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

US life expectancy flat for third year

US life expectancy flat for third year

Life expectancy in the United States has stalled for three straight years, the government announced Wednesday.

A child born last year can expect to make it to 78 years and 9 1/2 months — the same prediction made for the previous two years.

In most of the years since World War II, life expectancy in the U.S. has inched up —- thanks largely to medical advances, public health campaigns and better nutrition and education. The last time it was stuck for three years was in the mid-1980s.

What does this mean for the future solvency of Social Security? Beats the crap out of me. But it sure casts doubt on all those who preach “demography is destiny” and “we are all living longer so work until you are 70”.

On a more mathy note small changes in input into Social Security models can have amazing effects on output, particularly over 75 year actuarial projections. Tweak some mortality and immigration assumptions and results change dramatically. We don’t even have to go the MJ.ABW. Though More Jobs. At Better Wages would itself have some outsized effects.

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2013 Social Security Report

Well I am back at Angry Bear and just getting my feet wet with WordPress, so this first post won’t be ambitious.


The 2013 Annual Report of the Trustees of Social Security was released today Friday the 31st of May. The short take-aways are ‘not much change’ and ‘no news is good news’: date of Trust Fund depletion remaining at 2033 and the 75 year actuarial gap going up from 2.66 to 2.72 which is precisely the structural amount due to the change in actuarial period. (On the other hand the numbers INSIDE that number would repay examination, an exercise for the diligent student.)

For now I am just putting this up for comment, consider this a Social Security open thread.

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A Brain-Dead "Financial Reporter" at NPR Defines the Problem

Via Doctor Black, who printed the answer but not the question:

PIGNAL: This is actually the second bailout for Dexia. In 2008, it had to be bailed out after exceptionally imprudent investing, including in U.S. subprime mortgages. This time around, it was basically dealing with the legacy of the past, and it was trying to do what it could to get back into safer waters. But with the Eurozone debt crisis in the past year, it basically ran out of time.

SIEGEL: Yeah, that was the past. This is now. And if the 12th most secure bank in Europe just collapsed, does that mean that several more bank collapses are in store? [idiocy emphasized by me]

This is what happens when you try Extend and Pretend while leaving the Management (think Pandit, Moynihan) who screwed up in the first place in charge of the burning building.

Anyone stupid enough to hire Robert Siegel as a “financial reporter” should be defenstrated with all deliberate speed.

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Patrick on OWS and Steve Jobs

You can go read the OWS stuff yourself; I want to highlight this:

Escaping on the R train from Rector Street, we got home to discover that Steve Jobs died. And that my Twitter feed is full of people wanting to wag their finger in my face for caring too much, in the wrong way.

As John Emerson said on Facebook, “I would hate to use a product that I loved so much that I would mourn its creator the way I mourned a family member.” Otoh, some of us have been using Macs since long before we were married (even if there was that period of, you know, trial separation and dalliances with Ubuntu and RedHat). And even John finished that statement with “I have guarded carefully against that possibility by using Microsoft products (damn him to hell).”

The other half of the backlash was summed up by Michael Moore on Twitter:

Devices made in sweatshops. We all use them. We use them at times for the greater good. Don’t think about where they come from.

He later amended that with:

Correction: FEW PEOPLE think about where these devices come from. We ignore this at our own peril. R.I.P., Steve Jobs.

but the point is clear: all the people talking about the miracle of “cheap technology” are ignoring that it’s only cheap because people price their lives and their health too cheaply in the “labor market.” Or, as Erik Loomis noted of a similar technological marvel, ” I’ll tell you one thing for damn sure—the cotton gin made the lives of slaves a hell of a lot worse.”

So I’m guessing those are the types of things Patrick was seeing, though probably more stridently. And his response—again, a few paragraphs at the end of a long, informative post that you should go read the whole thing—is worth quoting here on this “slightly left of center economic commentary” blog, or whatever we are today:

He was complicit in many of the sins I just got home from marching against. He gamed the inequities between labor in the First World and labor in the Third. He was probably a lot of people’s boss-from-hell.

He also made a world in which people like me and Teresa—computer users since 1988, when we got our first Mac SE—are technologists rather than passive victims of someone else’s vision of technology. Selfish though it may be, I have to acknowledge that this means a very great deal to us.

The world is complicated. Late capitalism sucks. Our systems don’t work. Our futures are controlled by people who don’t give a crap for anything we care about.

Steven Jobs cared about something. Without him, our lives would have been different, and probably worse. We’ll miss him. Anyone who wants to take this as the occasion to wag a reproving finger is invited—not entirely cordially—to comprehensively plobz the frap off. You may quote me, in this life or the next.

I’ll let Steve Jobs have his night, and note that the local Fox News station just posted this:

What was once a protest of powerful Wall Street financial firms and banks is growing into a larger movement about the working class, employment, poverty, education, and more.

As they say, a liberal is just a conservative who got maced and batoned by police.

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Why Are You Out There?

When someone attempts to impede democracy actions are good things:

Writer and naturalist Henry David Thoreau was once locked up for refusing to pay a poll tax. He opposed the tax on moral grounds – in a democracy, he argued, a man shouldn’t have to pay to vote….

That night, so the story goes, Thoreau looked up from his jail cell to see Ralph Waldo Emerson…standing outside. Emerson looked at him and asked, “Henry, why are you in there?” Thoreau fired right back: “Ralph, why are you out there?”…

The man outside the bars may be every bit as much a prisoner as the one inside. Or even more so, if his so-called freedom is built on a foundation of denial and lies.

Now, Thoreau was anything but a Christian. That particular idea, though, was downright Biblical. It’s more or less what Jesus is getting at [in John 8:31-47]. Jesus is comparing two kinds of freedom: the outward kind, built on a foundation of happy lies and outright denial, which in the end turns out to be just another kind of slavery; and the inward kind, which comes from a clean conscience before God, and can never be taken away.

Far be it for me to cite The Sequel; I’ll take Bentleyville’s current Presbyterian minister* at his word. And tell anyone who happens to be in the area of One Liberty Plaza this afternoon to say “hello.”

*Full disclosure: one of the previous Ministers is an ex-roommate of mine. That said, the above was found from a Google search, purely a fortuitous coincidence. At least as far as I know.

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Sheer Idiocy, European (and American) Style

It’s rare to see theft described so directly:

Proposals made in July by the Basel Committee on Banking Supervision should be redrafted to allow banks to use so-called contingent capital to meet the obligations, the European Banking Federation said in a letter seen by Bloomberg News. They should also be changed so lenders that can’t meet the requirements don’t immediately face restrictions on their ability to pay dividends and bonuses, the EBF said.

Stringing up a few EBF bankers is seeming more and more like a calm, rational approach to solving their issues. Especially when even investors are calling out their lies:

“European banks are in the deepest hole of all. Over the past five years, the European financial sector has shed 900 billion euros in capitalisation and two thirds of its value,” said Jacques Chahine, chairman of European investment firm J.Chahine Capital.

“Although the sector has raised 450 billion euros in capital over the same period, this has clearly been inadequate to cover increased risk on sovereign debt. We believe banks will have to be recapitalised by an additional 450 billion euros to cover that risk,” he said.

The response from the European Banking Authority is less than encouraging:

“The stress test recently conducted by the EBA showed that EU banks have significantly strengthened their capital positions and are able to withstand adverse macroeconomic scenarios, a view not changed by the additional disclosure of sovereign exposures,” it said….

“The main EU banks have significantly strengthened their liquidity buffers, lengthened the maturity profile of their liabilities and covered most of their funding needs for 2011. However, going forward it will be important that normal access to medium and long-term funding markets is restored,” the EBA said. [emphasis mine]

Well, so long as it’s not an immediate crisis, everything is hunky-dory. Ignore that woman running the IMF.

Lest you think I’m only bashing Europeans—a role usually left to Rebecca, who uses their data, not their words—let’s also look at the glories of U.S. corporations. I’m taking the more delicate quotes here, just so you don’t think I’ve gone all Mish:

Central bank and Commerce Department data reveal that gross domestic debts of nonfinancial corporations now amount to 50% of GDP. That’s a postwar record. In 1945, it was just 20%. Even at the credit-bubble peaks in the late 1980s and 2005-06, it was only around 45%.

The Fed data “underline the poor state of the U.S. private sector’s balance sheets,” reports financial analyst Andrew Smithers, who’s also the author of “Wall Street Revalued: Imperfect Markets and Inept Central Bankers,” and chairman of Smithers & Co. in London.

“While this is generally recognized for households,” he said, “it is often denied with regard to corporations. These denials are without merit and depend on looking at cash assets and ignoring liabilities. Cash assets have risen recently, in response to the fall in inventories, but nonfinancials’ corporate debt, whether measured gross or after netting off bank deposits and other interest-bearing assets, is at peak levels.”

By Smithers’ analysis, net leverage is nearly 50% of corporate net worth, a modern record. [emphasis mine]

This should come as no surprise. The lie coming out of KocherlakotaLand in early 2008 was that since companies drawing down on previously-unneeded-and-therefore-unused lines of credit was evidence that we were not in a recession [warning: PDF the reading of which will damage your brain; superstitious Christians should note the Working Paper Number].

Now, those same borrowings, along with capital market moves, are being used to show that companies have “record cash holdings.”

Borrowing money without having a use for it is good in two circumstances: (1) if you are paying down higher-cost debt [oops, that’s a use] and (2) if the carry is positive (that is, if you can earn more than you are being charged in interest–oops, that’s a use, too).

If families worked like European banks, we would all be taking vacations and spending like there is no tomorrow. If they worked like American corporations, they would be borrowing money and boasting about how much cash they have on hand.

Can we now stuff the sh*t about how “governments have to work like families”? Corporations—and most especially financial services intermediaries—certainly do not.

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The Monetary Policy Debates

This article by David Leonhardt in the New York Times is getting a lot of attention.

Leonhardt argues that there is an active debate in the economics profession between inflation hawks, moderates and doves and that only the position of hawks and moderates are represented on the Fed open market committee (FOMC). He guesses that Perry’s equating dovishness with treason (now for monetary policy too) might be part of the problem.

I personally have a strong objection to Leonhardt’s article. He lumps together people who think that the Fed should not cause higher inflation with people who think that the Fed can’t cause higher inflation.

IF you were to conduct a survey of the country’s top economists, you would find a fair number who did not believe that the Federal Reserve should be taking more aggressive steps to help the economy. Some would worry that injecting more money into the economy might unnerve global investors or set off uncontrollable inflation. Others would wonder whether, with interest rates already so low, the Fed even had much power to lift economic growth.

But you would also find a sizable group of economists who thought the Fed could and should do far more than it was doing. This group, known as doves, tilts liberal, though it includes conservatives as well. If anything, it can probably claim a larger number of big-name economists — J. Bradford DeLong, Paul Krugman (an Op-Ed columnist for The New York Times), Christina D. Romer, Scott Sumner and Mark Thoma, among others — than the camp that believes the Fed has done too much.

Note that the group that think that the Fed doesn’t have much power to lift economic growth are lost somewhere between the two paragraphs. Leonhardt goes on to present the debate between DeLong et al on one side and FOMC hawks “Richard W. Fisher of Dallas, Narayana R. Kocherlakota of Minneapolis and Charles I. Plosser of Philadelphia.” with the moderates such as Bernanke in the mushy middle.

The hawks and those who doubt that the Fed can cause higher inflation absolutely disagree. The hawks say there is a risk of higher inflation. DeLong says higher inflation is possible and would be good. They agree on the first question and then disagree about the effects of inflation and the relative importance of economic catastrophe and whatever costs 4% inflation would have (small to minimal according to top conservative academics like uh Kocherlakota).

It is just not true that no prominent FOMC nominee Nobel Laureate has expressed doubt as to whether the Fed can cause higher inflation. Leonhardt seems to have decided that Peter Diamond just doesn’t exist (or to agree with Sen Shelby that he doesn’t know about money — I might add that top academic N. Kocherlakota’s research on money is all based on Peter Diamond’s search model).

I don’t have the sense that Romer and Krugman firmly disagree with those who think the Fed can’t do much more. They call for more more more, but don’t IIRC express confidence that anything the Fed might do would have a really big effect. Conflating the questions of should the Fed try to cause higher inflation and can the Fed achieve it makes them definitely doves. That’s why I object to the conflation.

Before the jump I note (again) that I think the Fed could do more which would be useful — buy risky assets (via Maiden Lane III if necessary). But that means I absolutely don’t agree with people who call for QEIII and look at the quantity and not the quality or who think that saying more inflation would be nice would have much effect or who call for targeting nominal GDP (why not jut “target” real GDP and cut out the middle man ?).

By the way Leonhardt forgets about Diamond also when making the obligatory claim that both parties share blame “The Obama administration has also been slow to fill some Fed openings. At least one of the 12 seats has been vacant since Mr. Obama took office, and two are now.” as Leonhardt knows perfectly well, the Obama administration can’t fill Fed openings if Republican senators filibuster votes on nominees. Obama is not the reason that there are two vacancies, Shelby is. Hat tip Tom Levenson

On the other hand the article does contain news for anyone who thinks that Scott Sumner is reality based.

Mr. Sumner has become so dispirited by the Fed that, before leaving on a trip for Italy last week, he left a post on his well-read blog, The Money Illusion, under the headline, “Not enough.” The headline, he wrote, “refers to my reaction if the Fed does something while I’m gone.”

Sumner just wrote that he doesn’t bother to wait to learn the facts, because he already knows the answer. I knew that was true of him (in general) but you aren’t supposed to say so.

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NIKKEI vs S&P 500

For years I’ve made it no secret that I thought the US was going to follow Japan into a so called lost decade — of course it’s now more than a decade.

With the US stock market now apparently in a free fall I though this chart I’ve been keeping for years would prove of interest. In particular, note how nicely the two stock market major peaks and troughs seem to coincide. Is it more than just an interesting coincidence?

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THE Reason for the Downgrade

Or, Barack Obama sucks at 11-dimensional chess.

On July 14, 2011, S&P was assuming that 2001 and 2003 tax fraud deferrals would expire at the end of 2012 [Update: link updated, via MG; PDF–see page 4].

It is no longer making that assumption, which is worth another $4T. Brad DeLong annotates/redlines the press release without comment on that part:

Compared with previous projections, our revised base case scenario now assumes that the 2001 and 2003 tax cuts, due to expire by the end of 2012, remain in place. We have changed our assumption on this because the majority of Republicans in Congress continue to resist any measure that would raise revenues, a position we believe Congress reinforced by passing the act.

English translation: even though extending the tax cuts would require an affirmative action of both houses of Congress and consent from President Obama (or veto override by vote of 2/3 of both houses), we don’t believe this will happen or we would have kept our innumerate mouths shut in the first place (or at least after Treasury called us on our McArdlesque calculations).

Our revised upside scenario–which, other things being equal, we view as consistent with the outlook on the ‘AA+’ long-term rating being revised to stable–retains these same macroeconomic assumptions. In addition, it incorporates $950 billion of new revenues on the assumption that the 2001 and 2003 tax cuts for high earners lapse from 2013 onwards, as the Administration is advocating. In this scenario, we project that the net general government debt would rise from an estimated 74% of GDP by the end of 2011 to 79% in 2015 and to 87% by 2021. to 77% in 2015 and to 78% by 2021. [redlining by BdL]

English translation: if we thought Barack Obama and his Administration both were serious and would be successful, we wouldn’t have left the U.S. on credit watch for possible downgrade. But we don’t, nyah, nyah, nyah.

As I noted earlier today, it’s not coincident that the twenty countries still rated AAA (with the possible exception of New Zealand) all either are tax havens, authoritarian “democracies” (Hong Kong and Singapore) or have Mandatory National Health Insurance.

If S&P on 14 July had said, “The U.S. needs to control its health care costs or we will downgrade it,” no one would have said a word of dissent. But the downgrade S&P presented is not based on the root issue; it is based on the belief that temporary blackmail does long-term damage.

It’s punditry, not analysis. Even Barack Obama deserves better.

At least until he fails 11-dimensional chess the way S&P believes he will.

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