Wednesday, June 30, 2010

Sweet tea for toddlers?

Rep. Maggie Jeffus has come in for some criticism over at Joe Guarino's blog. Joe criticizes her for H1726, a bill that would require modest standards for the types of foods that licensed day care centers could provide children and that would lead to the development of physical activity standards for day care centers.

Among the specific requirements, the bill would require the NC Child Care Commission to
...adopt rules for child care facilities to ensure that all children receive nutritious food and beverages according to their developmental needs. The Commission shall consult with the Division of Child Development of the Department of Health and Human Services to develop nutrition standards to provide for requirements appropriate for children of different ages. In developing nutrition standards, the Commission shall consider the following recommendations:
  1. Limiting or prohibiting the serving of sweetened beverages, other than 100% fruit juice, to children of any age.
  2. Limiting or prohibiting the serving of whole milk to children two years of age or older or flavored milk to children of any age.
  3. Limiting or prohibiting the serving of more than six ounces of juice per day to children of any age.
  4. Limiting or prohibiting the serving of juice from a bottle.
  5. Creating an exception from the rules for parents of children who have medical needs, special diets, or food allergies.
Joe criticizes the bill as "ridiculous."

The language in the bill closely follows a recommendation that was made by the the "ridiculous" NC General Assembly Task Force on Childhood Obesity. The Task Force, in turn, relied on "ridiculous" model regulations that were proposed by researchers at UNC and other experts.

The Task Force was responding to high and growing rates of obesity in North Carolina. Indeed, the Robert Wood Johnson Foundation has just released a study that shows that North Carolina ranks 10th in rates of adult obesity and 11th in rates of childhood obesity. However, these figures must also be "ridiculous."

There is also evidence that North Carolina day care centers do a poor job of feeding their charges. A research team from UNC examined the foods and beverages that preschoolers in NC day care centers were served and consumed (Ball et al., J. Am. Dietetic Assoc., 2008). The team found that, on average, preschoolers consumed less than 13% of the recommended amounts of whole grain foods and around 7% of the recommended amounts of dark vegetables. Preschoolers did get adequate amounts of milk, but most of that milk was whole milk--only 11% was low- or non-fat.

They concluded
Our data suggest that children are not consuming recommended amounts of whole grains, fruits, or vegetables while attending full-time child care. Instead, children are consuming excessive amounts of added sugars from sweet snacks and condiments, and saturated fat from whole milk and high-fat or fried meats.
It would be nice if we could rely on market pressures to contribute to better nutrition standards at day care centers. The laissez faire argument goes something as follows:
  • parents know what's best for their children and will value care providers who meet their children's nutritional needs;
  • day care providers, in turn, will be forced to compete for the hard-earned dollars of those parents; the day care centers will have to provide good meals or risk going out of business.
However, the trends in obesity and the evidence that child care centers do a poor job of feeding children undercut this argument.

While parents may know what's best for their children in a general sense, they may not know everything that goes on in a day care center. There is asymmetric information in the sense that day care centers know more about the quality of care provided than the parents. Day care centers are especially problematic because their clients--infants, toddlers, and preschoolers--have limited or no ability to report what happens to them.

A related problem is that the consequences of poor nutritional practices are not immediately apparent. A single serving of soda or whole milk typically doesn't lead to noticeable, immediate problems (unless the child is diabetic or lactose intolerant). People have considerable trouble appropriately accounting for consequences that are uncertain or that occur far off in the future.

Even if parents and care providers take these direct consequences into account, they are unlikely to take other externality effects into account, such as the amounts that society is likely to contribute to mitigating health problems or that obesity may have on society.

The costs of complying with this legislation are minimal. Sugar-free drinks, including water, can be substituted for sugary drinks. Low-fat milk can be substituted for whole milk. There's virtually no cost difference.

At the same time, there's scope for some real benefits from reduced obesity and its co-morbidities.

Rep. Jeffus and the 66 other representatives who supported this legislation (including 5 Republicans) are offering a modest, common-sense, and well-considered approach to improve children's nutrition and reduce obesity.

Thursday, June 24, 2010

Rep. Kanjorski's offensive statement

Democratic Congressman Paul Kanjorski (D-PA) recently spoke in favor of a program that would help for "average, good American people" who were facing foreclosures and the loss of their homes--a fine sentiment.

However, he defined those "average, good American people" as those who were "not minorities" and "not defective." His quote in full,
We're giving relief to people that I deal with in my office every day now unfortunately. But because of the longevity of this recession, these are people -- and they're not minorities and they're not defective and they're not all the things you'd like to insinuate that these programs are about -- these are average, good American people."
The implications, of course are that minorities and "defective(s)" are somehow distinct from "good American(s)" and that these groups are less deserving of assistance with their housing hardships. The implications may have been unintended, but even so, it's not clear what positive implications might have possibly been intended.

Rep. Kanjorski should apologize for his offensive statement. So far, he's refusing.

Thursday, June 17, 2010

NC Lege wants to incentivize big-business tax cheats

The NC legislature is considering a change in the state's tax system that is projected to cost the state $100 million in business tax payments that are legitimately owed.
The state Senate and the business lobby want to take away a big stick that the state's tax collector says it needs to punish big businesses that dodge their taxes.

The issue is up for debate in budget negotiations under way between the state House and Senate. The Senate's version includes a provision that would prevent the N.C. Department of Revenue from assessing a penalty on businesses it thinks are hiding income. The provision is not included in the House's version.

N.C. Department of Revenue Secretary Ken Lay, who is under pressure to maximize the state's collections in the aftermath of a deep recession, says he needs the ability to assess penalties to force companies to be honest. Without the penalties, the revenue department thinks it would miss $100 million in taxes it would otherwise collect. The state faces an $800 million revenue shortfall.
The current policy penalizes substantial under-reporting of business income--it only applies to businesses that under-report their income by 25 percent or more. The policy provides an incentive, albeit an incomplete one, for multi-state businesses to report their NC income. If a company is found to under-report, it must pay the tax that is legitimately owed and a penalty.

The new policy would remove that penalty. In so doing, multi-state companies would have strong incentives to hide their NC income in sham out-of-state operations. If the NC tax authorities fail to detect these maneuvers, the companies escape their tax obligations. If the authorities do uncover the shenanigans, the companies would only be on the hook for the amount that was originally owed plus interest.

The results are easily predicted. More companies will attempt to hide income, and enforcement will become both more costly and less effective. Tax cheats get a tremendous break, leaving the rest of us to either pay more or make due with fewer state services.

The NewsObserver article states that
Supporters of the idea say the revenue department is overstepping its authority and unfairly punishing business. The penalties punish a well-intentioned company that had no way of knowing the department would disagree with its tax return years later, they say.

The revenue department is hardly "overstepping its authority" by investigating tax returns and following state policies in assessing penalties.

It also seems unlikely that "a well-intentioned company" would be punished, as the current penalty doesn't apply unless there is substantial under-reporting.

As for not knowing, the companies have the same responsibility that the rest of us do to follow the law and compute their taxes correctly.

North Carolina faces enough problems with its antiquated tax system and with anticipated budget shortfalls over the next few years. The legislature shouldn't compound that problems by encouraging multi-state businesses to hide their incomes.

Monday, June 14, 2010

Vast mineral wealth in Afghanistan?

Afghanistan, in part because of 30-odd years of war and political instability, is one of the world's poorest and least-developed countries. All of that could change, however, with the discovery of vast, untapped, and previously unknown mineral wealth.

The New York Times reports
The United States has discovered nearly $1 trillion in untapped mineral deposits in Afghanistan, far beyond any previously known reserves and enough to fundamentally alter the Afghan economy and perhaps the Afghan war itself, according to senior American government officials.

The previously unknown deposits — including huge veins of iron, copper, cobalt, gold and critical industrial metals like lithium — are so big and include so many minerals that are essential to modern industry that Afghanistan could eventually be transformed into one of the most important mining centers in the world, the United States officials believe.
The minerals represent a tremendous development opportunity for the Afghan people and a route out of poverty.

In 2009, total GDP in Afghanistan was estimated to be $23 billion, or $800 per person. Only 8 countries had lower levels of per capita GDP. And it's important to remember that the $23 billion figure is inflated by large inflows of development assistance. Afghanistan's own economic performance is much worse.

One trillion in potential resources represents an off-the-charts jump in wealth. Tapping just one percent of the deposits per year would raise the country's pre-transfer income by more than 50 percent. Building the mines and infrastructure necessary to extract and export would further add to the economy.

The changes for Afghanistan could be profound. As Benjamin Friedman has argued in The Moral Consequences of Economic Growth, sustained economic development tends bring positive social changes, including more social cohesion, more personal freedom, and more openness. If handled properly, the wealth could form the glue that finally brings this shattered country back together. The wealth could also set the stage for more sustained development.

However, that's a big "if." Exploitation of mineral wealth is hardly a surefire development strategy, especially in a country that is as weak, divided, corrupt, and poorly governed as Afghanistan. One need only consider the Democratic Republic of the Congo, which has vastly more mineral wealth but also fought a civil war and remains even poorer than Afghanistan, to see the risks. Iraq, too, has tremendous oil wealth, but that wealth has served as much as a touchpoint of conflict as a catalyst for progress. Both the benefits and costs from the extraction of natural resources tend to be divided unequally, which also is destabilizing.

Nevertheless, an opportunity has appeared that wasn't known before. With any luck, this opportunity will bring good things to Afghanistan.