Empire of Debt

Earlier this week, I was reading a very interesting book called 'Empire of Debt', where the authors fret over rising debt and arrogance in the US, drawing parallels to the decaying of the Roman empire. While I'm not sure I completely buy all their arguments or even their tone, it does make for a fascinating read and good perspective. But a quote from David Walker, the Comptroller General of the US, got my attention, so I tracked down a presentation he gave for some similar numbers. The images below are slides in a talk he gave to the National Conference of State Legislatures on April 8, 2006.





I have heard about the Social Security and Medicare crises, but this really helps to bring home the fact that in fact our debt burden is largely one of entitlement spending. (OK, admittedly any model that goes out to 2080 isn't the most reliable, but still anything remotely close to a quarter of GDP's got to make you sit up and take notice)

I was at a talk by Dr Peter Rodrigeuz of the Darden School of Business at the University of Viriginia earlier this week, where he explained why the changes in demographics in the US and Europe would require them to renegotiate social contracts. It appears that the Hon'ble David Walker's suggesting we may have to do the same.

Quote of the Day

I've found myself reading more history recently, especially the history of the American Revolution. One of the great writers of that era, Thomas Paine had this to say about the turmoils of that day (and maybe this one too?)

These are the times that try men's souls. The summer soldier and the sunshine patriot will, in this crisis, shrink from the service of their country; but he that stands it now, deserves the love and thanks of man and woman. Tyranny, like hell, is not easily conquered; yet we have this consolation with us, that the harder the conflict, the more glorious the triumph.

The Next Sex Frontier?

CAUTION: This post contains some material which some readers may find offensive ... although I guess you're used to some form of offensivespeak if you've ever read my blog, this time it isn't political!

MSNBC recently covered a story about research going into the development of robotic sexual partners which could cater to every fantasy. It even has a name, "teledildonics" (get it?). Hmm, ok so maybe I'm a bit of a prude, but WHAT!! Teledildonics - gimme a break!

Maybe this is why we are having trouble holding relationships together! Sex is the ultimate expression of emotional intimacy, but we have divorced all emotion and converted it into a merely physical activity. And we wonder where the love's gone. I mean, how f**ked up you gotta to be that you want to get it on with a robot, when there are some wonderful people out there with whom you can enjoy the excitation of not just the body but so much more.

That really is a damning indictment of our societal mindset - we just can't appreciate quality any more. It's like eating dinner at McDonald's because you don't have the time and energy and love to put together a sumptious meal! I don't know if I read it somewhere or I just made it up, but a saying comes to mind:

Life is always about the little things

Whether its a soft loving carress of a partner, or the melodious chirping of the birds, or that faint whiff of spices in your dinner, it's the little things that make life worthwhile. Without them, living, and yes even "pleasure", is a chore!

The Palestinian Implosion?

I was in a passionate debate with a Muslim friend today about Israel-Palestinian politics. This friend argued, like many other Muslims, that the Palestinians are fighting a just war for their lands, and were martyrs. While there may have been historic injustices to the Palestinians, I find it hard to accept a struggle based on violence, especially one directed at innocent men, women and even children.

I cherish the Indian freedom movement's peaceful roots, which later served as role models for great movements such as Martin Luther King's civil rights protests, the battle against apartheid and the like. Peaceful protest has incredibly great power not just of galvanising the outside world to support your cause, but also controlling the spread of violence internally. Palestinians are already starting to see the cracks in their society, such as armed militants storming the office of the Prime Minister. Ethnic conflicts propped by violence have a tendency for those violent tendencies to backfire on the individual societies, and it's only a matter of time before Palestine implodes. Western aid drying up and a lack of true aid in excess of lip service from the Arab countries could prove the catalyst.

Hamas would do well then to take some time to read the history of global conflicts, not for the sake of the Jewish people who they target, but for the sake of their own people.

The Rich Pay Too Much!

USAToday reported that most Americans think the tax system is unfair, according to the latest Ipsos poll. Most middle-class Americans think they, as well as lower income earners, pay way too much in income, while rich Americans pay too little. This goes well with political hype from the left about tax cuts for the top 5% while the poor are being left to roost, bread and butter for those in the Left. As a low wage-earner, I certainly am tempted to believe this is true. After all, even the books that promise you the secret of wealth usually tell you the rich don't pay as much in taxes, using loopholes and what have you.

Unfortunately, it's a giant lie! The reality is that the richest Americans already pay a disproportionate share of their incomes to support our tax system. But don't take my word for it - check out this table from the Congressional Budget Office. Now, there are some corrections to be applied to their stats (they don't, for example, count estate taxes and the like) but for the most part, it tells an interesting story. The lowest quintile of wage-earners (that's 25% percentile, or the people who make less than 75% of all wage-earners) pay under 5% of their income to Uncle Sam, as of 2002. The top quintile? Almost 19% The top 5%? Almost 30% The top 1%? Almost a third!

A third? WOW!! That's incredible. I can't think of how you can be accused of being derilict in your civil duty when you fork over a third of your income to Uncle Sam. Remember, this is after deductions for charitable work and the like. The reality is that it's always tempting to skew rules to favor the majority. Most Americans would like to see someone but them pay for the roads they drive on, the clean water they drink, the clean air they breathe, the police force that protects them, and all of the other things that I would argue disproportionately favors the middle and lower classes (after all, rich people don't, for example, need cops, they hire their own security service!)

So suck it up and stop complaining about how you're being screwed by the rich white folk!

Oh, To Be Laid Off By GM

You hear all these stories of GM and Ford laying off workers and images of struggling families come to mind. Well, that may be an illusion, according to this article by George Will. Here's the part that just stunned me:

Under contracts negotiated, beginning in 1984, with the United Auto Workers (UAW), there are about 14,700 laid-off autoworkers in the "Jobs Bank." About 7,500 of them are from GM. They get paid most of their wages and benefits -- between $100,000 and $130,000 a year, for an annual cost to GM of $750 million to $900 million.

jWow, if that's correct, that's incredible - a lot more than I'll probably ever make in my life, even with a PhD! And for doing nothing, zilch, nada!

I loved the last line of this article:

Detroit today is having what Washington will eventually have -- a wrenching rendezvous with promises that seemed compassionate, or at least convenient, when originally made but that cannot be kept without ruinous consequences.

Incidentally, if you are looking for an investment tip, Ford bonds may not be a bad buy, considering the juicy yields and this fact:

Jay Palmer of Barron's says Ford cannot win concessions from workers by credibly threatening bankruptcy because "CEO Bill Ford and other descendants of founder Henry Ford own roughly 40% of the company's voting equity. A bankruptcy would in one stroke eliminate a huge chunk of their fortune and effectively sever the family's ties with the company."

Fire the Accountant!

Vice President Dick Cheney, arguably one of the most powerful men in the world, cannot seem to afford a decent accountant! What else would explain that he overpaid his income taxes by about $1.93 million this year. Even at a modest 3% rate of interest, that's a LOT of money that Uncle Sam got for free. I don't get it, me with my measly stipend try to get my tax burden right to avoid giving a interest-free loan, you think Cheney with his bevy of accountants could do a little better than that?

The Smallest Quiz

Someone forwarded me an e-mail link for the smallest quiz that helps put you on the map in terms of political and economic views with just 10 questions. Interesting, although I question its validity despite rave reviews. Anyway, just FYI, I'm a centrist - scored 50% on Personal Issues (dead center) and 80% on economic issues (conservative).

Cheers,
Karthik

Ouch ... We're Even More in Debt!

The US budget deficit edged up in March, thanks in large part due to a 13.7% increase in spending compared to last March. Yes, the actual deficit increased by a lot less due to increased tax receipts, but that doesn't take away from the fact that we've got runaway spending. Talk about the collaboration of villians - a White House and its clones that just don't seem to care about deficits (in fact, Cheney loves to talk about how "Reagan proved deficits don't matter") and an opposition party that to whom the solution to deficits is not spending cuts but tax raises.

First the idea that Reagan somehow proved deficits don't matter. I'd love to see evidence that this was the case. The reality is that we have had a serious deficit crisis building for the last several decades, one that was temporarily ameliorated by the booming '90s (see the figure, taken from this page at K-State)



The red line's the Federal government's projects for the deficit. Keep in mind they are required to cut the budget in half within the next 5 years, so I'd take their projections with more than a grain of salt. The question is will tax receipts be able to reduce deficits? Given the multitude of asset bubbles we have at present, it appears unlikely that we will see even constant, let alone booming, receipts without a sharp increase in tax rates. We might, but it hardly is a given. Prudence then requires we focus on the spending side.

But of course, all this leads back to politicians. How many pols win elections talking about deficits as opposed to their favorite pet projects, be it war, protection of entitlement spending or what have you? And so we can continue to see growing deficits and more macroeconomic concern.

The Muzzles Go to ...

The Thomas Jefferson Center for the Protection of Free Speech announced the recipients of the 2006 Jefferson Muzzles for attempting to suppress free speech. Besides the usual suspects in President Bush, Dept of Justice, FCC, Dept of Homeland Security, there were a few not-so-familiar ones. Here are a couple I found interesting:

Rep. Joe Barton, for attempting to bully climate change scientists, using not a citation from a peer-reviewed journal but the Wall Street Journal! I'm all ears for any respectable scientist who wants to present data arguing against global warming, but when we decide to pressure scientists for policy reasons, that crosses the line.

William Paterson University. This is a sad reality of how hypersensitive and freaking PC people have gotten. A professor sent an e-mail about some lesbian films that were to be screened, and inviting comments from the university readership. A student who was offended responded by calling the acts "a perversion" and offensive to his religious beliefs. The university went on to file sexual harrassment charges against the student, with the professor claiming it caused her to "feel threatened in her workplace" GIVE ME A FREAKING BREAK!

The reality is free speech is threatened, but not only by those in the federal government. I have noticed in my very own college newspaper a definitive tendency to publish liberal garbage rather than conservative speak, a scenario where a leftist may criticize the Christian faith, but a Christian cannot enunciate his views on abortion or homosexuality, to print extensive essays on the need for a "living wage", but not even a letter (which I have tried to submit on multiple occasions) on why the call for a living wage is misplaced.

Free File Isn't That Free

So the IRS has a program called Free File whereby taxpayers who make less than $50,000 can e-file their taxes for free using a third-party vendor. Except maybe free isn't always free. For a second year in a row, I grew frustrated with several wasted hours on H&R Block before I chucked the computer for the good ol' paper and pen (ok, not quite - I did fill my tax forms online with Acrobat, but then printed them out and will postal mail them). It appears that at least H&R Block wants to be confusing, forcing you constantly to consider abandoning the Free File for time with a consultant. Amazingly, it's a lot easier to figure things out by reading the tax booklets (never thought I'd live to say this!)

The IRS' refusal to provide an e-file platform is senseless. MSNBC reported Bert DuMars, IRS director of electronic tax administration, giving his interpretation of Congress statutues was "that IRS should stay out of the tax software preparation business." Sure, no one wants the IRS to hire software programmers to manage this work. But the IRS can, for a very small amount of money, hire a third-party vendor to manage this free platform. My state, Virginia has done this, and I must say, even given that state taxes are a lot simpler than federal tax returns, it was a pleasure to finish filing your taxes and pay your shortfall in all of 5 minutes!

Appears to me like some firms are seeing healthy returns on their lobbying investments, while the average taxpayer gets screwed!

Immigration Rallies

The US has seen the largest rallies in its history since the Vietnam war, spearheaded by pro-immigrant groups, churches, unions and small businesses. Several small business leaders pointed out on news shows that they would go out of business without the labor these immigrants bring. One of them pointed out that for 8 of the 16 years of his firm, they used exclusively US citizens for labor, but reliable help was hard to find. Migrant workers work hard and prevent wage inflation, and reduce costs for all of us.

Much has been made by so-called conservatives about the fact that immigrants cost the country more than they benefit the economy. (I used the phrase "so-called" because a true conservative, in my opinion, is one who understands basic laws of supply and demand) Well, CBS News tonight had a few numbers and while they didn't intend to put them side-by-side, I made the connection! Illegal immigrants pay $10 billion in taxes currently, and if all were under the tax net, an additional $15 billion would be forthcoming. Later in the story, a number on how much they cost the exchequer - $2.2 billion in health spending. That means even the current tax revenues from illegal immigrants probably covers their healthcare costs. A guest worker program could end up being a tax bonanza for Uncle Sam, especially since non-citizens don't get the benefits from programs such as Social Security, even though they pay these taxes.

And while a small section of xenophobic Republicans have proved a stumbling block, the real shocker for immigrant groups must have been that in the end, we don't have a practical bill because of the Democrats. Here's the left-leaning Washington Post:

Democrats - whether their motive was partisan advantage or legitimate fear of a bad bill emerging from conference with the House - are the ones who refused, in the end, to proceed with debate on amendments, which is, after all, how legislation gets made. The unfortunate result is that the momentum toward balanced reform may be lost. ‘The Democratic leadership played politics with the prospect of 10 million immigrants getting on a path to citizenship,’ said Frank Sharry, executive director of the National Immigration Forum, a pro-immigration group. ‘It seems that Democratic leaders wanted an issue, not a bill.’”

Black Men Dropping Out

As a scientist, I tend to approach even mainstream articles and politics with a critical view, and found a lot of bone to pick with this article by Michael Ross. He correctly worries about the increasing drop-out of black men from the labor force, but then goes on to list the usual suspects for reasons why - discrimination, high incidence of prison stay, etc. All of which might well be true - I'm no expert on the social problems of the black community - but doesn't explain why black women are improving their lot. Being in a university, I'm struck by how so few American black men (i.e. non-immigrants) are present in research settings compared to their female counterparts. I remember Newsweek also did a story where there's some social turmoil associated with a widening gap between the educational expectations of male and female.

There may be a good socialogical explanation for this, one I'd like to hear. Instead, we get "experts" in the media who'd rather rehash the same old cliches!

El-Erian Interview

I was reading an interview in Smart Money magazine with Mohammed El-Erian, formerly with PIMCO and Harvard's new endowment money manager, and I found some interesting insight about why China has been such an aggressive buyer of low-yielding Treasurys that I hadn't heard before. Most "experts" argue it's because US Treasuries are so safe, and what have you, but El-Erian had this to say:

[The Chinese] are not doing it out of charity; they're doing it out of self-interest. they know three things: One is that their export machine creates jobs, and they have a tremendous amount of people coming off the farms and coming out of state-owned enterprises. So there's a social need to create jobs, and exports are a good way of doing that. The second is that they are great students of history. International trade history tells you something very simple: once you capture market share, it's very difficult to lose. So there's the long term benefit to building their export business. The third issue is that once you've become an export machine, every single multinational will desperately want to set up a factory in your country. Suddenly, instead of paying for technology or paying for capital, it's all moving to you very cheaply. So China's view is, "Yeah, buying a 5-year Treasury at 4/3% may not make much sense, but look at what I'm getting in return,. I'm getting things that will contribute to my long-term development"

Tainted Journos?

So Katie Couric may be moving over to CBS, taking over from Bob Schieffer. I think she'll pull in new viewers for a while, but as a huge fan of Bob Schieffer, one who switched to the CBS Evening News after he took over from Dan Rather, I gotta say I'm disappointed. But the discomfort with Katie Couric taking over had me investigating if I had a bias against women journalists as hosts.

Not true, I concluded. I really like PBS' two female journalists - Gwen Ifill and Margaret Warner. I think either of them could host an news program and attract me (actually both do when Jim Lehrer isn't in town). Gwen hosts Washington Week, which is one of my must-not-miss political shows (the other two are McLaughlin Group on PBS and Chris Mathews Show on NBC). So why the discomfort with Katie Couric or Elizabeth Vargas or Connie Chung?

Well, here's my conclusion. Serious news viewers (and we're a small breed) don't want a journalist tainted by a non-news background. We would shudder to think of a sportscaster taking over the evening news, and we certainly don't like someone who spent the last 10 years of their life talking about minutae like fashion or cooking to migrate to the serious business of news. The network evening news are already suffering from an overdose on non-news and the lack of analysis, and I guess I have a deep-seated fear that a journo tainted with non-news will bring more of it with him or her.

So I may still continue to watch CBS News, but in the meanwhile, how about a network asking Gwen or Margaret to migrate over? Aw heck, it'll never happen. Neither of them would degrade themselves into talking the crap that network news would want on there anyway!

Bring 'em Back to the Ground

You ever noticed how the media tends to create angelic companies. We've been inundated with stories about how Google's motto is "first do no harm" or how great Apple is. But when you take the hype away, you see these companies for what they fundamentally are - companies which are in the business of making money. Now, I'm a free-market capitalist and don't have a problem with that, but I am sick and tired of the propoganda.

Apple refused to share source code that would allow other MP3 players to access the iTunes website, even though they are legally different segments of the business. When Microsoft did that, there was an outrage, but for Apple, there was nary a whisper. Apple tends to keep pushing new versions of the OS and software, and offers poor support on their old versions ... nothing?

As for Google, well, they certainly violated their stated motto by doing serious harm to their stockholder with their plans to offer a secondary stock offering. For more analysis on this issue, read this article on the Motley Fool website.

My intent is not to denigrate these companies or to prop up Microsoft. I have been gradually steering away from Word and even Powerpoint for my work applications (moving to Latex and Acrobat instead). But open-source isn't the answer for everyone - it's hard to understand, there's no support and basically isn't worth your while if you aren't a geek willing to spend your precious free time on it. The point is there are several good vendors offering different products that may be good or crappy depending on your application. All of them are in to make a profit, as they should, and none of them have some greater social goal, except where it lines up with their business interests.

Bring Back the Uniform

A high school student has sued to force school officials to allow her to wear clothes with the Confederate flag on it. The Confederate flag is one of those intriguing symbols that at the same time represents heritage and the sacrifice of Southern soldiers, but also prejudice and slavery, equated by some along with the Nazi symbol. But this post is not about the Confederate symbol, but about school uniforms. That's right, uniforms!

I went to a school with uniforms, and I can tell you I'm appreciative. Not just because of contentious debate over Confederate flags or the like. Students in uniforms mean kids expend less energy at school being distracted by others' clothing. The lines between the preppy and the nerdy begins to dim. It means poor families no longer have to deal with their teen needing to wear fashionable clothing to school. It allows for better homogenization among different groups, but more importantly, as a consequence, it allows students to focus on the subjects in the classroom, rather than external factors. Oh, and I'd have strict rules on hair and grooming ... sorry, I don't think a school has to honor a kid's freedom of expression by wearing a purple mohawk!

Of course, what exactly we focus on in school is another issue. George Will wrote a brilliant piece where he pointed out that we seem to be spending more energy and attention on "helping kids discover themselves" rather than teaching them core subjects, like science and mathematics. This might have been ok in the past, but in an increasing age of global competiveness, this won't do!