Things are more or less back to normal - the government is "functioning" and money is being printed like mad to the benefit of the 150,000 who pay for and own our politicians. The market continues to go up, seemingly forever. Or at least until someone has the nerve to pull the plug on QE. Last time they even talked about slowly scaling back QE interest rates shot up by better than a percent in a few weeks. Imagine if they actually do something. Some think the Fed has now painted themselves into a corner and QE will never end.
There has been talk of raising the Medicare eligibility age from 65 to 67 to save money. The Congressional Budget Organization just released a study showing it basically doesn't. Raising the age would save less than $2 billion per year. It's well known that 90% of our health care costs go to 5% of our population. People in their early 60s who are in this 5% are likely on disability and already getting medicare; raising the eligibility age has nothing to do with them or the buckets of money they consume.
In October consumer confidence fell rather dramatically, as did manufacturing output. Of course the government believes this is because of the government shutdown. Outside of some stories about tickets and restaurant closures, I don't know anyone who was affected by the shutdown. The small businessmen I know would all be perfectly happy if the government packed up and moved to Afghanistan.
Puerto Rico is close to bankruptcy - close enough that the SEC is quietly asking funds about their exposure. Only 40% of Puerto Ricans work, and many of those work for the government. Their retirement fund for government workers is only 7% funded. There is actually no legal mechanism for Puerto Rico to declare bankruptcy, so what will likely happen is a default on payments, then a renegotiation with several banks and hedge funds.
Several economists including Professor Iourii Manovskii of UPenn and Fatih Karahan from the New York Fed studied unemployment benefits. They found that when states extended unemployment benefits from 26 to 99 weeks the long run average unemployment rate rises from 5% to 10.5%. They said, "Our estimates imply that most of the persistent increase in unemployment during the Great Recession can be accounted for by the unprecedented extensions of unemployment benefit eligibility."
Our unemployment rate is now a critical number - after all, the Fed says they'll print money until it hits an acceptable level. So what is it? Well, that's hard to say - it's been redefined several times in the last couple of decades, and lately we're moving millions of people into long term disability. More generous unemployment benefits tend to elevate participation rates since workers must be looking for work to qualify. With disability insurance (DI), however, the opposite applies: to qualify applicants must generally demonstrate that they cannot work. In theory, disability and unemployment should not be correlated--and from 1966 to 1985 they were not, according to a new study prepared for the Brookings Papers on Economic Activity by Olivier Coibion and two others. But in 1984 DI eligibility criteria were eased so that applicants could qualify based on a combination of conditions rather than just one. Since then, highly subjective conditions such as back pain and mental illnesses have grown to account for most DI beneficiaries, and claims have become more correlated with unemployment. That strongly suggests that many workers find a way to qualify for DI when other benefits have been exhausted. Between 2007 and 2012 the number of applicants for DI shot up from 11.2 per 1,000 working-age people to 14. Unpublished research by Mary Daly of the San Francisco Fed and Richard Burkhauser of Cornell estimates that this rise in applications equates to 2.6m people. Depending on how many of those applicants are eventually awarded benefits, this could explain between 31% and 59% of the decline in employment participation among 16-to-64-year-olds. The proportion of working-age adults on DI has risen from 1.3% in 1970 to 4.6% in 2013. The DI trust fund is scheduled to run out of money in 2016. I expect it will just be folded into Social Security completely, eliminating the DI fund problem at the cost of making the SSI fund problem worse.
Press 1 for English - will it ever go away? Not bloody likely, see the rather chilling map below. The counties colored shades of purple have 20% to 50% non-english speakers. The more calloused of us can note the high correlation with Democrat strongholds.
Income equality has grown in the US in the last several decades. Richard Breen of Yale studied this. Income inequality is sometimes held to be a result of assortive mating - high IQ people meet at college and on the job, marry, and produce children with high education, IQ, earning power. Turns out this isn't the problem. Dr.Breen found that assortative mating was indeed increasing, but has "not [contributed] in any way to increased earnings differences between households in the United States. An increase in the share of households without a working man and the growing share of Hispanic and Other households have both tended to increase inequality, and this seems to have occurred because they led to a growth in the share of low earnings households. Conversely, the growth in educational assortative partnership had the opposite effect, tending to generate a reduction in inequality for exactly the opposite reason: it led to higher earning households increasing their share of the population." So, the democrats cause this problem with their welfare state that promotes single mothers, then complain about their results and claim the solution is higher taxes on those who marry and more benefits for unmarried mothers. The real solution, it seems clear, is to promote marriage and have disincentives for single motherhood. Fathers. What a concept.
September is a big month for ice. This is the month when ice in the Arctic reaches its minimum; it's also the month when ice in the Antarctic reaches its maximum. For years we've read stories about how the Arctic ice is melting, shrinking, so soon the Arctic will be ice free in summer. How's the Antarctic doing? Actually, the ice there is on a long term growing trend - what's actually happening isn't global warming eliminating ice on our planet, what's really happening is the ice seems to be moving south. Also glaciers in New Zealand are growing. Very embarrassing for those who say not only is the Earth warming, but it's our fault.
Like Beef Jerky? There are jerky treats made for dogs. They're making dogs very sick - the FDA has had over 3000 complaints involving 3600 dogs and 580 deaths. The issue is not yet completely understood, but it's thought to involve ingredients imported from China. I'm beginning to suspect that in addition to their one child policy, the Chinese have also decided to poison a substantial fraction of their population. We're collateral damage.
Feminism has given us a world where over 60% of our college undergraduates are women, a bit over 50% of our middle managers are women, and young men are now dropping out, living with their mothers and playing X-Box all day. Is this what women really want? There are lots of ways to ask this question. If you ask MBA candidates, you find the women are just as ambitious as the men; if you poll college students 75% of the women say they like and want to work, only 3% say they don't want to work. But college undergraduates are a small fraction of all women, and they're the women who self-selected to invest in future careers; MBA candidates even more so. What about the Jane Average? There are a lot of men who hammer nails or make endless sales calls so that a few can be doctors, lawyers, corporate big shots; similarly there are a lot of women waitressing, working in day cares or assembling products so that a few can have stimulating and rewarding careers. In a recent survey, 84% of working women told Forbes that staying home to raise children is a financial luxury to which they aspire, and more than one in three resent their partner for not earning enough to make that dream a reality. On the other hand, 44% of stay at home mothers say their partners make them feel as if they are not pulling their financial weight, and 20% feel they'd be happier if they worked outside the home. Of course the widely believed caricature is that women are never satisfied and the grass is always greener elsewhere; it seems the statistics bear this out in women's work expectations.
How healthy are you? Here's a simple 10 second test that's remarkable effective in predicting life expectancy. If you score 8 or better you're in great shape. People who score fewer than eight points on the test are twice as likely to die within the next six years compared with those who score higher; those who score three or fewer points were more than five times as likely to die. I got 8: one knee each for down and up. You'll likely be hearing from me weekly for many more years.