An interesting technical note on the calculation of GDP:

As George Mason University’s Garett Jones rightfully notes government spending raises GDP “by definition.” That, however, doesn’t mean that the GDP boost induced by government hiring, for instance, is real or more productive than private hiring. For private hiring to boost GDP, something valuable has to be produced: Not so for government. As he explains:

Hiring a worker who (through no fault of her own) accomplishes absolutely nothing raises GDP if the government does the hiring. Hiring a worker who (through no fault of her own) accomplishes absolutely nothing does nothing to GDP if the private sector does the hiring.

Why? Because GDP counts government salaries as “government expenditures” as soon as the government hires a person. But the “consumption” and “investment” parts of GDP only count genuine purchases by the private sector (leaving the oddities of imputed spending for the coda below). So if a private sector product spends years in the incubator, burning through thousands of person-hours of work and millions of dollars of salary–but never sees the light of day–then the product never shows up in GDP. But if the government had hired those same workers who worked just as long on a similarly fruitless project, their labor would give a big boost to GDP. Government hiring creates GDP by definition. Private hiring only creates GDP if the worker actually creates a product.

The reverse is true. Reduction in government spending may cause a temporary shrinkage of GDP, but it doesn’t always mean that something valuable has been destroyed.

The left-leaning Brookings Institution on universal preschool:

This relatively recent explosion of public pre-K programs has been underpinned by research findings from two iconic preschool interventions from 30 to 40 years ago whose participants have been followed into adulthood, the Perry Preschool Project and the Abecedarian Project... In my view, generalizations to state pre-K programs from research findings on Perry and Abecedarian are prodigious leaps of faith. Perry and Abecedarian were multi-year intensive interventions whereas state pre-K programs are overwhelmingly one year programs for four-year-olds. Costs per participant for Perry and Abecedarian were multiples of the levels of investment in present-day state preschool programs, e.g., $90,000 per child for Abecedarian.[3] Both Perry and Abecedarian were small hothouse programs (less than 100 participants) run by very experienced, committed teams, whereas widely deployed present day preschool programs are, well, widely deployed. The circumstances of the very poor families of the Black children who were served by these model programs 30 to 40 years ago are very different from those faced by the families that are presently served by publicly funded preschool programs.

But we do have the Head Start findings I reviewed last week and we should not ignore them in thinking about state pre-K. Head Start spends about twice as much per child per year as states ($8K per child per year for Head Start vs. $4K for state pre-K). And Head Start includes many program components that are advocated by early childhood experts such as health, nutrition, and parental involvement that are much less prevalent in state pre-K. If a year of Head Start does not improve achievement in elementary school, should we assume that a year of state pre-K does?

These three studies fall far short of providing a convincing case for investment in universal pre-K: The Georgia study finds impacts that are at best very small and do not pass a cost-benefit test. The Texas study provides evidence for value in a targeted program and is silent on the effectiveness of a universal program. The Tulsa study and other studies that use a design that compares children who just meet or just miss the age cut-off for pre-K can't estimate the impact of state pre-K because they are comparing children that may differ in many experiences in addition to their participation in state pre-K.

Is it rational to neglect savings in favor of conspicuous consumption?

Historically, how did we handle enemy combatants in the United States?

In the debate over this subject, the most ubiquitous of the examples of Americans killed fighting for the Nazis comes from the famous Supreme Court case of Ex Parte Quirin (1942). He is Hans Haupt, one of several Nazi saboteurs who infiltrated the U.S. in 1942 by secretly landing on Long Island and Ponte Verde Beach.

The interesting thing about that for present purposes is that, once ashore, they shed their uniforms. (By the way, Judge Mukasey had a very interesting explanation of why they did this in his district court opinion in the 2002 case of another American enemy combatant, Jose Padilla. See Padilla v. Bush (SDNY 2002), Op. p. 62 & n. 12 — link here.) When the Nazis were captured days later — by the FBI, not the military — they were wearing civilian clothes and not in the act of carrying out any of the terrorism they had plotted. Despite the fact that Haupt was an American and that the U.S. courts were open and functioning, FDR had them designated as enemy combatants, tried by military commission, and put to death (i.e., Haupt and five others, all German nationals, were executed; others who had cooperated were given lengthy sentences).

[A]s the evidence has built up, Head Start is failing its test. The latest evidence appears in the “Third Grade Follow-up to the Head Start Impact Study: Final Report,” which was released in December. The report was carried out by a company called Westat and published by the Office of Planning, Research and Evaluation, Administration for Children and Families, U.S. Department of Health and Human Services. Basically, the report shows that Head Start provides short-term gains to preschool children, but those gains have faded to essentially nothing by third grade.

To appreciate how depressing this conclusion is, you need to appreciate the high quality of the study. It’s based on a nationally representative sample of more than 5,000 3 and 4 year-olds from low-income families who were eligible for Head Start. These children were randomly either assigned to Head Start, or not. Data collection started in 2002, and so by 2008, data was available on how the children were performing in third grade. The study didn’t just look at test scores: it considered a range of data on how Head Start might affect aspects of cognitive development, social-emotional development, health status and services, and even parenting practices.

link.

Daniel Mitchell points out that we can balance the budget in only five years if all we do is hold spending to the rate of inflation. Even allowing 3.4% annual growth above inflation, we can balance the budget in ten years.

Of course, this ignores the largest driver of spending growth, entitlements are growing largely because of demographic change, and our current Medicare covers everything approach to health care sacks us with much of the cost overruns there too.

The CDC says "The legalization of induced abortion beginning in the 1960s contributed to an 89% decline in deaths from septic illegal abortions during 1950-1973." Similarly, the pro-abortion Alan Guttmacher Institute claims "By making abortion legal nationwide, Roe v. Wade has had a dramatic impact on the health and well-being of American women. Deaths from abortion have plummeted, and are now a rarity." However, the data says otherwise. The first legal abortion on demand was in 1970, and Roe was in 1973. Here's the data, which those dates indicated with vertical lines:


Here is AGI's own data, with Roe highlighted:

All of the reduction in abortion deaths came before legalization. It was solely the result of advances in medicine, particularly antibiotics.

Hat tip: Christina Dunigan.

Hugo Chavez didn't help the poor. Here's the data:

But hey, wait a minute . . . shouldn't the country with some of the largest proven oil reserves in the world be doing better than the regional average?

Looked at in the context of Latin America as a whole, the poverty reduction achieved doesn't look so special either:

Oil prices are booming, but Venezuela is not. Why? Because they're pumping less oil than they used to.

Even Slate piles on:

What has Chávez bequeathed his fellow Venezuelans? The hard facts are unmistakable: The oil-rich South American country is in shambles. It has one of the world’s highest rates of inflation, largest fiscal deficits, and fastest growing debts. Despite a boom in oil prices, the country’s infrastructure is in disrepair—power outages and rolling blackouts are common—and it is more dependent on crude exports than when Chávez arrived. Venezuela is the only member of OPEC that suffers from shortages of staples such as flour, milk, and sugar. Crime and violence skyrocketed during Chávez’s years. On an average weekend, more people are killed in Caracas than in Baghdad and Kabul combined. (In 2009, there were 19,133 murders in Venezuela, more than four times the number of a decade earlier.) When the grisly statistics failed to improve, the Venezuelan government simply stopped publishing the figures.

But, it is also a stretch to call him freely elected too:

And unlike Castro and many other autocrats, Chávez didn’t fear elections; He embraced them. Most opposition leaders will tell you that Venezuelan elections are relatively clean. The problem isn’t Election Day—It’s the other 364 days. Rather than stuffing ballot boxes, Chávez understood that he could tilt the playing field enough to make it nearly impossible to defeat him. Thus, the regime’s electoral wizards engineered gerrymandering schemes that made anything attempted in the American South look like child’s play. Chávez’s campaign coffers were fed by opaque slush funds holding billions in oil revenue. The government’s media dominance drowned out the opposition. Politicians who appeared formidable were simply banned from running for office. And the ruling party became expert in using fear and selective intimidation to tamp down the vote. Chávez took a populist message and married it to an autocratic scheme that allowed him to consolidate power. The net effect over Chávez’s years was a paradoxical one: With each election Venezuela lost more of its democracy.

Looming trouble in China:

Xi Jinping, named Communist Party general secretary in November, reflects a new militancy. On Tuesday, he delivered a hard-edged speech to the Politburo in which he effectively ruled out compromise on territorial and security issues. His tough words were in keeping with the ever-more strident tones of his messages to the People’s Liberation Army about being ready to plan, fight, and win wars. Chinese leaders have traditionally addressed the army and urged improvement in general readiness, but, as veteran China watcher Willy Lam notes, Xi has put a special emphasis on it. Moreover, his calls on preparing for conflict go well beyond those of his two predecessors, Jiang Zemin and Hu Jintao.

In the past, the military’s war talk contrasted with soothing words from senior civilian leaders. Now, with Xi, the aggressive comments from flag officers are consistent with what he, as top leader, is saying. Worse, as the Financial Times notes, Xi’s words of war are now “being bundled” with his rhetoric, which seems calculated to “fan nationalism.”

In this environment, Chinese military officers can get away with advocating “short, sharp wars” and talking about the need to “strike first.” Their boldness suggests, as some privately say, that General Secretary Xi is associating with generals and admirals who think war with the U.S. might be a good idea.

China looks like it is taking one of its periodic wrong turns.

Unremarked is the extent that this rising militancy is being inadvertantly stoked by the Obama administration. In recently announcing its "Shift to the Pacific", this administration has directly called out China as our primary military adversary. While the policy is mostly correct on its merits, it is also something that the President of the US shouldn't be saying out loud. China is a highly nationalistic, militarized country with an unfulfilled self-conception as a global superpower. Rumsfeld's previous "lillypad" strategy had the benefit of boxing in China (by establishing basing agreements fully surrounding them), while ostensibly keeping the eye on global Islamic terrorism--purposefully offering an excuse against inflaming nationalist sentiment in China.

The Obama administration seems intent on letting domestic politics drive foreign policy. This administration wants to put the War on Terror behind them, thus driving their recent, regrettable policy that puts China in our sights. This is similar to the policy of closing Guantanamo to try terrorists in civilian courts--which could only guarantee acquittal or devastate domestic civil rights protections. This administration is rushing to "Move On" from George W. Bush, thinking tactically, not strategically, and leading to some dramatic policy blunders.

Ramesh Ponnuru on the sources, and reality of the Gender Wage Gap:

Economist Diana Furchtgott-Roth cites a 2005 study by economists June O’Neill and Dave O’Neill, which found that for the most part “the gender gap is attributable to choices made by women concerning the amount of time and energy to devote to a career.” They continue: “There is no gender gap in wages among men and women with similar family roles.”

In addition to being more likely to seek part-time work, women are also more likely to have gaps in their employment history and to enter lower-paying fields. The consulting company Consad, in a 2009 report for the Labor Department, found that these factors account for most of the pay gap. Correct for them, and men make only 5 percent to 7 percent more than women for the same work.

Even the American Association of University Women, in a recent report playing up the pay gap, conceded that 5 percent is a reasonable estimate of the difference between men’s and women’s wages that cannot be explained by choice of occupation, employment history and the like.

Not even that smaller gap can be attributed wholly to employer discrimination. Lawson, although she favors “legislative solutions,” also writes that women are less likely than men to drive hard bargains in salary negotiations. If true, that would explain part of the gap, as well.

To say that women’s choices result in their being paid less, on average, than men is not to deny that unfair social conditions may constrain those choices. Perhaps men should do more of the work of running households and raising children, and boys should be brought up with that expectation. Perhaps child care should be made more affordable. Perhaps efforts should be made to make sure college women aren’t being steered toward majors that won’t prepare them for lucrative careers.

Carrie Lukas, who has written often about the pay gap for the conservative Independent Women’s Forum, says “it’s a mistake to default to the idea that it’s all discrimination.” She agrees with Lawson, however, that women should be less reticent about demanding higher pay: “As parents of daughters we can make a difference in that.”

A common defense of hefty green energy subsidies is "Our clean-energy industry . . . has to fight uphill against the oil subsidies." Well, the facts show a different story:

A Texas Comptroller’s study in 2006 found that federal clean-energy subsidies amounted to 4.5 percent of total consumer spending on those sources, while oil-and-gas and coal subsidies clocked in at just 0.83 percent. That makes renewables more than five times more subsidized than nonrenewable sources. The single largest recipient of subsidies when the study was conducted was not the gargantuan oil-and-gas industry but that swing-state sop, ethanol. The nominal costs of renewable subsidies totaled 83 percent of the dollars allowed to fossil-fuel companies, despite the latter industry being magnitudes larger than the former.

And that was before both oilman President Bush and President Obama dramatically expanded the subsidies available to renewable-energy producers...

By the nonpartisan Congressional Budget Office’s reckoning, there are only three major exemptions granted to fossil-fuel producers: the “expensing of exploration and development costs for oil and natural gas” ($800 million), the “option to expense 50 percent of qualified property used to refine liquid fuels” ($800 million), and the “option to expense investment costs on the basis of gross income rather than on production” ($900 million). (There are also $600 million, by their calculation, of other miscellaneous subsidies.)

The much vaunted Consumer Financial Protection Bureau recently released it's new rules for mortgages, but Megan McArdle points out some significant caveats:

1. This will probably make it harder to get a mortgage, particularly if you are poorer.

2. Nonetheless, it will not do that much to prevent default Arnold Kling, a former Freddie Mac economist who has long been my favorite source on housing finance, points out that debt-to-income ratios aren't a very good predictor of default risk.

As I point out in a new essay, mortgage defaults are driven largely by the borrower’s loss of equity. Thus, the most important risk factor at the time the loan is made is the size of the down payment. The rules ignore that. Instead, the focus in the borrower’s debt/income ratio, which is far and away the least predictive of the major factors used in predicting default (the down payment is most useful, followed by credit score and then by loan purpose, although the effects of these variables interact with one another so that it is not so easy to rank-order their importance).

4. The new rules tell you a lot about how the CFPB thinks The new rules are part of the CFPB's drive to create "qualified" mortgages: low-risk, easy to understand products that will prevent consumers from getting themselves into trouble. Their mandate is not to protect banks (and savers) from default; it's to protect borrowers from themselves. That's why their approach is focused on the household income statement.

But, most troubling:

3. The government can continue writing mortgages under the old rules

This is especially important as the GSEs have already cost the taxpayers $180 Billion, and the FHA may require a bailout:

As private-financing options have disappeared, the role of the FHA has grown. Its market share has increased to about 30 percent today from 3-4 percent in 2007. That’s because the agency is now practically the only game in town, accepting borrowers with down payments of as low as 3.5 percent. As the last few years have made clear, sizable down payments -- or “skin in the game” -- are the key to avoiding defaults in the near term and to achieving a stable housing market in the long term.

So how has the FHA fared financially in serving borrowers with low down payments? As the housing bubble burst in 2007, and the number of mortgage-related defaults started to climb, the FHA’s capital reserves declined to $3.5 billion from $22 billion.

This means that the FHA is on the verge of requiring a bailout to support its outstanding mortgage guarantees, which are projected to exceed $1 trillion in 2011.

To improve national transportation spending, eliminate the gas tax:

The basic reason the present system isn’t working is that there is no longer a consensus in Congress on what a national transportation program should be. From 1956 to 1991, the objective was to build the interstate highway system. Then, the focus shifted to highway maintenance and transit. At this point, local interests became more important and the national mission faded. Absent a grand policy, earmarks kept every congressman invested in a big transportation bill; but these are no more.

As a result, “getting back our share” has become the key objective, so that every state now gets as much (or more) money in transportation grants as it pays in federal gas taxes. Along with the money, the federal government issues various rules for spending it, many of which require the states to put in some of their own money, too. It’s common to hear state transportation officials say that the feds provide 25 percent of the money and 75 percent of the hassle.

Eliminating the federal role would enhance state autonomy and streamline decision making. What’s more exciting is that it would also lead to more and better spending on transportation.

Megan McArdle on Media Bias:

Bias matters not because liberals deliberately slant their stories, but because they are much more likely to interrogate the facts that contradict their ideological beliefs, than the ones that support them. When they come across an uncomfortable fact, they'll go out of their way to figure out why it isn't really true. When they come across a fact that confirms what they believe, they'll be more likely to accept it at face value.

I'm not claiming that liberals do this more than conservatives (I think that being human, they're equally prone to this phenomenon)--only that in the media, liberal bias is mostly what matters, because the media is overwhelmingly somewhere to the left of the American center. Even if you have a conservative reporter prone to insufficient interrogation of convenient facts, those same facts are going to set off alarm bells with his editors, who are quite likely to question the whole story.

Robert Stacy McCain:

Watching it, I noticed that Michael Moore wasn’t really trying to explain what caused the mortgage meltdown. No, he was telling his audience who (and what) to blame for the mortgage meltdown.

A preference for blame over understanding is a hallmark of prejudice. There’s not really that much difference in hating “the rich” and hating any other group of people.

Using loaded language about “greed” and labels like “Corporate America” isn’t any less prejudicial than talking about how Mexicans are sneaking over the border to take away American jobs. As a matter of fact, Democrats spent a lot of time the past year talking about “outsourcing” and “shipping jobs overseas,” which is really just another method of xenophobic blame-shifting: The Foreigners! Are Taking! Our Jobs!

Why don’t we recognize the language of the Left as expressions of prejudice? Why is demonization of ”the rich” accepted as a substitute for actual understanding of how the economy works?