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Polling Obsession

The 2012 Presidential is so close just so close that not only do different polls show different results but different averages of polls do.

OK it is clear that extremely fancy models such as the fivethirtyeight model which attempt to assign undecideds and use state data to estimate the national vote and vice versa are different (generally I don’t like fancy but Nate Silver has a track record).  But simple smoothers also give different results.

Partly it is the choice of polls to include yes/no on web based or partisan polls. is a simple average but they don’t include partisan polls or web based polls (and use self reported partisanship so Rasmussen is included but not PPP ooops).

But part of it is the smoothing algorithm.  both and use loess smoothers which fit a constant and a coefficient on time using weights which decline away from time t and report the fitted value for t.  I think this means they are too quick to extrapolate trends.  This means that one outlier can convince the computer that the polls have been trending for a candidate.

My example the odd case of TalkingPointsMemo and Michigan.  The program has Ohio leans Obama and Michigan a tossup.  This is due to one poll by Foster-McCallum (in serious contention for the bitterly fought prize for worst pollster).  Without them, the computer estimates that Obama is 3.9% ahead.  That is enough for TPM to call the state leans Obama and give more than 269 electoral votes in Obama leaning states.

Here is the graph with Foster-McCallum

Here is the graph without them

This is extreme, because Foster/McCallum had a Florida poll with an absurd sample which earned the coveted and very rare double asterix from TPM for not included in the average because of an editorial decision.

I think such decisions should be made pollster by pollster not poll by poll.  But totally aside from that a sensible smoothing algorithm shouldn’t be so sensitive to one poll when 10 October polls are available all of which polled after the first TV debate.

Notice how the poll pulls down estimates of the state of the race before it’s sample began.  This feature of the smoother makes it hard to see if a shift is due to an event.

I say even simpler is better than Loess.

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Universities and ‘think tanks”

Via Naked Capitalism comes a heads up from reader Paul Tioxon:

Propaganda on the Rise on the Health Care Policy FrontReader Paul Tioxon sent the following sighting by e-mail. By way of background, it’s important to keep in mind that pretty much every place that professes simply to read research and translate into stuff journalists and the lay public can understand is generally called a “think tank” and they are Trojan horses for policy agendas. It is also worth noting that Leonard Davis founded Colonial Penn, a large insurance company. 

From Paul:
$100M annually for 200 fellows for Wharton econ research into health care policy economics at the Leonard Davis Institute.
“Established in 1967, LDI is one of the country’s largest health services research centers with more than 200 Senior Fellows studying the organization, delivery, management and financing of health care.” They have their own “Journal of Health Economics”. They recently hired an Ad Age journalist to head up a group of writers who will translate econ mumbo jumbo for decision makers who need guidance and make health policy.
You can read the blog piece which links to Penn’s announcement which should give you a picture of the kind of policy that goes on there. Nice work if you can get it, huh?

Read more at Naked Capitalism.

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Water economics for beginners

From David Zetland (Aguanomics) comes this note…

Marginal Revolution University [free, online] has released 14 lessons (2-7 min, each) on water economics as part of its development economics unit. They give a decent introduction to several issues. I am going to contribute a few lessons.

The series has a point of view about an economic approach to the issues, but offers a beginning for those new to thinking about the issues.

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Mark Thoma presses the issue of increasing income inequality

Mark Thoma  presses the issue of increasing income inequality:

Via an email from Lane Kenworthy, here’s more research contradicting the claim made by Kevin Hassett and Aparna Mathur in the WSJ that consumption inequality has not increased (here’s my response summarizing additional work contradicting their claim, a claim that is really an attempt to blunt the call to use taxation to address the growing inequality problem):

Inequality of Income and Consumption: Measuring the Trends in Inequality from 1985-2010 for the Same Individuals, by Jonathan Fisher, David S. Johnson, and Timothy M. Smeeding: I. Introduction: Income and Consumption The 2012 Economic Report of the President stated: “The confluence of rising inequality and low economic mobility over the past three decades poses a real threat to the United States as a land of opportunity.” This view was also repeated in a speech by Council of Economics Advisors Chairman, Alan Krueger (2012). President Obama suggested that inequality was “…the defining issue of our time…” As suggested by Isabel Sawhill (2012), 2011 was the year of inequality.

Recent research shows that income inequality has increased over the past three decades (Burkhauser, et al. (2012), Smeeding and Thompson (2011), CBO (2011), Atkinson, Piketty and Saez (2011)). And most research suggests that this increase is mainly due to the larger increase in income at the very top of the distribution (see CBO (2011) and Saez (2012)). Researchers, however, dispute the extent of the increase. The extent of the increase depends on the resource measure used (income or consumption), the definition of the resource measure (e.g., market income or after-tax income), and the population of interest.

This paper examines the distribution of income and consumption in the US using data that obtains measures of both income and consumption from the same set of individuals and this paper develops a set of inequality measures that show the increase in inequality during the past 25 years using the 1984-2010 Consumer Expenditure (CE) Survey.
The dispute over whether income or consumption should be preferred as a measure of economic well-being is discussed in the National Academy of Sciences (NAS) report on poverty measurement (Citro and Michael (1995), p. 36). The NAS report argues:

Conceptually, an income definition is more appropriate to the view that what matters is a family’s ability to attain a living standard above the poverty level by means of its own resources…. In contrast to an income definition, an expenditure (or consumption) definition is more appropriate to the view that what matters is someone’s actual standard of living, regardless of how it is attained. In practice the availability of high-quality data is often a prime determinant of whether an incomeor expenditure-based family resource definition is used.

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Dean Baker ponders the lack of focus on Social Security

Dean Baker ponders the lack of focus on Social Security via Alternet:

It is remarkable that social security hasn’t been a more issue in the presidential race. After all, Governor Romney has proposed a plan that would imply cuts of more than 40% for middle-class workers just entering the labor force . Since social security is hugely popular across the political spectrum, it would seem that President Obama could gain an enormous advantage by clearly proclaiming his support for the program.

But President Obama has consistently refused to rise to the defense of social security. In fact, in the first debate, he explicitly took the issue off the table, telling the American people that there is not much difference between his position on social security and Romney’s.

On its face, this is difficult to understand. In addition to being good politics, there are also solid policy grounds for defending social security. The social security system is perhaps the greatest success story of any program in US history. By providing a core retirement income, it has lifted tens of millions of retirees and their families out of poverty. It also provides disability insurance to almost the entire workforce. The amount of fraud in the system is minimal, and the administrative costs are less than one 20th as large as the costs of private-sector insurers.

In addition, the program is more necessary now than ever. The economic mismanagement of the last two decades has left the baby boomers ill-prepared for retirement – few have traditional pensions. The stock market crashes of the last 15 years have left 401(k)s depleted, and the collapse of the housing bubble destroyed much of their housing equity, which has always been the main source of wealth for middle-income families.

It would be great if we had reason to believe that the generations that followed had better retirement prospects, but we don’t. Even in good times, the 401(k) system does more to enrich the financial industry than to provide a secure retirement income. Any reasonable projection indicates that social security will provide the bulk of retirement income for most middle-class retirees long into the future. In this context, the idea of cutting back benefits, even for younger workers, seems misguided…

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Off-topic again: All dogs go to heaven

On Wednesday I posted here about Bella, my friend’s daughter’s three-year-old German shepherd/collie mix who suddenly started experiencing severe pain near the back of her spine last weekend and a day later became paraplegic.  A wonderful lady who’s active in animal shelter work took Bella this morning to see a highly-regarded vet who works closely with one of the shelters this lady is involved with.  The lady planned to keep Bella at her home indefinitely, until a permanent home could be found for her.

But the injury to Bella’s spine caused damage to her kidneys.  I don’t fully understand it; my friend was crying when she was telling me about it.  But the vet said Bella would die within a few days.  So, at the vet’s recommendation, the lady (my friend’s daughter had signed papers this morning relinquishing the doggie) agreed to have Bella put to sleep.

But all dogs go to heaven.  All dog lovers know that.

Thank you to everyone who responded to my earlier post.  It was much appreciated. 

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Bounce and momentum

Lifted from Robert Waldmann’s Stochastic thoughts:

Brendan Nyhan autopsies the mittmentum narrative here.

I comment.

Thank you for this very good post.  I had been puzzled by the “bad narrative about momentum” narrative on progressive blogs (largely because I interact with the rest of humanity largely by reading progressive blogs).  You demonstrate that there was indeed a mittmentum narrative.

I’d like to add some thoughts.  First, aside from the general tendency to seek facts which confirm the story we want to tell, people have huge amounts of trouble with time series which have no momentum.  This has been demonstrated by psychologists.

The experiment is to show people a random walk — a time series in which the changes are uncorrelated so the best forecast of where it will end up is always exactly the current level.  Subjects just can’t resist perceiving mean reversion or  momentum. These are opposite.  Mean reversion is called “a bounce” in the campaign literature.  The idea is that a recent change shall partly fade away and things will go back to the way they were.    So immediately after the first debate, there was much discussion of whether Romney’s gains were a bounce — destined to vanish.  Momentum is the opposite, people see a trend and extrapolate it so they think a shift will not just last but grow stronger over time.  Basically people always see one or the other when they are shown data with neither.

These opposite errors are linked.  The idea that a random series of changes shouldn’t move in the same direction for a while (so changes are perceived as bounce) makes people think something funny is going on when they happen to be in the same direction for a while (we see a new trend).   Notably, since polls contain sampling error which is independent across polls, polling averages contain independent changes and give the sort of series which we just can’t mentally accept.

Tracking polls make things trickier still.  Because they are moving averages, the will have trends even if overall public opinion doesn’t.  Say the Gallup poll will tend to move in the same direction for a week, because it is a weekly moving average.  It is psychologically hard to see something trend for a week and not extrapolate the trend.  This is true even if one knows that the data are a weekly moving average.
I don’t know votamatic (I check Jackman, Talking Points Memo, fivethirtyeight ,and Real Clear Politics uh often).  Jackman and the TPM group add to the problem.  Their smoothed average is LOESS which means they calculate the value for t as follows: estimate a time trend with data with weights which decline for polls further from t then report the fitted value for time t.  this means that they extrapolate trends.  The approach assumes that there is momentum.  Then people extrapolate the trend in the extrapolated trend.    I  have checked and confirmed that dropping a medium old poll with huge Romney – Obama can cause the current estimate of Romney minus Obama to go *up*.  I try and try to find such cases and have found one or two IIRC think the McLaughlin for Allen Virginia poll was one (the web user clicking buttons experiment depends on what other data are used so can’t trivially be reproduced using tools at the sites).

There is also just a lag in reporting.  Total webaholic political junkies consider early October ancient history.  The ink, paper and TV reliant not so much.  This post stresses how a 10 day old pattern was noted 3 days after it was confidently asserted that there was no such pattern.  7 days  has not always a huge amount of time.

Finally there is spin frankly reported as spin.  A whole lot of the momentum stories quoted (often anonymous) Romney campaign staff claiming they had momentum.  It is just a fact that they made those claims.  Importantly the Obama campaign didn’t push back (Ezra Klein claims this and he would know).  Reporters just don’t report that while he said and she said the same thing, the data show something else.   I think many consider reporting the mutually denied facts to be unethical — they feel they can’t contest Romney campaign claims more than the Obama campaign does.  Now I have no idea why anyone granted anonymity to flacks pushing the campaign’s narrative and I don’t like the he said she said approach.  But it is not the same as perceiving momentum and reporting that there is momentum.   They said Romney flacks said Romney had momentum, because this is just what happened.  We have a problem, but it is not in our common psychology but in the manipulability (sp) of reporting based on   simple rules.
Anyway sorry for the overlong comment on your excellent post.

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So this IS how Romney’s miracle Caymans IRA metastasized! And we also know now how he plans to help the 47% take responsibility for their lives: Nu Skin samples!

Okay, all.  Remember all the speculation last summer about how Romney managed to parlay an IRA in a Cayman Islands bank into an account worth between $20 million and $101 million? 

Much of the speculation concerned whether Romney stacked the account with Bain shares and significantly undervalued them as worth less than the maximum yearly deposits.  There was speculation that he also might have done the same with privately-held shares in companies that Bain owned.  I don’t remember whether Staples was specifically mentioned in the speculation back then.  But it sure appears now that it should have been.  And should be, now.

And when the Romney campaign starts whining that raising this issue now is an attempt to change the subject from Obama’s record, Obama and the PAC supporting him should respond by suggesting that we start talking about certain aspects of Romney’s record—such as the aspect of Romney’s record that New York Times columnist Joe Nocera writes about in his column today. In short, Romney suggested that the 47% of Americans who don’t take responsibility for their own lives do so by using … Nu Skin!

Seriously.  He did!  Nu Skin is “about taking control of your life and managing your own destiny,” he said.

Well, anyway, no one can say any longer that Romney has no actual plan for helping the 47% take responsibility for their lives.  Too bad he’ll never be able to convince them to vote for him.  They just don’t know what they’d be missing, if only he were elected: Nu Skin samples!

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Romney, Family Business, Carried Interest, and potential conflicts of interest

by Linda Beale

Romney, Family Business, Carried Interest, and potential conflicts of interest

Just a quick note this morning on an interesting article in the October 29, 2012 edition of The Nation magazine, Lee Fang, Romney Family Business: Investors in Tagg Romney’s firm, Solamere Capital, could hit the jackpot if his father wins, The Nation (Oct. 29, 2012), at 18.

Marc Leder, the wealthy investor who hosted the Romney fundraiser last May in Boca Raton where Romney made his comment disparaging almost half of Americans as personally irresponsible and happy to depend on government, is just one of several high-powered investors linked to the Romney family business empire.  The Nation article describes it this way.

In 2008, … [Romney’s] eldest son Tagg and his chief fundraiser Spencer Zwick formed Solamere Capital, a private equity firm …. What Tagg lacked in experience in the world of high finance, he made up for with a vast network of political connections forged through his father, who seeded the firm with $10 million and was the featured speaker at its first investor conference in January 2010. …
Unlike most private equity firms…, Solamere specializes in something else:  billing itself as a ‘fund of funds’ with ‘unparalleled networks’, it provides investors with ‘unique access’ to an elite set of other private equity firms and hedge funds.

Solamere, a firm predicated on its founders’ relationship with Romney, presents a channel for powerful investors to influence the White House if he wins.

The looming matters range from general matters that affect all private equity firms–such as tax changes or the new rules mandated by the Dodd-Frank financial reform bill–to more specific concerns relating to businesses owned or controlled by Solamere’s partner firms.   Many of these businesses, in fact, depend on government contracts; indeed, some have been accused of fleecing taxpayers…. A Romney administration could directly affect the profitability of these companies–and, by extension, potentially the success of Tagg’s venture….
Take Leder … whose Sun Capital firm bought a stake in the Scooter Store last year.  The company, known for its ubiquitous television ads promising seemingly free motorized wheelchairs for Medicare beneficiaries, has struggled as the Centers for Medicare and Medicaid Services, the federal agency that governs the programs, implements rules to curb rampant billing fraud.  …80 percent of the claims for scooters and power wheelchairs did not meet Medicare requirements, meaning that $492 million a year is being improperly spent.  In 2007, the Scooter Store gave up $13 million in Medicare payments and paid $4 million to settle with the Justice Department over allegations that it had overbiled for its electric wheelchairs. … Disclosures … suggest that pressuring the government is the only way [Leder’s] investment in Scooter Store can turn a profit.  Since Leder’s firm invested in the Scooter Store, the company has spent nearly $900,000 on lobbyists to push back on [the] two latest challenges to its motorized-scooter empire.
Records indicate the firm [Solamere Capital] was incorporated at the same Boston office where Romney’s campaign headquarters had been located, and later shared an office address with Romney’s PAC. Zwick … has been referred to as Romney’s ‘sixth son.’  And by all accounts, he’s one of the most trusted advisers in Romney’s circle. … [I]n February 2008, Solamer Capital registered with the State of Massachusetts. Zwick and Tagg joined with Eric Scheuermann, a former Jupiter Partners executive, as the three managing partners of the firm.  Scheuermann was the only one with prior experience in private equity. … However, success for the firm seemed preordained. … Solamere surpassed its $200 million fundraising goal with help from an elite set of ‘high net worth’ individuals, many of whom are close Romney allies. … The three managing partners will receive $16.8 million in management fees over the first six years, as well as ‘performance-based incentive’ pay. … A tax return filed by Mitt and Ann Romney, made public in September, showed that Solamere has used an array of Cayman Islands entities … [It] likely uses ‘blocker corporations’ to help its tax-exempt investors avoid paying the unrelated business income tax.
In June, the Romney campaign announced that if he’s elected, the candidate would move his assets into a federally qualified blind trust, and would also likely sell off any assets that ‘are not fully compliant with federal disclosure and other rules applicable to the office of the presidency.’ But if Romney wins, there’s almost no chance that the underlying assets of his son’s firm, Solamere, will be revealed.  Solamere could have assets involved in healthcare, energy, telecommunications or any number of other industries, but the public will be left in the dark.
What is known is that Solamere’s private equity partners are eager to influence the federal government. Three of the firms listed in the Solamere prospectus–Sun Capital Partners, TPG Capital and TA Associates–are currently financing a lobbying campaign under a trade group called the Private Equity Growth Capital Councill (PEGCC), which is seeking to influence a number of tax and regulatory decisions.  The PEGCC has spent nearly $5.8 million on federal lobbying over the past three years, and untold millions this year on a public relations campaign in swing states to improve the image of private equity–a strategy seen as designed to benefit Romney’s campaign. One of the primary concerns of the PEGCC … is that the carried interest loophole, which allows wealthy investment managers to be taxed [on their compensation for services] at only the 15 percent capital gains rate, may be closed. The group has also …held meetings with regulators to complain about the Dodd-Frank financial reform bill’s mandates.
Other Solamere investment partners own businesses that face imminent regulatory action [including SCF partners, Rockwater Energy Solutions, and IPS Canada].
Meanwhile, HIG Capital–one of the largest Solamere partners, with nearly $10 billion of equity capital–owns a number of other firms that are closely monitoring the federal government.  One area where private equity firms have made lucrative investments is the new industry of dental management companies that bill Medicaid.  In November 2011, Senators Chuck Grassley of Iowa and Max Baucus of Montana opened an investigation in response to allegations that these corporate-controlled dentists have abused children.
The Medicaid reimbursements for the dental management companies offer a revealing look at the underlying business model being pursued by the Romney-supporting private equity firms:  big government, when harnessed to industry-friendly regulators, can mean big profits. Many of these private equity-owned companies rely on federal and state contracts, from HIG Capital’s Hart Intercivic, a voting machine company, to EnviroFoam Technologies, a biological and chemical decontamination firm that does business with the US military and is owned by Peterson Partners, a private equity firm listed in the Solamere prospectus.
Asked about the rising cost of colleges …, Romney said that students should take a look at for-profit colleges like Full Sail Uniersity …. Weeks later… Romney hailed the ‘advent of for-profit institutions of higher learning’ for providing competition with public and private universities.  He again volunteered Full Sail University as a good example of how students can ‘hold down the cost of their education.’
What Romney neglected to mention is that Full Sail University–in fact the third most expensive college in the United States–is owned by TA Associates.  Indeed, TA Associates has viewed the for-profit college industry–a $40 billion maker where 85 percent of the funds are supplied by taxpayers–as an excellent opportunity for growth. …Like most profit driven colleges, which account for only 10 percent of all students but about half of all loan defaults, TA Associates’ schools do not boast a stellar track record.
‘The fact that Romney praised an overpriced, underperforming college that is owned by his son’s investment partners, and whose owners have contributed a quarter-million dollars to his campaign and Super PAC, shows how he embodies the corrupting influence of money on politics,’ asserts David Halperin …. ‘It shows how his administration could, as a matter of course, allow special interests–the interests of his rich friends–to skew important policy decisions and harm the public interest.’ Id (emphases added).

The article goes on to discuss how closely Solarmere and its investors are intertwined with the Romney campaign.  Tagg is a part of Romney’s inner circle.  Solamere holds an investor conference that happens to coincide with a neighboring fundraising event for the campaign.  American Crossroads, Karl Rove’s Super PAC engine of radical GOP ideas, attends both.  The Super PAC can’t coordinate with campaigns, but the fundraising is hosted by Solamere so that makes it okay, technically.

This excerpt thus amply illustrates the way class warfare really works:  a closely knit group of oligarchs with business ties through their private equity empires and a shared corporatist perspective on society can use insider access to the channels of government power to make government work for them and prevent its working for ordinary folk.

First, money speaks loudly, so legislation tends to get passed that favors the elite or gets blocked when it disfavors their special interests.  Ending the carried interest loophole can’t make it through Congress, even though there is a wealth of commentary condemning it as an inappropriate subsidy for an industry that is often destructive to the economy.  Hampering the EPA’s ability to safeguard wildnerness lands or healthy air and water is easily accomplished.  Insider information, influential networks among oligarchs, and intimate acquaintanceship among executives in government and corporate executives ensures the smooth flow and fit of wishlists and accomplishments.

Second, with their focus steadfastly on their own rentier profits from their vulture businesses, oligarchs refuse to support measures that are important for the commonweal, and urge the passage of measures that have harsh impact on ordinary workers.  Offshoring is praised as a “creative destruction” even though compensating creative innovation seldom offsets the costs of worker loss, community disintegration, and economic decline.  Unions are viewed as hostile opponents (because the more money that goes to workers in respect of their real work acomplished, the less can be skimmed off the top by vulture capitalists), and hence much of big corporate money is targeted to eliminate collective bargaining rights that protect workers.

Note that this is always just one of many blows from private equity’s leveraged buyout methods, since the use of excess leveraging for quick profits to the private equity managers builds up debt that sucks out cashflow and either provides justification for reduced wages to workers from a barely stable industry or provides justification for a bankruptcy process through which the company’s pension obligations to its retired workers can more easily be scrapped (even though it could have met them if it had only treated them as important as its payouts to overpaid managers).

cross posted with ataxingmatter

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