It's All George Bush's Fault

The New York Times has often reflexively lent its voice to the chorus of  "It's All George Bush's Fault".  The editors probably missed the irony when they published this article pointing out that falling oil and gas prices are a direct result of actions taken by the reviled Bush-Cheney administration.

The Bush administration worked from the start on finding ways to unlock the nation’s energy reserves and reverse decades of declining output, with Mr. Cheney leading a White House energy task force that met in secret with top oil executives.

“Ramping up production was a high priority,” said Gale Norton, a member of the task force and the secretary of the Interior at the time. “We hated being at the mercy of other countries, and we were determined to change that.”

The task force’s work helped produce the Energy Policy Act of 2005, which set rules that contributed to the current surge. It prohibited the Environmental Protection Agency from regulating fracking under the Safe Drinking Water Act, eliminating a potential impediment to wide use of the technique. The legislation also offered the industry billions of dollars in new tax breaks to help independent producers recoup some drilling costs even when a well came up dry.

Separately, the Interior Department was granted the power to issue drilling permits on millions of acres of federal lands without extensive environmental impact studies for individual projects, addressing industry complaints about the glacial pace of approvals. That new power has been used at least 8,400 times, mostly in Wyoming, Utah and New Mexico, representing a quarter of all permits issued on federal land in the last six federal fiscal years.

The Bush administration also opened large swaths of the Gulf of Mexico and the waters off Alaska to exploration, granting lease deals that required companies to pay only a tiny share of their profits to the government.

These measures primed the pump for the burst in drilling that began once oil prices started rising sharply in 2005 and 2006. — The New York Times

Job Creation is All in Texas

The President has recently taken to touting his "job creation" performance by pointing out that in the last six years, the US economy has created over 300,000 new jobs. Not particularly good, but it allows the President to suggest that his policies have had a positive effect. But as it turns out, the job growth has all been in one state -- Texas.

US job growth                    +327,000
Texas job growth            +1,320, 255
US (other than Texas)       -  993,255

But for Texas, the US would have lost almost a million jobs! And why did Texas add so many jobs?

1. Fossil fuels extraction
2. Lower taxes
3. Less regulation
4. Right-to-work laws

All things that the President opposes.

Sort of casts a different light on the claim that the President policies can create any jobs in the future.

The Unemployment Rate Does not Measure Labor Market Vitality

Despite what you will hear out of Washington, there is really only one reason that the reported unemployment rate keeps dropping. Each month there are fewer people actually participating in the workforce. The unemployment number you see reported each month is the percentage of the people in the workforce who are unemployed. When the denominator of that ratio drops, the unemployment number drops even though there may be no more people actually employed.

You will sometimes hear that the drop in labor force participation is due to more people taking normal retirement. This may be happening, but take a look at the chart below. Do you think the normal retirement rate suddenly accelerated starting in 2007?

The number of people not working increased by 315,000 this month to a record 92.6 million. Anyway you cut it, that's not good. Fewer people working -- for whatever reason -- means fewer people producing things and (in general) less money to spend buying things. There is no way that the US economy can have robust growth when fewer people are working each money,

The 80/20 Rule

One of the first things I learned in Marketing 101 was the 80/20 Rule. That rule states that in virtually every category, 80% of the consumption is accounted for by 20% of the consumers.  Your job as a marketer is to identify those heavy users and influence their brand choice. You can pretty much ignore the other 80%. Which is why the public sometimes gets frustrated with traditional advertising. The odds are heavily that you're not in the 20%, the advertiser is trying to reach. It also illustrates the importance of technology that helps the advertiser target that 20%. You should actually be grateful that Google, Facebook, et al  are better able to discern into which group you fall. 

The chart below shows how this works for alcoholic beverages (although it's more like a 90/10 rule here). The next time you're watch an NFL game on TV, think about the fact that possibly half the people watching don't even drink beer. 

It Depends On How You "Define" Income Inequality

The President says that income inequality is "the defining issue of our time." Really? Of course, when you ignore the facts, you can say just about anything that pops into your head.



Do you think it's just a coincidence that income inequality became the defining issue after the previous defining issues -- Obamacare and Global Warming -- blew up on the President?

Thanks to Mark Perry and the Census Bureau.

Equal Pay for Equal Risk

The next time you hear a woman complain that they are not paid as much as men, please suggest to her that one way to change that would be to seek out jobs that pay premiums for high risk. For some reason women are not well represented in these dangerous professions. Equal pay for Equal Risk.



Source: Carpe Diem

Worldwide IQ in Decline

This chart was derived from a study at the University of Hartford (Connecticut). While people have tired desperately to come up with all sorts of hypotheses related to pollution and global warming (yes, global warming), the answer is quite simple to anyone who has taken even an introductory course in statistics.

Fertility rates are inversely proportional to intelligence. That is, the more intelligent you and your spouse are, the fewer children you are likely to have. Rudimentary statistics tells you that the average intelligence of the entire population will fall.




Now, compounding this are two additional factors:

1. One of the balances to the fertility rate problems has been the Darwinian one -- low IQ is not a survival characteristic. That is, peoples with low IQ tend to have lower life expectancies. Therefore they reproduced at lower rates. Modern science and technology has intervened to reduce the effects of life-threatening disease -- from malaria to Ebola.

2. As Charles Murray pointed out in Coming Apart, the tendencies for like to marry like are increasing. Since a child’s IQ is highly correlated to that of his parents, this means that instead of reverting to the mean, IQ is becoming more bi-modal – that is, greater concentrations at high levels (low fertility)  and low levels (high fertility).

All of this suggests strongly that we should expect the decline of the last 50 years to continue. Not a particularly positive trend in light of the fact that technology is also rapidly eliminating the sorts of jobs that people with lower intelligence can do. 

The Federal Check Writing Machine

The US Census Bureau released the following data (as of Q4 2012)


312 million      US population
110 million      People living in households that receive Federal welfare (means-tested benefits)
153 million      People in households receiving federal benefits (includes non-means-tested)                                        

35% of all US households get Federal welfare payments. Almost half (49%) get benefits from the government of some kind.

Is it any wonder that a message of "turning down the Federal spigot" doesn't resonate with a large portion of the populace -- and that it does with the half of the populace that sees itself as writing those checks.

How Little We Work

The Bureau of Labor statistics has released it's newest American Time Use Survey. Below are listed the daily averages for for adults. It is interesting to note that on average Americans spend only about an hour more per day working than watching television. The working number average is as low as it is because it includes all the adults who do no work of any kind (90 year-olds in nursing homes and 25 year-olds on welfare), but from an economic perspective that doesn't really matter. The average American spends less than four hours a day actually producing something of economic value. Imagine how much larger would be the American economy if everyone worked an extra 15 minutes per day -- or there were fewer people not working at all.

Minimum Wage Reality in Oakland

The City of Oakland, California is getting ready to follow other liberal enclaves like Seattle in imposing higher minimum wage ordinances. But it turns out that at least one non-profit organization in Oakland understands the economics of wage floors. The San Francisco Chronicle reports:

Oakland's Youth Employment Partnership spends roughly $1.8 million a year to give 800 hard-to-employ teens steady minimum-wage jobs that keep them away from vice and encourage them to appreciate a hard day's work.

But the nonprofit could be forced to cut the jobs it offers by 30 percent next year if Oakland voters approve a plan in November to raise the city's minimum wage from $9 to $12.25 an hour starting March 1, its executive director said.

Because nonprofits have only a fixed amount of grant money each year, the ballot measure, called Lift Up Oakland, could have the unintended consequence of making it harder to hire and train thousands of at-risk and needy workers - teens, parolees and those with limited work experience, nonprofit leaders say.

If artificially increasing the price of something (low-skilled labor in this case) results in less of it being used by this non-profit organization, what is it (other than rampant ignorance) that would make someone think that every other user of low-skilled labor won't behave the same way? The author of this article, Will Kane, implies that for-profit employers must have unlimited amounts of money to spend on wages. Which, of course, means that Will has never actually run a business. 

The War on Poverty

The US was winning the war on poverty --- right up to the point where the Federal Government declared a WAR ON POVERTY.

Percent US Families Below the Federal Poverty Line

Progressives Are The Real Segregationists

Progressives are fond of calling out conservatives as "racists”.  According to them, racial segregation is a result of the backward attitudes of conservatives toward racial equality. 

In a 2013 report professors John Logan and Brian Stults of Brown University and Florida State University analyzed 2010 Census data for major cities using a dissimilarity index. The dissimilarity index measures the percentage of one group that would have to move to a different neighborhood to put an end to segregation. Here are the top 10 US cities based on that index.

1.   Milwaukee 
2.   New York 
3.   Chicago 
4.   Detroit 
5.   Cleveland 
6.   Buffalo 
7.   St. Louis 
8.   Cincinnati 
9.   Philadelphia 
10. Los Angeles 

Note that all of these cities are hotbeds of Progressivism where local government has been controlled by Democrats for decades. If Progressives actually (as opposed to rhetorically) abhor segregation, why would they not have done something in the places they already run -- far from the influences of those evil conservatives? Actions speak louder than words. Especially in places like Milwaukee, New York, Chicago and Detroit. 

Reducing Corporate Income Tax would Create Jobs

A new paper from the St. Louis Federal Reserve concludes:

This paper finds that a reduction in the corporate income tax leads to moderate job creation and higher wages. In the extreme case, the elimination of the corporate income tax would reduce the non-employed population by 5.4 percent …

Yet the Obama administration's response to this has been not only to keep US corporate tax rates as the highest in the world, but to propose subjecting the foreign income of domestically based companies to US taxation as well. Now WHO is it that is driving jobs overseas?

Inconvenient Data

Al Gore made a fortune with his movie An Inconvenient Truth which forecast imminent increases in temperature that would greatly affect the United States. He would probably find this data inconvenient.

The Scientific Method Part 2

The scientific test of alternate theories is how well they account for observed data.

Theory 1 (aka Al Gore's hockey stick): Increases in CO2 emissions are causing the earth's average temperature to rise at an accelerating rate. The rise in temperature will result in the melting of polar ice caps.

Theory 2 (aka the Null hypothesis): CO2 emissions are not causing the earth's temperature to rise nor to melt polar ice.   

Observed data:

Southern Hemisphere Sea Ice

Which hypothesis better explains the results that have been observed? 

Now, the observed data does not prove or disprove either hypothesis, and the total global ice anomaly is not at record levels (but it's still above the average of the last 25 years. 

Global Sea Ice

 

But as of now, it is the Null hypothesis that is supported by true scientific method. 

The Scientific Method

The scientific test of alternate theories is how well they account for observed data.

Theory 1 (aka Al Gore's hockey stick): Increases in CO2 emissions are causing the earth's average temperature to rise at an accelerating rate.

Theory 2 (aka the Null hypothesis): CO2 emissions are not causing the earth's temperature to rise.  

Observed data:

1. Between 1998 and 2012 the global economy more than doubled in size—to some $71 trillion in GDP from $30 trillion. Over the same period the world pumped more than 100 billion tons of carbon dioxide into the atmosphere.
2. During that period global surface temperatures have remained essentially flat. 

Which hypothesis better explains the results that have been observed? 

Now, the observed data does not prove or disprove either hypothesis, and  it is entirely possible that the next 14 year sample will yield results that are more consistent with Theory 1, but as of now, it is the Null hypothesis that is supported by true scientific method. 

The Minimum Wage Tax

Liberals regularly worship at the Church of The Free Lunch, which catechizes that government can impose costs on business that will never be borne by the public. They just disappear, or, better yet, are borne by the business owner.

This year voters in Sea-Tac, Washington voted to adopt a $15 minimum wage. Here's your Free Lunch. Kudos to MasterPark for highlighting this government imposed tax (because that's what it is) rather than burying it in daily parking rates.

Income Inequality and Household Size

Those who complain about income inequality generally disingenuously use household statistics without disclosing that that measurement itself is the source of much "inequality". Households in the top quintile have FOUR TIMES the number of earners in the household as those in the bottom quintile. Do you think maybe that has a big effect on income? When earners marry and form a household unit are we supposed to be incensed about that? Should they be punished for doing so?

The Really Productive Driver Behind Income Inequality

As the uproar over income inequality reaches ever higher decibel levels, it is worth reminding ourselves that technology is the principal driver that is responsible. Technology allows the best people to leverage their skills in ways that could not have been done before. Think about these examples:

1. When Babe Ruth was playing baseball, he was one of the best. He and the Yankees were able to monetize that greatness every time he played in front of 30,000 or so people. Today, you might argue that Miguel Cabrera has similar greatness. When he plays he, the Tigers and MLB can monetize that greatness over perhaps millions of people who can watch him play via electronic media.

2. Imagine you were a good trader on the NY Stock Exchange 60 years ago. How many shares could you trade every day? A few hundred thousand? How many could you today? A few hundred million? What's that worth compared to the same job 60 years ago.

3. Assume you are a really good tax accountant. Sixty years ago you might leverage that ability over, say, 20 clients. Today with software you might be able to leverage it over hundreds of clients. And if you created TaxAct software you'd be leveraging it over millions of clients.

4. Assume you were a really good merchant. Sixty years ago you might have worked for Macy's or Marshall Field and made them quite a bit of money.  Today, if you're name is Jeff Bezos and your store is Amazon.com, think how much more your skill is worth today.

Scale matters. Being the best performing manager for a hedge fund matters A LOT. Designing a whole new social media network matters ever more. If you're working at a job that doesn't scale well -- e.g.  as a waiter or a a school teacher -- the gap between what you can produce and what someone harnessing technology can do is increasing. Of course it's increasing. Would you want it not to?  But if you're Hillary Clinton, you consider it a "cancer".

Fewer Men Working in Prime Earning Years.

The chart below is for men 25-54 -- what should be the prime working years. If this were related to cyclical phenomena you should see a reduction in non-participation by 2010 at least. Yet it keeps going up. Economics teaches us that when you make not working less painful you will have fewer people working. It is hard to build sustainable growth when fewer and fewer people work to support more and more people that aren't working.