Thursday’s Musings

Job creation is the top concern of the Obama administration and Congressional Democrats. The several million lost jobs and millions more underemployed are creating real hardship for the affected, and imperiling Democrat election prospects in 2010 and 2012. Imagine, then, that China has to create 15 million jobs a year to keep pace with its graduates and those moving from the countryside to cities. And, for the most part, it has succeeded.

It would be good for the U.S. dollar to lose its reserve currency status. The U.S. is able to issue debt in its own currency. If it could not, because others did not accept the dollar as their official foreign exchange reserves, it would be harder and more costly to issue public debt. The higher cost of debt would have the salutary effect of making it more difficult to run large budget deficits and pile up a massive national debt that future generations will have to repay.

Thursday’s Thoughts

In years to come, immigration reform will doubtless extend government subsidized health care to illegal immigrants, either by granting them amnesty, or because the courts will rule that excluding them is discriminatory. Since every human life is valuable, why not include in health care/insurance reform all Mexicans living within ten miles of the U.S. border?

China has managed the financial crisis of 2008-09 better than the U.S. and all other Western industrial democracies. Let’s invite some of the leading Chinese economists and financial officials to lecture our economists and officials on what they did and why they succeeded.

It is often said of U.S. public debt that we owe it to ourselves, hence it’s no big deal. Not so. Almost half is held by foreign institutions and individuals. Foreigners do not pay tax on their interest earnings on these assets.

The U.S. needs an educated population to compete with other countries in the global economy. What has been happening in inner-city Chicago in mid-September 2009, gang murders of students, bodes ill for the future. The same can be said of Detroit, Oakland, Philadelphia, and numerous other inner city residents across the country.

Rehabilitation of the Sheriff of Nottingham

It has been an American tradition that each generation could look forward to a higher standard of living than its predecessor. No more.

Robin Hood stole the onerous taxes taken from the poor by the Sheriff of Nottingham and gave the money back to them. This much maligned sheriff has been rehabilitated in the twenty-first century.

Bush and Obama, aided and abetted by Republican and Democrat congresses, have burdened future generations of Americans with a large and growing public debt to finance wars, maintain entitlements, create new entitlements, expand existing programs, and implement new programs. Projections show a quadrupling of the publicly-held national debt during 2001-2019. Servicing and repaying this debt means (1) higher taxes, (2) higher interest rates (raising the cost of credit), (3) higher inflation (reducing the purchasing power of the dollar), or (4) some combination of the three.

By comparison, the Sheriff of Nottingham looks like a piker. He only stole from the living poor. The U.S. government is stealing not only from our children and grandchildren, but as yet unborn generations.

Economists at War: A Macroeconomics Soap Opera

The macroeconomics blogosphere is daily theater few dramas can match. The world’s leading economists are engaged in a great debate, often going for the jugular, asserting who is right and who is wrong in the choice of intellectual framework (Keynesian, classical, behavioral, Austrian, hybrid) that best explains the "Great Recession," and how to resolve the financial crisis and its aftermath.

Those at war include leading professors at Harvard, Columbia, Princeton, Chicago, Berkeley, Stanford, George Mason, Oxford (apologies to those not specifically listed), along with numerous commentators in business and the financial media. There is a strong tone of partisanship in the debate.

Among the issues: How many jobs could a stimulus stimulate...? Harvard’s Robert Barro says none, Stanford’s John Taylor says some, Princeton’s Paul Krugman, Columbia’s Joe Stiglitz, and Berkeley’s Christina Romer (head of the Council of Economic Advisers) say a lot. All use data and argument to buttress their claims.

What is the proper mix of fiscal and monetary policies? Are today’s deficits the cure or tomorrow’s problem?

Considering the following proposition. Have the students completing intermediate macroeconomics from any of the combatants take their final exams from any of their professor’s antagonists. The results should be very interesting.

Racism and the Race Card

Political debate is increasingly supercharged with claims of racism (Obama supporters) and playing the race card (anti-Obamians). Immigration reform, which is coming back to life, is being cast as anti-Hispanic by its proponents, largely Democrats, who expect newly legalized Hispanics to disproportionately vote Democrat. The Republican Party is being cast as a party of the South. Racial, ethnic, and geographic divisions are increasingly pitting Americans against each other.

On the international front, the Dayton Accord, which resolved the conflict in Bosnia and Herzegovina, is crumbling in the face of rising tensions between Bosnian Serbs, Bosnian Croats, and Bosnian Muslims. Catalans and Basques continue to press for greater autonomy from Madrid. China has a growing problem with Uighur Muslims.

Yet some continue to believe that the United States military and civilian agencies can construct, at what has been an enormous cost, a unified stable polity in Iraq out of its Shia, Sunni, and Kurdish communities that can hold together once withdrawal of U.S. Troops begins in mass.

Some also believe that a similarly positive outcome can be achieved in Afghanistan among its five large ethnic groups if only an Iraqi-style surge with an additional 40,000-60,000 U.S. troops is carried out over the next year or two or more.

If America has trouble transcending its racial and ethnic divisions, why should one suppose that success in Iraq and Afghanistan is just another surge away.

Becoming a Matriarchate

There are more than 900 women’s/gender/feminist undergraduate and graduate studies programs, departments, and research centers around the world. Over half are in the United States, up from a mere two in 1970.

During this period, higher education has been transformed from a disproportionately male-oriented to a female-driven program. In 1970, 4.25 million males participated in undergraduate enrollment in degree-granting, post-secondary institutions compared with 3.12 million females, a ratio of 1.36 to 1. By 1980, female undergraduate enrollment surpassed that of males. In 2007, the latest year for which exact figures are available, females represented 56.9 percent of undergraduate enrollees. The projection for 2018 is that females will increase to 58.6 percent.

The Council of Graduate Schools has released its data for 2008. Females constituted 58.9 percent of all graduate enrollment, a ratio of 1.43 to men. They remain a minority in business (45.7 percent), engineering (22.0 percent), and the physical sciences (33.2 percent). They are the majority, vastly so in some instances, in arts and humanities, biological and agricultural sciences, education, health sciences, public administration, social and behavioral sciences, and the remaining other fields lumped together.

These trends parallel the growth of the service sector and relative decline of manufacturing in the United States.

Women also control about half the wealth in the United States. This share is likely to rise as women’s earnings increasingly reflect their higher education. Women are presidents of Harvard, Princeton, MIT, Penn, and other leading universities. For want of a few caucus states, America would have its first female president.

The American patriarchy has been and remains in decline. Those who want an advance look at the developing American matriarchate may want to spent some time in Scandinavia.

Obama-Care: A New Paradigm for Public Policy

Obama-Care portends a new paradigm for public policy. President Obama promises that any health care bill he signs into law will improve access, cut costs, and increase results. This means providing health coverage for tens of millions of uninsured, reducing the share of national income spent on health care, and improve "life quality indicators."

How would Obama-Care apply to tertiary education, which depends heavily on government funding for research, faculty, and student support?

First, professors would be judged on "research quality indicators" of their government-funded work. They would be expected to improve research output with smaller budgets.

Second, universities, especially elite "ivies," would be expected to educate more poor, lower-middle class, and less prepared students, thus extending brand-name education to those currently excluded, at less cost. Universities offering "gold-plated" education to a few would be taxed to support the many at less costly institutions to spread the benefits of higher education.

Third, universities would be judged on "educational quality indicators," for example, graduation rates. Roughly half of those enrolling in four-year tertiary institutions fail to graduate. Unless that ratio increases, government funding would be reduced. To insure that grades are not inflated and graduation criteria lowered, a national educational clearing house would establish universal standards of objective tests to insure quality.

Extending the paradigm of Obama-Care to higher education means more educated students, more productive research, and taxpayer savings. This is a winning recipe and ought to be endorsed by those supporting Obama-Care. To dream.