Relevant and even prescient commentary on news, politics and the economy.

A Major New Report On Child Welfare In the United States

Since last Friday, our minds have been focused on children.  Those who lost their lives in the Newtown, Conn. tragedy on Friday.  Those at that school who survived.  Those at schools around the country, who now seem much more vulnerable to, of all things, an assault-rifle hit, even though they don’t live in a war zone.  Or even in a high-crime neighborhood.

Newtown is, I now know although I’d never heard of it before Friday, an upscale midsize town that serves largely as a so-called bedroom community for families like shooter Adam Lanza’s.  Lanza’s father Peter is an executive at General Electric in Stamford.  Lanza’s  24-year-old brother Ryan is an accountant at Ernst & Young in Manhattan and now lives in gentrified Hoboken.  One of the six-year-old victims was an especially sweet-natured girl of apparent (based on her last name) British Isles ancestry whose articulate father was teaching her Portuguese in his spare time from a well-paying job.

So a major new research report released today detailing the breathtaking increase in child poverty and surprisingly broad-based decrease in several measurements of child welfare in the United States since 2000 is, or at least until Friday was, not really—or rather, not directly—about the children of idyllic Newton and upper-middle-class bedroom communities like it.  But it is quite directly about huge swaths of other American children.  And its revelations should play a central role in the outcome of what had been, until Friday, the major ongoing news story of the month: the “fiscal cliff” chess game.

The report, called the 2012 National Child and Youth Well-Being Index (CWI), is this year’s edition of an annual report produced by the Foundation for Child Development (FCD), a national, private philanthropic organization, and the Child and Youth Well-Being Index Project at Duke University. 

The introduction explains that the FCD is dedicated to the principle that all families should have the social and material resources to raise their children to be healthy, educated, and productive members of their communities.  The annual report is a comprehensive measure of how children are faring in the United States, based on a composite of 28 key Indicators of well-being, grouped into seven Quality-of-Life/Well-Being Domains. These Domains are: Family Economic Well-Being, Safe/Risky Behavior, Social Relationships, Emotional/Spiritual Well-Being, Community Engagement, Educational Attainment, and Health.

The report explains that the CWI tracks changes in these Domains and Indicators, and in the value of the overall Index, compared to 1975 base year values.  But this year, for the first time, the report focuses on changes over the last decade, specifically the period from 2001 to 2011.  (It also includes some preliminary data from 2011.)

The two bottom-line broad findings derived from several specific ones are striking, I think, not so much independently—neither one surprised me—but instead juxtaposed with each other.  After consistent improvements during the 1900s, family economic well-being has deteriorated significantly and consistently since 2001; the deterioration began at the beginning of the decade, not at the beginning of the 2008 economic collapse, which of course did accelerate it.  Median family income decreased.  Secure employment has decreased.  The percentage of children living in poverty has risen substantially.  Pre-kindergarten enrollment, which rose during the -90s, has stalled. 

Yet that same period saw a fairly dramatic and consistent decline in what the report calls risky behaviors among teenagers and young adults as the decade progressed: “a dramatic reduction in the likelihood of teenagers being victims or perpetrators of violent crime, as well as substantial decreases in teenage childbearing, cigarette smoking, and binge drinking.”  (In discussing the crime rate, the report says it was down dramatically among teenagers even in 2011, but notes that that year’s teenagers were young when the major economic downturn began.) 

In other words, the blame-the-victim canard cannot be employed convincingly this time around.

We’re speeding headlong into a progressive populist, highly pragmatic, era.  The three-decades-long stranglehold of the right, with its deeply unpragmatic, ideology-above-all-else, credo, has been broken, finally, by that ideology’s arch enemy: unequivocal facts that enough people who vote can recognize for themselves. 

Checkmate. 

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Okay, What Exactly Did Chris Cillizza MEAN By “Mental Health Sentencing”?

I rarely watch TV news shows anymore, much less cable political talk shows.  (Okay, I rarely watch TV at all anymore.)  But I happened to watch Chris Matthews’ Hardball tonight on MSNBC.  The topic was, of course, gun control. (Actually, the lack thereof, and whether is any real chance that that might change now.)  And Washington Post political blogger and reporter* Chris Cillizza was answering Matthews’ question about what he thought was the problem with this country.  As in, why do we have so many mass shootings?  Matthews suggested some possibilities.  Is it the absence of meaningful gun laws?  Is it lack of health care to treat mental illness?  (At least that’s how I recall it; I haven’t reviewed a transcript of the show.)

Cillizza responded with something like, “It’s gun laws.  It’s healthcare.  It’s mental health sentencing.” His emphasis, not mine.

It’s mental health sentencing?  Really?  How so, exactly–since actually there is no such thing.  Not formally, any way.  In truth, of course, large percentages of people serving prison sentences in this country, including people serving very long sentences, are mentally ill, some of them severely so.  But, thanks to John Hinckley, mental illness almost never is a defense to a criminal charge in this country. Presumably, Cillizza knows this.

But also presumably, he knows that Adam Lanza, James Holmes, Jared Loughner, Cho Seung-Hui, Eric Harris, Dylan Klebold, and the others–several of whom (including Lanza, Cho, Harris and Klebold) killed themselves at the end of their maniacal spree–had no criminal record and therefore no mental illness sentence.  Whatever that is.

What concerns me about Cillizza’s statement is that the very last thing we should do is allow gun-rights fanatics to try to turn this debate into one about whether prison sentences for mentally ill mass shooters are long enough to serve as a deterrent–which is what I assume that Cillizza meant.  Lanza and most of the others sentenced themselves to death.  And Loughner’s plea agreement calls for a life sentence.  But I doubt that that will deter the next severely mentally ill teenager or young man who has access to an assault rifle and enough ammunition to kill or maim a lot of people during a rampage, and wants to do exactly that.

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*This post originally referred incorrectly to Cillizza as a political columnist.

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Goggle’s Bermuda hideaway/HSBC’s too-big status: time to rein in the corporations!

by Linda Beale

Goggle’s Bermuda hideaway/HSBC’s too-big status: time to rein in the corporations!

If you are a company that depends on IP for a lot of your revenue, you may be able to avoid considerable taxes by funneling profits from subsidiaries in high-tax countries into a Bermuda shell company.  Google avoided about $2 billion in worldwide income taxes in 2011 by shifting about 80% of its total pretax profits– $9.8 billion — into Bermuda.  See Jesse Drucker, Google Royalties Sheltered in No-Tax Bermuda Soar to Nearly $10 Billion, Bloomberg.com (Dec. 10, 2012).

Meanwhile, the US decided not to take action against HSBC for its fraudulent behavior because it was considered so big that it could damage the financial system (again) to interfere with its continuing corporate existence.  See  Glenn Greenwald,HSBC, too big to jail, is the new poster child for US two-tiered justice system, guaradian.co.uk (Dec. 12, 2012) (noting that “one of the world’s largest banks, HSBC, spent years committing serious crimes, involving money laundering for terrorists; ‘facilitating money laundering by Mexican drug cartels’; and ‘moving tainted money for Saudi banks tied to terrorist groups’ ” but US officials decided “not to prosecute HSBC for accepting the tainted money of rogue states and drug lords on Tuesday, insisting that a $1.9bn fine for a litany of offences was preferable to the ‘collateral consequences’ of taking the bank to court”).


Maybe this kind of information will finally incense governments against corporate tax dodging.  What we need are laws that refuse to recognize shell companies set up in tax-haven countries to siphon profits from the countries where they originate.  What we need are fewer possibilities for companies to expand through tax-free mergers and acquisitions that allow them to get so big that they become immune to ruin when they commit major crimes.

cross posted with ataxingmatter

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Gun Control, and the Debate

by Mike Kimel

Whether you favor more gun control or less, via the less famous Roger Ailes, a story in Australian Sky
News
on one of the very few things that can change the entire dynamic of the debate:

Media mogul Rupert Murdoch has called on United States
lawmakers to ban automatic weapons following the Connecticut school
massacre, alluding to Australia’s response to the Port Arthur
massacre.

The News Corp chairman used the social media platform Twitter to
express frustration at the easy availability of automatic and
semi-automatic guns in his adopted country.

‘Terrible news today,’ he tweeted. ‘When will politicians find courage
to ban automatic weapons? As in Oz after similar
tragedy.’

Murdoch’s statement may be starting to have an effect.

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Wealth and Redistribution Revisited: Does Enriching the Rich Actually Make Us All Richer?

Update: There is a revised and corrected version of the model and spreadsheet here, with discussion.

In a recent post I built a model with one rich person and ten poorer people to ask: does redistribution from rich to poor make us all more wealthy? The conclusion was Yes. Jump back there to see a quick rundown of the model’s assumptions.

Michael Sankowski at Monetary Realism put the model through its paces, and provide feedback by email. He pointed out one very interesting thing: total wealth accumulation in the model increases (faster) with redistribution in both directions — from rich to poor and poor to rich.

(Note that redistribution could take infinite forms — traditional welfare, education and health-care spending, tax preferences for rich people’s investment income, corporate subsidies, etc. This is systemic redistribution we’re talking about here. Like this model, the system just does it.)

Here’s what that looks like, with starting wealth of $2 million, divided 50/50 between the rich person and the ten poorer people. (click for larger):

wealth redistribution

(Since income in this model is based on spending from wealth, the income curves look similar to these wealth curves.)

It sure looks like giving more money to rich people does make the pie bigger — just not as fast or as much as giving more money to poorer people.

Since the model is based on the idea that poorer people spend more of their wealth each year, so giving them more money increases money velocity hence GDP and eventually wealth, this seems weird. But here’s the explanation: there’s a zero lower bound on poor people’s spending. It can only decrease so far, and so fast. Rich people’s spending can keep increasing with no constraints.

So as you transfer more wealth from poor to rich, the poorer people’s spending doesn’t decline as fast as the rich person’s spending increases — even though the poorer people spend a far larger proportion of their wealth than the rich (here, 80% vs. 30%). The zero-bound effect overwhelms the velocity effect.

Except. There’s a flaw in the model: as I’ve said, it assumes no behavioral responses — only that production (and the surplus from production) are driven by spending, with that whole process relegated to a black box. More spending yields more production and more surplus, with those received as income proportionally to each person’s spending. And spending is based on wealth.

But at the left side of the curve, where the rich person starts getting all the income, doing all the spending, and holding all the wealth, the poorer people have no incentive to work. (Their time is much better spent storming the castle with torches and pitchforks.)

If the poorer people have no incentive to work, there are no goods for the rich person to buy. Spending, income, and wealth would all go negative. So you would inevitably expect the left end of the income and wealth curves (like the peasants) to bend over and di(v)e eventually.

But for quite a ways along the left side of the graph, we’re not at that point. People have plenty of incentive, actually increasing incentive, until they actually are starving: they need to keep their families from starving, get health care for their kids, keep a house over their heads. So the bulk of the graph does yield lessons.

Here’s the most interesting one, to me: the smallest wealth accumulation in this model occurs at the point that maintains the status-quo wealth distribution. (Where there’s a 1.4% annual wealth transfer from poor to rich.) Everybody stays the same relative to each other, and the pie does get bigger (there’s a 5% surplus every year!). But it ends up being a smaller pie than with any other redistribution scheme.

Another lesson here: trickle-down actually works! Compared to zero redistribution, transferring 1.4-4% of poorer people’s wealth to the rich person results in everyone getting wealthier (again, compared to no redistribution), including the poorer people. Move to the left of that, though, and the poorer people get poorer while the the rich person gets richer.

And everyone, poor and rich alike, gets wealthier faster if you redistribute in the other direction — from rich to poor. Compare:

 

Ending wealth in millions after 20 years if you transfer 1.5% of wealth annually (starting wealth $2 million divided 50/50):
Rich One Poorer Ten Total
Rich to poor: $1.0 $3.1 $4.1
Poor to rich: $1.8 $1.7 $3.5

Remember that this model assumes no inflation, so in the top line the rich person’s real wealth is unchanged.

Note that these redistribution percentages are just illustrative. They’re nothing like policy proposals. The turning points and break points all depend on what parameters you plug into the model. But the shape of the curve, and the concepts that emerge, remain unchanged.

Finally, note this: If we redistribute enough (rich to poor) to actually reduce rich people’s dollar wealth, the pie gets much bigger, much faster.

And if you add the notion of declining marginal utility of spending and consumption, the aggregate utility pie gets even bigger, even faster.

Cross-posted at Asymptosis.

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The laying on of scorn

Dan Crawford notes Paul Krugman’s change of heart on the increasing importance of automated systems, in particular robotics:

In the past discussions at Angry Bear on the impacts automation might have on our lives, and the economics involved, gathered comments such as “You are a neo luddite”. As if widespread use of automated systems was automatically good for us overall because we would have access to ‘more higher wage and higher skilled jobs’, cheaper goods, and robots need a work force to maintain them…of course, there was no offering of numbers of jobs and whether the wage premium for a college education would be maintained. This is the time to pay more attention as ‘insourcing’ gains traction as a buzz word…

Peter Frasure Robots and Liberalism, Sociology, CUNY Graduate Center responds, and offers a post as a lesson in scorn, and he was kind to me, tough with others:

What I mainly find interesting is what all this interest in technology and jobless growth says about the limits of contemporary liberalism. We can all hope that Gavin Mueller’s reverie of Paul Krugman dropping LSD and becoming a Marxist will come to pass, but in the meantime his type seems to have no real answer. Nor do those of a more labor-liberal bent, like Dan Crawford at Angry Bear, who laments being called a neo-luddite and scornfully says: “As if widespread use of automated systems was automatically good for us overall”. As if a world in which we hold back technical change in order to keep everyone locked into deadening jobs is a vision that will rally the masses to liberalism.

So exactly who is the man actually talking to??  What am I missing?

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by Tom aka Rusty Rustbelt
Security 101
This week I visited my grandsons’ elementary school four times, three times through the front door and once through a side door. I immediately had the run of the entire building if I so desired. The only line of defense was the receptionist, who gave me a wave because she knows “Papa Tom.”
The most basic security premise is to limit access and to screen anyone entering. This may not stop a lunatic, but it could buy time for a response. Lock the doors during school hours.
Despite the current tragedy, elementary school is a very safe place, except for the heartbreaking exception when it is not.
PS: many churches are now upgrading security measures – who would have thought it necessary?

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Republicans Do to have a Medical Cost Control Proposal Not Already in Obamacare

The ever hopeful infinitely patient Ezra Klein attempts to find good Republican proposals for health care cost control.  He notes that the Congressional leadership’s proposal to raise the Medicare eligibility age would increase total health care spending and sins grievously against Ballance writing “But an increase in the eligibility age would be a trophy that Boehner could present to his political base — proof that he had bagged his prey. In the absence of good ideas that Republicans agree on, bad ideas that Democrats hate will do. ” But not for the Kleinest of hopes.

Of course Republicans can come up with good proposals — they just have to read the Affordable Care Act and propose strengthening it a bit.  Indeed  

Jim Capretta, who worked on budgets in the George W. Bush administration, has emerged as one of the Republican Party’s most influential voices on health-care policy.

[skip]

Capretta’s goal is to make seniors more cost-conscious at the point of service. He even sees an opportunity to build on some Obamacare reforms, despite being an implacable critic of the law. He thinks the Affordable Care Act’s effort to expand accountable care organizations — provider networks that are paid based on the quality, rather than the quantity, of care they deliver — should be encouraged. Trouble is, he says, Democrats are encouraging the spread of such networks mostly by paying them more. To hold costs down, he would like to give patients a bigger role and greater financial stake in choosing a network.

 In other words, put your government hands on their Medicare penalizing them for not going in a direction subsidized by Obamacare.

But Klein also  talked to Doctro Senator Tom Coburn MD who proposes something not at all in the ACA. 

“I’d change all physicians to time instead of fee-for-service,” he said. “What we’re doing with fee-for-service, and most people don’t realize this, is when you go to the doctor, they have this pressure to see X number of patients a day to meet their numbers.”
If we cut payments to doctors, Coburn says, “they’re going to cut the time they spend per patient. When a patient is in a room and you haven’t used your skills as a physician to really listen, you walk out and cover that absence of time by ordering tests. So if you say here’s all the hours we’ll pay for if you’re a Medicare doctor, and we can actually audit that time, doctors would have to demonstrate proof that they’re spending this time with patients.”

 Holy mother of heffalump traps Coburn is proposing making physicians hourly employees of the US government, maybe with a time clock in their offices.  That’s not Obamacare thats the British National Health Service.  Coburn’s proposal was much too far left for Obama, Clinton or Kennedy. 

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