The U.S. Debt Buildup Before 2008

Source of the graph

I recently posted showing that the United States was doing rather well, as compared with other developed nations, in pulling down the debt as percentage of GDP since 2008. This graph shows were that debt accumulated. There was a sharp change early in the Great Depression (decrease in GDP) followed by a long recovery lasting until the early 1950s. There was a long slow buildup from that low until the early 1980s when the Reagan administration budgets kicked in. The rate of increase was somewhat moderated from the late 1980s until the 2000s, the administration of George W Bush. If we had not had the Reagan and George W Bush administration periods of government spending and cutting taxes, would we have gotten into the problems that led to the crash of 2008?

Think about that when the Republicans try to blame Obama for the economic problems we face in 2012!

The top one percent

Source: The Economist

The average household income of the 1% was $1.2m in 2008, according to federal tax data. The ultra-rich skew that average upwards: admission to the 1% began at $380,000 in 2008. The Congressional Budget Office puts the cut-off lower, at $347,000 in 2007, or $252,000 after subtracting federal taxes and adding back transfers. Measured by net worth, rather than income, the top 1% started at $6.9m in 2009, according to the Federal Reserve, down 23% from 2007.

I am tempted to let this data speak for itself, but I will point out that the portion of the total income obtained by the tope 0.1 percent of the tax payers in the United States peaked at the Great Crash in 1929 and at the crash of 2008. The bubbles, represented by the steep uphill climb of the 1920s and 2000s, burst. The graph shows that the share of GDP captured by the top tiny portion was relatively low during the long period of relatively stable economic growth from the end of World War II to the election of Ronald Reagan.

Year-to-Year Increases in US GDP (as Percent GDP) and Debt (as Percent GDP)

Source: Wikimedia Commons

Did you know this after all the discussion of the debt crisis

The figure above is from The Economist. It shows the total debt in six countries, that is government debt plus other forms of debt. Note that among these six developed economies, the United States has the lowest total debt as a portion of GDP and also the fastest rate of pull down of that debt.

This is true because government stimulus programs have provided for an economic recovery that helped companies and people to pay off their debts, debts such as credit card debt and debt from tuition loans. The Economist feels that this U.S. approach is more successful than that used by the advanced European economies. Of course. the Germans didn't get into the same debt problems in the first place and so are less concerned with pulling it down.

Where value is added in the Apple iPad value chain

The Economist has an article pointing out that U.S. trade statistics focus on the final value of products imported into the United States, not the overseas value added in those products. The figure above apportions the costs of an Apple iPad, noting that the labor accounts for less than the profits to Apple, and that South Korea and Taiwan gain as much or more employment in its production as China. I think this was brought to public attention by my former professor, Ken Kraemer  and his colleagues at the University of California, Irvine.

A second article in the same edition points out that outsourcing R&D from the United States to Asia (where it can be done cheaper) is not necessarily bad for the U.S. economy if the entrepreneurial expertise in the United States can be used to capture remunerative portions of the value chain. That is perhaps true, but of course R&D capacity grows with use and there is no shortage of entrepreneurial talent in Asia. Indeed, experience has suggested that R&D units that start with simple development efforts may work up to important research producing disruptive innovations.

Moreover, if you want jobs in the United States industry better reserve some portion of the value chain that creates those jobs. If it is only profits feeding investor income that is brought to the United States, we will have richer rich people and lots of people involved in non-tradable services.

Good News On Polio

The Economist has an article noting that India has not had a case of polio for a year and appears well on the way to the three year period required to declare the disease eradicated. The disease is still being found in Afghanistan, Pakistan and Nigeria. Credit is given to Rotary International which has put $800 million into the polio eradication program over the last quarter century. Of course, many other people and organizations must have participated.

Thus polio seems on the brink of joining smallpox and guinea worm on the list of diseases that no longer threaten mankind. I certainly hope that the program will continue to wipe out the disease in the last three counties.

Recall that Nigerian in the north were refusing vaccination some years ago due to false stories about the risks involved, leading to an epidemic; infected people joined the Haj and spread the disease to pilgrims from several other countries, restarting the disease in their countries.

Governments in Nigeria, Pakistan and Afghanistan are weak and apparently do not have full control of all of their countries. It is important that the World Health Organization and other organizations that will be seen as neutral and well meaning lead the efforts to complete eradication in these places.

Thinking about knowledge intensive economic goods and services

From Science and Engineering Indicators Digest 2012:

D. HIGH-TECHNOLOGY MANUFACTURING
The United States, the EU, and China generate most of the value in the world’s high-technology manufacturing output. The worldwide recession changed trends in high-technology output growth around the world. U.S. growth nearly halted, and the EU, Japan, and Asia-8 experienced contraction in 2008 and 2009. Only China’s output continued to grow rapidly, albeit at a somewhat slower pace than its previous double-digit growth.
E. HIGH-TECHNOLOGY EXPORTS
Exports of high-technology manufactured goods (excluding intra-EU and China-Hong Kong trade) expanded from $761 billion in 1996 to $2.14 trillion in 2010, amid major shifts in countries’ export positions, including a 10% recession-induced drop in 2009. The 2010 recovery was 6% above 2008 peak levels. The combined China and Asia-8 exports amounted to half the world’s total, with Asia-8 exports including substantial intermediate goods trade with China and other Asian economies. The United States and EU each accounted for about 15% of world high-technology exports.

The Science and Engineering Indicators 2012 Report also includes a category for Commercial Knowledge Intensive Services, an area in which the United States appears to be doing better than in high technology manufacturing, not surprising since the U.S. economy is so service intensive.

It occurs to me that the meaning of "high" technology changes with time. Once steam engines and telegraph were high technology, perhaps 150 years ago, but no longer. When I was a young engineer 50 years ago, computers were high technology but a computer of comparable power to those of my youth, if still produced, would be a toy. Personal computers are now produced as commodities for a mass consumer market.

Of course this presents a problem for the National Science Foundation and other organizations seeking to record and present statistics describing the evolution of technology markets. It is important to use definitions that remain the same so that the data are comparable but as technology diffuses the very idea of "high technology" changes.

The introduction of computers, semiconductors, and integrated circuits has led to a massive increase in the manufacturing of information technology, and the introduction of lasers, fiber optics and satellite communications led to a massive increase in the manufacturing of communications technology. Over time there developed large consumer markets for ICT devices, while there also remains a market for high tech ICT devices such as super computers. The United States has depended on a leadership in knowledge intensive services and high technology for exports in increasingly globalized markets, and ICT exports have been an important part of that knowledge intensive production, but consumer ICT manufacturing and exports have largely moved to Asia.

The key competitive advantage for which the United States economy searches come from disruptive sources of innovations, such as those which led to the Information Revolution in the mid part of the 20th century (or steam engines and mechanical devices that led to the industrial revolution, or to electrical machinery and internal combustion engines that led to a second industrial revolution around the turn of the 20th century). Where are we to find those disruptive innovations?

Where will the next disruptive source of innovations arise? That question is important, because the answer suggests an area in which the Government should be focusing its support for fundamental research and development.

Perhaps that source is biotechnology, which should be leading to increasingly rapid rates of innovation in medical, agricultural and materials processing technologies. However, one questions whether those will be disruptive or merely incremental innovations.

Author of this graph was Wgsimon

Examining the graph of Moore's famous law on the transistor count per microprocessor (doubling every two years), one can see that the long term improvement of the technology was based on a large number of incremental innovations. It may well be that biotechnology will lead to many incremental innovations in crop cultivars, in treatments for medical problems and in industrial processes, rather than transformational innovations such as the first integrated microprocessor. Alternatively, it may lead to transformational innovations with respect to the treatment of individual diseases, but with limited economic importance if those diseases are of relatively low incidence.

Many nations are investing in fundamental research and development on nanotechnology, not only in the production of smaller and smaller semiconductor devices, but also in the production of other applications of materials produced on the nano scale. It seems likely that this is an area that will be increasingly important economically, but we will have to wait to see just how important.

My bet is that we will see disruptive technologies coming out of cognitive science and neurobiology. Some of them will be medical, allowing better diagnosis and treatment of mental diseases and problems. Some will be educational, leading to improved learning. Some may be simply improving the intellectual performance of people. Recall that the Flynn Effect has been known for many years (according to one study, U.S. average IQ scores increased by 20 points from 1932 to 1997). The products of such innovations may not be financial, but they would be hugely important. However, a smarter work force might also be a powerful element in global competition.

Will we find other disruptive social technologies derived from knowledge obtained from the social sciences? Perhaps! I would love to see political institutions work better than they are in the United States, not to mention may other countries. Perhaps those political institutions could come up with better approaches to avoiding the periodic recessions and depressions that afflict the economy. Perhaps they could lead to a society with more opportunity and less prejudice.

We need new words to describe what the brain does!

Words reflect our mental models, or at least the mental models when they came into use. The sun "rises" and "sets" because the concepts of sunrise and sunset come from a time when people thought that the sun orbits the earth rather than the earth revolving around its axis. We describe Europe and Asia as separate continents from a time in which geographical models were limited to a small part of the world. Out names for the months come from Roman times and the names of the days come from Roman and Norse cultures.

It seems to me that our language about brain and mind, awareness, consciousness, and thinking need to be updated with improving understanding of the brain in order to clear our thinking about thinking.

Modern understanding of the brain sees it as very complex, with many layers of processing. Even when we are "unconscious" parts of the brain are working to maintain life. "Sleep" is not a single state but a set of states with different brain function.

We use the term "unconscious" as if it were a place, while it implies brain activity which (probably like most brain activity) is not done consciously.

We say that we receive sensory input of which we are "not aware". On the other hand, if something occurs in sensory input that some portion of the brain perceives as worthy of attention, it is brought to our attention. Thus, in some sense we are "subconsciously aware" of the input. But that appears to be an oxymoron, a contradiction in terms as we use "subconscious" and "aware".

There is a condition called "agnosia" in which the brain is unable to attach meaning some kind of sensory input.  Aphasia, for example, is a form of agnosia in which language ability fails in some way. "Agnosonosia" is a condition in which a person does not know that they are subject to some form of agnosia, perceiving his/her brain function as normal when others perceive it as failing in some form of comprehension. I guess that would be being unconscious of some are of which one was unconscious.

See the problem with the language we use?

Another image from NASA

This great photo from NASA via The Washington Post shows a giant blob of plasma ejected from the sun which is to hit the earth today. Not to worry as it is not supposed to be dangerous.

Check the Post article for a great streaming video of the ejection!

What if he had Perry's Brains and Paul's looks?

There is an old story of a very smart man (variously George Bernard Shaw, Winston Churchill, Groucho Marx, and Albert Einstein) sitting next to a beautiful women. She remarked that they two could have wonderful children with his brains and her beauty. He replied, but madam, what if she had your brains and my beauty.

In the South Carolina primary buildup, a number of voters remarked that it was too bad that they could not clone a candidate with all the better characteristics of each of the four actually running. But what if they got a candidate with all of the bad characteristics:

• Someone who thought like a very rich man with no understanding of what life is like for the rest of us, nor much sympathy for those in need.
• Someone with the kind of ethics that might see him disciplined by the Congress and eventually driven out of office, someone who would accept huge payments from a failing mortgage firm (one that would help drive the financial system into crisis and the nation into a Great Recession), sleeping around during his serial marriages and cheating on his sick wife, willing to close down the government to make a political point.
• Someone with a Christian fundamentalist viewpoint that would alienate most of America, and who would be a super hawk getting us into military entanglements we can not at the moment afford, someone who admits he can not be elected president but advises Republicans to vote for him anyway.
• Someone who would espouse libertarian views, especially on the economy, that would be seen as extreme by most voters.
• Like two or more of the current candidates, someone who flip-flops on issues according to what sells in the electoral marketplace, with no discernible governing philosophy, with no discernible understanding of foreign policy, with no military experience and with no experience suggesting he could run a huge enterprise such as the federal government.

Obama has spent several years learning how to do a really hard job. Do we want to start all over again with someone who would have to learn how to lead the administration, the government and the nation?

Incidentally, I have always like Groucho Marx, especially since my father won the jackpot on his quiz program, You Bet Your Life some 60 years ago.

Lets make conspicuous consumption by the rich more expensive for them!

Robert Frank, in his book The Darwin Economy: Liberty, Competition, and the Common Good, suggests that we should have a strongly progressive consumption tax. I confess that I don't understand how that would work. For example, think of a family that buys a second house at the beach planning to rent it out when they could, but to live in it when a renter could not be found; what portion of the cost of the house should be considered investment to produce future income and what should be considered consumption? Would you consider the total price of the house to be divided between investment and consumption at the time of the purchase, or merely the down payment with the interest paid on the loan so divided when the interest was paid? If the latter, would the actual experience with rental be used to divide investment from consumption or would the declared original plan? If the latter, how would the government decide whether the declared plan was reasonable or merely a figment declared to avoid taxes?

Frank makes what seems to me to be a good point. He compares the tendency of increasing conspicuous consumption to increasing conspicuous consumption to the evolution of huge antlers in elk. The antlers have an advantage for the individual in sexual competition to obtain large harems of females (and thus to pass on the genes for huge antlers), but the species winds up with all its males more vulnerable to predators since the huge antlers slow them down but don't help in fighting off predators. Rich people, who are getting ever richer, are spending more and more on consumption -- bigger houses, more expensive cars, more houses, hugely expensive parties, etc. In doing so, they invest less. While China is investing 50 percent of GDP with household saving accounting for 35 percent of GDP, the United States is investing only 10 percent of GDP, half of which comes from household saving.

Frank suggests that conspicuous consumption is fueled by the desire to live in a slightly more lavish lifestyle than ones peers. A rich man wants a house slightly more lavish than his neighbors or business colleagues, a car slightly more luxurious. But since those people also want slightly more lavish and luxurious lifestyles, they too will upscale. Moreover, the just less affluent will have consumption desires based on their comparison with their just more affluent acquaintances and thus they too will upscale, and so it goes.

Like me, Frank was a Peace Corps volunteer long ago who lived in two tiny rooms, neither embarrassed by their size nor by the limited income that made that accommodation necessary; like me, Frank recalls that time as among the happiest in his life. It is not the size nor the luxury of one's home that makes one happy. Indeed, the huge manor houses of the British aristocracy often made them quite unhappy.

Of course, it one is so poor that one is hungry, unable to afford medical attention even when it is needed, unable to properly educate one's children, with no hope of escaping that poverty, the condition affects one's happiness. However, as Frank points out, there are decreasing returns in happiness to increasing wealth and income and to increasing consumption. When the real estate bubble was at its biggest and new houses were much more than 2000 square feet in size on the average, Americans were no happier than they were a generation earlier when houses were some 1600 square feet in size. Conspicuous consumption does not buy happiness. Indeed the increasing inequality of wealth and income in our society seems clearly to reduce our happiness, if not by making most of us feel deprived by comparison with the more affluent, then by the reduction of our future potential by the reduction of investment.

Frank also points out that with more income, people tend to consume more, including the very rich and with higher prices, people consume less. The first seems obvious. Frank points out that where real estate costs are outlandish, such as in Manhattan, even the rich live in smaller places while where they are low, for example Wyoming, people of comparable wealth own more property and larger houses.

One step to reduce competitive consumption would be to have more progressive taxation. For the rich to pay lower percentage of tax on their income makes no sense. Lets at least end the Bush tax cuts for the very rich.

Another step that I think would be feasible would be to limit tax exemptions for mortgage interest paid. We may want to encourage home ownership but lets not encourage people to spend outlandishly on residences. Lets say that the maximum tax exempt interest on personal residences would be $200,000 or $300,000.

We might also impose progressive excise taxes on luxury goods. Tax a $50,000 car much more than a $20,000 car, a $200,000 car much more than either. Tax the collector cars, art and other collectibles that sell at outrageous prices heavily. (Except of course for those purchased by public museums for public edification, which would also be cheaper without so much the plutocratic competition).

I doubt that such policies can be enacted now with our Congress so subservient to money interests, but they would be good for the country.

Mozilla on the Strike against SOPA and PIPA

Here is the content of an email I received:

Today, Mozilla is joining in a virtual strike with other leading public interest organizations and tech companies, from Wikipedia to Reddit to Google, to protest the PROTECT IP Act (PIPA) and its companion legislation in the US House, the Stop Online Piracy Act (SOPA) -- and we need your voice. 

The fact is that it's been a great couple of weeks in the fight against the PROTECT IP and Stop Online Piracy Acts -- the White House came out against them, and the growing chorus of opposition both in and outside of government has been heartening. 

But the fight is not over, particularly in the Senate. There's a week left until Senators return to Washington from their districts, when their vote is scheduled on the PROTECT IP Act -- can you help make one last push while they're still nearby, by calling their local offices and asking them not to support PIPA? Get started here: 

http://stopthewall.us/ 

And to see how Mozilla is striking -- and for other ways to take action today -- check out: 

http://mozilla.org/sopa 

No matter what happens, this isn't the last step -- there's currently a vote on the PROTECT IP Actscheduled for next week, once the Senate is back in session, and if it goes forward we'll be in touch with how to make the biggest difference beforehand.

Oppose SOPA and PIPA

(T)he important task of protecting intellectual property online must not threaten an open and innovative internet.
Obama administration

This is easy. Do I want to support Google (motto: "don't be evil"} and the Obama administration or Rupert Murdoch (remember the phone hacking scandal)? Google, Wikipedia and other websites are campaigning today to protect their services.

Two bills before Congress, known as the Protect IP Act (PIPA) in the Senate and the Stop Online Piracy Act (SOPA) in the House, would censor the Web and impose harmful regulations on American business. Millions of Internet users and entrepreneurs already oppose SOPA and PIPA.

Sign the petition telling the Congress you are with those who want a free internet and against those who are willing to limit access to protect profits.

I just heard a Brit spokesman for the content industry on BBC News urge Americans to support these bills, saying he didn't know anything about U.S. law. The bills would authorize the U.S. Government to block sites abroad. It would impose on services like Wikipedia and Google, not to mention Twitter and Facebook, the responsibility to police all the content that passes over them.

These laws, in spite of the advertising, are not intended to protect the rights of writers, musicians, and others who create content. They are part of the effort by big media companies to protect their profits. They are part of the same mindset that extended copyright to the life of the author plus 70 years. Do you think it really encourages creativity to know that people will not be able to copy your paper or cover your song for 70 years after you die without paying the publisher?

How do my last two posts tie into the theme of this blog

The theme of this blog is "thoughts about knowledge for development". International development has two key themes:

• Development strategies that further enrich the rich in the hope that the wealth will trickle down don't work for the poor.
• Economic Development programs work for all when accomplished in a framework of pro poor policies.

The trend towards enriching the rich in the United States, leaving the middle class and the poor behind, is clearly dangerous. The first step in dealing with the problem is gathering the knowledge of the situation. In fact enough information exists to amply demonstrate the problem that the nation faces. However, the information has not been internalized by the voters, and it is necessary that that information be converted into knowledge.

Both the Occupy movement and the Tea Party movement reflect deep dissatisfaction of the public with the status quo. Main Street is suffering while the government has bailed out Wall Street and the plutocrats are more comfortable than ever, and people know that.

The voters do not seem to realize that corporations have organized to exercise political power in support of the interests of their top executives and their major stock holders, and that they are using money to do so. Some of that money goes into electing people who will support the corporate positions. By funding candidates in key swing elections a lot can be done with relatively modest funding. The current system in which sitting legislators almost always get reelected means that getting your man in once makes it a lot easier to do so again and again. The role of big money in elections has just gotten worse with the Supreme Court's decision that corporations have the same rights of free speech as people, and the development of the SuperPACs.

Voters don't seem to understand how much corporations are putting into lobbying, and the lobbyists are paying off big. Here is the finding from one study:

The lobbying industry has experienced exponential growth within the past decade. The general public, the media, and special interest groups perceive lobbying to be a powerful mechanism affecting public policy. However, academic research finds inconclusive results when quantifying the rate of return on political lobbying expenditures. In this paper we use audited corporate tax disclosures relating to a tax holiday on repatriated earnings created by the American Jobs Creation Act of 2004 to examine the return on lobbying. We find firms lobbying for this provision have a return in excess of $220 for every $1 spent on lobbying, or 22,000%. Repatriating firms are more profitable overall, but surprisingly, profitability is not a predictor of repatriation amount. Rather, industry and firm size are most predictive of repatriation. Cash on hand, a proxy for ability to repatriate, is not associated with the repatriation decision or the repatriation amount. This paper provides compelling evidence that lobbying expenditures have a positive and significant return on investment.

Part of the reason that voters don't know all that they should know is that they aren't sufficiently interested to find out. Part however, is the failure of the news media and the media in general. We still depend on television and print media for a lot of our information, but increasingly we focus on media that provide news biased towards our parochial interests. We listen almost always to people who purvey the myths to which we already subscribe or who entertain rather than inform. The Internet makes a huge amount of information available, and it only took a few hours to put together the last two posts, but how many people really mine the Internet for credible information that would inform their political behavior?

As the book Bowling Alone: The Collapse and Revival of American Community showed several years ago, the famous tendency of Americans to organize civil society to work together for common purposes has greatly diminished. It used to be that our local organizations stimulated political interests and provided political information we need. Especially problematic for the middle class is how weak the unions have become. According to Wikipedia:

In 2010, total labor union density (the percentage of workers—both public and private—belonging to a labor union) was 11.4% in the United States. For comparison, it was 18.6% in Germany, 27.5% in Canada, and 70% in Finland.[1] Union membership in the private sector has in recent years fallen under 9% — levels not seen since 1932.

Voters can reverse the political trends that have led us to more and more inequality with knowledge of those trends and their impact, but only be organizing to do so.

This and the previous two posts are a very small effort to promote that organization. I suspect that it need not be done via traditional face to face organization as in the past, but via online organization.

Inequality in the United States is a Civil Rights Problem

The increasing difference in income in the United States is linked inextricably to inequities in the opportunities for youth, poor health and especially lack of access to education that I find unacceptable. As my last post indicated, there is good evidence that these changes are not simply "the way things are", but are significantly the result of government policies that in turn came from the influence of money on policy.

Source: Congressional Budget Office

 For the 1 percent of the population with the highest income, average real after-tax household income grew by 275 percent between 1979 and 2007
 For others in the 20 percent of the population with the highest income (those in the 81st through 99th
percentiles), average real after-tax household income grew by 65 percent over that period, much faster than it did for the remaining 80 percent of the population, but not nearly as fast as for the top 1 percent.
 For the 60 percent of the population in the middle of the income scale (the 21st through 80th percentiles), the growth in average real after-tax household income was just under 40 percent.
 For the 20 percent of the population with the lowest income, average real after-tax household income was about 18 percent higher in 2007 than it had been in 1979. 

As a result of that uneven income growth, the distribution of after-tax household income in the United States was substantially more unequal in 2007 than in 1979: The share of income accruing to higher-income households increased, whereas the share accruing to other households declined.

This data from the CBO is for real (inflation-adjusted) average household income, measured after government transfers and federal taxes. The share of total market income (labor income such as cash wages and salaries and employer paid health insurance premiums, business income, capital gains, capital income, and other income) for the top one percent of households nearly tripled over the period, leading to its share of total national income increasing from about ten percent to more than 20 percent. Tax policy increased the share of income for the rich.

The share of after-tax household income for the 1 percent of the population with the highest income more than doubled, climbing from nearly 8 percent in 1979 to 17 percent in 2007.

Worldwide Poverty is Measured in Other than Income Terms 

I quote from a Department of Health and Human Services Fact Sheet:

In 2007, nearly 40 percent of children in the United States lived in low-income families — families with incomes at or below 200 percent of the federal poverty level (FPL). Youth from low-income families are vulnerable to poor outcomes as adults, as these youth often lack the resources and opportunities found to lead to better outcomes. This fact sheet compares the young adult outcomes and adolescent risk-taking behaviors of youth from low-income families to those from middle-income (201–400 percent of FPL) and high-income (401 percent of FPL or higher) families. All differences discussed below are significant at the 95 percent confidence level or above.

• Youth from low-income families engage in more risk behaviors during adolescence (3.5 mean cumulative risks) than youth from middle-income (3.2 mean cumulative risks) and high-income (2.9 mean cumulative risks) families.[2]

• Youth from low-income families are more likely than youth from middle- and high-income families to have sex before age 16, become a member of a gang, attack someone or get into a fight, steal something worth more than 50 dollars, and ever run away.  However, youth from low-income families are not more likely than youth from middle- and high-income families to use alcohol and marijuana, sell illegal drugs, or destroy property.

• Seven percent of young women from low-income families have a child by age 18, while only 2 percent of females from middle-income families and 1 percent of females from high-income families have a birth by this age.

• Nearly a third of youth from low-income families (29 percent) fail to earn high school diplomas, approximately three times greater than the percentage of youth from middle-income families (10 percent) and roughly six times greater than the percentage of youth from high-income families (5 percent).[3]

• Only one in ten youth from low-income families (10 percent) go on to graduate from a four-year college, compared with over a quarter (28 percent) of youth from middle-income families and half (50 percent) of youth from high-income families.

• One in five youth from low-income families (20 percent) are charged with an adult crime by the age of 24, which is higher than the number of youth from middle- and high-income families (16 and 12 percent, respectively).

• Less than half of youth from low-income families (44 percent) remain consistently-connected to school and/or the labor market between ages 18 and 24, a lower share than among youth from middle- and high-income families (67 and 75 percent, respectively) (see Figure 1).[4]

• Roughly 1 in 5 youth from low-income families (18 percent) never connect (making extremely short, or no connections to school and/or the labor market between ages 18 and 24), while only 1 in 50 youth from high-income families (2 percent) fall into this category.

In the following sections I look at health, education and crime.

Source: New York Times (2008)

Gopal K. Singh, a demographer at the Department of Health and Human Services, said “the growing inequalities in life expectancy” mirrored trends in infant mortality and in death from heart disease and certain cancers.

In 1980-82, Dr. Singh said, people in the most affluent group could expect to live 2.8 years longer than people in the most deprived group (75.8 versus 73 years). By 1998-2000, the difference in life expectancy had increased to 4.5 years (79.2 versus 74.7 years), and it continues to grow, he said.

 Percentage Distribution of Parental Expectations of Academic Attainment

 for Children in Grades 6 through 12,

Source: Parental Expectations for Children's Academic Attainment

 The left hand columns are for 2003, the right hand columns for 2007. Parental expectations for the poorest households not only are much less than for more affluent households, but they actually went down.

Only about half of parents with annual incomes of less than $25,000 expect their child will attain a four-year-college degree, compared with more than eight in ten parents with incomes over $75,000.

And from the National Center for the Victims of Crime:

In 2010, households in the lowest income category (less than $7,500 per year) had a higher overall property victimization rate (168.7 per 1,000 households), compared to households earning $75,000 or more (119.3 per 1,000)

Winner Take All or Justice for All?

In Winner-Take-All Politics: How Washington Made the Rich Richer - And Turned Its Back on the Middle Class, Jacob S. Hacker of Yale and Paul Pierson of Berkeley argue that America's money-addicted and change-resistant political system is at the heart of the enormous and rapidly growing income inequality that they say is undermining America's economic and political stability.

Nearly 40 percent of all the economic growth in the United States in the last 40 years has been captured by the top one percent of the population by income. The top one-tenth of one percent has 7.5 percent of the total after tax income in the United States. The United States is drifting from being one of the more egalitarian countries in the world with opportunity for all towards being a country like Mexico, Argentina or Russia with a small minority at the top monopolizing a great deal of the wealth and income of the nation.

Hacker and Pierson argue that government policies have been responsible for (much of) this change. They point to the failure of the federal government to update key policies that should have been modified to deal with changes in the real world. They emphasize:

• Tax reductions for the top income earners (which encouraged them to take more money out of their firms)
• Failure to regulate, especially the failure to regulate the financial industry and the new derivatives that it introduced during the last several decades
• Failure to support unions against the strengthened anti-union efforts of the corporations.

They specifically do not believe that the move towards a more knowledge based economy is the explanation for the drift.

Why then does the Congress pass this legislation? Hacker and Pierson say the reason is money. They suggest that the money needed for campaign financing is important, but far more so is the huge expenditure on lobbying over the last few decades. Money leads to some legislation that is favorable to the very rich, but perhaps more important, block legislation that would be unfavorable to them.

At still a deeper level of causality, Hacker and Pierson point to 

• A major efforts of corporations to organize politically to counter the regulatory successes in the late 1960s and early1970 around issues such as the environment and occupational health and safety
• The diminishing role of organizations representing the economic interests of "the rest of us" in the political sphere, including of the unions.
• The inadequate ability of the media to inform "the rest of us" of the economic issues before the Congress and their meaning in our everyday lives.

Incidentally, I came across this book in the new Bill Moyers program on public television, a program which is a refreshing return to a medium providing the kind of information we need.

Hacker and Pierson do not really have a program to restore the balance, but clearly we need for "the rest of us" to organize to project our economic interests on the Congress and the political process. In the aftermath of the Arab Spring, the importance of the Internet in doing so should be obvious. So too, the media have to do more.

Today is Martin Luther King Day, a day in which we remember the organization that lead in the drive for civil rights and the courage shown by the freedom riders and others in that campaign. That drive was for the civil rights of minorities. It was a movement that meant to achieve more nearly that promised in the Declaration of Independence.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.--That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed.

Perhaps the civil rights issue of our time is how to get our government in America to fulfill its responsibility of helping all of our citizens to secure their rights to life and the pursuit of happiness -- not just the rights of the one percent to prosper economically.

Living through the Cold War

Source of the Cold War map

I tend to forget that I am much older than most Americans and that they don't share my memories of living through the Cold War. I did not suffer in that war in any serious way, but it was an influence for a very long time.

• In school in the 1940's I went through "drop drills" where we ducked under our desks to practice self defense in case there was an atomic bomb attack on Los Angeles.
• In high school, which I started while the Korean War was still being fought, I took ROTC rather than physical education and joined the rifle team, thinking military skills would be likely to be needed at some future date.
• As an undergraduate at UCLA I had to sign a loyalty oath in order to take up a position as a teaching assistant. On one occasion camping in the desert east of Los Angeles, I saw an atom bomb blast. Although it was 200 or more miles away, it brightened the sky as a false dawn before the actual dawn.
• As a graduate student at UC Berkeley I not only had to sign the oath again, but I discovered that the student cooperative boarding house where I got my meals was on the California Attorney General's List of possible subversive organizations.
• On graduating and starting work as a research engineer, I had to obtain a security clearance. On one occasion I was told I could not see a memo that I had written and that I was to explain to a superior because it was then classified beyond my level of clearance. Of course I was working for firms that made a large portion of their funds through defense contracting, although I was working on civilian projects. A machine I worked on was sent to the Soviet Union as part of a traveling computer and electronics show, part of the effort to ease Cold War tensions. I was surprised to learn that a book in which I had co-authored a chapter was translated into Russian and published in the USSR.
• As a Peace Corps volunteer in the 1960s I discovered that my group was greeted on arrival in country by a headline stating that 45 new CIA spies had arrived disguised as PCVs. The Peace Corps was targeted by Communist groups, including an invasion of the Peace Corps offices. The university at which I taught was closed for a year by a student strike, part of a broad multinational youth movement of the time. I worked for a time on a project that was initiated by a U.S. labor organization later identified as funded by the CIA; the project fell through with considerable damage to the people it was supposed to help. My wife's nursery school had two mothers' groups, one Communist and one Christian Democrat.
• When I joined the World Health Organization in 1970, a colleague took me aside to explain who could be trusted and which were the agents of the USSR in the Department. One Russian colleague was abducted from Geneva and imprisoned in a mental institution in Moscow, apparently for transgressing the security rules of the USSR. The university in Colombia in which our offices were located was occupied by leftest students; the military retook the university in a confrontation in which 14 students were killed, rioting spread to the city and eventually some 25,000 people were arrested and imprisoned in the sports stadium; the university remained closed for a year, during most of which time we too could not reach our offices.
• Returning to the United States and taking a government job working in foreign assistance, I again had to go through the security clearance process. While the development assistance projects that I worked on were not political in any way that I could tell, the priorities set in the allocation of foreign aid to countries and regions must have been. I recall when I was a member of the national committee for IIASA a couple of Russian researchers were thrown out of a Scandinavian country accused of gathering information for the USSR. After the Soviet Union was broken up, I managed a couple of programs funding scientists from the former Soviet Union as part of the response to the ending of Communism. So too, we provided some help to former Warsaw Pact nation scientific administrators interested in learning how we managed research funding here.

I suppose that I was as little involved in the Cold War as might have been possible, but still the events such as the creation of the Berlin wall and the Cuban missile crisis affected me as they did everyone.

Magical thinking, myths and ignorance are not good for national policy!

Map source

I lived in Chile for a couple of years in the last days of the Christian Democratic administration there. The general opinion of people to whom I talked at the time was that Salvador Allende would win the next election and become president of Chile. At the time, there was a lot of poverty in Chile, high inflation and the economy wasn't working very well for the people. A lot of Chileans thought that by electing a Marxist president the economic problems of the country would be solved. (A lot of other Chileans thought that electing Allende would inevitably lead to a military coup and authoritarian government, as it did.)

I have long thought that many of those Chileans who looked to a Marxist government as the solution to economic problems were doing magical thinking. They did not understand how the vision of economic success would come true, but simply believed that it would do so as if by magic. In fact, the transformation of the Chilean economy has been accomplished, but it took decades of hard work by an entire society. The magical thinking was in the fact that people thought transformation would be fast, easy and by process which they could not foresee.

We cannot solve our problems with the same thinking we used when we created them.  Albert Einstein

Of course, change was necessary. As Einstein said, to do the same thing over and over again expecting different results is insanity. In fact, the Pinochet military dictatorship did do something different, implementing a plan developed by very conservative, free-market economists, and with a long period of financial discipline and great efforts and suffering of the Chilean people.

A man should look for what is, and not for what he thinks should be.  Albert Einstein

Read more: http://www.brainyquote.com/quotes/quotes/a/alberteins133991.html#ixzz1jSYdiTcG


Perhaps, however, the problem was not so much magical thinking as belief in myths rather than facts. By 1970 when Allende was elected there was a lot of information around that Marxist regimes were not solving economic problems, and indeed that some democratic, capitalist countries were doing quite well economically.

The George W. Bush administration believed that the United States would be successful in introducing democratic government in Iraq and Afghanistan by invading them, overthrowing their governing autocrats, and nation building for a limited time. They might have believed that the experience in West Germany, Italy and Japan after World War II was proof that such an approach would work, ignoring failures in many other countries.

Perhaps ignorance is the problem. George Kennan was clear that it would be possible to introduce democratic government in countries that "were ready for it", but not in other countries that did not have the needed culture and institutional precursors. Moreover, the Bush administration, which had been elected promising to avoid nation building efforts in its foreign policy, might have been aware of the difficulty of getting the American Congress and public to support nation building for the extended period that would be needed to build rule of law, free elections and other democratic institutions in Iraq and Afghanistan.

Too many Americans are too ignorant of other peoples and other nations, including too often the people we elect to high office. Indeed, the experience since 9/11 has amply demonstrated that this country did not even have enough people to staff the necessary positions in the intelligence  agencies, the military agencies and the foreign service with the needed knowledge of Iraq, Afghanistan, Pakistan, or indeed the entire region. I recall that the State Department had gathered a group of experts on Iraq to develop plans for the occupation, but their recommendations were ignored. Thus, American not only did not have enough expertise, but it was not placed to be effective; those in power seemed to have ignored their own ignorance and failed to utilize the expert advice that would have been available.

Mitt, Newt, Rick, Rick and Ron

The last six Republican presidents were named Dwight, Richard, Gerald, Ronald, George and George. Why is it that the five most likely Republican candidates this year don't have a grownup name among them?

An important choice for me and my neighbors in April

Donna Edwards

I have been redistricted, and am now in the sixth Congressional District of Maryland. Instead of Donna Edwards who represented me when my house was still in the fourth Congressional District, I am now represented by Roscoe Bartlett. Donna Edwards is a young, active, liberal Congresswoman who has done a great job of representing me. Roscoe Bartlett, at 85, is the second oldest member of the House of Representatives and a member of the Tea Party Caucus.

The primary election in Maryland is scheduled for April 3, 2012. That will be an opportunity for the Republicans to choose a candidate more in line with the policies preferred by the people of Maryland. It will be an opportunity for the Democrats to choose a candidate who may defeat the Republican candidate in November, and who may better represent the people of this district and Maryland.

Roscoe Bartlett

Apparently there are the following candidates for the Democratic nomination for the District:

• Robert Garagiola: Current state senator
• Milad Pooran: Physician and Air Force veteran
• Mark Shriver: Former state delegate
• John Delaney: Commercial Banker
• Charles Bailey

Rob Garagiola from his job as State Senate Majority Leader

It is not clear from what I can find on the Internet that Mark Shriver, a member of the Kennedy clan who currently has a senior position in Save the Children, will actually run. If he is, I would guess that he and Garagiola will be the leading Democratic candidates. Garagiola seems to have strong performance at the state level and be an effective campaigner.

Gaddis' book, The Cold War

The Cold War: A New History by John Lewis Gaddis is enormously encouraging in recounting three great triumphs that took place between 1945 and 1991. In 1945 the world was divided between capitalist, free market economies of the West and socialist, command economies of the East, and beginning to be armed with nuclear weapons. In the previous three decades there had been two world wars that had killed tens of millions of people, a great depression,  and there was a considerable fear that there would be a third world war that would be much worse than the first two, perhaps ending civilization. The East based its projections on a belief that the capitalists in charge of the Western empires would through their greed lead the West into self destruction. The West based its projections on the belief that the Communist economic system would not function well and that the authoritarian regimes would eventually moderate or become unsustainable. Yet, in 1945, the USSR had undeniably played the major role in defeating the Nazis, Communists had played an important role opposing Nazi Germany in the rest of Europe and Communist parties were important in many European countries, Communists were fighting a war for Control of China that would eventually prove successful, and many people in the world were poor and dissatisfied.

The Success of the West

The United States, with half of the world's GDP at the end of World War II, not only helped its former Western allies to recover from the war but also helped its former enemies; with that help, formerly autocratic enemies turned into democratic allies. The Western European imperial powers decolonized. They gave up part of their sovereignty to create a common military command with the United States, created a European common market, and eventually a European Union. The likelihood of another war between Western European imperial powers was greatly reduced.

The Success of the East


In the late 1980s it had become clear to many within the Communist sphere that the authoritarian, command economy system was not working for most of its people. Within a few years the Warsaw Pact was abolished, former satellite countries moved to more participatory governance, free market economies, and integration with Western European countries. The Soviet Union was dissolved, allowing self government in Central Asia and the Baltic states. The Russian Federation too embraced Capitalism and achieved a less authoritarian government. China and Viet Nam embraced free markets and opened their economies to the West.

The Success of the Two

There was no nuclear war, no general war between the East and the West. The danger of nuclear holocaust was contained for five decades, and indeed progress was made in preventing testing of nuclear weapons, limiting their spread, and reducing their numbers. While the United States and the USSR came to the brink of nuclear war on at least a couple of occasions, they stepped back and found peaceful resolutions. The threat of future East-West war seemed much less in 1991 than it had seemed in 1945.

How Did This Happen?


There was no general plan in either the West or the East for achieving these successes. Leaders arose at key moments in both the West and the East to embrace change and promote reforms. They managed to muddle through to success. Those leaders within each camp managed often enough to work together to achieve common purposes promoting peace, prosperity and freedom. Leaders of the West and East managed to establish and utilize channels of communication between East and West in order to keep the peace.

The world changed during the Cold War. It was richer, and many more people had emerged from poverty and became concerned with satisfying higher order needs. The education level had increased and many people were much more aware of geopolitical issues. Indeed, Gorbachev was the first premier of the USSR to have a college education. People demanded what they had come to regard as their human rights, and indeed political leaders too had come to regard those as rights. Information infrastructure changed radically and people began to see how others in the affluent countries lived, to see no reason that they too should not have such a style of life.

The Book

John Lewis Gaddis is apparently the leading U.S. scholar of the Cold War, having written a number of well received books on topics relevant to the subject. This book is a short, readable distillation of decades of scholarship, making it available to the general reader. It is well organized in chapters focusing on key themes in the sequence that they became most relevant to the situation. He writes a beautiful sentence and a beautiful paragraph! My book club put it in the top five percent of the more than 100 history books it has discussed. I recommend it wholeheartedly.