A History of Gridlock

A recent episode of Backstory reviews a history of political gridlock in the US and offers some fascinating insights.  Here's a brief summary.

My favorite part was Backstory's "game theory" analysis of filibusters.  They point out that until about 40 years ago, filibusters were actually quite rare and were mostly used by the South to block desegregation.  In the 1960s, the Senators introduced an arcane rule on cloture.  Under this rule, any Senator could hold up proceedings by merely threatening to filibuster and the Senate needed 60 votes to break the lock and proceed.  Now, when introduced, they expected this to reduce filibusters and speed up things as actual filibusters were taking up a lot of time.  However, while the actual time spent filibustering dropped as predicted, the cost of a filibuster suddenly dropped for Senators and suddenly there was no downside to threatening filibusters, and each time you did, 60 votes were needed to proceed.  The result has been a creeping increase in the number of threats of filibusters until today, when really you need 60 votes to pass anything.  In a thought experiment, they explain lowering the votes required to break cloture is unlikely to help as the opposition (Dems and GOP as the case may be) can just invoke cloture more often, causing the system to grind to a halt.

Another aspect that Backstory touches on is the role of media.  They point out that with the advent of broadcast media, politicians are less able to change positions, which has actually decreased their ability to compromise.  Also, they point out, that when there were only 3 national networks, the networks needed massive economies of scale to be profitable, so they tended to naturally gravitate to the center.  However, as costs have reduced and with the advent of internet and the cable networks, there is much more incentive now for very successful and profitable networks that cater to niches, and so the media thrives on partisanship.

Finally, Backstory reviews the history of compromise during Madison and the Missouri compromise and the fascinating history of the nexus between economics and slavery.  The machinations are probably less relevant today, but still are extremely engaging and well worth the time.

How to park

There is an art to writing manuals and infographics.  This posting on how to park is one of the best instructions on parking I have seen.  It was apparently created by UK car dealer T W White & Sons.  Excellent!

Can isolated genes be patented?

Did you know that parts of you may in fact be owned by companies?  Well, Myriad Genetics has patented two human genes BRCA1 and BRCA2.  Women who have mutations in those two genes have a significantly higher chance of developing breast or ovarian cancer and may have a higher risk of developing other types of cancers. 

Here is what underlies the problem.  Myriad has, even in the opinion of their opponents, undoubtedly unlocked secrets of the BRCA genes and should get the "credit" for isolating the BRCA genes.  However, does that mean that should get exclusive rights to those genes, i.e. be able to preclude others from being able to research the genes without paying them a royalty.

There is a long standing principle in patent law that you cannot patent products of nature.  The question here is whether an isolated human gene is a product of nature or an invention.

Here's a link to the arguments, which are fascinating.

This is a great video explaining the issues:

Did Bush make us safer?

Charles Krauthammer has an opinion piece which argues that President George W Bush's policies have made us safer.  This being a claim that is somewhat empirical in nature, I decided to check out whether this is accurate.

First, let's consider gun deaths.  What we find is that the aggregate number of gun deaths was not materially lower post President Bush:

Next we find that the rate of gun deaths per 100,000 people also did not drop post Bush:

Of course, Krauthammer didn't mean overall deaths.  He meant deaths due to terrorist attacks.  Well, let's consider that.  Here's Wikipedia's list of terrorist attacks between 1990 and 2013.  Wikipedia lists 43 terrorist attacks in the US since 1990.  Of these, 15 were between 1993 and 2000, 16 were between 2001 and 2008, and 12 were between 2009 and April 2013.  So, the overall rate of terrorist attacks has not actually dropped.

More pertinently, Krauthammer meant terrorist attacks by Islamic terrorists.  Well, sorting through that aforesaid list, according to Wikipedia, here are the terrorist attacks by Muslims since 1990::

• 1993: CIA shooting
• 1993: World Trade Center bombing
• 1994: Brooklyn Brindge shooting
• 1997: Empire State Building shooting
• 2000: New York Bronx Molotov coctail attack
• 2001: World Trade Center / Pentagon attacks
• 2002: LA airport shooting
• 2006: UNC Chapel Hill attack
• 2006: Seattle Jewish Federation attack
• 2009: Arkansas recruiting office attack
• 2009: Fort Hood attack
• 2013: Boston Marathon attack 

OK, so we had five attacks in 8 years pre 9/11 and 5 attacks in the 8 years post 9/11.  Let's see.  Aha!  That means the rate was the same.

How about the number of deaths?  Well, if you exclude 9/11 itself then there were 10 people killed in the terrorist attacks in the eight years pre-9/11 and there were 17 deaths in the eight years post 9/11 (which does not include the Boston bombing).  Hmmm ... still not safer!

It is undoubtedly true that threats from Islamic terrorists may have changed and it is entirely possible (and indeed I would speculate probable) that the US security is significantly better able to intercept and stop these threats now.  However, that merely means that the defense and security mechanism is more tuned to the threats.  To argue that we are actually safer would require that the probability of attacks or the probability of death from attacks to have been materially lowered.  There does not seem to be any evidence that such a decrease in risk has occurred.

Are winning the War on Drugs?

In a damning report the GAO has concluded that: "our analysis shows lack of progress toward achieving four of the Strategy’s five goals for which primary data are available."

I could have told them this.  Here is a chart which I have not been able to verify, but which if true summarizes the whole war on drugs:



CNN has some fascinating facts on how much the war costs us.  Pretty sure we need to rethink this.

The Bush Presidency

With the opening of the Presidential Library for President George W Bush, there has been a lot of examination as to how good a President he was.  This is a cogent but unflattering summary of Bush's record by Jonathan Chait. This is an article by Dylan Matthews that examines the Bush Presidency in charts.

I was a bit disappointed because the charts, while interesting, did not quite show the impact of the Bush Presidency.  Here are some other charts that may help clear some of the questions:

1.  When Bush took the reigns of power, US public debt as a percentage of GDP was actually falling.  During his term in office not only did he reverse the trend but by 2009 he basically had created a situation where the country was forced to go into massive debt.

2.  Bush expanded federal spending at rates that far outstripped inflation.

3.  As you can see below, he grew both defense and non defense spending.

4.  Real household income under him stagnated and fell:

5.  He also oversaw a period of effective stagnation in the market as evidenced by the S&P 500:

This is the same chart plotted on a logarithmic scale:

6.  And oversaw the largest increase in unemployment in recent memory:

Then there is the $4T he spent on wars.  The fact that at least one of the wars was purportedly because of Saddam's weapons of mass destruction, which turned out to be false.  There is the complete debacle of his handling of Katrina.

It is possible that in hindsight, a lot of the messes will look less of an issue, especially if the US out of Iraq and Afghanistan, and we get back on track to growth.  His unfunded Medicare Part D will be dwarfed by Obamacare.  And, he may seem prescient on his prediction that democracy will spread through the Middle East.  He may even get credit for trying on immigration and lauded for his work on education, and aid to Africa and for Aids etc.  On the other hand, there is a good chance that other aspects such as torture, Guantanamo Bay, his being asleep at the wheel on climate change, etc. may prove to be much worse than they seem now.

It's hard to know what history will say, but its hard to argue that he did not leave the country in disarray when he left office.

Acts of terror - how scared should we be?

The heinous and distressing Boston bombing attacks last week have generated understandable anxiety.  However, some of the reaction has been so extreme that it begs the question, are we overreacting?

Consider for instance Lindsay Graham, the Republican Senator from South Carolina, who is suggesting "the surviving suspect -- due to the ties that these two have to radical Islamic thought and the ties to Chechnya, one of most radical countries in the world -- that the president declare preliminarily that the evidence suggests that this man should be treated as an enemy combatant."

So, Lindsay Graham is suggesting suspending due process for a US citizen based on what they think?   

Let's break this down.  

The first question is whether Boston was a terrorist attack.  Well, it isn't clear that it should be considered as this article in the Guardian and this one by Charles Krauthammer suggests.  To understand why, you have to first understand that there is a distinction between an "act of terror" and "terrorism".  In general, an "act of terror" is an attack or killing of some sort that is calculated to terrorize people.  "Terrorism" is when a political entity or group uses "acts of terror" as a tactic for its political ends.  A deranged group of killers who commit an "act of terror" probably should not be considered "terrorists", no matter what their ideological leanings, unless their act had a political purpose and was linked to a political group.  Latest reports on the Boston bombers are beginning to suggest that they were ideologically driven, but that they had no political ties and acted alone, calling into question the description of them as terrorists.

The next question is how worried should we be?

This article by John Cassidy in the New Yorker is a good review of the issue.  Let me put some of the numbers into perspective.  

First, if you just consider mass killings, then in 2012, according to the Washington Post, there were 84 people killed in various mass shootings.  Since then there have been 8 that I know of, 4 allegedly by Christopher Dorner and the 4 in the Boston bombings (These numbers don't include the deaths of the perpetrators).  Meanwhile, there are roughly 2.5M deaths every year in the US.  So, the conditional probability that a person in the US will have died due to a mass killing given that the person has died is less than 0.004%.  That is basically inconsequential.  

What about if we just considered terrorist attacks and leave aside the question of whether Boston was a terrorist attack or not for a second?  Here's how John Cassidy puts it:

"According to “Terrorism Since 9/11: The American Cases,” a new book edited by John Mueller, a political scientist at Ohio State University, since the World Trade Center attacks there have been fifty-two alleged Islamic plots to stage attacks on American soil or on planes bound for the United States. If Boston is added to the list, the total is fifty-three. Most of these plots only got to the stage of talking (often with disguised federal agents) before the authorities broke them up, but some went further than that, and a few—all shootings rather than bombings—led to fatalities.

... But compared to other types of violent deaths, the numbers are small.  In 2010, to take a year at random, there were 11,078 firearm homicides in the United States, and 19,392 firearm suicides.  In the same year, there were 544 homicides by suffocation and 89 by fire, plus 79 intentional poisonings and 52 intentional drownings. Statistically speaking, people in American had a higher chance of being killed by malaria than by terrorists. (These figures come from the Centers for Disease Control.)"

As an aside, John Cassidy goes on to point out that there is evidence to suggest that terrorist attacks around the world are declining.  Also, he points out that the bulk of Islamic terrorist attacks are actually not against the US or Christians but in Muslim countries against Muslims.

Anyway, the core point is that the Boston Bombing is likely better called a mass killing by deranged youth than a terrorist attack.and, even if we called it a terrorist attack, helped by the vigilance of our security forces, terrorist attacks in the US are rare as are mass killings of any sort.  So, Lindsay Graham is probably being a little paranoid.

As an aside, there is a constitutional question underlying Lindsay Graham's request.  This is an excellent article by George Will highlighting why such a suspension of constitutional rights based on color, race or beliefs is a bad idea.

Austerity mistake not the first

The debate on austerity rages on.  If you don't know the story, here's a summary.  At the height of the recession, two respected Harvard Professors published a paper that basically suggested that: (a) high debt-to-GDP ratio basically depresses growth, and (b) there is a magic ratio of 90% debt-to-GDP ratio where growth goes off a cliff and becomes negative.  The problem was that no other economist appeared to be able to replicate their results using largely similar data.  Recently, three economists got hold of the original analysis and they discovered that there were numerous Excel mistakes - ranges incorrectly specified and the data had been massaged in a way that enabled the conclusion.  You can read more about what happened here and here.

Paul Krugman, who is undoubtedly gloating, has a piece pointing out just how wrong the analysis was.  Bill Gross meanwhile is slamming the UK and EU strategy of austerity.

OK, so this was a one of mistake and there are other very serious economists who support the view that austerity is good, right?  Well, it turns out that this isn't the first error to occur in connection with the whole austerity argument.   Wonkblog has a piece that breaks down the argument.  Essentially, you can think of the argument for austerity as being one of two things:  Here's Mike Konczal on the subject:

The counter-Keynesian arguments fell into two broad categories. The first is that the economy has no short-term, demand-driven cyclical problems that the government can address and that the real problems come from the supply constraints of our economy. The second focuses on the discovery of serious limits to how much debt a country can carry, as well as evidence that austerity can create enough growth to offset itself.

As Mike Konczal points out these are two very different arguments.  And the data supporting both has largely proved to be incorrect or has not validated in the last few years.  He doesn't exhaustively address the question, but he does point out that numerous data points supposedly suggesting "structural unemployment" or supply side constraints have proven to be wrong.  Meanwhile, the case that austerity is the cure because public borrowing is crowding out private borrowing is just not there.  In fact, the current US austerity measures will likely cause a mini slow down because there will be no offsetting private spending increases when the government pulls back.

Remember, the argument is not that austerity is never good or that austerity is necessarily bad.  The argument here is that conditions or circumstances that are causing the current economic malaise appear to be caused more by factors Keynesians are focusing on and so austerity is probably not the appropriate cure.  

Is silence protected?

Last week there was one surprising case argued before the Supreme Court that really got me thinking.  The case is Salinas v Texas.  Here's a wonderful summary of the case on the scotusblog.com:

The case goes back to the murders in December 1992 of the Garza brothers in the Houston apartment where one of them lived.  At the scene, officers found discarded shotgun casings.  A neighbor told police that he had heard shots, and saw a dark auto leaving the scene.  Others told the police that there had been a party at the apartment the night before the shooting, and that Genovevo Salinas might have been there.

Police went to Salinas’s house, and they discovered that his mother had a car that may have matched the one seen leaving the night of the shooting.   The police told of the shootings, and received permission to search.  Salinas’s father gave the officers a shotgun.

The police asked Salinas to go with them to the police station, so they could get fingerprints that would eliminate him as a suspect.  He went along voluntarily, and at no time was under arrest.  During an interview that lasted for about an hour, the officers questioned Salinas about others at the party, and he answered those questions.

One officer then asked him if the shotgun given them by his father would match the shell casings found at the scene.  Salinas looked down, but did not answer.  He was then put under arrest for an outstanding traffic ticket, as a way to ensure that he stayed at the police station.  They got a ballistics report showing that the shell casings matched the shotgun.   At that point, however, police opted not to press any charges, and actually told Salinas he was free to leave.

Later, a friend of Salinas went to the police station, and told the officer that Salinas had told him he did the killing.  Salinas was charged with two counts of murder.  But he was not taken into custody at that time and, in fact, was not arrested until some fourteen years later, when he was located elsewhere in Texas, living under a new name.

At the trial, prosecutors offered the testimony of the friend who implicated Salinas in the crimes, the potential link of the mother’s car to the crime, and the ballistic test results.  In a closing argument, a prosecutor made a brief mention of Salinas’s refusal to answer the question about what the ballistics test would show.  Salinas did not take the stand at the trial.  The trial ended in a mistrial; the jury could not agree on a verdict.

Put on trial a second time, the same evidence was offered by prosecutors.  The defense objected to the police statement that Salinas had remained silent when asked about the shell casings and the gun.  A defense lawyer said Salinas had a right to remain silent at that time, and had no duty even to talk to the police.  The judge rejected the protest.  Salinas did not testify.

In closing argument, a prosecutor stressed again to the jury that Salinas had remained silent when asked about the shell casings and the gun.  He told the jurors that an innocent person would have protested that the gun was not his, and that he was not at the scene.   The jury convicted Salinas, and he was sentenced to twenty years in prison.

The question before the court is whether in a ]pre-custody situation, a person's silence is protected under the Fifth Amendment and whether it can be used against him or her.  If its protected then stressing Salinas' silence was a violation of his rights.  The government is arguing that people have to expressly invoke the fifth amendment.  Salinas is arguing that all silence is excluded.

Now, when I read this, I thought to myself the man looked guilty what's the problem.  However, when I heard the oral arguments it got me thinking.  People keep hearing in movies and on TV that they have the right to remain silence.  If you go with the government's argument, how is a person to know how to invoke the fifth amendment?  And, if you permit a non answer to infer suspicion, can the police badger you with questions such as: Did you murder her? etc. and use any question you fail to answer as suspicious in court?  Fascinating!

Curious to see how this will be decided.

Parental rights or discrimination?

One of the fascinating cases argued before the US Supreme Court this week was Adoptive couple v baby girl.  Here's how Wikipedia summarizes the situation: 

"Dusten Brown and Christina Maldonado were engaged to be married. Brown was a member of the Cherokee Nation and serving in the United States Army at Fort Sill, Oklahoma and the father of one other child. Maldonado was a non-Indian single mother of two. In Jan. 2009, Maldonado became pregnant, On learning Maldonado was pregnant, Brown began to press her to go ahead and marry him, but in May 2009, Maldonado broke off the engagement by text message and cut all communications with Brown. A few months prior to the baby's birth, she began to work with an adoption attorney to place the child with Matt and Melanie Capobianco of South Carolina. Although Oklahoma law requires that an Indian tribe be notified, Maldonado's attorney misspelled Brown's name and provided an incorrect date of birth, so the tribe was not put on notice of the proposed adoption. After receiving permission from Oklahoma authorities, based in part on the misidentification of the child as Hispanic instead of Native American, the Capobiancos took the child to South Carolina. Four months after the birth of the child and just days from deployment to Iraq, Brown was served with notice of the proposed adoption. Brown signed the document, believing that he was relinquishing rights to Maldonado. Brown, once he realized what he was signing, immediately tried to retrieve the document, and failing that, contacted the Judge Advocate General at Fort Sill for assistance. Seven days after being notified of the proposed adoption by the Capobiancos, Brown had obtained a stay of the adoption proceedings under the Servicemembers Civil Relief Act and he deployed with his Army unit to Iraq." 

If you read the description, the case seems to be cut and dry and weighted towards the father.  However, if you listen to the audio of the argument, what you realize is that its more complicated.

The issue is that Brown did not pay any child support and did not participate in any way during pregnancy or birth of his child.  Under state law any other person would not have any custodial rights and could not have challenged the adoption,  Brown, however, is about 1% Cherokee, or as Breyer quipped, he had an ancestor around the time of Washington who was Cherokee, and so, he could invoke the Indian Child Welfare Act to block an adoption which no other father in his position could.

The issue before the SCOTUS is a matter of law and not of the specifics of this case.  On the one hand, the tone of the questioning particularly by Scalia and to a lesser extent Sotomayer and Ginsburg seemed to be inclined to view the situation as a biological father wanting to assert his rights and they seem to believe that a biological father's rights should outweigh that of the adoptive parents.  On the other hand, Alito, Breyer and Roberts were troubled by the fact that such a right was being given exclusively to an Indian parent and they wanted to know what triggers the right and what would happen in the case of a sperm donor, an absconding parent or even a rapist, if the only major consideration is biology and a drop of Indian blood, as Brown is arguing.

Here is scotusblog.com's analysis of the arguments.  I am with Kennedy, who at one point wished for Solomon.

An intriguing reversal by the SCOTUS

This was a dramatic week for the US Supreme Court with several fascinating cases and one interesting decision.

The decision was in the case of: Kiobel v. Royal Dutch Petroleum.  Here's  scotusblog.com summarizing the case:

Plaintiffs were a group of Nigerian nationals who alleged that the Nigerian military committed human rights violations against them in the 1990s in response to local protests concerning oil exploration and production by a subsidiary of the defendants (Royal Dutch Petroleum Company and Shell Transport and Trading Company, two holding companies incorporated in the Netherlands).  After the plaintiffs obtained political asylum in the United States, they sued in federal court, alleging that the defendants had aided and abetted the atrocities by providing food, transportation, and compensation to the Nigerian military, and allowing it to use their property as a staging area for the attacks.  The plaintiffs premised jurisdiction on the ATS, an obscure jurisdictional provision that was enacted by the First Congress in 1789 and that once was described by Judge Friendly as a “legal Lohengrin” in that “no one seems to know whence it came.”  The statute provides in full: “The district courts shall have original jurisdiction of any civil action by an alien for a tort only, committed in violation of the law of nations or a treaty of the United States.” 

The court held unanimously that the presumption against the extraterritorial application of U.S. law applies to claims under the Alien Tort Statute, and nothing in the text, history, or purposes of the statute rebuts that presumption.

The result is dramatic as it overturns a reading of a long standing law and as many commentators have opined, the question it raises whether any US company can ever be sued for violations of international laws in other countries.  The reason this is thrown open is that the opinions expressed by Roberts, Alito, Scalia and Thomas would suggest no.  The opinion penned by Breyer and joined by Ginsburg, Sotomayer and Kagan, would suggest may be.  Breyer writes that: "I would find jurisdiction under this statute where (1) the alleged tort occurs on American soil, (2) the defendant is an American national, or (3) the defendant's conduct substantially and adversely affects an important American national interest, and that includes a distinct interest in preventing the United States from becoming a safe harbor (free of civil as well as criminal liability) for a torturer or other common enemy of mankind." 

And, Kennedy writes cryptically: "The opinion for the Court is careful to leave open a number of significant questions regarding the reach and interpretation of the Alien Tort Statute. In my view that is a proper disposition."

One of the world's most prolific serial killers?

One of the most interesting and horrifying serial killing cases I came across a few years ago was about the serial killer, Charlie Cullen.

Here's what I have surmised (I may be getting some of this wrong).  Charlie Cullen was a nurse.  He used to routinely kill patients by administering lethal doses of  drugs.  In the first hospital he was in, a patient on IV developed acute diabetes.  When they took him to the emergency room he miraculously recovered.  When he went back to his room he developed diabetes again.  After a few rounds of this, someone began suspecting that there was something wrong in the room.  The tested the IV fluid and discovered it had insulin.  Then they discovered someone had used a hypodermic needle to inject the IV fluid packs with insulin.  Now, this was so extreme that they didn't know what to do.  Suspicion fell on the patient's relatives.  Ultimately, they narrowed it down to Cullen and he basically said they couldn't prove it.  They could not fire him, but the effectively stopped assigning him work.  The chilling part is that just as he was being terminated, he found work at a different hospital where he could start again afresh.

He went on to move from hospital to hospital.  In every hospital he served at, they ultimately became suspicious, often figured out he was involved, but never followed through, allowing him to leave, move on to a new hospital and start again.

He served as a nurse for 16 years before he was caught.  He is known to have killed as many as 40 people but no one knows for sure.  Some estimates suggest he may have killed as many as 300 people.  Since he added poisons to IVs etc., it was often unclear when it was a natural death and when it was him.  So, even he isn't sure of how many he may have killed.  At 300 odd though, he is very close to being one of the most prolific known serial killers in history.

Now there is a book called "The Good Nurse" by Charlie Graeber about him.  Here's an interview with the author on NPR.  Chilling!  It's startling how long he went undetected.

The case for austerity was flawed? - Part Deux

I had posted a recent report that showed that one of the major papers supporting austerity actually messed up the analysis due to a simple Excel mistake.  Since then, this issue has exploded over the Internet!  Krugman has been lambasting them, but that's hardly surprising.  Alexandra Petri has a funny piece on the subject.  One of the best analysis I read on it was in the New Yorker.

Brad Plummer has a fantastic piece on the subject.  Here's the part that caught my eye:

But a new critique (pdf) by Thomas Herndon, Michael Ash and Robert Pollin claims that this result may need revision. For one, the economists argue that Reinhart and Rogoff excluded three episodes of high-debt, high-growth nations — Canada, New Zealand, and Australia in the late 1940s. Second, they argue, Reinhart and Rogoff made some contestable assumptions about weighting different historical episodes. 

Now, those are two methodological objections. But there’s also a third problem, as Mike Konczal details here. Reinhart and Rogoff appear to have made an error with one of their Excel spreadsheet formulas. By typing AVERAGE(L30:L44) at one point instead of AVERAGE(L30:L49), they left out Belgium, a key counterexample:

 Brad Plummer goes on to note:

It’s worth emphasizing, however, that the Excel coding error itself is only responsible for a small portion of this difference in results — about 0.3 percentage points. So the spreadsheet mistake, by itself, does not appear to be fatal. Here’s the difference between the two studies in chart form:

 

Brad Plummer's article cites a number of sources that raise other objections.  However, the key concession in Reinhart and Rogoff's response is: "By the way, we are very careful in all our papers to speak of “association” and not “causality” since of course our 2009 book  THIS TIME IS DIFFERENT showed that debt explodes in the immediate aftermath of financial crises."

So, let me put that simply.  

Reinhart and Rogoff found, and this has been found by others, that countries with slow growth often have high Deebt-to-GDP ratios.  This is not disputed.  People reading their report had suggested that there is an inflection point at 90% debt-to-GDP where growth becomes negative.  The new revelations suggest that this inflection point was wrong and based on a calculation error. So, what is the position with respect to debt and GDP?  The answer is unclear.  The reason is that critics basically argue that its more likely that slow growth causes high debt-to-GDP than the other way around.  Recent IMF recommendations to push for less austerity suggest that they have concluded the causality runs the other way too.

Finally, let me point out that debt-to-GDP is likely the wrong metric.  Why?  Well because debt is a balance sheet number and GDP is a P&L or flow number.  Comparing the two isn't very meaningful.  If an underwriter did this for a company, he'd be fired.  Yes, I understand that macroeconomics is different, but still, I am not sure that in this case the underlying criticism is that far wrong.

What may be more useful is either Debt-to-asset ratio.  However, I conjecture that a debt servicing-to-GDP ratio may be much more effective.  The idea is that countries with high risk have very high borrowing costs and so much higher debt servicing obligations for the same level of debt than countries with lower borrowing costs.  So, the impact of debt would be the joint effect of the total debt burden and the sovereign interest rate and not just the debt alone.  I would hazard a guess that the debt obligation is effectively a tax and should have similar effects on economic growth.  

If my conjecture is correct, then higher debt should lead to slower growth, but lower interest rates could offset the effect.  

So, how is the US doing?  Here is a chart that shows the interest payments as a percentage of GDP:

 

As Joel Kurtzman, the author of the article from which this chart was sourced points out, the debt servicing obligation (interest) as a percentage of GDP is actually pretty affordable, and even the CBOs "alternative fiscal scenario" which takes away the rosy assumptions of the Obama/Ryan budgets put interest costs at not more than ~5% of GDP.  Make no mistake, that's large.  That's one of the largest obligations in the Federal budget.  However, the US isn't about to go bankrupt any time soon with that level of debt servicing obligation.

Distribution of healthcare costs

One of the fascinating problems that goes unaddressed in the healthcare debate is the distribution of healthcare costs.



As the chart above shows, roughly 50% of the total healthcare spending in the US comes from the top 5% of patients.

A separate study by the AHRQ also showed similar concentrations of spend.

They focus a lot on the conditions that cause this, for instance here's their analysis of the most costly diseases.



However, they have to add up 15 rather broad categories of diseases to get to ~50% of the costs.  By contrast, if you add up the 5% who are getting end of life care you get roughly the same percentage of costs.

The fact is that with so much of the cost locked in end of life care, meaningful cost reductions in healthcare requires a discussion of death and when its OK to let someone die.  CNN Money had an interesting article on this subject.

The case for austerity was flawed?

There has been a tremendous push for austerity in recent years.  In fact, its been the primary criticism against Obama.  The idea is that Public Sector spending is out of control and that its crowding out legitimate businesses causing stagnation.

The case for austerity got a huge fillip from, among other things, a study done by economists Carmen Reinhardt and Kenneth Rogoff who looked at “data on forty-four countries spanning about two hundred years.  They claimed that the data showed that if debt-to-GDP exceeds 90%, then there is a marked slowdown in growth.

Well, now it turns out that the analysis itself was wrong.  Let me cite the stunning piece by James Downie:

"... three economics professors at the University of Massachusetts at Amherst have been allowed to look at Reinhardt and Rogoff’s original data, and their findings are troubling, to say the least. The Roosevelt Institute’s Mike Konczal summarizes: “First, Reinhart and Rogoff selectively exclude years of high debt and average growth. Second, they use a debatable method to weight the countries. Third, there also appears to be a coding error that excludes high-debt and average-growth countries. All three bias in favor of their result, and without them you don’t get their controversial result.” That “coding error,” by the way, is an incorrect entry in an electronic spreadsheet; as Konczal puts it, this means “that one of the core empirical points providing the intellectual foundation for the global move to austerity in the early 2010s was based on someone accidentally not updating a row formula in [Microsoft] Excel.” 

What does the data actually show? “When properly calculated,” the authors write, “the average real GDP growth rate for countries carrying a public-debt-to-GDP ratio of over 90 percent is actually 2.2 percent, not -0.1 percent as published in Reinhart and Rogoff.” 

So, let's get this straight.  The foundation of the entire argument for austerity was based on incorrect analysis and the data set actually shows something quite different.

To make matters more interesting as reported by the Huffingtonpost and others,  the IMF has looked at the data and concluded that too much austerity is a bad idea and that Obama probably had it right with the stimulus.

Hmmm ... the opinion in the academic circles has shifted.  You wouldn't know it if you heard the politicians.

Some interesting news

Here are some interesting posts:

• An excellent piece explaining why Federal budget deficits don't matter as much as people think.
• An interesting analysis by a Harvard professor that suggests that racism cost Obama as much as 4 points in support.
• Jindal is backing away from his proposal to eliminate the income tax.
• A very interesting article about how underemployment has tracked in the recent economic downturn.

Margaret Thatcher's Economic Record

Margaret Thatcher died today.  The opinions on her legacy are at best mixed. This is a nice discussion of her economic record.


Dylan Matthews has an excellent dissection of her economic legacy.  The summary is that she brought inflation down but caused unemployment to spike.





She did scale back government:




However, GDP growth rate under Thatcher wasn't much greater than under her predecessors

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As a result, the per capita income in the UK has grown steadily and there is no appreciable change due to Thatcher.



What you do see though is a massive spike in Household Expenditure - i.e. private spending:

So, what exactly happened?

David Ignatius has a fascinating article on the subject.  Essentially, by breaking the might of the unions and deregulating the financial sector, Thatcher helped create the modern Western economy.  In Britain, its unclear whether it helped or hurt the overall economy but it likely did redistribute wealth creating a broader middle class.

While there is debate about the normative impact of her policies, it is undeniable that she revolutionized the UK and possibly the world.