Thursday, April 30, 2009

Deporting suspected aliens -- a cautionary tale

The News & Observer reports today about a mildly retarded, mentally ill citizen, Mark Lyttle, who was deported to Mexico and subsequently other Central American countries after serving a short prison sentence.
U.S. immigration officials confirmed this week that they wrongly deported Lyttle, 31, who his family says is mentally ill and suffers from mild retardation, in December after finding him in a North Carolina prison. He and his lawyer say he spent four months bouncing among Latin American prisons and homeless shelters before ending up this month at a U.S. embassy in Guatemala, where officials confirmed his citizenship.
When Lyttle finally arrived in a U.S. airport, federal officials again tried to deport him.

Lyttle's story should give pause to proponents of deportation, like our local sheriff BJ Barnes. Proving citizenship is a simple matter for most people; however, for poor people, especially those who may be homeless, mentally challenged, mentally ill, or otherwise marginally connected to society, it can be incredibly difficult.

In their rush to throw all illegal aliens out, proponents of deportation overlook the fact bureaucracies make mistakes and that citizenship and residency status can be misidentified.

In this case, the mistake sent a disabled citizen on a bewildering four-month odyssey through Central America. It shouldn't have happened.

New "one percent doctrine"

After eight years of Dick Cheney, I was really hoping for a Vice President who would reduce panic rather than add to it.

I'm still looking for the section of the Constitution that says the Vice President's job shall be to convene the Senate and run through the streets yelling "OMIGOD! OMIGOD!"

Next shoes to drop

Ed Cone has linked to an article about commercial real estate possibly being the next contributor to the ongoing financial crisis.
Two years after fissures in the residential housing market gave way to a national collapse of home prices and sales, experts warn the next shoe to drop is the commercial real-estate market, bringing more woes to the battered economy.

Thousands of commercial mortgages valued at hundreds of billions of dollars are approaching a renewal date. By some estimates, two out of every three will no longer meet the original loan conditions and won't be able to refinance. And with prices for commercial properties expected to plunge, a vicious cycle may unfold much as it has in the nation's housing market.
Commerical real estate will need to get in line behind other looming vulnerabities. For example, the New York Times gave a similar warning last week but in terms of subprime commercial debt.
So it went with the subprime mortgage crisis. And so it is now going with corporate loans and bonds. It appears that defaults on leveraged loans and corporate bonds will soon rise to levels not seen since the Great Depression.

If that does happen, a wave of corporate bankruptcies will deal another blow to the American economy, and present the Obama administration with more painful decisions about possible bailouts — bailouts that could be made directly or indirectly by persuading bailed-out banks to make loans that might not seem wise to the bankers.
The main driver of defaults in the Times story is the inability of firms with existing subprime financing to roll over that financing when it comes due.

The International Monetary Fund in its latest (April) Global Financial Stability Report has increased its estimate of bad debt originated in the U.S. by a quarter over its earlier January estimate.
Though subject to a number of assumptions, our best estimate of writedowns on U.S.-originated assets to be suffered by all holders since the outbreak of the crisis until 2010 has increased from $2.2 trillion in the January 2009 Global Financial Stability Report (GFSR) Update to $2.7 trillion, largely as a result of the worsening base-case scenario for economic growth. In this GFSR, estimates for writedowns have been extended to include other mature market-originated assets and, while the information underpinning these scenarios is more uncertain, such estimates suggest writedowns could reach a total of around $4 trillion, about two-thirds of which would be incurred by banks.
Joseph Stiglitz continues to argue that large financial institutions themselves continue to pose a huge systemic risk to the economy.

Being too big to fail creates perverse incentives for excessive risk taking. The taxpayer bears the loss, while the bondholders, shareholders, and managers get the reward. It also distorts the marketplace in another way: as we have noted, there are hidden subsidies (which have been increased in the current crisis), for instance in deposit insurance, in the government-provided explicit guarantees to newly issued bonds, and in the implicit guarantees to bondholders and shareholders associated with the bail-outs. (Even if the FDIC bears the cost, it does not stay there; ultimately, it gets borne by market participants. Unless a strict “polluter pays” principle is adopted, the costs will be shifted in part to other financial institutions, with consequent distortions to the financial sector.)
Despite some recent less negative indicators for the economy, the evidence is growing that stronger and more decisive action is going to be needed for the financial sector. Banks appear to be sitting on a mountain of bad debt. A great deal of that debt has been written down but a great deal more remains to be written down.

Tuesday, April 28, 2009

And how was your day?

Today has brought a metric boatload of cheery news from North Carolina state officials. This morning, the state announced that state workers, including teachers and higher education employees, would have 1/2 percent of their total annual pay cut from their May and June paychecks. That works out to each of those monthly checks being cut by 3 percent. In return, the employees would get an extra 10 hours off from work sometime between June 1 and the end of the calendar year.

While a 10-hour mandatory furlough beats a several month layoff, it's hardly good news. Moreover, there's no guarantee that 10 hours will be the total extent of the cut. The proposed furlough is needed to close a funding gap for the current fiscal year, but the next year isn't looking any rosier.

The furlough is also somewhat self-defeating. The furlough is applied across the board, which means that employees who bring in revenue through grants and other activities can't bill those sources for their time (most grants require you to bill for a proportion of your total time, not specific hours of time). There's no savings to the state from those "billable" employees. Worse, the state can't collect its usual administrative expenses, so it actually some money on the deal. For UNCG employees, the extra administrative charge (indirect cost rate) is just under 40 cents for each dollar billed.

To further brighten the day, the state health director announced this afternoon that swine flu is suspected in the state and that his department has ordered isolation for people who are sick.

You can never tell how these things will work out, but the plan for now is to save the upcoming furlough hours and isolation time for next Fall's faculty meetings.

Specter-al shifts

It's like a scene right out of Harry Potter. An elephant magically transforms into a donkey. Michael Steele, however, is claiming that it was really only a RINO that transformed and that it's not so magical.

You can bet, however, that the Republicans are now conjuring up some additional hocus-pocus to delay seating Minnesota's senator and the Democrats' 60th Senate vote.

Sunday, April 26, 2009

Swine flu precautions

Besides avoiding someone who coughs while reading Charlotte's Web, the Centers for Disease Control has practical advice on how to avoid Swine Flu and how to care for household members who are sick.

Surprising follow up to Thrifty Diet

During the first two weeks of March, we followed a diet of meals that were supposed to be affordable under the U.S. Department of Agriculture "Thrifty Food Plan."

At the end of those two weeks, we calculated that our food costs were $383, about 20 percent over the Thrifty Food Plan amount. I also wrote that we would continue tracking our food costs and that the difference between those food costs and the diet costs of $383 would be sent to World Vision.

We kept the receipts for March, but it's taken me a while to go through them. I can now report that our total food costs for the rest of March were a surprisingly low $543.71. This amount includes grocery costs of $437.79, which on a prorated basis is almost the same as our grocery costs under the diet. It also includes restaurant costs of $105.92.

The costs were much lower than we expected. In part, the low costs reflect some travel in the last two weeks of March where my meals were provided by the hosting organizations. The low costs also reflect our family taking it easy on restaurant meals during Lent. Even so, we were surprised at how modest the bills were.

$161 is on its way to World Vision.

Monday, April 20, 2009

Instructions for waterboarding

Apparently, the Bush administration's instructions for waterboarding went something like this:
- strap subject into an inclined gurney and apply face cloth,
- rinse
- repeat as needed (with the "repeat" part being used more than 200 times for Abu Zubaydah and Khalid Sheikh Mohammed).

Specifically, the Department of Justice described instructions applicable in 2005 as:
Waterboard may be approved for use with a given detainee only during, at most, one single 30-day period, and that during that period, the waterboard technique may be used on no more than five days. We further understand that in any 24-hour period, interrogators may use no more than two "sessions" of the waterboard on a subject--with a "session" defined to mean the time that the detainee is strapped to the waterboard--and that no session may last more than two hours. Moreover, during any session, the number of individual applications of water lasting 10 seconds or longer may not exceed six. As noted above, the maximum length of any application of water is 40 seconds (you have informed us that this maximum has rarely been reached). Finally, the total cumulative time of all applications of whatever length in a 24-hour period may not exceed 12 minutes.
The techniques that were used on Abu Zubaydah and Khalid Sheikh Mohammed were likely more severe, with these guidelines being developed in light of that earlier experience.

Many people have argued that waterboarding is not torture because we subject SERE trainees to this procedure. However, the DOJ memo emphasizes the differences between the way the technique was applied in SERE training and the way that it was applied to the detainees. In addition to more frequent applications, the CIA interrogators used greater volumes of water and employed numerous techniques to force detainees to take in water. The CIA's Office of Medical Services concluded that "the SERE waterboard experience is so different from the subsequent Agency usage as to make it almost irrelevant. Consequently, according to the OMS, there was no a priori reason to believe that applying the waterboard with the frequency and intensity with which it was used by the psychologist/interrogators was either efficacious or medically safe."

Of course, your mileage may vary.

Thursday, April 16, 2009

Our Senator's own financial panic

The News & Observer is reporting about the hysterical antics of NC's senior Senator.
When the banking crisis hit last fall, U.S. Sen. Richard Burr told his wife to take as much money from the ATM as she could.
Our Senator has been regaling audiences with the following instructions that he gave to his wife shortly after receiving a briefing from Treasury Secretary Paulson last Fall.
"Tonight, I want you to go to the ATM machine, and I want you to draw out everything it will let you take. And I want you to tomorrow, and I want you to go Sunday," he said, according to an account in the Hendersonville Times-News. "I was convinced on Friday night that if you put a plastic card in an ATM machine the last thing you were going to get was cash."
Let's count the ways Sen. Burr's panicked actions were wrong.

First, he clearly does not understand the banking system. Deposits in FDIC-insured banks at the time were guaranteed up to $100,000; they are currently guaranteed up to $250,000. The money in the Senator's account, or at least any reasonable amount that could quickly be accessed through an ATM was not at risk.

Second, through his actions, the Senator is effectively telling his constituents that their money is at risk. He's not only giving bad information but spreading unnecessary panic. Along the same lines, he is role-modeling bank-run behavior.

Third, if a financial meltdown and ensuing bank run had occurred, his story shows that he wanted to make sure that he was the first in line. Screw everyone else, including his constituents--the Senator was going to make sure that he was taken care of. If the ship was going down, he was going to jump in the front seat in the life boat.

Finally, his story indicates that he was also willing to use inside information--a briefing he received from then Secretary Paulson--to benefit himself.

At a time when North Carolina and the nation need calm leadership, Sen. Burr is instead trying to scare the pants off his constituents with a story that shows that he is ill-informed, panicked, and selfish.

Wednesday, April 15, 2009

Campus intolerance

A speech by former Presidential candidate and Representative Tom Tancredo at UNC was interrupted and eventually halted by protesters, who disagreed with his views on illegal immigration.

The protesters disrupted Tancredo's talk by unfurling a banner between him and the audience. Shortly after, they broke a window in the classroom where he was speaking. Finally, the protesters had to be dispersed with pepper spray and threats of tasers.

Because of the protests, commotion, and risks to the audience, administrators had to halt the talk.

The protesters actions were disgraceful and wholly inconsistent with the free exchange of ideas that should occur on a college campus. The Chancellor has appropriately condemned the incident. However, he needs to do more and should take steps to remove those responsible for the intimidation and disruption from the campus community.

We learn from considering others' ideas and opinions, especially those views that challenge ours.

Tea bags childish and self-defeating

The News-Record reports that some "clever" folks are attaching tea bags to the tax forms that they are submitting to Raleigh as a form of protest.
Drawing on the imagery of the Boston Tea Party, a movement driven mainly by conservatives has been sending tea to government offices — including some in Congress — as a signal that they would like to see taxes and government spending lowered.
However, the packages require extra handling, including extra security screening. The net result of the "tea-baggers" childish behavior is to increase the costs of government and to make it more difficult to discern genuine security threats.

Last November, the voters weren't buying what these selfish, spoiled children were selling. Now, these same brats are going to show their true colors by throwing an expensive tantrum.

Thursday, April 9, 2009

Obama and the S&P 500

The Standard & Poors 500 stock index rose almost 4 percent today to close at 856.56. The S&P 500 has risen more than 28 percent from its low point early last month.

The close marks an interesting milestone. On Friday, January 16, the last full trading day of the Bush administration, the S&P 500 closed at 850.12. After the new President was inaugurated, stocks fell. The S&P 500 briefly rallied and closed above the 850 mark in early February but then plummeted for the next month. Today is the first day since February that the S&P 500 has eclipsed the pre-inauguration mark.

The NASDAQ index is also higher than it was on January 16, while the Dow Jones Industrial average, which closed today at 8,083.38, remains below its pre-Obama mark of 8,281.22.

The S&P 500 is still down 5 percent for the year. And the economy still hasn't begun its recovery.

For a few days, however, the new President can point to some positive news.

Monday, April 6, 2009

Poor now, poor chances later

A new study has come out that links childhood poverty to impairments in working memory. The Washington Post reports

research is providing what could be crucial clues to explain how childhood poverty translates into dimmer chances of success: Chronic stress from growing up poor appears to have a direct impact on the brain, leaving children with impairment in at least one key area -- working memory.

"There's been lots of evidence that low-income families are under tremendous amounts of stress, and we know that stress has many implications," said Gary W. Evans, a professor of human ecology at Cornell University in Ithaca, N.Y., who led the research. "What this data raises is the possibility that it's also related to cognitive development."
The article is available on-line and will appear shortly in the peer-reviewed Proceedings of the National Academy of Sciences. The abstract for the article is
The income–achievement gap is a formidable societal problem, but little is known about either neurocognitive or biological mechanisms that might account for income-related deficits in academic achievement. We show that childhood poverty is inversely related to working memory in young adults. Furthermore, this prospective relationship is mediated by elevated chronic stress during childhood. Chronic stress is measured by allostatic load, a biological marker of cumulative wear and tear on the body that is caused by the mobilization of multiple physiological systems in response to chronic environmental demands.
Research already indicates that social mobility from one generation to the next is astonishingly low in the United States. Far from being a shining beacon of opportunity or a "classless" society, children's economic attainments in the U.S. are more closely tied to parents' attainments than in any other developed country.

The U.S. has substantially higher income inequality than other developed countries, with children being overrepresented among the poor. The new research suggests that this inequality is likely to compound itself.

The research also suggests that policies to help poor families, such as work supports, could have "trickle up" effects that improve the human capital and productivity of subsequent generations.

Friday, April 3, 2009

Positive reviews for the President's first major foreign trip

Steve Pearlstein comments favorably on the President's trip to the G-20 summit.
International economic summits deserve to be regarded with skepticism: The most important decision to come out of them is usually the call for yet another meeting.

But yesterday's G-20 meeting in London was an exception. While President Obama may have overstated things a bit when he declared it a 'turning point' for the now-shrinking global economy, the meeting did manage to boost the confidence of financial markets, inject another trillion dollars into the financial system and provide needed political cover for world leaders to take unpopular actions back home.
Pearlstein concludes
All in all, a pretty successful opening-night performance for President Obama on the international economic stage. He achieved most of what he wanted while allowing others to claim victory and allowing the United States to shed its Bush-era reputation for inflexibility and heavy-handedness. And by the standards of past summits, this one was full of accomplishment.
Fred Kaplan has positive comments for the President's return to realistic diplomacy
Vast multinational conferences, like the G20 summit in London, are useful mainly for the "bilaterals"—the one-on-one side-room conversations—and, in these forums, President Barack Obama is living up to high expectations.

Which is to say, the United States seems to be returning to diplomatic basics—a development that in the wake of the last eight years is practically revolutionary.

...At his press conference on Wednesday, Obama emphasized that the United States and Russia have serious differences and that he wouldn't paper over them; from the start, he told Medvedev to forget about recognition of Abkhazia or South Ossetia as independent states, and he protested the beating of prominent human rights activist Lev Ponomaryov. But Obama also said he wouldn't let those differences get in the way of vital matters—such as nuclear proliferation, counterterrorism, regional conflicts, and international trade—where cooperation could promote (again) the interests of both countries.
An analysis piece in the New York Times paints a more modest picture
After more than 11 hours of meetings, Mr. Obama emerged Thursday from his first summit meeting with a handful of modest concrete commitments. He did not get much of what American officials had been hoping for, notably failing to persuade other countries to commit to more fiscal stimulus spending.

But he, along with the other world leaders present, did get a more forceful and detailed blueprint for a global recovery than a similar gathering 86 years ago, when an earlier generation failed to take collective action to counter the Great Depression. 'By being willing to accommodate European leaders on the need for better regulation of financial markets and emerging market leaders on their desire to have less protectionism,' said Eswar S. Prasad, a former China division chief at the International Monetary Fund, Mr. Obama 'has certainly guided the G-20 leaders to a positive outcome.'

'All in all, not a bad day’s work,' Mr. Prasad added.

Mr. Obama’s own assessment? 'Well, I think I did O.K.'
And to think, he did it all without once peering into President Medvedev's soul (or at least had the common sense to refrain from saying that he did).

The performance at the summit comes at the end of a week that could have gone disastrously. Recall that on Monday, the President rejected the turn-around plans offered by GM and Chrysler and set the stage for potential bankruptcies for both companies--a harsh dose of transparency that initially sent the stock market reeling and could have led to further panic. Instead, he was able to deliver grim news, while keeping the country calm.

The President is demonstrating that he can confront challenges realistically.

Thursday, April 2, 2009

Workers' comp

The New York Times has a great article describing the problems that workers and employers face in New York's workers' compensation program.
...employers and employees are still at war over workplace injuries, a war marked by mistrust and fear. Each side is angry; each side has its own powerful evidence to justify that anger.

Workers say companies are going to extraordinary lengths to cut back on claims: contesting injuries, checking on workers at home, even firing those who file for benefits.

Employers say that the compensation system is so expensive, so riddled with fraudulent claims, that they need to take aggressive steps to curb their costs. A single injury can easily cost $10,000, and sometimes several hundred thousand dollars when a badly maimed worker draws benefits for life.
Many of the issues in the article stem from the well-known problem of asymmetric information. Workers know more about the state of their health and injuries than do their employers. Some work injuries, such as a severed digit or a broken bone, can be readily observed, but others, such as a hurt back or a repetitive motion injury, can't. Because the injuries can't be seen, workers have incentives in the form of workers' compensation benefits to misreport or overstate the severity of the injuries. In turn, employers create schemes to raise the costs of reporting a problem so that only those who are truly hurt will find it worthwhile to file a claim. The problem, of course, is that this imposes costs on people who have already been hurt.

An additional problem for employers is that lots of people--workers, doctors, judges--seem to view the compensation as a free good, not recognizing that the cost of the claims is paid by employers and, to some extent, employees.