All Things in Moderation

A long discussion of climate change continues on a two-day old thread, so I figured I would bring it forward and link to this, an article that appeared in yesterday’s WSJ about a project out of Berkeley attempting to clean up the rather messy historical records on temperature.

Calculating a global temperature is necessary to track climate trends because, as your TV meteorologist might warn, local conditions can differ. Much of the U.S. and Northern Europe has cooled in the last 70 years, Berkeley Earth found. So did one-third of all weather stations world-wide, while two-thirds warmed. The project cites this as evidence of overall warming; skeptics aren’t convinced because it depends how concentrated those warming sites are. If they happen to be bunched up while the cooling sites are in sparsely measured areas, then more places could be cooling.

The risk with models is that scientists can become enslaved to one they have chosen, says Mr. McIntyre. “The best antidote is for authors to make all their data available at the time of publication together with scrupulous documentation,” he says, crediting Berkeley Earth with attempting to do this.

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Full on snow storm here in the northeast, at least in southwestern CT. Good day to hang inside, watch college football, and blog. October 30th…are you kidding me? I blame global warming. And Wall Street. Probably the fault of weather derivatives.

Congrats to St. Louis. I wonder what the odds were on Sep 1 of the Cards winning the series. And if anyone made the bet. Still, quite a ways for the Cards to go before they catch the Yanks for most World Series championships. But they are inching closer.

Have at it.

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The other day lms pointed out that an unknown person named “Kite” had become a “Follower” of our little blog here (see the list of avatars in the sidebar). I was curious, so I chased him down to ask how he had discovered us. Apparently there is some application out there called Stumbleupon which somehow tracks your own interests and recommends sites that you may find interesting. One of our own blog posts turned up in Kite’s stumbleupon, and he thought it interesting enough to start to follow us. But what I really wanted to pass on about his response to me was this:

Not really much intent to post with anything resembling consistency, but your blog is an interesting read. One of the few times I’ve ever read a political blog that wasn’t a shouting matching within five posts.

Hey…that’s what we were trying to do! Nice to have an outside observer confirm that we have achieved some measure of success. Well done, all.

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A sure sign that home prices have stopped falling:

A San Francisco insurer will roll out coverage against falling housing values in Ohio, the first state where it is selling policies for owners of single-family houses and condos.

Home Value Insurance Co. will use calculations by the Case-Shiller Home Price Index to decide payouts if homeowner policyholders sell their houses below the insured values. The company, founded in 2009 and headed by former investment banker Scott Ryles, will sell its Home Value Protection policies through independent agents.

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One of the ongoing themes here at ATiM as well as in the wider media, and perhaps a motivating factor for the otherwise aimless and inexplicable happening (event? movement? protest?…what the hell is it, anyway?) known as Occupy Wall Street is that while the finance industry got saved by taxpayers during the financial crisis of 2008, the average person….the 99% in the lingo of the OWS crowd…was left on the outside looking in. Unemployment remains high, housing prices remain low, and the economy is growing at a glacial pace, leading many to resent the bailout of banks (along with, as never seems to be mentioned, insurance companies, car manufacturers and, of course, quasi-government agencies) and to pose the rhetorical question: While Wall Street was getting bailed out, what did Main Street get?

Well, allow me to point out what it got. Or, more accurately, gets.

Earlier today I posted a comment pointing out just how much gets spent on “Main Street” every year. But even the huge dollar numbers don’t do justice to the sheer number of federal programs aimed at providing aid to the self-declared 99%. Consider the following, not at all comprehensive, list, headed by the government department tasked with administering the aid.

Department of Agriculture

Agriculture Management Assistance Program
Business and Industrial Guaranteed Loan Program
Child and Adult Care Food Program
Commodity Marketing Assistance Loans and Loan Deficiency Payments
Commodity Supplemental Food Program
Crop Insurance Program
Dairy Indemnity Program
Disaster Supplemental Nutrition Assistance Program (Florida only)
Emergency Conservation Program for Agricultural Producers
Emergency Farm Loans Program
Emergency Food Assistance Program
Farm Operating Loans Program
Farm Ownership Loans Program
Farm Storage Facility Loans Program
Noninsured Crop Disaster Assistance Program
Outreach and Assistance for Socially Disadvantaged Farmers and Ranchers Competitive Grants Program
Rural Housing Loans Program
Farm Labor Housing Loans and Grants Program
Housing Repair Loans and Grants Program
Rural Rental Assistance Program
Rural Rental Housing Program
School Lunch and Breakfast Program
Senior Farmers Market Nutrition Program
Special Milk Program
Special Supplemental Program for Women, Infants, and Children (WIC) Program
Summer Food Service Program
Supplemental Nutrition Assistance Program
WIC Farmers’ Market Nutrition Program

Department of Education

Advanced Placement Test Fee Program
Byrd Honors Scholarships
Child Care Access Means Parents in School Program
Early Intervention Program for Infants and Toddlers with Disabilities
Education Consolidation Loans
Federal Pell Grants
Federal Perkins Loan Program
Federal Supplemental Educational Opportunity Grants
Federal Work Study
Graduate Assistance in Areas of National Need
Jacob K. Javits Fellowship Program
PLUS Parent Loan
Stafford Loans for Students
TRIO Student Support Services

Department of Health and Human Services

Advanced Education Nursing Traineeships
Assets for Independence Program
Child Care and Development Fund
Clinical Research Loan Repayment Program
Community Food Nutrition Program
Consolidated Health Centers
Contraception and Infertility Research Loan Repayment Program
Disaster Assistance for Older Americans
General Research Loan Repayment Program
Head Start and Early Head Start
Health Disparities Research Loan Repayment Program
Health Professional Scholarship Program
Immunization Grants
Low Income Home Energy Assistance Program
Medicaid Program
Medicare Program
National Health Service Corps Loan Repayment Program
National Health Service Corp Scholarship Program
National Research Service Awards
National Vaccine Injury Compensation Program
Nursing Education Loan Repayment Program
Pediatric Research Loan Repayment Program
Prescription Drug and Other Assistance Programs
Preventive Health and Health Services Block Grant
Social Services Block Grant
State Children’s Health Insurance Program
Temporary Assistance for Needy Families
Undergraduate Scholarship Program for Individuals from Disadvantaged Backgrounds

Department of Housing and Urban Development

Adjustable Rate Mortgage Insurance
Basic FHA Insured Home Mortgage
Combination Mortgage Insurance for Manufactured Home and Lot
Doctoral Dissertation Research Grants
Early Doctoral Student Research Grants
HUD Public Housing Program
Home Equity Conversion Mortgages
Home Rehabilitation Mortgage Insurance
Manufactured Home Loan Insurance
Property Improvement Loan Insurance
Mortgage Insurance for Disaster Victims

Department of Labor

Disaster Unemployment Insurance
Dislocated Worker Program
EBSA COBRA Premium Assistance
Health Coverage Tax Credit
Longshore and Harbor Workers Compensation
National Emergency Grants
Unemployment Insurance

Small Business Administration

7a Small Business Loan
Business Physical Disaster Loans
Certified Development Company Loan Program
Economic Injury Disaster Loans
Small Business Investment Company Program
Home and Property Disaster Loans
Microloan Program

Social Security Administration

Child’s Insurance Benefits
Disability Benefits
Disabled Surviving Divorced Spouse Benefits
Disabled Widow(er)’s Insurance Benefits
Divorced Spouse Benefits
Independently Entitled Divorced Spouse’s Benefits
SS Medicare Program
Mother’s or Father’s Insurance Benefits
Parent’s Insurance Benefits
Retirement Insurance Benefits
Spouse’s Insurance Benefits
Surviving Divorced Spouse Benefits
Widow(er)’s benefits
Supplemental Security Income

Again, as long as this list may appear, it is not comprehensive. And note that, unlike the Wall Street bailouts, these are not one-off programs. They are on-going benefits with annual budgets, year after year. Note also that few of these benefits are available to the demonized 1% that the OWSers are making such a fuss about. Perhaps the 1% ought to think about Occupying Main Street.

Instead of joining Occupy Main Street, I’m going to join this movement:

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I’ve been banging this drum for a while, but today Peter Wallison has an excellent op-ed in the WSJ about how the housing market collapse caused the financial panic in 2008, and the sources of that housing collapse.

Read the whole thing, but key take-aways are:

1) Starting in 1992, the government required Fannie Mae and Freddie Mac to direct mortgage financing towards people below the median income level. The original quota was set at 30%, but that grew to 55% by 2007, necessitating a drop in lending standards.

2) By 2008, over 70% of the 27 million existing sub-prime mortgages were held by Fannie or Freddie.

3) While the housing bubble created by this policy attracted private investors towards the higher yields and low default rates to be achieved from sub-prime borrowers in this environment, by 2008 the private MBS market acconted for less than one third of total sub-prime borrowing.

4) The popping of the housing bubble in 2007 created the conditions that led to the financial panic of 2008, and the subsequent downturn in the economy.

Again, read the whole thing, but Wallison concludes:

The narrative that came out of these events—largely propagated by government officials and accepted by a credulous media—was that the private sector’s greed and risk-taking caused the financial crisis and the government’s policies were not responsible. This narrative stimulated the punitive Dodd-Frank Act—fittingly named after Congress’s two key supporters of the government’s destructive housing policies. It also gave us the occupiers of Wall Street.

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The question of whether SS is sound on an actuarial basis came up on an earlier thread, and I decided to do some analysis to see whether a person of average income can expect to get more out of Social Security than he puts in.

My hypothetical person, Harry, was born in 1945, began work in 1967 at the age of 22 and retired in 2010 at the age of 65. In every year of Harry’s career he earned the average income for an American in that year, as reported by the US Census (an Excel file). The data was separated out by sex, so I took the weighted average of the 2 for each year. I then used the Social Security benefits calculator to input each year’s income and establish what Harry’s monthly benefit would be based on his annual earnings. I used the historical payroll tax to determine how much Harry would have contributed to SS in each year of his career. Note that Harry’s contribution was half of the posted rate, as his employer paid the other half. Finally, I used historical US Treasury yield data to determine an average rate of interest earned on his contributions.

This is what I found.

In 1967, Harry earned $4,509 of income, which grew to $38,336 in 2010, the year he finally retired. Throughout his career, he averaged $19,769 dollars in annual income. He paid a total of $51,779 in payroll taxes over his 44 working years. The average 1 year and 10 year Treasury yield between 1967 and 2010 was 6.35%. Using this average yield compounded annually, Harry’s contributions will have earned a total of $108,779 by 2010, making his total contributions to Social Security $160,558.

Given Harry’s annual income, his calculated monthly SS benefit will be $1,501, for an annual total of $18,012. This means that he will have recouped his contributions within 8.9 years of his retirement, or by the time he is 74. If we assume that his remaining contributions continue to accrue interest until they actually get paid, and we assume a currently very generous interest rate of 3%, his contributions will last for 10 years, or until he is 75.

Now, according to these CDC tables, when Harry was born in 1945, his life expectancy was roughly 68 years. And by the time he started working at the age of 22 in 1967, his life expectancy had climbed to about 73 years, almost enough for him to get back what we now know his full contribution to Social Security would end up being. But having made it to 65 in 2010, he could expect to live over 18 more years. Meaning that, at $18,012 per year in SS benefits, Harry can expect to receive $324,216 in benefits…more than twice his contributions and earned interest over the course of his working life.

Recall here that Harry is just average. Average income, average contributions, average life expectancy at retirement. Seems to me that the government has promised the average person far more in SS benefits than they have been expected to contribute to the system. Can the US really be expected to honor such crazy promises in perpetuity?

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Nonfarm Payrolls up 103k. Last month’s 0 number revised up to 57k.

Private payrolls (ie excluding government jobs) up 137k, with last month’s number revised up from 17k to 42k. This means that jobs are moving out of the public sector and into the private sector. Which, despite the controversy around saying so, is good news. (Although the revised numbers from last month suggest that the public sector actually added 15k jobs last month.)

Unemployment rate remains unchanged at 9.1%.

Big selloff in bonds as a result. Rates higher. Stock futures up….Dow up 119 and S&P up 15.

All-in, a good and encouraging jobs report this month.

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Imagine you find yourself transported back in time to the 1970’s and an appearance on Monty Hall’s Let’s Make a Deal, and Monty has just selected you as a contestant. He shows you three doors and assures you that the day’s grand prize is sitting behind one of those doors. If you pick the correct door, the prize is yours. After you pick door number 1, Monty then opens door number 3 to reveal nothing behind it. He then offers you another choice…stick with your original door or switch choices to door number 2. What should you do?

(from Mike)
I hope Scott doesn’t mind my adding to his post. Here’s a link where you can play the game yourself, with both Scott’s and Mark’s scenarios (whether Monty knows where the prize is or not).

Three Door Monty

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Apologies for making this a full blown post. I wanted to comment on shrink’s “Peace be upon you” post, but my iPad will not allow me to post comments for some reason. Anyway…

For the record, and for those of you who might be wondering just what it is shrink (or “-“, as he is now apparently known) is talking about, this thread and this comment in particular is what apparently “wrecks it for everybody” and “drives away the people worth having” (ie shrink himself, or Teilhard de Chardin as he was called before he became “-“).

I leave it to you to decide just what or who “the problem” really is.

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