Guest Post: Inaguration as an Expat

Joy Nedved currently resides in Amsterdam with her husband David. Before the global recession she worked for a local newspaper as a pub critic. Now she spends much of her time volunteering for the Amercian Women's Club of Amsterdam. She has graciously agreed to share her reflections on Obama's inauguration as seen from outside America. Oh, and she's my sister!

Living abroad has in many ways made me more appreciative of my homeland and at other times more chagrin, especially in social settings. Those of us living abroad found ourselves at dinner parties defending a president (Bush) and foreign policy that we neither voted for nor agreed upon during the pause between the aperitif course and first course. By the dessert course most of us were passing on the chocolate tart and asking for another glass of port. I don't even like port. Yet, six months ago the tenor of these parties changed, everyone wanted to know about Obama. Was it possible for the US to elect an African American president? No way, everyone exclaimed but secretly hoped. 90 percent of the Dutch population polled said that they would have voted for Obama if given the chance. The Dutch public broadcaster NPS devoted 8 hour long shows devoted to him in the 2 weeks before election night. There were at least 5 different "official" sold out election night parties where expats from all of the world stayed up until 6:00 am AMS time just to hear Obama's acceptance speech.

Hearing people sing, "I'm proud to be an American" in heavily accented voices will always bring a tear to my eye. Seeing non-Americans on Inauguration night holding the American flag and singing, "Simply the Best, America's better than all the rest" made my heart burst with patriotic pride. Is Obama the end all and be all of a New America? I don't know and right know I don't care because you see, here on this side of the Atlantic, We have Obamamania! This uninhibited media enthusiasm for an American president is a far cry from the coverage of the last 2 years of the Bush administration. Granted there was a lot to gripe about, Iraq, Iran, Guantanamo and Abu Ghraib- but somewhere along the way, the over sees anti-Bush attitude crossed over into the a more generalized anti-Americanism. We became a symbol of the big steroid bully picking on smaller, underdeveloped countries. Yet now. With this election people are starting to see America in a different perhaps more realistic light. Not that of an aggressive bully but as a protective brother willing to flex muscle but also willing to sit down and talk about disputes. As witnessed by Obama's first official phone call abroad to Palestinian President Abbas. This single yet important act proved to people that here is an American president willing to sit down and open up dialogue with his adversaries. It reminded people from all over the world that America is the land of free will, democracy and that all things are possible…this is the America that I'm proud of and will gladly discuss at the next dinner party sans the port.

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Please contact me if you are interested in a guest post.

Improvisation Catch-22

After just seeing some of the best improvisers in the nation at the North Carolina Comedy Art Festival, I realized a problematic truth about improvisation:
1) good improv requires confident choices
2) already good improvisers are confident
3) inexperienced improvisers logically make fearful choices

Ten Positives of the Recession

If you watch TV, listen to the radio, or speak to people, you've probably heard why this recession is the "worst since the Great Depression." Not only is that comparison absurd, but there are actually many positives to this difficult time; here are a few.

1) Overall production (which is what really makes us rich/poor) may not actually be down as much as we think:

But when unemployment suddenly rises, as in a recession, people shift from work for pay to household production; people don’t take more leisure time than before.

So if we would measure output to include production at home, we would infer that a recession doesn’t reduce total output by as much as we thought; and perhaps the utility burden of a short recession is not as severe as one might imagine.

2) The evolution of good and bad businesses:

Economic cycles are Darwinian, picking off weak companies and leaving survivors stronger. A year into the recession, solid retailers have their pick of mall space. Respected banks are getting an influx of deposits. Tech companies with money to spend are having an easier time hiring.

3) The influx of skilled workers into other fields:

You may have guessed by now what all this has to do with Wall Street. Like them or not, the men and women who’ve gone into finance in the past 10 or 20 years have certainly been among our best and brightest. They are super-well-educated and work incredibly hard, with intense focus. In economic terms, these people represent a huge stockpile of human capital — and now, some 200,000 or so of them are losing their jobs. Perhaps even more noteworthy, however, are the hundreds of thousands, perhaps millions, of college undergrads and graduate students who had planned to work in finance.

4) Increase in evangelical church attendance:

During each recession cycle between 1968 and 2004, the rate of growth in evangelical churches jumped by 50 percent. By comparison, mainline Protestant churches continued their decline during recessions, though a bit more slowly.

5) Governmental belt tightening (it has to happen eventually) may result in less defense spending globally, thereby making everyone safer for cheaper:

we can know with absolute certainty that some governments must be overproviding what is called national defense; otherwise the service would not be needed in the first place. The overprovision is often a significant net loss of efficiency not only in the country "defended" but in other countries its government threatens.

6) It will increase America's relative global status:

the US has become the only remaining super-borrower, able to issue thousands of billions of dollars in debt at record low rates while the dollar strengthens. People are unwilling to lend to almost anybody except for the US Treasury.

7) Recessions can be great times to start good businesses like...

FedEx, Microsoft, CNN, Wikipedia, HP, etc. Pre-existing companies can also make incredible gains in years where the economy is down, like Google, PayPal and Salesforce.com Inc.

8) Even though access to health care declines, heath actually increases:

Sure, it's stressful to miss a paycheck, but eliminating the stresses of a job may have some beneficial effects. Perhaps more important, people may take fewer car trips, thus lowering the risk of accidents, and spend less on alcohol and tobacco. They also have more time for exercise and sleep, and tend to choose home cooking over fast food. In a 2003 paper, “Healthy Living in Hard Times,” Christopher J. Ruhm, an economist at the University of North Carolina at Greensboro, found that the death rate falls as unemployment rises. In the United States, he found, a 1 percent increase in the unemployment rate, on average, decreases the death rate by 0.5 percent.

9) It may be good for grandparents:

Doing the annual pilgrimage to South Florida this holiday season, we’ve all been struck by how everywhere seems to be more crowded than usual. Parks, beaches, even stores are jammed. We could barely find a parking space at our favorite park, which is usually empty.

Could it be that with the down economy, people canceled or didn’t book expensive trips like cruises or ski vacations in favor of bunking with grandma and grandpa?

10) Last but not least, maybe God has a purpose for this recession. John Piper thinks so:

1. He intends for this recession to expose hidden sin and so bring us to repentance and cleansing.

2. He intends to wake us up to the constant and desperate condition of the developing world where there is always and only recession of the worst kind.

3. He intends to relocate the roots of our joy in his grace rather than in our goods, in his mercy rather than our money, in his worth rather than our wealth.

4. He intends to advance his saving mission in the world—the spread of the gospel and the growth of his church—precisely at a time when human resources are least able to support it. This is how he guards his glory.

5. He intends for the church to care for its hurting members and to grow in the gift of love.

Catching Up, The Stimulus Package

I'm back, refreshed, and ready to hit the ground running. After skimming 704 unread blog posts, I thought it would be best to summarize all we've missed. So here's the first part, the "cream of the cream" on the stimulus package.

The world is not ending. One of George Bush's final failures was his claim that he'd "abandoned free-market principles to save the free-market system." This is just foolish. By the most economic measures this is not even the worst economic crisis since the Great Depression. In fact, the panic of the 1980's was clearly worse than now (chart). Even on a global scale, the world is the best its ever been. For the first time in history, half the population of the world has reached the middle class. This is up from almost 2% 200 years ago. The idea that capitalism has failed us is simply not true. Llewellyn Rockwell, president of the Mises Institute, puts it this way:

To the free market, we owe all material prosperity, all our leisure time, our health and longevity, our huge and growing population, nearly everything we call life itself. Capitalism and capitalism alone has rescued the human race from degrading poverty, rampant sickness, and early death.

Below are a laundry list of problems I've accumulated with the stimulus package. Most of these ideas come from the 200 people smarter than me who signed the below statement:

Notwithstanding reports that all economists are now Keynesians and that we all support a big increase in the burden of government, we do not believe that more government spending is a way to improve economic performance. More government spending by Hoover and Roosevelt did not pull the United States economy out of the Great Depression in the 1930s. More government spending did not solve Japan's "lost decade" in the 1990s. As such, it is a triumph of hope over experience to believe that more government spending will help the U.S. today. To improve the economy, policy makers should focus on reforms that remove impediments to work, saving, investment and production. Lower tax rates and a reduction in the burden of government are the best ways of using fiscal policy to boost growth.

One of the points they mention is that Japan's recession, one similar to our current one, was not helped by increased government spending. In the 1980's Japan accumulated a debt twice the size of its economy only to remain stagnant. Many would claim that Japan built too many unneeded and slow spending projects, but that is unavoidable. As of January, in Obama's plan, only $4 of the $30 billion for roads and $3 of the $18 billion for renewable energy will be will be spent in the next two years. But speed is not the only problem. It is historically and geographically universal that governments are not very efficient at spending taxpayer money. Here are three recent examples:

Iraqi reconstruction: The Special Inspector General for Reconstruction, Stuart Bowen,...has found that the effort has been riddled with cost overruns, project delays, fraud, failed projects and wasteful expenditures...even though the first tranche of $19 billion in Iraqi reconstruction money became available in October 2003, the Defense Department did not issue the first requests for proposals for this money until 10 months later...

Hurricane Katrina: ...the US has appropriated, over $100 billion in short and long term reconstruction grants, loan subsidies [etc]...GAO found that FEMA made over $1 billion--or 16% of the total in this particular category--in fraudulent payments...items like professional football tickets and Caribbean vacations.

The Big Dig: ...the largest single infrastructure project in the US...many lessons on how not to run a project...officially launched in 1982, but it did not break ground until 1991, due to environmental impact statements, technical difficulties and jurisdictional squabbles...not "completed" until 2007.

The efficiency of this bill is similar. It will spend $214.5 billion to create/save 330,400 government jobs. This is $646,214 per job. So why is this even on the table? What are the political incentives that make government spending seem like the solution in nations all around the world? I believe its because of bad politicians and bad voters. Bad politicians see this as a chance to pass the pork they've been trying to pass all along. And bad voters refuse to allow for "don't just do something; stand there."

So if government spending isn't the solution (and it surely isn't) then what is? Believe it or not there are some government action I do support. However it's important to note I support these all the time, not just in a recession. Economist Greg Mankiw proposes "an immediate and permanent reduction in the payroll tax, financed by a gradual, permanent, and substantial increase in the gasoline tax." This would not only help strengthen US business (1 year of pay roll tax is roughly equal to the stimulus package), but it would also deal with road congestion, which I have discussed before. Best of all this isn't like "mailing a letter to the fire department to tell them that your house is on fire." This could happen tomorrow, not 2011. Speed aside, here's why tax cuts will always out perform government spending:

Tax cuts stimulate both aggregate demand and aggregate supply. If taxes are temporarily lower, they make working today more attractive than working tomorrow, and thus increase labor supply. This boost to the nation’s productive capacity means that a tax-cut-based stimulus doesn’t do as much to narrow the gap between output and what we can produce.

Finally, here's another unexpected solution that I would want even if our economy wasn't slumping: increased immigration. These immigrants would buy up the bubble homes, improve our savings rate, and work overtime increasing productivity. Although open borders will always help a country, the help is needed even more in a recession. This solution stands in stark contrast to the "buy American" death trap that has been floating as a part of the stimulus package. Although protectionism didn't cause the Great Depression, it did make it "Great" (can't claim credit that one). To put it bluntly, buying American will destroy jobs, not create them.

This whole post can be summed up like this: Many wonder how we can fix the economy, but we fail to notice that it is already fixing itself. There were too many houses, people are now building less houses. Banks lent money to risky borrowers, now they're not. Americans weren't saving enough, now people are spending less. I predict we have positive economic growth in 2010.

150 Posts in 1 Year Deserves a Furlough

The recent increase in the number of posts here is partially due to the free time I had over the holidays; but it is mostly an effort to get out my backlog of thoughts before I take a break. Starting today, on my 1 year blog-iversary, I will refrain from posting and reading blogs for the next 30 days. The main goal is to evaluate just how much time and effort I put into it. Since the creation of the Bottlenecked blog I have been debating about my benefit, reader's enjoyment, and possible selfishness of personal blogging. I'll be back in a month, rested and eager to share.

Also, here are some posts in progress you can expect when I get back: the economics of relationships, solutions to democracy, evidence against tithing, why this recession might be a good thing, and a guest post on Obama's inauguration from a current expat. If I find something I just have to share, I'll post it in the Bookmarks. See you on February 16th!

Emptying the Bottle: January '09 Links List

Here is a biggie sized edition to hold you over during my hiatus:

1) Mortality cost of smoking: $25 per pack.

2) Judge a book by its 69th page.

3) Humorous legal immigration flowchart.

4) Meaning of the name Brookie.

5) Popular Russian academic predicts a United States civil war.

6) Discover the details of your personal genetic information.

7) Does birth order really matter? I still think so.

8) Interactive map of the entire outer space: WikiSky.org

9) Humorous man baby pictures.

10) Great chart on past presidents first 100 days.

11) Student auctions off virginity for millions of dollars.

12) What the other team in a Disney sports movie feels like.

13) Part one and two of a series on congestion pricing of roads (before).

14) Do you speak 2009?

15) Economics of brushing your teeth.

16) Top gifts for people you hate.

17) My job is ranked 127 out of 200. How about you?

18) Kelly Blue Book for health care.

19) Hiter was not a very good economist.

20) Adult-proof cell phone ring.

*I'll share any interesting stories on my Bookmarks while on break*

Do We Have an Upside-Down Government?

With all the talk of businesses and individuals not covering their debt, it got me thinking, does our government even have the assets to cover its debt? When a business buys a building it can usually borrow the full price of the building. If it goes under it can always pay back the loan with the resale of the building. Like a business, our government owns a lot of capital: highways, roads, bridges, government buildings, parks, etc. Like a business our government has debt: currently over 10 1/2 trillion dollars. Now that's big, but how big depends on your measurement. Here is a chart that puts it in perspective:

As you can see, our debt is increasing at an increasing rate. But the second graph shows that our debt as a percentage of what we produce is actually much lower than the days of the New Deal. But what exactly does that mean? I wasn't totally sure myself, so I decided to ask someone smarter than me. I sent an email to the economists over at Marginal Revolution to see what they thought. They were kind enough to respond to my question: "Does our government have the assets to cover its debt?"

Tyler Cowen: I say yes, but raising taxes makes us poorer...

Although I appreciate Tyler's short and sweet answer, I feel like Alex hits the nail on the head:

Alex Tabarrok: The government has the power to tax - so its ultimate asset is the wallets of the American people. In that sense, yes the government has enough to pay off our future debt.

So our government can pay its debt (which is why people around the world still invest in US government bonds). That said, total debt and debt % has been on the increase since the 1980's. The graph above shows that a large portion of that debt is non-government. In fact, household debt percentage of GDP has doubled since 1980 (from 50% to 100%). Also, the financial sector has increased their debt from 21% of GDP in 1980 to 116% in 2007 (this helps explain its recent vulnerability). So what is the solution to the current economic problem? On this one, Tyler Cowen gets it perfect:

Tyler Cowen: Spend less, save more, be poorer for a while.

Look Who's Pictured on Clemon's Homepage

Me. But sadly the article has nothing to do with yours truly. I guess they just wanted a strapping young man who looks good in blurry.


Also in Clemson news: The university is now ranked the 22nd best public school in the nation and our men's basketball team is still undefeated.

Undead Personal Finance

From Indexed:

Debunking Thirteen Medical Myths

Here and here are the facts:

1) Sugar does NOT cause children to be hyperactive.

Scientists have even studied how parents react to the sugar myth. When parents think their children have been given a drink containing sugar (even if it is really sugar-free), they rate their children’s behavior as more hyperactive. The differences in the children’s behavior were all in the parents’ minds.

2) Suicide rates do NOT increase over the holidays.

One study from Japan that looked at suicides in 1979-94 showed that the rate of suicide was lowest in the days before a holiday and highest in the days after the holiday. In contrast, in a study from the United States of suicides over a 35 year period, there was no increase before, during, or after holidays.

3) Poinsettia's are NOT toxic.

In an analysis of 849,575 plant exposures reported to the American Association of Poison Control Centers,17 none of the 22,793 cases involving poinsettia resulted in considerable poisoning. No one died from exposure to or ingestion of poinsettia, and most (96%) did not even require medical treatment. In 92 of the cases, children ingested substantial quantities of poinsettias, but none needed medical treatment, and toxicologists concluded that poinsettia exposures and ingestion can be treated without referral to a health care facility.

4) A disproportionate percentage of body heat is NOT lost through the head.

A more recent study confirms that there is nothing special about the head and heat loss. Any uncovered part of the body loses heat and will reduce the core body temperature proportionally.

5) Eating late at night does NOT cause excess weight gain.

But just because obesity and eating more meals at night are associated, it does not mean that one causes the other. People gain weight because they take in more calories overall than they burn up. The obese women were not just night eaters, they were also eating more meals, and taking in more calories makes you gain weight regardless of when calories are consumed.

6) There is NO cure for hangovers.

No scientific evidence, however, supports any cure or effective prevention for alcohol hangovers. A systematic review of randomized trials evaluating medical interventions for preventing or treating hangovers found no effective interventions in either traditional or complementary medicine.

7) People should NOT necessarily drink eight glasses of water a day.

Furthermore, existing studies suggest that adequate fluid intake is usually met through typical daily consumption of juice, milk, and even caffeinated drinks. In contrast, drinking excess amounts of water can be dangerous, resulting in water intoxication, hyponatraemia, and even death.

8) People do NOT only use 10% of their brain.

Evidence from studies of brain damage, brain imaging, localization of function, microstructural analysis, and metabolic studies show that people use much more than 10% of their brains. Studies of patients with brain injury suggest that damage to almost any area of the brain has specific and lasting effects on mental, vegetative, and behavioral capabilities.

9) Fingernails and hair do NOT continue to grow after death.

As Maples and numerous dermatologists explain, dehydration of the body after death and drying or desiccation may lead to retraction of the skin around the hair or nails. The skin’s retraction can create an appearance of increased length or of greater prominence because of the optical illusion created by contrasting the shrunken soft tissues with the nails or hair.

10) Shaving hair does NOT cause it to grow back faster, darker, or coarser.

In addition, shaving removes the dead portion of hair, not the living section lying below the skin’s surface, so it is unlikely to affect the rate or type of growth. Shaved hair lacks the finer taper seen at the ends of unshaven hair, giving an impression of coarseness. Similarly, the new hair has not yet been lightened by the sun or other chemical exposures, resulting in an appearance that seems darker than existing hair.

11). Reading in the dark does NOT ruin your eyesight.

The majority consensus in ophthalmology, as outlined in a collection of educational material for patients, is that reading in dim light does not damage your eyes. Although it can cause eye strain with multiple temporary negative effects, it is unlikely to cause a permanent change on the function or structure of the eyes.

12) Eating turkey does NOT make you especially drowsy.

Actually, turkey does not contain an exceptional amount of tryptophan. Turkey, chicken, and minced beef contain nearly equivalent amounts of tryptophan.

13) Cell phones create considerable electromagnetic interference in hospitals.

A 2007 study, examining mobile phones "used in a normal way," found no interference of any kind during 300 tests in 75 treatment rooms. In contrast, a large survey of anesthesiologists suggested that use of mobile phones by doctors was associated with reduced risk of medical error or injury resulting from delays in communication.