Tag Archives: Politics

The unsurprising tragedies of the Afghanistan war

As we ponder the tragedies of the US withdrawal from Afghanistan, it is important to also remember the costs of our continuing. An excerpt from the Boston Globe is pasted in below.

The bottom line is that the wars in Afghanistan and Iraq will have cost the US at least $4 trillion dollars (excluding interest costs) which is 4 million million dollars. Given that the US has only 132 million households, this spending averages to over $30,000 per household, all paid for by debt we will eventually have to pay off (unlike previous wars, taxes were not increased).

$4 trillion could have instead been invested in free public university tuition, free health care for all children, reducing climate change, or the $4 trillion infrastructure bill that President Biden is asking for.

I commend President Biden for actually doing what presidents Bush, Obama and Trump all said they wanted to do but did not.

Joy and I have been listening to the audiobook “The Father of All Things: A Marine, His Son and the Legacy of Vietnam” which covers the fall of Saigon in Vietnam and subsequent events. There should be no surprise that the events in Kabul are the consequence of war. Even the speedy fall of the government.

The Father of All Things: A Marine, His Son – Amazon.com

https://www.amazon.com › Father-All-Things-Vietnam-…

 

Below is from The Boston Globe on Tuesday 8/16/2021.

Costs of the Afghanistan war, in lives and dollars

By ELLEN KNICKMEYER The Associated Press, Updated August 16, 2021, 5:00 p.m.

 

https://www.bostonglobe.com/2021/08/16/nation/costs-afghanistan-war-lives-dollars/

_________________________

The longest war:

Percentage of US population born since the 2001 attacks plotted by Al Qaeda leaders who were sheltering in Afghanistan: Roughly one out of every four.

The human cost:

American service members killed in Afghanistan through April: 2,448.

US contractors: 3,846.

Afghan national military and police: 66,000.

Other allied service members, including from other NATO member states: 1,144.

Afghan civilians: 47,245.

Taliban and other opposition fighters: 51,191.

Aid workers: 444.

Journalists: 72.

Afghanistan after nearly 20 years of US occupation:

Percentage drop in infant mortality rate since US, Afghan, and other allied forces overthrew the Taliban government, which had sought to restrict women and girls to the home: About 50. (RE note: Statistica still lists the IMR at 5% (“about 46.5 per 1000”) of all live births in 2019. This is still an abysmal rate: 1 in 20 infants are dying.)

Percentage of Afghan teenage girls able to read today: 37%. (RE note: World Bank data show it as roughly doubling since 2011. Still appalling.)

Oversight by congress:

Date Congress authorized US forces to go after culprits in Sept. 11, 2001, attacks: Sept. 18, 2001.

Number of times US lawmakers have voted to declare war in Afghanistan: 0.

Number of times lawmakers on Senate Appropriations defense subcommittee addressed costs of Vietnam War, during that conflict: 42

Number of times lawmakers in same subcommittee have mentioned costs of Afghanistan and Iraq wars, through mid-summer 2021: 5.

Number of times lawmakers on Senate Finance Committee have mentioned costs of Afghanistan and Iraq wars since Sept. 11, 2001, through mid-summer 2021: 1.

Paying for a war on credit, not in cash:

Amount that President Truman temporarily raised top tax rates to pay for Korean War: 92 percent.

Amount that President Johnson temporarily raised top tax rates to pay for Vietnam War: 77 percent.

Amount that President George W. Bush cut tax rates for the wealthiest, rather than raise them, at outset of Afghanistan and Iraq wars: At least 8 percent.

Estimated amount of direct Afghanistan and Iraq war costs that the United States has debt-financed as of 2020: $2 trillion.

Estimated interest costs by 2050: Up to $6.5 trillion.

The wars end. The costs don’t:

Amount Bilmes estimates the United States has committed to pay in health care, disability, burial and other costs for roughly 4 million Afghanistan and Iraq veterans: more than $2 trillion.

Period those costs will peak: after 2048.

Source of the above: Much of the data is from Linda Bilmes of Harvard University’s Kennedy School and from the Brown University Costs of War project. Because the United States between 2003 and 2011 fought the Afghanistan and Iraq wars simultaneously, and many American troops served tours in both wars, some figures as noted cover both post-9/11 US wars.

 

Impact of the GOP tax reform on tax-favored donations

This extended blog will mostly be of interest to Americans thinking about end of year tax strategies. It extends a discussion among some Yale colleagues about the current tax bill as well as some calculations based on web sources. This blog focuses on the new high standard deduction and the Alternative Minimum Tax (AMT) provisions, and what it means for charitable donations. Much of it is oriented toward income earners earning $150k-500k. There are of course many, many other features of the new tax bill not examined.

My glimpse at the new tax tables, included below, are that most people in the range from $150-500k will see tax cuts of their marginal rate of about 2-6%, unless they are affected by the AMT. Those affected by the AMT will see significant lump sum gains but marginal rates that are similar to this years, at 26 or 28 percent.

This discussion will be complex for many unless you are used to thinking about the tax subsidies for donations and the implications for timing of donation. (Most people donate because it just feels good.)

My bottom line is at the bottom of this email. COMMENTS/CORRECTIONS WELCOME.

I am not a tax expert and you should get expert advice before acting on anything you read here.

The standard deduction is proposed to be raised to $24,000 for a married couple filing jointly. More important are the AMT changes for high income people.

So under the new system a married couple can claim itemized deductions (look at Sch A of your return for last year for this amount) of a minimum of $24,000, ($12k if single) even if they have no itemized deductions.

The main itemized deductions for most people are mortgage interest, state and local income and property taxes, and charitable contributions.

Base case: Assume you don’t have any mortgage interest and your 2017 itemized deductions are say $40,000 in state income and property taxes, and $5,000 in charitable contributions:

Under current law you claim itemized deductions of $45,000 which is more than the standard deduction.

Under proposed 2018 law the allowable itemized deductions will be $10,000 state income and property taxes plus $5,000 for the donations. So if a person claims the standard deduction of $24,000 – he gets this regardless of whether he makes a charitable contribution of nil or $14,000.  So the first 14k of charitable deductions doesn’t produce a tax benefit.

Wrinkle 1:

 

If you have deductible mortgage interest next year (Say $10,000) from an existing first mortgage next year, then the interest on it can be added to your $10,000 of local property taxes and the threshold for donations affecting your taxes would be only $4000. Since 10k+10k+4k=$24,000.

Wrinkle 1a: home equity line of credit mortgage interest is no longer deductible at all.

Wrinkle 1b: for any new mortgages taken out after Dec 15, 2017, only the interest on the first $750k of home mortgage will be deductible.

 

Important Wrinkle 2:

If your income is subject to the alternative  minimum  tax (AMT) for 2017 then the marginal value of a deduction this year is either 26 or 28 percent, depending on where you are in the phase out of the AMT, since these are the AMT income marginal rates. Your AMT is calculated from your income without taking most deductions but after a moderately large exemption. The AMT is based on your Alternative Minimum Taxable Income AMTI (See intuitive discussion  below).  Call this Y. Taxes are applied to Y minus the AMT standard exemption, call it Z, which is $84,500 for joint filers and $54,300 for others. The exemption starts to phase out once your income exceeds Q=$160,900 for joint filers, and $120,700 for singles. Under the proposed new tax bill, the AMT exemption (Z) is increased and the point at which the exemptions begin to be phased out are increased, but the tax rates remain the same. Z is decreased by $.25 for each dollar  of AMTI above the phase out threshold Q.

 

The following focuses on joint filers and are based on a recent article by the Tax foundation (Link below).

 

Currently, if Y your AMT income is $160,900 then the AMT tax is

AMT=.26*(Y-Z) = .26*(160,900-84,500)=$19,864

 

If your AMT income is 250k then your AMT tax would be

 

Y=250,000

Q=160,900

Z = 84,500-.25(250,000-160,900)  (reflecting the phase out of the exemption starting at 160,900)

AMT=0.28*(Y-Z) = .28*(250000-62225) = $52,577

 

If your income is 500,000 at which the exemption Z is currently fully phased out, then your AMT would be

AMT = .28*(500000 – 0) = $140k.

 

(The .26 rate applies when your Y = AMTI is less than $187,800, while the “higher rate”  of 28% applies to more than that. This step also creates modest infra-marginal changes that I have ignored. Silly complexity…)

 

The current law raises the exemption amounts, and also raises the threshold at which the exemption starts to be  phased out.

 

“Exemption amounts under the conference agreement are increased from their current level of $84,500 for joint filers and $54,300 for other filers to $109,400 and $70,300, respectively.”

 

More importantly, the AMT exemption does not begin to phase out until alternative minimum taxable income exceeds $1 million for joint filing households. So for the three households just examined the new AMT amounts would be:

 

AMT only kicks in at AMTI >= 160,900.

 

At Y = 160,900: AMT=.26*(Y-Z) = .26*(160,900-109,400)=$13,390 a reduction of $6,474 from the existing AMT tax.

At Y = $250,000 AMT = .28*(Y-Z) = .28*(250,000-109,400)=$36,556 a reduction of $16,021

At Y=$500,000: AMT = .28*(Y-Z) = 0.28*(500,000-109,400) = $109,400 a reduction of $30,632

You can interpolate pretty well between these amounts using the following figure. The slight nonlinearity results from the change from 26% to 28% at Y=187,800.tax reform fig 1 2017

 

These AMT amounts are only relevant when they are more than the taxable income calculated using the normal way (using deductions and the standard exemptions). For many, these AMT changes are the gifts of the current tax reform.

 

So the AMT, which currently affects about half of all HH  with incomes above $200k is projected to affect a smaller number of people after the reform mostly because of the higher exemption.

 

This AMT change is a big cost component of the current reform, but gets less attention since it is harder to explain.

 

“All told, the Joint Committee on Taxation estimated that these [AMT] changes would reduce federal revenues by $637.1 billion over the next decade, compared to current law.” This is 42% of the total deficit increase!

 

https://taxfoundation.org/conference-report-alternative-minimum-tax/

 

Here is a brief, non-technical discussion of the Alternative Minimum Taxable Income AMTI.

Some of these items added back into your income include personal exemptions, state and local income taxes, miscellaneous itemized deductions and mortgage interest on home equity debt. Accordingly, you’re more likely affected by AMT if you have a high number of exemptions (a larger family), high state income and property taxes and/or high miscellaneous itemized deductions like significant investment management fees.

You may also have to include certain types of income that you wouldn’t normally count in your regular taxable income, such as exercising incentive stock options or tax-exempt interest from private activity bonds. The disallowance of deductions and addition of income leads to your Alternative Minimum Taxable Income (AMTI).

For 2017, you pay a tax rate of 26% on AMTI of $187,800 or less for those filing single, married filing jointly, head of household or qualify widower. For married filing separate taxpayers, the income threshold stops at $93,900.  The tax rate grows to 28% of income over those amounts. Multiplying your AMTI minus your exemption times the corresponding tax rate gives you your tentative minimum tax.

You may have some additional tax due if you reported capital gains distributions, qualified dividends, and/or used the foreign tax credit, but your software should add those for you.

You should note that AMT is only the difference between your regular income tax and the tentative minimum tax amount calculated through AMT. For example, if you owed $30,000 in regular income tax and your tentative minimum tax amount was $33,000, AMT of $3000 will show up on line 45 of your Form 1040.

https://www.forbes.com/sites/brianthompson1/2017/12/17/tax-reform-and-amt-what-you-should-know/#4c35e80f2081

 

 

Here is another discussion from CBSNews.

 

What's the deal with the alternative minimum tax?

For corporations, the AMT disappears.

That's not the case for individual filers, but fewer will have to pay it, at least.

  • Exemption amounts will increase from $84,000 for joint filers under the current law level to $109,400. Single filers will see that number increase from $54,300 to $70,300.
  • The exemption currently phases out for joint filers at $160,900, and $120,700 for individuals. Under the tax bill, that phaseout would kick in at $1 million for married filers and $500,000 for those who are single. Above the threshold, filers lose 25 percent of their exemption, that is, $0.25 on every dollar in income.

What if I give to charity?

The charitable deduction will remain as it is. So, if you itemize your deductions, you may be able to deduct charitable contributions that are made to qualifying organizations. According to the IRS, you may deduct up to 50 percent of your adjusted gross income, although some filers are limited to 20 percent and 30 percent.

 

https://www.cbsnews.com/news/gop-tax-bill-how-the-new-tax-plan-will-affect-you/

 

Here are the current “final” tax rates and intervals as of 10:30 am Tuesday morning.

 

https://www.cnbc.com/2017/12/15/find-your-new-tax-brackets-under-the-final-gop-tax-plan.html

See below for a breakdown of the proposed income tax brackets for singles.

Rate Taxable Income Bracket
10% 0 to $9,525
12% $9,525 to $38,700
22% $38,700 to $82,500
24% $82,500 to $157,500
32% $157,500 to $200,000
35% $200,000 to $500,000
37% $500,000 and up

Here are the proposed rates for married couples who file jointly.

Rate Taxable Income Bracket
10% 0 to $19,050
12% $19,050 to $77,400
22% $77,400 to $165,000
24% $165,000 to $315,000
32% $315,000 to $400,000
35% $400,000 to $600,000
37% $600,000 and up

For comparison, here would be the 2018 brackets under current tax law, adjusted for inflation.

Rate Taxable Income Bracket-Single Taxable Income Bracket-Married Filing Jointly
10% 0 to $9,525 0 to $19,050
15% $9,525 to $38,700 $19,050 to $77,400
25% $38,700 to $93,700 $77,400 to $156,150
28% $93,700 to $195,450 $156,150 to $237,950
33% $195,450 to $424,950 $237,950 to $424,950
35% $424,950 to $426,700 $424,950 to $480,050
39.60% $426,700 and up $480,050 and up

 

Here it is in a graph for joint filers. This assumes everyone just takes the standard deduction of $24,000.

tax reform fig 2 2017

Of course, low income people are not likely to have deduction that exceed the $24,000 standard deduction while high income people are more likely to. Most of the changes are only visible at the higher income levels…

 

Putting together the new tax schedule with the new AMT taxes, and assuming joint filers only take the $24,000 standard deduction, the following reveals the key role that the new AMT plays.

tax reform fig 3 2017

 

For people who have lots of possible deductions under the new tax system, the AMT places a much lower minimum on tax payments than the old one.

The new AMT schedule is substantially more attractive to high income salary earners affected by the AMT. The relevant tax rate for them is 28%.

Not shown in this figure is that eventually the difference between the existing and new AMT disappears at about $1.4 million.

 

My bottom line from this is:

 

In general, under the new tax program, bunching of charitable donations and concentration of deductions into a single year will be attractive, so that you  might take the standard deduction one year and not the next.

 

The AMT makes it unclear whether bunching in 2017 is particularly worthwhile relative to 2018, since the 26% or 28% rates in the AMT may be less than the new marginal rate next year when combined with a more favorable AMT in future years. In short, a large donation this year may mean that on the margin you only get a 26-28% tax subsidy, while a donation next year may have a 33-37% deduction for large donors with moderately high incomes (<$500k).

 

For salary earners not affected by the AMT, donations this year are likely to be more favored than next year, when the lower rates and higher thresholds for tax rates will matter.

 

If you want to take a deduction for a donation THIS YEAR but decide who it goes to next year, you could open a  Donor advised fund, such as at Fidelity.

 

My bottom, bottom line is that I don’t expect large tax savings from moving around deductions between this year and next if you are affected by the AMT. A good strategy is to give what feels right.

 

Of course, all of this is based on the current tax bill, which could change or not be passed…

 

Get TAX ADVICE BEFORE YOU RELY ON THIS INFORMATION!

(This warning is mostly to protect me in case I am wrong.)

 

The quintessential challenge of our time

"...the quintessential challenge of our time: the ascendance of belief over fact, outrage over thoughtful debate, and the accessibility of an endless supply of “information” that confirms our preexisting beliefs, whatever they may be. In a sociopolitical climate in which disgust often substitutes for disagreement, many people recognize the futility of using evidence to establish common ground, but few seem to know what to do about it."

 

From Lisa Rosenbaum, M.D. Understanding the Planned Parenthood Divide — Albert Lasker and Women’s Health

New England Journal of Medicine, November 1, 2017DOI: 10.1056/NEJMp1713518

#stupideconomics and Healthcare Triage on the AHCA

Two interesting links related to the recent Republican health care proposal called the AHCA.

The first is a serious but also humorous Forbes article by my BU colleague Larry Kotlikoff in his series about Stupid Economics, this one targeting Tom Price and the AHCA bill. (A 3-minute read.)

Tom Price's Liver And 'The Coverage They Want'

The second is an excellent Youtube summary of the CBO forecasts (called “scoring”) of the effects of the AHCA by pediatrician Aaron Carroll.

Healthcare Triage: Results Are In! Congressional Budget Office Scores the American Health Care Act

Posted: 17 Mar 2017 06:09 AM PDT  Text of the report here.

(Broadcast is eight minutes.)

Facts about Tom Price, HHS nominee

Health economists and every concerned citizen should disseminate the facts in this NEJM article about Donald Trump’s nominee of Tom Price to be the next secretary of HHS.
Coauthor Richard Frank is also a BU Ph.D. alum!

Randy Ellis

 

Care for the Vulnerable vs. Cash for the Powerful — Trump’s Pick for HHS

Sherry A. Glied, Ph.D., and Richard G. Frank, Ph.D.

New England Journal of Medicine

December 21, 2016DOI: 10.1056/NEJMp1615714

http://www.nejm.org/doi/full/10.1056/NEJMp1615714#t=article

 

Since there is no abstract, here are the first two paragraphs.

Representative Tom Price of Georgia, an orthopedic surgeon, will be President-elect Donald Trump’s nominee for secretary of health and human services (HHS). In the 63-year history of the HHS Department and its predecessor, the Department of Health, Education, and Welfare, only two previous secretaries have been physicians. Otis Bowen, President Ronald Reagan’s second HHS secretary, engineered the first major expansion of Medicare, championed comparative effectiveness research and, with Surgeon General C. Everett Koop, led the fight against HIV–AIDS.1 Louis Sullivan, HHS secretary under President George H.W. Bush, focused his attention on care for vulnerable populations, campaigned against tobacco use, led the development of federally sponsored clinical guidelines,2 and introduced President Bush’s health insurance plan, which incorporated income-related tax credits3 and a system of risk adjustment. In their work at HHS, both men, serving in Republican administrations, drew on a long tradition of physicians as advocates for the most vulnerable, defenders of public health, and enthusiastic proponents of scientific approaches to clinical care.

Tom Price represents a different tradition. Ostensibly, he emphasizes the importance of making our health care system “more responsive and affordable to meet the needs of America’s patients and those who care for them.”4 But as compared with his predecessors’ actions, Price’s record demonstrates less concern for the sick, the poor, and the health of the public and much greater concern for the economic well-being of their physician caregivers.

Since the NEJM full article  requires a subscription, here is a summary what they document:

Price has sponsored legislation that

  • supports making armor-piercing bullets more accessible
  • opposes regulations on cigars
  • Repeals and replaces the ACA (see details below)

Voted  

  • Against the Affordable Care Act (ACA)
  • Against regulating tobacco as a drug
  • Against the Domenici–Wellstone Mental Health Parity and Addiction Equity Act
  • Against funding for combating AIDS, malaria, and tuberculosis
  • Against expansion of the State Children’s Health Insurance Program
  • In favor of allowing hospitals to turn away Medicaid and Medicare patients seeking nonemergency care if they could not afford copayments
  • Against reauthorization of the Violence Against Women Act
  • Against legislation prohibiting job discrimination against lesbian, gay, bisexual, and transgender (LGBT) people
  • Against enforcement of laws against anti-LGBT hate crimes.
  • Against expanding the NIH budget
  • Against the recently enacted 21st Century Cures Act

Price stated views:

  • Favors converting Medicare to a premium-support system
  • Favors changing the structure of Medicaid to a block grant program
  • Favors amending the Constitution to outlaw same-sex marriage
  • Opposes stem-cell research
  • Inconsistent in supporting investments in biomedical science.

His proposal for repealing and replacing the ACA is H.R. 2300, the Empowering Patients First Act,5 which would

  • Eliminate the ACA’s Medicaid expansion and
  • Replace ACA subsidies with flat tax credits based on age, not income
  • Be regressive, with larger subsidies for high than low incomes.
  • Credits would pay only about one third of the premium of a low-cost plan
  • Credits proposed are smaller than those proposed by President Bush in 1992, and will not be sufficient to get most people to buy health insurance
  • Eliminate the guaranteed-issue and community-rating requirements in the ACA, with ineffective substitutes.
  • Withdraw almost all the ACA’s federal consumer-protection regulations, including limits on insurer profits and requirements that plans cover essential health benefits.
  • Allow the sale of health insurance across state lines, effectively eliminating all state regulation of health insurance plans
  • Fund his plan by capping the tax exclusion for employer-sponsored health insurance at $8,000 per individual or $20,000 per family, caps that are lower than the unpopular Cadillac tax in the ACA, which Price himself has voted to repeal, and hence is unlikely to ever be approved
  • Directly advance physicians’ economic interests by permitting them to bill Medicare patients for amounts above those covered by the Medicare fee schedule and allowing them to join together and negotiate with insurance carriers without violating antitrust statutes.
  • Oppose strategies for value-based purchasing and guideline development,
  • Oppose the use of bundled payments for lower-extremity joint replacements and
  • Propose that physician specialty societies hold veto power over the release of comparative effectiveness findings.

Consider what you can do to make sure that these facts are widely known. Perhaps ask your legislators which of these views they support.

Obama’s JAMA article is a must read for all professionals

There is a very important  article in this week’s JAMA - Internal Medicine, written by Barach Obama.

It highlights the effects of the ACA/Obamacare.  It is free on-line.

United States Health Care Reform: Progress to Date and Next Steps

http://jama.jamanetwork.com/article.aspx?articleid=2533698

If you are short on time, then the following link to just the figures provides many of the key results.

http://jama.jamanetwork.com/article.aspx?articleid=2533698

To me the highlights of the article are that it documents:

The decline in the uninsured (no surprise, but well presented) now down to 9.1 percent from over 16
Declines in teen smoking from 19.5% to 10.8% due to the Tobacco Control Act of 2009 (Wow)
Much slower rates of decline in the uninsured in states that refused the Medicaid expansion (no surprise)
The decline in the underinsured among privately insured as measured by the near disappeance of unlimited exposure (new to me)
Lower rates of individual debt sent to a collection agency (great to see)
Negative rates of real cost growth in Medicare and Medicaid since 2010, with drastically lower growth in privately Insured
Constant share of out of pocket spending as a fraction of total spending among the employer based insurance
(new to me, he cites increases in deductibles offset by decreases in copays and coinsurance.)
Forecast Medicare spending in 2019 is now 20% LOWER than when he took office.
Decline in Medicare 30 day, all hospital readmission rates as well as improvements in other measures.
This information is important to understand to counter the repeated false claims that Obamacare is a failure, or has increased health care spending, or is bankrupting the government, all of which are shown to be false in the evidence presented here.

Here is the link again.

http://jama.jamanetwork.com/article.aspx?articleid=2533698

Read Flash Boys by Michael Lewis

I just finished reading the book Flash Boys by Michael Lewis (author of Moneyball and the Big Short). I highly recommend it to economists as a quick read (270 pages) in accessible prose. Or anyone.

http://www.amazon.com/Flash-Boys-Wall-Street-Revolt/dp/0393244660/

Every economist should be aware of the grossly unfair trading practices that the SEC and NASDAQ have allowed to dominate virtually all stock trades. Lewis documents a large number of explicit rip off techniques from High Frequency Traders (HFT) (which include most of the major money managers) that affect every mutual fund, stock broker and stock trade conducted in the world.   While true that HFT create liquidity in the market so that traders can instantly sell whatever stocks at "the market price"  in whatever quantities, they do this at the cost of a significant tax on all such transactions and result in billions of dollars of revenue for the HFT companies. Basically, the HFT can influence the market price. This is done in plain sight (the title of chapter 1), not hidden in the form of impenetrable documents such as the the unsecured and overrated mortgage securities.

Since many of you won't read the book, here is a flavor in my own words.

Your pension fund ABC, which manages a few billions of dollars of stocks, is constantly buying and selling stocks on your behalf to maintain its portfolio. Say it  wants to buy 10,000 shares of Microsoft "at the current price" which is $41.90 (the most recently traded price right now on 6/30/2014). The official NASDAQ ticker price shows more than 10,000 shares are offered at $41.90. But as soon as ABC's bid to buy "at market" is executed, essentially all of those available shares are purchased by HFT within a few microseconds (i.e., a few millions of a second) BEFORE ABC's purchase, thereby bidding up the price. It could be a penny or it could be much much more, depending on how volatile the stock price is. Today, Microsoft has already varied by .82%, so the variation WITHIN A FEW MICROSECONDS can easily be that amount and you would not even know. Your price at the end of the day would be within the low and high for the day.  ABC pays say $41.95, and the HFTs pocket the extra five cents per share on the trade since they were able to purchase at $41.90 before selling it back to you a few microseconds later at $41.95.

You think that it doesn't matter much because it was only a few pennies on the transaction, and you hold onto your assets for years. But your pension fund is constantly buying and selling as more funds are added, taken out, or market shares of different stocks change. All of these transactions are "taxed" by the HFT firms who buy at below your bid price and then sell the stock to ABC at NO RISK. According to the book, the best HFT firms have traded for years and never had a losing day, since they only bet on sure things.

Here is a second example. You may think there is only one market for each stock, but actually there are more than a dozen different prices since a majority of all trades happen in "dark pools" which are private exchanges organized by the large money managers. The official offer price may appear to be $10.05 but you don't know that some of these dark pools have offer to sell prices of as little as $10.00.  What the market is supposed to do is that if you bid "at market" then you get the lowest value price, which would be $10. What actually happens is that the HFT firms turn this into two transactions, buying at $10.00 and selling  to you at $10.05. Again, it doesn't sound like much until you realize how many millions of transactions there are.

What I found particularly unfair is that the SEC has allowed all kinds of sleazy types of stock sales practices, involving small lot transactions, and bids for shares at prices that need not be honored. This makes it very low cost/low risk for the HFT to figure out who is buying or selling, and take advantage of it.

There is a new exchange called IEX that is trying to become a fair exchange, with some success, but it is getting major push back from the big players. Read more here. http://en.wikipedia.org/wiki/IEX

Playing video games does not predict voilent behavoir in children

(Reposted from The Incidental Economist) This November 2013 UK study confirms what other studies have shown, which is that playing video games does not predict psychosocial adjustment problems in young children. Even watching 3 hours of TV per day in the UK has no meaningful association.

I also reposted my favorite graph about videos and gun violence from an earlier TIE posting.

Perhaps the 50th anniversary of  JFK's death, done with a $20 mail order rifle, is yet another good time to refocus on gun control.

Happy Thanksgiving!

Randy

The dangers of TV and video games
Posted: 25 Nov 2013 06:01 AM PST
From Archives of Diseases of Childhood, “
Do television and electronic games predict children’s psychosocial adjustment? Longitudinal research using the UK Millennium Cohort Study
“:

BACKGROUND: Screen entertainment for young children has been associated with several aspects of psychosocial adjustment. Most research is from North America and focuses on television. Few longitudinal studies have compared the effects of TV and electronic games, or have investigated gender differences.

PURPOSE: To explore how time watching TV and playing electronic games at age 5 years each predicts change in psychosocial adjustment in a representative sample of 7 year-olds from the UK.

METHODS: Typical daily hours viewing television and playing electronic games at age 5 years were reported by mothers of 11 014 children from the UK Millennium Cohort Study. Conduct problems, emotional symptoms, peer relationship problems, hyperactivity/inattention and prosocial behaviour were reported by mothers using the Strengths and Difficulties Questionnaire. Change in adjustment from age 5 years to 7 years was regressed on screen exposures; adjusting for family characteristics and functioning, and child characteristics.

RESULTS: Watching TV for 3 h or more at 5 years predicted a 0.13 point increase (95% CI 0.03 to 0.24) in conduct problems by 7 years, compared with watching for under an hour, but playing electronic games was not associated with conduct problems. No associations were found between either type of screen time and emotional symptoms, hyperactivity/inattention, peer relationship problems or prosocial behaviour. There was no evidence of gender differences in the effect of screen time.

CONCLUSIONS: TV but not electronic games predicted a small increase in conduct problems. Screen time did not predict other aspects of psychosocial adjustment. Further work is required to establish causal mechanisms.

Since we’re never going to have an RCT of TV or video games, these kinds of prospective cohort studies are important. In this one, they followed more than 11,000 children in the UK. They found that watching TV for three hours or more (a day!) at 5 years associated with a higher chance of having a conduct disorder at 7 years versus kids who watched less than an hour a day. How much of a difference? A 0.13 point increase in conduct problems. That corresponds, according to the article, to “0.09 of a SD [standard deviation] increase in age 7 years conduct score. Do you understand now? I don’t either.Anyway, the authors said it was a “small increase in conduct problems”.Video games? No effect.Yes, these are young kids, and it’s unlikely that they have been playing much GTA 5 or Battlefield 4. So I’ll look forward to more data. But that this point, it’s hard to point to a large study like this and find a smoking gun. Figuratively or literally.More on this topic here and here.@aaronecarrollShare

This is my favorite graph on this topic. From here

http://theincidentaleconomist.com/wordpress/wp-content/uploads/2012/12/video-game-chart-no-trendline.jpg

Early Exchange Bids from NY are VERY LOW

This news is sufficiently important that I am posting sections of several articles and summaries.

From July 16, 2013 New York Times:

Health Plan Cost for New Yorkers

Set to Fall 50%

By and
Published: July 16, 2013

Individuals buying health insurance on their own will see their premiums tumble next year in New York State as changes under the federal health care law take effect, Gov. Andrew M. Cuomo announced on Wednesday.

Read Full article here. Particularly view the graphic.

http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/health_insurance_and_managed_care/index.html?inline=nyt-classifier

Comments from today:

New York Times

9) Obamacare is the Right's Worst Nightmare
from New York Times by Paul Krugman

News from New York: it looks as if insurance premiums on the individual market are going to plunge thanks to Obamacare. This shouldn't come as a surprise; in fact, the New York experience perfectly illustrates why Obamacare had to look the way it does. And it also illustrates why conservatives should be terrified about this legislation, as it takes effect. Americans may have had a lot of misgivings in advance, thanks to vast, deliberately spread misinformation. But I agree with Matt Yglesias - unless the GOP finds even more ways to sabotage the plan, this thing is going to work, it's going to be extremely popular, and it's going to wreak havoc with conservative ideology.

Wall Street Journal

10) Big Labor Wakes Up to ObamaCare
from Wall Street Journal by Editorial Board

Every revolution devours its children, but it's still surprising to see some of ObamaCare's keenest boosters deny paternity so soon after the birth. Witness the emotional volte-face from three top union leaders, warning that the program will "shatter not only our hard-earned health benefits, but destroy the foundation of the 40-hour workweek that is the backbone of the American middle class."

 

11) ObamaCare's Coalition Begins to Fracture
from Wall Street Journal by Karl Rove

The three union leaders also complained their nonprofit insurance plans are still subject to ObamaCare's new 2%-3% tax on each insurance policy. They want their members exempted from the tax every other family with health insurance must pay. Who knew labor leaders were such staunch tax opponents? It will not help Democratic enthusiasm in the 2014 midterm elections if ObamaCare causes (a) more workers to lose their union-provided insurance and (b) their hours and paychecks to be cut. In addition, Democratic candidates could be seriously damaged if the three labor bosses follow through on their letter's threat to stop helping elect Democrats if the law isn't changed.

2) Obama to Tout Americans Already Benefiting from Health Law
from USA Today by Aamer Madhani

President Obama will use a speech at the White House on Thursday to tout how a provision in his signature health care law is forcing health insurance providers to return money to consumers. With his administration facing deadlines to establish health care exchanges in all 50 states by Oct. 1 and GOP lawmakers continuing to call for a repeal of the law, the president is looking to trumpet the law by highlighting one of the most tangible ways Americans are benefiting from it even as his administration struggles to fully implement it. With that objective in mind, Obama will hone in on what is known as the medical loss ratio provision of the health care law in his speech. The provision requires insurers to refund customers when they spend less than 80% of premiums they collect on medical care. This year the provision will result in 8.5 million Americans receiving $500 million in rebates later this summer, according to the Department of Health and Human Services. The agency estimates that the average rebate is about $100 per family.

Washington Post

8) Obama's Last Campaign: Inside the White House Plan to Sell Obamacare
from Washington Post by Ezra Klein and Sarah Kliff

The focus on young, minority voters. The heavy reliance on microtargeting. The enthusiasm about nontraditional communications channels. The analytics-rich modeling. It sounds like the Obama campaign. And administration officials don't shy away from the comparison. But the effort will have to go far beyond engineering turnout among key demographics. The administration needs to build more insurance marketplaces than they ever expected, and create an unprecedented IT infrastructure that lets the federal government's computers seamlessly talk to the (often ancient) systems used in state Medicaid offices. They need to fend off repeal efforts from congressional Republicans - like Wednesday's vote to delay the individual mandate - and somehow work with red-state bureaucracies that want to see Obamacare fail. And they can't escape the fact that the law, three years after passage, remains stubbornly unpopular.

31 charts to destroy your faith in humanity

This humorous web site from the Washington Post's WonkBlog is worth a look. It will only take a couple of minutes.

31 charts that are informative but illustrates how one can put a negative spin on anything.

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/05/24/these-31-charts-will-destroy-your-faith-in-humanity/

Here is the original post that it is spoofing.

http://www.businessinsider.com/charts-that-will-restore-your-faith-in-humanity-2013-5

Steve Brill Interview on the Daily Show

Steve Brill, who just wrote a 36 page article for Time Magazine, conducted an informative interview on the daily show on Thursday, Feb 21, 2013. Here is the link to the unedited version. It is in three parts, and lasts about 12 minutes (including some ads). Worth watching if you have time.

http://www.thedailyshow.com/watch/thu-february-21-2013/exclusive---steven-brill-extended-interview-pt--1

#5 “Let the Children and Grandchildren Pay?”

Time to Change the Tax Discussion #5

This is the  fifth and final posting in a five part series about taxes.

Every time congress passes legislation to increase public spending, they should have to specify which taxes they favor increasing to balance the budget. If not, then congress should have to openly discuss why they believe it is appropriate to LET THE CHILDREN AND GRANDCHILDREN PAY. If every unfunded benefit increase included this selfish labeling of the congressmen who voted for it, perhaps it would make it more stigmatizing to fight unfunded wars, increase discretionary spending (e.g., disaster relief) or resist Medicare payment increases without other spending cuts or tax increases.

Case in point: as I write this blog the House is debating how large the Hurricane Sandy relief fund should be, in the neighborhood of $50 billion ($160 per American). While I favor this expenditure, but I also favor committing to how we will pay for it (even if we only start next year...) This is a large enough expense that Congress should also be committing to the tax increase that will pay for it. For example 1% more income tax on the wealthy, or eliminating one subsidy or tax subsidy would do it. Note that ObamaCare legislation was forced to do this. It is possible.

Almost every Republican in Congress has signed Grover Norquist's No Tax Pledge not to increase any taxes, ever. This pledge is highly destructive of rational discussion of taxes and deficit reduction. I would be much happier if fiscally conservatives  instead signed a pledge not to increase our budget deficit ( and hence national debt) unless it is specifically part of an economic stimulus to deal with a potential or actual recession. Too often we have cut taxes even in times of a growing economy, effectively pushing onto our children and grandchildren (who do not even vote yet) the burden of paying for our overspending.

Increasing taxes will never be attractive, but why should we LET THE CHILDREN AND GRANDCHILDREN PAY?

Here are links to my four previous blogs on Taxes

#1 All Taxes and Budgets Should be Expressed as Dollars per Person

#2. Include Social Security and Medicare taxes when discussing tax burdens

#3 Tax Bads (or at least don’t subsidize them!)

#4 State Tax Rates are Not Related to State Income or Growth

#5 "Let the Children and Grandchildren Pay?"

#4 State Tax Rates are Not Related to State Income or Growth

Time to Change the Tax Discussion #4

This is the fourth in a five part series about taxes.

It has  become common in the media to argue that state income or sales taxes cannot be increased or it will dampen incentives and hurt the state or local economy. While this might be true at sufficiently high tax rates, there is no evidence that tax rates currently imposed on income or sales by states has any effect on the level or growth rates of the state economy. The following nine plots will let you decide for yourself whether there is any relation between

{Sales tax revenue, income tax revenue, or total state and local government revenue}

and

{Levels of Gross State Product per Capita, One year changes in Gross State Product (the "recovery") and Ten year changes in Gross State Product per Capita)

If there is, it is a very weak relationship, not worth worrying about. Instead we should be debating whether we want more or fewer government services relative to private goods.

All data used state-level rates as stored on the  web site http://www.usgovernmentrevenue.com maintained by Christopher Chantrill, self-described "writer and conservative".

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

I intentionally chose a strong title for this blog. My academic colleagues will reasonably argue that sales and income taxes DO have some dampening effect on a state economy. I do not disagree that there is some effect. But these graphs reveal that it is not detectable when it is realized that tax increases are used to pay for public services. For political decision-making, which of the following two statements is more nearly true? I would go with the latter.

Raising sales or income taxes by one percent in order to invest in bridges, public transit and education will have a meaningful negative effect on the state economy.

Raising sales or income taxes by one percent in order to invest in bridges, public transit and education will have a meaningful positive effect on the state economy.

Here are links to the previous three blogs on Taxes

#1 All Taxes and Budgets Should be Expressed as Dollars per Person

#2. Include Social Security and Medicare taxes when discussing tax burdens

#3 Tax Bads (or at least don’t subsidize them!)

#3 Tax Bads (or at least don’t subsidize them!)

Time to Change the Tax Discussion #3

This is the third in a five part series about taxes.

Introductory economics tells us that when the government taxes something, unless it is perfectly inelastically supplied or demanded, the tax will cause a distortion in a market and reduce the taxed activity. For most things (labor, profits, food, etc.) this reduction is considered a bad thing, and causes welfare losses. Yet taxes on BADS (i.e., goods with strong negative externalities) are welfare improving, since they reduce something that you want to reduce anyway.  Almost all economists will agree with this conceptually. Yet politicians and consumers are not forced to confront this reality. Perhaps economists could do a better job holding politicians accountable to this, by speaking out more. Here are six examples from recent policy debates. Why are economists not lining up behind these?

1. Tax the Sale of Guns.

The constitution asserts the right of people to own "arms" but says nothing about them being free or cheap. Econmists should favor taxing the sale of all guns, and even taxing the annual ownership of guns (similar to what we do for cars and housing) because of their large negative externalities. Higher taxes on more dangerous weapons (e.g. assault weapons), would also be appropriate. We could raise several billion dollars a year this way, and even earmark it for the extra medical care and law enforcement made necessary by the widespread ownership of guns. (In theory, I prefer not to earmark revenues, but history shows it is much easier to pass legislation if this is done, such as taxes on cigarettes. Hence in practice I support it.)

2. Tax Carbon

We will never have unanimous agreement that our excess carbon is a major cause of global warning, but we don't need to believe this unanimously to be willing to act on it. British Columbia (Canada) implemented a carbon tax in 2008 which is raising billions of dollars while nudging people to use less fuel. Look at two recent postings here

Climate Action Through a Tax Swap Describes a currrent initiative in Washington State to implement a state carbon tax. See numerous links within it.

More on BCs carbon tax shift. Posted in 2009 this discusses the reasons for the British Columbia's tax

3. Remove US Subsidies on Corn and Sugar

It is totally bizarre that at the same that we are thinking of taxing soft drinks for their sugar content, we are still spending billions on subsidizing corn (and hence high fructose corn syrup). US Department of Agriculture numbers show that in 2011 alone we spent 4.9 billion dollars subsidizing corn, which is  $16 per American. Visit the excellent website of  Environmental Working Group, which tracks agricultural subsidies and focus on Corn if you wish.

Remarkably, even farmers in Massachusetts benefit from the corn subsidy:

Corn Subsidies** in Massachusetts totaled $16.8 million from 1995-2011.

That works out to $4 per Massachusetts resident over 17 years. But the Massachusetts subsidy is nothing compared to Iowa which received

14.9 billion dollars ($4,866 per resident, or $286 per Iowa resident per year) over the same period. 2011 is not a particularly large outlier.

For further discussion of the serious problems with our crop insurance program consider this quote about US crop insurance.

"The most stunning evidence of the need to overhaul the current system is Dr. Babcock’s estimate that taxpayers
send $1 dollar to insurance companies and agents for every $1 dollar that goes to farmers."

Bruce Babcock "Giving It Away free: Free Crop Insurance Can Save Money and Strengthen the Farm Safety Net"
April 2012, (Professor of Economics at Iowa State University)

http://static.ewg.org/reports/2012/farm_bill/babcock_free_crop_insurance.pdf

4. Remove subsidies on US fossil fuel production, consumption, and depletion.

This follows from point #2 above. I know it is hard to do, but so is a Carbon Tax.

The surprising reason that Oil Subsidies Persist: Even Liberals Love them. Forbes, April 25, 2012.

We should not be subsidizing oil, coal and natural gas: 15.1 billion dollars in 2010 ($48 per American in 2010), according to OECD estimates.

5. Tax (more) people who do not purchase health insurance

As a health economist, I had to add at least one health related "bad".

The Affordable Care Act of 2010 includes provisions for taxing people who choose not to purchase health insurance, as it should, since they impose costs on the rest of us who do by: relying on charity care when they have emergency medical needs, relying on bankruptcy when they have high uninsured costs, and raising average premiums for insurance buyers since the people not buying insurance are on average healthier (and lower cost) than average. Hence this tax will be welfare improving, overall.

I thought about discussing/supporting taxes on obesity, smoking, or alcohol abuse, but see lots of problems with that, even those these are bads, often under the control of consumers.

6. Don't subsidize war

War is bad, and has a lot of negative externalities. (Yes, there are also some benefits.) In 2013 the US will spend $902 billion  on national defense (excluding police, fire, law and prisons). That is $2863 per American in 2013 alone on "defense". (Health and Education have mostly positive externalities.)

Brown University researchers maintain a web site on the cost of wars since 9/11

Here is one sobering sentence from a recent press release.

"The war bills already paid and obligated to be paid by the U.S. federal government as of fiscal year 2012 are $3.7 trillion in constant dollars."

That is $11,746 per US citizen...

There are many more bads that should be taxed and not subsidized, but I will end here.

For related discussion see the earlier blogs

#1 All Taxes and Budgets Should be Expressed as Dollars per Person

#2. Include Social Security and Medicare taxes when discussing tax burdens

Commonwealth Fund Report on Health Care Cost Control

The Commonwealth Fund has just come out with a new report outlining a strategy for containing health care costs in the US. It seems rather optimistic to me. Here is the opening two paragraphs and link.

Confronting Costs: Stabilizing U.S. Health Spending While Moving Toward a High Performance Health Care System, Authored by The Commonwealth Fund Commission on a High Performance Health System
January 10, 2013

Michael Chernew (Harvard) is the only economist on the Commission, which is mostly MDs and MBAs.

"Overview

The Commonwealth Fund Commission on a High Performance Health System, to hold increases in national health expenditures to no more than long-term economic growth, recommends a set of synergistic provider payment reforms, consumer incentives, and systemwide reforms to confront costs while improving health system performance. This approach could slow spending by a cumulative $2 trillion by 2023—if begun now with public and private payers acting in concert. Payment reforms would: provide incentives to innovate and participate in accountable care systems; strengthen primary care and patient-centered teams; and spread reforms across Medicare, Medicaid, and private insurers. With better consumer information and incentives to choose wisely and lower provider administrative costs, incentives would be further aligned to improve population health at more affordable cost. Savings could be substantial for families, businesses, and government at all levels and would more than offset the costs of repealing scheduled Medicare cuts in physician fees." from The Commonwealth Fund Report

The heart of their analysis is in the technical report by Actuarial Research Corp.

Jim Mays, Dan Waldo, Rebecca Socarras, and Monica Brenner "Technical Report: Modeling the Impact of Health Care Payment, Financing, and System Reforms" Actuarial Research Corporation, January 10, 2013

The areas they simulate are revealed in the table of content headings. Nice recent references.

Introduction .................................................................................................................................................. 1
I. Improved Provider Payment ................................................................................................................. 4
II. Primary Care: Medical Homes ............................................................................................................... 7
III. High-Cost Care Management Teams .................................................................................................. 13
IV. Bundled Payments .............................................................................................................................. 16
V. Modified Payment Policy for Medicare Advantage ............................................................................ 22
VI. Medicare Essential Benefits Plan ........................................................................................................ 26
VII. Private Insurance: Tightened Medical Loss Ratio Rules ...................................................................... 30
VIII. Reduced Administrative Costs and Regulatory Burden ...................................................................... 32
IX. Combined Estimates ........................................................................................................................... 35
X. Setting Spending Targets .................................................................................................................... 37
Appendix A. Creating the "Current Policy" Baseline ................................................................................... 40

 

Be Ready for the Trillion Dollar Coin!

In case you have not been paying attention, there is growing sentiment in favor of the Platinum Coin Seigniorage (PCS) and the Trillion Dollar Coin.

Here are two solid posts on it, one by economist Paul Krugman, the other by Philip Diehl, former director of the US mint .

The crux of the issue is that the debt ceiling,  created by legislation of our congress, is inconsistent with the powers enumerated in the constitution, specifically the fourteenth amendment.

Be Ready To Mint That Coin

http://krugman.blogs.nytimes.com/2013/01/07/be-ready-to-mint-that-coin/?smid=tw-NytimesKrugman&seid=auto

Co-author of platinum coin law weighs in on trillion dollar coin

http://www.dailykos.com/story/2013/01/08/1177211/-Co-author-of-platinum-coin-law-weighs-in-on-trillion-dollar-coin?detail=email

Here is the relevant sentence in section 4, of the 14th amendment of the US constitution.

Section 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned.

This amendment was passed in July 9, 1868 and "Section 4 confirmed the legitimacy of all United States public debt appropriated by the Congress." Wikipedia.

Here is the Wikipedia discussion of the issue, somewhat dated.

The issue of what effect Section 4 has regarding the debt ceiling remains unsettled.[52] Legal analyst Jeffrey Rosen has argued that Section 4 gives the President unilateral authority to raise or ignore the national debt ceiling, and that if challenged the Supreme Court would likely rule in favor of expanded executive power or dismiss the case altogether for lack of standing.[53] Erwin Chemerinsky, professor and dean at University of California, Irvine School of Law, has argued that not even in a "dire financial emergency" could the President raise the debt ceiling as "there is no reasonable way to interpret the Constitution that [allows him to do so]".[54]

 

#2 Include Social Security and Medicare taxes when discussing tax burdens

Time to Change the Tax Discussion #2

This is the second in a five part series on Taxes.

Far too much of the discussion of tax burdens has focused on the federal income tax rates while the federal payroll taxes - Social Security and the Medicare tax - get minor attention. This was epitomized by Mitt Romney's reference to 47 percent of Americans as not paying any taxes, when what he meant was not paying any Federal income taxes. This line of discussion ignores the fact that low income earners pay Social Security and Medicare taxes. Almost every economist would agree that these payroll taxes affect net pay and incentives in fundamentally the same way as income taxes and hence matter greatly. While true that these are earmarked taxes, they are nonetheless important contributions to federal revenue and affect deficits. In 2012 The federal income tax contributed 32 percent of total federal revenue, while social security and medicare payroll taxes contributed 23.9 percent.  Since these social insurance taxes are either proportional (Medicare tax) or regressive (SSI, since it stops after $110,000 in 2012), they substantially change the overall progressivity of the taxes. the following figure is from the Concord Coalition, based on US Treasury data.

https://spreadsheets.google.com/spreadsheet/oimg?key=0AqDf7XX8MI2BcGVxYmhHME92YWgtTXQ1bm84YTlpZkE&oid=2&zx=n74qil40ph5k

U.S. Treasury Department, Final Monthly Treasury Statement from Sept. 2012

http://www.concordcoalition.org/learn/budget/federal-budget-pie-charts

In an earlier blog (What are current marginal tax rates?), I calculated marginal tax rates for various levels of taxable income, which show that currently people earning $70,700 to $142,700 pay the highest marginal tax rates (38.1% including federal, SSI and Medicare taxes, higher if you add in Massachusetts income taxes).Warren Buffett basically referred to this same phenomenon when he said that his secretary paid higher taxes than he does on earned income.

Allowing the Bush tax cuts to expire will return those earning over $388,350 to paying the highest marginal rates (43.4% including the Medicare and ACA taxes).

For related discussion see the earlier blogs

#1 All Taxes and Budgets Should be Expressed as Dollars per Person

#2. Include Social Security and Medicare taxes when discussing tax burdens

 

All Taxes and Budgets Should be Expressed as Dollars per Person

Time to change the discussion #1

This is the first of five posts on my blog on how discussion of taxes and budgets in the US needs to change to improve decision-making.

Recent political debate and the media throws around costs of millions, billions and trillions of dollars even though there is no easy way for an ordinary citizen to evaluate the meaning of these terms. All of these are very big numbers. Consider the following numbers, sorted from largest to smallest. Which ones should we be worrying about?

Sample of recent numbers in the news (or that should be there)

$16.4 trillion US National Debt [1]

$3.7 trillion Total cost of wars in Iraq, Afghanistan and Pakistan [Reuters,2]

$1.2 trillion Size of tax increases and budget cuts in the fiscal cliff [3]

$1.1 trillion Federal deficit for 2012 [4]

$849 billion What is at stake in the Bush-era tax cuts for the wealthy, those earning more than $250,000, over ten years. [ABC news,5]

$ 807 billion The US government’s estimate of the direct cost of the war in Iraq thru FY2012. [6]

$ 571 billion The US government’s estimate of the direct cost of the war in Afghanistan and Pakistan thru FY2012 [6]

$ 100 billion Cost of the Iraq war that was used in discussions just before attacking Iraq [7]

$ 1.4 billion Financial spending for all presidential candidates, 2011-2012. [8]

$ 446 million The FY2013 annual budget for the Corporation for Public Broadcasting. [9]

$192 million The cost of the 2010 Newton North High School serving half of the Newton MA population [10]

$  83 million Campaigning expenses, all candidates including outside spending, on Elizabeth Warren vs. Scott Brown Massachusetts Senate race, 2012. [11]

$ 11 million Proposed tax override for Newton MA in 2013 to pay for schools [12]

$ 54,000 Cost of running the March special election to vote on the Newton override. [13]

The relevant populations

US population: 315 million people

MA population:  6.6 million

Newton population:  86,000 (half served by Newton North High School, the other by Newton South High School.)

Costs revisited with Ellis commentary

 

$ 52,000                US National Debt per Person -    High, but can be reduced if we try hard.

$12,000                 Total cost of wars in Iraq, Afghanistan and Pakistan per Person Not worthwhile to me, and 23% of our total US debt!

$ 3,800                  Per person size of the 2013 fiscal cliff, in taxes and reduced spending.

$ 3,500                  Extra cost per person per year to eliminate the federal deficit for 2012. Although similar to the preceding, note that this is for one year, while the above is over ten years… Even jumping over this cliff does not eliminate our deficit.

$ 2,700                  Ten-year cost per person of the Bush-era tax cut on those earning more than $250,000. A lot is at stake here, not small change.

$ 270 Average per year cost per person of Bush-era tax cut on >$250k Doesn't look like such a big number, and this is how much it reduces our per person annual deficit.

$13,500 Average per year cost per wealthy person (top 2%) of Bush-era tax cuts. Recall that the average income of this group is way higher than $250k

$ 2,600                  The official direct cost per person of the war in IraqWhy isn’t there more discussion of this?

$ 1,800                  Cost per person of the Afghanistan war. Maybe Afghan was worthwhile, but I doubt it.

$   317                    Initial cost per person of the Iraq war used in selling it to the public. How could we have been so wrong?

$       4                    Cost per person of the US presidential campaign. Maybe higher than I wish, but it is not going to break our budgets. Plus it is all voluntary, unlike the taxes.

$       1                    Cost per person of federal funding of public TV and radio. A small portion of their total budget. Why are we talking about this at all?

$4,500                   Cost per Newton resident of the Newton North High School. High, but I bet we more than made it back in increased property values. Even ignoring that more than half was funded by the state, if there are 4 people per household, then this is only 2.6% of median property value in Newton.

$    13                     Cost per Massachussetts resident of the 2012 Senate race. Seems reasonable expense for making big decisions. Plus it only happens every six years for each senate race, so only $2 per year per person.

$  128                     Cost per Newton resident per year of proposed tax override to help pay for schools. Definitely affordable.

$       .62                 Per person cost of running Newton’s March special election. Should not have even made the papers. Informed decision-making costs money.

Lessons

Big cost numbers are easier to understand when expressed as a cost per person.

Some big numbers don’t look very scary. Others look worse.

The numbers that get a lot of play in the media are not necessarily the right numbers.

Thought to Ponder: Why is it that almost no one in Newton is worried about having incurred a debt for one school in the amount of $4500 per resident, while citizens, and our Congress in particular, seems paralyzed to contemplate reducing our federal debt by a similar amount?

Citations

[1]  http://www.brillig.com/debt_clock/

[2] Reuter. 2012. Cost of war at least $3.7 trillion and counting.  http://www.reuters.com/article/2011/06/29/us-usa-war-idUSTRE75S25320110629 based on estimates from “Cost of War at http://costofwar.com/ which is sponsored by the National Priorities Project.

[5] http://abcnews.go.com/Politics/fiscal-cliff-bush-tax-cuts-expire/story?id=17907791#.UMnzFXfgztE

[4] http://www.gpo.gov/fdsys/search/pagedetails.action?packageId=BUDGET-2012-BUD

[5] http://abcnews.go.com/Politics/fiscal-cliff-bush-tax-cuts-expire/story?id=17907791#.UMoiRnfgztE

[6] Congressional Research Service, 2011. The Cost of Iraq, Afghanistan, and Other Global War on Terror Operations Since 9/11. http://www.fas.org/sgp/crs/natsec/RL33110.pdf updated continually at “Cost of War at http://costofwar.com/.

[7] Tom Russert Interview with Vice-President Dick Cheney, “NBC News’ Meet the Press," Transcript for March 16, 2003.https://www.mtholyoke.edu/acad/intrel/bush/cheneymeetthepress.htm

[8] Center for Responsive Politics, 2012.Most Expensive Races 2012 Overview

http://www.opensecrets.org/overview/index.php and

[9] Corporation for Public Broadcasting. 2012 Fiscal Year 2013 Operating Budget. http://www.cpb.org/aboutcpb/financials/budget/

[10] Newton Tab. 2012. Newton North High School final cost $6M less than expected. http://www.wickedlocal.com/newton/news/x1334618956/Newton-North-High-School-final-cost-6M-less-than-expected#ixzz2EwkW8uLrhttp://www.wickedlocal.com/newton/news/x1334618956/Newton-North-High-School-final-cost-6M-less-than-expected#axzz2EwkHptlI

[11] Center for Responsive Politics, 2012.Most Expensive Races 2012 Overview http://www.opensecrets.org/overview/topraces.php?cycle=2012&display=allcandsout

[12] http://www.newtonma.gov/gov/executive/override.asp

[13] Newton Tab, December 12, 2012. Table showing breakdown of the various costs of the special election in March, 2013 on the override.

Americans Elect is on Ballot in 25 states

Looking ahead 20 years, it is inconceivable to me that the US will sustain its current archaic primary system for selecting presidents. The new party Americans Elect is one possible new approach. It is getting little publicity relative to the Republican Primary, even though AE is now on the ballot in 25 states. Along with many others, I prefer Obama to the current roster of candidates at Americans Elect, (which includes BU's own Larry Kotlikoff) but I look to AE to play an important role at debates and in our national discourse, even for the coming election. Here is a recent press release from their web site, at http://www.americanselect.org. Worth a visit.

Press Release: AE Hits Halfway Mark for Ballot Access!

WASHINGTON, D.C., APRIL 19, 2012 - Americans Elect has secured ballot access in 25 states. Over 2.5 million people have signed petitions across the country. Demand for a third choice in November is real and Americans Elect is offering that choice. Citizens from across the political spectrum are signing up to change this election and let the people, not the parties, nominate and elect the leadership in the country.

<more>

http://www.americanselect.org/news/4-2012/press-release-ae-hits-halfway-mark-ballot-access