Economic Growth Now Below Average for Eleven Years in a Row

Last week the government’s Bureau of Economic Analysis released its latest report on U.S. Gross Domestic Product, the economy’s total output of goods and services. For calendar year 2016, the report showed that real GDP grew by an anemic 1.6%. Although further revisions might boost this figure a little bit, it’s certain that 2016 marked the eleventh straight year with growth below 3%. Three percent is the average that the economy has maintained, more or less, over the long-term, ever since we have had reliable data (going back to about 1880). Never before has the economy experienced so many consecutive years with growth under 3%. The previous post-War record was four years, which occurred from 1979 through 1982.

The record is especially troubling since the economy usually rebounds strongly for a few years following a deep recession, but that did not happen after the Great Recession of 2008-09. In the seven-and-a-half years since the recession ended in mid-2009, the economy has averaged only 2.1% growth. If the economy over that period had instead managed 3.0% growth–which is only mediocre, not good–the economy today would be larger by 6.8%. If household income were larger by that proportion, it would mean the median household would have an extra $4,000 per year.

As we noted previously, some economists think that actual growth is stronger than the official statistics reveal. But even after accounting for this possible bias in the statistics, actual growth is still not too impressive.

When it comes right down to it, nobody knows for sure the reason for the slow growth. But a prime suspect would have to be the relentless growth of the regulatory state. If President Trump is looking for an excuse to roll back federal regulations, eleven years of below-average growth is a pretty good justification.

Obamacare: Finally, a Journalist Asks the Right Questions

At this point it is now seven years too late, but a journalist finally asked the right questions about Obamacare. That journalist was Tucker Carlson, and he asked the man who should know the answers as well as anybody–Jonathan Gruber, the MIT economist who was the ‘architect’ of Obamacare.

Tucker Carlson Destroys Obamacare Architect Jonathan Gruber

Carlson specifically asked two good questions that go to the heart of what is objectionable about Obamacare. Here is one of them.

Why should I be forced to buy a plan that offers things that don’t pertain to me in any way?…They’re forcing people to buy things they don’t want and that don’t help them…things that do not apply and will never apply to me such as breastfeeding, prenatal care, substance abuse counseling…why should I have to buy those plans?

Indeed, one of the most objectionable, maybe the most objectionable, provision of Obamacare is that it empowers unelected federal bureaucrats to decide the terms of my health care plan–what it covers and what it does not cover. In a free society, the terms of my insurance policy should be determined through agreement between me and my insurance company. Gruber calls this a “small issue,” but it’s actually an outrageous encroachment on the freedom of the people.

After first dodging the question and forcing Carlson to ask a second time, Gruber offered the following response.

The answer is that basically as a society we have to decide what is going to define fair insurance.

This is another way of saying that people–you and I–should not be free to decide, and so ‘society’ should decide for us. But it turns out that the group of people who decide is not ‘society’ but rather those aforementioned unelected federal bureaucrats. Gruber’s response provides no rational justification for the policy, just an assertion of his belief that people should not be free to decide for themselves. Every time choices and decisions get taken away from individuals and turned over to ‘society,’ it means that the people have less freedom.

Why should it be necessary for ‘society’ to define “fair insurance,” anymore than for ‘society’ to define a “fair golf course,” a “fair gym membership,” or “fair supermarket shopping”? These are all just contractual relationships voluntarily agreed upon by buyers and sellers. Would Gruber propose that federal bureaucrats insure “fair” grocery shopping by dictating to supermarkets which products they should and should not offer for sale?

Carlson’s second fundamental question (although it comes up first in the video) is this one.

Who are the victims? Who’s been hurt by Obamacare?

This is a crucial question, because the great con run by the political class is that they talk only about the benefits of their policies but not the costs. They don’t want to talk about all the people who will be hurt by the policy, because those people might then wake up and go into political opposition.

Gruber in reply identified only two categories of people hurt by Obamacare: “the wealthiest Americans…the top two percent,” and young, healthy people who, prior to Obamacare, benefited from “a discriminatory insurance market.”

What Gruber means by “a discriminatory insurance market” is actually just “an insurance market.” In a free and efficient insurance market, policy premiums are priced according to the risk of the individual. Healthy people with healthy habits therefore pay less than people with unhealthy habits. That’s how insurance is supposed to work–the market prices the risk. Gruber, however, believes that having an actual insurance market is unfair. When it comes right down to it, he is fundamentally opposed to the idea of health insurance. That’s why Obamacare is NOT health insurance, but an abolition of health insurance. Obamacare replaces the insurance market with an elaborate government scheme for rationing care and redistributing wealth.

I’ve always said that a one-line argument against big government is that it always ends up rewarding bad behavior and punishing good behavior. And that is precisely what Gruber advocates. He thinks smokers should be taxed to subsidize non-smokers, that those who eat healthy and exercise should be taxed to subsidize couch potatoes who overeat. As the saying goes, if you tax anything, you get less of it, and if you subsidize anything, you get more of it.

But in any event, Gruber’s list of Obamacare’s losers is far too narrow. In no particular order, the list needs to include all those young white women who go to tanning salons, because Obamacare put a 10% tax on indoor tanning. Other losers include millions of people who purchase insurance on the individual market but who are not eligible for Obamacare subsidies. Those people have seen their premiums soar. And speaking of those subsidies, they consist of tens of billions of dollars of taxpayer money that are needed to (barely) keep Obamacare afloat. So really, the losers also include basically anybody who pays federal taxes. That’s a lot of losers.

Obamacare’s losers also encompass all those who cherish the Constitution and constitutional government. Because in order to save Obamacare, the Supreme Court had to re-write the Constitution by ruling that the government is free to regulate inactivity so long as the penalty is called a ‘tax.’

Gruber’s reaction to the point that Obamacare has created many losers was somewhat fatalistic.

As with any law, the law creates winners and losers.

Sure, but the idea of a free society is that political insiders–in this case, industry lobbyists and Congressional aides–shouldn’t be able to get together and decide to make me a loser.

Gruber is right that the law creates both losers and winners. But he neglected to mention one of the biggest winners from Obamacare: himself. The man has made hundreds of thousands of dollars off of Obamacare.

A Relative Age Effect in ADHD Diagnoses

One of the more interesting–and robust–empirical relationships discovered in recent years is the so-called relative age effect. Schoolkids in a given grade can differ in age by up to a full year, depending on their birthdays. This age difference can result in significant variation in physical and emotional development among kids in the same cohort. The difference in relative maturity between a 36-year-old and a 35-year-old is negligible, but a 7-year-old is nearly 17% older than a 6-year-old. The older kids seem to more easily develop confidence and self-esteem, which bolsters their likelihood of life success in the long run. The younger kids lag behind, and never seem to catch up. The effect seems to carry over even into adulthood. The kids with late birthdays have less success as adults.

The relative age effect has been well documented in various contexts including sports and academia. About 40% of pro hockey players from Canada, as well as European soccer players, have birthdays during the first quarter of the year. Other studies show that students with late birthdays are less likely to go to college.

Most recently, studies have shown that students with late birthdays are also more likely to be diagnosed with ADHD.

New research has found the youngest children in West Australian primary school classes are twice as likely as their oldest classmates to receive medication for Attention Deficit Hyperactivity Disorder (ADHD).
Published in the Medical Journal of Australia, the research analysed data for 311,384 WA schoolchildren, of whom 5,937 received at least one government subsidised ADHD prescription in 2013. The proportion of boys receiving medication (2.9%) was much higher than that of girls (0.8%).

Among children aged 6–10 years, those born in June (the last month of the recommended school-year intake) were about twice as likely (boys 1.93 times, girls 2.11 times) to have received ADHD medication as those born in the first intake month (the previous July).

For children aged 11–15 years, the effect was smaller, but still significant.

Previous studies have found similar results for students in the U.S., Canada, and Taiwan.

The reason for the higher rate of diagnosis is that kids with late birthdays probably have more behavioral and emotional problems due to their relative lack of maturity. But that suggests that the students are being misdiagnosed. The purpose of ADHD medications is supposed to be the treatment of a neurological disorder. Youthful immaturity, however, is not a neurological disorder.

Multiple studies, including the WA study, have established boys are three to four times more likely to be medicated for ADHD. If, as is routinely claimed, ADHD is a neurobiological disorder, a child’s birthdate or gender should have no bearing on their chances of being diagnosed.

Well, the article’s point about ‘gender’ doesn’t make sense, because there are plenty of afflictions that have greater incidence among boys, including autism and learning disabilities. We can’t therefore conclude that anything is amiss from the fact that boys get diagnosed more. The correlation with birthdate, however, does suggest the drugs are improperly prescribed. There’s no reason that neurological disorders should correlate with date of birth. This is strong evidence that, at the very least, ADHD drugs are over prescribed. And a more cynical interpretation is that ADHD is not real at all.

$7 Billion, Down the Rat Hole

Wanna know how the federal government spends your hard-earned tax dollars? A new report reveals that the Department of Education burned through $7 billion–that’s billion with a ‘b’–with literally nothing to show for it.

One of the Obama administration’s signature efforts in education, which pumped billions of federal dollars into overhauling the nation’s worst schools, failed to produce meaningful results, according to a federal analysis.

Test scores, graduation rates and college enrollment were no different in schools that received money through the School Improvement Grants program — the largest federal investment ever targeted to failing schools — than in schools that did not.

The Education Department published the findings on the website of its research division on Wednesday, hours before President Obama’s political appointees walked out the door.

“We’re talking about millions of kids who are assigned to these failing schools, and we just spent several billion dollars promising them things were going to get better,” said Andy Smarick, a resident fellow at the American Enterprise Institute who has long been skeptical that the Obama administration’s strategy would work. “Think of what all that money could have been spent on instead.”

Yeah, I’ve thought about it. At the current median price of a new home ($305,000), it’s enough money to build 23,000 houses. That’s enough to put about 60,000 people–the entire population of a small city like, say, Canton, Ohio–into new homes. You could literally build a Canton from scratch.

At the average current price of a new mid-size car ($26,000), you could give every household in the state of Delaware a brand new car. Everybody in the whole state gets up in the morning to find a brand new car in their driveway.

But we’ll never see those new cars or homes because the federal government wouldn’t allow it. They left the taxpayers empty-handed.

If terrorists or an invading foreign army burned to the ground a small American city, we wouldn’t hesitate to go to war. But the Department of Education does the equivalent and nobody is even fired or demoted.

The Department of Education did not even exist for the first 200 years of the United States. It was created during the failed presidency of Jimmy Carter. Can we ever get rid of it?

Like I Said, Fat is Good

From msn.com:

Eating fatty foods such as red meat, cheese and butter could actually be good for your health, a new study suggests.

Researchers from the University of Ireland found that overweight middle-aged men who switched to a diet high in natural saturated fats and low in carbohydrates grew slimmer and healthier.

The diet also led to a reduction in blood pressure and glucose levels, which are associated with a lower risk of heart disease, Type 2 diabetes and cancer.

Professor Sherif Sultan, a heart specialist, said: “We urgently need to overturn current dietary guidelines.”

“People should not be eating high carbohydrate diets as they have been told over the past decade.”

The past decade? Dude, it has been four decades.

On Rolling Back Government, GOP Talking Big

When it comes to rolling back the federal government, the GOP has been talking big lately.

Donald Trump is ready to take an ax to government spending.

Staffers for the Trump transition team have been meeting with career staff at the White House ahead of Friday’s presidential inauguration to outline their plans for shrinking the federal bureaucracy, The Hill has learned.

The changes they propose are dramatic.

The departments of Commerce and Energy would see major reductions in funding, with programs under their jurisdiction either being eliminated or transferred to other agencies. The departments of Transportation, Justice and State would see significant cuts and program eliminations.

The Corporation for Public Broadcasting would be privatized, while the National Endowment for the Arts and National Endowment for the Humanities would be eliminated entirely.

Overall, the blueprint being used by Trump’s team would reduce federal spending by $10.5 trillion over 10 years.

A trillion a year? I’d be gobsmacked if all this actually transpired. Does Trump really believe he can achieve all of it? Maybe he’d settle for less and this is just his opening offer to the Democrats.

Meanwhile, the GOP House has passed some very significant regulatory reforms. First, the REINS Act.

The Regulations from the Executive in Need of Scrutiny (REINS) Act would require any regulation which would have an economic impact of $100 million or more to pass Congress and be signed by the president. If the regulation failed to do so after 70 days, it would become null and void.

The REINS Act sounds like a huge step towards restoring Constitutional government, according to which laws are voted on by the people’s elected representatives in Congress, rather than imposed on the people by unelected bureaucrats in the executive branch.

REINS sounds great to me, but law scholar Richard Epstein has some objections to the ‘factual review’ provisions that are beyond my pay grade. Epstein likes better another bill that has been introduced in the House, the Separation of Powers Restoration Act (SOPRA).

Its key provision reads that any court reviewing administrative action shall “decide de novo all relevant questions of law, including the interpretation of constitutional and statutory provisions, and rules made by agencies.” “De novo” review means that the reviewing court gives no deference to the legal opinions of either the parties or lower court judges and administrators.

This compact and straightforward provision, which should be promptly enacted, takes aim at two of the most misguided decisions of administrative law that instructed courts to take a deferential stance toward agency actions interpreting the key statutes and regulations they administer. The first of these cases, Chevron USA Inc. v. NRDC (1984), written by Justice John Paul Stevens, insisted that in all ambiguous cases, reviewing courts should defer to an agency interpretation of its governing statute. Auer v. Robbins (1997), written by the late Justice Antonin Scalia, similarly held that for an agency’s “own regulations, [its] interpretation of it is, under our jurisprudence, controlling unless ‘plainly erroneous or inconsistent with the regulation.’”

Letting the courts smack down the bureaucrats’ interpretations of law sounds great to me. But one thing Epstein doesn’t mention is that none of these bills can get enough Senate votes to override a Democrat filibuster. There’s just no way they can become law in this Congress, and the House must know that very well. Which raises the question: if it can’t become law, then what’s the point? Political grandstanding?

Given that the GOP House knows the bill can’t become law, there’s no cost to the members in voting for it. Which also means there’s no evidence they really support the legislation. Passing a dead-end bill doesn’t prove they really mean it.

Trump: Schools are ‘Flush with Cash’

I didn’t watch President Trump’s inaugural address, but he apparently made a controversial statement about America’s schools being ‘flush with cash.’ This statement was denounced by the usual assortment of fraudsters and freeloaders who are the bane of what remains of our civilization.

Donald Trump lies.

If you haven’t learned that yet, America, you’ve got four more cringe-inducing years to do so.

Even in his inaugural address, he couldn’t help but let loose a whooper [sic] about US public schools.

“Americans want great schools for their children, safe neighborhoods for their families and good jobs for themselves,” he said. “But for too many of our citizens, a different reality exists. … An education system flush with cash but which leaves our young and beautiful students deprived of all knowledge.”

Los Angeles Unified School district routinely has broken desks and chairs, missing ceiling tiles, damaged flooring, broken sprinklers, damaged lunch tables and broken toilet paper dispensers.

They’re flush with cash!?

New York City public schools removed more than 160 toxic light fixtures containing polychlorinated biphenyls, a cancer causing agent that also hinders cognitive and neurological development. Yet many schools are still waiting on a fix, especially those serving minority students.

They’re flush with cash!?

At Charles L. Spain school in Detroit, the air vents are so warped and moldy, turning on the heat brings a rancid stench. Water drips from a leaky roof into the gym, warping the floor tiles. Cockroaches literally scurry around some children’s classrooms until they are squashed by student volunteers.

They’re flush with freakin cash!?

Are you serious, Donald Trump!?

Well, let’s take a look at the figures. The U.S. Census Bureau publishes data on school spending, but those figures are typically incomplete and underestimate the true amount of spending. A few years ago, Adam Schaeffer of the Cato Institute found that schools usually leave important categories of spending out of their reported figures. For instance, the Los Angeles Unified School District reports spending only about $11,000 per student, but this figure does not include capital spending financed by bond issues. Here are the figures Schaeffer estimated for fiscal year 2008:

New York City: $21,543 per student.

Los Angeles: $25,208 per student.

Keep in mind that those figures are from way back in 2008. Spending now must be considerably higher; LA in particular probably now exceeds $30,000 per student. By comparison, at private schools in the LA area, the average is something like $12,000.

Schaeffer did not obtain an estimate for Detroit, but the Census reports $14,197 for 2014, which is probably an underestimate, and in any event, above the national average and well above what private schools spend.

$30,000 in LA should be enough to send a pupil to a fancy private school with a polo field and a personal Uber ride to school every morning. But put government in charge and what we get for that kind of spending is “broken desks and chairs, missing ceiling tiles, damaged flooring, broken sprinklers, damaged lunch tables and broken toilet paper dispensers.” What a disgrace.

With the possible exception of the major news media (another Trump nemesis), public schooling must be the worst-performing industry in America. Kudos to Trump for pointing this out.

Moneyball: Statistics or Steroids?

Moneyball was a best-selling 2003 book by Michael Lewis and a 2011 hit movie starring Brad Pitt. Moneyball’s underlying theme attempts to support a specific hypothesis about management science–that statistical analysis, such as econometrics, offers a more reliable guide to decision making than does gut-instinct based on experience. Hence Moneyball attributes the success of the 2002 Oakland A’s to general manager Billy Beane’s reliance on econometric analysis, and consequent disregard for the advice of his professional scouting staff.

As someone who actually teaches econometrics, I happen to know a bit about the limitations of the technique, and I therefore always believed that Moneyball oversold the benefits of data analysis. As Steve Sailer argues, the success of the 2002 A’s might have a simpler explanation: steroids.

[I]t never seems to have occurred to [Lewis] that Oakland A’s baseball general manager Billy Beane might not have drawn back the curtain on his statistical techniques for the benefit of Lewis’ Moneyball purely out of a disinterested love of advancing learning.

One possibility is that Lewis’ book served Beane’s need to permanently distract from the large role played in the success of the A’s by performance-enhancing drugs, at least since Jose Canseco arrived in Oakland in the mid-1980s. I heard from a baseball agent in the early 1990s that “Jose Canseco is the Typhoid Mary of steroids,” but in Moneyball a decade later Lewis mentioned the word “steroids” only once.

Moneyball diverted attention to obscure Oakland fringe players and away from Beane employing in 2002 a slugging shortstop, Miguel Tejada, who won the Most Valuable Player award by driving in a remarkable 131 runs.

And then, two years later, Tejada knocked in 150 runs.

A couple of years after Moneyball hit the best-seller lists, Tejada was mentioned in Canseco’s memoir Juiced: Wild Times, Rampant ’Roids, Smash Hits & How Baseball Got Big.

In 2009, Tejada pleaded guilty to perjuring himself to Congress regarding steroids.

Econometrics is a great subject. But when it comes to explaining the success of the 2002 A’s, I find chemical enhancement more relevant than the fact that Billy Beane hired a Yale grad with a laptop.

By the way, back in 1998, students asked me what I thought about the fact that Mark McGwire had just broken the home run record. I replied that McGwire must be taking steroids. The students expressed shock at my reply, and seemed appalled that I would disparage McGwire’s achievement.

Oh well. Young people often have their delusions shattered.

Idiocracy is Real

The cited article tries to reassure by noting that the predicted decline in average IQ is only 0.3 points per decade, so that none of us would notice any substantial change in society during our lifetimes. The IQ decline does become significant, however, if the trend continues for centuries, which was in fact the premise of Idiocracy. The film specifically envisioned a dumbed down society emerging after a period of 500 years. Sustaining a loss of 0.3 points per decade for 500 years would reduce average IQ by 15 points, or almost exactly one full standard deviation–a very significant change. Losing a full standard deviation would cause the population to produce only a minuscule percentage of people smart enough to be, say, a physician or an engineer.