Political Calculations
Unexpectedly Intriguing!
29 April 2011

You may have to stand back from your monitor screen to fully appreciate the layout design of the information, but Stanley Kay's information-rich data visualization wonderfully communicates the relative size of each of the world's nation's carbon emissions:

Global Carbon Footprint

Here's Stanford Kay's description of his infographic:

Originally conceived as one of my Myth Buster information graphics for Newsweek's International Edition, a piece on global carbon emissions showing both national and per capita data has found a home in the April issue of the Atlantic Monthly. The image of a footprint is composed of circles sized relative to the carbon emissions of each nation and color coded according to region. In the final version of this information graphic there will be a second footprint of per capita emissions by nations. That will be a very different picture. The leader in per capita emissions is Gibraltar followed by the Virgin Islands. The U.S. drops down to number twelve and China falls way down the list due to its large population. It appears that countries that don't grow or produce much have the largest footprint because they have to import almost everything they need.

HT: Core77.


Kay, Stanford. Information Graphics. Global Carbon Emissions. Accessed 28 April 2011.

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28 April 2011
Gaussian Bell-Curve Probability Distribution

Now that we've refined our analysis of the major trends in U.S. layoff activity since January 2006, how can we further refine our analysis to predict what the number of seasonally-adjusted initial unemployment insurance claims will be in future weeks?

After all, our previous analysis suggested that the number of new unemployment claims for the week ending 23 April 2011, which the BLS will be releasing today, will most likely be somewhere between a low value of 360,540 and a high value of 409,963. With a difference of 49,423 between these two figures, which is the range defined by the current trend's plus-and-minus one standard deviation boundaries from the mean trend line, that's a really big gap into which the actual figure might likely fall. That's also assuming the current trend continues, which is itself a whole different matter.

So how can we narrow the gap and make a more precise forecast?

It occurred to us that we could apply residual analysis, which considers the difference between the actual data and the mean trend line. Here, if we correctly constructed our primary model describing the major trends, the remaining differences between the actual data and the mean trend line should be able to be described with a simple normal bell-curve type distribution.

The advantage here is that when we're working with rising or falling mean trends over time, the standard deviation of the residuals should be lower than the standard deviation of the trend data, because we've eliminated the effect of the changing value of the mean trend over time. That then allows us to narrow the likely range in which we can expect future data points to fall.

We've illustrated the results of our residual analysis in the chart below. We'll note that the standard deviation of the original data for the current trend is 24,711, while the standard deviation of the residual data for the current trend is 13,851, and the overall effect is to narrow the boundaries within which we expect the data within the trend to fall. This same dynamic applies to the other rising or falling linear trends shown on our chart, which you can compare to our previous analysis.

Seasonally-Adjusted Initial Unemployment Insurance Claims Residuals - 7 January 2006 - 16 April 2011

For the week ending 23 April 2011, the table below gives the following likelihoods of being within the given values:

Forecast New Unemployment Claims for Week Ending 23 April 2011
Probability of Being in Range Range Span
68.2% 371,370 - 398,833 27,164
95.4% 358,088 - 412,415 54,327
99.7% 344,506 - 425,997 81,491

Using the similar one-standard-deviation boundaries that we used in our previous analysis, we would anticipate that there is a 68.2% probability that the number of new unemployment claim filings for the week of 23 April 2011 will fall between 348,964 and 376,126. That possible range is just over half as large as our original forecast range of 360,540 to 409,963.

Now, all we have to do is wait to see where the actual number falls!

Update: The advance data for the week ending 23 April 2011 has been released - the seasonally-adjusted number of initial unemployment insurance claim filings was 429,000. If this data is not an outlier, it marks the potential beginning of a new trend as the probability that a value falling above 425,997 in this week was just 0.15% for our residual analysis.

If sustained, we would not consider such a new trend to be a positive development, as it would mark the end of a period of improvement in U.S. layoff activity.

However, because this week's advance value is less than 436,680, which marks the uppermost band of probable values for our primary trend analysis, we cannot yet exclude the possibility that the current falling trend is continuing, although with greater volatility than we've seen prior to this point in time. We'll know within the next several weeks which situation applies.


27 April 2011

Back on 3 February 2011, a number of Republican party members in the U.S. Senate introduced Senate Joint Resolution 5, which proposes to amend the U.S. Constitution to require the U.S. Congress to balance the annual budget of the U.S. federal government. The resolution has since been signed on to by all the Republican members of the U.S. Senate.

It's a good sentiment, and it has some points to recommend it, however it's got some real world problems.

Here's the text of the proposed amendment, along with our comments:

Section 1. Total outlays for any fiscal year shall not exceed total receipts for that fiscal year.

That really sounds good, doesn't it? In theory, that's all the U.S. Congress would ever need to do to balance the U.S. government's budget. But as Yogi Berra observed, "In theory, there is no difference between theory and practice. But, in practice, there is."

Section 2. Total outlays shall not exceed 18 percent of the gross domestic product of the United States for the calendar year ending prior to the beginning of such fiscal year.

We like the 18% of GDP figure - the long term average of total federal receipts since 1946 is 17.8% of GDP, so this figure is certainly in the right ballpark. And even though the amount of the federal government's total receipts varies annually with economic booms and recessions (the standard deviation of total receipts since 1946 is 1.2% of GDP), the combination of positive and negative deviations from this average amount on account of this variation would largely balance out over time.

The big problem though, as identified by Bruce Bartlett, is that there isn't a standard legal definition of Gross Domestic Product. Although not insurmountable, there are a lot of games that politicians and bureaucrats could play with the vagueness inherent in the law with respect to GDP to make the requirement pretty meaningless.

Another problem with this section of the proposed amendment is that it keeps the U.S. Congress from knowing what GDP of the previous calendar year is until the end of March of the next year, thanks to the Bureau of Economic Analysis' revision process. That's a long time to go without knowing how much spending will be allowed under the amendment's restrictions.

Section 3. The Congress may provide for suspension of the limitations imposed by section 1 or 2 of this article for any fiscal year for which two-thirds of the whole number of each House shall provide, by a roll call vote, for a specific excess of outlays over receipts or over 18 percent of the gross domestic product of the United States for the calendar year ending prior to the beginning of such fiscal year.

This section of the proposed amendment would allow the U.S. Congress to override the first two sections with a two-thirds vote, allowing the federal government to deliberately run a deficit if enough elected politicians sign onto it. It's reasonable, since there may be situations in which the U.S. Congress may overwhelming decide to spend far more money , but has the same "GDP" vagueness of meaning problem we noted earlier.

Section 4. Any bill to levy a new tax or increase the rate of any tax shall not become law unless approved by two-thirds of the whole number of each House of Congress by a roll call vote.

This section of the proposed amendment really isn't required to produce a balanced budget. Nice idea though, although it obviously wouldn't cover so-called fees or "spending reductions in the tax code," or other slippery terminology that politicians and bureaucrats might adopt to get around the requirements of having a two-thirds vote whenever they really would rather not.

Section 5. The limit on the debt of the United States held by the public shall not be increased, unless two-thirds of the whole number of each House of Congress shall provide for such an increase by a roll call vote.

This is another section that sounds good in theory, but not so much in practice. It applies only to the portion of the U.S. national debt that is "held by the public", which is significantly less than the "public debt outstanding", which would cover the whole ball of wax. We're not fans of escape valves for politicians and bureaucrats, which they could easily get around by playing with the "intragovernmental holdings" portion of the national debt, where the government hides how much it's really borrowing by making it look like it's only borrowing money from itself.

Section 6. Any Member of Congress shall have standing and a cause of action to seek judicial enforcement of this article, when authorized to do so by a petition signed by one-third of the Members of either House of Congress. No court of the United States or of any State shall order any increase in revenue to enforce this article.

This section provides the teeth for enforcing the amendment's requirements, while also preventing judicially-ordered tax increases as a potential remedy should such a case be brought to court.

Section 7. The Congress shall have the power to enforce this article by appropriate legislation.

This section is pretty "boilerplate" in its nature, as it provides for the U.S. Congress to develop and provide for whatever mechanisms it chooses to enforce the proposed amendment.

Section 8. Total receipts shall include all receipts of the United States except those derived from borrowing. Total outlays shall include all outlays of the United States except those for repayment of debt principal.

This section provides the definition for how the U.S. Congress intends the words "total receipts" and "total outlays" will be interpreted by U.S. courts. Note that these definitions would allow "total outlays" to exceed 18% of GDP, so long as the portion that would exceed that threshold consists of the principal portion of the nation's debt payments.

Section 9. This article shall become effective beginning with the second fiscal year commencing after its ratification by the legislatures of three-fourths of the several States.

This final section is the constitutional boilerplate for the timing of when the amendment would officially take effect.

Now, here's how we might rewrite the proposed amendment to be more practical and to the point:

Section 1. Total outlays for any fiscal year shall not exceed one hundred five percent of the total receipts for the previous fiscal year.

Section 2. The Congress may provide for suspension of the limitations imposed by section 1 of this article for any fiscal year for which two-thirds of the whole number of each House shall provide, by a roll call vote, for a specific excess of total outlays over one hundred five percent of the total receipts for the previous fiscal year.

Section 3. The limit on the public debt outstanding of the United States shall not be increased, unless two-thirds of the whole number of each House of Congress shall provide for such an increase by a roll call vote.

Section 4. Any Member of Congress shall have standing and a cause of action to seek judicial enforcement of this article, when authorized to do so by a petition signed by one-third of the Members of either House of Congress. No court of the United States or of any State shall order any increase in revenue to enforce this article.

Section 5. The Congress shall have the power to enforce this article by appropriate legislation.

Section 6. Total receipts shall include all receipts of the United States except those derived from borrowing. Total outlays shall include all outlays of the United States except those for repayment of debt principal.

Section 7. This article shall become effective beginning with the second fiscal year commencing after its ratification by the legislatures of three-fourths of the several States.

Note that we locked the amount of total outlays to the previous year's tax receipts in our version of a balanced budget amendment. This provides an easy point of reference that already has a legal definition provided for in the body of the amendment itself. We selected 105% to account for the typical historic economic growth and inflation that would affect the potential total receipts figure for the fiscal year for which the U.S. Congress would be creating a budget, although the amendment writers could select a different figure to use in a final version of this proposed amendment.

We'll observe in closing that they could just as easily select 100% of the previous year's total receipts and not have to worry much about hitting any national debt reduction goals they might set.

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26 April 2011

U.S. President Barack Obama displayed his talent for Newspeak oratory when announcing his second proposed budget for the United States federal government's 2012 fiscal year on 18 April 2011.

Last week, President Barack Obama' proposal on long-term deficits demands spending cuts and tax increases in 2014, if the federal government does not reach its debt-cutting targets.

"If, by 2014, our debt is not projected to fall as a share of the economy -- if we haven't hit our targets, if Congress has failed to act -- then my plan will require us to come together and make up the additional savings with more spending cuts and more spending reductions in the tax code," he said.

So, what exactly does President Obama mean when he calls for "spending reductions in the tax code"?

To get straight to the bottom line, what he proposes to do is to significantly increase the federal income taxes that productive Americans are required to pay without having to go to the trouble of increasing income tax rates.

Instead, the President is seeking to hike federal income taxes by reducing the amount of deductions and tax credits that honest Americans can claim on their tax returns. But because he doesn't want to appear to be raising federal income taxes, he's using some really deceptive language.

To understand why President Obama would seem to be so anxious to do this, consider the following chart, in which we've calculated the aggregate distribution of income in the United States by personal annual income for 2009. We've also estimated how much of this aggregate income is actually subjected to federal income taxes, where the taxpayer pays out money to the federal government, which we've shown in the shaded red region:

Total Aggregate Income Within Each $100 Increment of Personal Annual Income in the U.S. for 2009

Theoretically, all the area under the blue total aggregate income curve is subject to federal income taxes. In practice, deductions and tax credits exempt large portions of low-to-middle income earners from the burden of paying federal income taxes. The Tax Policy Center estimates that 47% of all income earners in 2009 either paid no federal income taxes or received back more from the federal government than what they would have had to pay, if not for the deductions and tax credits they could legitimately claim.

You can see how twisted the President's ambition to increase federal income taxes is if you consider that all of those deductions and tax credits are related to things that the federal government wants to encourage among Americans. Things like home ownership (via the mortgage interest deduction), higher education (through education tax credits) and having children (unsurprisingly, the child tax credit).

Before we close, please consider one last thing. Much of the President's rhetoric focuses on getting more from people at the highest end of the income spectrum. As you can see in our chart above, these are the people who already have the least amount of avoidance in escaping having to pay federal income taxes, which we see in the minimal white space above these income levels. The biggest potential gains for the federal government's tax collections are to be had by going after the where the amount of white space in the chart is the greatest.

Where does your personal income fall on that scale?

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25 April 2011
Western Electric Rules for Detecting Breaks in Established Trends Using Statistical Control Charts

We've been in the midst of a data conversion project behind the scenes here at Political Calculations, in which we've been upgrading our previously generated analyses that were maintained in Microsoft Excel's 2003 format to the newer 2010 format. As part of that project, we have also been automating various aspects of our analytical techniques, so we don't have to work as hard to divine what we can from the data we read.

Today, we're showing off the first stage of what we've done with weekly U.S. seasonally-adjusted initial unemployment insurance claim filings, where we've previously applied statistical control chart-type analysis to identify major trends and turning points in U.S. layoff activity.

Here, we've automated the "red flags" given by Western Electric's four major rules for detecting when an established trend might be breaking down, which in turn, allows us to more precisely track changes in trends over time.

As a result, we've refined our previous presentation of the seasonally-adjusted major trends in U.S. layoff activity, which we've presented in the chart below, where we've arbitrarily selected the first weekly new unemployment claims report of 2006 as our starting point.

Seasonally-Adjusted Initial Unemployment Insurance Claims, 7 January 2006 - 3 March 2011

The table below lists the corresponding dates that apply to each identified trend, as well as the likely trigger that caused the shift initiating the trend. Here, we identify news events that could cause employers to revise their existing outlook for their employee retention decisions that occurred in the 2-3 weeks prior to the shift in trend taking hold.

This 2-3 week period of time is consistent with the practice of employers reacting to a change in their business outlook with their next payroll cycle, without altering their current payroll cycle. In the United States, since most employees are paid on a weekly or biweekly basis, that translates to our two-to-three week long window of time for a such a reaction to an outlook-changing event to be reflected in the government's official data.

Timing and Events of Major Shifts in Layoffs of U.S. Employees
Period Starting Date Ending Date Likely Event(s) Triggering New Trend (Occurs 2 to 3 Weeks Prior to New Trend Taking Effect)
A 7 January 2006 22 April 2006 This period of time marks a short term event in which layoff activity briefly dipped as the U.S. housing bubble reached its peak. Builders kept their employees busy as they raced to "beat the clock" to capitalize on high housing demand and prices.
B 29 April 2006 17 November 2007 The calm before the storm. U.S. layoff activity is remarkably stable as solid economic growth is recorded during this period, even though the housing and credit bubbles have begun their deflation phase.
C 24 November 2007 26 July 2008 Federal Reserve acts to slash interest rates for the first time in 4 1/2 years as it begins to respond to the growing housing and credit crisis, which coincides with a spike in the TED spread. Negative change in future outlook for economy leads U.S. businesses to begin increasing the rate of layoffs on a small scale, as the beginning of a recession looms in the month ahead.
D 2 August 2008 21 March 2009 Oil prices spike toward inflation-adjusted all-time highs (over $140 per barrel in 2008 U.S. dollars.) Negative change in future outlook for economy leads businesses to sharply accelerate the rate of employee layoffs.
E 28 March 2009 7 November 2009 Stock market bottoms as future outlook for U.S. economy improves, as rate at which the U.S. economic situation is worsening stops increasing and begins to decelerate instead. U.S. businesses react to the positive change in their outlook by significantly slowing the pace of their layoffs, as the Chinese government announced how it would spend its massive economic stimulus effort, which stood to directly benefit U.S.-based exporters of capital goods and raw materials. By contrast, the U.S. stimulus effort that passed into law over a week earlier had no impact upon U.S. business employee retention decisions, as the measure was perceived to be excessively wasteful in generating new and sustainable economic activity.
F 14 November 2009 11 September 2010 Introduction of HR 3962 (Affordable Health Care for America Act) derails improving picture for employees of U.S. businesses, as the measure (and corresponding legislation introduced in the U.S. Senate) is likely to increase the costs to businesses of retaining employees in the future. Employers react to the negative change in their business outlook by slowing the rate of improvement in layoff activity.
G 18 September 2010 Present Possible multiple causes. Political polling indicates Republican party could reasonably win both the U.S. House and Senate, preventing the Democratic party from being able to continue cramming unpopular and economically destructive legislation into law, bringing relief to distressed U.S. businesses. Fed Chairman Ben Bernanke announces Federal Reserve will act if economy worsens, potentially restoring some employer confidence. The White House announces there will be no big new stimulus plan, eliminating the possibility that more wasteful economic activity directed by the federal government would continue to crowd out the economic activity of U.S. businesses.

We've also projected the current trend in U.S. layoff activity in our chart through the end of June 2011. The region between the light purple lines indicating the plus-or-minus one standard deviation from the mean trend line is the most likely region in which the data will fall going forward through that time, absent a break in the current trend.

If the current trend does hold, we can expect new seasonally-adjusted unemployment insurance claim filings to fall in the range between 360,540 and 409,963 for the week of 23 April 2011, the limits of which would then steadily fall by about 2,270 filings each week until reaching a range between 337,835 and 387,257 by 2 July 2011.

Those ranges seem to be awfully wide, but we do have another trick up our sleeve for narrowing down the likely range into which new unemployment insurance claims will fall, which we'll share soon.

Image Credit: MiC Quality

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22 April 2011

Can a nation become a banana republic if it grows no bananas?

George at Washington's Blog considers that very question:

Experts on third world banana republics from the IMF and the Federal Reserve have said the U.S. has become a third world banana republic (and see this and this).

Are they right?

Well, let's look at Wikipedia's description of the four factors which make a country a banana republic.

Summarizing George's presentation, the four factors that indicate whether a nation has become a banana republic are:

  1. Profits Privatized and Debts Socialized
  2. Devalued Paper Currency
  3. Politicians Use Time in Office to Maximize Their Own Gains
  4. Corruption Remains Unchecked, Politicians Are Only for Show

Let's start by looking just at what the International Monetary Fund is seeing in considering the first item of this checklist, to see if it's worth continuing the analysis. Here, the IMF released a report in April 2011, Durable Financial Stability: Getting There from Here; Global Financial Stability Report. Here's Table 1.1 from the report, which shows the indebtedness of several major advanced world economies:

IMF: Table 1.1 Indebtedness and Leverage in Selected Advanced Economies

The top row of the chart shows the percentage of each nation's government gross debt for 2011 as a percentage of its 2010 GDP. Looking at just the United States, the country's gross government debt in 2008 was 69.8% of its GDP, which has risen for 2011 to be equal to 100% of its GDP, putting it into the IMF's red zone. We should note that this is "socialized" debt, or rather, debt whose burden for repaying has been spread over all of the nation's society.

Next, scan down to the row for "Bank leverage". Here, bank leverage refers to the banks' asset to equity ratio, which for a bank, indicates the extent of the financial risk to which it is exposed. A high ratio, which the IMF sets at 25 to be in its red zone, indicates that the nation's banks are vulnerable to financial shocks, which puts the banks themselves at risk of failure.

In 2008, the U.S. bank leverage ratio was over the red zone line of 25 (see Chart 1.18 here). Today, the IMF reports the U.S. bank leverage ratio is 8, which you can see directly in the chart above.

The dramatic swings in these figures is where the banks exposure to the risk of losses has been transferred to U.S. taxpayers, which occurred in the series of bailouts that began in 2008 and continue through this day. The banks are now in the profitable green zone, while their losses and debts have been fully socialized, in that they've been transferred to U.S. taxpayers.

Corruption - Source: Michigan.gov

We must therefore conclude that the U.S. has indeed crossed the first line toward becoming a banana republic. It's almost a classic case of crony capitalism at work, which is currently continuing to corrupt the character and condition of the country's economy.

We should recognize that the U.S. is clearly not alone in this situation. If we look at the nations that are in the "green zone" on the bank leverage line and that are in the red zone in the top line for government gross debt, what we are seeing are the nations whose banks were successful in their attempts to shift their exposure to risk and losses to their governments, while they have been made "healthy" and profitable as a result. Meanwhile, nations with lower gross debt levels and higher bank leverage ratios are those who have not succumbed to the demand of their banks to be relieved of their losses.

We should also recognize that it's not just U.S. banks that are benefiting from this kind of special privilege with today's politicians and government bureaucrats. Labor Unions like the UAW have benefited from other bailouts, while companies like General Electric have become dependent upon their crony ties to the current administration. It should come as no surprise that both are continuing to milk their government connections for all they're worth.

Meanwhile, the Obama administration's consistent role in supporting what might best be described as today's open political corruption market is pretty remarkable!

As for the rest of the items on the list, Washington makes a pretty strong case that all four factors apply in the U.S. today (do read the whole thing).

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21 April 2011

There is a lot to not like about the Patient Protection and Affordable Care Act (PPACA, a.k.a. "ObamaCare"), but now that the federal government is spending money allocated by the health care reform law, there's perhaps even more to not like about it!

We're referring to more than $1.789 billion dollars of corporate welfare that was authorized by the law for the purpose of subsidizing the health care expenses of the early retirees whose benefits are paid by corporations, unions and state or local government agencies, who would otherwise have had to continue paying these costs out of their own pockets—just as they did before the law's passage.

Overall, some 1,315 of these entities received cash from the federal government in the first year since the PPACA became law, totaling $1,789,449,634 in all. The pie chart below shows how much the top ten recipients of this new kind of taxpayer-funded corporate welfare received of the total, along with the combined take of the remaining 1,305 recipients.

Who Got Part of $1.789 Billion from Year One of ObamaCare To Pay for Health Benefits for Early Retirees?

Combined, the Top Ten recipients of this corporate welfare took 45.6% of the total $1,789,449,634 taxpayer dollars that were doled out, with the United Auto Workers taking the largest chunk by a wide margin, with $206,798,086, or 11.6% of all the taxpayer money that was allocated for the purpose.

Surprisingly, two telecommunication giants AT&T and Verizon took the second and third positions, with 7.8% and 5.1% of the total take respectively.

After that, three state agencies occupied the fourth, fifth and sixth largest positions—the Teacher Retirement System of Texas, the Georgia Department of Community Health and the California Public Employees' Retirement System (CalPERS), the latter frequently in the news recently for corruption scandals and its massively underfunded pension liabilities.

The eighth and ninth ranks are taken up by the State of New York and the Pension Accounting Services Department within the State of New Jersey's Treasury Department.

Corporate basket case General Electric, which has come to rely greatly upon government mandates, special protections, subsidies and bailouts for its revenue, rounds out the Top Ten with an even 2.0% of the total handout.

The remaining 1,305 entities collected the remaining 54.4% of the money paid out by the government to pay for the health benefits of people who chose to retire from their professions early, with the Minnesota Cement Masons taking the least of all the recipients, at 60 dollars.

We know what you're thinking, and no, we really can't make this stuff up!

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20 April 2011
Escape from New York

The New York Times' newspaper business continued to decline in 2010, as the circulation of the United States' former newspaper of record further deteriorated beyond the grim milestone it passed in 2009.

According to documents filed with the U.S. Securities and Exchange Commission on 22 February 2011, the total circulation of the New York Times' Sunday edition dropped by 3.4% from 2009 to 2010 to 1,356,000, while the circulation of the New York Times' weekday edition plunged by 5.5% to 906,100. In 2009, the average total circulation of the weekday edition of the New York Times had dropped below the one million mark for the first time in decades.

Examining the circulation data the New York Times has published in its annual reports since 1993, we've discovered that the New York Times appears to be systematically abandoning its presence in the 31 counties in the New York City metropolitan area that make up its traditional home market in favor of expanding nationally and on the Internet.

The charts below show how the circulation for both the New York Times' Sunday and weekday editions has changed since last peaking in 1993, first within its New York City home market (left) and outside of its home market (right):

Estimated New York Times Circulation Within New York City Market, 1993-2010 Estimated New York Times Circulation Outside New York City Market, 1993-2010

The New York Times' strategy to expand nationally appears to have been initiated in 1997 or early 1998. By contrast, it appears that the decision to slowly wind down the newspaper's presence in the New York City market took place in 2001, as the newspaper's weekday circulation began a steady decline in the years following 2001 after holding level for four years in its home market. This outcome suggests a conscious decision on the part of the New York Times' management to either stop trying to sustain the newspaper's circulation levels in New York City or to systematically draw down its presence in its home market to devote its resources to other areas.

In either case, those resources appear to have been diverted to support the newspaper's national expansion, which accelerated in the years from 2001 to 2005. It appears however that the newspaper's national strategy then topped out in 2005, as its national circulation has fallen off since. The circulation of the newspapers' national weekday edition has continued to decline, but at a considerably less steep rate than its home market editions, while its Sunday edition circulation appears to have stabilized as of 2010.

The chart and table below presents the New York Times' weekday edition circulation data for the years since 1993, as taken or calculated from information provided by the newspaper's SEC filings:

New York Times Weekday Circulation, 1993-2010
New York Times Average Weekday Circulation, 1993 through 2009
Year Weekday Circulation (Mon-Fri) Weekday Percentage of Total Circulation in NYC Weekday Circulation Within NYC Market Weekday Circulation Outside NYC Market Percentage Decline of Total Weekday Circulation
1993 1,183,100 64 757,184 425,916 0.0
1994 1,148,800 64 735,232 413,568 -2.9
1995 1,124,300 62 697,066 427,234 -5.0
1996 1,111,800 62 689,316 422,484 -6.0
1997 1,090,900 62 676,358 414,542 -7.8
1998 1,088,100 61 663,741 424,359 -8.0
1999 1,109,700 60 665,820 443,880 -6.2
2000 1,122,400 59 662,216 460,184 -5.1
2001 1,143,700 58 663,346 480,354 -3.3
2002 1,131,400 55 622,270 509,130 -4.4
2003 1,132,000 53 599,960 532,040 -4.3
2004 1,124,700 50 562,350 562,350 -4.9
2005 1,135,800 49 556,542 579,258 -4.0
2006 1,103,600 48 529,728 573,872 -6.7
2007 1,066,600 47 501,302 565,298 -9.8
2008 1,033,800 46 475,548 558,252 -12.6
2009 959,200 44 422,048 537,152 -18.9
2010 906,100 43 389,623 516,477 -23.4

The chart and table below presents the New York Times' Sunday edition circulation data for the years since 1993, as taken or calculated from information provided by the newspaper's SEC filings:

New York Times Sunday Circulation, 1993-2010
New York Times Average Sunday Circulation, 1993 through 2010
Year Sunday Circulation Sunday Percentage of Total Circulation in NYC Sunday Circulation Within NYC Market Sunday Circulation Outside NYC Market Percentage Decline of Total Sunday Circulation
1993 1,783,900 63 1,123,857 660,043 0.0
1994 1,742,200 63 1,097,586 644,614 -2.3
1995 1,720,300 60 1,032,180 688,120 -3.6
1996 1,701,800 60 1,021,080 680,720 -4.6
1997 1,651,400 59 974,326 677,074 -7.4
1998 1,638,900 58 950,562 688,338 -8.1
1999 1,671,200 56 935,872 735,328 -6.3
2000 1,686,700 55 927,685 759,015 -5.4
2001 1,659,900 53 879,747 780,153 -7.0
2002 1,682,100 51 857,871 824,229 -5.7
2003 1,682,100 49 824,229 857,871 -5.7
2004 1,669,700 47 784,759 884,941 -6.4
2005 1,684,700 44 741,268 943,432 -5.6
2006 1,637,700 44 720,588 917,112 -8.2
2007 1,529,700 42 642,474 887,226 -14.2
2008 1,451,300 41 595,033 856,267 -18.6
2009 1,405,200 40 562,080 843,120 -21.2
2010 1,356,800 38 515,584 841,216 -23.9

Even with these circulation declines, the New York Times Company was able to post a net profit in 2010 of $107.7 million, even though the company's total revenue fell by 1.9%, from $2.44 billion in 2009 to $2.39 billion in 2010, as the company profited by reducing its costs and its payroll in both 2009 and 2010. At present, we would expect the erosion of the New York Times circulation to continue, given its management's new focus on promoting and generating revenue from its Internet operations.

We wonder at what circulation level will the New York Times' management dispense with the pretense of being a New York City newspaper.

Disclosure: Ironman does not hold any positions in the New York Times (NYSE: NYT).


19 April 2011
The Money Suck Vortex

Last Wednesday, months after rejecting his own presidential commission's recommendations for reducing the U.S.' record deficits produced by his administration, President Barack Obama finally offered a plan to deal with the nation's excessive federal budget deficit.

He didn't do it because he wanted to do it or because he genuinely believes it's in the country's best interest. He did it because he was forced to do it.

To understand why that's the case, let's look at the situation with the U.S. national debt that was developing below the mainstream media's radar during the last two weeks, part of which finally flew up into full view yesterday.

What flew into full view yesterday was Standard and Poor acting to downgrade its credit outlook for the United States from "stable" to "negative." Reuters reports on what that means:

(Reuters) - Standard & Poor's on Monday downgraded its credit outlook for the United States, citing a "material risk" that policymakers may not reach agreement on a plan trim its large budget deficit.

While the agency maintained the country's top AAA credit rating, it said that authorities have not made clear how they will tackle long-term fiscal pressures.

S&P said the move signals there's at least a one-in-three chance that it could cut its long-term rating on the United States within two years.

"Because the U.S. has, relative to its AAA peers, what we consider to be very large budget deficits and rising government indebtedness and the path to addressing these is not clear to us, we have revise dour outlook on the long-term rating to negative from stable," S&P said in a release.

If President Obama had not presented his sudden deficit reduction proposal when he did, this new report would have read very differently. In addition to shifting to a negative outlook for the U.S. government's fiscal situation, S&P might have finally pulled the trigger on lowering its credit rating for the United States, which would have the effect of increasing the government's cost of borrowing money. That, in turn, would make it much more difficult for the government to continue spending the amount of money that President Obama really wants to spend.

The New Obama Spending Future, FY2012

Instead, the world's bond markets reacted positively to the President's "johnny-come-lately" deficit reduction proposal, as it signaled that the President might finally be catching on to fiscal reality and that some kind of deal might be possible.

We can't understate how seriously out of whack the President's priorities with respect to deficit reduction have been compared to just about everyone else. Our chart below visualizes Goldman Sachs' estimates of the extent of deficit reduction as a percent share of GDP over the next ten years for the various major deficit reduction plans that have released since December 2010 (HT: Reuters' James Pethokoukis):

How the Various Deficit Reduction Proposals Seek to Cut the Deficit from 2012 Through 2021

The Simpson-Bowles plan shown in the first column is the product of President Obama's blue-ribbon commission, which was released in December 2010. The second column shows the deficit reduction components of the Domenici-Rivlin plan, which came about as the result of a bipartisan effort that paralleled the President's deficit reduction commission's work, was also released in December 2010. The middle column of the chart reflects the President's priorities for deficit reduction as presented in his Fiscal Year 2012 Budget for the U.S. Government, which was released in February 2011. The fourth column represents the U.S. House of Representatives' Ways and Means Committee chairman Paul Ryan's "path to prosperity" plan, a budget resolution that was released in early April 2011 and has since passed in the U.S. House of Representatives. President Obama's newly drawn up deficit reduction proposal was released on 13 April 2011 and occupies the fifth column of the chart.

And yes, the President's FY2012 budget proposal actually proposes to borrow money to pay for paying out Social Security benefits, which counts against the higher taxes and reductions in discretionary expenditures (everything but Social Security, Medicare, Medicaid and Net Interest on the National Debt) he was also seeking. That's not an error on the chart - that's the equivalent of borrowing money for the purpose of meeting the payroll of a failing business!

And that's why the bond market signaled to the President's Treasury department what was in the works behind the scenes. They appear to have finally gotten his attention.

We'll close by pointing to James Pethokoukis again, who offers the international perspective of the implications of S&P's downgrade of the U.S. government's debt outlook from stable to negative by Barclays bank, and also reports the reaction to the downgrade by President Obama's Treasury Department and by Paul Ryan. We'll simply observe that Barack Obama can truly afford to learn something about the bond market from James Carville.

Image Credit: Multifamily Investor.


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