Return to growth

The advance figures for 3rd quarter Gross Domestic Product (GDP) were released this morning, and they indicate that the U.S. economy grew at a annual rate of 3.5 percent.

The growth appeared to be spread over most sectors of the economy with durable goods expenditures (mostly motor vehicles), investment (mostly inventory changes), and federal government spending leading the way. Exports were up strongly, but imports rose even faster, meaning that trade was a net negative. Spending by state and local governments was also down.

The figures mean that the economy has turned the corner and that the Great Recession has ended, at least for now. While the news is good, it's important to remember that the level of output is still substantially (2.3 percent) below where it was a year ago. Foreclosures, bankruptcies, and bank failures continue to mount. Unemployment is expected to continue rising into next year. And at some point the government has to take its foot off the fiscal and monetary accelerator pedals.

It will be a while yet before the growth in the economy translates into better outcomes for many businesses and households.

Still, a recovery beats the alternative, nu?

$13 billion pander to seniors

This morning's consumer price report brought good news to consumers, or so you'd think. The Department of Labor reported that its consumer price index for all urban consumers was 1.2 percent lower than a year ago. This means that, on average, the goods that people are buying cost less.

The news is especially good for seniors and others living on fixed incomes. When prices are lower, those incomes go farther and can purchase more. Other things held constant, it's as if someone on a fixed income received at 1.2 percent raise. Given the high and rising unemployment, falling wages, and other financial problems that many other households are facing, a 1.2 percent increase in living standards should be good news.

Instead, however, seniors are complaining because for the first time in more than 30 years, there will be no cost of living increase in Social Security payments. The real value of those payments will increase, but the nominal value will be flat.

As a group, seniors are doing better than others in this economy. In its most recent income and poverty estimates, the Census Bureau reported that the median, inflation-adjusted income for households headed by people aged 65 and over rose 1.2 percent from 2007 to 2008, while the median real income for other households fell 3.3 percent. Over the same period, the poverty rate for people 65 and over was unchanged at 9.7 percent, while the poverty rate for younger people rose and was higher (in 2008, 19 percent of children and 11.7 percent of non-elderly adults were in households below the poverty line). And, older people have near-universal health insurance coverage, while more than one out of six younger people (including one out ten children) is uninsured.

Enter the Obama administration with an expensive "solution" to a non-existent problem

President Obama on Wednesday attempted to preempt the announcement that Social Security recipients will not get an increase in their benefit checks for the first time in three decades, encouraging Congress to provide a one-time payment of $250 to help seniors and disabled Americans weather the recession.

Obama endorsed the idea, which is expected to cost at least $13 billion, as the administration gropes for ways to sustain an apparent economic rebound without the kind of massive spending package that critics could label a second stimulus act.

Through a quirk in the cost-of-living formula which only adjusts benefits up and never down, Social Security recipients have effectively gotten a raise. However, President Obama wants to give them another in a Mini-Me version of a stimulus package.

The administration's proposal also raises the question of what it will do in future years. There is a good possibility that prices will remain flat for another year, leading to no cost of living adjustment next year. At that point, not only would another "emergency" increase be needed then but the increase would have to be larger to prevent nominal incomes from going down. So $250 this year could become an even larger amount next year. Also, at some point the emergency will pass, but politicians will be confronted the problem of how to cut the "temporary" increases. It's hard to see how these increases won't someday find their way into the baseline benefit calculations and become permanent.

Without a doubt, many elderly households are enduring economic hardships. However, on average, elderly households will see their living standards improve under the current cost of living formula. The average non-elderly household can't say the same. It violates every reasonable notion of fairness to ask households whose circumstances are getting worse to contribute more to households whose circumstances are getting better.

A fairer and more affordable approach would be to target assistance to the specific types of elderly households that are likely to fall through the gaps in the various cost of living formulas. An example would be households that are just coming on to Social Security this year--these households are not protected from Medicare increases. A targeted benefit for genuinely disadvantaged households can be justified. A $250 payment to all elderly households cannot.

Nevertheless, the political pressure for an unneeded hand-out is likely to prove irresistible. Kids, start saving those $5 birthday checks from Grandma and Grandpa, the government will be asking for them (and a whole lot more) in another few years.

Goodbye Captain Lou

CNN reports

Legendary wrestling figure Captain Lou Albano, perhaps best known for his association with pop singer Cyndi Lauper, died Wednesday, according to World Wrestling Entertainment.

As the clip shows, his association extended to the group NRBQ.

Republican budget busting

Sen. Johnny Isakson two weeks ago on the Senate floor:

Those are the two things Republicans don't want, which is more debt to bankrupt our children and grandchildren and more taxes.

Sen. Isakson today:

Those purchasing new homes would be eligible for an $8,000 tax credit under legislation to be introduced by Sen. Johnny Isakson (R-Ga.).

Isakson will offer the tax break for homebuyers as an amendment to legislation extending unemployment benefits, according to his office.

Isakson’s measure would greatly expand an $8,000 tax credit included in the $787 billion economic stimulus package Congress approved earlier this year. That credit expires at the end of November.

The new measure would keep the credit at $8,000, but would make all homebuyers eligible, instead of limiting it to those purchasing their first home. It would also double the income limits on those eligible to win the credit to $150,000 for an individual and $300,000 for a couple.

This would greatly increase the cost of the tax credit at a time when the government is dealing with record budget deficits.

Okay, one out of two isn't so bad. Apparently, "bankrupt(ing) our children and grandchildren" is okay, so long as it involves extending a tax credit to households making up to $300,000 per year.

The current tax credit costs about $15 billion per year. Sen. Isakson's proposal could easily double those costs.

Congress needs to look at ways to close the budget gap, not add to it.

Guns do kill people

Two tragedies in the last week remind us that guns in the home are dangerous things. Today CNN links to a story about a man who shot his fiancee on the eve of their wedding, mistaking her for an intruder. Late last week, several news outlets reported on the story of a gun-toting soccer mom who ended up becoming the victim of a murder-suicide by her husband.

Although the circumstances of these cases were unusual, family-related, self-inflicted, and accidental gun deaths are not.

The Centers for Disease Control (CDC) tracks detailed statistics for violent deaths--deaths "resulting from either the intentional use of physical force or power against oneself, another person, or a group or community, or the unintentional use of a firearm"--in 16 states. The CDC's latest report covers 2006.

Although the report is limited to 16 states, the included states come from every region of the country and cover just over a quarter of the U.S. population, so they are broadly, though not completely, representative. There are also limitations (see p. 15) in the underlying information. Data are missing or inconsistent for some reports. Data also come from initial reports and are not reconciled with later information, such as prosecutions.

In the 16 states that were examined, there were more suicides involving guns (4,410) than all types of homicides or deaths involving legal intervention (4,343). Overall, identified suicides accounted for 56 percent of violent deaths; of the suicides, just over half involved a gun. Of the much smaller number of murder-suicides (166 suicides with 194 additional victims), nearly five-sixths involved a gun. To this list of mayhem, you can also add 101 accidental gun deaths.

The annual death toll from suicides and accidents involving guns in just these 16 states works out to one and a half 9-11s. If the figures can be extrapolated to the rest of the country, the national total would be approximately six 9-11s.

The total number of people killed (by guns and otherwise) in self-defense and by law enforcement pales in comparison. The number of such deaths in the 16 states was just 234.

The sad fact is that guns in the home are much more likely to be used by the owner against himself or herself or against another family member, partner, or friend than against an intruder.

"Principled" opposition to health reform

It's pretty obvious that at least some of the opposition to the President's health care agenda is racially motivated.

When you walk into the Georgia Peach Oyster Bar in Paulding County, you feel like you've walked into a different era.

Behind the pool tables stands a mannequin in a Klu Klux Klan costume, but it's what's outside of the Patrick Lanzo's restaurant that has some people angry.

Lanzo put up a sign that reads "Obama's plan for health-care: N*&%*r rig it."

The audacity of hope

I woke up to the news that President Obama had won the Nobel peace prize. After checking the calendar to make sure that I hadn't slept until April 1, I started trying to think how that could have happened. To quote Dr. Suess, I puzzled and puzzled 'til my puzzler got sore.

Sure Obama has united parts of this country, mostly the Republican parts that are united in opposition to health care, a better climate, and evolution.

And sure he's pursuing more peaceful policies, such as keeping only some of the detainees in Guantanamo and having predator drones fire missiles at wedding rehearsal dinners instead of actual wedding parties.

Heck, one of these days he may even make a decision about what we're going to do in Afghanistan.

But once you get past there, the resume really thins out.

In the end, the answer that I come to is that the Nobel committee has awarded the equivalent of one of those self-esteem trophies that the last place kids' soccer team gets at its Fuddruckers end-of-season banquet. You can almost hear them saying, "Way to be there Barry!"

Incentivizing poverty

It appears that North Carolina is preparing to pay economic incentives to a company that will provide 375 jobs that pay wages near the poverty level.

The Raleigh News & Observer reports

A Roxboro parachute manufacturer is on a hiring binge to fill 375 jobs and meet a major order for the U.S. Army.

North American Aerodynamics plans to increase its work force from 45 people to about 420 by next year to rush out parachutes for use in Afghanistan. It is investing $900,000 for a new factory.

The creation of jobs on that scale during a recession is so unusual in Person County that the company qualified for as much as $600,000 in state and local incentives, although the jobs will pay considerably less than the county average. The average wage will be $23,834, well below the Person County average of $31,824.

The poverty threshold this year for a family of four is $22,050. If the average wage is $23,834, it is very likely that some of the jobs will pay less than the poverty level. Even at $23,834, four-person households with no other income would qualify for food stamps, free school lunches and breakfasts, subsidized medical care, and the Earned Income Tax Credit.

The news story indicates that the company will need roughly five years to fulfill its contract. Once that contract ends, the extra jobs could well be gone.

With alarmingly high unemployment and only the faintest signs of economic growth, North Carolina needs jobs. Also, jobs need to be available at different skill levels. Nevertheless, $600,000 in incentives for poverty-level employment that may only last a few years is a bad investment.

Will's "national commission"

In his Washington Post column today, George Will, cites some recent news stories and research that seemingly contradict expectations regarding global warming. Will impugns scientists who disagree with his take on the data.

For instance, Will muses about a scientist who is quoted in a news article as saying that evidence from one controversial study (Will conveniently ignores the controversey) might be misused or misrepresented by opponents (as Will does). Will also accuses a new scientific report that indicates greater long-term warming as being "strident," as if the report were written in reaction to the recent news articles (Will writes this way; the scientists did not).

Will ends his column with a call for "a national commission appointed to assess the evidence about climate change." Will either overlooks or ignores that the United States has had a series of independent, non-partisan, expert commissions that have studied and continue to study climate issues. The commissions have been organized under the auspices of the National Research Council of the National Academy of Sciences (NAS). The current, ongoing commission is the Committee on America's Climate Choices.

The most recent assessment and summary of the evidence from the NAS reports as follows.

There is a growing concern about global warming and the impact it will have on people and the ecosystems on which they depend. Temperatures have already risen 1.4°F since the start of the 20th century—with much of this warming occurring in just the last 30 years—and temperatures will likely rise at least another 2°F, and possibly more than 11°F, over the next 100 years. This warming will cause significant changes in sea level, ecosystems, and ice cover, among other impacts. In the Arctic, where temperatures have increased almost twice as much as the global average, the landscape and ecosystems are already changing rapidly.

Most scientists agree that the warming in recent decades has been caused primarily by human activities that have increased the amount of greenhouse gases in the atmosphere (see Figure 1). Greenhouse gases, such as carbon dioxide, have increased significantly since the Industrial Revolution, mostly from the burning of fossil fuels for energy, industrial processes, and transportation. Carbon dioxide levels are at their highest in at least 650,000 years and continue to rise.

There is no doubt that climate will continue to change throughout the 21st century and beyond, but there are still important questions regarding how large and how fast these changes will be, and what effects they will have in different regions. In some parts of the world, global warming could bring positive effects such as longer growing seasons and milder winters. Unfortunately, it is likely to bring harmful effects to a much higher percentage of the world’s people. For example, people in coastal communities will likely experience increased flooding due to rising sea levels.

The scientific understanding of climate change is now sufficiently clear to begin taking steps to prepare for climate change and to slow it. Human actions over the next few decades will have a major influence on the magnitude and rate of future warming. Large, disruptive changes are much more likely if greenhouse gases are allowed to continue building up in the atmosphere at their present rate. However, reducing greenhouse gas emissions will require strong national and international commitments, technological innovation, and human willpower.

It takes another type of willpower to ignore recommendations of an independent, expert panel composed of the nation's top scientists.