Sunday, May 30, 2010

Greece urged to give up euro

THE Greek government has been advised by British economists to leave the euro and default on its €300 billion (£255 billion) debt to save its economy.

The Centre for Economics and Business Research (CEBR), a London-based consultancy, has warned Greek ministers they will be unable to escape their debt trap without devaluing their own currency to boost exports. The only way this can happen is if Greece returns to its own currency.

Greek politicians have played down the prospect of abandoning the euro, which could lead to the break-up of the single currency.

Speaking from Athens yesterday, Doug McWilliams, chief executive of the CEBR, said: “Leaving the euro would mean the new currency will fall by a minimum of 15%. But as the national debt is valued in euros, this would raise the debt from its current level of 120% of GDP to 140% overnight.

“So part of the package of leaving the euro must be to convert the debt into the new domestic currency unilaterally.”

Greece’s departure from the euro would prove disastrous for German and French banks, to which it owes billions of euros.

McWilliams called the move “virtually inevitable” and said other members may follow.

“The only question is the timing,” he said. “The other issue is the extent of contagion. Spain would probably be forced to follow suit, and probably Portugal and Italy, though the Italian debt position is less serious.

“Could this be the last weekend of the single currency? Quite possibly, yes.”

Mark Weisbrot and the Center for Economic and Policy Research recommended this not too long ago comparing Greece's situation to that of Argentina and Latvia

As of today the idea that Greece might be better off leaving the Euro and renegotiating its debt is considered by many to be unthinkable. Instead, the country is embarking upon a program of “internal devaluation” – in which it keeps the Euro and lowers its real exchange rate by creating enough unemployment to drive down the country’s wages and prices.
Let’s compare this process to two other countries that have tried it – one which abandoned it after three and a half years – Argentina – and one that is continuing it – Latvia.
First, Greece:  Figure 1 shows the IMF’s April 2010 projections for real (inflation-adjusted) GDP. Note that in 2015, Greece still does not reach its pre-crisis (2008) level of GDP.  However, these projections are already out of date; the current projections from the Greek Finance Ministry show a 4 percent decline for 2010, whereas the IMF’s projections had only shown a 2 percent drop. Moreover, it will most likely be worse; when Latvia began its “internal devaluation” in 2008, the IMF projected a 5 percent drop in GDP for 2009; it came in at more than 18 percent. Result: Greece will probably need at least 8 or 9 years, if things go well under the current program, to reach pre-crisis output.
Greece: Real GDP 
Second, Latvia: As can be seen in Figure 2, Latvia – which set a world-historic record in 2008-2009 by losing more than 25 percent of GDP – is not expected to reach even its 2006 level of GDP in 2015. And in 2015, it is still 16 percent below its pre-crisis peak in 2007. Result: well over a decade to return to pre-crisis GDP, barring unforeseen negative events.
Latvia: Real GDP 
Sources for Figures 1 and 2: IMF International Financial Statistics and World Economic Outlook.
Third, Argentina:  Figure 3 shows Argentina’s recession beginning in the middle of 1998. Argentina tried the “internal devaluation” process – its currency was pegged at 1 to 1 to the dollar -- until the end of 2001, leading to an economic and financial collapse. In December 2001-January 2002, the government defaulted on its debt and abandoned the fixed exchange rate. Result: after the default/devaluation, the economy continued to shrink for just one quarter (first quarter 2002). It then grew and passed up its pre-crisis peak within three years of the default and devaluation, with real (inflation-adjusted) growth of 63 percent over 6 years.
Argentina: Real GDP 
Source: Instituto Nacional de Estadística y Censos, República Argentina.

Conclusion: before making a commitment to indefinite recession and slow recovery, including many years of high unemployment and other social costs, Greece may want to consider the alternatives. They may be less painful and allow for a speedier, more robust economic recovery.

Posted via email from Jim Nichols

The Real Problem With PAYGO | Capital Gains and Games

Expecting every new spending programs to be paid for with specific offsets looks very much like a fallacy well known in the trade area. Even those who think it would be desirable for our trade accounts to be balanced in the aggregate know that it would be stupid to expect that our trade with each individual country should be in balance. We necessarily are going to need to import things from countries that we aren't going to be able to sell enough goods and services to in return. But there will also be countries with which the reverse will be true. It's the aggregate trade balance that matters, to the extent that it matters at all, not the bilateral balance with each country.

I think the same is true of the budget. We should be looking at aggregate revenues with reference to aggregate spending. If aggregate revenues are too low then they should be raised as sensibly as possible so as to minimize unfairness and economic distortion. PAYGO works against that goal even though it is motivated by a reasonable desire to avoid increasing the deficit more than necessary.

Instead of PAYGO, I think it would make more sense for Congress to stop ignoring the Budget Act of 1974 and adhere to its rules and procedures. It should set an aggregate target for revenues and expenditures, and pass a budget resolution that enforces caps on spending and floors on revenues. Then there will be no need for PAYGO.

Posted via email from Jim Nichols

Saturday, May 29, 2010

Everything you need to know about U.S. foreign policy (and the domestic budget deficit)... available from these four charts--plus.  I guess it also helps to have read Thucydides.

Posted via email from Jim Nichols

Bookman to Republicans...

Wow is it just me or did Jay Bookman just call every single Republican politician in the state of GA "a hypocrite more devoted to a precious political theory than to the country they claim to love." 
Yes, yes, I believe he just did.

Posted via email from Jim Nichols

But, what do I know?

The Great Financial Crisis of 2008, coming in an election year, after the twin debacles of the Wars in Iraq and Afganistan, and the humiliation of Katrina, should have been the Perfect Storm -- that coming together of political and economic consequences of bad policy with a devastating narrative critique and the ambition of political rivals, to create shift, a change, an alteration in the political and economic structures and paradigms that brought us to this extreme.

Polls show a majority of Americans began to feel the country was off on the wrong track, soon after the War in Iraq started, and except for a brief moment of hope soon after Obama's election, Americans have continued in that pessimistic conviction. Personally, I thought the country was off on the wrong track, when a Pittsburgh billionaire bought a 7-year "scandal" culminating in the Impeachment of the President of the United States. I thought the country was off on the wrong track, when the Supreme Court cancelled an election recount, and appointed Alfred E. Newman as President. I thought the country was off on the wrong track, when the appointed President, a self-described fiscal conservative, launched a massive program of tax cuts for the wealthiest Americans. I thought the country was off on the wrong track, when an Administration lied its way into an aggressive war against Iraq, as a "response" to a terror attack perpetrated by a bunch of Saudi Arabians. But, what do I know?

I'm admittedly fascinated by the "cycles" of history, the apparent patterns of rise and fall, of paradigmatic organization, growth and collapse. Political economy -- the somewhat chaotic, somewhat organized mass behavior of polities, societies and economies -- does seem to find stable patterns in which to channel development and growth, and then, having exhausted the possibilities, to dis-organize in moments of crisis.

The Financial Crisis of 2008 looks remarkably like the culmination of a long political and economic program, traceable, at least, to Reagan, and the ultimate exhaustion of an economic paradigm that goes back to FDR, the New Deal and WWII. Reagan began the process of dismantling the New Deal at home, and the international regime abroad. The Reagan economic program of de-regulation, restricted public investments and tax-cuts for the rich would feed off the entropy of the post-WWII prosperity.

Posted via email from Jim Nichols

Coming Perfect Storm: The Moral Courage of the Obama Administration in Action

Rwanda’s Economy to Expand 7% as Subsidies Boost Farm Output

 Rwanda’s economy will probably expand 7 percent this year as the government steps up subsidies to farmers and construction expands, Finance Minister John Rwangombwa said.

Economic growth may accelerate further to 8 percent in 2011, after reaching 6 percent in 2009, Rwangombwa said in an interview yesterday in Abidjan, the commercial capital of Ivory Coast.

Rwanda began paying subsidies to farmers to buy fertilizer and seeds in 2007, with those getting financial support farming 40 percent of the country’s arable land. The government aims to increase that to half of the Rwanda’s farmland, Rwangombwa said, without giving a timeframe. Agriculture will probably expand 8 percent this year, he said.

“We think this kind of growth in the economy can be sustained,” Rwangombwa said. “Agriculture has big potential.”

Rwanda’s coffee production this year may climb 13 percent to 27,000 metric tons because of improved weather, the Rwanda Coffee Development Authority said on Jan. 6. The country produces mainly the arabica variety and exports 98 percent of the crop in the form of green beans.

The East African nation has eased access to credit and simplified rules to start up businesses to help attract foreign investment, which climbed to $230 million last year from $10 million in 2001, the minister said. Rwanda made more business- friendly changes to its regulations than any other government last year, the World Bank said in a report on Sept. 9.

Posted via email from Jim Nichols

Friday, May 28, 2010

Consumer Price Index -April 2010 redux

I posted earlier on the April CPI numbers but came across the macroblog post so wanted to revist the stuff i've come across on the recent CPI numbers--figured I might as well repost it...
On a seasonally adjusted basis, the Consumer Price Index for All
Urban Consumers (CPI-U) declined 0.1 percent in April, the U.S.
Bureau of Labor Statistics reported today. Over the last 12 months,
the index increased 2.2 percent before seasonal adjustment.
The index for energy decreased 1.4 percent in April and accounted for
the seasonally adjusted decline in the all items index. The indexes
for gasoline and natural gas both decreased significantly,
outweighing increases in the indexes for fuel oil and electricity.
The food index increased 0.2 percent in April, while the index for
all items less food and energy was unchanged. The index for meats,
poultry, fish, and eggs rose sharply in April and accounted for the
food increase; other grocery store food groups were mixed and the
index for food away from home rose slightly. Within all items less
food and energy, the indexes for recreation, airline fares, and
medical care all rose in April. Offsetting these increases were
declines in the indexes for apparel and for household furnishings and
operations. The continuing stability of the index for all items less
food and energy has resulted in an increase over the last 12 months
of 0.9 percent, the smallest 12-month increase since January 1966.
The cost of living in the U.S. unexpectedly dropped in April for the first time in more than a year, signaling the world’s largest economy is recovering without causing prices to flare.

The 0.1 percent fall in the consumer price index was the first decrease since March 2009, figures from the Labor Department showed today in Washington. Excluding food and fuel, the so-called core rate was unchanged, capping the smallest 12- month gain in four decades.

Retailers such as Wal-Mart Stores Inc. are cutting prices to bolster sales as customers face almost 10 percent unemployment and rising foreclosures. The lack of inflation, which may be reined in even more by the European debt crisis, is one reason Federal Reserve policy makers have pledged to keep the benchmark interest rate near zero in coming months.

“There simply isn’t any kind of price pressure of any consequence in the economy,” said David Resler, chief economist at Nomura Securities International Inc. in New York, who accurately forecast the decline in prices. “This puts the Fed firmly in place for the foreseeable future.”

Stock-index futures held earlier losses after the report. The contract on the Standard & Poor’s 500 Index fell 0.5 percent to 1,112.9 at 8:43 a.m. in New York. Treasury securities were also lower, pushing the yield on the benchmark 10-year note up to 3.37 percent from 3.35 percent late yesterday.

Rise Projected

Consumer prices were forecast to rise 0.1 percent, according to the median forecast of 79 economists in a Bloomberg News survey. Estimates ranged from a drop of 0.2 percent to a gain of 0.4 percent. Costs excluding food and energy were projected to rise 0.1 percent.

In the 12 months ended in April, prices rose 2.2 percent following a 2.3 percent year-over-year gain the prior month. Economists had forecast a 2.4 percent rise in the 12 months to April, according to the survey median.

The core rate rose 0.9 percent from April 2009, the smallest increase since January 1966, after a 1.1 percent year- over-year advance the prior month.

Compared with a month earlier, energy costs dropped. Gasoline prices fell 2.4 percent.
The disinflationary trend continues - and with all the slack in the system (especially the 9.9% unemployment rate), it is hard to see inflation picking up any time soon. The high unemployment rate and low measured inflation suggest the Fed will hold the Fed funds rate at the current level for some time.
No matter how you cut the April report on consumer prices, retail inflation keeps coming up zero. Here are the key points:
  • The consumer price index (CPI) fell a tiny bit in April but has remained essentially unchanged since January.
  • The core CPI (excluding food and energy) hasn't posted a significant increase dating back to last October, and its 0.9 percent rise from a year ago is its smallest 12-month increase since 1966.
  • The Federal Reserve Bank of Cleveland's median CPI continued a trend of essentially no change since October and is up a mere 0.5 percent from a year ago—a new year-over-year low for the series.

Oh, and the sticky-price CPI was up only 1.25 percent (annualized) in April. Maybe we ought to explain this last one a little more.

When you look at the headline CPI, what you're really looking at is a constellation of price movements that are a mixture of various forces. For example, there are changes in market conditions that are specific to particular goods—dairy prices fell sharply in April, presumably in response to an unanticipated jump in milk production. Stripping away these idiosyncratic price movements is, in large part, what the core inflation measures, including the Cleveland Fed's median CPI, are designed to do.

But economists tend to think of two general forces that drive all prices: (1) the amount of "slack" in the economy influencing the pricing power of firms and workers and (2) inflation expectations, which affect forward-looking price and wage decisions.

Of course, these two forces are unlikely to affect all prices in the exactly same way. Economists have long accepted the idea that some prices are "sticky," meaning they may not be particularly sensitive to changing market conditions, including economic slack.

Falling energy prices pushed down the consumer price index 0.1 percent in the month of April.  After rising 2.7 percent from January of 2009 to January of 2010, consumer prices were unchanged over the first three months of this year.  Core prices were unchanged in April.  Inflation in the core index has risen at a 0.6 percent annual rate over the last three months and 0.3 percent over the last six.

After falling sharply in the second half of 2008, consumer prices rose at a 4.8 percent annualized rate from May to August of 2009.  Since then, the three-month rate of inflation has declined to zero.  Energy prices had been a strong driver of inflation; the three-month annualized rate reached 57 percent in the three months ending last August before falling at a 7.6 percent rate since January.

Change in the Rent of Shelter, April 2007- April 2010

Falling rents also continue to hold down core inflation.  Rent of primary residence was essentially unchanged in April and despite a 0.1 percent increase in March, has remained flat over the last six months.  Owners’ equivalent rent (OER) of primary residences—which accounts for nearly four times as much of the CPI—fell less than 0.1 percent in April.  This was the sixth consecutive month of small decline in OER, and over that time it has fallen at a 0.7 percent annualized rate.

Falling energy prices helped push down transportation prices, which fell 0.5 percent in April.  Transportation prices have fallen at a 2.8 percent annualized rate over the last three months, after rising at a 14.2 percent rate over the previous three.  The previously-reported disinflation in the used-car market continued in April as prices rose only 0.2 percent in the month.  The cash-for-clunkers program drove the three-month rate of inflation in the price of used cars to an annualized rate of over 30 percent for the quarter ending in October, but has declined steadily since then.  Used car prices have risen at a 5.6 percent rate since January.

Apparel prices fell again in April.  Though apparel accounts for less than 4 percent of the overall CPI, prices have fallen at a 7.0 percent annualized rate over the last three months and 3.4 percent over the last six.

Elsewhere in the core index, medical care continues to be a source of price pressure—rising 0.2 percent in the month.  Among medical care costs, hospital and related services were again the fastest growing in April, though not as fast as the previous two months.  The price of hospital services rose 0.4 percent in the month—a 4.3 percent annualized rate of growth.  By contrast, those prices rose 1.1 and 1.0 percent in February and March, respectively.

Education prices rose another 0.5 percent in April.  Tuition, fees, and child-care prices have seen a 1.7 percent increase in the last three months—a 7.0 percent annualized rate of growth.  Tuition prices have averaged 5.9 percent annual inflation over the last ten years—more than twice as fast as the 2.4 percent inflation overall.

Non-agricultural export prices rose 1.4 percent in April, and have risen 6.0 percent over the last year.  At the same time, nonfuel import prices rose 0.5 percent.  The rise in both import and export prices has been concentrated in industrial supplies rather than consumer or capital goods.  The producer price indices largely tell the same story, as the price of core finished goods have risen at a 1.4 percent annualized rate over the last three months.

Non-food, non-energy crude prices have risen at a 43 percent rate over the last year, but this is in large part a recovery from the rapid fall in the second half of 2008.  Over the last three years, prices have risen at a 5.1 percent annualized rate.  Intermediate core goods show the same pattern.  Despite a sharp run-up and fall in 2008, and a current three-month rate of inflation over 11 percent, intermediate prices have risen a cumulative 8.2 percent over the last three years.

Overall, the inflation picture is not much changed since last month. The pressures at earlier stages of production are confined to supplies and materials, which have experienced large price booms and busts over the last few years, but producers have largely not passed these price changes on to consumers.  As a result, deflation is present in much of the core index and energy prices have begun to fall once again—leaving little threat of inflation.


Posted via email from Jim Nichols

Jeremy Jackson: How we wrecked the ocean

Jeremy Jackson: How we wrecked the ocean

Georgia Unemployment Rate: 10.4%

GA Unemployment rate: 10.4%

How to prevent huge teacher layoffs

The emergency spending bill before the House would address the education crisis facing communities across America -- and the jobs of hundreds of thousands of teachers are at stake. Because of continued high unemployment, state and local budgets are stressed to the breaking point. Many states and localities are drastically cutting education spending. This year school districts in Hawaii went to only four days of instruction a week. In many other districts, officials are ending the school year early to save money.

Most worrisome, hundreds of thousands of public school teachers are likely to be laid off over the next few months. As many as one out of every 15 teachers could receive a pink slip this summer, the White House Council of Economic Advisers estimates. These layoffs would be spread throughout the country -- in urban, rural and suburban districts.

Such layoffs are terrible for teachers, for communities and, most important, for students. For the families directly affected, layoffs mean not only lost wages but often lost homes and postponed dreams. Because unemployed teachers have to cut back on spending, local businesses and overall economic activity suffer. And the costs of decreased learning time and support for students will be felt not just in the next year or two but will reduce our productivity for decades to come.

Additional federal aid targeted at preventing these layoffs can play a critical role in combating the crisis. Such aid would be very cost-effective. There are no hiring or setup costs. The teachers are there, eager to stay in their classrooms. The American Recovery and Reinvestment Act of 2009 included some of this aid for 2009 and 2010. The recipient reports filled out by states and school districts show that, last quarter, Recovery Act funds supported more than 400,000 education positions.

Furthermore, by preventing layoffs, we would save on unemployment insurance payments, food stamps and COBRA subsidies for health insurance, and we would maintain tax revenue. Accounting for these savings, the actual cost of the program is likely to be 20 to 40 percent below the sticker price -- perhaps even lower when one considers the spillover effects of maintaining employment. And the country will recoup much of the cost in coming years, as a better-educated workforce leads to higher tax revenue and less reliance on the social safety net.

The American economy has made tremendous progress over the past year. We have gone from job losses of three-quarters of a million per month, in the first months of 2009, to now adding jobs -- nearly 300,000 in April. But we still have a very long way to go. Overall employment is down almost 8 million from its December 2007 peak. And for the millions of Americans who are struggling to make ends meet without a paycheck, this is still an economic crisis.

Further targeted actions to speed the recovery and reduce unemployment, such as the teacher layoff prevention fund that is included in the emergency spending bill, are good for the economy and good for families. With teacher layoffs imminent, the time to act is now, before schools send out more layoff notices and make their staffing decisions for the fall.

Yes, we all understand that our budget deficit is too large. Profligate policies of the past and rising entitlement spending have created a mess that simply must be dealt with as we return to full employment. But it would be penny-wise and pound-foolish to deal with that issue by failing to allot essential spending on teachers at a time when the unemployment rate is still near 10 percent.

The right way to deal with a budget problem that was years in the making is by formulating a credible plan to reduce the deficit over time and as the economy is able to withstand the necessary fiscal belt-tightening. That is what President Obama is doing.

Let's also do what we need to do now -- keep hundreds of thousands of teachers in the classroom and prepare our students for the challenges of the future.

Posted via email from Jim Nichols

Thursday, May 27, 2010

Deficit hawks ignore the R-word

Of all the gaps between elite and mass opinion in America today, perhaps the greatest is this: The elites don't really believe we're still in recession. Or maybe, they just don't care.

How else to explain the continual harping on the deficit by editorialists, centrist think tanks and the like when the nation is still enmeshed in the most serious economic downturn since the 1930s? How else to understand the growing opposition to the jobs bills Congress is set to vote on this week, particularly when nobody has identified any future engine of American economic growth save countercyclical public investment?

It's not that the American people aren't concerned about the deficit. But in poll after poll, they make clear that their No. 1 concern is jobs. Forty-seven percent of respondents to a Fox News poll this month, for instance, said they were concerned with the economy and jobs, while just 15 percent acknowledged concern over the deficit and spending. Eighty-one percent of respondents to a Pew Research Center poll from this month thought it "very important" for Congress to address the jobs situation -- more than for any other topic. "There is no significant difference across party lines," Pew reported.

Beneath these numbers lies broad public anxiety over job loss and downward mobility. A Gallup survey from April showed that 21 percent of Americans feared they would lose their jobs or be laid off in the next 12 months, and that the percentage of respondents who believed they would find a job as good as the one they would lose if laid off had declined from 70 percent in 2001 to 64 percent in 2007 to just 42 percent last month.

This anxiety accurately reflects both the long- and short-term downward trajectory of work in America. As the U.S. economy has moved from a substantially unionized manufacturing base to a non-union service-sector workforce, working-class incomes have stagnated or declined. In the current downturn, those new college graduates able to find jobs often fail to find ones commensurate with their education. Northeastern University economist Andrew Sum calculates that only 51 percent of college graduates under 25 work in jobs that require a college degree, the New York Times reported on Tuesday.

Of course, no one at any point on the political spectrum has a complete prescription for what ails the American economy. But we do know how to preserve and create enough jobs to keep a recession from becoming a depression and, more particularly, how to keep still-reeling state and local governments from deepening the downturn by laying off thousands more workers. We did just that last year: The Obama stimulus Congress passed last winter saved or created what most economists estimate to be roughly 2 million jobs. For that matter, every major nation enacted a Keynesian stimulus last year, preventing a return to the agony of the 1930s.

These are achievements that the more nuanced deficit hawks acknowledge. But consider what happens when the question is whether the medicine that worked in 2009 should be taken again, in the smaller doses, in 2010, as the legislation before Congress this week would have it. The official unemployment rate is 9.9 percent; there are still more than five unemployed job seekers for every opening; and a record percentage of the unemployed have been jobless for more than six months.

Yet the deficit hawks' rejoinder is essentially: So what? Government spending is out of control. We need to cut back now.

The problem with this ostensible solution is twofold. First, it conflates short-term deficits needed to stanch the recession with long-term issues of fiscal sustainability. Such thinking risks turning a short-term recession into long-term stagnation, much as Japan did in the 1990s by failing to stimulate its economy sufficiently. Second, it calculates the dollar cost of the stimulus but neglects to factor in the dollar benefit from, for instance, keeping hundreds of thousands of teachers, police and firefighters on the job and paying taxes rather than collecting unemployment insurance. Once such particulars are accounted for, a new study from the liberal Economic Policy Institute argues, the cost of the jobs created in the bill coming before the House this week is more than halved, from $75 billion to $35 billion.

Those who oppose the jobs bills in the House and Senate this week should be compelled to answer some questions, starting with: Absent more stimulus, what do they see as the plausible engine of economic recovery? What effect will laying off as many as 300,000 teachers have on the education of American children? And, more elementally, don't they know there's a recession on?

Posted via email from Jim Nichols

Economy in U.S. Expands Less Than First Estimated

The U.S. economy grew in the first quarter at a slower pace than previously calculated, reflecting smaller gains in consumer and business spending and highlighting the risks to the recovery posed by the European debt crisis.

The 3 percent increase at an annual rate in gross domestic product was less than the median estimate of economists surveyed by Bloomberg News and compares with an advance estimate of 3.2 percent issued last month, figures from the Commerce Department showed today in Washington. Corporate profits grew and incomes were revised down.

Households are gaining confidence this quarter as employment improves, and manufacturing is powering ahead as business investment and exports keep growing. The setback in stocks and rebound in the dollar caused by Europe’s financial troubles may cool spending here and abroad, giving the Federal Reserve additional scope to keep interest rates low.

“We are at a fairly fragile turning point,” said Julia Coronado, a senior U.S. economist at BNP Paribas in New York. “There’s a lot of headwinds that the economy is struggling with.”

More Americans than forecast filed applications for unemployment benefits last week, indicating firings persist even as the economy rebounds and employment picks up, figures from the Labor Department also showed today. Initial jobless claims fell by 14,000 to 460,000 in the week ended May 22. Economists forecast claims would drop to 455,000, according to the median estimate in a Bloomberg News survey.

Shares Rebound

Stock-index futures trimmed earlier gains following the reports. The contract on the Standard & Poor’s 500 Index rose 2 percent to 1,082.5 at 8:56 a.m. in New York. Treasury securities dropped, pushing the yield on the 10-year note up to 3.27 percent from 3.19 percent late yesterday.

GDP was forecast to grow at a 3.4 percent annual pace, according to the median estimate of 79 economists surveyed. Projections ranged from gains of 3 percent to 4.1 percent.

Consumer spending, which accounts for about 70 percent of the economy, rose at a 3.5 percent pace last quarter, compared with the 3.6 percent the government estimated last month and a 1.6 percent gain in the prior three months. The first-quarter increase was the biggest since 2007.

Corporate Profits

Company earnings increased 5.5 percent in the first quarter after climbing 8 percent in the previous three months. Earnings were up 31 percent from the same time last year, the biggest year-over-year gain since 1984, one reason why hiring and spending on capital equipment is improving.

Chrysler Group LLC, the automaker controlled by Fiat SpA, posted a $143 million operating profit in its first quarter and said last week that it will add a second shift to a Detroit factory that makes Jeep Grand Cherokees.

The company will add 1,100 workers at the assembly plant to increase production of the redesigned sport-utility vehicle, Chief Executive Officer Sergio Marchionne said at a May 21 news conference. He said he expects to add jobs at other Chrysler plants, without specifying which factories.

Today’s report also revised household earnings data covering the past two quarters. Wages and salaries decreased by $13.2 billion in the last three months of 2009, a downward revision of $30.3 billion. The figures, which incorporate new data on bonuses and stock options, indicate employment may have been weaker at the end of last year than current data show.

Less Income

Today’s report also showed that gross domestic income, or the money earned by the people, businesses and government agencies whose purchases go into calculating growth, grew at a slower pace than GDP before adjusting for inflation during the past two quarters. According to Fed research, GDI is a better gauge of the economy, signaling growth may be overestimated.

Since then, mounting concern over the sovereign-debt crisis in Europe has rattled global financial markets. The Standard & Poor’s 500 Index is down 8.7 percent from March 31 through yesterday, and the dollar index, which tracks the currency’s performance against six major currencies including the euro and yen, is up 7.6 percent.

The drop in stocks will damp household wealth, leading to smaller gains in consumer spending over the next year than would otherwise be the case, according to Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. The advance in the dollar will also hurt American exports, he said.

Posted via email from Jim Nichols

Jobless Claims in U.S. Fell Last Week to 460,000

New unemployment numbers released today...
In the week ending May 22, the advance figure for seasonally adjusted initial claims was 460,000, a decrease of 14,000 from the previous week's revised figure of 474,000. The 4-week moving average was 456,500, an increase of 2,250 from the previous week's revised average of 454,250.

The advance seasonally adjusted insured unemployment rate was 3.6 percent for the week ending May 15, unchanged from the prior week's unrevised rate of 3.6 percent.

The advance number for seasonally adjusted insured unemployment during the week ending May 15 was 4,607,000, a decrease of 49,000 from the preceding week's revised level of 4,656,000. The 4-week moving average was 4,637,250, a decrease of 11,500 from the preceding week's revised average of 4,648,750.

The fiscal year-to-date average of seasonally adjusted weekly insured unemployment, which corresponds to the appropriated AWIU trigger, was 5.134 million. 

More Americans than forecast filed applications for unemployment benefits last week, indicating firings persist even as the economy rebounds and employment picks up.

Initial jobless claims fell by 14,000 to 460,000 in the week ended May 22, Labor Department figures showed today in Washington. Economists forecast claims would drop to 455,000, according to the median estimate in a Bloomberg News survey. The economy expanded in the first quarter at a slower pace than initially estimated, the Commerce Department said today.

Some companies such as Pfizer Inc. are shedding workers and closing plants to cut costs, even as the economy has added jobs each month this year. The unemployment rate, at 9.9 percent in April, will still take time to recede as more jobseekers enter the workforce and fail to find work.

“Claims remain the conundrum in the employment picture,” said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit, who accurately forecast initial claims. “They remain elevated, while the vast majority of data point to an improving labor market. Not all industries or sectors are seeing the full benefit of the recovery yet.”

The economy grew at a 3 percent annual rate in the first three months of the year, compared with an advance estimate of 3.2 percent, Commerce Department figures showed. Consumer and business spending rose less than initially estimated.

Weekly Unemployment Claims 

This graph shows the 4-week moving average of weekly claims since 1971.

The four-week average of weekly unemployment claims increased this week by 2,250 to 456,500.

The dashed line on the graph is the current 4-week average. The current level of 460,000 (and 4-week average of 456,500) is still high, and suggests ongoing weakness in the labor market.

Still disappointing ... the 4-week average has been moving sideways for almost five months.


Posted via email from Jim Nichols

Wednesday, May 26, 2010

File under no kidding

Oil giant BP PLC told congressional investigators that a decision to continue work on an oil well in the Gulf of Mexico after a test warned that something was wrong may have been a "fundamental mistake," according to a memo released by two lawmakers Tuesday.
Ya' think?

Posted via email from Jim Nichols

Class size: After state board vote Monday, the sky’s the limit

The state Board of Education voted Monday to lift all limits on class sizes over the next year in response to the deepening school budget crisis that has already forced thousands of teacher layoffs, the loss of music and arts programs and shorter school years in some Georgia districts.

Described as an emergency response to a worsening financial climate, The 9-2 vote means that Georgia school districts can raise class size by 5five, 10, 15 students — or as many students as they choose — without seeking a waiver from the board or the Department of Education.

So it goes when you fail to run a fiscally sustainable budget. Republicans are running this state into the ground.  This is terrible news for parents with kids in public schools.  Our kids deserve class sizes that allow for teachers to engage with each student.  Grades aren't everything as our kids need more role models in their lives and that can't happen if the teacher is never able to spend time with you. Not to mention we want learning environments that can focus on individual learning styles--which is more likely one to one than in a class with 45 kids...

Posted via email from Jim Nichols

On the question of transit funding...

From the Inbox:
Maybe we need pictures of oil covered pelicans, Osama bin Laden and Mahmoud Ahmadinejad and a picture of MARTA and ask people which they support.   I  notice the new report from the Union of Concerned Scientists says we are sending over $2 billion a year out of Georgia for coal.  I wonder how many millions a day go out of Georgia for oil and what percentage of the $100 million a day that goes to Iran Georgians supply.  You would hope Georgia citizens who may be unsure about global warming would be sure they don't want to fund terrorists.
Just as a side note: I've never understood those who claim we should drill here drill now for national security reasons.  Don't we want to save that oil in case we do get cut off or have access problems.  Right now we can access oil on the open market.  If you are worried about national security why would you want to use up what little oil we have...

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The Policy Debate vs The Policy Horse Race

I've posted on this problem a number of times.  This is a great example of how its hard to get real news to voters. We have to do something about improving the quality of the debate as voters are going into the voting booth poorly informed about whats going on.  Talking heads on tv and radio want to make money so the spin spin spin with lies and half truths.
We have to improve access to quality information...
I googled “Warner” “derivative”
Some articles quote Warner, so it is clear that he is talking about spinning off derivatives trading desks. They don’t mention the fact that there are other, more important, aspects of derivative-trading reform in the Senate bill.
Some don’t specify exactly what change Warner predicts and, if taken literally, falsely assert that he predicts removal of all the derivative trading reforms in the bill reported out of the Senate Agriculture committee
“Sen. Mark Warner (D-VA) appearing today MSNBC with Andrea Mitchell let the cat out of the bag that Sen. Lincoln’s derivative language will be striped [sic] out in the conference committee.”
This link sends me back to the one above
Hmm this is interesting. A very large fraction of the top relevant google hits in Warner and derivatives trading contain the same exageration and the same typo “in tact” for “intact.”
This post has a good summary but includes the typo. It might be the source
The errors propogated over the internet. Both the typo and the important exageration. Many of the sites which copied from the Tolbert report, explicitly cite the Tolbert report so I am not accusing them of plagiary, just cut and paste journalism from a secondary source.


This mostly sends me to an independent trove of exageration in which “derivative-reform” becomes “spinning of derivative trading desks” and nothing else. Much of the distortion is at, where they are campaigning hard against Lincoln and much inclined to claim that her derivative-reform will amount to nothing, because it will amount only to exchange trading and clearning requirements. I had considered titling this post “firedog feaver” as I think they excell at ignoring important policy issues to focus on their disagreements with conservadems. If conservadems are for it, it doesn’t exist over there.
The distorted descussion of derivative-reform is similar to the way there was more discussion of the cornhusker kickback allowing Nebraska to not pay part of the cost of medicaid expansion than of medicaid expansion itself. Quick pop quiz: How many more people will get medicaid due to health care reform (HCR) ? Who are they ? That is, who has family income below four thirds of the poverty line but no medicaid ? Where are they ? Is the geographic distribution similar to the distribution of people with income under four thirds of the poverty line ? These are important questions. One can’t have an informed opinion of HCR without answering them. They were discussed almost not at all, because there was no doubt that medicaid expansion would be part of the final bill.
The fate of medicaid expansion was not news. Also it was not a way to see who won the struggle between progressives and blue dog conservadems. So it only matters to the 16 million people who will get health insurance as a result.

Posted via email from Jim Nichols

Tuesday, May 25, 2010

Your morning news...

 Asian stocks and the won plunged to 10-month lows after a report that North Korean leader Kim Jong Il ordered his military to prepare for combat last week. The euro weakened and commodities declined on concern Europe’s debt crisis will spread.

The MSCI Asia Pacific Index dropped 3 percent to 109.00 at 4 p.m. in Tokyo, set for its lowest close since July 30. The Stoxx Euro 600 slid 1.5 percent to 232.80. Standard & Poor’s 500 futures lost 2 percent. The won lost 3.7 percent against the yen. Korea’s Kospi Index slumped 2.8 percent. The euro fell 1.4 percent against the yen. Crude oil slipped below $70 a barrel.

“Increasing tensions on the Korean peninsula, coupled with deepening concern about sovereign debt risks in Europe, are affecting investors’ sentiment,” said Kim Young Joon, a fund manager at NH-CA Asset Management in Seoul, which manages $9.7 billion in assets. “But much of North Korea’s comments appear bluffing. I don’t think another disastrous event will happen.”

The North Korea Intellectuals Solidarity group said on its web site that the country’s military was put on alert and the U.S. announced plans yesterday to conduct anti-submarine exercises with South Korea following the March 26 torpedoing of a warship. The International Monetary Fund urged Spain to take more steps to overhaul ailing banks as the nation’s financial sector “remains under pressure.”.....


Commodities Drop

BHP Billiton Ltd., which got 22 percent of its fiscal 2009 revenue in Europe, slid 3.9 percent to A$36.34 in Sydney after copper and oil prices retreated on concern a slowdown in the euro region will reduce demand. Rio Tinto Group, the world’s third-largest mining company, lost 3.7 percent to A$61.81.

Crude oil declined 2.4 percent to $68.51 a barrel in New York. Copper dropped 2.2 percent to $6,756.25 a metric ton on the London Metal Exchange. The metal has slumped 11 percent in the past month. Aluminum declined 2.4 percent to $2,035 a ton and nickel slumped 2.7 percent to $21,600 a ton.

“I don’t think things have worsened in Europe in the past few days, but the reason we haven’t seen any significant rallies in the market is that the uncertainty hasn’t dissipated,” Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne, said in a telephone interview. “The one thing about the euro zone is that everyone has been revising down their demand outlook. The fundamentals there have no doubt become weaker in the last month.”

Some scientists fault the federal government for not having investigated dispersants more fully earlier. Knowledge of dispersants' environmental effect is limited because the government "had virtually no money to put into that research," Nancy Kinner, a professor of civil and environmental engineering at the University of New Hampshire, said at a congressional hearing last week.

Although thousands of people are working to fight the spill, basic questions about its environmental impact remain. One is how much oil is spewing into the gulf. Scientists' estimates vary widely—from some 5,000 barrels a day to more than 50,000 barrels a day. The National Oceanic and Atmospheric Administration chief, Jane Lubchenco, said last week that efforts to measure the leak have been delayed in part because they would require sending more robots to the ocean floor. That would increase the chance that the robots might impede eachother's work and lead to an accident, she said. Federal officials say 16 robots already are working in the vicinity of the leaking well to try to plug it.A government team spent the weekend crunching reams of existing data—from video footage and pressure readings to overhead imagery—to try to come up with a more accurate estimate by early this week.

Equally unclear is how the leaking oil is affecting undersea life. Earlier this month, a research vessel sponsored by the National Oceanic and Atmospheric Administration produced water samples from the Gulf that researchers said suggested oil was collecting in a plume deep below the water's surface. But scientists analyzing the samples say they are of limited value because they were taken with equipment not designed for oil. The researchers on the ship took the samples using bottles designed to test for substances that dissolve in water—but oil doesn't, said Edward Overton, an emeritus professor of environmental sciences at Louisiana State University who is analyzing some of the samples. The oil stuck to many of the research bottles, he said, potentially skewing lab results."This is not a very satisfactory way to do it," Mr. Overton said of the water-sampling method. "Unfortunately, it's all that we've got out there right now."

Additional research ships are heading out to study the water.

Onshore, authorities are responding to the spill with more than a decade-old maps that assess the environmental sensitivity of U.S. coastal areas—maps that spill responders use to prioritize areas they want to protect from oil. NOAA said last week that it would cost $11 million to update the environmental-sensitivity maps—money NOAA hasn't had.

China and the U.S. focused their first day of talks in Beijing on joint efforts to prop up the world’s economy in the face of a European sovereign-debt crunch that pushed off a showdown on the yuan’s value.

Officials “spent quite a bit of time discussing the European debt crisis,” Chinese central bank Governor Zhou Xiaochuan said at a press briefing. The nation’s currency policy is being “touched upon” at the talks, he said.

President Hu Jintao said China will move gradually and independently in altering exchange-rate policy after keeping the yuan pegged to the U.S. dollar for 22 months. Treasury Secretary Timothy F. Geithner, who has delayed a report to the U.S. Congress that could name the nation a currency manipulator, said he welcomed China’s commitment to yuan changes.

“Behind the scenes, U.S. officials will be concerned that Europe’s debt crisis provides a convenient justification for Beijing to delay for a few more months” in ending the peg, said Brian Jackson, an emerging markets strategist at Royal Bank of Canada in Hong Kong who previously worked at the Federal Reserve and Bank of England.

Jackson sees the yuan rising 5 percent to 6.5 per dollar by the year’s end. In contrast, non-deliverable yuan forwards indicated a 1.5 percent gain in the next 12 months as of 9:41 a.m. in Hong Kong. Investors last week pared back expectations for an appreciation on concern the debt debacle centered on Greece will undermine the global recovery.

Republican National Committee Chairman Michael Steele criticized Kentucky Senate candidate Rand Paul’s views on anti-discrimination laws, yet said he expects Paul to join Republicans in fighting for civil rights.

Paul is facing a controversy because he questioned part of the Civil Rights Act of 1964. While Paul said racism and discrimination are abhorrent, he said he would have tried to change the provision that deals with private businesses.

“His philosophy is misplaced in these times,” Steele said yesterday on “Fox News Sunday.” Earlier, on ABC’s “This Week,” Steele said he “wasn’t comfortable” with Paul’s view, yet expects him to be “on the same page” in the future.

“Rand Paul as United States senator will be four-square with the Republican Party and lockstep with moving forward on civil rights, not looking backward,” Steele said.

Republicans and Democrats are struggling to adjust to a wave of election results that show Americans are upset with the establishment in both parties. In his primary, Paul beat Kentucky Secretary of State Trey Grayson, the chosen candidate of Senate Republican leader Mitch McConnell.

Paul’s comments “were unfortunate,” Minnesota Governor Tim Pawlenty, a fellow Republican, said on CNN’s “State of the Union.” Still, Paul’s identification with the Tea Party movement represents “new energy, new ideas, passion” that will help Republicans, Pawlenty said.

The euro weakened for a second day against the yen and dollar as signs the European debt crisis is spreading revived concern the region’s recovery will slow.

The single currency dropped to within one yen of its weakest in more than eight years after the International Monetary Fund urged Spain to do more to overhaul its ailing banks, adding to speculation Europe’s financial institutions face more losses. The yen strengthened as a decline in Asian stocks boosted demand for Japan’s currency as a refuge. The won slumped as tensions escalated between the two Koreas over the sinking of a warship from the South’s navy in March.

“I’m concerned about what policy makers can do to contain the debt crisis should it spread from Greece to bigger nations like Spain and Italy,” said Tetsuya Inoue, chief researcher for financial markets at Nomura Research Institute, a unit of Japan’s largest brokerage. “Economic growth can’t help but lose momentum. The euro will stay under downward pressure.”

The euro fell 1.3 percent to 110.29 yen as of 6:45 a.m. in London from yesterday in New York. The common currency dropped to $1.2283 from $1.2372. The dollar was at 89.81 yen from 90.29 yen, and climbed to $1.4339 per pound from $1.4425.

The 16-nation euro touched a four-year low of $1.2144 on May 19, and the weakest since 2001 at 109.51 per yen on May 20.

Spain’s banking industry “remains under pressure,” as consolidation has been “too slow,” the Washington-based IMF said in a report yesterday after a regular review of Spain.

“We fully support” the new austerity measures, it said, referring to Spain’s plans to rein in its budget deficit with the deepest spending cuts in three decades.

Spain’s Banks

Four Spanish savings banks plan to combine to form the nation’s fifth-largest financial group with more than 135 billion euros ($166 billion) in assets, as regulators push ailing lenders to merge with stronger partners.

“Looking ahead, we suspect contagion risks from the European sovereign debt crisis will remain front-brain for markets,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “With negative momentum firmly ingrained, we wouldn’t be surprised to see the euro re-test recent lows around $1.22 in coming sessions.”

The Bank of Spain said on May 22 it appointed a provisional administrator to run CajaSur, a savings bank crippled by property-loan defaults. The seizure is the first under a state- financed rescue plan that Standard & Poor’s estimates may cost as much as 35 billion euros, increasing the burden on Spain’s finances as the government tries to reduce its budget deficit.

South Korea broadcast a pop song extolling freedom of choice and a warning on the dangers of overeating into North Korea, ending a six-year moratorium on propaganda in retaliation for the sinking of a warship.

The four-hour radio program yesterday evening included a speech by South Korean President Lee Myung Bak outlining his government’s response to the March 26 sinking, which an international panel concluded was caused by a North Korean torpedo. The South, which lost 46 sailors in the attack, will seek more United Nations Security Council sanctions, halt most trade, and bar North Korean vessels from its waters.

“We have always tolerated North Korea’s brutality, time and again,” Lee said yesterday. “Now, things are different.”

Lee’s cutting of ties will increase North Korea’s economic dependency on China, which has yet to accept the panel’s findings and yesterday urged all sides to remain “coolheaded.” Kim Jong Il’s regime said it will shell South Korean positions that use loudspeakers for “psychological warfare,” the official Korean Central News Agency reported.

South Korea’s won plunged to a 10-month low today as the Seoul-based Yonhap News Agency reported that Kim ordered his military to prepare for combat, citing a defector group. The benchmark Kospi index sank as much as 3.5 percent.

‘All-Out War’

North Korea last week threatened “all-out war” for any punitive action taking against its regime.

Lee’s actions mark “the end of an era of reconciliation and the beginning of a new Cold War,” said Yang Moo Jin, a professor at the University of North Korean studies in Seoul. “China will resist joining international condemnation of North Korea. It doesn’t need to be seen as bending to U.S. pressure.”

The propaganda broadcast made on FM radio began at 6 p.m. local time yesterday when a woman anchor announced what she called the “voice of freedom.” North Korean listeners were regaled with a song by a South Korean girl band, Four Minute.

In the tune, “Huh,” the band sings: “When I say I want to appear on TV, when I say I want to become prettier, everybody says I can’t do it. Baby, you’re kidding me? I do as I please.”

Food Propaganda

The broadcast then explained how South Koreans no longer experience hunger, and are more worried about getting fat.

“Always remember, we want to share our prosperity with you,” the anchor said, accusing North Korean officials of enriching themselves while the people go hungry.

The UN World Food Program said this month its aid to North Korea will run out by the end of next month.

Kim’s regime, which has been relying on handouts since the mid-1990s, is suffering from worsening shortages after a botched currency revaluation late last year. Academics including Rudiger Frank, professor of East Asian Economy and Society at the University of Vienna, said the reform was an attempt to roll back an experiment with free markets that had loosened the state’s control over jobs, food and patronage.

While the U.S., Japan and other allies of South Korea lined up in support of Lee, China said it was considering the results of the investigation. All sides should “exercise restraint,” Foreign Ministry spokesman Ma Zhaoxu said in Beijing yesterday.

Encouraging small business growth and initiating tax cuts are the keys to saving Georgia's economy, state Speaker of the House David Ralston said Thursday.

"I believe the best way out of the economic situation we're in is growth, not increasing taxes," said Ralston, who was the keynote speaker during a Columbia County Chamber of Commerce post-legislative breakfast at Savannah Rapids Pavilion.

Ralston, a Republican from Blue Ridge, Ga., said Georgia needs to be a pro-growth state and avoid economic catastrophes such as what is happening in California.

California lawmakers have "raised every conceivable tax" and as a result "small businesses are closing in droves and leaving," Ralston said.

"There we have the template of what not to do," he said. "We're committed to not do that."

During the recent legislative session, Ralston said the General Assembly formed a council modeled after the Base Realignment and Closure committee to scrutinize Georgia's tax code. He hopes their recommendations, due in January, will include relief for small businesses.

"We're going to grow our way out of it (the recession)," he said.

Despite the optimistic outlook, the first-year speaker called this year's legislative session a "monumental challenge."

During the past two years, lawmakers have cut the state budget by 20 percent, which equates to about $4 billion.

"We did what you do" when legislators are constitutionally obligated to balance the budget and revenues have declined, said Rep. Ben Harbin, who spoke before Ralston.

Harbin, R-Evans, said state departments were asked to cut expenses by 10 percent, except education, which endured a 6 percent cut in state funding.

Lawmakers eventually created a $17.8 billion budget for next fiscal year.

Still, there is reason for optimism, said Harbin, the chairman of the House Appropriations Committee.

Sales tax and motor fuel tax revenues are rising, which means consumers are spending more.

"The economy is moving in the right direction," he said.

The curriculum standards will now be published in a state register, opening them up for 30 days of public comment. A final vote will be taken in May, but given the Republican dominance of the board, it is unlikely that many changes will be made.

The standards, reviewed every decade, serve as a template for textbook publishers, who must come before the board next year with drafts of their books. The board’s makeup will have changed by then because Dr. McLeroy lost in a primary this month to a more moderate Republican, and two others — one Democrat and one conservative Republican — announced they were not seeking re-election.

There are seven members of the conservative bloc on the board, but they are often joined by one of the other three Republicans on crucial votes. There were no historians, sociologists or economists consulted at the meetings, though some members of the conservative bloc held themselves out as experts on certain topics.

The conservative members maintain that they are trying to correct what they see as a liberal bias among the teachers who proposed the curriculum. To that end, they made dozens of minor changes aimed at calling into question, among other things, concepts like the separation of church and state and the secular nature of the American Revolution.

“I reject the notion by the left of a constitutional separation of church and state,” said David Bradley, a conservative from Beaumont who works in real estate. “I have $1,000 for the charity of your choice if you can find it in the Constitution.”

They also included a plank to ensure that students learn about “the conservative resurgence of the 1980s and 1990s, including Phyllis Schlafly, the Contract With America, the Heritage Foundation, the Moral Majority and the National Rifle Association.”

Dr. McLeroy, a dentist by training, pushed through a change to the teaching of the civil rights movement to ensure that students study the violent philosophy of the Black Panthers in addition to the nonviolent approach of the Rev. Dr. Martin Luther King Jr. He also made sure that textbooks would mention the votes in Congress on civil rights legislation, which Republicans supported.

“Republicans need a little credit for that,” he said. “I think it’s going to surprise some students.”

Mr. Bradley won approval for an amendment saying students should study “the unintended consequences” of the Great Society legislation, affirmative action and Title IX legislation. He also won approval for an amendment stressing that Germans and Italians as well as Japanese were interned in the United States during World War II, to counter the idea that the internment of Japanese was motivated by racism.

Other changes seem aimed at tamping down criticism of the right. Conservatives passed one amendment, for instance, requiring that the history of McCarthyism include “how the later release of the Venona papers confirmed suspicions of communist infiltration in U.S. government.” The Venona papers were transcripts of some 3,000 communications between the Soviet Union and its agents in the United States.

Mavis B. Knight, a Democrat from Dallas, introduced an amendment requiring that students study the reasons “the founding fathers protected religious freedom in America by barring the government from promoting or disfavoring any particular religion above all others.”

It was defeated on a party-line vote.

After the vote, Ms. Knight said, “The social conservatives have perverted accurate history to fulfill their own agenda.”

In economics, the revisions add Milton Friedman and Friedrich von Hayek, two champions of free-market economic theory, among the usual list of economists to be studied, like Adam Smith, Karl Marx and John Maynard Keynes. They also replaced the word “capitalism” throughout their texts with the “free-enterprise system.”

“Let’s face it, capitalism does have a negative connotation,” said one conservative member, Terri Leo. “You know, ‘capitalist pig!’ ”

In the field of sociology, another conservative member, Barbara Cargill, won passage of an amendment requiring the teaching of “the importance of personal responsibility for life choices” in a section on teenage suicide, dating violence, sexuality, drug use and eating disorders.

“The topic of sociology tends to blame society for everything,” Ms. Cargill said.

Even the course on world history did not escape the board’s scalpel.

Cynthia Dunbar, a lawyer from Richmond who is a strict constitutionalist and thinks the nation was founded on Christian beliefs, managed to cut Thomas Jefferson from a list of figures whose writings inspired revolutions in the late 18th century and 19th century, replacing him with St. Thomas Aquinas, John Calvin and William Blackstone. (Jefferson is not well liked among conservatives on the board because he coined the term “separation between church and state.”)

“The Enlightenment was not the only philosophy on which these revolutions were based,” Ms. Dunbar said.

On behalf of those horrified — or at least mystified (”the Atlantic triangular trade“? Really?) — by the Texas Board of Education’s assault on, well, education, a California state legislator recently introduced a bill seeking to prevent these changes from reaching California students. The bill requires the California Education Board to “look out for any of the Texas content” in its own textbooks and “then report any findings to the legislature and the secretary of education.”

Since California is the largest school textbook market (with Texas in at second), I had a moment of hope that such a measure could prevent textbook companies from going through with Texas-mandated distortions. Until I read this part:

California education officials say they aren’t worried about any spillover. Tom Adams, director of the state Education Department’s standards and curriculum division, was quoted by the Associated Press as saying that the Texas standards could make their way into national editions of textbooks, but that California uses its own.

Thus the only state with enough clout to actually counter the Texas changes already has cocooned itself with its own separate textbook standards. That other states could coordinate sufficiently to outweigh the Texas megamarket seems an unrealistic hope. Which means that one state can effectively mandate changes that will reach the entire non-California nation.

So where is the conservative outrage on this? Cato tells us that the federal government has no place in education because the “Founders wanted most aspects of life managed by those who were closest to them, either by state or local government or by families, businesses, and other elements of civil society.” The 2008 GOP platform lamented the diminishing local control over education; its nominee had once publicly called for the elimination of the Department of Education. The current darling of the right rejects federal education assistance because “competition breeds excellence.”

But so far, silence form the Right on this usurpation of local control. And it’s hard for me to think of really anything so antithetical to the Founding principles than for one state to mandate radical changes that all the other states are forced to swallow. Indeed, avoiding such an outcome was in large part the purpose of the Senate, not to mention the Supremacy Clause of the Constitution — really, the scrapping of the Articles of Confederation altogether.


Posted via email from Jim Nichols

Monday, May 24, 2010

The evolution of emotion: Charles Darwin's little-known psychology experiment

Charles Darwin is famous for his prolific writing about biology. In addition to publishing his theory of evolution, Darwin wrote books about coral reefs, earthworms and carnivorous plants. But the eminent naturalist made important contributions to more than just the life sciences. It turns out Darwin was also an early experimental psychologist.

Darwin conducted one of the first studies on how people recognize emotion in faces, according to new archival research by Peter Snyder, a neuroscientist at Brown University. Snyder's findings rely on biographical documents never before published; they now appear in the May issue of the Journal of the History of the Neurosciences.

While looking through Darwin's letters at the University of Cambridge in England, Snyder noticed multiple references to a small experiment on emotion that Darwin had performed in his house. With the help of librarians, Snyder uncovered the relevant documents—research notes and tables filled with the illegible scrawl of Darwin's elderly hands and the neater writing of his wife Emma. Although Darwin's fascination with emotional expression is well documented, no one had pieced together the details of his home experiment. Now, a fuller narrative emerges.

"Darwin applied an experimental method that at the time was pretty rare in Victorian England," Snyder said. "He pushed boundaries in all sorts of biological sciences, but what isn't as well known are his contributions to psychology."

Posted via email from Jim's Science Posts

A billion-dollar burden or justice?

“We have proven that we can be tough on crime and that we can spend $1.2 billion a year doing it,” said Brian Owens, the silver-haired former parole officer who now runs Georgia’s prison system. “But I think it might be time to transition to being smart on crime.”

One in 13 Georgians is behind bars, on probation or on parole, according to the Pew Center on the States. That’s the highest rate of correctional control in the nation and more than the double the national average: 1 in 31.

By far the most costly segment of corrections is locking someone up. About 1 in 70 Georgians is behind bars, according to the Pew study.

“It makes no intuitive sense that Georgia is the ninth-most populous state with about 9.5 million citizens but has a prison population the same as New York state with 19.5 million citizens,” Owens said. “It’s not because we’re committing more crime in Georgia.’’

Rather, it’s because the state’s laws and policies keep offenders behind bars longer than ever. Among inmates released last year, the average time in prison was 3.4 years, up from 1.6 years in 1990. At today’s price tag of $49 a day, the cost to house the average offender jumped from about $28,800 to more than $61,000.

The trend held even among nonviolent offenders: the average inmate released last year on a drug possession charge spent 21 months locked up, compared with 10 months in 1990.

Even small changes in sentences have a gigantic financial impact when multiplied across the prison population. Simply shaving a month or two off a typical inmate’s stay could allow a 1,000-bed cut in prison capacity. The result: a savings of $17.9 million a year.

If judges sentenced offenders to an average of 55 months instead of 60 months, the state would save in the neighborhood of $90 million a year.

Offenders are in prison longer largely because Georgia is much less likely now to shave significant time off of sentences through parole, even though the state runs one of the most highly-regarded parole supervision operations in the nation.

The increased time, along with a jump in prison admissions, explains why corrections spending in Georgia has increased five-fold since 1985.

“I think there is room to right-size a little bit and still make public safety the focus of what we’re doing,” Owens said.

Mark Earley, a Republican former attorney general in Virginia who is chief executive of the nonprofit Prison Fellowship, agreed.

“When you have in Georgia 1 in every 70 adults [incarcerated] and 1 in every 13 is in some form of correctional control, that’s big government with a big big G, ” he said.

Georgia legislators avoided any serious debate about changes to the state’s sentencing system this year. They relied on staffing cuts, more efficient new prison wings and federal stimulus dollars to cover $1.1 billion in costs.

But they will have to take on the issue next year, when $85 million in federal money is no longer there to fill the gap.

Owens, a details man who is all about efficiency and data, is eliminating 2,000 positions from the department, down to 13,000. And he has told lawmakers there aren’t many more places to cut if the state wants to reduce the corrections budget.

“There have to be changes in sentencing in this state or parole is going to have to open up the doors,” Owens said.

Most Georgia legislators are wary of even discussing changes that would lead to shorter sentences, either because they believe in long prison terms or because they are fearful of a soft-on-crime image. And some in districts with lots of prison jobs fret that fewer inmates in the system will make local correctional facilities vulnerable.

But Georgia House Speaker David Ralston (R-Blue Ridge) said a public discussion of Georgia’s approach to criminal sentencing makes sense.

“I don’t think we ought to let public safety depend on getting a bargain basement price, but I think we do have to be conscious of the cost of incarceration,” Ralston said. “I think the dialogue has already started.”

Ralston, an attorney, said he is a strong supporter of Georgia’s drug courts, an approach to handling substance abusers that is managed by a judge but offers alternatives to incarceration. And he said that even the most tough-minded in the criminal justice system – cops and prosecutors – tell him Georgia needs more discretion in the courtroom and more alternatives to prison.

“From time to time we need to step back and ask ourselves ‘Is it working?’ ” Ralston said.

Posted via email from Jim Nichols