who expect newly legalized Hispanics to disproportionately vote Democrat. The Republican Party is being cast as a party of the South. Racial, ethnic, and geographic divisions are increasingly pitting Americans against each other.

On the international front, the Dayton Accord, which resolved the conflict in Bosnia and Herzegovina, is crumbling in the face of rising tensions between Bosnian Serbs, Bosnian Croats, and Bosnian Muslims. Catalans and Basques continue to press for greater autonomy from Madrid. China has a growing problem with Uighur Muslims.

Yet some continue to believe that the United States military and civilian agencies can construct, at what has been an enormous cost, a unified stable polity in Iraq out of its Shia, Sunni, and Kurdish communities that can hold together once withdrawal of U.S. Troops begins in mass.

Some also believe that a similarly positive outcome can be achieved in Afghanistan among its five large ethnic groups if only an Iraqi-style surge with an additional 40,000-60,000 U.S. troops is carried out over the next year or two or more.

If America has trouble transcending its racial and ethnic divisions, why should one suppose that success in Iraq and Afghanistan is just another surge away.

Sunday, September 20, 2009

Becoming a Matriarchate

There are more than 900 women’s/gender/feminist undergraduate and graduate studies programs, departments, and research centers around the world. Over half are in the United States, up from a mere two in 1970.

During this period, higher education has been transformed from a disproportionately male-oriented to a female-driven program. In 1970, 4.25 million males participated in undergraduate enrollment in degree-granting, post-secondary institutions compared with 3.12 million females, a ratio of 1.36 to 1. By 1980, female undergraduate enrollment surpassed that of males. In 2007, the latest year for which exact figures are available, females represented 56.9 percent of undergraduate enrollees. The projection for 2018 is that females will increase to 58.6 percent.

The Council of Graduate Schools has released its data for 2008. Females constituted 58.9 percent of all graduate enrollment, a ratio of 1.43 to men. They remain a minority in business (45.7 percent), engineering (22.0 percent), and the physical sciences (33.2 percent). They are the majority, vastly so in some instances, in arts and humanities, biological and agricultural sciences, education, health sciences, public administration, social and behavioral sciences, and the remaining other fields lumped together.

These trends parallel the growth of the service sector and relative decline of manufacturing in the United States.

Women also control about half the wealth in the United States. This share is likely to rise as women’s earnings increasingly reflect their higher education. Women are presidents of Harvard, Princeton, MIT, Penn, and other leading universities. For want of a few caucus states, America would have its first female president.

The American patriarchy has been and remains in decline. Those who want an advance look at the developing American matriarchate may want to spent some time in Scandinavia.

Friday, September 18, 2009

Obama-Care: A New Paradigm for Public Policy

Obama-Care portends a new paradigm for public policy. President Obama promises that any health care bill he signs into law will improve access, cut costs, and increase results. This means providing health coverage for tens of millions of uninsured, reducing the share of national income spent on health care, and improve "life quality indicators."

How would Obama-Care apply to tertiary education, which depends heavily on government funding for research, faculty, and student support?

First, professors would be judged on "research quality indicators" of their government-funded work. They would be expected to improve research output with smaller budgets.

Second, universities, especially elite "ivies," would be expected to educate more poor, lower-middle class, and less prepared students, thus extending brand-name education to those currently excluded, at less cost. Universities offering "gold-plated" education to a few would be taxed to support the many at less costly institutions to spread the benefits of higher education.

Third, universities would be judged on "educational quality indicators," for example, graduation rates. Roughly half of those enrolling in four-year tertiary institutions fail to graduate. Unless that ratio increases, government funding would be reduced. To insure that grades are not inflated and graduation criteria lowered, a national educational clearing house would establish universal standards of objective tests to insure quality.

Extending the paradigm of Obama-Care to higher education means more educated students, more productive research, and taxpayer savings. This is a winning recipe and ought to be endorsed by those supporting Obama-Care. To dream.

Friday, September 11, 2009

Deficit Reduction—Show Me the Money

At a CNBC town hall forum held on September 10, 2009, Treasury Secretary Timothy Geithner stated that sustained large annual (trillion dollar) budget deficits would damage the economy—but that deficit reduction measures should not be undertaken until current deficits had stabilized the economy and restored growth.

Pressed to state if he thought higher taxes would be required in the future, Geithner ducked the question and, on its repetition, did so a second time. Nor did Geithner point to any cuts that could be made in federal spending.

Many languages have a phrase akin to "show me the money." Geithner did not do so.

The night before, speaking at a joint session of Congress, President Obama stated that over $500 billion in savings could be wrung out of waste and inefficiency in Medicare and Medicaid to underwrite the lion’s share of the cost of health insurance reform. Obama failed to identify specific instances of waste and inefficiency that could be eliminated to achieve the savings. Obama did not show me the money.

Thursday, September 10, 2009

Resolving America’s Scandal of Millions of Uninsured

In his speech to a Joint Session of Congress on September 10, 2009, President Obama said it was a national scandal that the United States was the only major industrial democracy that fails to provide universal health care for all its citizens.

If all the illegal residents in the United States return to their homelands, that would reduce the number of uninsured by twelve or more million.

The immigration of U.S. citizens, legally or otherwise, to any of the countries in North America, Asia, or Europe that provide universal health care would remove the remaining thirty-plus million from the uninsured.

Perhaps Obama can explore this option with the other Western democracies at the G-20 meeting in Pittsburgh during September 24-25.

Wednesday, September 9, 2009

Is Obama Sexist?

President Obama has appointed several dozen "czars" to supervise various aspects of American economic and social life. Of these, four are women.

The dictionary definition of czar is (1) a male monarch, (2) an autocrat, or (3) an appointed official having special powers to regulate or supervise an activity.

A czarina is (1) the wife of a Russian czar, or (2) a female autocrat.

Shouldn’t Obama refer to his non-Senate confirmed special assistants as "czars" and "czarinas?"
Chinese vs. American Characteristics

China has called its economic system "Socialism with Chinese Characteristics." In truth, it is really "Capitalism with Chinese characteristics."

Meanwhile, the American economy is evolving into "Socialism with American characteristics."

If you are feeling brave, you may wish to extrapolate the trends.

Friday, September 4, 2009

Snowe’s Trojan Horse?

Speculation abounds that Maine Senator Olympia Snowe will be the kingpin in any health care/insurance reform enacted into law this year. (With Ted Kennedy’s passage, her vote might be needed to reach the magic number of 60 to shut off Senate debate in the event of a Republican filibuster.) Her proposal is that a public option be included in the law, which, after a specified period of time, would be triggered on the failure of private insurance companies to lower costs and improve coverage. As of this posting (September 4, 2009), that time period has not surfaced from conversations she has been having with the White House.

It’s ironic that a "trigger" would ignite the public option. Trigger was Roy Roger’s horse and a Trojan horse enabled the Greeks to destroy Troy.

If and when a trigger-law is enacted, Congress is likely to subsequently lower the bar for ignition. The time period will be reduced in the face of charges that insurance companies are dragging their feet on reform. New onerous conditions will be imposed on insurance companies that will be increasingly hard to meet.

The pros and cons of health care have obscured the politics behind the debate. Universal insurance and care will disproportionately benefit Hispanics. Even if legislation explicitly excludes illegal aliens, Congress will likely insert that provision in the law at some future date, and/or the courts will rule the exclusion unconstitutional. Adding ten-plus million Hispanics to the voter rolls should insure Democrat majorities for years to come, mirroring Franklin Delano Roosevelt’s long-governing coalition of Jews, Blacks, and Catholics.

Thursday, September 3, 2009

Medicare Savings?

The president and members of Congress urging national health care/insurance reform state that hundreds of billions of dollars in Medicare savings will help finance the cost in extending health care coverage to tens of millions currently uninsured.

These statements imply that over the years Medicare administrators have failed in their responsibility to spend Medicare payroll tax revenue efficiently, resulting in waste, fraud, and abuse. They proponents of national health care promise that future Medicare administrators will change their ways.

Quoting President Reagan in translation, "trust but verify," to which I add, "I’m from Missouri, show me."

Wednesday, September 2, 2009

California Burning

Fires are a recurrent problem in California every summer and fall. This year’s outbreak in late August is especially massive. The carbon footprint of so much brush and trees going up in flames must be huge. Is there anyone out there who has tried to compute the amount of carbon released into the atmosphere from these fires?
What’s Wrong with Rising Productivity?

Despite the current recovery in the stock market, leading economists, journalists, market participants, and politicians all decry the lack of job creation in the economy. This morning’s economic news (September 2, 2009) included a 6.6 percent increase in Q2 productivity, which translated into lower labor costs. Although productivity gains are the foundation of rising living standards, current gains are blamed for retarding job growth (whether productive or make work jobs).

The reverse of Parkinson’s Law may be in play here. The law, first published in 1955 by C. Northcote Parkinson, stated that "work expands to fill the time available for its completion." Parkinson pointed to such facts as the number of employees in Britain’s Colonial Office increased as the size of the British Empire declined, and the number of admirals in the British Navy rose as the number of ships declined.

I’ve witnessed the reverse of his law on the Stanford campus this summer. Over the last ten years, the number of faculty has grown less than 10 percent, while the non-academic staff has increased 50 percent. Sharp falls in endowment income and gifts have forced a reduction in staff. With fewer employees, the grounds department has done its best work since 1976 cleaning up the campus, mowing winter growth, pruning trees, and so forth.

Those with jobs are working harder than ever before to keep their jobs. New hires are working hard to stay employed. When employers begin to add net new jobs to their payrolls, these newly hired will be more productive than in previous periods of job growth. This is a good thing, even if current unemployment is troubling. A more productive economy over time is good for workers, investors, and public revenue. Why can’t more people see this?