Archive for September 10, 2009

Balancing the Obama Budget With a Mandatory Gorilla

[youtube=http://www.youtube.com/watch?v=70lkobYY0Hc&hl=en&fs=1&]

After nearly two months of nothing, I figured I had to put something up. I’ve been tossing this idea around for a while looking for a metaphor that worked appropriately. I didn’t really push the metaphor of a household budget too far in the video because:

  • No one runs a household budget on $100 per month
  • Government does a lot of things that don’t correspond very well to household budgets
  • There is no good correspondence between mandatory spending and anything we budget for in real life.

But it is likely that you simply don’t care about the artistic matter of finding an appropriate metaphor and you only care about where the data came from.

Fair enough.

The data came from a couple of different places. First of all, the first data I’m using is a rough budget projection for 2017. This came from the CBO projection of President Obama’s budget extended to 2017. This is also where I got the federal reciept estimates I used to calculate how much we would have to decrease spending in order to balance the budget as well as the estimates for mandatory spending and interest.

For the purposes of the video, I combined what the CBO calls “mandatory spending” (which is mostly entitlement spending like Social Security, Medicare and Medicaid) and interest payments on the national debt into a single “mandatory spending” amount because both these parts of the budget are automatic and neither of them can be changed through the normal budget channels.

The next piece of data is the distribution of spending according to agency. In order to estimate how much we would spend on various departments and agencies, I took the latest projected data from President Obama’s budget, which is for 2014. I then calculated that, if we split up spending proportionally the same way in 2017 as we do in 2014 we would end up with the money distribution you see in the video (give or take a few cents).

Then, for the part where I take away the money until the budget is balanced, I simply looked at the amount of money we would have left over after we take care of all the mandatory spending with the receipts we expect to have.

That number was:

Federal Receipts – Mandatory Spending = Money Left To Spend

The “Money Left To Spend” number came out to $427 billion in 2017. The Defense spending in 2017 is anticipated to be about $662 billion, so I got rid of everything except defense spending. Then I started shaving off parts of the defense department until I got to a number small enough to roughly equal $427 billion.

Using this web site as a guide and calculating the proportional spending between the 2010 budget and the 2017 one, I subtracted the entire intelligence budget and the Navy. Then I reduced “Defense Wide” spending by half (I figure with the Navy gone, we don’t need quite as much military support bureaucracy) and I added up the Army, Air Force and the reduced bureaucracy.

That number came to $447 billion. Which means that we’re technically still running a deficit, but it’s a really small one.

One thing I did not do was calculate out how much more we would have to cut if we pass health care reform. This is because the legislation is so fluid and malleable at this point, it seemed pointless to put it into a number that would just change in a couple weeks.

But, I can say this one thing with an enormous level of certainty (and I’ll even put it into bold so you know I’m really serious):

President Obama, despite his best intentions, will not sign a “deficit neutral” bill.

This is because entitlement programs always start out with the best intentions and with rosy predictions. They almost always fail to meet those predictions, costing far more than was originally estimated. The problem is that the programs go on auto-pilot and neither the president nor Congress can do a damn thing to pull back on the costs.

What can be done about this? My suggestion is one that would satisfy no one.

I think President Obama should refuse to sign any legislation that doesn’t have an expiration date on it. If health care reform is really as wonderful as he says it will be, this shouldn’t be a problem. People will adore it, burn incense to it, throw ticker tape parades for it. Voting it back into law would be like raising Abraham Lincoln from the dead and having him run for another term.

But the fact of the matter is that it will never as wonderful as President Obama claims, which is why it can’t have an expiration date. Once people have a benefit, changing the status quo away from that benefit is often politically impossible. Just ask George W. Bush when he tried to change the clearly broken Social Security system. Everyone agreed that it was broken, but no one could muster the political wherewithal to fix it. So they just left it broken.

This is, I believe, exactly what will happen with health care reform. But that part is just my opinion.

College Students: Learn Things You Can’t Learn On Your Own

New York Times has a short group of blurbs on college advice from educators. Some of it is good, but some of it is shockingly bad.

Rabbit Trail: One professor tells students to read a good newspaper every day. He might as well tell students to check the typeset on their printing presses. If you want to make a point for someone to expand their horizons, tell them to actively seek out the opinions of those with whom they disagree and discover why they disagree or tell them to independently verify facts that they read in a news article once a week. Both these activities will expand your horizons far more than burying your face in a dead tree containing the collected daily writings of 400 people who voted for the same person in the last election.

Back to the point:

I thought the make-up of professors polled was fascinating. Out of 9 total professors, two of them were technical professors (biology and physics), and their advice is shoved down to the bottom of the page. If you considered “science” to be a single subject, it would have been as well represented as English, history or law. No engineering professors. No math professors either.

Here is the reason this kind of irks me: I got tons of terrible college advice from people who gave me some permutation of “expand your horizons”, “do what you like” or “follow your dream”. This led perfectly intelligent individuals to spend $60,000 on an education so they could get perfectly hideous careers taking customer complaints for American Express.

Most of my college classes were fairly technical (mathematics, chemistry, computer science, physics, statistics). But I always kind of bristled at the fact that so many universities basically discriminate against students with technical degrees. If you have a degree in something technical, the chances are you were forced to take a ton of humanities.

And I’m not talking English composition or public speaking classes, which every single person should take (or test out of) in order to be a functioning college degree holder. Every degree holder should be able to write in a manner appropriate for educated communication and everyone should be able to stand up in front of people and make some kind of speaking presentation. When I say “humanities”, I’m talking the often endless humanities, literature, history, and “society” classes that go far beyond basic proficiency.

Universities make technical students take all these humanities on the laughable premise that it will make them “rounded” individuals. On an informal survey of core curriculum at a half dozen major universities, a rounded individual takes twice as many classes in the humanities as he or she does in math and science.

What I am NOT saying is “humanities are worthless”. I’m an avid literature fanatic with enough books to take over one of the rooms in my house. What I AM saying is that a college education should be cost-effective. It is my opinion (and my advice to new college students) that students should make every effort to spend their time and money learning things that they can’t learn on their own.

If this survey is correct, students are paying $35,000 dollars for a private university (and ) on classes and fees this year. It is my understanding that out-of-state students to public universities are similarly priced. If a student takes a 15 hour workload (five 3-hour classes), they’re looking at about $3200 per class.

My guess is that most places have a core humanities curriculum that takes about 30-40 hours to complete. So, if you’re getting a science or engineering degree, you’re looking at about $30,000 – $40,000 to pay for classes that have nothing to do with your profession and (here’s the key part) are filled with things you could have figured out on your own.

Example: I took a survey of western literature and thought from the Reformation to the modern era. The key take away from that class on my side of things was the fact that the book we used had a wretched translation of “The Grand Inquisitor”, a portion of Fyodor Dostoevsky’s opus “The Brothers Karamazov“. I knew it was a wretched translation because I had read “The Brothers Karamazov” the previous summer (it remains to this day my favorite novel) and vital imagery was toned down because the translators had no respect for the intelligence of their readers. Of all of the authors assigned in that class, I’ve re-discovered all but one in my own leisure time.

In fact, most of the stuff we learned in order to secure the calligraphic document that got us jobs were things quickly forgotten after the final exam. I have since re-learned far more than I was taught because of:

As a contrast, how many people in the audience figured out fluid dynamics all by themselves because they were curious? Calculus? Organic chemistry? These are topics that are very difficult to get into simply by hitting up Wikipedia for some info.

Don’t even get me started on Social Science classes. I was lucky enough to take a gender class my final semester in undergrad. We had several biology students in the class who tried to patiently argue with the professor that men were more aggressive than women not because society taught them to be aggressive but because men have more testosterone. Our professor refused to believe them. One of them suggested that the professor should investigate societies of lab rats. He did not get a good grade.

Every gender class should be taught with an evolutionary biologist and a neuroscientist sitting in the back row trying not to laugh.

Maybe if I wasn’t still paying off tens of thousands of dollars in student loans, I wouldn’t feel this enormous resentment to the months I spent reading stuff I’d already read (or would read again when I wanted to) and talking about it in classes with 3 students who cared and 40 who didn’t. But the fact of the matter is that many students are going to college to get degrees to get jobs. For technical students, their progress is being slowed by humanities classes filled with readings they can do on their own time if they are so inclined.

The Best Paying Undergrad College Degrees

Cool little piece on the best paying undergrad college degrees has this accompanying graph.

(Parts of the graph aren’t showing up very well on wordpress, so feel free to head over there to check it out.)

Degrees Degrees
Methodology
Annual pay for Bachelors graduates without higher degrees. Typical starting graduates have 2 years of experience; mid-career have 15 years. See full methodology for more.

If you’re thinking about choosing your major, my only advice has stayed the same over the years: Go as technical as you think you can handle.

Many employers assume that, if you have a technical degree they can teach you the other stuff. Very few of them assume that if you have a liberal arts degree they can teach you the technical side.

I’ve Got My Eye On You, Robert Stacy McCain

Robert Stacy McCain (who is totally hilarious, even if you vehemently disagree with him) has a post on an FHA bailout he believes is heading our way. I have no opinion on the matter one way or another because I haven’t really looked into it and I try to have some idea of what is going on before I open my big mouth.

(Although I occasionally fail at even that simple task.)

But one of McCain’s statements made me pretty skeptical (emphasized below):

The FHA is on the hook for lots of “underwater” loans, taken out by low-income homeowners who got special low down-payment deals and — in case you didn’t notice — unemployment hit a 26-year high in August, with no prospect the 9.7% jobless rate will go down any time this year.

Really? No prospect at all? Not  even an itsy-bitsy prospect?

I know it is something of a debate as to whether we’re currently seeing a real recovery or something more akin to an extended dead cat bounce. I personally kind of oscillate between the two views and I think there is a good deal of evidence supporting either side.

But I tend to think we’re definately seeing a slowdown in unemployment and I wouldn’t be at all surprised to see it go down by the end of the year.

So, Mr. McCain, I’m watching you. One of the greatest things about the internet is normal people can go back and see how right or wrong someone was in the past, using this information to judge their future claims.

If unemployment dips below 9.7% by the end of the year, I will make a point that your enormous confidence in the suckiness of the economy was misplaced.

If it does not, I will write a humble post begging your forgiveness. I’m curious to see how this goes.