A colony in the Americas is a waste of money. We have spent untold treasures building ships to send men to the far corners of the world, and what do we have to show for it? What is the purpose of all this commotion and expense? A few holds full of strange and exotic commodities? Only luxury items are worth shipping such great distances, and that is hardly the basis for funding more expeditions and certainly not in any way capable of justifying wholesale colonization!

Ok, sarcasm aside, Frum seems to miss some very basic points:

Most of the research purpose of sending human beings into space is to test the effects of sending human beings into space. The missions exist to test whether the missions can continue. This seems the very definition of futility.

And has been for some time now. Read this for more information:

But what has been lost in the political debate over the Post Office is why it is losing this money. Major media coverage points to the rise of email or Internet services and the inefficiency of the post model as the major culprits. While these factors may cause some fiscal pain, almost all of the postal service’s losses over the last four years can be traced back to a single, artificial restriction forced onto the Post Office by the Republican-led Congress in 2006.

At the very end of that year, Congress passed the Postal Accountability and Enhancement Act of 2006 (PAEA). Under PAEA, USPS was forced to “prefund its future health care benefit payments to retirees for the next 75 years in an astonishing ten-year time span” — meaning that it had to put aside billions of dollars to pay for the health benefits of employees it hasn’t even hired yet, something “that no other government or private corporation is required to do.”

As consumer advocate Ralph Nader noted, if PAEA was never enacted, USPS would actually be facing a $1.5 billion surplus today...

The 2006 PAEA was just the first major assault--there have been other, more minor ones that are making the post office insolvent, less reliable, and are putting the screws to the workers there. Make no mistake, the USPS is being demolished to make way for privatized delivery routes. They'll be sold off to well-connected cronies, who will then turn around and extract rent from what should be a public monopoly, leaving us all poorer for it.

Meanwhile, everyone just argues about how unprofitable the USPS is because of the internet, email, etc. Missing the point. It's unprofitable because a group of people in our government-financial complex have decided to make it that way and to focus the public discussion on how to change the post office to deal with the very unprofitable situation they've created.

The Palestinians should be pragmatic now and not bid for statehood at the UN, just like how the Israelis were pragmatic in 1947 and were granted statehood by having the UN give them Palestinian land. Oh, and the Palestinians were not pragmatic in 1947 because they didn't want to give Israel their land!

I think CNN is just trying to make me mad. They're posting articles that are just flat out wrong or misleading, that go with "conventional wisdom" in identifying problems and solutions, and that are written by credentialed, experienced, ostensibly knowledgeable people. For example, this gem, "Record-low SAT scores a wake-up call", written by William J. Bennett, US Secretary of Education from 1985 to 1988 and former "Drug Czar" under George H.W. Bush.

The last round of SAT scores were apparently the lowest on record. Why was that? According to Michael Chandler at the Washington Post (who actually looked into the reasons):

The College Board has traditionally calculated average SAT scores for graduating seniors through March of that year. For the Class of 2011, it began including scores from tests taken through June.

The switch added about 50,000 test-takers, or 3 percent of the total. While not a huge number, these late entrants to the college process are more likely to be “VERY low performers,” a College Board spokeswoman said in an e-mail.

...

Greater participation often brings lower scores.

...

Increasingly, the SAT and the ACT are being used to encourage students to apply to college, not just to enable them.

Delaware has a new four-year contract with the College Board to administer the SAT to all high school juniors. Texas offers all students vouchers to take the SAT or ACT for free, and Idaho is moving in the same direction. Seven states offer the ACT to all juniors: Colorado, Illinois, Kentucky, Michigan, North Dakota, Tennessee and Wyoming.

In other words, more students were included in this year's calculations, many of these additional students were low performers, and there is a growing trend of requiring or encouraging all high school students to take the SAT. All of these changes quite obviously would lead to lower average scores, as the students in the bottom 20% or 40% of their classes are now starting to take these tests.

How does Mr. Bennett reply on CNN.com?

In an article on CNN.com today, an economics professor at Boston University basically gets everything about policy and macroeconomics wrong.

We're broke for a reason. We've spent six decades accumulating a huge official debt (U.S. Treasury bills and bonds) and vastly larger unofficial debts to pay for Social Security, Medicare, and Medicaid benefits to today's and tomorrow's 100 million-plus retirees.

No, these debts do not pay for Medicare or Medicaid or most government programs. The federal government does not spend tax dollars, it simply collects them and then spends its own money into the private sector. It is allowed to create money from nothing and does just that every day while annually removing money from circulation through taxes ("destroying" money). Social Security, as far as I know, is a somewhat different case and actually relates payments in to payments out--but this is a procedural rule that can be changed quite easily.

The US cannot be insolvent in its own currency and there is no worry about "paying back" the debts. So long as there are people to do the work and resources to create/consume, we can pay for whatever we need. Problems only arise when we reach the limits of our capacity, at which point we must choose to either stop or invest in greater capacity!

So, what is his solution to the debt "crisis?" Simple! Institute a huge federal sales tax of 17.5% with an effective rate of 15%, explained in the article, and rebate the collected money every month to those living below the poverty line. Eliminate personal and corporate income taxes, one of the few progressive tax structures left. Set inheritance taxes to 15% and eliminate the estate tax (the latter is currently at 35%, down from 55% in 2001). This appears to eliminate the estate tax and replace it with an inheritance tax, then makes the replacement much lower than the original. Also, institute a 15% gift tax on all sums over $1 million--the tax currently applies to sums over $13,000 per person per year, with varying rates. Oh, but keep a modified payroll tax (exempting the first $40k of earnings).

Taxing at the point of consumption sounds fair though, right? The problem is that a sales tax only taxes goods and services, while the vast amount of wealth that the rich own is simply used for investments and elaborate financial/political games. That money will never be used in a manner that would be caught by a sales tax, and the proposed inheritance tax, which presumably would catch some of it, is much lower than the current estate tax.

And then you get this gem:

A paper was published in January 2006 titled "Measuring Trends in Leisure: The Allocation of Time over Five Decades". The authors, Aguiar and Hurst, explored how leisure time has changed from 1965 to 2003 by gender, education level, marital status, work status, and parental status. They defined leisure time as any time spent not engaged in market work (for-pay) and non-market work (household or other work activities). Time spent on child care is handled entirely separately and found to have not significantly changed over time.

One of the apparently counter-intuitive results of their study was that leisure time had increased overall across the population, but that it had increased the most for those with lower educational attainment--defined as a high school diploma/GED or less. Less educated men worked 14.3 hours/week less at their jobs in 2003 compared to 1965, while more educated men worked only 8.7 hours/week less. Women's situation is more complicated, as their working hours actually increased overall while the non-market work time decreased, but the same education/leisure gap exists for them as well.

I've seen these results brought up in arguments by conservatives or libertarians to support their position that those lower on the economic ladder are simply lazy or have chosen to have more free time rather than work to get ahead. This then is used as justification for attacking "entitlements" such as welfare. But this argument is bullshit, and I'm going to tell you why.

The following email was just forwarded to me by the National Treasury Employees Union (I am not a member but I do receive their emails). It outlines exactly how the debt ceiling agreement is slated to play out over the next year or so, minus the details on whatever the "Super Committee" ends up deciding to cut. What scares me the most about it are the sequesters--the failure to meet certain deadlines or reduction goals will result in automatic across-the-board cuts to all but a handful of essential federal agencies/services.

The legislation to raise the debt ceiling and reduce the deficit
that was enacted earlier this month includes numerous provisions that
could impact the federal workforce. I am attaching a copy of a timeline
that lays out when actions are expected to occur.

Spending caps for FY 2012 spending bills were included in the
legislation. Whether those caps will be breached and trigger a phase 1
sequester will not be known until all the FY 2012 spending bills are
passed by Congress. No FY 2012 spending bills have been enacted so far.

The 12 members of the Congressional “Super Committee” have now
been named and will begin deliberations in the near future. The “Super
Committee” is charged with producing legislation to reduce the deficit
by $1.2 to $1.5 trillion over ten years. If such legislation is not
enacted by January 15, 2012, automatic across-the-board cuts, referred
to as a sequester will be triggered. However, while the deadline for
avoiding the sequester is January 15, 2012, the cuts would not be
implemented until January 2, 2013. The members of the “Super Committee”
are: Senators Patty Murray (D-WA, Co-Chair), John Kerry (D-MA), Max
Baucus (D-MT), John Kyl (R-AZ), Rob Portman (R-OH), Pat Toomey (R-PA);
Representatives Jeb Hensarling (R-TX, Co-Chair), Dave Camp (R-MI), Fred Upton (R-MI), Chris Van Hollen (D-MD), Jim Clyburn (D-SC), and Xavier Becerra (D-CA).

DEBT CEILING DEAL

1) Aug 2, 2011 – debt ceiling raised $400 billion.

2) Around Sept 30, 2011 – The President will move to raise the debt
ceiling another $500 billion through Feb 2012. Congress can vote
to disapprove this move, but if it does, the President can veto
and it would take two-thirds votes in the House and Senate to
override. Such an override is extremely unlikely.

3) Oct 1, 2011 – FY 2012 appropriations bills due. Discretionary
spending (agency funding) caps go into effect. 2012 cap is $1.043
trillion, $7 billion less than 2011 level of $1.050 trillion, but
$24 billion above the House passed Ryan budget level. The caps
are split at $684 billion for “security” agencies and $359 billion
for “non-security.” Security agencies are: DOD, DHS, VA, National
Nuclear Security Administration, intelligence agencies and foreign
aid. Non-security agencies are everything else. Total
discretionary savings projected to be $917 billion over 10 years.

Phase 1 sequesters: If these discretionary spending caps are
breached, across the board cuts, or sequesters will take effect.
A review of 2012 appropriations bills will take place when this
Congress adjourns to end the current session, most likely at the
end of December, 2011, to determine whether sequestration is
required. A sequester would take place within 15 days of the end
of the session. These sequesters would apply only to
discretionary (agency funding) spending. Each “category” would be
cut by the same percentage. The President could exempt some
military personnel accounts and Congress could designate some
spending as “emergency,” which would also exempt it from cuts.
There is also an exemption for some increased funding for
continuing disability reviews at SSA and health care fraud and
abuse detection programs at HHS. (The original Senate bill had a
similar exemption for increased funding for IRS enforcement, but
that was not included in the final bill.)

(more below the fold)

So Goldman Sachs has lowered its Q1 2011 GDP growth estimate to only 1.75%. S&P has changed its outlook on the US credit rating to "negative". President Obama and the Republicans in Congress both have proposed $4 trillion in cuts to federal spending over the next decade or so, accomplished through varying means.

My question: Where is the real problem in the economy?

Where is the shortage of food? Where is the shortage of medical supplies and facilities? Do we not have enough transportation goods (cars, trucks, airplanes, etc.)? Not enough computers? Not enough houses and apartments? Are we lacking clothing? What about our people? Do we have a shortage of labor--people willing to work? Skilled labor for crucial occupations? Do people not have enough education for their jobs? We may be facing a crunch on oil and energy, either now or in the near future, so I'd definitely grant that as a problem--one that we're doing almost nothing to address. But is there anything else?

According to S&P, the US government, and most organizations around the world, we are in desperate straits. Not because we're short of physical goods or willing and skilled labor. Oh no, it’s something much more serious--we're short of money. You know, money? Those tickets printed on paper that facilitate transactions? No, we're not short of paper or ink. Most money is represented by digits in computer memory anyway, so paper money is really not a big concern. Nope, no shortage of electrons or computer memory either. We just don't have enough flimsy tickets (electronic or paper or even metal) to trade each other to get what we need.

And according to our betters, we can't very well afford to make more tickets. Why, look at our ticket deficit--the number of tickets the government has given out with spending vs. taken in with taxes! Trillions! That's a big number. A big number with lots of big, round zeros that must be made smaller because big numbers are bad. No, making tickets doesn't cost much at all. Again, most of them are digital data held in computers, so that's not the problem. Yes, our population has increased, as has our material wealth, so the number of tickets could have increased due to that and due to people demanding more purchasing power--but thinking like that is bad. It ignores the bad number. It is so big and therefore so very bad. Look at all those zeros, threatening to come over here, beat us up, and steal our lunches. The government should greatly decrease the number of tickets it makes and spends on people and should increase the number of tickets it takes away from people. This way, the net number of tickets out there will decrease, ideally toward zero. Then our ticket problem will be solved, because there will be no more tickets! We will save our children by disposing of as many tickets as possible, which will allow them to spend more tickets on what they need.

It looks like Obama has just come out pledging to cut $4 trillion over the next 12 years, which is different from Paul Ryan's proposal to cut $4 trillion in 10 years. Ok, the details are important and Obama's proposal doesn't sound quite as regressive as Ryan's.

I'll reserve comment on the particulars because I haven't seen all of them yet and just say this: We now have two major proposals to reduce public sector stimulus of the economy by $4 trillion dollars in the next decade or so. Ryan wants to just outright stop spending and prevent money from moving from public to private sector hands. Obama wants to actively pull money out of private sector hands via taxes while somewhat reducing spending as well.

Make sure your lap bars are securely fastened, as this roller coaster is about to drop.

Judging by my last couple of posts here, I'm becoming a one-trick pony--stuck on Modern Monetary Theory (MMT). However, I just came across the sort of blog post that I wish I had written myself, so I'm going to link to it and reproduce much of it below.

Also, please note that MMT is not a solution to our problems. Instead, it frees us to generate more and better solutions. This is extraordinarily valuable given that only two major visions of our future are prevalent today:

(1) Austerity, budget cuts, and increasing servitude in both public and private life imposed from the top via governmental and economic authoritarians because we have been profligate and living beyond our means and must be disciplined--and this course of action is determined to be valid according to a hugely subjective set of rules we have developed for our monetary and economic systems.

(2) Voluntary reductions in material wealth, standards of living, and technological progress that are justified because we have been profligate and living beyond our means and must engage in self-sacrifice to atone for our errors--and this is determined to be valid according to hugely subjective definitions of what is a "sustainable" human life.

I believe these two solutions are indistinguishable in the long run (either one eventually bleeds into the other) and, frankly, both of them suck and I will not submit to either without a fight. Their wide adoption will bring us into a new Dark Age.

On to the post, written at Heteconomist, and titled What is 'productive'?:

Net financial assets increase when the government undertakes such net expenditure, but so too does productive activity, unless somebody wants to argue that attending to the sick is socially unproductive. Actually, that is what neoliberal logic suggests. It implies that the expenditure is unproductive because the source of demand was not private. The patients were too poor to pay, so meeting their needs was unproductive.

In a society of individuals, it is arbitrary to privilege private demand over public demand in this way and is simply a reflection of the ideological bias of neo-liberalism and the class-interested motivations involved. What is productive? That question is answered socially. A market is a social institution. A market assessment of whether an activity is productive is merely one social construction of productiveness...

...

...Whether the assessment of productiveness is through a market, democracy or some other mechanism, it is always and everywhere a social construction. To attach an aura of ‘naturalness’ to one mode of social construction – the market – is a superstitious act. It attaches god-like qualities to something that has – and could only ever have been – created by us. There is nothing natural about the current distribution of income, nor any measure of productiveness that hinges on that distribution.

Those who suggest that mass unemployment and idle capacity reflect a lack of productive uses for available resources may as well argue that we have run out of things to do with ourselves. No one with any imagination could think there is a lack of ways to improve our lives. No need for activities that help to preserve or regenerate the environment. No reason to develop alternative energy. No scope to invest in education, research and development, and technical innovation. No need to improve health care, public transport systems or other social infrastructure. No way to make our cities, towns and communities more liveable. No benefit to providing more personalized care for the elderly, better childcare, services and facilities to enhance physical, mental and social well-being. No point in enhancing facilities for social, creative or sporting pursuits. No point using our brains to think of anything worthwhile to do at all.

My recent post titled Money, Debt, and Why the Government is Different didn't get too many responses (though thanks to those of you who did respond). I'm working my way through many of these concepts for the first time without any formal economic training, though this lack of training may actually be an advantage.

I want to direct you to a blog that I've been reading in the last few months that is the source for much of my previous post. In particular, I'd like to start a discussion centered around the ideas contained in a particular post titled The Year is Nearly Done, but Spending Still Equals Income. A few excerpts (bolded for emphasis):

Yesterday, US Department of Labor released the latest Jobless Claims data. That was good news and suggested that not only has the fiscal expansion in the US been supporting growth but that the economy may be turning the corner – albeit very slowly. Earlier in the week the extremists – the unrelenting deficit terrorists who don’t understand what has been going on were at it again. Like an old gramophone record stuck in a worn out groove they chanted their mantras about record debt levels and how best to cut the deficit. They appear to be stuck in a pre-1971 monetary system as well and haven’t yet caught up with the fact that times have changed. We have CDs, DVDs, MP3s and a fiat monetary system. Anyway, I guess we know have an inkling as to their problem now – see this blog – We always knew it – their brains are thinner!. They do not seem capable of understanding that if you want deficits to fall then you need growth. Growth occurs because spending equals income – public or private the cash till operators don’t discriminate. When there is insufficient private spending to support robust growth, then you have to supplement it with public spending. End of story.

...

The national unemployment rate in the US is at its highest level since 1948 and there are more people unemployed than during the Great Depression – (Source).

The US population is at its highest level since statistics were kept – (Source).

The population statistic is unambiguously about scale and doesn’t tell us all that much. Just like the level of federal debt. What does the level of federal debt tell us by way of information about anything that is important? Not much.

It might signal a strong economy being supported by a full-employment budget deficit with very low unemployment and strong productivity growth and real wages growth.

It might signal exactly the opposite.

The other statistics I cited are much more meaningful. They tell us that something dramatically is wrong with the US economy and the damage is in terms of things that matter – people’s jobs, their income-earning capacity, and their ability to risk-manage their lives and those of their families.

...

There is nothing intrinsically interesting about the level of federal public debt. All of it is denominated in US dollars which means that the US government can always honour the interest payments and the redemption.

Given the US government is holding on to its archaic gold standard practice of issuing debt $-for-$ to match its net spending (deficit) which is a voluntary and unnecessary act in the fiat monetary system it now oversees, the only thing that the rising federal debt tells me is that deficits have been rising.

My last post on economics was an introduction to modern monetary theory. I’m going to continue with that topic and may repeat myself somewhat, but I feel that my grasp of the subject has increased over the past few months. Hopefully I can discuss it more thoroughly and without resorting to relatively complicated econo-speak.

As with the last post, note that this discussion only makes sense when we’re dealing with money that is not based on a commodity—in other words, US dollars are not convertible into some weight of gold (or other physical quantity) but are instead only valued because the US government vouches for them and demands taxes to be paid in them. That is the current system we have and what I’m going to write about below bears directly on such a system.

I’ll start with a flat-out statement of economic reality: Public debt incurred by a government that issues its own currency is fundamentally different from private debt. Now I need to prove this.

Money

Let’s start from the basics. Your employer pays you for the work you do. You take $20 out of your wage check and decide to spend it on dinner. You go to a restaurant, eat your food, and give the restaurant your money. In everyday language, we say that the restaurant owner has made $20, when in fact the owner has simply acquired $20 in exchange for preparing and serving you food. No money has been made, in the literal sense of the word—it has only been exchanged. The owner then uses that $20 (and other money supplied by other patrons) to purchase more raw ingredients, buy cooking utensils, pay her staff, pay taxes, etc. Let’s pick one of these items and follow along with her to the purchase of the raw ingredients.

For simplicity, assume she buys her food from a local farmer. The next morning she goes to this farm and spends your $20 to buy a portion of her restaurant’s food for the day. The farmer now has the money that started out in your hands. He pays his farmhands at the end of the week and your $20 forms part of one of their wages. That night, one of the farmhands spends the $20 purchasing a new shirt from the company that you work for and so transfers that $20 to your employer. The next week, your employer pays your wages again and you receive your $20 back.

This is how money works. In this example, the same $20 is able to purchase prepared food, raw ingredients, some amount of farm labor, a shirt, and more labor that helps make the shirt. If you want to take this cycle to its logical conclusion, I turn your attention to Beavis and Butthead.

http://www.youtube.com/watch?v=FoekaAkVlWg

Skip to about 2:30 at the above link and watch until about 4:30. For those who don’t want to watch the video, I’ll explain it here.

(More below the fold).

I mentioned a few days ago that my wife and I had moved across the country and now live just outside of DC. I'm currently with the in-laws down in Williamsburg, VA and am seeing the colonial sights (plus Busch Gardens, Water Country, etc.). They own a timeshare down here and have been coming here for about two decades.

This is my first time down in the area so I can't make any comparisons, but they've been open-mouthed astonished at how dead it is down here. There are businesses that they've patronized for almost twenty years (and which have been around for much longer) that are now boarded up. The local outlet mall felt almost abandoned, when in previous years--so I'm told--you had to navigate through throngs of shoppers. We just spent a day walking around the preserved section of colonial Williamsburg and the crowds were sparse at best. My in-laws come at the same time every year, so this isn't due to some sort of seasonal shift or change in schedule. Business is down. Waaaaay down.

My wife and I just spent 4 days driving from Phoenix to the DC area. We're now officially living inside the beltway--someone please tell me if my brain turns to mush! I don't have much detail to fill in here since we didn't stop anywhere to sight-see or play tourist. Instead, I have a few quick observations about each state/region, glimpsed from the windows of my speeding car:

Arizona: Phoenix to Payson on the 87N was relatively boring since not many people live out in the desert and the scenery itself is mediocre at best. There's a bit of Native American tribal land with casinos, but that's about it. Then we took the 260E to the 60E out of Payson--absolutely beautiful land up there! We'd never been to this part of Arizona before and the rolling hills, bright green grass, and rocky slopes/fields reminded me of Scotland. Well, pictures of Scotland--I've never been there. But the contrast with the brown, boring desert was extreme. The scattered sun/rain we encountered while driving only made it better. I would love to visit this area again.

The video alternates between English and Arabic(?). Note that the video is a mix of previously shot and live footage being played over live commentary. It sounds like the shooting started before the soldiers boarded. All those videos released of the soldiers being attacked on board, while true, come after an initial salvo.

The first English segment starts with the reporter mentioning that two people have been shot and that tear gas, flashbangs, and sporadic fire have been used on the ship. After the Arabic-language reporter takes over for a minute or so, the English speaking reporter comes back with an update and mentions that the boat has now been boarded by Israeli soldiers. There may still be some room for interpretation as to the timeline of events, but it looks pretty likely that the soldiers fired first, descended on the boat, were attacked by the occupants of the boat, and then perhaps opened fire again.

Regardless of when the soldiers opened fire (before boarding the boat or after), the fact remains that Israeli soldiers boarded a ship in international waters and opened fire on civilians who could wield only pipes and clubs in their own defense.

Also, can anyone translate or find subtitles for the non-English segments of this video? That may clarify things more.

I’ll try to provide brief, working definitions to everything below. Before I dig in, I just want everyone reading to know that I'm not an economist, I am not an expert on anything pertaining to economics, and for all I know everything I'm about to tell you is dead wrong and I'm an idiot. Now, with that out of the way:

In my recent travels around the internet, I happened across the blogs of Bill Mitchell and Warren Mosler, which discuss Modern Monetary Theory (MMT). MMT is a macroeconomic theory which tries to explain the operation, structure, and behavior of national economies (as all macroeconomic theories do). This puts it in the same league as Keynesianism and Monetarism. Keynesianism is an economic theory that states that private sector organizations will often make decisions that are good for themselves but that may lead to a net bad for the economy/society as a whole. The public sector (government) must step in and, through either direct spending/stimulus or fiscal manipulations, correct these problems and restore balance to the up-and-down business cycle. Essentially, when the economy starts tanking, the government should step in and spend money to stop the decline and prevent or lighten a recession. Monetarism also believes in public sector intervention, though it places a much higher emphasis on regulating the supply of money and managing interest rates via central banks. Monetarists tend to look down on excessive government spending and direct interventions and instead manipulate the money supply. Roughly speaking, US economic policy from the New Deal until the early 1980s was mostly Keynesian, while policy from the early 1980s until today has been roughly Monetarist.

But MMT has fascinated me, because it claims both of these schools of thought are fundamentally in error. If its proponents are correct, then the way that we currently think about the national economy is very wrong, often backwards, and extremely harmful to our own well-being. We have been systematically under-investing in the economy and in our human capital since at least the 1970s. Why do I say the 1970s? Because that’s when we switched from the gold standard to a fiat currency, and that switch subtly changed the nature of our government’s relationship to the economy.

Data:

So, let's take Scotjen's data here about China vs. US R&D spending in 2009 and add to it the following information:

US year-on-year (yoy) R&D increases (source (.pdf warning))
China yoy R&D increases and recent annual expenditure (source 1, source 2.)

Now we'll construct low, medium, and high scenarios for each country. In the data below, the numbers represent low/medium/high estimates for each parameter:

US yoy increase: 1%/3%/5%
US investment (2009, billions): 400/400/400

China yoy increase: 10%/17%/24%
China investment (2008 or 2009, billions): 30/50/67

Model:

Now we apply a basic calculation used to figure out annual interest to see what a X% year-on-year increase in investment will do in all the scenarios above. The formula applied is I(t) = I(0) * (1 + yoy)^t. I(t) is the annual investment in year t, I(0) is the investment in 2009, yoy is the year-on-year % increase rate, and t is the number of years I'm projecting out. In this case, I am projecting out to 2020 and, since my starting numbers are from 2009, t = 11. As an example, US investment in 2020 in the medium scenario is calculated as I(11) = 400 * (1 + 0.03)^11 = 554.

Results (billions $):

US investment in 2020: 446/554/684
China investment in 2020: 86/281/714

Only the most optimistic assumptions place China ahead of the US in 2020, and I doubt that China can sustain annual increases of 24% in R&D for 11 years. However, the medium scenario is based on more realistic data. My source above for the Chinese "medium" yoy growth rate states that it has been 17% since 1995, so this may be a safe number going forward. This means that, by 2020, China will be investing about half as much in R&D as the US. The two numbers will only come close if the US seriously under-invests and China is able to sustain a long period of enormous growth in R&D investment. And note that this is all barring any major economic disruptions or breakthroughs in either country, though I would guess that a big change in one country (say, a huge crash in the US) would heavily affect the other.

A recent news article at AZCentral.com concerning budget woes caught my eye the other day. Here are a few choice excerpts:

...The current-year budget is still $1.4 billion out of balance. Then there is the fiscal 2011 budget, which begins July 1; estimates of its deficit hover in the $3 billion range.

To deal with the shortfall, lawmakers did almost everything but raise taxes. They swiped money in various state accounts, borrowed, delayed payments and made cuts that reduce the size of government.

...

The cutbacks, while intangible to most, have not been painless. Many of them have landed on vulnerable populations, such as disabled children, home-bound seniors. The cuts took 78 percent of the K-12 dollars that aren't protected by voter mandates or federal requirements.

But that is just a warm-up act. Deeper and more painful cuts are certain this year.

So what are the details on these cuts? (More below)

Sean-Paul just posted a critique of a recent David Brooks column here. I want to throw in my two cents on what Brooks is talking about and where he is going wrong. My overall view of Brooks’ article is that he’s dealing in ideas that, on their own, have merit, but he’s mixing them around into a hodgepodge that doesn’t make sense. He’s also being really shortsighted and adhering to narrow definitions caused by his lack of long-term perspective.

If you want a quick read that goes over some of what I’m about to say below, click here. Otherwise, please continue to read below.

Well, perhaps not uniquely American, but certainly typically American:

None of us would choose a recession. But sometimes backwards can also be forwards. Perhaps, within its destruction, we can find some revitalization. We can strive to become more independent and more capable.

Maybe our children will grow up stronger, more resilient, with values that center less on money and more on relationships and meaning. Maybe they'll be more prepared to live well in an unpredictable world, learn craftsmanship as they build or fix their own toys, imagination as they invent their own games, and initiative as they find creative solutions to their own boredom.

And maybe we'll all gain some compassion as we learn to adapt to our own circumstances and as we watch others adapt to theirs.

Because that's what we do: adapt. When we have more money, we buy cars. When we have less, we buy bicycles. When we have more, we buy fruits shipped from overseas. When we have less, we grow vegetables in our own gardens.

I say this is typically American because, in the face of a massive recession caused by rapacious elites hoovering up money from the lower classes while encouraging massive spending and the accumulation of debt, this columnist advocates that we learn to be adaptive and resilient to face an unpredictable world. And, most importantly, that we do it as individual consumers who learn to buy less and find creative solutions to our own boredom. And we do this in a void, separated from our fellows. The notion of any kind of collective action, any kind of community response or work, is missing. This sentence here is the most telling:

And maybe we'll all gain some compassion as we learn to adapt to our own circumstances and as we watch others adapt to theirs.

There is a chasm of interpersonal separation here. Maybe we'll gain some compassion by watching others struggle and adapt to difficult circumstances. How about helping them? And asking if they can help you in return? No, let us all suffer silently as individuals, peeking in on others' desperation to learn a few tricks for ourselves.

The article has a few general ideas that are good overall (self-reliance, creativity, adaptability) but which I think must be coupled with a larger focus beyond the self-serving individual consumer. Then again, the writer starts the column out by lauding the fact that some street sweepers in China make their own brooms by twining together tree branches. His reaction is "how innovative and creative they are in the face of adversity!" My reaction was "those people must be scraping bottom and feeling miserably poor and destitute if they can't afford the tools they need to do their jobs." Well, maybe I'm just weird...

Graham posted the opening video of the Copenhagen Climate Change Conference earlier today. Click on that link to go to his post and view it, then come on back here and I'll tell you what's very wrong with it.

Back? First, start with this excerpt from the COP15's blog:

“We have made a film which speaks to the heart rather than to the brain,” says the Danish director of the film Mikkel Blaabjerg Poulsen.

The film shows a six-year old girl who, after watching news reports on climate change, has a nightmare in which she tries to escape floods, tornadoes and droughts. She wakes up and begs politicians to “please help the world” in a touching scene on top of a skyscraper.

“I hope that the film can affect politicians in a positive way, so that they may raise their goals a little higher, because their emotions have been touched,” says Mr. Poulsen. The film is made by Danish production company Zentropa RamBUk.

While conducting a Google search for the film, I ran across tons of sites decrying the video as "carbon propaganda." This film is indeed propaganda, even though climate change is a very real phenomenon that will cause big problems for us if we don't take action. The propaganda aspect of it arises in the following way: This film is all about "reinforcement," designed to strengthen the convictions of those already in the community and maybe pick up a few on the outer edges. But anyone not in the community looks at it and sees something that is patently absurd, borrowing special effects from "The Day After Tomorrow" and putting young children on-camera to guilt you into "saving the world." This is propaganda--something that is aimed at the "homeland." I use that term specifically in reference to 20th-century state propaganda, though perhaps "home tribe" would be more general and more applicable here. Those outside the tribe view the film as absurd because they do not share the same beliefs, cultural context, and cultural cues that the propaganda uses. In fact, the obvious misalignment of emotional cues that those outside feel, coupled with their already-existing mistrust of the climate change community, makes it even more offensive and unbelievable to them.

I think the climate change community (or at least that part represented at Copenhagen) needs to work on its PR a bit more... At best this film will scare a few people into taking climate change more seriously. At worst, it just provides more fodder for the anti-climate change cannons.

What Exactly Does Comcast Already Own? Here's a List

On the "corporate conglomerates getting bigger" front, Comcast and NBC Universal are looking at the idea of a merger. The article above explicitly outlines much of the Comcast corporate empire. Here's the final takeaway, though I encourage you to read the whole thing for more details:

So what would a controlling interest in NBC Universal add to the mix? Ten television stations, Telemundo, NBC Entertainment (Jay Leno, etc), NBC News, NBC Universal Sports and Olympics, Universal Pictures (movies), a big stake in Hulu.com, and Universal Parks and Resorts (Universal Studios Hollywood).

That's quite a lot of stuff to add to your management system, but Comcast has had practice running an empire. It already operates a vertically integrated national network that includes two delivery systems (Internet and cable), video programming that reaches close to 100 million people, Web publishing, Web TV on demand, social networking, sports teams, performance stadiums, event and audience marketing/management enterprises, with financial interests in motion pictures, 4G wireless, public television, and more TV on demand. The company has over 100,000 full and part-time employees, most associated with the cable end of the business.

Too big to fail? No. But should this one company own so many diverse subsidiaries, many of which generate conflicts of interest? Well, in my opinion, no.

In the video in Nat's post here, Ed Schultz says the following:

Do you think Obama would have been elected President of the United States if he had gone around campaigning saying 'We're going to put another 30,000 troops in Afghanistan?

The thing is, he kind of did. No, not 30,000 troops exactly, but he did say that he'd commit more people and resources to Afghanistan. Let's see...

(Note: This is very long. I stopped because I got tired. There are many more speeches around and between all these.)

From Remarks of Senator Obama: National Security Avail (October 22, 2008):

Ending the war [in Iraq] will help us deal with Afghanistan, which we talked about at length this morning. In 2002, I said we should focus on finishing the fight against Osama bin Laden. Throughout this campaign, I have argued that we need more troops and more resources to win the war in Afghanistan, and to confront the growing threat from al Qaeda along the Pakistani border.

Over seven years after 9/11, the situation in Afghanistan is grave. This is the most violent year of the war, with the highest number of American casualties. The Taliban is on the offensive, al Qaeda has a sanctuary across the border in Pakistan, and some experts believe that 50 percent of the Afghan economy comes from the heroin trade. As the Chairman of the Joint Chiefs of Staff recently said, "The trends across the board are not going in the right direction."

Make no mistake: we are confronting an urgent crisis in Afghanistan, and we have to act. It's time to heed the call from General McKiernan and others for more troops. That's why I'd send at least two or three additional combat brigades to Afghanistan. We also need more training for Afghan Security forces, more non-military assistance to help Afghans develop alternatives to poppy farming, more safeguards to prevent corruption, and a new effort to crack down on cross-border terrorism. Only a comprehensive strategy that prioritizes Afghanistan and the fight against al Qaeda will succeed, and that's the change I'll bring to the White House.

(More below the break)

Introduction

Predicting the future is extraordinarily difficult and becomes downright impossible when you extend your time horizon sufficiently. Five years is probably a good ballpark limit for forecasts involving any detail—Ian, Stirling, Numerian, and others are good at pushing toward this limit and were able to predict many of the particulars of the current economic crisis. But beyond five years you start getting into terra incognita and must generalize. To predict what 2040 looks like (30 years out) you must really generalize and are often stuck just proposing some “what if” scenarios.

I’ve added one or two sections here that were not originally asked for, mostly because I think they are important categories that relate to many of the originally requested subjects. I’m also waaaay over the word limit—I’m writing a thesis right now and have picked up the academic bad habit of writing too much. I hope you can get through this whole thing!

I've written this in reference to Michael Collins's diary post One More Reason to Kill this Bill and some of the confusion over sections and what is in the bill as far as coverage requirements and penalties.

I'm looking here (.pdf file) for the new Health bill and somewhere around here for the IRS Tax Code. Will post more precise links (possibly to other sources) as needed.

1) HR3962 Sec. 501 (p. 297) If you fail to purchase insurance you will pay 2.5% of (modified adjusted gross income - gross income) but, if that value is higher than the “average premium for self-only coverage under a basic plan which is offered in a Health Insurance Exchange…” you will pay that average premium instead. So, there is a cap on the 2.5%, set at the average premium of a plan on the exchange. Not sure how high that average will be. HR3962 Sec. 501 (p.298) This amount is pro-rated based upon the fraction of the year that you go without coverage.

Note that a “basic plan” is outlined in HR3962 Section 303(c) on page 168.

Modified Adjusted Gross Income is defined as adjusted gross income increased by (A) any amount excluded from gross income under section 911 of IRS Code (see the link below) and (B) any amount of interest received or accrued by the taxpayer during the taxable year which is exempt from tax.

2) HR3962 Sec 501 (p.299). For Americans living overseas, you are exempt from paying this tax if you have been living abroad and are a resident of a foreign country for at least one taxable year. Relevant IRS code is here (scroll down a bit to sec. 911(d)(1)). I assume the prorating would apply if you’ve only been living overseas for less than a year.

3) You can apparently file an exemption from the requirement to purchase insurance based upon religious beliefs, though you must document your adherence to a faith that would want this. There’s a bit more in there, starting on HR3962 Sec. 501, pages 299-300.

4) HR3962 Sec 501, p. 304. Seems to state that small lapses in coverage are not going to result in taxes. I would assume this means a few days, but I don’t see any specific numbers. The bill just calls them “de minimis lapses of acceptable coverage.”

Now, if you don’t pay the tax in point (1) above then you will be subject to normal IRS rules and regulations. I would assume this is where IRS Code sections 7201 and 7203(see links below) come in. They feature up to $25,000 in fines and no more than 1 or 5 years in jail (depending on which is applicable). I’m not sure how these are applied in practice.

So, it looks like no specific penalties are outlined in the bill, but the 2.5% is designed as a tax and so would fall under IRS rules for non-compliance.

IRS Code Section 7201
IRS Code Section 7203