Tuesday, October 9, 2018

econlife - Six Facts We Need To Know About the U.S. Federal Debt by Elaine Schwartz



The U.S. Treasury tells us that the national debt was in the vicinity of $71 million in 1790. Used to fight the Revolutionary War, the money from abroad mostly came from Dutch and French bankers. Meanwhile, at home, people like you and me bought government securities.

We all expected a payback and Alexander Hamilton made it happen.

Still though, since then (except during 1835) the U.S. has been in debt. But not to worry. We’ve always paid it back and then borrowed some more.

Now, however we could have some problems. Here are the basics…
1. The deficit is different from the debt.
When federal expenditures exceed federal revenue during one year, we have a deficit. Then, to pay for that deficit, we borrow. All that we’ve borrowed to cover years of deficits minus what has been paid back is the nation’s debt.
2. We judge the size of the debt by comparing it to the GDP.
If you hear that someone owes $100,000, it’s tough to know whether the loan is large or small. It all depends on the borrower’s affluence. For someone who earns $500,000 a year, a $100,000 loan can be manageable. However, if you take home a much smaller wage, then borrowing $100,000 is a massive and risky obligation.

Similarly, we compare the U.S. debt to the size of the U.S. GDP (the dollar value of goods and services produced annually).

Below, you can see that like WW II, the current debt to GDP ratio is higher than 100%. Most say that the current ratio is not as worrisome as our increasing tendency to borrow more and more:

Gross_Federal_Debt_as_Percent_of_Gross_Domestic_Product___ALFRED___St__Louis_Fed
3. To fund the debt, the U.S. borrows money by selling securities.
We owe more than half of the debt to ourselves. The U.S. government lends to itself, for example, when the Social Security trust fund swaps its extra cash for bonds. In addition, individuals, businesses, state governments, local governments, pension funds–the list is long–buy U.S. Treasury securities.

The rest of the U.S. debt is held by foreign governments, businesses and citizens.
4. Foreign governments own 44% of the  U.S. debt.
In the list of countries that own the U.S. debt, China is at the top and Japan is next. China has the dollars to buy our securities from its trade surplus with us. (When we buy their goods, we pay with dollars.) So, if the trade surplus goes down, China might not be a handy way to finance our growing debt.

Ranging from China to the Cayman Islands, large and small nations are our top 10 lenders:

•_Major_foreign_holders_of_U_S__treasury_securities_2018___Statistic
5. Interest payments on the debt are a category of federal spending (as are Medicare and Social Security, defense, highways….you get the picture.)
With federal outlays on the rise and interest rates relatively low, interest payments have been a smaller part of the federal budget.

Although it is not up-to-date, the following graph conveys an accurate message about interest payments:

5_facts_about_the_national_debt___Pew_Research_Center
6. The debt ceiling was supposed to control the growth of the debt.
We have a debt ceiling because of a 1917 law. At the time, the Congress decided it was losing control of the volume of borrowing. To regain power over the federal purse and fiscal policy, they said the Congress would decide the maximum amount the U.S. can borrow. And, from that day onward, whenever borrowing touched its statutory limit,  they voted to raise the debt ceiling.

But not quite.

Right now, we have no debt ceiling. Suspended during February 2018 until March 1, 2019, there is no limit to how much the U.S. can borrow.

Our Bottom Line: The Future


With tax cuts diminishing government revenue and more spending from entitlement programs like Social Security and Medicare, there is pressure for the debt to grow.

My sources and more: For starters, this CBO report, and a WSJ summary provide insight about the national debt. Then, for the global perspective, Bloomberg had a Q&A about China and Japan. However, if you go to just one article, do read about the history of the debt until 2012 in The Atlantic.


Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.


Thursday, October 4, 2018

econlife - Pink It, Shrink It, and Gender Design Discrimination by Elaine Schwartz


For years, women have needed sweaters, jackets, even snuggies at work. The reason takes us to some solid science…for men.

Our story starts with a 154 pound man in a business suit. Decades ago, the American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE) needed guidelines for indoor climate control. To get some answers, they quantified the thermal protection from a man’s clothing (the clo scale) and a man’s activity (his MET).

What they wound up with is great for most men. But not for women. And not for a political candidate. I added the arrow:

Can_an_Office_Temperature_Be_‘Sexist’__Women__and_Science__Say_So_-_The_New_York_Times

Because women like and need it warmer–75 degrees rather than the male 70 degrees–much less cooling is necessary in commercial buildings.

This thermal comfort gender discrimination is only the beginning…


Design Discrimination


Outdoor Gear

According to the “Shrunk and Punk’d” podcast from New Hampshire Public Radio, women who want serious gear head for the men’s section in most stores.

When you look in the men’s department for backpacks, the usual choice is dark gray or black. Described as sleek and rather urban, men’s backpacks have metal loops and a generous supply of pockets. The women’s version is typically smaller and purple, pink, or light gray. It has fewer pockets, loops that are less durably made, and even a totally useless fringe. It is supposed to be “pretty.”

Seatbelts

For seatbelts also, the men have been favored. A 2011 study concluded that women wearing seatbelts had a 71% higher chance of moderate injury than a man in a seatbelt. One possible reason? According to CBS News, seatbelts are designed for the average 40-year old man.

We should add though that the National Highway Administration started using female crash dummies in 2003 and GM, way before that, during the 1980s. However, the 2016 safety data still indicate the male is safer because of seatbelt design.


Our Bottom Line: Gender Design Discrimination


While there is gender design discrimination, we can end on a hopeful note.

Citing thermal sexism, New York’s Cynthia Nixon requested that a 76-degree room temperature for her debate with Governor Andrew Cuomo. Wired Magazine tells us that a female VP for merchandising was one reason that that REI is designing equipment and clothing for many body shapes and sizes. As for seatbelts, I can cite one female Swedish researcher at the Swedish National Road and Transport Institute. In 2016, she was working (2016) with Volvo on a female crash dummy.

You can see where I am going.

Breaking through glass ceilings, women have entered the rooms where men have been making political, design, and car safety decisions.

My sources and more: Thanks to Outside/In for making one of my walks a delight by telling me about “Shrunk and Punk’d.” Hearing that, I went to the Wired, the NY Times, this study, and this Medium article. Finally, for more on seatbelts, CBS and Driving had some facts while here is Cynthia Nixon’s 76 degree protest.

Our featured image is a Nest thermostat.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

Tuesday, September 25, 2018

econlife - The Impact of the Starbucks Effect by Elaine Schwartz


Strolling around 110th street in New York’s Harlem, you see new restaurants and small cafes that sell gourmet coffee.

It could be called the Starbucks effect.

The Starbucks Effect


Zillow

A 2015 study from Zillow tells us that home prices increase after Starbucks arrives in a neighborhood. Yes, they say that “properties near Starbucks tend to start out more expensive.” However, they claim that the Starbucks connection stands out.

While homes near a Starbucks sell, on average, for $137,000, those that are distant from it average $102,000. They also found that over 17 years, the Starbucks correlation was reflected by a 96% appreciation. Homes not near went up by 65%.

The clincher though is the Dunkin’ Donuts comparison. You can see that your wealth went up by less when a Dunkin’ Donuts was nearby:



Here’s the data:



Asked which came first, the Zillow people concluded that Starbucks fueled the housing price increases. At Starbucks, they just said, sure…we understand real estate. It’s art and science and we get both.

Some Harvard professors do not entirely agree.

Harvard

In a recent paper, three economists from Harvard used Yelp to compare real time local business activity and gentrification. The Starbucks part of their study focused on the number of cafes. They wanted to see if housing prices rose when there were more Starbucks. Sidestepping causality, they were looking for a leading indicator.

And they found one.

With each new Starbucks, the home prices in a zip code rose by .5%. However, they suggest that Starbuck selects zip codes with an “upswing.” Also, Starbucks is one of many new establishments in the neighborhood. As the authors point out, we simply have communities where more people like expensive coffee. They also want more restaurants, bars, cafes, and grocery stores.


Our Bottom Line: Consumption Expenditures


Whether looking at Starbucks or the other businesses that accompany higher housing prices, we can hypothesize that GDP spending rises. As a dollar measure of what we produce, the totals are mostly what we, businesses, and governments spend. So, a new Starbucks can mean more consumer spending. Meanwhile, the new Starbucks and new housing are in the businesses category because they are defined as investments.

I guess we could conclude that the Starbucks effect is a GDP effect.

My sources and more: In two slightly different ways, Starbucks is linked to rising home prices. Quartz had an excerpt of a Zillow study in 2015. Much more auspiciously sourced, this NBER paper from Harvard Business School is dated August 2018.
Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

Thursday, September 20, 2018

econlife - Why Driving is Safer in Sweden by Elaine Schwartz


An economist might say that the optimal number of traffic fatalities depends on the cost of preventing them. Sweden disagrees.

Compared to most other countries, Sweden’s road safety is tops:

Sweden_May_Hold_the_Secret_to_Reducing_Traffic_Deaths_-_WSJ

In the European Union, Sweden and Norway have the low numbers while Bulgaria and Romania (dark blue) have the most road deaths per million:

https___ec_europa_eu_transport_road_safety_sites_roadsafety_files_pdf_statistics_dacota_bfs2017_main_figures_pdf


The Swedish Safety Solution


Through a “Vision Zero” strategy, Sweden is aiming for no traffic fatalities. So far, they’ve been able to almost halve the number of road-related deaths from 541 to 270 between 1996 and 2017. Why? Because Swedish traffic authorities focused on traffic laws and infrastructure instead of the drivers, walkers, and bikers.

Many of Sweden’s roads have new safety features. The wider arteries that installed guard rails between oncoming traffic diminished deaths by 80%. Their use of the 2+1 road boosted safety by having one direction-switching lane that permits passing. In addition, Sweden built more roundabouts and rotaries because they reduce how fast people drive and eliminate the hazard of left turn accidents.

But it’s about more than the flow of traffic. In places with bikers and other unprotected road users, top speed limits are 30 kilometers an hour (18.6 mph). At so low a speed, people struck by vehicles have less than a 10% chance of dying. In 50 kilometer zones, the percent rises to more than 80. On long stretches of country roads safety cameras are supposed to “nudge” people to drive more slowly rather than nab speeders.

Smiling, I can say this is what Sweden’s traffic planners avoid:

xkcd__Highway_Engineer_Pranks


Our Bottom Line: The Cost of Road Safety


Below you can see that the Americas have 15.9 road-related fatalities per 100,000 population. In Africa that number soars to 26.6 per 100,000.

www_who_int_violence_injury_prevention_road_safety_status_2015_magnitude_A4_web_pdf


As economists we have a mindset that asks the cost of eliminating those deaths. Thinking at the margin (as we might also for diminishing air pollution), we can compare two numbers. We can ask the extra cost and the extra benefit for every life saved. And, when cost exceeds benefit, our life-saving initiative stops.

Sweden disagrees.

My sources and more: In WSJ, in Quartz, and at City Lab,  Sweden was the perfect traffic safety starting point. A much more recent WEF discussion confirms what those 2014 articles say.

Our featured image is a roundabout visualization of a Texas I-35 improvement plan.


Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.

Wednesday, September 19, 2018

Educational Travel by Mike Siekkinen


I have written in the past about the benefits of educational travel and continue to push this approach for many reasons. For many teachers, the thought of organizing a trip with students sounds scary. There is a certain amount of risk when taking students outside the safety of the school.

To be honest, there have been years, based on the students I had, that I did not do any field trips. There were a few years where I wouldn’t have taken my students across the street, much less to an educational destination due to student behaviors. So I understand why some teachers shy away from doing “trips.”

At the same time, showing students real world applications, actually touching history and visiting historic places, can be magical for students.

For those new to educational travel, I would start small. Perhaps a single destination for a shortened period of time. A museum or public park program is a good start. To be successful you need to plan, and then overplan. Look at how many students you are taking and consider their age. Obviously the younger the student, the more supervision. You may need parent volunteers to help on the trip.

Also consider cost. Where will the funds come from? Will you need to fundraise and if so, what is your school’s policy concerning fundraising? You will have to arrange transportation to and from the event. Also consider contingency plans if this is an outdoor event. Will you be gone during lunch and if so, how and where will students be fed? Student medications will need to be arranged and brought on the trip as well, so coordinate with your school nurse. Additionally, parent permissions for these events need to be received.

This may seem like a lot to do and can be daunting for someone the first time it is done. I still see this as a rewarding experience for students and well worth the extra work to set up. Give it a try!

Have you taken any students on an extended trip? Share your stories and/or photos with us!




mike_s_blogDr. Mike Siekkinen, a retired U.S. Navy submariner, became a teacher as a second career. He teaches history at St Marys Middle School as well as Adult and Career Education at Valdosta State in Georgia.

Tuesday, September 11, 2018

econlife - The Best Reasons For Later School Start Times by Elaine Schwartz


Last September, a bill flopped in the California state legislature. Advocating an 8:30 (or later) start time at schools, it fell far short of the votes it needed. Currently they are reconsidering.

I wonder if those lawmakers know they are really talking about the GDP.


The Wake up Call


In California. the average school start time is 8:07. By moving it 23 minutes later, we could diminish tardiness and car accidents. Researchers hypothesize also that graduation rates would rise.

Studies show that teens would go to bed at the same time but sleep later if school began after 8:30. They would also get better quality sleep during the morning hours. In dollars, a Rand study reports that after the initial cost, the benefit to California alone would be $10 billion ($83 billion for the entire U.S.) if you just project fewer auto accidents (20% of teen accidents from sleepiness) and higher graduation rates. From there, they say, students then move onward to better jobs and more of an economic contribution.

The predicted gains in state domestic product could be considerable:

Later_school_start_times_in_the_U_S___An_economic_analysis-1

As did I, you might suspect that some of this reflects a statistical leap. But even when we consider the high cost of compressed bus schedules and lighting for later activities, the basics make sense.


Our Bottom Line: Human Capital


Really, we are just talking about human capital. As a resource that fuels economic growthhuman capital includes our education, entrepreneurial spirit, and health. With U.S. economic growth at a 2.2% rate for Q1 (2018) and 4.1% for Q2 (2018), maybe we could sustain the increase by giving adolescents a bit more sleep?

And finally, I could not resist this xkcd cartoon. After all, the impact of sleep deprivation extends far beyond teens.

xkcd__Can_t_Sleep

My sources and more: This LA Times article tells about the California schools sleep bill rejection while this site has the update. But for a report chock full of detail, do look at the original paper from Rand or this summary.

Please note that I repeated several phrases from a past econlife post on the same topic.

Ideal for the classroom, econlife.com reflects Elaine Schwartz’s work as a teacher and a writer. As a teacher at the Kent Place School in Summit, NJ, she’s been an Endowed Chair in Economics and chaired the history department. She’s developed curricula, was a featured teacher in the Annenberg/CPB video project “The Economics Classroom,” and has written several books including Econ 101 ½ (Avon Books/Harper Collins). You can get econlife on a daily basis! Head to econlife.