Do Deficits Matter?

Maybe not. Back when the deep 1981-82 recession along with Reagan's tax cuts combined with increased military led to big budget deficits, his apologists claimed deficits didn't matter. Now, it's the Obama supporters making this claim. The argument is that deficit spending is critical to economic growth right now, and that low interest rates prove it's not much of a problem anyway. But if we need deficits to promote growth, we're not getting much bang for the buck right now. Compare the growth in GDP to the deficit for each quarter of this recovery:

With the exception of Q1 2011 and Q3 2012, the deficit has actually exceeded the growth in GDP - usually by a huge margin. So the deficit isn't encouraging economic growth, but instead masking economic contraction. But is this normal in a recovery? Not hardly! Compare this recovery to the one following the very deep 19821-82 recession:

Despite it's reputation for historic deficits, the Reagan deficits were were typically well below GDP growth and only exceeded it in two quarters. The Reagan apologists certainly were on much firmer ground than Obama's. In the 14 months of this recovery, each $1 of deficit spending has purchased only 45 cents of economic growth. In comparison, in the 80's recovery, we got $1.63 of additional GDP for each dollar of additional debt.

I would say that the term "unsustainable" is a fair assessment of our current fiscal situation. The deficit apologists are basically making the novel argument that doing something that provides merely short-term relief of pain can't really present a long-term problem because it hasn't hurt us yet!

Sources:
Deficits: U.S. Treasury - http://www.fms.treas.gov/mts/index.html
GDP: Bureau of Economic Analysis - http://bea.gov/national/index.htm#gdp

Democrats to Republicans: Watch What We Do, Not What We Say

Republicans have been taking advice from Democrats and New-York-Times types on how to improve their electoral prospects by embracing amnesty for illegal immigrants. Of course following this advice will positively doom the party to permanent minority status, as Latinos vote overwhelmingly Democrat. But Republicans are pretty stupid, so they anointed the lightweight Marco Rubio to lead their surrender on immigration reform and to deliver the State-of-the-Union reply.

And of course the Left has been mocking Rubio mercilessly ever since. Can Republicans possibly see what's going on here, how they've been duped? Doesn't look like it. O'Reilly is now "investigating" how the Democrats are out to smear Rubio over a silly water-bottle gaffe. The real investigation should be into how a dope like Rubio came to be thought of as a party leader. They should look at what's being done to their choice to lead their Hispanic-outreach efforts and realize that there's no way to win that game. Instead we just hear whining: "Hey, we did what you said, we're reaching out to Hispanics, and then you slam us - No Fair!"

Meanwhile, Rubio is on a high-profile trip to the Mideast, where he will meet with Netanyahu! Now that's gravitas!

Taking advise from your deadly rival doesn't make much sense, obviously. When has it happened before? Arguably, that's what Gorbachev did - he listened to "advice" from the West that unless the Soviet Union opened up more, allowed more dissent, they were doomed. And guess what happened? He opened up, allowed more dissent, and in 3 years the Soviet Union was no more. The Chinese authorities, on the other hand, so the folly in that appoach and harshly cracked down on any protests, despite much "advice" from the  West. They remain in charge today, stronger than ever, even though Tom Friedman advises them every other week that they need to allow more dissent.

More on Pre-School

Why would anyone think pre-school is so damn important, anyway? Alright, I confess I know little about the history of education, but as a concept that's been around since like forever, its formulation and structure must have more-or-less evolved through trial and error. Over time people presumably settled on a sweet spot for when it makes sense to start teaching kids reading and arithmetic. If teaching kids younger than 6 were a fruitful enterprise, why wouldn't that have been common. Sure, not teaching kids at all would be easier, but if you're going to bother to start teaching them at age 6, why not earlier?

And how often do you hear about parents pushing to get their children into classes early? Red-shirting, on the other had, is very common - why? Because an older child is able to learn more than a younger child. If learning at an earlier age were such a tremendous advantage, parents would be jockeying left-and-right to have their allegedly precocious child entered into kindergarten a year early. But this rarely happens.

Of course it makes sense that whatever additional education can be provided at age 3 or 4 or 5 will help the child read and add faster when he does get to first grade. But then the improvement should be immediately obvious. But how is that supposed to lead to significant, measurable improvements at age 30? Common sense tells you that whatever the advantage pre-school provides would be most magnified in first grade and then dissipate over time. But if the advantage is supposed to be evident at age 30, then it must be absolutely overwhelming in the early grades - and surely jump out at you as early as 4th grade.

But, as I pointed out in yesterday's posting, no such obvious advantage is observable among 4th graders. And if we can't see any clear advantage among 4th graders, how in God's name can we expect there to be any lasting mpact into adulthood? Yet David Brooks and President Obama are both certain that early-childhood education is the golden road to future prosperity. We are being led by insane people.

Is Early Childhood Education a Good Investment?

Lots of folks are debating the merits of President Obama's proposal to build "high quality" universal pre-school programs nationwide. The suggested price is $10b per year, which doesn't really sound all that bad. We already dump well over $20b a year on Pell Grants, which go to people well past their educational prime and is surely a big waste of money, so half that on 4 year olds doesn't sound so terrible.

But Obama and other proponents are touting it as some miracle investment that pays off its investment 7 fold. The claim seems preposterous on its face. Is there any good evidence of such a payoff?

Obama praised Georgia and Oklahoma, the latter in particular, for establishing such high-quality, universal pre-school. Oklahoma's went into effect in the 2000-2001 school year. So how'd they do? The NAEP tracks state performance every couple years or so. Those bragging about the program go on-and-on about how these pre-school students do far better than their peers in word recognition in first grade. Critics contend that whatever advantages might exist in first grade dissipate in later grades.

Since this is mostly intended to help "disadvantaged" students, lets look at the performance of black 4th grade students on reading. We'll look at Oklahoma, its neighbor Arkansas that does not have universal pre-school, the nation as a whole, and a large-city composite.

 Oklahoma had a large increase in scores in 2007, but it's not clear that this would have included the first class of universal pre-schoolers (presumably that first class would have still been in 3rd grade in 2007). and this cohort would have been the in the second class of universal pre-schoolers. But that year appears to have been a fluke, as the scores for 2009 and 2011 do not show any clear advantage for Oklahoma students.

How about Math - Obama's always going on about how we need to better our STEM performance in order to compete internationally. Surely we must expect this awesome investment to demonstrate improved math performance among 4th graders. Here are the math results:

Again, there clearly improvements in Oklahoma scores, but not clearly any more than the comparison groups. Oklahoma students do indeed do better than their pre-school-less Arkansas neighbors, but that was the case 10 years ago, and over that period Arkansas scores have improved even more dramatically than Oklahoma's.

If universal pre-school is going to have such a powerful effect that it results in measurable performance improvements in adulthood, then surely this power should be clearly evident just 5 years later in 4th grade. Yet no such obvious improvement is visible for the much praised Oklahoma system.

Universal pre-school might be desirable for other reasons - like for working mothers - although for welfare mothers we hardly need any more incentives for them to have more kids. But it seems highly unlikely it will amount to much of an "investment." Perhaps in a few years we'll see some dramatic improvements - but until then there's no evidence it is any such thing. It would make sense to wait at least a few years to see if anything substantive develops.

Update (2/15 8:10am EST):
Looking at 8th grade reading, again there is a bit of a spike, but no clear positive trend that differs from either neighboring state Arkansas or national trends. In fact, the 2009 spike we see would pre-date the first univesal-pre-school class, which would have been in 7th grade at the time. Of course that means only one such class is visible among 8th grade NAEP assessments - the 2011 assessment. But no increase is notable.

The Minimum Wage and Immigration

Ron Unz has proposed a large increase in the minimum wage, for various reasons, but among them their presumed salutary effect on our illegal immigration woes. He argues:

After all, the primary force which originally drew those 11 million illegals to America was the attractive availability of so many millions of low-wage jobs in our country, and unless this suction force at the bottom of the economy is eliminated, more border crossers will eventually come to take their places once the current ones are legalized...Raising our minimum wage to $12 per hour as part of the proposed amnesty legislation would probably do more to solve future immigration problems than would any sort of electronic fence or national ID card.

While this appears to make a lot of sense, I don't think raising the minimum wage to even the $12 Unz proposes will deter illegal immigration. It certainly won't discourage the immigrants themselves, for whom the resulting higher wage base will be an even stronger lure. But will it discourage employers from seeking out the illegals? I don't think so.

First of all, regardless of what the minimum wage is, many will still be paid less than minimum wage since they will be paid under the table. Illegal immigrants and off-the-books employment are a perfect combination as the employee likes it (cash right up front, no un-redeemable deductions) and the employer likes it of course (usually a below-minimum wage, no forms and other regulatory hassles, and with an illegal immigrant no fear of the employee reporting the violation). So there will still be a strong incentive for hiring illegal immigrants. It's just not clear how many now work under the table vs. are on the books with a phony SSN.

But more important, employers simply like the Mexican workers. (They're probably generally from Central America and  Mayan - many of these workers I see look like they could have stepped right off a frieze at Chichen-Itza -but for simplicity we can say Mexican). I have talked to a number of employers about this, and without exception they extol the virtues of this class of workers - hard working, competent, compliant. In particular, they highlight how much better they are compared to the alternative - spoiled part-time high-school students and - well, you know, we needn't go into who that other disfavored group is, do we?

Certainly part of their effectiveness as workers is their illegal status itself - constantly living on the edge of deportation is an encouragement to keep one's head down, nose to the grindstone and to do what one's told. But they do seem generally quite competent from my observation, and I wonder if there isn't some stronger cultural or even deeper factor that makes these folks just plain good workers? After all, their ancestors did build some impressive structures away back when.

Overall, I support Unz's proposal. It will cause some unemployment, but the current minimum wage is so preposterously low I can't imagine the dislocation will be that great a loss to already marginal workers. But I have strong doubts it will do much to deter illegal immigration. We still need stronger border security (Build that wall!) and in particular strong employer sanctions and verification (to clamp down on the meat-packing factory-type frauds). But, at pretty much any wage, low-skill employers will still prefer the Central-American illegal worker  to - well, you know who.

Why It Sucks to be Poor

As has been pointed out elsewhere, the worst part about being poor is having to live among other poor people. The obvious concern is that you'll become a crime victim, but what will more certainly happen is that you'll just have to suffer through their dreadful behavior and in the worst case this behavior will become so intolerable that you'll lose control and end up being the victimizer and then find yourself in the worst neighborhood of all - prison.

That's more-or-less what happened to George Zimmerman down in Florida (though there's a chance he might get off, depending on how intimidated the jurors are by the circus around them). Just the other day, an elderly Korean man reached the end of his tether. He was living at the Sable Ridge Condos in Dallas (see reviews here) in an apartment beneath what I presume to be Section 8 tenants (an unmarried couple, 5 kids, mother had non-paying jobs at non-profits). Their dog defecated and urinated on their balcony - the pee dripped down onto Chung's balcony and the poop was tossed off the balcony, landing on his balcony or in front of his doorway. Plus, the dogs and kids ran around constantly. His complaints fell on deaf ears. He apparently couldn't take it any longer, and ended up shooting and killing the mother and boyfriend - and now will, at the age of 75, be going to prison for the rest of his life where the clientele will no doubt make him long for his old neighbors.

I'm wondering if he had foolishly bought the apartment and was thus stuck there. Or else he was just too poor to move anywhere else or break his lease. If you don't have much money, you've still got to figure out ways to find a civilized place to live. But buying a place anywhere but in a stable, well governed neighborhood is just foolhardy.