No poetry today. In fact, what I have for you today is more of a rant than anything else because I'm still flabbergasted by the results of the CBS News / NY Times Poll released Feb. 11, 2010, on the Tea Party Movement.
In particular, I'm flat-out astonished by two statistics. Only 2% of self-identified "Tea Partiers" know that tax rates have gone down since Obama took office. This means that 98% of them are flat-out factually ignorant about the tax rates that are allegedly their primary point of protest.* Is it any wonder that Sarah Palin is their queen? **
Nearly as astonishing is that only 12% of all Americans know that tax rates have gone down since Obama took office, but at least they have the excuse of not being so obsessed with taxes that they are running around waving tea bags at TV cameras. I would at this point pull out some comparative poll statistics on how many people know who won the last season of American Idol or Survivor, but why make this post any more depressing than it has to be?
I probably wouldn't be so irked if I didn't believe that public ignorance of the basic facts of our governance has grown significantly over the last decade. I truly believe this is one of the most important factors that has led to the disastrous partisanship we see these days in Washington, in our state capitals, and even in county governments.
Having abandoned their responsibility to be informed citizens, it seems that far too many people have decided to choose their positions based on a concept of politics as a sporting event in which the only thing that matters is that their side wins. And in this win-at-all-costs view of politics, lying and cheating are perfectly okay if it leads to electoral victory.
I would at this point like to lay the blame at the feet of convenient whipping boys like "the media" or "pundits" or "the blogosphere" or "those lying politicians" but I that is the attitude among too many citizens that has led us down this disastrous path. Because ultimately the media, the pundits, or even the polticians are not responsible for educating us.
We are responsible for educating ourselves. This is a democracy, and too many people in the last decade have abandoned that basic responsibility of citizenship. They think that somehow relying on Glenn Beck or Keith Olberman or some other entertainer for their "news" makes them educated. Listen up folks. It doesn't make you educated. It makes you ignorant. And the saddest part is that you are so ignorant that you don't even see the bars and walls of the prison that you have chosen.
In the last decade there was a phrase that was thrown around with quite a bit of disdain among the punditry, especially by some in the Bush Administration: "Fact-based politics."
Count me as a big fan of fact-based politics. Because I'm really, really, really tired of what ignorance-based politics has done to my country, and I would very much like to see a return to fact-based politics. I think it's our best chance to get out of this hole.
*Yeah, I know. Their primary purpose seems generally to be opposition to Obama being the president under any and all circumstances, but I'm willing to cut them some slack and credit them with taxes as their rallying point.
**How's that "hopey-changey" thing working out for me, Sarah? A lot better than electing an ignorant quitter as our vice-president would've worked out.
Showing posts with label What Went Wrong. Show all posts
Showing posts with label What Went Wrong. Show all posts
Thursday, February 18, 2010
Saturday, February 6, 2010
Re-creating the Dubious Foundation of The House of Cards
I will try not to let this become an arcane post on arcane points of financial regulation. But among an assortment of news items this morning that made me believe the Democratic Congress is well on its way to botching financial reform every bit as badly as it has so far botched health care reform, was a story on securitization in this morning's New York Times: Seeking a Safer Way To Securitization.
I suppose before I dip in to the article, I should explain a few basic items about securitization of loans. Securitization is the process through which a lender takes a bundle of loans, packages them together, and then sells that package to investors in the form of market securities, similar to bonds. The investors recoup their money as the loans are paid back. You may also occasionally hear about "tranches." Those are different parts of a securitized bundle of loans. The safest loans within the bundle can be sub-bundled and sold as one sort of security with one rate of return and guarantees, while the riskier loans can be sold as a different tranche with a different rate of return.
The process of securitization is not necessarily an inherently bad thing. It lets a lender spread a bit of the risk of its loan portfolio, and in return investors get something to invest in -- presumably with a rate of return that corresponds with the riskiness of the loans.
However, the way that securitization of loans worked in our economy for at least the last decade is that lenders would generate large batches of loans, securitize them, provide their own estimate of risk for the various tranches, and either sell the entire loan on the market or sell all but a tranche whose repayment was guaranteed at the expense of the higher-risk tranches. The rates of risk for the various tranches presented to investors were often grossly misrepresented. The lender's profit no longer came from the repayment of loans with interest; the lender's profit came from selling off bundles of securitized loans.
This means that a lender could generate loans with the profit guaranteed, regardless of how ill-conceived the loans themselves were or whether they were ever paid back. Loan risk was divorced from lending profit, and available credit mushroomed as lenders generated loans with nary a thought as to whether they could or would ever be repaid. Borrowers took this cheap credit and invested in homes, often basing their lending decisions on the assumption that housing prices would always rise at a rate that outpaced their interest rate. Many of them didn't just invest in a home for themselves to live in. They leveraged the easy credit into a series of home purchases well beyond their means as they tried to "flip" their way to wealth.
Even ordinary mortgage borrowers, who just wanted a place to live, found themselves forced to take on far more debt than they might have wanted to incur because housing prices had risen so high, so quickly. They could at least reassure themselves with the rationalization that the bank wouldn't loan them the money if the bank didn't think they could repay the loan, little knowing that the bank no longer cared whether or not they could repay the loan.
Thus a bubble in housing prices was created.
But remember this. The problem was not that home prices eventually fell. The problem is that borrowers were given loans that they could not repay. And the heart of the problem is that those borrowers were able to borrow money that they could not repay because securitization now fully insulated lenders from any risk that the loan would not be repaid. Those bad loans could have inflated a bubble in anything: airline stocks in the 1920s, dot-coms in the 1990s, or tulip bulbs in Holland in the 1630s. In the Naughts, it was housing.
These dubious securitized loans formed the foundation of the house of cards that was our financial system in the Naughts: easy credit for bad loans. Several more layers of unregulated risk in the form of assorted derivatives and credit default swaps were built atop this shaky foundation. I won't get into them today. Suffice it to say that the home loans defaults couldn't have wrecked our financial system without help from those other things.
Okay, so I may have tip-toed towards financial system arcana there, but hopefully you found it useful. Back to this morning's New York Times article: Seeking a Safer Way To Securitization. The article features remarks to a meeting of the American Securitization Forum by John C. Dugan, the U.S. Comptroller of the Currency, the official whose department is charged with maintaining the safety and security of our banking system.
Here's what he said that has me bothered today:
“A requirement intended to improve the securitization market by improving the quality and trustworthiness of underwriting could significantly curtail the number of securitizations that are actually done,” he said. “And that, of course, could materially reduce the amount of credit available for housing or any of the other sectors that have traditionally benefited from securitizations.”
In other words, he's worried that regulating the securitization process in a way that discourages lenders from dumping bad loans onto investors would keep lenders from generating the sorts of bad loans that created the housing bubble in the first place.
And this is what worries me today. I don't see any willingness in Washington to fix the basic regulatory failures that brought our nation to the brink of utter ruin in 2008 and that caused The Great Recession. Instead, I see Democrats who are unwilling to engage in serious reform, and Republicans who are so unable to take accountability for any of their actions when they ran the country for eight years that it's impossible to take anything they say seriously.
Oh, and let me add to that a Comptroller of the Currency who apparently seems to think that we shouldn't create regulations for securitization if the regulations discourage banks from lending money to people who can't repay it.
Yeah, I got a feeling the upcoming bout of "financial reform" is going to make the health-care debacle look like a shining city on the hill before Congress is done with it.
I suppose before I dip in to the article, I should explain a few basic items about securitization of loans. Securitization is the process through which a lender takes a bundle of loans, packages them together, and then sells that package to investors in the form of market securities, similar to bonds. The investors recoup their money as the loans are paid back. You may also occasionally hear about "tranches." Those are different parts of a securitized bundle of loans. The safest loans within the bundle can be sub-bundled and sold as one sort of security with one rate of return and guarantees, while the riskier loans can be sold as a different tranche with a different rate of return.
The process of securitization is not necessarily an inherently bad thing. It lets a lender spread a bit of the risk of its loan portfolio, and in return investors get something to invest in -- presumably with a rate of return that corresponds with the riskiness of the loans.
However, the way that securitization of loans worked in our economy for at least the last decade is that lenders would generate large batches of loans, securitize them, provide their own estimate of risk for the various tranches, and either sell the entire loan on the market or sell all but a tranche whose repayment was guaranteed at the expense of the higher-risk tranches. The rates of risk for the various tranches presented to investors were often grossly misrepresented. The lender's profit no longer came from the repayment of loans with interest; the lender's profit came from selling off bundles of securitized loans.
This means that a lender could generate loans with the profit guaranteed, regardless of how ill-conceived the loans themselves were or whether they were ever paid back. Loan risk was divorced from lending profit, and available credit mushroomed as lenders generated loans with nary a thought as to whether they could or would ever be repaid. Borrowers took this cheap credit and invested in homes, often basing their lending decisions on the assumption that housing prices would always rise at a rate that outpaced their interest rate. Many of them didn't just invest in a home for themselves to live in. They leveraged the easy credit into a series of home purchases well beyond their means as they tried to "flip" their way to wealth.
Even ordinary mortgage borrowers, who just wanted a place to live, found themselves forced to take on far more debt than they might have wanted to incur because housing prices had risen so high, so quickly. They could at least reassure themselves with the rationalization that the bank wouldn't loan them the money if the bank didn't think they could repay the loan, little knowing that the bank no longer cared whether or not they could repay the loan.
Thus a bubble in housing prices was created.
But remember this. The problem was not that home prices eventually fell. The problem is that borrowers were given loans that they could not repay. And the heart of the problem is that those borrowers were able to borrow money that they could not repay because securitization now fully insulated lenders from any risk that the loan would not be repaid. Those bad loans could have inflated a bubble in anything: airline stocks in the 1920s, dot-coms in the 1990s, or tulip bulbs in Holland in the 1630s. In the Naughts, it was housing.
These dubious securitized loans formed the foundation of the house of cards that was our financial system in the Naughts: easy credit for bad loans. Several more layers of unregulated risk in the form of assorted derivatives and credit default swaps were built atop this shaky foundation. I won't get into them today. Suffice it to say that the home loans defaults couldn't have wrecked our financial system without help from those other things.
Okay, so I may have tip-toed towards financial system arcana there, but hopefully you found it useful. Back to this morning's New York Times article: Seeking a Safer Way To Securitization. The article features remarks to a meeting of the American Securitization Forum by John C. Dugan, the U.S. Comptroller of the Currency, the official whose department is charged with maintaining the safety and security of our banking system.
Here's what he said that has me bothered today:
“A requirement intended to improve the securitization market by improving the quality and trustworthiness of underwriting could significantly curtail the number of securitizations that are actually done,” he said. “And that, of course, could materially reduce the amount of credit available for housing or any of the other sectors that have traditionally benefited from securitizations.”
In other words, he's worried that regulating the securitization process in a way that discourages lenders from dumping bad loans onto investors would keep lenders from generating the sorts of bad loans that created the housing bubble in the first place.
And this is what worries me today. I don't see any willingness in Washington to fix the basic regulatory failures that brought our nation to the brink of utter ruin in 2008 and that caused The Great Recession. Instead, I see Democrats who are unwilling to engage in serious reform, and Republicans who are so unable to take accountability for any of their actions when they ran the country for eight years that it's impossible to take anything they say seriously.
Oh, and let me add to that a Comptroller of the Currency who apparently seems to think that we shouldn't create regulations for securitization if the regulations discourage banks from lending money to people who can't repay it.
Yeah, I got a feeling the upcoming bout of "financial reform" is going to make the health-care debacle look like a shining city on the hill before Congress is done with it.
Friday, January 15, 2010
The Naughtful Naughties: Gerrymandering and an Electoral Results Database Plea
No data-based post today. Instead I'm going to have a long generic discussion of the theoretical gerrymandering, followed by a plea asking whether anybody can steer me to a good database or set of online tables of electoral results, especially for US House elections and/or state legislatures.
Why am I asking for such a thing you ask? So far we've looked at a few sets of economic data. But at some point this year I'd like to take a look at another phenomenon whose effect I think worsened during the Naughts: gerrymandering.
As databases and data analysis has grown more sophisticated over the years, it has become easier for redistricting committees to design districts that tilt towards one party or another. In cases when a single party controls the redistricting party, this allows incumbents to draw districts that maximize the number of representatives that there party will have.
The way this is done is to design as many "reasonably safe" districts for the incumbent party, and to crowd as many voters from the other party into a very few "overwhelmingly safe" districts. "Reasonably safe" districts tend to have something like a 55%-45% to 60%-40% advantage for the incumbent party, while "overwhelmingly safe" districts can have an advantage for the out party of anywhere from 75%-25% to 90%-10%.
Let me give you an example. Let's say we have a state with ten million voters and 100 state house seats. For sake of our example, we'll split our voters into five million voters that favor Party A and five million voters that favor Party B.
In an absolutely even mathematical construct, we would have 100 districts, each of which has 50,000 voters from Party A and 50,000 representatives from Party B. In a completely neutral election these districts would split randomly, 50 for Party A and 50 for Party B.
Geography and demography is not a random mathematical construct of course. Because different areas favor different parties, what we might reasonably expect would be a bell-shaped curve in which we have something like five "overwhelmingly safe" seats for each party, ten or fifteen "reasonably safe" seats for each party, and perhaps as many as 50 or 60 seats that could potentially be up for grabs in each election, depending on which way the political winds are blowing.
However, a clever gerrymander will shift the apportionment. Let's say that Party A is in power. They can then draw up districts that look something like this:
Reasonably Safe for Party A - 83 seats
55,000 from Party A
45,000 from Party B
Overwhelmingly Safe for Party B - 17 seats
25,000 from Party A
75,000 from Party B
(One of those "overwhelmingly safe" seats for Party B needs to be a 35,000-65,000 split to make the math work perfectly, but that's still an overwhelmingly safe margin.)
What effect does that sort of districting have on our 100-seat legislative body?
The most obvious, of course, is that the body will vote overwhelmingly for the positions of Party A on each and every issue. And because their advantage is so large, they will have no incentive in considering or including even part of the platform of Party B as they craft legislation.
But what about cases in which redistricting is shared between the parties? Even in these cases the redistricting is being drawn by incumbents. So it shouldn't surprise anybody if the redistricting tends to favor creating safe districts for incumbents. We may end up with a legislature that is split 50 seats to 50 seats; however, what we are likely to have in district makeup is something like this:
Safe for Party A - 50 Seats
60,000 Party A
40,000 Party B
Safe for Party B - 50 Seats
40,000 Party A
60,000 Party B
The popular description of this phenomenon goes something like this:
Instead of a system in which the electorate chooses their representatives, we have a system in which the representatives choose their electorate.
Whether there is a single-party or shared gerrymander, there is very little chance that we will see seats change parties during the decade that follows the redistricting. This means that the real election to choose the person who holds that seat is the party primary, in which that parties nominee for the general election is selected. Independent voters either shun party primaries or are shut out of them altogether, depending on that state's rules. Primaries also see low voter turnout and tend to be dominated by the most active segments of each party's electorate, the "wings" of their party. In the case of Democrats and Republicans, these tend to be the liberal and conservative bases.
This means that in our gerrymandered legislatures, if you want to represent a district, you should have policies that favor the wings of the party for whom that district is safe. In our single-party gerrymander this means that not only do we have a legislature with representatives who favor Party A, we have a legislature that overwhelmingly favors the most extreme factions of Party A with a noisy minority from Party B. In our two-party gerrymander we have a legislature with 50 representives from the wing of Party A and 50 representatives from the wing of Party B. In either case there's no electoral incentive for the representatives to govern from the center of the poltical spectrum.
Thus, does gerrymandering push centrists out of power altogether.
In our theoretical gerrymandered legislature we would expect to see extreme partisan rancor, very few representatives crossing party lines for votes, legislation that favors the most extreme positions of the controlling party, and a growing sense of disenfranchisement among centrists. The more sophisticated the gerrymandering, the more likely we are to see those behaviors.
Does this sound like a legislature near you? You may have gerrymandered districts.
Was gerrymandering any worse during the Naughts than in previous years? That's why I'd like the data in a nice, convenient bundle. So we can see whether reality matched my nice theoretical construct above.
If gerrymandering is afoot, I would expect to see a pattern in which the average margin of victory is greatest in the year following a redistricting (2002, for this decade) and slowly decreases as voters shift and move. And if it's worse in this decade than previous decade, I would expect to see a pattern in which the average margin of victory for US House and state house elections is larger in this decade than in previous decades.
The data's out there, and looking up individual elections is easy enough. But if somebody's already compiled it all in a single place, I'd just as soon not replicate the effort, and would appreciate you steering me in that direction. Muchas gracias!
Why am I asking for such a thing you ask? So far we've looked at a few sets of economic data. But at some point this year I'd like to take a look at another phenomenon whose effect I think worsened during the Naughts: gerrymandering.
As databases and data analysis has grown more sophisticated over the years, it has become easier for redistricting committees to design districts that tilt towards one party or another. In cases when a single party controls the redistricting party, this allows incumbents to draw districts that maximize the number of representatives that there party will have.
The way this is done is to design as many "reasonably safe" districts for the incumbent party, and to crowd as many voters from the other party into a very few "overwhelmingly safe" districts. "Reasonably safe" districts tend to have something like a 55%-45% to 60%-40% advantage for the incumbent party, while "overwhelmingly safe" districts can have an advantage for the out party of anywhere from 75%-25% to 90%-10%.
Let me give you an example. Let's say we have a state with ten million voters and 100 state house seats. For sake of our example, we'll split our voters into five million voters that favor Party A and five million voters that favor Party B.
In an absolutely even mathematical construct, we would have 100 districts, each of which has 50,000 voters from Party A and 50,000 representatives from Party B. In a completely neutral election these districts would split randomly, 50 for Party A and 50 for Party B.
Geography and demography is not a random mathematical construct of course. Because different areas favor different parties, what we might reasonably expect would be a bell-shaped curve in which we have something like five "overwhelmingly safe" seats for each party, ten or fifteen "reasonably safe" seats for each party, and perhaps as many as 50 or 60 seats that could potentially be up for grabs in each election, depending on which way the political winds are blowing.
However, a clever gerrymander will shift the apportionment. Let's say that Party A is in power. They can then draw up districts that look something like this:
Reasonably Safe for Party A - 83 seats
55,000 from Party A
45,000 from Party B
Overwhelmingly Safe for Party B - 17 seats
25,000 from Party A
75,000 from Party B
(One of those "overwhelmingly safe" seats for Party B needs to be a 35,000-65,000 split to make the math work perfectly, but that's still an overwhelmingly safe margin.)
What effect does that sort of districting have on our 100-seat legislative body?
The most obvious, of course, is that the body will vote overwhelmingly for the positions of Party A on each and every issue. And because their advantage is so large, they will have no incentive in considering or including even part of the platform of Party B as they craft legislation.
But what about cases in which redistricting is shared between the parties? Even in these cases the redistricting is being drawn by incumbents. So it shouldn't surprise anybody if the redistricting tends to favor creating safe districts for incumbents. We may end up with a legislature that is split 50 seats to 50 seats; however, what we are likely to have in district makeup is something like this:
Safe for Party A - 50 Seats
60,000 Party A
40,000 Party B
Safe for Party B - 50 Seats
40,000 Party A
60,000 Party B
The popular description of this phenomenon goes something like this:
Instead of a system in which the electorate chooses their representatives, we have a system in which the representatives choose their electorate.
Whether there is a single-party or shared gerrymander, there is very little chance that we will see seats change parties during the decade that follows the redistricting. This means that the real election to choose the person who holds that seat is the party primary, in which that parties nominee for the general election is selected. Independent voters either shun party primaries or are shut out of them altogether, depending on that state's rules. Primaries also see low voter turnout and tend to be dominated by the most active segments of each party's electorate, the "wings" of their party. In the case of Democrats and Republicans, these tend to be the liberal and conservative bases.
This means that in our gerrymandered legislatures, if you want to represent a district, you should have policies that favor the wings of the party for whom that district is safe. In our single-party gerrymander this means that not only do we have a legislature with representatives who favor Party A, we have a legislature that overwhelmingly favors the most extreme factions of Party A with a noisy minority from Party B. In our two-party gerrymander we have a legislature with 50 representives from the wing of Party A and 50 representatives from the wing of Party B. In either case there's no electoral incentive for the representatives to govern from the center of the poltical spectrum.
Thus, does gerrymandering push centrists out of power altogether.
In our theoretical gerrymandered legislature we would expect to see extreme partisan rancor, very few representatives crossing party lines for votes, legislation that favors the most extreme positions of the controlling party, and a growing sense of disenfranchisement among centrists. The more sophisticated the gerrymandering, the more likely we are to see those behaviors.
Does this sound like a legislature near you? You may have gerrymandered districts.
Was gerrymandering any worse during the Naughts than in previous years? That's why I'd like the data in a nice, convenient bundle. So we can see whether reality matched my nice theoretical construct above.
If gerrymandering is afoot, I would expect to see a pattern in which the average margin of victory is greatest in the year following a redistricting (2002, for this decade) and slowly decreases as voters shift and move. And if it's worse in this decade than previous decade, I would expect to see a pattern in which the average margin of victory for US House and state house elections is larger in this decade than in previous decades.
The data's out there, and looking up individual elections is easy enough. But if somebody's already compiled it all in a single place, I'd just as soon not replicate the effort, and would appreciate you steering me in that direction. Muchas gracias!
Tuesday, January 12, 2010
The Naughtful Naughties: State Tax Revenues
Just quickly passing along another chart today, this one courtesy of the The Business Insider's Chart of the Day (click on the chart to pop up a full-size version):
What I find especially noteworthy in this chart is the extent to which the two recessions of the Naughts led to far greater decreases in state revenue that we saw in any of the recessions of the previous forty years. We might have expected the biggest drop in state revenue to come from the Great Recession at the end of the decade, but what happened in the recession that started the decade? Why was it so much worse for state governments than previous recessions?
I suspect the answer lies in some combination of changes in the source of tax revenues and an unwillingness to raise taxes at the state level to make up for revenue shortfalls. But I don't know. It certainly seems an interesting area for further research.
Opinions differ on tax rates (to put it mildly!) and a lot of folks see less tax money going to state government as an inherently good thing. One thing we can all agree on is that decreased revenues lead directly to state cutting services (education, infrastructure, policing, etc.) for the citizens of that state, pushing the burden of providing those services down on local municipalities that are dealing with their own revenue shortfalls, or engaging in accounting chicanery to balance the books for that year. In Michigan -- where we never really got that mid-decade bump upwards in revenues -- we've seen all three.
What worries me about the increasing volatility of state revenues shown in that chart above is that it leads state governments to seek short-term solutions that have bad long-term results. A few years ago in Michigan we sold off the long-term revenue stream from our tobacco settlement to use the money to plug immediate budget holes. Now we have the same structural budget holes, with even less revenue than ever to weather the current crisis.
Arizona plans to sell off and re-lease their state government buildings to plug the cash-flow hole in this year's budget. Is this a good long-term deal for the citizens of the state? No. But given the sort of precipitous decline in state revenues shown above, I can see how it might be an appealing quick fix to a state government. The same goes for privatizing lotteries, selling off park land, and a host of other options that all of you have probably heard floated from your own state governments.
As you can see from the chart above, fiscal crisis management is the order of the day for our state governments. But it isn't necessarily leading to better government.
What I find especially noteworthy in this chart is the extent to which the two recessions of the Naughts led to far greater decreases in state revenue that we saw in any of the recessions of the previous forty years. We might have expected the biggest drop in state revenue to come from the Great Recession at the end of the decade, but what happened in the recession that started the decade? Why was it so much worse for state governments than previous recessions?
I suspect the answer lies in some combination of changes in the source of tax revenues and an unwillingness to raise taxes at the state level to make up for revenue shortfalls. But I don't know. It certainly seems an interesting area for further research.
Opinions differ on tax rates (to put it mildly!) and a lot of folks see less tax money going to state government as an inherently good thing. One thing we can all agree on is that decreased revenues lead directly to state cutting services (education, infrastructure, policing, etc.) for the citizens of that state, pushing the burden of providing those services down on local municipalities that are dealing with their own revenue shortfalls, or engaging in accounting chicanery to balance the books for that year. In Michigan -- where we never really got that mid-decade bump upwards in revenues -- we've seen all three.
What worries me about the increasing volatility of state revenues shown in that chart above is that it leads state governments to seek short-term solutions that have bad long-term results. A few years ago in Michigan we sold off the long-term revenue stream from our tobacco settlement to use the money to plug immediate budget holes. Now we have the same structural budget holes, with even less revenue than ever to weather the current crisis.
Arizona plans to sell off and re-lease their state government buildings to plug the cash-flow hole in this year's budget. Is this a good long-term deal for the citizens of the state? No. But given the sort of precipitous decline in state revenues shown above, I can see how it might be an appealing quick fix to a state government. The same goes for privatizing lotteries, selling off park land, and a host of other options that all of you have probably heard floated from your own state governments.
As you can see from the chart above, fiscal crisis management is the order of the day for our state governments. But it isn't necessarily leading to better government.
Sunday, January 10, 2010
The Naughtful Naughts: Unemployment
Just collecting up a bit more data on the Naughtful Naughts. I think we can all agree about one thing that went wrong in the Naughts was the collapse in the job market after mid-2007. Let's take a look at a couple of graphs:
Here's the annual unemployment rate from 1950 through 2009:
Ups and downs aplenty in there. A few items in that graph struck me:
So let's take a look at what happened the last ten years or so. Here's the seasonally adjusted unemployment rate for the months January 1999 to December 2009:
A few items of note:
All statistics courtesy of the U.S. Bureau of Labor Statistics.
Here's the annual unemployment rate from 1950 through 2009:
Ups and downs aplenty in there. A few items in that graph struck me:- Annual unemployment peaked in 1982 at 9.7 percent.
- The lowest annual unemployment rate: 2.9% in 1953. That was 66 years ago.
- Three long periods of declining unemployment rates: 1961-1969 (6.7% to 3.5%), 1982-1989 (9.7% to 5.3%), 1992 to 2000 (7.5% to 4.0%.)
- None of the steep climbs over the last sixty years look as steep or as large as what we saw in the last few years of the decade. The annual rate for 2009 was 9.3 percent -- rapidly approaching the all-time high for the last sixty years.
So let's take a look at what happened the last ten years or so. Here's the seasonally adjusted unemployment rate for the months January 1999 to December 2009:
A few items of note:
- The low point came in April 2000 at 3.7%.
- The unemployment rate was 4.0% or below from September 1999 to January 2001.
- We had a moderate increase from then until June 2003, 4.1% to a high of 6.4 percent.
- That increase was followed by a long, steady decrease from July 2003 until May 2007 when it bottomed out at 4.3 percent.
- The number of full-time workers in the United States peaked in July 2007 at 147,315,000.
- Unemployment climbed slowly from then until June 2008 when it hit 5.5 percent.
- After that, the job losses accelerated, hitting a peak of 11.1 percent in October 2009.
- The rate dropped one-tenth of a percent in November 2009 (11.0%) and December 2009 (10.9%).
All statistics courtesy of the U.S. Bureau of Labor Statistics.
Wednesday, January 6, 2010
The Naughtful Naughties
Since year-end statistics about a variety of things will be coming out soon, I thought I'd put up a quick post to let you all know that I'm kicking off a new feature for this year, occasional posts that will review statistics from the last decade. I expect to concentrate on financial and economic issues, but I'm sure I'll touch on some social, political, and other issues as I go along.
Like a lot of folks, it feels to me that the U.S. went pretty far off the tracks over the last ten years. Some of those trends were new, but a lot of them have been building for some time. What I hope to accomplish is better understand where we've been lately, and where we're going. And by posting some facts and my thoughts about them here, perhaps some of you can also add to our understanding.
Look for three categories of posts:
I don't have a big pile of data for today's post, but I do have a homework assignment for all of you. It's the little bit of web surfing that started me down this path.
I was thinking about the stagnation of income over the past decade, and feeling pretty fortunate that I made a better salary now than I did ten years ago. Then I went to the Bureau of Labor Statistics' Inflation Calculator. It uses the Consumer Price Index to calculate what a current dollar would have been worth in past years. Not surprisingly, I found that the vast majority of my income increase over the last ten years had been eaten up by inflation. I'd always been aware of that at some level, but it was a bit of a kick in the pants to see it in black and white.
So that's your homework assignment, if you care to take it. Go to the Inflation Calculator, enter your 2000 income, and see what it would have been in 2009. Or try the reverse, enter your 2009 income and see what it would have been in 2000. How do you feel about it?
I feel stagnant. And I don't feel good about it.
Like a lot of folks, it feels to me that the U.S. went pretty far off the tracks over the last ten years. Some of those trends were new, but a lot of them have been building for some time. What I hope to accomplish is better understand where we've been lately, and where we're going. And by posting some facts and my thoughts about them here, perhaps some of you can also add to our understanding.
Look for three categories of posts:
- The Naughtful Naughties: What Went Wrong
- The Naughtful Naughties: What Went Right
- The Naughtful Naughties: What I Flat-Out Don't Understand
I don't have a big pile of data for today's post, but I do have a homework assignment for all of you. It's the little bit of web surfing that started me down this path.
I was thinking about the stagnation of income over the past decade, and feeling pretty fortunate that I made a better salary now than I did ten years ago. Then I went to the Bureau of Labor Statistics' Inflation Calculator. It uses the Consumer Price Index to calculate what a current dollar would have been worth in past years. Not surprisingly, I found that the vast majority of my income increase over the last ten years had been eaten up by inflation. I'd always been aware of that at some level, but it was a bit of a kick in the pants to see it in black and white.
So that's your homework assignment, if you care to take it. Go to the Inflation Calculator, enter your 2000 income, and see what it would have been in 2009. Or try the reverse, enter your 2009 income and see what it would have been in 2000. How do you feel about it?
I feel stagnant. And I don't feel good about it.
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