College Education at the Margin

College Education at the Margin — Richard Vedder writes, approximately 60 percent of the increase in the number of college graduates from 1992 to 2008 worked in jobs that the BLS considers relatively low skilled–occupations where many participants have only high school diplomas and often even less. This reinforces my suspicion that if one does the calculation at the relevant margin, adding to the pool of college graduates will not raise productivity or wages.  I hasten to add that this is a highly controversial issue. For some people, the best hope for reducing the dreaded Rising Inequality is more education. Of course, for some people (not necessarily the same people), the best hope for ____ is renewable energy, where the blank can be filled by fighting terrorism, saving the climate, or what have you.
 

FT Alphaville » Bonds: Bubble, bubble, toil and trouble – After this week’s mass sell-off in Treasuries, debate is still raging about whether this is a bursting bond bubble — and whether we should all be stampeding into equities and out of commodities (or even, back into commodities). Many believe, as MeanStreet’s Evan Newmark declared, that “America’s great bond bubble is over”. The problem, as he sums it up, was simply “too much money chasing too little yield”. As Mizuho International’s Jonathan Allum remarks in a more restrained fashion in his latest newsletter, for the world’s major government bond markets, in particular, “this has been the worst of times… ” Over the last month, he notes, 10-year bond yields have risen 28 per cent in the US, 29 per cent in Japan, 27 per cent in Germany and 18 per cent in the UK. As for what it all means Allum notes: The bearish view is that the developed bond markets are finally, albeit in a modest way, going the way of Greece, Ireland etc as investors finally start to worry about the fiscal position of the UK, US etc. The bullish view is that they reflect higher growth, and thus inflation expectations. Note, BOTH explanations are bad for the bond markets themselves.

Americans in Poll Say Cut Deficit With Entitlements Secured as Rich Pay Up – Americans want Congress to bring down a federal budget deficit that many believe is “dangerously out of control,” only under two conditions: minimize the pain and make the rich pay.  The public wants Congress to keep its hands off entitlements such as Medicare, Medicaid and Social Security, a Bloomberg National Poll shows. They oppose cuts in most other major domestic programs and defense. They want to maintain subsidies for farmers and tax breaks like the mortgage-interest deduction. And they’re against an increase in the gasoline tax.   “The idea that we can solve our structural-deficit problems merely by asking more of the well-off is totally unrealistic,” said David Walker, who was U.S. comptroller general from 1998 to 2008 and now leads a group advocating against deficits. “The math simply doesn’t work.”

Hive-minds and Kleptocrats – Krugman – There was a time, back when John Kenneth Galbraith was writing The New Industrial State and all that, when the notion of the soulless corporation transcending individual will was big stuff. But much of what JKG wrote then if anything evokes nostalgia now. These days, we’re living in the world of the imperial, very self-interested individual; the man in the gray flannel suit has been replaced by the man in the very expensive Armani suit. Look at the protagonists in the global financial meltdown, and you won’t see faceless corporations subverting individual will; you’ll see avaricious individuals exploiting corporate forms to enrich themselves, often bringing the corporations down in the process. Lehman, AIG, Anglo-Irish, etc. were not cases of immortal hive-minds at work; they were cases of kleptocrats run wild. And when it comes to the subversion of the political process — yes, there are faceless corporations in the mix, but the really dastardly players have names and large individual fortunes; Koch brothers, anyone? So never mind the hive-minds; good old greed still rules.
How conservatives learned to love the federal food stamps program. – Of all the numbers quantifying this recession, few can match the grim precision of 42,911,042. That’s the number of Americans, mostly children and the elderly, who used food stamps in September—521,428 more than in August, itself a record month, and 12 million more than in September 2008. In the past year, according to the Department of Agriculture, every state has seen its rolls swell—with increases ranging from 5.1 percent in West Virginia to 28.7 percent in Nevada. Then there is Idaho. Enrollment in the state’s program soared nearly 40 percent year-on-year, 10 percentage points more than in any other state. What gives in potato country? In one sense, the jump is expected, given the economic fundamentals. Unemployment sits at 9.1 percent—lower than the national average, but eons away from the 2.7 percent rate the state saw just before the recession hit. Idaho has also suffered a catastrophic housing bust, causing billions of dollars of wealth to evaporate. But there’s another reason for the soaring growth: Idaho has made it easier and quicker for residents to apply.

Economic Impacts of Waiting to Resolve the Long-Term Budget Imbalance – CBO Director’s Blog – Under current policies, the aging of the U.S. population and increases in health care costs will almost certainly push up federal spending significantly in coming decades relative to the size of the economy. Without changes in policy, spending on the government’s major mandatory health care programs as well as on Social Security will increase from the present level of roughly 10 percent of the nation’s output, or gross domestic product (GDP), to about 16 percent over the next 25 years. If revenues remain at their past levels relative to GDP, that rise in spending will lead to rapidly growing budget deficits and mounting federal debt, which would have significant negative economic consequences. Addressing the long-term budget imbalance would, at a minimum, require stabilizing the ratio of debt to output. In deciding when and how to do that, an important consideration is: What are the costs of waiting to address the budget imbalance? A CBO issue brief released today addresses that question.

Treasury Fall Poses Long-Term Dilemma for Fed Balance Sheet – This week’s jump in Treasury yields hints at a day in the distant future when the Federal Reserve could confront real difficulties managing an enlarged balance sheet. At issue is the eventual cost of the Fed’s vast holdings of Treasury securities, which are growing rapidly as it carries out a “quantitative easing” program to add $600 billion in Treasurys to its books and reinvest up to $300 billion of maturing mortgages. While the institution faces no near-term threats to its healthy profitability, if it grows its portfolio while yields on Treasurys keep marching higher — and, by extension, when their prices are going lower — its profits won’t be as juicy.Sorting out what’s driving yields higher isn’t straightforward.  The Fed, whose principal concern right now is the risk of deflation and the weak state of the U.S. jobs market, would likely welcome both of those developments. Nonetheless, there are risks associated with yields rising so early in a quantitative-easing process that has many months to go. A fast market shift could quickly test the tools the Fed has put in place to control the inflation potential of a balance sheet that could reach $3 trillion.
 
Foreclosure is not an Option- Given the grim news in lending and home financing in recent months, it would appear that little can be done to stem the tide of foreclosures sweeping the nation.That’s why I’m focusing today on ESOP, an organization headquartered in downtown Cleveland that has been unusually successful in helping struggling Ohioans to hold onto their homes. Last year, ESOP, reported that about 70 percent of those who completed its process received loan modifications that allowed them to avert foreclosure. The organization, which honed its strategy fighting predatory lending in the inner city, has now become an important destination for suburban homeowners desperate for help.Bank officials say that they try to avoid foreclosures, but the recent “robo-signing” scandal indicates that many have sought to repossess homes as cheaply as possible, even if it has sometimes meant sidestepping the law. (Last month, 50 attorneys general launched a joint inquiry to examine charges that banks used deceptive practices to accelerate foreclosures.) So how has ESOP, a not-for-profit organization with about 50 employees and 10 offices across Ohio, been beating the odds?
 
Death Tax Compromise Protects Thousands of Estates from the Tax – One of the most debated provisions in the current tax deal between President Obama and the Republicans is over the reinstatement of the estate tax, which was allowed to expire for all of 2010. On January 1st, the estate tax rate is scheduled to rise from the current rate of zero to 55 percent on estates worth more than $1 million. Under the Obama/Republican agreement, the estate tax rate will instead rise to 35 percent on estates larger than $5 million ($10 million per couple). While the difference between $1 million and $5 million may not seem large to some people, it is remarkable how many estates will be protected from the tax by the higher exemption level. According to an estimate by Congress’ Joint Committee on Taxation,  there would be ten times as many taxable estates between $1 million and $5 million under current law (with the top rate of 55 percent)  compared to the number facing higher taxes under the compromise deal (with the top rate of 35 percent). The table below also indicates the number of farm and small business estates protected from the estate tax because of the compromise deal.
Under 35: Living with Parents vs. Homeownership rate – This interesting graph is from economist Tom Lawler comparing the percent of 24-34 year olds living at home vs. the under 35 year old homeownership rate … There is a clear inverse relationship, and this suggests some pent up demand for housing units when the employment picture improves (although the demand could be for rental units).
 
NASA: Hottest November on record, 2010 likely hottest year on record globally — despite deepest solar minimum in a century. In U.S., heat records far exceed cold for 10th consecutive month – NASA released its monthly global temperature data, revealing November was easily the hottest in the temperature record.  The “meteorological year” — December to November — was also the hottest on record.  Calendar year 2010 appears poised to be the hottest on record. These records are especially impressive because we’re in the middle of a strong La Niña, which would normally cool off temperatures for a few months (relatively speaking), and we’ve been in “the deepest solar minimum in nearly a century.”  It’s just hard to stop the march of manmade global warming, other than by sharply reducing greenhouse gas emissions, that is.As for the U.S., Steve Scolnik at Capital Climate analyzed the data from NOAA’s National Climatic Data Center (NCDC) for his post, “November Temperature Extremes: Heat Records Far Exceed Cold For 10th Consecutive Month,” which notes: As they have for every month in 2010 except January and February, U.S. daily maximum temperature records far exceeded minimum records in November.

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