Friday, August 19, 2011
I recently purchased the URL www.roseonpolitics.com and switched everything from here to a Wordpress account. This will make it easier for people to find my posts and my goal is to do more original reporting as well.
So again, all new writing will be on www.roseonpolitics.com. Please check it out and don't be afraid to comment!
Wednesday, June 8, 2011
After failing to pass a "clean" debt vote, Republican's in Congress are looking for a compromise. The Hill reported today that Senator Jon Kyl said "the GOP would look to a shorter-term increase in the debt ceiling if the talks fail to produce more than $2.5 trillion in cuts." The Treasury has been dipping into reserve funds to forestall the worst case scenario, but those funds will run out in July, and it looks like the GOP is still willing to play politics until the very last moment.
It left me with two questions. 1) What is Kyl thinking? $2.5 trillion worth in cuts?! In a time where most states are strapped for cash Republican's have decided that cutting social programs that millions of American's rely on is OK by them.
Plus, what is a "short term" increase? Congress has voted to raise the debt ceiling every year for the past decade. If the time period is any shorter than that, it means the Republican's aren't kicking the can down the road, they're crushing it.
If you're a politician, the rule of thumb you follow in any crisis is to do no harm. Well, many families are in a crisis right now, and by not raising the debt ceiling Congress will be doing them harm. All the positive "estimates" that economists made for 2011 will be wiped out because, as the U.S. is already broke, there won't be any room to make the investments it needs to execute programs that will help create jobs or make sure families are taken care of. As the majority of the debt is for paying programs such as Medicare and Social Security, asking for $2.5 trillion in cuts means these vital programs will be a part of it.
2) Can the Republican's do math? Even though the Congressional Budget Office has stated numerous times The Affordable Care Act will reduce future deficits, all the GOP talks about is how it will ruin America. But as it will help our fiscal situation, it also saves lives. The law forbids insurance companies from saying no to certain medical treatments, and giving parents the ability to keep their children insured under their plan until they are 26. It also includes tax credits for small businesses, and makes sure seniors can pay for their prescription drugs. I'm not making this up.
But politics has succumbed over policy once again. The Affordable Care Act is better known as Obamacare, and recent polls show 47 percent of American's do not want the debt ceiling raised. A Pew study also found the majority of people are not in favor of raising taxes or cutting benefits. But this is not because they are irrational people, it's because they don't have enough information. Our "leaders" in Congress are supposed to tell us what we need to know so we understand the actions they are taking. Instead, it has become a battle of words and trying to figure out which ones will position their party or candidate to win the next election. Instead of calling them out on it, the media focuses on it and polls the candidates that don't even try to have credibility.
If the emergency funds run out and the debt ceiling isn't raised, it means America will have to default on its loans, leading to an even worse economic down turn than the one we're still recovering from. President Obama has said his decision to vote against raising the debt ceiling while still in the Senate was a mistake; it's the Republican's turn to stop playing politics and deal with the matters at hand.
Monday, June 6, 2011
There was big buzz in the education world when the NAACP sued the Department of Education in New York City. On their website they list the reasons for the suit:
- The "regular school's children" had library access for a little over four hours so that the "new charter school's kids" could have access for almost seven.
- Traditional school students were moved to a basement, where they were next to the boiler room, to make room for their charter school peers, and teachers of the regular students were forced to teach in the halls due to lack of space.
- Students in the traditional public school must now eat lunch at 10 a.m. so that charter school students can enjoy lunch at noon
- New York state law requires the city to involve parents before announcing its intention to shut down a school or make way for a charter to share a school's space.
We don't know if student's are having class next the boiler room, but do you really think a librarian is telling students in a school that they can't enter the library? That would have to be the meanest librarian ever and the NAACP should focus on getting that librarian out of the school. But there's not much link to this and the teacher's union. Yes, the NAACP and UFT have been on the same side on many battles, but (my uneducated legal analysis) I can't see how a win for the NAACP would also be a win for the UFT. Even politically, does either group really want to be responsible for closing a school?
Now at the risk of sounding old, when I went to high school we had lunch at 10:30am. Yes it was a public school, and no it wasn't a charter. The building was transformed into a school after being a factory for over a decade. In fact, the trucks for American Express still move in and out of a garage right next to it.
It's a small building, and during my sophomore year the principles were forced to accept (because it was considered one of the best schools) around 200 more students then had graduated the previous year. The hallways were always crowded and if your class wasn't on the same floor it usually took over five minutes to get there. In my senior year, rooms in the basement were opened because there wasn't enough space on the other three levels. There was no boiler. Administrators had no choice but to schedule lunch at odd times because the cafeteria was too small to hold everyone. The question then became whether it was better for the students to have lunch early or late. Speaking from experience, eating that early wasn't fun, and by the time my last class came I was so hungry it was hard to concentrate.
There are other parts in the city where classes are being held in trailers. This isn't right, but the problem is not the Board of Education kicking out traditional schools, it's structural. There simply aren't enough schools for the growing young population in New York. So we not only need better schools, we also need better buildings.
Sunday, June 5, 2011
The fact is GDP doesn't measure what voters really care about and can miss a lot of important aspects to a families quality of life. Pollster's never ask how many people know how much the economy grew in the last quarter. Instead they ask how they feel it is going, and since the majority of voters aren't economists, the only reference they can refer to is themselves. So they think about if they are able to pay the bills, put food on the table, and have healthcare for the members of their family. The reason why Nate's formulas are so off is because GDP, like most macro data, doesn't cover these things. Even basic data like average incomes still don't tell you the whole story. Take a look at the average income for individuals:
Whether incomes have gone up or down, it hasn't lead to a President, or his party, keeping the White House. This was the case in 1976, 1992, and 2000. While there wasn't much change between 2004 and 2008, there was a drop in 2009 because of the Great Recession, and we all know who won that year.
While pollsters try and figure out what's on people's minds, economists need to try and start doing the same thing. A Washington think tank called the Economic Policy Institute came out with a report titled The Rising Instability of American Family Incomes, 1969-2004. The authors point out that "Part of the reason why family economic instability—sometimes called "income volatility"—has not been extensively examined is that aggregate economic statistics have been relatively stable and favorable. Neither the 1991 nor the 2001 recessions were particularly deep, and inflation and unemployment have remained historically low. Yet.. these broadly stable and favorable aggregate indicators mask many signs of declining economic security among American families."
The report came out in May of 2008, before the Great Recession, but some of the findings might surprise you. It turns out 15 percent of American's saw their salaries decrease between 1969 and 2004, causing serious strain within the family. Right at the turn of the century, levels of family income were extremely violent, where over half of American families saw their earnings drop.
Just because incomes were rising and unemployment was low, didn't mean all families were living the high life. Health care costs soared way over inflation, so even if there were two breadwinners per household, there was still a good chance they couldn't afford health insurance. Not to mention most people received coverage through their job. And future problems are becoming apparent. As the price of food has gone up, it will eventually start affecting a large amount of families.
The unemployment numbers that came out last week weren't good. And yes those and other macro indicators can show politicians where the state of the overall economy is right now. But if politicians want to actually do something about it, they need to look at the root causes of high unemployment, why food prices are rising, and figure out why the cost of health care has been rising. But they can't do this without getting the right information. If a politicians job is to get reelected, they will start demanding the information that will show them how to help their constituents, and economists will start figuring out ways to calculate it.
Friday, June 3, 2011
Last week Governor Cuomo and Republican's in the Senate agreed to cap property taxes by 2 percent for parts of Long Island, Westchester, and most of upstate New York (you're welcome Westchester, I won't bundle you in with the suburbs of Albany, Syracuse, or Buffalo). There was no choice but to lower property taxes. Being that they were already one of the highest in the nation and many families were already tightening their belts as much as they could. But the problem was that the revenue was not made up from anywhere else.
Instead of raising taxes on the wealthy or corporations, New York's legislature cut programs for education, the homeless, and safety. These cuts have had a disproportionate affect on the bigger counties and cities. While 93 percent of counties were able to pass education budgets, New York City's Council is now debating the ways it can stop experienced teachers from being fired. Neither Syracuse, Buffalo, or Albany, figured out how to pass their budgets either.
One of the reasons for the bad employment data that came out today was because state governments cut their budgets. But raising taxes is never a popular move, especially in bad economic times. One of the problems with tax policy is that it's so complicated. The federal code is longer than War and Peace, and it makes it hard in this thirty seconds or less media to explain the effects this compromise will have on the state.
But the fact remains people are willing to pay for the programs that benefit their families like public education and safety. Cuomo got the political victory for getting his agenda passed, but the reality is most New Yorker's are facing the reality of those cuts.
Thursday, June 2, 2011
Tuesday, May 31, 2011
If you are arguing with your friends about how John Boehner doesn't wield much power, here's some ammunition. When the Republican's took control of the House of Representatives last year, Speaker Boehner said he would put an end to all earmarks. Well, guess what? Lawmakers found a loophole for their own rule.
Instead of directly asking money from a committee, the committee members have set aside money for lawmakers where they can request money to be allocated for their district. Walter Pincus reported that the House Armed Services Committee reserved one billion dollars (that's twenty zeros) for what has been dubbed the Mission Force Enhancement Fund (MFEF). In this Fund, members of Congress could request money for projects in their districts through the appropriate federal agency within the Defense Department. Ironically, or maybe not, even before the bill could be passed half of the money within MFEF was already allocated for members who sit on the House Armed Services Committee.
This proves two things. First, Speaker Boehner can't handle his job. You don't run on reducing the deficit and the size of government, then allow your members to spite you on those very issues. In the 90's Tom Delay threatened to remove members of his own caucus of their chairmanship if he didn't like what they were doing. If Boehner had the same control like The Hammer once did, the Committee chairs would be afraid of applying this run around.
Second, the Tea Party doesn't have as much influence as they like to believe. If members really cared about reducing the deficit and America's debt, they wouldn't take place in this practice. Instead, Freshman members like Congressman Joe Heck walk a tight line between getting the funds their district needs, and making sure they don't get a primary challenge for doing so. Congressman Heck, who is a member of the Armed Services Committee, realizes if a terrorist attack does occur in the high tourist area of Las Vegas, it could be detrimental to the local economy. As someone who recently went there for the first time (I broke even), and wouldn't mind going back one day, I would like to know that I'm safe doing so. Also, as a tourist attraction for people and businesses around the world, you could give a good argument for why terrorists would want to attack the city.
If the Tea Party really had a major influence over what the Republicans were doing, these funds never would have been created. They only represent a tiny proportion of conservative Americans, and the GOP knows they can't retain their majority by exclusively pandering to them. The current speaker hasn't figured out how to handle either of these issues, and instead has let his caucus take votes that he knew would hurt them at the polls leading to its recent defeat in NY26.
Personally, I don't mind members of Congress asking for money. It is part of their job, and if they weren't their constituents would be asking them why they haven't been doing anything. Which happens to be the case for this Congress anyway.
Monday, May 23, 2011
Saturday, May 21, 2011
Thursday, May 19, 2011
You can always tell when President Obama means what he is saying. Obama wrote the speech he gave at the memorial service for Congressman Giffords, was always fired up during the campaign because he believed he could bring change to Washington, and obviously wanted to bridge the gap between the two America's he described at the 2004 Democratic National Convention. But today's speech on the Middle East was clearly written for him, probably by some policy wonk in the State Department, whose job was to make sure the President didn't say anything that would end the negotiations between Israel and the Palestinians before they got started.
Today's speech came at a time when tensions are high in the region because of the recent killing of Osama Bin Laden and what has been dubbed the Arab Spring. With Israeli President Netanyahu coming to Washington, the State Department's envoy to the Middle East, George Mitchell, quit because of the lack of progress. For the last two years all talks have stopped because Israel realized with the world economy going belly up everyone was focused on other things and could leave them alone. Since then Israel has decided to build more settlements on the borders and has used its military to do so.
So all eyes are on Obama and what he will do next. Since the election, Obama and Secretary of State Hilary Clinton, have restored some relations with the Arab countries. But Israel has always been a problem because many of the countries in the nation see America as favoring Israel over the other people living in the region. On the flip side Israel is sometimes afraid of losing America's support and the billions in military aid we have given it over the years. But having visited the country I feel confident in saying the majority of Israeli's not only want peace but would be willing to compromise with the Palestinians and come up with a solution where both can live there.
Obama believes this as well otherwise he wouldn't have said today "At a time when the people of the Middle East and North Africa are casting off the burdens of the past, the drive for a lasting peace that ends the conflict and resolves all claims is more urgent than ever. That's certainly true for the two parties involved." And went on to call for both sides to agree to the same terms in 1967 when America and the United Nations agreed to recognize Israel as a state. But the problem is we've seen this play before, and Obama knows this policy isn't going to work.
The more I thought about it, I couldn't think of a good reason for Obama even making the speech today. Some people were saying it would put pressure on Netanyahu, but without the U.S. willing to put something strong on the table like taking away military aid or walk away from its trade agreements, there is no reason for him or other future President of Israel to change their position. American President's have tried to get the two sides to mend ties based on these original borders. But even when they have agreed to do so, like during the Clinton administration, both sides wound up breaking the agreement.
On Tuesday, when Obama gave his speech at Booker T. Washington high school in Tennessee, it was awesome. He wanted to show the graduates and future graduates there that in this country anything was possible. He was charismatic, optimistic, did his best to relate to the audience, and he meant every word. Obama is too smart to not realize he's not doing anything that hasn't already been done or tried before when it comes to Israel. While this speech was to set up next week when Netanyahu gets here, it's only going to be Netanyahu and no one else. So after the Israeli President gives his speech to Congress to tell them how great they are, I'm willing to bet both sides will say the discussions went well and hope to continue them in the future.
Have you ever been stuck in the rain, in a rush, wet, miserable, and not sure what the quickest way to get to your destination is? Well, there's an app for that! For the past few years Mayor Michael Bloomberg has joined Twitter, hired the city's first Chief Digital Officer, and has made a push for New York City to become a major player in the online development community.
A conglomerate of businesses in the city called NYC Seed, has worked with the New York's Economic Development Corporation to attract developers to the city. In a competition called SeedStart 2011, entrepreneurs competed to live in New York for a summer, plus a prize of $20,000 to work on their proposed project. Owen Davis, Managing Director of NYC Seed, told me they received hundreds of applications. When I asked him if New York could compete with the major companies in Silicon Valley, he said that it is a "silly" comparison and "New York has many substantial industries in it already "giving it an edge to attract start ups to work within the fashion, media, and advertizing industries. According to Davis, many developers are already doing so: "There's a lot of startups coming to New York and it's increasing so you have a good supporting system that is being built and will continue to be built."
Many popular online features have already been created in the city such as Tweetdeck which was recently bought by Twitter for $50 billion. A lot of these start ups are located in the flatiron district where you can find large, open, spaces for $26 dollars per square foot. Tech companies are attracted to these types of offices because much of the work they do is collaborative and these areas make everyone in the office more accessible.
Under the title Government 2.0, a number of corporations and other entities have been trying to figure out ways office holders and public agencies can release information so it can be used to benefit the people they represent. Mayor Bloomberg has worked within this realm and initiated the BigApps competition. Over 350 data sets were released by city agencies for programmers to create smartphone applications. The prize was a dinner with the Mayor and $40 thousand dollars. The best part of the competition is that is has already solved the rainy day problem. In its second year, the top prize went to a iphone app called Roadify, which tells people the latest subway, bus, and driving conditions in real time.
There are other applications the city has put out, one of which is called Don't Eat At. Using information from the city's Department of Health's grading system, you can check into a restaurant via Foursquare (also created in New York) and get an instant text message telling you whether the chef washes his hands before cooking. The MTA has also created an application where people can see where there are delays on the subway and bus routes, and in the future will tell people the exact time when a subway or bus will arrive.
As social media is slowly becoming a part of our everyday lives, it is important for office holders to enter this realm as a way to interact with their constituents and govern in a way where they are accessible. New York is already home to the largest amount of Twitter accounts with over 26 million people, making it only natural for the City's mayor to get in on the game. "I think social media overall, especially Twitter, gives politicians a new and exciting way to connect to constituents in ways they weren't able to do even a few years ago. And it has really changed the dynamic of how politicians are able to respond to the citizens." Richard Robbins, the Marketing Director for Media Innovation at AT&T explained. But there is no filter for the internet, and being caught in a gaff online can be much worse than being committing one caught on TV. To conquer this problem, Robbins said politicians should think about social media as "a campaign event or a cocktail party where it's an opportunity to go and meet with people. And the idea whether they're running for office or in office, interacting with constituents, helping constituents bring their concerns, responding to them is all politics."
Since creating his account, Bloomberg has held online town halls using the #askmike hashtag. While there were some serious questions about housing, crime, and other city matters, the Mayor was also asked to explain how magnets work. As an engineer he knew the answer, but probably did not know the question was actually referring to a song by the hip hop group Insane Clown Posse. Making yourself more accessible to constituents is of course important, but obviously some can pull it off better than others. As Microsoft's Director of Innovative Social Engagement, Dr. Mark Drapeau emailed me "if the goal is to make government and its billionaire mayor seem more human and down-to-earth through Twitter, than Insane Clown Posse could be an appropriate discussion topic, even if the mayor doesn't completely appreciate who they are. Some of his citizens do, and he's doing his best to relate."
When I told him about the BigApp competition Drapeau said "App contest are not strictly necessary, and many of them end up on the proverbial shelf not getting much use. But they also motivate the developer community into public service, show citizens and govies the art of the possible, and occasionally deliver a hit." It can also be a good way to promote the start ups and build the community that will further drive New York's economic engine into the future.
Robbins explained to me that all these efforts help grow the industry "there's more capitol at the early stage, the city is behind supporting entrepreneurs, there's very good investors who are experienced who are trying to deploy capitol. And all those things matter in terms of building a ecosystem, it's not one beast that does it."
But flip phones are going the way of the dinosaur and young people are some of the most computer literate people in the country. Having grown up with this technology, using new devices is more natural to them than their parents. But looking further, Facebook is not going to be all fun anymore. Not only do politicians need to go where their constituents are, but governments will have to upgrade their services to keep up with the increasing demand as this new technology becomes more prominent.
Monday, May 16, 2011
As the housing market continues to slog along, many American's are facing foreclosure, unable to sell their homes, and recent reports have shown banks are not willing to help people lower their monthly payments. On top of that, the Washington Post completed a yearlong investigation into the Department of Housing and Urban Development (HUD) showing many of the funds allocated have not been used.
According to the Post, $400 million dollars has been allocated for 700 projects across the country, but many of those projects have not been constructed because managers could not get funding from banks, land codes had been violated, or just plain old politics (Not In My Back Yard). Many of these grants were to be used to build developments for people living below the poverty line. This makes it a two edge problem; not having the money spent hurts the area it was supposed to be spent in, and it leaves people who need those homes looking for places to live.
The article described how HUD was having trouble enforcing their own rules because they did not have enough lawyers, and even while the majority of states tell HUD that the projects are not able to take off, the process is very slow because it goes through a lot of red tape. This left millions of dollars in accounts that have been sitting there for years. In the meantime, these funds could have been transferred for projects that are ready to be built, which would have created jobs and helped to keep the economy moving.
Some of this shouldn't be that big of a surprise considering the state of the overall housing market. And enforcement has always been a problem when it comes to government programs, usually because agencies are understaffed. One way to raise revenue and lower the debt would be to hire more IRS agents. But if there is a lack of communication between local, state, and federal officials, there is an easy fix: the internet.
With all the work being done to make the federal government more transparent, and releasing data from within the agencies with data.gov, why not create a program that shows all the players involved within a project what step they are at? Agencies at HUD can look for the last time someone updated the project within the program, and if it has been a while they can get in touch with local authorities and ask for an update. There are plenty of programmers and companies that figure out how best to create these collaborations which, if done right, can make sure everyone is on the same page and build the projects that will benefit the families that need a roof over their heads.
The recent recent floods in the south have destroyed a number of houses, and even though the Post points out that some non-profits do not have the expertise to properly build them, there are plenty of organizations that do. In fact, many of them can be found working in New Orleans as I'm writing and you're reading this post. Many of the houses being built are green houses where so family that lives in the house will save money on their heating and electric bills.
A major hurdle in this effort will be to get the banks to loan money to landlords and managers of these projects. But in a recent interview with housingfinance.com, Bob Simpson, Head of Fannie Mae's Affordable Housing Unit said "As we look at our production on a month-to-month basis, we're definitely very busy, and that's probably the best sign that it's working. We now have a dedicated affordable credit team, a dedicated production team, and a pricing team that just prices affordable transactions." Translation: Since we were bailed out by the Federal Government, it gave us the ability to get rid of the loans we never should have made, and now we can start to create more loans that won't bust."
Last week, the major banks reported the amount of people who owed money on their mortgage was the lowest in 15 years, which could give them the confidence to start lending more money. Dorothy was right, there is no place like home, and building them can help America's economy and families.
Sunday, May 15, 2011
Tuesday, May 3, 2011
On the ninth anniversary of September 11th 2001, the one comment I kept hearing from my friends and family was how this one seemed more stressful than in past years, and next year (the big one zero) was probably going to be worse. Maybe it was because it was the first time in eight years I was back in New York City, but I think the real reason was because the event still weighed on everyone like it was just yesterday. But on Sunday night we were able to breathe a sigh of relief. Finding and killing Osama Bin Laden was the first visible victory American's have seen since the War on Terror began ten years ago.
Yes there was the elections that that took place in Afghanistan and Iraq. While it was a step in the right direction, those were more victories for the people of those countries to choose their future. But those governments still have not made much progress. Al Qaeda still has a major presence in Afghanistan where they are threatening those who work with the government, or what is left of the allied forces that invaded the country. Iraq has been lucky to have strong leadership by President Maliki, but they still have not figured out a way to fairly distribute the oil revenues between the rival Sunni and Shia sects. There is still a lot of work to do there and neither parliaments have been able to come together and initiate policies to help people get their people jobs or keep their children healthy.
Having spent billions of dollars on the two wars and not seeing much progress, American's were understandably ambivalent. Gallup came out with a poll this past February showing 69 percent of American's had an unfavorable view of Iraq, and a 64 percent had an unfavorable view of Afghanistan. At the same time, there were large majorities who believed what happens in these countries will have a large affect on America's future. When asked "how important do you think what happens in each of the following countries is to the United States today" 52 percent said Iraq was vitally important and 51 percent said the same for Afghanistan. Only 5 percent of American's said these countries were not important at all. America was stuck in a situation it never should have gotten into in the first place (Iraq), there were no signs it was getting better, and there weren't any new ideas on how to get out of it.
A lot of the pundits were making fun of the college students who went outside the White House cheering "U.S.A!!" because most of them were not even old enough to remember the attacks. But the fact those students felt that relieved Osama was killed shows just how stressful these past ten years have been.
The Arab Spring taking place in the Middle East has showed the world that Al Qaeda's ideology is not what people living in the region want. The young people in Egypt took to the streets for democracy and better economic opportunities for them and their children's future. Then in Libya, Yemen, and Tunisia, protests broke out on main streets and main squares demanding freedom and the ability to improve their lives. Al Qaeda had nothing to do with this. It was a mass organization by the true majority in these countries that had not been listened to before. In the west, it showed us we are more alike to our eastern counterparts than we may have realized ten years ago. It was a foreign land that most American's have never visited while only seeing the attacks in Israel, or sometimes the oppression of women on the news. But those incidences were far away, Oklahoma City was done by someone who was described as a lunatic, and the WTC bombing in 1993 was so rare no one thought it would happen again.
The death of Osama Bin Laden has lifted a tremendous amount of stress off America's backs. With the economy is still struggling to recover, politicians arguing over pointless and minute details only so they can disagree with each other, or pundits bringing up issues that no one cares about, it is no wonder why a large number of American's thought we were on the wrong track. No one was sure anyone in their government knew what they were doing. While Bin Laden's death is not going to make the economy better, or end the War on Terrorism, it is the first real sign, in a long time, American's can see that something is going right.
Unfortunately, there are so many issues that need to be dealt with right now this victory won't last long. President Obama's approval rating will go up (my guess: 65%), and then fall as bad economic news comes in, or as the debate to raise the debt ceiling heats up. But it is a sign we are headed in the right direction. Obama has a time table in place to remove American troops from Iraq, and this past week we saw some of the first images of the new World Trade Center being built. Dealing with so many issues at once is never a good thing, and needless to say Osama was a big issue. No one who lived that day will be able to fully move on from it, but now that the main figurehead of past decade is gone, it will be easier to enact policies that we could not before. On the tenth anniversary of 9/11 we will be able to not just remember those we have lost, but be able to take a step forward. It doesn't mean we're out of the woods, but we can finally start seeing through the trees.
Thursday, April 28, 2011
As a policy wonk, I was excited to see Ben Bernanke's press conference, the first ever at the Federal Reserve. I know there aren't a lot of us out there, but in a time where people are uncertain it is important to hear from the leaders who are supposed to be looking out for our best interests. I wrote a column for Government In The Lab about how these conferences came to form. Now, it wasn't as entertaining as Donald Trump, but more importantly it wasn't stupid.
While many people on Wall Street are very good at math, I kinda doubt many of them were history majors. After the Civil War, recessions were a pretty common occurrence and it hurt a lot of businesses around the country. The turn of the century was a time where the dollar was just starting to go into circulation, which meant when there was a slowdown in the north it affected the south and vice versa. But there was no Standard and Poors or Moody's coming out with information where people can get a picture of what was happening. To stop these blips in the economy, President Woodrow Wilson signed the Federal Reserve Act in 1912. The central bank had two mandates which still drive its policy decisions today: 1) control America's monetary policy and 2) create jobs.
Whatever Ben Bernanke said at the conference is on the record and can be held accountable too. For instance, one of the bigger items mentioned was the Quantitative Easing (QE) policy being implemented, and there is controversy over how effective it has been. Basically, the Fed is buying back the mortgages the banks sold before the recession thinking the housing bubble wouldn't burst. The Fed claims this has allowed banks to clean their books giving them the ability to loan each other, small businesses, and individual's money to keep the economy moving. The Fed claims this has worked because there has been growth since it has started. But critics point to the fact banks have not been lending a lot of money, the economy hasn't grown all that much (GDP grew only 1.8% the first quarter of 2011), and job numbers are still at an all time low.
Bernanke is just like any other person in charge of a big institution, at certain times they need to cover their own behind. If it doesn't seem like he knows what he's talking about, or the facts don't back up what he's saying, he will lose legitimacy and trust. While addressing reporters' questions yesterday, Bernanke said this about the steps the Fed, under his tenure, have done to help the economy recover:
I do believe that the second round of securities purchases was effective. We saw that first in the financial markets. The way monetary policy always works is by easing financial conditions, and we saw increases in stock prices. We saw reduced spreads in credit markets. We saw reduced volatility.
On certain parts there isn't a lot of debate. The market is less volatile; we see this as the stock market has gone up, banks are no longer in need of extra money, and most companies are reporting strong profits this quarter. All good signs. So sure, it seems unlikely there will be another recession, but what about the jobs?
When one reporter asked about why there hasn't been strong job growth all Bernanke could say is:
the pace of improvement is still quite slow and we are digging ourselves out of a very, very deep hole. We are still something like 7 million plus jobs below where we were before the crisis. So clearly, the fact that we are moving in the right direction even though that's encouraging doesn't mean that the labor market is in good shape. Obviously it's not, we are going to have to continue to watch and hope that we will get stronger, increasingly strong job creation going forward.
Now if the reporter had the chance to follow up, he could have pointed out the unemployment number is actually around 11 or 12 million people. But this was Bernanke's weakest point during the press conference. The person in charge of creating jobs in this country is "hoping" that the economy will pick up enough so more jobs can be created. Well, I feel more confidant, don't you?
The money the Federal Reserve decides to spend, or not spend, has an effect on all of us. It controls our purchasing power affecting small businesses and their ability to sell their products abroad, and individuals who are having to choose between buying food and health insurance. But now that Bernanke has made these statements, at the next press conference reporters can ask him (after he has spent $600 billion helping the banks recover) why the economy still hasn't picked up as much as he thought it would?
Bernanke did not just become Chairman on a whim. He was an economist at Princeton and his academic writings were very impressive. But even the best economists screw up. Bernanke was on the Board of Federal Reserve while there were signs the economy was declining. And even though the Fed was fully implemented in 1913, look up what happened on October 29th 1929. You can always find economists disagreeing with each other, like they did before and during the Great Depression. But now we can ask the person in charge what he/she thinks, which goes a long way to making sure the Fed is implementing the right policies, and will help businesses and families plan for their future.
Monday, April 18, 2011
The International Labor Organization (ILO) has released a report titled Sharing Innovative Experiences. The eighteenth edition of the book gives examples of social protection programs, similar to what Social Security is for the US, that have helped to improve a developing nation's economy. The focus is on eighteen countries that have implemented policies that created retirement plans, allowed children to go to school, and families to receive adequate health care. With these programs in place, thousands of people in developing countries were able to improve their living situation and lift themselves out of poverty.
As people who read this blog know, I am a fan of Amartya Sen's Capabilities Theory. In fact, I wrote an entire thesis on it. It has been proven time and time again that raising a country's Gross Domestic Product (GDP) does not mean the people living in that country will be able to live a better life. But the Capabilities Theory puts the emphasis back on the people and what they need to live. The ILO uses this theory in their research and promotes policies that will increase people's quality of life, rather than increase a companies profit. The emphasis on Social Protection Programs is a direct result of this theory, and as I will show here, not only helps people live a better life but grows the countries economy as well.
Those living in the developing world (and are lucky enough to have a job) often do not earn enough to pay for themselves and their family's medical needs. Not to mention the ability to save for retirement or pay for their children to go to school. The ILO looks at social protection programs as a way for governments to invest in their people (sound familiar?). But in the developing world, just 1 in 10 people have some sort of retirement pension, and even less (1 in 20) are enrolled in a health care plan. Social protection programs are needed so families can focus on their current situation, and in some countries have proven to reduce poverty in half. These policies make it easier for families to obtain food, an education, and health care, which not only make it easier for families to live their lives, but builds a stronger labor force for the future.
According to the ILO, over a billion people have been helped from Social Protection programs. It has been "one of the most impacting tools to change quality of life of the poor and vulnerable," according to Francisco Simplisio head of the Division for Program and Knowledge Management at the United Nations Development Program. In an interview I conducted upon publication of the new update, Simplicio explained, "that's the key portions of experience in collecting developing countries perspectives implementing it and making it possible for implementation. That's one of the innovations of this book. And then of course it makes the case it's possible, which is the second major step."
The first example in the book comes from Argentina where there is the Universal Child Allowance (AUH). In 2002, 60 percent of Argentina's children were living in households that were recognized as below the poverty line. This program covers children 0-18 years old where families are given allowances of $46.20 per month and must prove they are in school and registered for health care services. The program is divided by two subsystems called the contributory where all formal sector workers are registered in the system; and the non-contributory subsystem comprised of retirees.
Today, 85 percent of Argentina's children are covered by AUH. To make sure the money was not being wasted, parents must sign affidavits, and letters must be signed by teachers and doctors affirming the child has been attending school and receiving treatment. Books, which are considered legal documents, are also kept by the government. Since the allowance is distributed through bank accounts, if a large amount of money is taken out at once it would be suspicious and violators risk not receiving allowances in the future and the possible facing prosecution. Nine million children and over two million retirees receive these benefits. With families receiving these allowances, they no longer have to worry about arbitrary policies that can force them to lose their home or job, and now have more certainty going into the future.
But in order to pay for these programs a combination of private and public sector investment is needed. The Director of the ILO's Economic and Labor Market Analysis Moazam Mahmood told me, "the beginning of the report says demand issues are critical as well. So you need to generate the level of aggregate demand to generate employment." Greater employment leads to more revenue and enables governments to expand their programs and cover more people. But the state still needs to lay a foundation for companies to invest in their country. "But it also has to come to from the public sector" Mahmood said "and we note the depressing statistics in terms of the production of the role of the public sector and much needed infrastructure because the report also notes the shortage of infrastructure has the potential to reduce GDP growth 2 percent a quarter."
It is not expensive to implement these policies. Less than 2 percent of global GDP is needed to provide a basic set of social security benefits to the world's poor. With over a billion people living on $1.25 a day, there is, of course, starvation. But several countries have implemented social programs that that allow families to buy food. The ILO has calculated an investment of 4 percent of the worlds GDP can reduce the food poverty rate in low income countries by 40 percent.
By investing in their people countries have been able to invest in their future. With their basic necessities in place, individuals can focus on obtaining better skills to get a better job. They are also able to work harder because they are well educated, plus physically and emotionally fit. When this is the case, multinational corporations are more willing to invest in a country because it will be easier to make a profit. And they're right. The more education a population receives the more versatile they become for companies who are willing to pay them more.
I know, all this sounds simplistic, but there is vast amounts of evidence to show these policies work. Social Protection Programs are needed in all societies, and Sharing Innovative Experiences is meant to show developing countries a way to improve their economy while at the same time improving their citizens' quality of life. There are a lot of lessons we can learn from the recession; one is that the fabric of society is delicate and it is important to protect the people in it. These programs help do that, and need to be promoted throughout the developing world.
Sunday, April 10, 2011
Like all political junkies, I wake up early on Sunday's to watch the political talk shows to see what news, if any, is going to be made. This week consisted of the budget battle and the last minute deal that was reached on Friday. So I'm watching Meet The Press and This Week, and the consensus among the reporters was that because the Republicans pushed the Democrats around, and got the cuts they were asking for, they were the winners. But then I wondered: what else is new? While getting an agenda through Congress can sometimes equal a political victory, this policy victory won't equal a political victory for the GOP.
Collectively, Congress has always had low approval ratings. It doesn't matter what they do, people watch the debates on C-SPAN and see the overblown rhetoric used by politicians on the news, and guess what..they don't like it. It gets to a point where both parties are looking like they are trying to save face (which they are) and really aren't doing what they were elected to do, represent the people. The way the negotiations took place this week didn't give American's any more confidence in their government, and instead, showed both sides to be spoiled brats.
We still don't know what the particulars are of the $38 billion that was cut, but who cares?! All the Republicans cared about was appeasing the Tea Party and cried for more cuts after getting what they originally asked for. I'm sure when John Boehner met with Harry Reid and President Obama at the White House, it was pointed out to him that polls consistently showed the majority of Republicans wanted a compromise. But all we got was more rhetoric and statements that argued for more cuts because it will help the economy or because abortions are bad. Both arguments are the crutch Republicans turn to when they know they reached too far, and people are sick of it.
The Republican's also liked to say elections have consequences, which is true. If the Democrats kept the House last year none of this would have happened. A Continuing Resolution would have been passed to keep spending levels where they were and no one could have complained. It's been done many times before. Even though they got their sound bites out there, the GOP never came up with one policy solution to help end the situation. If the government shut down it would have been their fault because they are the ones complaining.
In the meantime, Democrats looked like they didn't even know what they stood for. Even though they still control the Senate and White House they weren't able to get a strong message out. The way Boehner was acting was a gift for them. When he says that Government is the problem, Democrats should have reminded him of TARP (which he was in favor of) and how the program has actually earned America money. It was probably just easier for him to support it while George W. Bush was going to have to sign it into law. While Democrats can't totally claim it was their idea, there is no reason they can't use it to argue against Boehner's assertion that government programs were hurting the economy.
I'm not going to go as far to say the Democrats won, but it's hard for me to believe the Republicans took the trophy. American's want to see their government work for them, and when they see both sides bickering over an issue that really isn't going to help anyone, it makes them feel they don't have the right people representing them. As both parties tried in the aftermath to position themselves as "winning" they need to realize at some point they are going to get booed off the stage.
Thursday, March 31, 2011
In a closed meeting to the General Assembly, Secretary-General Ban Ki-moon said “there is an urgent need for humanitarian access” in Libya. But as soon as the rebels started the fighting, Qadhafi’s forces have been on the eastern and western borders stopping humanitarian agencies from entering the country.
As the no fly zone has been enforced, fighting continued between the Libyan government and the rebels, an entire week passed until three UNHCR trucks were able to enter the country delivering 18.5 tons of pulses (seeds that contain a variety of nutrients), plus sleeping mats and blankets.
With 23 people on the ground, the World Food Program (WFP) has distributed almost 11 thousand metric tons of food within the country and the surrounding camps, but they have only been able to enter the eastern part of the country. Abeer Etefa, Senior Regional Public Information Officer for WFP, told me food has been brought to “7,000 internally displaced persons in Eastern Libya.” But with the ongoing conflict “we face challenges in access to some cities especially in the contested areas. We hope to be able to deploy more teams on the ground as soon as the security situation allows and a safe humanitarian corridor is established.”
As the fighting increased, replenishing the food in the country has been difficult. Abeer told me 95 percent of the shops have been closed, making it more difficult for people to meet their basic needs. As the conflict continues, more people will need to receive aid.
While the total operation is costing $39 million dollars, an additional $4 million is being used to build better communications systems for non-profits working in the country. For the next three months, WFP plans to feed 600,000 people in Libya, and an additional 280,000 and 180,000 to the people living in the camps.
Tuesday, March 22, 2011
President's have always justified using force in different ways, whether for humanitarian, economic, or to protect the country. But when the decision is made to use the military, there needs to be clear goals. If you are positive military action is necessary, it should be obvious what you want to get out of it. In Libya though, no one seems to know when the strikes will stop or what will be accomplished by them.
As a communist country, Libya has been a thorn in America's side for decades. The jabs have been over its nuclear weapons, and the times Qadhafi tried to take over other countries in Africa. But recently things were going well. Just a few years ago Qadhafi decided to let inspectors to look at his nuclear facilities and accepted responsibility for the
Lockerbie bombing. But then he started killing innocent protestors.
I can't help but remember what President Obama said during his speech when he accepted the Nobel Peace Prize. "To say that force may sometimes be necessary is not a call to cynicism -- it is a recognition of history; the imperfections of man and the limits of reason." With all the protests going on in the Middle East and North Africa, it was only a matter of time before it became violent, and in Libya's this case the military was needed.
While agreeing to use the military, what bothers me is that there does not seem to be an end in sight. General Ham, who is in charge of this operation, has said there are no plans to go after Qadhafi and its mission is to protect the civilians. But how do you protect civilians without attacking the person who is trying to kill them? At one of the daily briefings, the UN spokesman said they have not decided whether the rebels were going to be considered citizens or casualties of war, because, technically, this isn't a war.
One of the country's leading military experts, (and one of my former professors) Michael O' Hanlon, told me in an email that "I don't know where it ends but I don't favor a military operation to overthrow Qaddafi". He also pointed out that the mission has already gone beyond a no fly zone because Libya's tanks have been taken out. But even without tanks, the government forces are much better armed than the rebels fighting them.
It is also unclear how many people are actually fighting against the government. While next door in Egypt the military held a non-violent coup, there have only been a handful of military officers who sacrificed themselves and chose not to fight. But if Qaddafi is going to be forced from office, the majority of the Libyan people are going to have to sacrifice the most.
Qadhaffi has shown no signs of slowing down and has placed his troops on the country's borders where thousands of civilians are trying to escape. To make matters worse, UN workers are not able to get into the country where there are even more displaced people who need help.
There doesn't seem to be much middle ground anymore. At this moment, both sides seem to be waiting for the other to stop, and no one is putting on the breaks. That's why the coalition supporting this operation is going to have to decide whether or not to try and find Qadhaffi or pull out.
Tuesday, March 15, 2011
It's almost that time of year again, tax season! OK, maybe I'm exaggerating on how exciting this is. The US tax code is longer than War and Peace, but just like the classic book, almost no one can understand it, and almost no one today has read it. But someone has to read the code in order to figure out how much money people owe their government. If only there was a simpler way…
Debating tax policy is almost as bad as actually paying them, but here I go. The last time any serious tax reform occurred was during the Reagan administration. The Tax Reform Act of 1986 reduced individual and corporate taxes almost by half, and indexed those standards for inflation. The number of tax brackets were also reduced. But the Act also included the Alternative Minimum Tax (AMT) which only complicated the code more. The more complicated the code became, the more loopholes were there for people to take advantage of. While less money was coming in, the government was spending more, which increased the national debt. The code has become so complicated, and hard to enforce, only 47% of American's who file for federal taxes actually pay them.
President Obama has said he wants to reform the tax code to make it easier for Americans. But what's the best way to do this? There are a lot of ideas out there. Some say there should be a flat tax where everyone pays the same amount. But that's not progressive. It can also hurt those who do not have a lot of money, while people who earn more won't be paying their fair share. Another idea is to eliminate loopholes and certain credits. This could work, but doesn't go at the heart of the problem, which seems to be the way we calculate how much American's need to pay.
One idea that works for forty other countries (mostly in Europe) is the Value Added Tax (VAT). Instead of pushing a sales tax onto the consumer, items are taxed at a percentage as the product is put together. So if the VAT was 10% it would work like this:
- The manufacturer pays $1.00 for the raw materials, certifying it is not a final consumer.
- The manufacturer charges the retailer $1.20, checking that the retailer is not a consumer, leaving the same gross margin of $0.20.
- The retailer charges the consumer $1.50 + ($1.50 x 10%) = $1.65 and pays the government $0.15, leaving the gross margin of $0.30.
The government gets paid each step of the way, and it is clear how much everyone owes so it is easy to enforce. Overall this reduces the costs to the consumer because they don't have to pay so much at the end. The French implemented a VAT in 1954 and today it counts for half of the government's income.
But there are opponents. People argue implementing a VAT can cause large amounts of fraud such as false claims. There have been instances where the individual or business argues that they did not know they had to pay a tax on a certain item. Then of course there is the old fashion "hidden sale" where the consumer is charged something that is completely made up.
Despite those concerns, studies show that if a 5% VAT was implemented, and covered 80% of goods people consume, it could generate roughly $260 billion. The Virginia Tax Review estimates that a VAT of 25% could pay for health care reform, exempt millions of American families from income taxes and still raise the revenues necessary to cut into the budget deficit.
One of the reasons American's are less inclined to pay taxes now is because we became a individualistic society. When FDR was President, there was a "we are in this together" philosophy. But that has gone away. The book Bowling Alone explains it pretty well. But when you are paying taxes, you are paying for the freedoms that people in the Middle East and North Africa are fighting for. Whether you are rich or poor, everyone benefits one way or another, and those who don't pay their taxes are cheating their fellow citizens.
Just because something is European doesn't make it scary. Paying taxes is important. It goes to Veteran Hospitals, public parks, schools, and keeps our food and water clean. But paying for these services doesn't have to be a burden. Instituting a VAT could bring in more money for areas that all Americans use, and everyone could get a bigger bang for their buck.
Thursday, March 10, 2011
Should it be surprising that 62% of American's oppose the elimination of collective bargaining for unions? Without this tool, young children would still be working in factories, people in factories would not be paid as well, and today's health care costs would be much much higher on families. While most American's don't seem to be lost in the madness, I haven't seen one article or report trying to explain what the problem is.
Two weeks ago, Governor Scott Walker said on Meet The Press: "For us to balance the $3.6 billion deficit we have -- but not only now, but to ensure we can continue to do that in the future so our kids don't inherit these same dire consequences -- we've got to have assurances. And over the past two weeks, even after they made those promises, we've seen local union after local union rush to their school boards, their city councils, their technical school boards and rush through contracts in the past two weeks that had no contributions to the pension and no contribution to health care."
Besides the fact Wisconsin's budget office said the state would be fine, Walker is playing politics (and losing), while he tries to make it sound like unions have been the problem. But really, no one has been responsible. Unions will always ask for more money because it's their job. And it's the Governors job to negotiate those costs down. But I don't believe the system is the problem. As Walker points out: "Under Barack Obama, he presides over a federal government where most federal employees do not have collective bargaining for, for benefits, nor for pay." But federal workers have some of the best benefits and get paid more than private employees. Plus, if public unions are the only problem, why have private sector health costs almost doubled in the past ten years?
States are facing fiscal problems mainly because of pensions and benefits which can't be paid for. It is a problem that was seen coming (whether the financial crisis occurred or not) and no one did anything about it. The stimulus package allocated money for companies like IBM to develop programs that would allow doctors to share information on patients. This would allow them to compare and figure out which treatments work best, thus reducing costs. Plus, it saves money on paper work, trees, and you won't have to worry about not being able to read your doctors handwriting anymore. Obviously, this hasn't been implemented yet, but experts agree it would be a step in the right direction.
The vote taken by Wisconsin's legislature last night was a bad political and policy move. It won't solve the problem of rising costs, and it pins one person, one party, against another, which voters never like to see. Walker may think he's winning, but instead he's acting like a putz.
So now that you have my opinion, what's yours? How would you lower health care costs? Or do you think collective bargaining is a problem?
Tuesday, February 22, 2011
There are too many stories out there that talk about all the kids who get into Ivy League colleges. We hear about the private tutors, college counselor, and of course the great over achievers. But for the rest of us, we would rather live our lives.
Junior year of high school is the biggest pressure cooker out of all four years. Parents start making you think about college, the experts say the grades you receive are the most important, you're preparing to take the SAT's (plus whatever other standardized test there is that year) while trying to keep your grades up, and of course, you need to do extracurricular activities otherwise you won't stick out on any of the applications you submit. Reading about these issues can only make it worse for students, and their families, who worry about whether they are making the right moves.
But what most newspapers and magazines focus on doesn't actually coincide with reality. According to Research Fellow for education studies at American Enterprise Institute (AEI) Andrew Kelly, these are not the typical stories most students go through. Kelly said most perspective students look at public colleges and universities that are close to home and competitive. According to Kelly
"a lot of times the story about college choice and rankings and stuff, is they just focus so heavily on really high achieving students or helicopter parents who are really on their case about getting into college. And frankly, because of all that attention, sometimes it makes us pay not enough attention to the vast majority of students."
It's always if you don't get into the right pre-school, you won't get into the right kindergarten, then you won't get into the right elementary school which means you have no chance to get into the right middle school. So forget about the top high school that Harvard saves spots for, and before you know it, your life is over. But not really. The dramatized stories distort reality, and worse, means "reporters" aren't actually reporting.
These stories are only highlighted by college rankings such as Barron's and the US News and World Report. But before you take them seriously, consider this. These rankings only take into consideration how selective a school is, not the knowledge students are supposed to get when they graduate. That means they need to get as many people to apply to them as possible so they can also reject as many people as possible. Colleges and universities spend tens of thousands of dollars on private firms to tell them how to get more applicants. By knowing what type of college students are applying they can also expand to other states where students aren't all that far, and also students they would like at the college to expand diversity between states and races.
To make sure these perspective students apply, they make it as simple as possible. It is usually only one or two page application with a fancy title to make it seem more exclusive then it really is. Schools send these type of applications out to thousands of students a year. And of course, the application fee is waived. The student has nothing to lose, so why wouldn't they apply?
A study conducted by Kelly and his colleagues, called What Parents Don't Know about College Graduation Rates Can Hurt, found that when parents know the graduation rates of colleges their son or daughter is looking at, they are more likely to choose the one with the better rate. And if you were wondering, no, US News and World Report does not count graduation rates when assessing their schools. "Do I think the US News count for something, sure, but I think they mainly capture prestige and selectivity. So the problem is that it's not all that helpful necessarily for people who are not the most sort of academically gifted or people who are looking for a moderately selective institution." Kelly also said "And that's partly why we did this in sort of to say most people aren't splitting hairs in deciding where to go to school they are going where it is closest by and they can afford. So the question is if they had better information about those schools would that change their mind?" And it did.
So not only are all the stories written and all the assessments bogus, but they don't even tell people the information they need or want to know.
Junior year of high school is a stressful time for families. The fact is a lot does ride on the university or college you go to. But what it doesn't mean is you can't or won't learn anything less than what other students who go to "more exclusive" places. The system is so screwed up there is no reason to take any of it seriously or personally. Just visit the colleges, and pick the one the feels best for you. In the end, chances are, you're not going to be in the field your degree prepared you for, or it was too broad for you to do anything with it. What does matter is that you take the opportunity to discover what you like and what area you want to be in. Knowing what you want to do when you graduate will make you more prepared than most other graduates out there.
Monday, February 14, 2011
Friday morning I was completely off the grid. I had a appointment downtown, went on the subway to get back to my place so I wasn't checking my cell phone, Twitter, or Facebook. It was just the like the 90's but better because Destiny's Child wasn't playing in the background. When I got back to my apartment I checked to see what was going on in the world and saw a peaceful revolution coming to a peaceful end, and a new beginning for the people of Egypt. There are no words that can describe what was being shown on television, but the word that can't be used enough is incredible.
When the first round of protests started on January 25th, it seemed to catch many people by surprise. Either people at the CIA don't have Facebook or Twitter accounts, or their efforts were focused on something else. But with all the countries in the middle east, why even worry about Egypt? With Mubarak in charge the country had been stable for 30 years, a peace treaty with Israel that it wasn't breaking, and it's GDP was growing at a higher rate than any other nations in Africa, and 25th in the world. So, what do Egyptians have anything to worry about?
The reasons for Egypt's revolt are complex, there are so many directions a writer can take in describing the events that lead up to January 25th. But what they all have in common is the Egyptians wanted to be free and have a democratic government working for them. I have written in the past about standard economic models and how they are inadequate assessments. The reason: they don't assess what people need or care about. Economists should look at what happened in Egypt and realize if the measurements they use do not change, the whole practice is in danger of becoming obsolete.
Before the recession in 2008 Egypt's GDP grew 7.2%, in 2009 it still grew another 4.6% (when most economies shrunk), and in 2010 it contued upward at 5.3%. Part of the growth was drilled from the oil in the country's vast dessert in the west, but its leading industry is in textiles, which grew at 5.5% just last year. But despite this improvement in production, it did not lead to people's lives being improved. Unemployment was still at 9.7% and over 14 million people were living below the poverty line.
Nobel laureate Amartya Sen developed the Capabilities Theory, an alternative to standard economic models. Instead of focusing on GDP as the primary factor in development, he argues economists should focus on social programs such as education and health care, which enable people to live their lives to the fullest extent possible. An important part of this theory is strong democratic governance where people can make their grievances known and work to expand their freedom. The theory calls for redistributive policies to be enacted through social programs, similar to Social Security and Medicaid, which give people the resources and skills they need.
If economists are going to solve this problem, they have to understand what's important to Egyptians, and people living around the world. There have been tons of stories written about the importance of bread, and all the people who have gone hungry (and I make no apologies for saying mine is the best) because they are not able to afford it. What's also important to the Egyptians is their health. When Mubarak first came into power in the 1980's he expanded health care by building hospitals and providing beds across the country. But despite the fact all Egyptians are eligible for health insurance, the government was refusing to pay for it (sound familiar?). The Ministry of Health owes $270 million dollars to health care providers across the country. But because they don't have the money, hospitals have had to delay or refuse people treatment because they can't afford to take them in.
Much of the talk has been about the smart, young people, who organized the protests through Facebook and Twitter. While this is true, the facts don't speak well for Egypt's education system. In the past, Egypt did have a good education system. But in recent years, as the population grew, more students were attending schools but were not receiving a good education. These children became disenfranchised only to drop out. Most of them tried to get the few jobs that were available, or went to a life in crime. This can lead to future economic stagnation because young Egyptians won't know how, or have the will, to start or run a business. More schools needed to be built and more teachers needed to be hired, both of which would have reduced the unemployment rate and brought brighter prospects for Egypt's future and the people who started the revolution.
The Carnegie Endowment for International Peace released a study on how hard it was to start a business in Egypt. This only empowered the rich and leaving behind the rest. While money was being given to the growing industries like textiles, this only enabled the rich and the businesses they own. Money wasn't being spent on other areas where the majority of the people needed it. Overall investment by the government was only 18% of GDP. This is despite the fact Egypt's purchasing power grew by $25 billion each year between 2008-2010.
The Capabilities Theory allows economists to focus on the areas of an economy that is most important to people, and their welling being. Providing for areas such as education, health care, housing, and food, provides security and stability allowing people to live their lives and pursue the areas they choose. Egyptians wanted access to better education and health care, among other things, and because they were being ruled instead of governed, they had to take to the streets in order to attain these freedoms.
February 11th 2011 is a day that my generation will ask itself "where were you?" when Egyptians took their country back? Now that it is in their hands, Egyptians will be able to elect officials that can enact policies which will help those desperately in need, and build a better stronger country for future generations.