Monday Morning Readings

I've really been slacking on the posting lately. The must read:
July Economic Data Summary

Recommended:
Turning Dumpsters Into Swimming Pools

A Simple Explanation of Health Reform

Unleashing the Spirit of Innovation

Things Are Looking Up at Ford

Some Contrarian Thinking On The Stock Market

Roubini on Bernanke

Nouriel Roubini comments on why Ben Bernanke deserves to be reappointed as chairmen of the Federal Reserve:

Mr. Bernanke deserves to be reappointed. Both the conventional and unconventional decisions made by this scholar of the Great Depression prevented the Great Recession of 2008-2009 from turning into the Great Depression 2.0.

Mr. Bernanke understands that in the Great Depression, the collapse of the money supply and the lack of monetary stimulus during contractions worsened the country’s economic free fall. This lesson has paid off. Mr. Bernanke’s decision to keep interest rates low and encourage lending has, for now, averted the L-shaped near depression that seemed highly likely after the financial collapse last fall.

OT: Not to Pile On...

But...

Hat Tip: Andrew

Monday Morning Readings

I'm going to be posting a set of links from the weekend on Sunday nights...something to read while you are readjusting to the working world on Mondays.

Must Read:
NYTimes: Health Care Reform and You

Recommended:
Friedman Thinks the Bad Guys are Losing the "War on Terror"

Daniel Gross on Taxing the Rich

Free Exchange Discusses the Effects of a Minimum Wage

$20/Barrel or $20/Gallon Oil?

The Ghosts of Clinton Care

A New Strategic and Economic Dialog with China

This op-ed by a Hillary Clinton and Tim Geithner tag team is worth featuring. What is the next step for diplomacy between the Chinese and US governments?

To keep up with these changes that affect our citizens and our planet, we need to update our official ties with Beijing. During their first meeting in April, President Barack Obama and President Hu Jintao announced a new dialogue as part of the administration’s efforts to build a positive, cooperative and comprehensive relationship with Beijing. So this week we will meet together in Washington with two of the highest-ranking officials in the Chinese government, Vice Premier Wang Qishan and State Councilor Dai Bingguo, to develop a new framework for U.S.-China relations. Many of our cabinet colleagues will join us in this “Strategic and Economic Dialogue,” along with an equally large number of the most senior leaders of the Chinese government. Why are we doing this with China, and what does it mean for Americans?

Simply put, few global problems can be solved by the U.S. or China alone. And few can be solved without the U.S. and China together. The strength of the global economy, the health of the global environment, the stability of fragile states and the solution to nonproliferation challenges turn in large measure on cooperation between the U.S. and China. While our two-day dialogue will break new ground in combining discussions of both economic and foreign policies, we will be building on the efforts of the past seven U.S. administrations and on the existing tapestry of government-to-government exchanges and cooperation in several dozen different areas.

Read the whole thing here

A New Type of School

The Economist reports on KIPP Academy, a group of charter schools that were founded with a simple motto: "Work Hard. Be Nice." 90% of KIPP students graduate from college compared with the typical 7% college graduation rate for low income families (which make up the majority of students at KIPP). Not bad:

KIPP (Knowledge Is Power Programme) started in 1994 with a simple philosophy, encapsulated in its main motto, “Work hard. Be nice.” It stresses personal responsibility and hard work (even the youngest students can expect a couple of hours of homework a night, and teachers must be available on their mobile phones to help with it) and tells its pupils that “there are no short cuts.”

Health Care Dimming?

I hope Tyler Cowen is wrong:

The prospects for health care reform seem to be dimming. If I were a progressive I would be wondering right now whether Medicare was a tactical mistake. The passage of Medicare meant that most old people get government-provided health care coverage. Yet the way to get things done in this country, politically, is to get old people behind them.

Maybe, how about the prescription drug bill? That Republican led disaster is an example of why governments shouldn't mess with health care. Is it giving them too much credit to say that this was the plan all along?

Work Life Balance and the Corporate Ladder

Conor Friedersdorf didn't like Jack Welch's comments about work life balance:

"There's no such thing as work-life balance," Mr. Welch told the Society for Human Resource Management's annual conference in New Orleans on June 28. "There are work-life choices, and you make them, and they have consequences."

Mr. Welch said those who take time off for family could be passed over for promotions if "you're not there in the clutch."

Conor's response:

Imagine that three people, all about 50 years old, are competing to be named CEO of a large company like General Electric -- one that pays a premium to compensate its top executive on the theory that singular talent at the top, drawn by necessity from a small pool of applicants, vastly increases corporate worth. Does it make sense that this decision would rest heavily on whether or not one of the applicants took a year off in her late twenties to care for her child?

No it doesn't make sense, and that is why it doesn't happen. All Mr. Welch was saying that reaching the top of a large company like GE is a cut-throat, career long competition. If significant time is missed, it is difficult to make up. He isn't talking about if a woman takes maternity leave a few times to have children.

Daily Noise Reduction (7/20)

Short update tonight, luckily it was a slow news day. The must read:
Yglesias on Poverty

Recommended:
This is Likely Where Journalism is Headed

The House Transportation and Infrastructure Committee Fights Back

New Home Sales Have Stabilized

Daily Noise Reduction (7/16)

These are from Thursday, didn't get a chance to post them.

Must Read:
The Economist and WSJ Advocate a Bank Tax

Recommended:
Krugman on the American Medical Association

The Climate Change Elevator Pitch

How Can Republicans Win on Climate Change?

Goldman Sachs 2Q Profit - Because of Government Support?

Daily Noise Reduction (7/15)

Today's Must Read:
Paint Roofs White - Solve Global Warming

Recommended:
Megan McArdle Doesn't Understand the Effect of Tax Rates

Paul Krugman - How Deficits Saved the World

The Complexity of the Current Health Care System

Show Me the Growth

As I alluded to in my Farming Bubble post yesterday, before anyone talks about economic recovery, the growth question needs to be answered. Where does the growth that drives the recovery come from?

CalculatedRisk sums it up:

Housing usually leads the economy both into and out of recessions (this was true for the Great Depression too). However this time, with the huge overhang of excess inventory and high levels of distressed sales, it seems unlikely that residential investment will pick up significantly any time soon.

And that leaves Personal Consumption Expenditures (PCE), and as households increase their savings rate to repair their balance sheets and work down their debt, it seems unlikely that PCE will increase significantly any time soon. Maybe there will be a pickup in auto sales from the current depressed levels, but in general a strong increase in PCE seems unlikely. So even if the economy bottoms in the 2nd half of 2009, any recovery will probably be very sluggish.

I have yet to see a good analysis presenting what will be the growth engines for the "quick" recovery that many are now predicting. Until then, don't buy the hype, this will be a long, slow process.

Is Farming Poised to be the Next Bubble?

Paul Kedrosky gathers some research pointing to an uptick in agricultural investing:

It’s interesting to see a major university endowment get behind the idea of farm investing in a fairly significant way:

George Washington University’s investment office, which manages the university’s $1 billion endowment fund, will lift farm investments to 10 percent of its portfolio, said Rodney Lake, an analyst at the university.

…The university’s investment office sees 10 percent to 15 percent as “the appropriate rate of return prospect” on its agriculture investments, according to Lake.

This makes sense when you look at what food importing governments are doing as the Economist pointed out in May:

The Saudi programme is an example of a powerful but contentious trend sweeping the poor world: countries that export capital but import food are outsourcing farm production to countries that need capital but have land to spare. Instead of buying food on world markets, governments and politically influential companies buy or lease farmland abroad, grow the crops there and ship them back.

Supporters of such deals argue they provide new seeds, techniques and money for agriculture, the basis of poor countries’ economies, which has suffered from disastrous underinvestment for decades. Opponents call the projects “land grabs”, claim the farms will be insulated from host countries and argue that poor farmers will be pushed off land they have farmed for generations.

One of the United States' many competitive advantages internationally is the fact that we are blessed with an abundance of water and farmland, enough to feed our entire population and then some. As China and India demand more and more food, the value of these resources internationally will only increase.

20 Bold Schemes to Save the World

Some of these are pretty cool, my favorites:

2. A Giant Artificial Stomach That Eats Seaweed
Step One: Grow lots of kelp near the surface of the ocean. Step Two: Harvest it and “digest” it in a giant plastic “stomach.” The giant green mass gives off lots of gas — the CO2 could be siphoned off and put in some dark place and the methane could be used for powering humanity’s myriad doohickeys and gadgets. So it’s a twofer, removing carbon from the atmosphere and creating an energy source.

9. Huge Solar Farms in the Sahara
A relatively small piece of the Sahara could theoretically provide electricity for the entire planet if it were covered in solar thermal mirrors. Plus think of all those jobs to build a solar plant the size of Britain. The
new transmission grid would be quite a project as well

I'm not sure that any of these are remotely feasible, but interesting nevertheless.

Health Care Reform - One Step Closer

The big news today was the house of representatives releasing its health care plan, from a quick read of the bill and early pundit reaction, it seems like a good plan. At the least, a great first step.

The major points:

• A public plan! In my opinion, one of the must haves of any reform to help get costs under control
• Some new taxes on those making over $300K including a 5.4% tax increase on those making over $1 million
• Caps out of pocket expenses for the insured
• No denying of coverage on pre-existing conditions
• Use reimbursement rates in Medicare to focus on quality of care instead of quantity

And the total cost seems like a quite a deal, as Krugman says:

OK, so the CBO score for the 3-committee House health care plan is in: $1 trillion over the next decade for 97 percent coverage of legal residents.

That’s a bargain: the catastrophe of being ill without insurance, the fear of losing insurance, all ended — for much less than the Bush administration’s useless $1.35 trillion first tax cut, quickly followed by another $350 billion.

I'll be following this closely the next few weeks.

Daily Noise Reduction (7/13)

There was a lot to get posted today. Here are some remainders including today's must read:
Barry Ritholtz Rips Megan McArdle

Recommended:
Wells Fargo Sues....well, they sue Wells Fargo

Drum Comments on the SSA's "Luxurious" Offsite

Mark Thoma Doesn't Want California to Print Money

Job Losses Outpace GDP Decline

Arnold Kling at Atlantic Business has an extremely optimistic post about why he thinks we'll see a quick recovery in the US. Key quote:

1. Cutbacks in employment (and, I would add, hours worked) are sharp relative to the cutbacks in output.

In addition, I would point out that:

2. The stock of automobiles is aging, because hardly any new cars have been bought for the past year.

3. Household formation is falling, because people cannot afford to form new households.

4. The rate of homebuilding is way below the long-term trend.

All of these factors will turn around once economic growth picks up. Firms will find themselves needing to add workers in order to meet demand. People will have pent-up demand to form households and get new cars. Homebuilding will actually start to contribute positively to growth.

Point number one is based on this article by Sudeep Reddy:

In a research note, Carson says job losses in prior downturns have been roughly proportional to the decline in gross domestic product. But in the current recession, the proportion of jobs lost is running about a third greater than the drop in real GDP.

While Reddy's data point is encouraging, Kling doesn't mention what will be driving economic growth going forward? (see bold text)

Former CIGNA Exec on Health Care Reform

Mark Thoma posted excerpts from a fascinating interview with a former CIGNA executive who very candidly discusses health care reform and the industry's current lobbying efforts. This is a must watch/read and I highly recommend forwarding this along to anyone who may be wavering in their support for health care reform. Key quote:

WENDELL POTTER: That we shouldn't fear government involvement in our health care system. That there is an appropriate role for government, and it's been proven in the countries that were in that movie.

You know, we have more people who are uninsured in this country than the entire population of Canada. And that if you include the people who are underinsured, more people than in the United Kingdom. We have huge numbers of people who are also just a lay-off away from joining the ranks of the uninsured, or being purged by their insurance company, and winding up there.

And another thing is that the advocates of reform or the opponents of reform are those who are saying that we need to be careful ... because we don't want the government to take away your choice of a health plan. It's more likely that your employer and your insurer is going to switch you from a plan that you're in now to one that you don't want. You might be in the plan you like now.

But chances are, pretty soon, you're going to be enrolled in one of these high deductible plans in which you're going to find that much more of the cost is being shifted to you than you ever imagined.

Video is here from PBS

OT: Ron Artest's Tribute to MJ

Seriously....

I'm not sure if I've ever heard a worse rap song. Oh, wait...

What Is It About Indonesia?

This article is a great read, it makes you question how we could adjust our current approach in Afghanistan and Iraq, and maybe save some of the billions we are currently spending to force a square peg into a round hole:

At minimum, Indonesia is an example of a country that has done almost the complete opposite of what the US and its allies have counseled, and with now five years to examine the results, it seems the Indonesian strategy worked, and ours remains a subject of debate.

What did they do differently? Most obviously, they fought terrorism firmly and lethally, but with police and courts, not military prisons and cluster bombs. They countered the arguments of extremists with the arguments of sectarians, not with censorship or strongly-urged talking points or switching every TV in the executive palace to the equivalent of Fox News.

Pros and Cons of Homeownership

Joel Kotkin describes the benefits:

Rather than a source of economic weakness, this renewed quest for homeownership could underpin a sustainable recovery. As prices fall to reasonable levels, more people will qualify for reasonable loans. First, the empty houses and somewhat later, the condominiums now on the market will find buyers, in most places in a matter of a few years.

This shift will create huge opportunities for a diverse set of geographies. For urban areas like New York or Los Angeles, there will be a unique--perhaps once in a generation--chance to induce middle-class people to settle down in big-city homes or condominiums. If they become homeowners, they will be more likely to stay than move elsewhere to the suburbs or other regions when the time comes to buy a home.

And against:

Robert Shiller, an economist at Yale University and an expert on national housing markets, has estimated that "from 1890 through 1990, the return on residential real estate was just about zero after inflation." Throw in the costs of maintenance of the property and it's easy to see how renting could certainly be cheaper than owning, even if you include the tax advantages. Yet the opportunity cost of those home investments - the foregone investment opportunities elsewhere - go largely unseen ...

Not to be forgotten, a homeowner is slowly building an asset that can later be used to help support their retirement. More responsible homeowners will, at least in theory, mean there will be less people completely dependent on their government when they stop working. That is the main reason I am supportive of government policies to encourage home ownership. In a way, it is forced savings. However, the government also has a role to play through regulation to protect these homeowners from the type of bubble we are climbing our way out of now.

Awkward...

This is random and old, but I just ran across this clip of real estate mogul and LA Lakers owner Jerry Buss's 19 year old son accepting the NBA Championship Trophy on behalf of his dad:

Ouch, apparently money doesn't buy communication skills.

Daily Noise Reduction (7/8)

Today's Must Read:
Regulation and Financial Pay Seem to be Linked (Surprise!)

Recommended:
Communist Russia Shouldn't be Used to Sell Health Care Reform

The Public-Private Investment Program Lives

Why Don't Politicians Listen to Sky-Is-Falling Economists

Why It's So Hard to Find a Job Right Now

How to Evaluate Health Care Plans

David Leonhardt, an economics journalist for the New York Times, has a great article describing one way to evaluate the upcoming health care legislation, he sets up the issue:

Right now, men with the most common form — slow-growing, early-stage prostate cancer — can choose from at least five different courses of treatment. The simplest is known as watchful waiting, which means doing nothing unless later tests show the cancer is worsening. More aggressive options include removing the prostate gland or receiving one of several forms of radiation. The latest treatment — proton radiation therapy — involves a proton accelerator that can be as big as a football field.

Some doctors swear by one treatment, others by another. But no one really knows which is best. Rigorous research has been scant. Above all, no serious study has found that the high-technology treatments do better at keeping men healthy and alive. Most die of something else before prostate cancer becomes a problem.

And why this is a problem:

But if the treatments have roughly similar benefits, they have very different prices. Watchful waiting costs just a few thousand dollars, in follow-up doctor visits and tests. Surgery to remove the prostate gland costs about $23,000. A targeted form of radiation, known as I.M.R.T., runs $50,000. Proton radiation therapy often exceeds $100,000.

And in our current fee-for-service medical system — in which doctors and hospitals are paid for how much care they provide, rather than how well they care for their patients — you can probably guess which treatments are becoming more popular: the ones that cost a lot of money.

This really is a critical piece of any health care legislation that is passed. In my opinion, universal coverage takes a back seat to getting the costs, which are crippling industry and entrepreneurship, under control.

Daily Noise Reduction (7/7)

Must Read:
How Much Does it Cost to Drive A Car in Manhattan?

Recommended:
Drum is Confused About Oil Bubbles (So Am I)

Ryan Avent on America, Climate Change and the World

David Brooks Wishes for the Age of Dignity