Ear Rational Thoughts

The working spouse effect

To think that the current level of unemployment is all about aggregate demand, you have to think that there are lots of jobs into which those displaced workers could easily transition. But if you own a house in the Detroit era, or have a spouse who still has a job, this is just clearly not the case.

That's from Megan McArdle.

I've heard the point about owning a home - that is, if you don't have a job but can't sell your home, you can't move out of an area with no jobs to get into an area with jobs.

But the point about the spouse is a really good - and obvious - one that I somehow haven't heard before. What percentage of the long-term unemployed have working spouses? If you couple that with 2 years of unemployment benefits, you could easily imagine anyone in such a situation being reluctant to take a job that's worse - or worse paying - than their old one. It seems like this could be a factor driving the high unemployment rate, but a quick google search revealed nothing interesting to confirm or deny it.

Accrual Accounting

What. The. Fuck:

What is the difference between the budget [from the Congress] and the financial report [from the Treasury Department]?

Most notably the federal budget is on what is essentially a cash basis. Contrast that to the federal financial report which is on an “accrual” basis and thereby recognizes revenues and expenses when they have their true economic impact, not necessarily when cash is received or disbursed.

As but one example, whereas the federal budget delays recognition of military pension costs until personnel retire and receive their payments, the annual report recognizes them as they perform their service. Similarly, the cash basis, but not the accrual basis permits the government to reduce expenses of a particular year merely by postponing payment of its bills from that year to the next.

That sounds illegal, but I guess when it's the Congress doing it, nothing's illegal. What's the end result?

The 2009 federal balance sheet indicates that the government’s net position (total assets less total liabilities) is a negative $11.5 trillion, 12.3 percent worse than the previous year. But that’s just the tip of the iceberg. That negative balance excludes government obligations for social insurance programs, mainly Social Security and Medicare.

Awesome.

Then this neat bit of trivia:

Rather, like other entitlement programs, they [Social Security] are a tax and spend program in which resources get redistributed from one group of citizens to another. After all, when social security was initially established the first recipient, Ida May Fuller of Brattleboro Vermont, contributed only $24.75 but received $22,888.92 in benefits.

So what if we include Social security and Medicare?

In the 2009 annual report this indicates that the total present value of estimated social insurance expenditures over revenues is $45.9 trillion.

Hence, simple addition indicates that the total net position of the government is a whopping negative $57.4 trillion.

That "trillion" with a "t".

HT Arnold Kling

Writing regulations ... and snapping their fingers

Why is the HAMP program working so poorly? My answer was that what Washington was attempting to do was take two complex business processes--loan origination and loan servicing--that have been developed over a period of years, and mash them together, almost reversing the order, into a completely new process, and to do this on the fly, without any allowance for differences in local conditions or individual circumstances. It did not surprise me that this was not working.

I did not say this at the hearing, but I will write here that this is indicative of what is wrong with the Obama Administration. These folks with no management or business experience think that they can make all sorts of changes happen by just writing regulations or laws and snapping their fingers. They have no concept of what a business process is, much less how to develop one and roll it out. If you think HAMP is a fiasco, just wait and see what happens with their health insurance reform.

My emphasis. From Arnold Kling, here