Tuesday, September 30, 2008

Raze the Republican Party to the ground...

Brad DeLong, professor of economics at UC Berkeley
"Raze the Republican Party to the ground. Plough it under. Scatter salt in the furrows so it can never grow back. We need another, very different opposition party to face the Democrats. We need it now." ---9/29/08

Monday, September 29, 2008

Bush's Bullsh*t Bail Out Fails in the House

Repugnicans sink proposal, thank god.

Roll Call of The Sept. 29 House Bailout Measure

Ayes: 205 (140 Democrats, 65 Republicans)
Noes: 228 (95 Democrats, 133 Republicans)
Not Voting: 1 (1 Republican)

Ackerman (D-NY)
Allen (D-ME)
Sanford D. Bishop, Jr. (D-GA)
Bishop (NY)
Bono Mack
Boyd (FL)
Brady (PA)
Brady (TX)
Brown (SC)
Brown, Corrine
Camp (MI)
Campbell (CA)
Cole (OK)
Davis (AL)
Davis (CA)
Davis (IL)
Davis, Tom
Edwards (TX)
Frank (MA)
Hall (NY)
Hastings (FL)
Inglis (SC)
Johnson, E. B.
King (NY)
Klein (FL)
Kline (MN)
Larsen (WA)
Larson (CT)
Lewis (CA)
Lewis (KY)
Lofgren, Zoe
Lungren, Daniel E.
Mahoney (FL)
Maloney (NY)
McCarthy (NY)
McCollum (MN)
Meek (FL)
Meeks (NY)
Miller (NC)
Miller, Gary
Miller, George
Moore (KS)
Moore (WI)
Moran (VA)
Murphy (CT)
Murphy, Patrick
Neal (MA)
Peterson (PA)
Price (NC)
Pryce (OH)
Rogers (AL)
Rogers (KY)
Ryan (OH)
Ryan (WI)
Smith (TX)
Smith (WA)
Van Hollen
Walden (OR)
Walsh (NY)
Wasserman Schultz
Weldon (FL)
Wilson (NM)
Wilson (OH)
Wilson (SC)


Barrett (SC)
Bartlett (MD)
Barton (TX)
Bishop (UT)
Boyda (KS)
Braley (IA)
Broun (GA)
Brown-Waite, Ginny
Burton (IN)
Davis (KY)
Davis, David
Davis, Lincoln
Deal (GA)
Diaz-Balart, L.
Diaz-Balart, M.
Edwards (MD)
English (PA)
Franks (AZ)
Garrett (NJ)
Green, Al
Green, Gene
Hall (TX)
Hastings (WA)
Herseth Sandlin
Jackson (IL)
Jackson-Lee (TX)
Johnson (GA)
Johnson (IL)
Johnson, Sam
Jones (NC)
King (IA)
Kuhl (NY)
Lewis (GA)
McCarthy (CA)
McCaul (TX)
McMorris Rodgers
Miller (FL)
Miller (MI)
Moran (KS)
Murphy, Tim
Peterson (MN)
Price (GA)
Rogers (MI)
Sánchez, Linda T.
Sanchez, Loretta
Scott (GA)
Scott (VA)
Smith (NE)
Smith (NJ)
Thompson (CA)
Thompson (MS)
Udall (CO)
Udall (NM)
Walz (MN)
Welch (VT)
Whitfield (KY)
Wittman (VA)
Young (AK)
Young (FL)



Sunday, September 28, 2008

Read this when you hear about the Bullsh*t Bush Bail Out....

...and then came John. (Or what right-wingnut gasbag George Will really thinks about the Repugnican's favorite gigolo.

Friday, September 26, 2008

Why Won't 'Mavericky' John McCain

Release His Medical Records?

Thursday, September 25, 2008

Paying for Bush's Bullsh*t Bail Out

Peter DeFazio, D-Ore., is advocating a new government fee (tax) of .25 percent of every stock transaction to recoup the real cash taxpayers will have to fork over to bail out the yachting class:
“If this is truly such a catastrophe, I don’t see how anybody can object to a one-quarter of one percent fee,” DeFazio said.

Let your Senator and Representative know you think this is a good idea!

Let Pete know you like the way he's thinking.
Click here for contact info.
Or call him in Washington at (202) 225-6416

Or send a thank you card to:
Hon. Peter DeFazio,
2134 Rayburn H.O.B.
Washington DC, 20515

Bush's Bullsh*t Bail Out Math

What Are We Buying?
by Devilstower on Daily Kos
Thu Sep 25, 2008 at 11:15:01 AM PDT

On one level, we know that the $700 billion taxpayers are being asked to cough up is going to investment banks, the institutions that have gobbled up the remains of investment banks, and wherever else Czar Paulson decides to pull out his checkbook. But what are those institutions using the money for? Because there's a little problem with the math.

This crisis was brought to you by subprime mortgages. We know that because we're told it many, many times each day. So how big is the problem?

The total value of all home mortgages has risen steeply over the last few years as the housing bubble drove home prices up and lax lending rules roped more people into the pool. Home mortgages were valued at $7 trillion in 2003 but were up to $11.1 trillion by last year.

How many of those were "subprime?" It depends on how you define it. Funny thing: the initial definition was loans that didn't meet Fannie Mae or Freddie Mac qualifications, meaning that those institutions shouldn't be holding any subprime loans. But as a term, subprime is now more often applied to any loan where either the applicant's credit fell below the mid-range of "good" or where the lender did an abbreviated credit check. That kind of loan really came and went rather quickly. They were 8% of loans in 2003, topped out at 20% of loans in 2005 and 2006, and were back to 3% of loans in 2007. According to the Joint Center for Housing Studies at Harvard, $139 billion of subprime loans were handed out in the last quarter of 2006, but this was down to $14 billion in the matching quarter of 2007

Now the real question: how many of those loans are in trouble?

Foreclosures were up a steep 79% in 2007, reaching just over 1% of mortgages. The numbers are up again so far in 2008 (though not as steeply). We could top 2% in default this year or next. There are some expectations that foreclosures could triple from today's historically high levels, meaning ultimately 3% of mortgages could be in trouble.

And that's where we get that math problem. 1% of all mortgages -- the amount now in default -- comes out to $111 billion. Triple that, and you've got $333 billion. Let's round that up to $350 billion. So even if we reach the point where three percent of all mortgages are in foreclosure, the total dollars to flat out buy all those mortgages would be half of what the Bush-Paulson-McCain plan calls for.

Then we need to factor in that a purchased mortgage isn't worth zero. After all, these documents come with property attached. Even with home prices falling and some of the homes lying around unsold, it's safe to assume that some portion of these values could be recovered. In the S&L crisis, about 70% of asset value was recovered, but let's say we don't do that well. Let's say we hit 50%. Then the real outlay for taxpayers would be around $175 billion.

Which, frankly, is a number that Wall Street should be able to handle without our help. After all, the top firms on Wall Steet payed out $120 billion in bonuses alone between 2000 and 2006. If they've got that kind of mad money, why do they need us to step in now? And why do they need twice as much as all the mortgages that are even likely to implode?

In going for $700 billion, what the Bush administration is saying is:

* Our pals on the street have been very creative in coming up with instruments in which they've entangled bad mortgages with good mortgages, and rather than untangle them, would rather we keep them from all that difficult paperwork.

* Oh, and while we're at it, we might as well buy up a chunk of the swaps and derivatives that were created in an unregulated shadow market so they could double-triple-quadruple dip on the value of these loans.

Handing out $700 billion wouldn't be buying up the mortgages of home owners who got in over their heads, it would be buying up the excesses of executives for whom even subprime loans weren't enough. A sensible solution would be to hand out less money -- maybe $100 billion -- to address mortgages now in default, and authorize bankruptcy judges to negotiate on the terms of mortgages on primary residences. On those renegotiated mortgages, the $100 billion fund could be used to pick up some portion of the difference between the original and revised terms. Used that way, $100 billion should cover every mortgage that fails for the next decade.

And if they need more help than that, if that didn't solve the problem, then practitioners of "creative" finance have to fess up that they can't make it because of their own malfeasance, not because some home buyers bit off more than they could chew.

Economists against Bush's Bullsh*t Bail Out

...or Stop Looting America! ...again

To the Speaker of the House of Representatives and the President pro tempore of the Senate:

As economists, we want to express to Congress our great concern for the plan proposed by Treasury Secretary Paulson to deal with the financial crisis. We are well aware of the difficulty of the current financial situation and we agree with the need for bold action to ensure that the financial system continues to function. We see three fatal pitfalls in the currently proposed plan:

1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.

2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.

For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come.

Acemoglu Daron (Massachusetts Institute of Technology)
Adler Michael (Columbia University)
Admati Anat R. (Stanford University)
Alvarez Fernando (University of Chicago)
Andersen Torben (Northwestern University)
Barankay Iwan (University of Pennsylvania)
Barry Brian (University of Chicago)
Beim David (Columbia University)
Berk Jonathan (Stanford University)
Bisin Alberto (New York University)
Bittlingmayer George (University of Kansas)
Boldrin Michele (Washington University)
Brooks Taggert J. (University of Wisconsin)
Brynjolfsson Erik (Massachusetts Institute of Technology)
Buera Francisco J.(UCLA)
Carroll Christopher (Johns Hopkins University)
Cassar Gavin (University of Pennsylvania)
Chaney Thomas (University of Chicago)
Chari Varadarajan V. (University of Minnesota)
Chauvin Keith W. (University of Kansas)
Chintagunta Pradeep K. (University of Chicago)
Christiano Lawrence J. (Northwestern University)
Cochrane John (University of Chicago)
Coleman John (Duke University)
Constantinides George M. (University of Chicago)
Crain Robert (UC Berkeley)
Culp Christopher (University of Chicago)
De Marzo Peter (Stanford University)
Dubé Jean-Pierre H. (University of Chicago)
Edlin Aaron (UC Berkeley)
Eichenbaum Martin (Northwestern University)
Ely Jeffrey (Northwestern University)
Eraslan Hülya K. K.(Johns Hopkins University)
Faulhaber Gerald (University of Pennsylvania)
Feldmann Sven (University of Melbourne)
Fernandez-Villaverde Jesus (University of Pennsylvania)
Fox Jeremy T. (University of Chicago)
Frank Murray Z.(University of Minnesota)
Fuchs William (University of Chicago)
Fudenberg Drew (Harvard University)
Gabaix Xavier (New York University)
Gao Paul (Notre Dame University)
Garicano Luis (University of Chicago)
Gerakos Joseph J. (University of Chicago)
Gibbs Michael (University of Chicago)
Goettler Ron (University of Chicago)
Goldin Claudia (Harvard University)
Gordon Robert J. (Northwestern University)
Guadalupe Maria (Columbia University)
Hagerty Kathleen (Northwestern University)
Hamada Robert S. (University of Chicago)
Hansen Lars (University of Chicago)
Harris Milton (University of Chicago)
Hart Oliver (Harvard University)
Hazlett Thomas W. (George Mason University)
Heaton John (University of Chicago)
Heckman James (University of Chicago - Nobel Laureate)
Henderson David R. (Hoover Institution)
Henisz, Witold (University of Pennsylvania)
Hertzberg Andrew (Columbia University)
Hite Gailen (Columbia University)
Hitsch Günter J. (University of Chicago)
Hodrick Robert J. (Columbia University)
Hopenhayn Hugo (UCLA)
Hurst Erik (University of Chicago)
Imrohoroglu Ayse (University of Southern California)
Israel Ronen (London Business School)
Jaffee Dwight M. (UC Berkeley)
Jagannathan Ravi (Northwestern University)
Jenter Dirk (Stanford University)
Jones Charles M. (Columbia Business School)
Kaboski Joseph P. (Ohio State University)
Kaplan Ethan (Stockholm University)
Karolyi, Andrew (Ohio State University)
Kashyap Anil (University of Chicago)
Keim Donald B (University of Pennsylvania)
Ketkar Suhas L (Vanderbilt University)
Kiesling Lynne (Northwestern University)
Klenow Pete (Stanford University)
Koch Paul (University of Kansas)
Kocherlakota Narayana (University of Minnesota)
Koijen Ralph S.J. (University of Chicago)
Kondo Jiro (Northwestern University)
Korteweg Arthur (Stanford University)
Kortum Samuel (University of Chicago)
Krueger Dirk (University of Pennsylvania)
Ledesma Patricia (Northwestern University)
Lee Lung-fei (Ohio State University)
Leuz Christian (University of Chicago)
Levine David I.(UC Berkeley)
Levine David K.(Washington University)
Linnainmaa Juhani (University of Chicago)
Lucas Robert (University of Chicago - Nobel Laureate)
Luttmer Erzo G.J. (University of Minnesota)
Manski Charles F. (Northwestern University)
Martin Ian (Stanford University)
Mayer Christopher (Columbia University)
Mazzeo Michael (Northwestern University)
McDonald Robert (Northwestern University)
Meadow Scott F. (University of Chicago)
Mehra Rajnish (UC Santa Barbara)
Mian Atif (University of Chicago)
Middlebrook Art (University of Chicago)
Miguel Edward (UC Berkeley)
Miravete Eugenio J. (University of Texas at Austin)
Miron Jeffrey (Harvard University)
Moretti Enrico (UC Berkeley)
Moriguchi Chiaki (Northwestern University)
Moro Andrea (Vanderbilt University)
Morse Adair (University of Chicago)
Mortensen Dale T. (Northwestern University)
Mortimer Julie Holland (Harvard University)
Muralidharan Karthik (UC San Diego)
Nevo Aviv (Northwestern University)
Ohanian Lee (UCLA)
Pagliari Joseph (University of Chicago)
Papanikolaou Dimitris (Northwestern University)
Paul Evans (Ohio State University)
Peltzman Sam (University of Chicago)
Perri Fabrizio (University of Minnesota)
Phelan Christopher (University of Minnesota)
Piazzesi Monika (Stanford University)
Piskorski Tomasz (Columbia University)
Rampini Adriano (Duke University)
Reagan Patricia (Ohio State University)
Reich Michael (UC Berkeley)
Reuben Ernesto (Northwestern University)
Roberts Michael (University of Pennsylvania)
Rogers Michele (Northwestern University)
Rotella Elyce (Indiana University)
Ruud Paul (Vassar College)
Safford Sean (University of Chicago)
Sandbu Martin E. (University of Pennsylvania)
Sapienza Paola (Northwestern University)
Savor Pavel (University of Pennsylvania)
Scharfstein David (Harvard University)
Seim Katja (University of Pennsylvania)
Shang-Jin Wei (Columbia University)
Shimer Robert (University of Chicago)
Shore Stephen H. (Johns Hopkins University)
Siegel Ron (Northwestern University)
Smith David C. (University of Virginia)
Smith Vernon L.(Chapman University - Nobel Laureate)
Sorensen Morten (Columbia University)
Spiegel Matthew (Yale University)
Stevenson Betsey (University of Pennsylvania)
Stokey Nancy (University of Chicago)
Strahan Philip (Boston College)
Strebulaev Ilya (Stanford University)
Sufi Amir (University of Chicago)
Tabarrok Alex (George Mason University)
Taylor Alan M. (UC Davis)
Thompson Tim (Northwestern University)
Tschoegl Adrian E. (University of Pennsylvania)
Uhlig Harald (University of Chicago)
Ulrich, Maxim (Columbia University)
Van Buskirk Andrew (University of Chicago)
Veronesi Pietro (University of Chicago)
Vissing-Jorgensen Annette (Northwestern University)
Wacziarg Romain (UCLA)
Weill Pierre-Olivier (UCLA)
Williamson Samuel H. (Miami University)
Witte Mark (Northwestern University)
Wolfers Justin (University of Pennsylvania)
Woutersen Tiemen (Johns Hopkins University)
Zingales Luigi (University of Chicago)

Signed (updated 9/24/2008 10:30AM CT)

Tuesday, September 23, 2008

Please most honorable person, I am need your help

"I am Ministry of the Treasury of the Republic of America. My country has had crisis that has caused the need for large transfer of funds of 800 billion dollars US. If you would assist me in this transfer, it would be most profitable to you...."

Monday, September 22, 2008

This Bullsh*t Bush Bail Out?

...just More Corporate Welfare

To know how we got here:
"The sub-prime mortgage crisis that has not only come so close to utterly destroying the markets, but has ruined the value of many people's homes and left millions with mortgages they can't pay, was also the outcome of the deregulation created by these men. The very predictable outcome. When taxpayers are left holding the bag for $1 trillion this time around, it's hard to believe it's any sort of accident.

This is enemy action. This is a bullet deliberately fired into the economy by men willing to exercise their ideology regardless of the cost to taxpayers. Men who have every expectation that they can plunder the system again and again, while the public picks up the tab. John McCain may not have had his finger directly on the trigger, but he was there. He assisted. These were his personal friends and philosophical comrades. He may not be the high priest, but he has been a loyal acolyte in the cult of deregulation.

It may come as a surprise to the champions of deregulation, but nobody likes regulation. The restrictions that were placed on banks, S&Ls, and other institutions in the 1930s weren't put there because someone thought it would be fun. They were put in place because they addressed problems that had just been clearly and painfully revealed. They were put in place because they were necessary.

It's bad enough if John McCain didn't know that. It's far worse if he did."

Read the full essay (which came from Daily Kos and is now cross-posted at the Nation here. ... by the by, the Nation currently offers many good, strong and related articles on the raping of the American economy.

Part Two

Robert Reich (Secretary of Labor in the Clinton administration) offers a warning and a few good ideas for inclusion in the inevitable middle-class taxpayer-funded bail-out Congress is scheming for America's aristocratic class.

"...watch your wallets. The tab here could be very high. ... if the bottom falls out, American taxpayers could be on the hook for trillions of dollars. What then? The federal debt soars. What then? Interest rates go out of sight. What then? Foreigners lend us less money. What then? We're cooked."

Read the whole essay here.

Part Three

Lastly, Senator Bernie Sanders (I-Vt) speaks for me:
"The current financial crisis facing our country has been caused by the extreme right-wing economic policies pursued by the Bush administration. These policies, which include huge tax breaks for the rich, unfettered free trade and the wholesale deregulation of commerce, have resulted in a massive redistribution of wealth from the middle class to the very wealthy.

(1) The people who can best afford to pay and the people who have benefited most from Bush’s economic policies are the people who should provide the funds for the bailout. It would be immoral to ask the middle class, the people whose standard of living has declined under Bush, to pay for this bailout while the rich, once again, avoid their responsibilities. Further, if the government is going to save companies from bankruptcy, the taxpayers of this country should be rewarded for assuming the risk by sharing in the gains that result from this government bailout. Specifically, to pay for the bailout, which is estimated to cost up to $1 trillion, the government should:

* Impose a five-year, 10 percent surtax on income over $1 million a year for couples and over $500,000 for single taxpayers ..."

Read Senator Sander's full thoughts here.


by the by, the new Republican plan is to get Democrats to bail out their corporate Wall Street robber baron pals, then run against the Democrats for doing so! Read it in their own words here.

Wednesday, September 17, 2008

It's our economy that's at risk.

Sunday, September 14, 2008

The growing polarisation of American society and its implications for productivity

James J. Heckman
from VoxEU, a global economics forum
--originally posted August 25, 2008

America has a growing skills problem. This column emphasizes the importance of early environments in determining skills. It suggests that to promote skills, public policy should refocus attention to the early years of childhood and away from its current emphasis on the later years.

America has a growing skills problem. One consequence of this skills problem is rising inequality and polarization of society. A greater fraction of young Americans are graduating from college. At the same time, a greater fraction are dropping out of high school. Trends in the production of skills from American high schools coupled with a growing influx of unskilled immigrants have produced an increasing proportion of low-skilled workers in the US workforce. More than 20% of American workers cannot understand the instructions written in a medical prescription. A further consequence of the skills problem is a slowdown in growth of productivity of the workforce.

The origin of this skills problem lies in the decline of the family in American society. Dysfunctional families retard the formation of the abilities needed for successful performance in modern society.

The importance of cognitive and noncognitive abilities
American public policy currently focuses on cognitive test scores or “smarts.” Yet an emerging literature shows that much more than smarts is required for success in life. Motivation, sociability, the ability to work with others, the ability to focus on tasks, self-regulation, self-esteem, time preference, health, and mental health all matter. In an earlier time, these traits were part of what was called “character.” A substantial body of research shows that earnings, employment, labour force experience, college attendance, teenage pregnancy, participation in risky activities, compliance with health protocols, and participation in crime are all strongly affected by non-cognitive as well as cognitive abilities. Heckman, Stixrud and Urzua (2006) show that in many dimensions of social performance, non-cognitive traits are as important, or more important, than cognitive traits in predicting success.

Compelling evidence on the importance of non-cognitive skills comes from the GED (General Education Degree) programme (Heckman and Rubinstein, 2001, and Heckman and LaFontaine 2008). GED recipients are high school dropouts who pass a test to certify that they are equivalent to high school graduates.
Currently, 14% of US high school certificates are issued to GEDs. Previous research shows that the cognitive test scores of GED recipients and the cognitive test scores of persons who graduate from high school but do not go on to college are comparable. Yet GED recipients have the earnings of high school dropouts. GED recipients are as “smart" as ordinary high school graduates, yet they lack non-cognitive skills. GED recipients are the “wise guys” who cannot finish anything. They quit the jobs and marriages they start at much greater rates than ordinary high school graduates. Most
branches of the US military recognize this in their recruiting strategies. Until the recent war in Iraq, the armed forces did not generally accept GED recipients because of their poor performance in the military.

Ability gaps open up early in life
Gaps in both cognitive and non-cognitive skills between advantaged and disadvantaged children emerge early and can be attributed, in part, to adverse early environments into which an increasing percentage of US children are being born. Figure 1 shows the gap in cognitive test scores by age of children stratified by the mother's education. Similar patterns are found for non-cognitive skills (see Heckman, 2008, and Cunha, Heckman, Lochner and Masterov, 2006). Gaps in ability emerge early and persist. Most of the gaps in ability at age 18, which substantially explain gaps in adult
outcomes, are present at age five. Schooling plays a minor role in creating or perpetuating gaps, even though American children go to very different schools depending on their family backgrounds. Test scores for children with very different family backgrounds are remarkably parallel with age.

Figure 1. Trend in mean cognitive score by maternal education, IHDP study
Note: Using all observations and assuming that data are missing at random. Source: Brooks-Gunn, Cunha, Duncan, Heckman, and Sojourner (2006).

How do these early and persistent differences in abilities arise?
Is the difference due to genes as Herrnstein and Murray claimed in The Bell Curve?
Evidence from the recent literature in psychology and biology suggests that the genes versus environment distinction that was once much in vogue is obsolete. Extensive recent literature suggests that gene-environment interactions are central to explaining children’s intellectual development. For example, breast-fed children attain higher IQ scores than non-breast fed children. This relationship is moderated by a gene that controls fatty acid pathways. Identical twins are affected by life experiences that substantially differentiate the genetic expression of adult twins. Further, the impact on adult antisocial behaviour of growing up in a harsh or abusive environment depends on the absence of a variant of a particular gene. A substantial literature shows that family environments play an independent role in creating adult abilities. Adverse family environments of children
create problem adults.

The decline of the American family and the rise of social problems
The evidence on the importance of family factors in explaining ability gaps is a source of concern because a greater proportion of American children are being born into disadvantaged environments, where disadvantage is measured by the quality of parenting (Heckman, 2008). A divide is opening up in American society. Those children born into disadvantaged environments are receiving relatively less stimulation and resources to promote child development than those born into more advantaged families. Women who are more educated are working and earning more. Their families are more stable and mothers in these families are also devoting more time to child development activities than less educated women. Children in affluent homes are bathed in financial and cognitive resources. Those children born into less advantaged circumstances are much less likely to receive cognitive and socio-emotional stimulation and other family resources. The family environments of single parent homes compared to intact families are much less favourable for investment in children (Moon, 2008).

Enriching early environments can partially compensate for early adversity
Experiments that enrich the early environments of disadvantaged children demonstrate causal effects of early environments on adolescent and adult outcomes and provide powerful evidence against genetic determinism. Two of these investigations, the Perry Preschool Program and the Carolina Abecedarian Project, use a random assignment design and collect long-term follow-up data. They demonstrate substantial positive effects of early environmental enrichment on a range of cognitive and non-cognitive skills, schooling achievement, job performance, and social behaviours long after the interventions end. The Perry Program was administered to 58 disadvantaged African-American children in Ypsilanti, Michigan between 1962 and 1967. The treatment for this program consisted of a daily 2.5-hour classroom session on weekday mornings and a weekly 90-minute home visit by the teacher on weekday afternoons. The control and treatment groups have been followed through age 40. There is a consistent pattern of successful outcomes for treatment group members compared with control group members, even though an initial increase in IQ gradually disappeared within the four years following the intervention.

Such IQ fadeouts have been observed in other studies. Focus on cognitive skills alone misses the point. The Perry program operates primarily through improving the non-cognitive traits of participants (Heckman, Malofeeva, Pinto and Savelyev, 2008). At the oldest ages tested, treated individuals scored higher on achievement tests, attained higher levels of education, required less special education, earned higher wages, were more likely to own a home, and were less likely to go on welfare or be incarcerated than controls even though their IQs were no higher than those in the control group. In the similar, but more intensive and earlier starting Abecedarian program, IQ gains were found to last into early adulthood.

An estimated rate of return (the return per dollar of cost) to the Perry Program is around 10%. This high rate of return is higher than the post-World War II return on US stock market equity (5.8%) and suggests that society at large can benefit substantially from such interventions in the lives of disadvantaged children. Interventions in the later lives of disadvantaged children, such as job training, convict rehabilitation, and reduced classroom sizes, have much lower returns (Cunha, Heckman, Lochner and Masterov, 2006).

Using an empirically determined technology of skill formation, Cunha and Heckman (2006) simulate an early childhood intervention that moves children from the bottom 10% of family resources to the 70th percentile. This intervention achieves Perry results. To achieve similar results using adolescent interventions requires spending 35-50% more in present value terms (Heckman, 2008).


Fifty percent of the variance in inequality in lifetime earnings is determined by age 18 (Cunha and Heckman, 2007). The family plays a powerful role in shaping adult outcomes that is not fully recognized by current American policies. As programs are currently configured, interventions early in the lives of disadvantaged children have substantially higher economic returns than later interventions such as reduced pupil-teacher ratios, public job training programs, convict rehabilitation programs, adult
literacy programs, tuition subsidies, or expenditure on police. This is because life-cycle skill formation is dynamic in nature. Skill begets skill; motivation begets motivation. Motivation cross-fosters skill, and skill cross-fosters motivation. If a child is not motivated to learn and engage early on in life, the more likely it is that when the child becomes an adult, he or she will fail in social and economic life. The longer society waits to intervene in the life cycle of a disadvantaged child, the more costly it is to remediate disadvantage.


Brooks-Gunn, J., F. Cunha G. Duncan J. J. Heckman, and A. Sojourner. “A Reanalysis of the IHDP Program,” 2006. Unpublished manuscript, Infant Health and Development Program, Northwestern University.

Cunha, F. and J. J. Heckman. “Investing in our Young People.", 2006. Unpublished manuscript, University of Chicago, Department of Economics.

Cunha, F. and J. J. Heckman. “The Evolution of Uncertainty in Labour Earnings in the US Economy,” 2007. Unpublished manuscript, University of Chicago. Under revision.

Cunha, F., J. J. Heckman, L. J. Lochner and D. V. Masterov. “Interpreting the Evidence on Life Cycle Skill Formation,” eds. E.A. Hanushek and F. Welch, 2006. Handbook of the Economics of Education, 12, 697-812, Amsterdam: North-Holland.

Heckman, J. J. “Schools, Skills, and Synapses”, Fall 2008. Economic Inquiry, 289-324.

Heckman, J. J. and P. A. LaFontaine. “The GED and the Problem of Noncognitive Skills in America,” 2008. Unpublished book manuscript, University of Chicago, Department of Economics.

Heckman, J. J., L. Malofeeva, R. Pinto and P. Savelyev. “The Effect of the Perry Preschool Program on Cognitive and Noncognitive Skills: Beyond Treatment Effects,” 2008. Unpublished manuscript, University of Chicago, Department of Economics.

Heckman, J. J. and Y. Rubinstein. “The Importance of Noncognitive Skills: Lessons from the GED Testing Program,” May 2001. American Economic Review, 91(2), 145-149.

Heckman, J. J., J. Stixrud and S. Urzua. “The Effects of Cognitive and Noncognitive Abilities on Labour Market Outcomes and Social Behavior,” July 2006. Journal of Labour Economics, 24(3), 411-482.

Herrnstein, R. J. and C. A. Murray, 1994. The Bell Curve: Intelligence and Class Structure in American Life. New York: Free Press.

Moon, S. H. “Skill Formation Technology and Multi-dimensional Parental Investment,” 2008. Unpublished PhD thesis, University of Chicago, Department of Economics.

This article may be reproduced with appropriate attribution.

Saturday, September 13, 2008

Tax cuts you can believe in

Thursday, September 11, 2008


"Iniquity, committed in this world,
produces not fruit immediately,
but, like the earth, in due season,
and advancing by little and little,
it eradicates the man who committed it.

... justice, being destroyed, will destroy;
being preserved, will preserve;
it must never therefore be violated."

Manu Smriti

Saturday, September 06, 2008

Plastic is poison. Still.

...and should be outlawed

A report by government scientists on a controversial toxic chemical appears to contradict recent reports by the FDA.

The National Toxicology Program found "some concern" that bisphenol A [BPA], a chemical used in plastics, alters behavior and the development of the brain and prostate gland in children and babies.

George Bush's highly politicized FDA released a claim two weeks ago that people are not endangered by exposure to BPA.

BPA is used in thousands of consumer products.

'Some concern' still tied to chemical found in plastics
by Liz Szabo, USA TODAY

A government agency Wednesday said there's "some concern" that a controversial ingredient in plastic alters behavior and development of the brain and prostate gland in children and babies, both before and after birth.

The National Toxicology Program's final ruling on bisphenol A, or BPA, contradicts a Food and Drug Administration report issued two weeks ago. The FDA found that people aren't endangered by their current exposure to BPA, which is found in thousands of consumer products and the bodies of virtually everyone tested. The FDA will discuss the safety of BPA at a meeting Sept. 16.

The toxicology program rates its concerns on a five-point scale, from "negligible" to "serious," based on the strength of scientific evidence. It expressed "some concern" — a middle level — that BPA affects development at levels to which people are exposed everyday. The program has "minimal" concern — its second-lowest level — that BPA affects the breast or causes early puberty in girls and "negligible" concern that it causes birth defects, fetal or newborn death or reproductive problems in adults.

"The possibility that BPA may affect human development cannot be dismissed," said John Bucher, toxicology program associate director, in a statement.

Concern over BPA has grown in the past year. Leading retailers such as Wal-Mart have announced plans to phase out products with BPA, and most baby bottle makers now offer BPA-free versions. In April, Sen. Charles Schumer, D-N.Y., introduced a bill to ban BPA in children's products.

The American Chemistry Council, which represents manufacturers, describes the toxicology program's findings as "limited and inconclusive evidence" from lab animals. "Additional research will be needed to determine if these concerns are relevant to human health," spokesman Steven Hentges says.

Bucher says concerned parents may want to reduce their family's exposure to BPA, because animal studies suggest that infants and children may be the most vulnerable to the chemical. The toxicology program offers this advice to people to want to avoid BPA:

•Don't microwave plastic, especially those made with polycarbonate plastic, which may leach BPA. These products may be marked with a number 7 recycling code.

•Reduce your use of canned foods, because metal cans are usually lined with BPA.

•Opt for glass, porcelain or stainless steel containers, especially for hot food or liquids.

•Use BPA-free baby bottles.

Bisphenol is a plastic-hardening chemical used to seal canned food and make baby bottles. After more than a year of complaints from consumer and parent groups, the FDA has agreed to revisit the chemical's safety. The agency last month said the trace amounts that leach out of food containers are not a threat to children or adults.

But the toxicology group said that may not be true.

"More research is clearly needed to understand exactly how these findings relate to human health and development," said Michael Shelby, who directed the group's report. "But at this point we can't dismiss the possibility that the effects we're seeing in animals may occur in humans."

Shelby's group did back away from one issue raised in its draft report. While the group said in April there was "some concern" the chemical could speed up puberty in girls, the final report states there is now only "minimal concern" about those risks.

The National Toxicology Program ranks its conclusions about chemical risks on a five-tiered scale ranging from "negligible concern" to "serious concern."

Shelby said it is too early to recommend changes in what consumers buy and eat, but he added that parents who are concerned can avoid buying food containers made from bisphenol.

Several major retailers — including Wal-Mart Stores Inc. and Toys "R" Us Inc. — have said they would stop selling baby bottles made with the chemical next year. And smaller companies like Eveflo and BornFree have ramped up production of glass baby bottles as a bisphenol-free alternative.

Canada has said it intends to ban the use of the chemical in baby bottles, and state and federal lawmakers have introduced legislation to ban bisphenol in U.S. children's products.

More than 6 billion pounds of bisphenol are produced in the U.S. each year by Dow Chemical, Bayer AG and other manufacturers.

Find this article at:

That's not gender politics we can believe in!

Watch Robin Williams palpitate the Palin phenome Here!

Tuesday, September 02, 2008

Honoring Labor Day

Repug's Paladin stumbles

By Richard Cohen
Tuesday, September 2, 2008; A15

One of the great sights of American political life -- a YouTube moment if ever there was one -- was to see the doughboy face of Newt Gingrich as he extolled the virtues of Sarah Palin, a sitcom of a vice presidential choice and a disaster movie if she moves up to the presidency: "She's the first journalist ever to be nominated, I think, for the president or vice president, and she was a sportscaster on local television," Gingrich said on the "Today" show. "So she has a lot of interesting background. And she has a lot of experience. Remember that, when people worry about how inexperienced she is, for two years she's been in charge of the Alaska National Guard."

It's a pity Gingrich was not around when the Roman Emperor Gaius Julius Caesar Augustus Germanicus, better known by his nickname Caligula, reputedly named Incitatus as a consul and a priest. Incitatus was his horse.

John McCain's selection of Palin, which I first viewed with horror, could now be seen in a different light. Based on various television interviews over the Labor Day weekend -- and a careful reading of the transcripts -- it is possible that this is McCain's attempt to make fools of his fellow Republicans. He has succeeded beyond all expectations.

Gingrich's point about Palin being commander in chief of the Alaska National Guard has been echoed throughout the GOP. In fact, even Cindy McCain pointed out -- rightly enough -- that Alaska is across the Bering Strait from Russia and so Palin, by deduction, has been on the front lines of the Cold War . . . had it not ended in 1989.

Still, you have to admit that in all that time, especially since Palin became governor about two years ago, no Russian invasion force has come across the strait, maybe because she was in charge of the Guard, maybe because she herself is a hunter and an athlete. The record is unclear because no high-ranking Russian appeared on any of the weekend talk shows to say how they had considered an invasion of Alaska and then backed off when Sarah Palin became commander in chief of the Alaska National Guard. Who could blame them?

Just to show that he would not ask of others what he would not do himself, McCain came before Chris Wallace to sing Palin's praises. He said that he had "watched her record . . . for many, many years" which is, a prudent man might say, more years than she's had a record. McCain, as a fellow military man, did not mention Palin's tenure as the supreme commander of the entire Alaska National Guard, maybe because he thought it speaks for itself. If that's the case, he's right.

Probably the most depressing thing about Palin is not her selection but the defense of it. It has produced a parade of GOP spokesmen intent on spiking the needle on a polygraph. Looking right into the camera, they offer statement after statement that they hope the voters will swallow but that history will forget. The sum effect on the diligent news consumer is a feeling of consummate contempt for the intelligence of the American people -- a contempt that will be justified should Palin be the factor that makes McCain a winner in November.

One of the more heroic efforts at Palin worship came from the commentator-columnist William Kristol, the former chief of staff for Vice President Dan Quayle. He had to use the code word "traditional" three times in a single sentence to make his point: "It's a pretty amazing story of personal success, being at once a traditional woman who broke all of these traditional barriers, kind of the best of both worlds, if you believe in traditional values."

About the only Republican who seemed totally sincere about Palin was Grover G. Norquist, an anti-tax obsessive who once likened the argument that the estate tax affected only a very few people to the argument -- made by no one I can think of -- that the Holocaust also affected a relatively few people. "I mean, that's the morality of the Holocaust," he said only five years ago. Norquist called the selection of the anti-tax Palin a "wise" choice.

In 1959, the novelist Terry Southern published The Magic Christian, a darkly comic tale based on the premise that people will do anything for money. The choice of Palin proves that people will also do anything for political power -- including rising early on a holiday weekend to make fools of themselves.

borrowed from the Washington Post
email the author at cohenr@washpost.com
Read more Richard Cohen at PostPartisan.

Monday, September 01, 2008

Should Affirmative Action be income rather then race-based?

In an interview with public radio, Robert Reich suggests that affirmative actions programs should be based on income more than race.

“Despite the fact that one of the great social achievements of the last quarter century is the emergence of a black middle and professional class, people of color are still over-represented among the poor and working class.
“The advantage of income-based affirmative action is it would address many of the same issues as race-based affirmative action, but it would also address the needs of low-income whites. And income-based affirmative action would not create tensions between lower-income whites who don’t benefit from race-based affirmative action and blacks who do — demagogues would have a harder time using race to stoke the fires of economic resentment.

“Finally, income-based affirmative action would lead to more economic diversity on our college campuses. And more economic diversity is a key to reversing America’s trend toward widening inequality.”

Separately, in a guest post on the Freakonomics blog, William Bernstein looks at the dangers of income inequality.

“Extreme income and wealth inequality alone may hinder growth. After all respect for property rights is really, in most cases, shorthand for respect by the have-nots for the property rights of the haves.
”If those on the bottom rungs do not feel that they are getting a fair shake, the very bedrock of our prosperity crumbles into social and economic apartheid as millions of Americans flee to gated communities, millions more are required to staff the burgeoning private security industry, and yet more millions fill our prisons.”

—borrowed from the Wall Street Journal's economic blog