Political Calculations
Unexpectedly Intriguing!
July 30, 2011

Has it occurred to anyone in Washington D.C. that there is a way to increase the statutory limit on the nation's debt without increasing the national debt burden on individual Americans?

Here's how. Instead of fixing the total amount of the national debt (aka "the nation's credit limit"), fix the amount of the national debt per capita.

Here's how that would work. As of 28 July 2011, the amount of the total public debt outstanding for the United States stands at \$14,342,865,885,306.46.

Meanwhile, the U.S. Census currently estimates the resident population of the United States to be 311,878,336, as of 30 July 2011.

That sets the current national debt per capita to be roughly \$45,988.66.

Since that's so close to \$46,000 of national debt for every man, woman and child living in the United States, we'll use that round figure for our remaining calculations.

According to the U.S. Census, there's a net gain of one person every 12 seconds in the United States. In 30 days, after 2,592,000 seconds have ticked off the clock, the U.S. population will have grown by 216,000 to an estimated 312,094,336 people.

The total public debt outstanding of the United States could then rise to \$14,356,339,456,000, an increase of \$13,473,570,693.54 (almost \$13.5 billion) from where it is today, without increasing the national debt burden per individual American, which would hold level at \$46,000.

And that could be done, automatically, for every month going forward.

The only question remaining is why should individual Americans be burdened more than than amount to accommodate the spending desires of Washington D.C.'s politicians and bureaucrats? So far, these people have not shown that they can provide a good return on the "investment"....

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July 28, 2011

Good news! The trend in new, seasonally-adjusted unemployment benefit claim filings is shifting in a more positive direction:

The major trends we observe in the number of seasonally-adjusted initial unemployment insurance claim filings, indicated by the letters in the chart above, are described here.

The shift from an upward (bad) trajectory to a slightly negative (better, not good) trajectory over the past several weeks coincides with the reduction in oil and gasoline prices. The current trend began when employers reacted to a spike in these prices in the spring of 2011, which impacts the both cost of transportation for businesses and the discretionary income of consumers.

We see that in what is now clearly a sudden upward shift in the number of weekly new jobless benefit claims that occurred in early April 2011. Since oil and gas prices peaked in early May, the trend in new jobless claims has been largely flat and through 23 June 2011, may be considered to be falling at an anemic rate of 361 per week.

That's better than seeing the number of new jobless claims rise each week. At roughly the 400,000 per week level however, that's nearly 75,000 per week higher than the 325,000 level that would be consistent with real economic growth.

There is a dark cloud on the economic horizon where these figures are concerned. After having bottomed just above \$3.55 per gallon several weeks ago, the national average price for gasoline in the United States has been rising. Now at \$3.70 per gallon, this price level suggests that job losses may reverse their current positive falling trend and will begin rising again in the weeks ahead.

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July 27, 2011

In 2010, Americans donated an estimated \$290.89 billion to charitable organizations, an amount approximately equal to 8.2% of the amount of U.S. federal government spending in 2009. The chart below shows the amounts received by various types of charitable organizations:

Giving USA reports that 2010 saw some \$1.43 billion that was directed toward post-earthquake relief efforts in Haiti. Approximately 75% of these charitable contributions went to Human Service organizations, while much of the remainder went to International Affairs-oriented charitable organizations.

According to data collected by The Guardian, the United States government under President Barack Obama committed some \$41,268,315 million to earthquake relief efforts in Haiti, while private organizations and individuals in the United States provided \$1,117,401,659.

Or in other words, when it comes to the desperate plight of the poorest people in the Western hemisphere after an especially devastating natural disaster, individual Americans and private charities have proven to be over 27 times more generous than the U.S. government.

### Data Sources

Giving USA Foundation. U.S. Charitable Giving Shows Modest Uptick in 2010 Following Two Years of Declines. 20 June 2011.

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July 26, 2011

Assuming that the current U.S. debt crisis began in 2008, which is more responsible for the current U.S. government debt crisis: excessive government spending or too big a fall in government tax receipts?

We present the answer using data from 1967 through 2010, graphically, below:

At its peak in 2009, we find that the gap between the federal government's spending and its tax collections is much more heavily weighted toward the side of excessive spending. With spending accounting for approximately 62% of the pre-crisis gap, we find that excessive spending by the U.S. federal government in the years since 2007 is primarily responsible for the current debt crisis.

But that may be a moot issue. The key point to understand in the current debate is that while the federal government is not capable of precisely controlling the amount of its tax receipts from year to year, it is more than fully capable of controlling the amount of its spending. But only if there are enough people elected to the government who make that objective a priority!

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July 25, 2011

Who donated money to U.S. charities in 2010? And how much money did they give?

Via the National Park Service (really!), who tapped the 2010 report on charitable giving produced by the American Association of Fundraising Council, through Giving USA, we have the answers to these two questions! The chart below summarize what we found:

Overall, 72.8% of the estimated total of \$290.89 billion for all estimated charitable contributions in 2010 were donated by American individuals and households, or \$211.77 billion.

Going by tax data reported by the CBO for 2008, approximately 87% of these charitable donations by individuals and households were claimed on U.S. income tax returns. The remaining 13% were made by Americans who did not itemize their charitable giving on their tax returns.

### Previously on Political Calculations

• Tax Deductions for Charity by Income Level - here, we determined the amount of charitable contributions by income level for the 87% of individual and households who itemized their charitable donations on their tax returns!

### Data Sources

Giving USA Foundation. U.S. Charitable Giving Shows Modest Uptick in 2010 Following Two Years of Declines. 20 June 2011.

Congressional Budget Office. Options for Changing the Tax Treatment of Charitable Giving. Table 1 - Charitable Contributions by Tax Filers' Itemizing Status and Income Group, 2008. May 2011.

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July 22, 2011

With the U.S. gripped by a heat wave, it's time once again to turn to science to solve one of the bigger problems that Americans will be dealing with this weekend: how to keep their cans of beer cold longer in triple digit temperatures (that's over 38 degrees Celsius for our metric system-burdened readers!)

And for that science, we turn to the the gang at My Science Project, who conducted one of the most unique studies we've seen into the matter. Here's how they described their first experiment, which sought to definitively answer the question "How Effective Are Beer Cozies?":

Beer drinking is one of the world’s favorite pastimes. So as the weather started heating up, we felt a scientific duty to investigate this burning beer-related question: what is the most effective beer can cozy?

We took temperature measurements using a digital thermometer with a metal probe. In most of the experiments, the probe was submerged 5.5 cm into the beer, at the approximate midpoint of the can. All experiments were performed outdoors, with ambient temperatures varying from 90F (32.2C) to 103F (39.4C). Except as noted, all beverages used were 12 oz. (355ml) domestic beers. The starting temperatures for the beers ranged between 35.7F (2.1C) and 43.7F (6.5C)

See? It really is science! Here are the beer cozies they tested:

• A can holder made by Coleman, made of a red vinyl-like material
• A neoprene cozy imprinted with a camouflage design
• A premium model made of a pewter casing with a black foam liner, embossed with the number and colors of NASCAR racer Jeff Gordon
• A foam rubber cozy imprinted with a humorous slogan
• A soft vinyl/plastic-like cozy with the colors and number of NASCAR racer Tony Stewart

Here are their conclusions for this first experiment:

Depending on their material, beer can cozies can be effective in keeping beer cool even in extremely hot weather. The two cozies that performed the best employed a layer of dense foam about half an inch thick, which prevents heat transferring into the cans and the beer by limiting convection and conduction. A cheap beer cozy can be just as effective as a more expensive cozy, provided you get the right type. On the other hand, an ineffective can cozy, while it may improve your grip on the can or keep your hand dry, will not do much to keep your beer cold.

See? It's science that you can even use! Next, they tested bottle cozies, finding that they're effective, especially if they're lighter colored.

But getting back to the can cozies, they also tested the "Cadillac" of cozies, Thermos' Thermax Can Insulator (similar to this model), to see how it might stack up against the foam competition. We'll let the results speak for themselves:

Results: We waited…for a full three hours, to verify the manufacturer’s claims. We found that the Thermos can cozy did indeed outperform the two most effective cozies from our previous trials, a traditional foam can cozy, and the pewter and foam Jeff Gordon commemorative NASCAR cozy. After one hour, the beer in the Thermos can holder was 53.4F (11.9C), compared to 58.6F (14.8C) in the foam cozy and 58.2F (14.6C) in the pewter and foam cozy. The uninsulated can was 69.2F (20.1C). So, it lived up to one of its claims by outperforming any cozy we could find.

Now for the really fun part! For our money, things really got interesting when they tested beer cozies made from "alternative" materials against the foam cozies they tested earlier. What kind of "alternative" materials, you ask?

In this experiment, we faced three types of carbohydrates off against a typical beer can cozy. The bagels and donuts we prepared in a similar manner – cutting a can-sized section out of the middle and stacking them three high. The Rice Krispies Treat beer cozy was a more elaborate production, which we have fully detailed here.

And now, the findings:

All of our food-based can cozies worked to some degree, but the Rice Krispies Treat cozy stole the show. We theorize that its superior insulating ability probably comes from the thickness of the material combined with the Styrofoam-like quality of the Rice Krispies Treats. And as gratifying as it would have been to see a successful synergy between beer and donuts, the bagels were slightly better insulators, perhaps because they are denser than the raised glazed pastries.

We'll close our Friday post with an image of the winning beer cozy:

Here's hoping you'll find a way to keep cool this weekend!

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July 21, 2011

In 2009, Americans reported nearly \$34.9 billion worth of donations to private charities serving the public interest on their federal tax forms, as they claimed the federal government's tax deduction for charitable contributions on their taxes.

Of all these donations, \$19.14 billion, or 54.9%, were made by taxpayer households that reported \$200,000 or more in annual income.

Needless to say, that's a lot of money that President Barack Obama believes would be better spent by the U.S. government in the form of spending controlled by elected U.S. politicians who would receive political benefits from it, which is why the President has repeatedly proposed cutting or eliminating the charitable contribution tax deduction for Americans who earn high incomes.

The President most recently went after the charitable contribution tax deduction in his original budget proposal for the U.S. government's 2012 fiscal year, which could limit the amount of a tax deduction for high income earners by up to 30%. Using the most recently available tax return data for 2009, the chart below shows the approximate distribution of charitable contributions by annual income along with the estimated impact of the President's ambition

Using 2009 data and assuming that if not for the tax deduction for charitable contributions that Americans earning high incomes would not donate as much money to private charities, we estimate that the potential effect of the President's FY2012 budget proposal would affect up to \$1.9 billion of charitable contributions, or 5.4% of the total, for which high income earning Americans would no longer have any income tax-reducing incentive to donate.

We also estimate that if the President's proposed reduction of the tax deduction for charitable giving were extended to include the donations of taxpaying households with incomes above \$200,000, the amount of charitable contributions that would be affected would grow to \$5.4 billion, or 16.5% of all charitable contributions reported on 2009's tax returns.

### Data Source

Joint Committee on Taxation. JCS-3-10: Estimates of Federal Tax Expenditures for Fiscal Years 2010-2014. Table 3 - Distribution by Income Class of Selected Individual Tax Expenditure Items, at 2009 Rates and 2009 Income Levels. http://www.jct.gov/publications.html?func=download&id=3718&chk=3718&no_html=1. 21 December 2010.

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July 20, 2011

If the federal government tries to increase the amount of its tax collections by eliminating or limiting the mortgage interest tax deduction, who's most at risk of seeing their taxes go up?

To find out, we tapped the U.S. Congress' Joint Committee on Taxation's report on tax expenditures for 2010-2014, which provides the breakdown of how much of the mortage interest tax deduction is claimed by taxpayer income level for the 2009 tax year.

We then used that data to construct the distribution of the mortgage interest tax deduction by taxpayer household income below:

As you can see in the chart above, the greatest amount of "losses" to the federal government, at least, from the perspective of a hypothetical government overlord, is represented by taxpayer households who have incomes in the range between \$50,000 and \$150,000.

Meanwhile, President Obama has proposed limiting or eliminating the tax deduction for mortgage interest for individuals with incomes over \$200,000 or households with incomes over \$250,000.

But given the amount of spending the President would like to do, we find it's unlikely that only these high income earners will be affected. If such a change to the U.S. tax code is implemented, we would expect that the income threshold that would see the tax reduction benefit of the mortgage interest deduction will be lowered over time.

### Data Source

Joint Committee on Taxation. JCS-3-10: Estimates of Federal Tax Expenditures for Fiscal Years 2010-2014. Table 3 - Distribution by Income Class of Selected Individual Tax Expenditure Items, at 2009 Rates and 2009 Income Levels. http://www.jct.gov/publications.html?func=download&id=3718&chk=3718&no_html=1. 21 December 2010.

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July 19, 2011

What percentage of employed teens make the minimum wage? And what percent of all minimum wage workers are teens?

Both questions are answered in the chart below, at least for the years from 2002 through 2010!...

From 2002 through 2006, the U.S. federal minimum wage was set at \$5.15 per hour. Then, beginning in 2007, it began being raised once a year - first to \$5.85 per hour on 24 July 2007, then to \$6.55 per hour on 24 July 2008 and finally to \$7.25 per hour on 24 July 2009, where it still stands today.

As of 2010, approximately the same percentage of teens earn the federal minimum wage or less as there are teens among the nation's minimum wage earners.

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July 18, 2011

The Big Picture's Invictus points us to an interesting study, via e-mail:

You may want to have a look at this BLS research:

http://www.bls.gov/opub/mlr/2009/11/art3full.pdf

which I had referenced here one year ago at The Big Picture:

http://www.ritholtz.com/blog/2010/07/demographics-to-the-fore/

Here's what Invictus wrote in that latter blog post:

Shortly after the minimum wage was raised last year, the right-wing chorus rose up and began to assert that the rise in teen unemployment was directly attributable to the more generous pay scale. To my eye, and based on numbers I’d crunched, I thought demographics were much more at play (note: that’s “much more,” not “exclusively”), and said so here last September:

There is evidence – real, actual evidence! – that it’s the 55+ age cohort staying in – or re-entering – the job market that is much more at play than the minimum wage…Where there had been less than 2.5 workers 55+ per teen worker in the year 2000, that number has now jumped to a record 5.5…As a percent of the workforce, the 55+ age cohort has now reached a new record of 19.4%, clear evidence that older workers are squeezing younger workers from the workforce.

and here last November:

…simple demographics coupled with the damage wrought by this recession on the Baby Boom generation — in terms of both real estate and investment portfolios (particularly retirement portfolios) — is so great that many Boomers have realized they’re going to have to postpone retirement (see one story on that here, there are thousands on “postponing retirement” out there on The Google).

I reiterated that position here at TBP last month when illegal immigrants became the target of choice for stealing teen employment:

What about demographics — an aging boomer population — and a crappy economy that has the 55+ cohort postponing retirement and consequently crowding out the younger generation (parents keeping their own kids/grandkids out of the job market, as I put it a while back). The data is there for all who choose to explore it.

Well, now comes Bloomberg news with this:

Workers Over 65 Vie With Teens in Labor Market for First Time Since Truman

U.S. employees old enough to retire are outnumbering their teenage counterparts for the first time since at least 1948 when Harry Truman was president, a sign of how generations are now having to compete for jobs.

That makes for a great question - how much might these geezers (our endearing term for the older workers of the U.S. workforce) be displacing teens from the U.S. workforce?

To answer that question, we turned to the Bureau of Labor Statistics' annual reports on the Characteristics of Minimum Wage Workers. Since so many teens in the United States earn the federal minimum wage or less (in 2010, 22.7% of all working teens earned the federal minimum wage or less, representing 22.8% of the entire minimum wage earning workforce for that year), if older Americans are indeed displacing teens from the U.S. workforce, we should definitely be able to see the effects of such a phenomenon in the age-based distribution of the minimum wage earning portion of the U.S. workforce.

The bad news is that these reports only go back to 2002, however that should provide enough data to see any large scale shifts in the age distribution of minimum wage earners.

Our first chart shows the stacked percentage share of each indicated age group within the minimum wage earning portion of the U.S. workforce from 2002 through 2010:

We see that the overall percentage share of teens within the U.S. minimum wage earning workforce has fallen from 2002 through 2010, however it's difficult to tell from this chart which other age groups might have made substantial gains. We'll next take a closer look by unstacking the data in this chart:

Looking closer, we see that a number of different age groups have seen an increase in their percentage share of the U.S. federal minimum wage earning workforce in the years from 2002 through 2010, however most of these changes appear to be relatively small as compared to the apparent decline in the teen percentage share of this portion of American workers.

We'll need to dig deeper, so we'll next look at the change in the percent share of each indicated age group with respect to their level in 2002:

That's more like it! Here, we see that the percentage representation of teens in the U.S. workforce in 2010 is 5.1% less than the level recorded in 2002. That figure confirms that teens are indeed being displaced from the U.S. workforce at the minimum wage level.

Next, we can see which age groups have done the displacing. Here they are, ranked from highest to lowest:

1. Age 25-29: +1.9%
2. Age 50-54: +1.7%
3. Age 45-49: +1.1%
4. Age 20-24: +0.7%
5. Age 55-59: +0.5%
6. Age 30-34: +0.1%

The remaining age groups, covering the Age 60+ portion of the U.S. federal minimum wage earning workforce, have also seen some displacement by the age groups listed above, as their combined percentage share in this portion of the U.S. workforce has declined by 0.9%.

In practical terms, for the 5.1% percentage decline from 2002 through 2010 in the teen share of American federal minimum wage earners, approximate half were displaced by young adults Age 20-34 (2.7%), while the remainder were displaced by geezers Age 45-59 (2.4%).

These figures assume that the geezers Age 45-59 also displaced the retirement age portion of the minimum wage earning workforce, those Age 60 or older.

So in terms of geezers competing directly with teens for minimum wage earning jobs, we find that there is some of that going on, however young adults are more likely to have displaced teens from the U.S. federal minimum wage earning workforce than older workers, but it's nearly 50-50.

Finally, we should note that for these years, what we've outlined above is really a competition by attrition as the number of employed teens in the U.S. economy has fallen sharply over this time, with the competitive edge going to pretty much anyone who has more education, skills and work experience than teens.

### Data Sources

Bureau of Labor Statistics. Characteristics of Minimum Wage Workers, 2002. Table 7. Employed wage and salary workers paid hourly rates with earnings at or below the prevailing Federal minimum wage by age and sex, 2002 annual averages. Accessed 18 July 2011.

Bureau of Labor Statistics. Characteristics of Minimum Wage Workers, 2003. Table 7. Employed wage and salary workers paid hourly rates with earnings at or below the prevailing Federal minimum wage by age and sex, 2003 annual averages. Accessed 18 July 2011.

Bureau of Labor Statistics. Characteristics of Minimum Wage Workers, 2004. Table 7. Employed wage and salary workers paid hourly rates with earnings at or below the prevailing Federal minimum wage by age and sex, 2004 annual averages. Accessed 18 July 2011.

Bureau of Labor Statistics. Characteristics of Minimum Wage Workers, 2005. Table 7. Employed wage and salary workers paid hourly rates with earnings at or below the prevailing Federal minimum wage by age and sex, 2005 annual averages. Accessed 18 July 2011.

Bureau of Labor Statistics. Characteristics of Minimum Wage Workers, 2006. Table 7. Employed wage and salary workers paid hourly rates with earnings at or below the prevailing Federal minimum wage by age and sex, 2006 annual averages. Accessed 18 July 2011.

Bureau of Labor Statistics. Characteristics of Minimum Wage Workers, 2007. Table 7. Employed wage and salary workers paid hourly rates with earnings at or below the prevailing Federal minimum wage by age and sex, 2007 annual averages. Accessed 18 July 2011.

Bureau of Labor Statistics. Characteristics of Minimum Wage Workers, 2008. Table 7. Employed wage and salary workers paid hourly rates with earnings at or below the prevailing Federal minimum wage by age and sex, 2008 annual averages. Accessed 18 July 2011.

Bureau of Labor Statistics. Characteristics of Minimum Wage Workers, 2009. Table 7. Employed wage and salary workers paid hourly rates with earnings at or below the prevailing Federal minimum wage by age and sex, 2009 annual averages. Accessed 18 July 2011.

Bureau of Labor Statistics. Characteristics of Minimum Wage Workers, 2010. Table 7. Employed wage and salary workers paid hourly rates with earnings at or below the prevailing Federal minimum wage by age and sex, 2010 annual averages. Accessed 18 July 2011.

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July 15, 2011

What's the top non-advertisement link you see when you type just one letter into Google? Here are the top results we got when we did just that!

We wonder how much this list changes from year to year....

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July 14, 2011

Today we're going to show you that increases in the minimum wage are indeed very well correlated with the reduction in the employment to population ratio for teens.

But wait, you say! Didn't Invictus show a chart indicating otherwise over at The Big Picture?

And didn't you yourself yesterday show a chart that seemed to agree with Invictus' conclusions?

Why yes! Yes we did! And here's what we said about that apparent agreement:

So at first glance, it would appear that Invictus is correct and the editorial writers of the Wall Street Journal are wrong on the effect of the minimum wage on teen employment levels.

However, that's only at first glance. We can't help but notice that Invictus' analysis is superficial at best and is really fundamentally flawed, because he appears to have a California-size hole in his analysis.

We say Invictus' analysis is fundamentally flawed, because what Invictus completely forgot to consider in his analysis discounting the role of the minimum wage in affecting the employment to population ratio of American teens is that there is more than one minimum wage in the United States!

As it happens, a large number of states, and even cities, have their own minimum wage. If those minimum wages are set lower than the federal minimum wage, then federal minimum wage is the minimum wage that employers must pay. But if those state and local minimum wages are set higher than the federal minimum wage, then those higher than the U.S. federal minimum wage is the minimum wage that employers are required to pay.

Since we keep mentioning this as being a California-size hole in Invictus' analysis, let's compare California's minimum wage with the U.S. federal minimum wage over the years from 1980 through 2012:

Here, in the period before 1998, we see that there was little difference between California's minimum wage and the U.S. federal minimum wage. But after 2008, we see a major divergence, as California's minimum wage rose to become 31% higher than the federal minimum wage of \$5.15 per hour in the years from 2002 through 2006. After 2006, both California's minimum wage and the U.S. minimum wage have increased, but the percentage difference between the two today is somewhat less at roughly 10%.

That's a big difference for the years from 2002 through 2006. And it's meaningful for a serious analysis of the relationship between increases in the minimum wage and rising teen joblessness because California is home to an awful lot of teenagers:

In fact, from 1980 through 2009, California's working age teens, those between the ages of 16 and 19, grew from accounting for 10.5% of all American working age teens to 12.8%. Since about 2000, California has been home to approximately one out of every eight American working age teens.

So what happens when a state that's home to one-eighth of the working age teen population of the United States sets its minimum wage at a level equal to 131% of the U.S. federal minimum wage? See for yourself:

We suddenly see that changes in the minimum wage, whether California's or the United States' federal minimum wage, correlates closely with major increases in the percentage of the jobless teen population of the United States.

There's only one exception. The period from 1998 to 2000, where an increase in California's minimum wage is not matched by an increase in the jobless teen population. As it happens, this period of time corresponds to the inflation phase of the Dot Com Bubble, which was characterized by a booming job market that was, perhaps coincidentally, centered in California's Silicon Valley.

The booming job market of the Dot Com Bubble's inflation phase counteracted the typical effect of a minimum wage increase on the teen employment to population ratio, which explains why this period displays results that are not observed in other periods. It is the only period of time covered by our analysis in which employers had enough of a boom in revenue to more than cover the increased costs of employing low-skilled entry level workers after a minimum wage hike was enacted.

In fact, if not for California's minimum wage increases in 1997 and 1998, it's very likely than the drop in the number of non-employed teens in the years from 1998 through 2000 would have been much greater, as more teens would likely have joined the U.S. workforce to take advantage of the opportunities available to them.

Finally, for our money, the most interesting correlation we observe in the chart may be seen by what happens to the non-employed teen to teen population ratio when either California's or the U.S. federal minimum wage increases and also by what happens when those increases stop and the minimum wages hold steady. It appears as if both the California state legislature and the U.S. Congress have a switch for controlling the level of the teen employment to population ratio that they can turn on and off.

As such, we find the changes observed in the teen employment to population ratio in the years from 1980 through 2011, and especially in the period of interest of 1997 through the present, to be largely a government-manufactured phenomenon.

And also as such, we find that the anonymous editorial writers of the Wall Street Journal are on much more solid ground than is the anonymous blogger Invictus in considering what correlation the minimum wage might have with respect to the decline in the percentage of the working teen population over time.

### Previously on Political Calculations

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July 13, 2011

Is there really a connection between the rise of the minimum wage and the disappearance of teen jobs from the U.S. workforce over time?

Having now set the stage for our analysis, our first step will be to essentially duplicate The Big Picture's Invictus' analysis, so that we can determine how much of a correlation might exist between the two things. Our first chart presents the BLS' data for the Employment-to-Population Ratio for individuals between the ages of 16 and 19. Although Invictus is mainly concerned with the period from 1997 onward, we'll go back to 1980 so we can pick up any previous trends:

Note: In the chart above, we've indicated the NBER's official periods of recession in the chart with the red-shaded vertical bands.

What we see in reviewing the chart is that there seems to be a fairly clear break in the overall trend in the teen employment-to-population ratio. Before 2002, we find this ratio was consistently above 40%, but that after 2002, it has fallen below this level.

Beyond that, we find that the teen employment to population ratio tends to fall during periods of recession, which is something we should expect.

In our next chart, we'll look at the mirror image of this chart - the teen non-employed to population ratio, which shows the percentage of the U.S. teen population who are not employed:

The reason why we're considering this chart is because it will make a visual comparison between the rising minimum wage over time and the change in the ratio of non-employed teens to the overall teen population of the U.S. easier to see.

Speaking of the rising minimum wage over time, here is the level of the federal minimum wage from 1980 through 2011:

Now, let's overlay these last two charts together and see what we can see!

In the chart above, we adjusted with the scale of the vertical axis for the U.S. Age 16-19 Non-Employed to Population Ratio so that it would fairly closely match up with the period from 1997 through 2000 (the beginning of Invictus' main period of interest) while aligning the major horizontal gridlines of both vertical axes.

Examining the chart from 1997 onward, we see that there appears to be very little correlation between the increase in the non-employed portion of the U.S. teen population and the federal minimum wage, although the period from 2007 through 2009 does appear to have some correlation, although this might be due to the recession that corresponds to these years as well.

So at first glance, it would appear that Invictus is correct and the editorial writers of the Wall Street Journal are wrong on the effect of the minimum wage on teen employment levels.

However, that's only at first glance. We can't help but notice that Invictus' analysis is superficial at best and is really fundamentally flawed, because he appears to have a California-size hole in his analysis. We'll address that problem and what the real connection between disappearing teen jobs and rising minimum wages looks like in the next post of this series.

### Data Sources

U.S. Department of Labor. Wage and Hour Division. History of Federal Minimum Wage Rates Under the Fair Labor Standards Act, 1938-2009.

U.S. Bureau of Labor Statistics. (Seas) Employment-Population Ratio - 16-19 yrs. Employment-population ratio. Age: 16 to 19 years. BLS Data Series LNS12300012.

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July 12, 2011

What does the data really tell us about the rising minimum wage over time and the disappearance of teens from the U.S. workforce in recent years?

The question rises, again, thanks to a Wall Street Journal editorial and criticism of it, both featuring some pretty blatant politically-motivated biases on both sides of the issue.

The WSJ takes the conservative side of the issue:

Perhaps you've already noticed around the neighborhood, but this is a rotten summer for young Americans to find a job. The Department of Labor reported last week that a smaller share of 16-19 year-olds are working than at anytime since records began to be kept in 1948.

Only 24% of teens, one in four, have jobs, compared to 42% as recently as the summer of 2001. The nearby chart chronicles the teen employment percentage over time, including the notable plunge in the last decade. So instead of learning valuable job skills—getting out of bed before noon, showing up on time, being courteous to customers, operating a cash register or fork lift—millions of kids will spend the summer playing computer games or hanging out.

The lousy economic recovery explains much of this decline in teens working, and some is due to increases in teen summer school enrollment. Some is also cultural: Many parents don't put the same demands on teens as they once did to get out and work.

But Congress has also contributed by passing one of the most ill-timed minimum wage increases in history. One of the first acts of the gone-but-not-forgotten Nancy Pelosi ascendancy was to raise the minimum wage in stages to \$7.25 an hour in 2009 from \$5.15 in 2007. Even liberals ought to understand that raising the cost of hiring the young and unskilled while employers are slashing payrolls is loopy economics.

The opposing position, arguing that the minimum wage has had little or no effect on the decline of working teens was taken up by Invictus at The Big Picture. Here's the core of Invictus' argument:

How a minimum wage increase that was enacted first in 2007 is responsible for a teen employment/population ratio that has been declining since 2001 — throughout the other guy’s entire presidency, in fact — is not addressed. Where was the Journal as the rate declined from 44.6 when Bush took office to 30.6 when he left? Where were they when it made a historic low under Bush’s watch (August 2008)?

Journal:

Back on planet Earth, the minimum wage increase has coincided with the plunge in the percentage of working teens. Before the most recent wage hikes, roughly seven million teens were working. Now there are closer to five million with a job and paycheck.

That statement is, sadly, simply false. At the time “before the recent wage hikes” (July 2007), there were 5.888 million teens employed (BLS Series LNS12000012). There are now 4.240 million employed. There have not been “seven million teens” working since the early months of the Bush administration. As for when “the plunge” actually began, see for yourselves:

Source: BLS.gov

The plunge — which began on Bush’s watch and continued through his “boom” — took place during a period when the minimum wage was \$5.15/hour and was not raised until 2007. No explanation for that inconvenient fact. Or the inconvenient fact that the teen employment/population ratio rose after the Sept. 1997 increase in the minimum wage to \$5.15 (where it stayed until a decade later, when it went to \$5.85).

Invictus goes on to argue that "teens, generally, are not eligible to make the minimum wage", which is really going off the rails in our real-world based opinion, but could there be something to the portion of his argument that's actually based on data rather than poorly understood legal trivia? Who's more right in the serious part of this fight - the WSJ's editorial writers or some anonymous blogger(s) named "Invictus"?

As some anonymous blogger(s) named "Ironman", we're going to dig into the bigger picture to work out what really was going on through Invictus' specified period of interest.

And why not us? We've long established our street cred in the econoblogosphere with respect to our coverage of the teen employment scene, but we've really only focused on the period since we began blogging (since December 2004). We've never really looked at the data for teens before that time, which is really what's at the heart of Invictus' data-based arguments.

And we'll play it all out this week. Stay tuned!

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July 11, 2011

By now, you've likely heard much of the commentary of how bad the June 2011 Employment Situation report was. Words like horrible, stunningly bad and awful have been used to describe it.

And yet, it was actually worse than that, with one surprising exception.

The surprising exception is the teen employment level, as June 2011 saw 59,000 more individuals between the ages of 16 and 19 enter the U.S. work force. That positive net change quickly evaporated however, as 59,000 fewer young adults between the ages of 20 and 24 were counted as being employed during the month. And then, things took a dramatic turn for the worse for individuals Age 25 and older, as the number of employed Americans in this age category saw their numbers in the workforce plunge by 445,000.

For those Age 25 and older, we have to go back to December 2009's month-to-month job loss of 595,000 to find a worse figure for this age category. The same holds true for all individuals Age 16 or older.

Of the 455,000 jobs lost by those Age 25 or older, approximately 45% were lost by individuals between the ages of 25 and 34, 23% were lost by individuals between the ages of 35 and 44 and 21% were lost by individuals between the ages of 45 and 54. Just 11% of the 455,000 job loss figure was represented by individuals Age 55 and older.

Compared to when the total employment level in the United States peaked in November 2007 just ahead of the recession, some 7,250,000 fewer Americans are being counted as being part of the U.S. workforce today.

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July 8, 2011

Today's post is inspired by Strange Maps, who broke away from a lengthy discussion of the role of the scary land octopii that dominate the landscape of many maps to feature two maps depicting what each U.S. state is best at and what each U.S. state is worst at!

First up, "The United States of Awesome"!

Your challenge, should you choose to accept it, is to work out exactly how the two things for each state correspond to one another. For example, we see that Arizona is the sunniest U.S. state and also the state with the highest level of alcoholism. Clearly, Arizonans deal with all that sun by drinking a lot of fluids. Those fluids just happen to contain a lot of alcohol, which is how we can connect what makes Arizona awesome to what shames the state!

Meanwhile, Kentucky is the best armed state and also the state with the highest rate of cancer deaths. Clearly, that's because Kentuckians haven't figured out how to shoot cancer dead yet....

We'll leave it as an exercise for our readers to work out the connections between the remaining states' awesomeness and shame factors. Have a great weekend!

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July 7, 2011

If you are in poverty today, or fall into it tomorrow, will you be doomed to be in poverty for the rest of your life?

If you're one of those people who are so brain dead that you get your ideas from the editorial sections in today's newspapers, you might think so. And if you do, remember that you should use that newspaper for insulation in the winter.

But if you're a typical American, the truth is that poverty, for you, will be a short-lived experience. But you don't have to take our word for it. The U.S. Census, whose job it is to count all Americans regardless of their economic situation, says so!

In Dynamics of Economic Well-Being: Poverty, 2004-2006, Robin J. Anderson finds that for the people who were counted as being in poverty at different times during this three year period, some 77% lifted themselves out of poverty.

Remarkably, for all those who were in poverty for two or more consecutive months in the time from 2004 to 2006, the typical duration of being in poverty was 4.5 months, with 47.7% getting out of poverty in four months or less, but with 12.4% lasting more than 24 months.

But what about the people who were chronically in poverty? What percentage of all the people in the entire United States were counted as being continually in poverty in the three years from 2004 through 2006?

The following figure from the report illustrates the depth of chronic poverty in the U.S. during these years:

The way to read the bars in the chart above is to recognize that the percentage indicated in each bar applies only to the identified segment of the population indicated on the left hand side. For example, we see that 2.8% (7,554,000) of "All People" (270,914,000) in the U.S. were counted as being continuously in poverty for the years from 2004 to 2006, while the "Black Alone" percentage of 8.4% means that 8.4% (2,838,000) of the much smaller "Black Alone" population in the U.S. (numbering 33,773,000) was counted as being in poverty.

As you can see, these values are far smaller than the monthly and annual poverty rates recorded and widely reported over the same period:

That's not to say that poverty isn't a problem. For the vast majority of Americans, it is however best described as a very temporary condition. The only way it could become permanent is if the government acts to put well-intentioned barriers in the way of those seeking to leave poverty behind.

And how do we know that isn't what kept those chronic 2.8% of the U.S. population in their impoverished conditions during those three years?

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July 6, 2011

How many pages does it take to explain the basics of the U.S. Medicare program?

If you answered "a lot more than it used to", you're right! Each year, legal publisher CCH puts out a book simply titled Medicare Explained, which they describe as follows:

A book for Medicare beneficiaries and others who need a relatively thorough explanation of the Medicare program with particular emphasis on services covered in institutional settings and services provided by physicians and suppliers. A detailed explanation is provided regarding eligibility, enrollment, benefits, exclusions and payment rules for Medicare Parts A, B, C and D. This book also explains the process for submitting beneficiary claims and filing an appeal.

As we saw with CCH's Standard Federal Tax Reporter and the U.S. tax code, the growth of the complexity of the laws and regulations affecting Medicare can be measured by the number of pages this particular book requires each year. Our chart below shows how that's changed for each year in which an edition has been published since 1996:

We see that over time, more and more pages have been required to "explain Medicare", although the real explosion in the government program appears to have taken place since 2007.

As it happens, that corresponds to the passage of the Medicare, Medicaid and SCHIP Extension Act of 2007, which passed into law on 29 December 2007.

It may seem strange that this act, whose main purpose was to extend existing health insurance coverage benefits for the existing Medicare, Medicaid and SCHIP programs, in addition to postponing payment cuts to physicians, would have such an effect.

However, the law, co-sponsored by Senators Max Baucus (D) of Montana and Charles Grassley (R) of Iowa, also contained a massive increase in regulatory reporting requirements for insurance providers. Commercial property and casualty insurance provider CNA explains in its summary of the Medicare, Medicaid and SCHIP Extension Act as it relates to the Medicare Second Payer Act from 1980:

#### What is the Medicare Secondary Payer Act?

In 1980, the Medicare Secondary Payer Act (the MSP) was enacted to amend the Social Security Act, representing an effort to reduce federal health care costs. MSP prohibits Medicare from reimbursing for medical benefits where "payment has been made or can reasonably be expected to be made" under a workers' compensation law, or other private insurance plans. As a result, Medicare was no longer a primary payer for a Medicare beneficiary's medical costs.

#### What is Section 111 of the Medicare, Medicaid & SCHIP Extension Act of 2007?

As of January 1, 2009, Section 111 adds mandatory data reporting requirements for nongroup health plans, such as liability insurance (including self-insurance), workers' compensation and no-fault insurance plans.

Insurers providing these products must report claim information involving a Medicare beneficiary claimant (a) where an ongoing responsibility for medical payments exists as of July 1, 2009, and (b) where the settlement, judgment or award date is on or after January 1, 2010. Failure to comply with these requirements can result in civil penalties of \$1,000 per day, per claimant.

These new requirements reinforce the goals of the MSP statute, supporting Medicare’s ability to:

• avoid making initial payments
• require set-asides for the payment of a claimant’s or a covered individual’s future medical expenses

Under Section 111, insurers must (1) determine whether an injured claimant is a Medicare beneficiary; and if so, (2) submit additional information for that claimant via a quarterly secure electronic data interface.

The Centers for Medicare & Medicaid Services (CMS) is the federal agency in charge of the administration of Section 111.

Each quarter, it will review and validate all data transmissions received from insurers. These transmissions are being referred to variously as 'Claim Input Files,' 'Mandatory Insurer Reports,' or 'MIRs.' The CMS will also issue and collect all fines.

So what does all that mean for U.S. businesses? CNA continues:

Complying with Section 111 and CMS guidelines may require your company to introduce new policies, change internal business practices, or enhance technical functionality within your data management systems. In order to remain compliant, your company should focus on the quality of the claimant data you collect, analyze, and submit electronically to the CMS — and be sure that all electronic transmissions occur on or before the dates mandated.

It turns out that combination of new regulatory requirements and potential penalties for failing to comply with the letter of the regulations are exactly the sort of thing that can make a book called "Medicare Explained" increase in size by 25%, or 76 pages, in just one year!

By contrast, the portion of the Patient Protection and Affordable Care Act (aka "Obamacare") that goes into effect in 2011 only added 12.8% more pages, or 52 pages to CCH's Medicare Explained book. But then, the changes driven by ObamaCare will be adding to the size of the book for years to come!

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July 5, 2011

After months of inaction as gasoline prices were rising, President Obama suddenly announced on 23 June 2011 that the U.S. would release 30 million barrels of oil from the Strategic Petroleum Reserve, in a move that appears to be somewhat of a panicked effort to try to claim some credit for a decline in gasoline prices, which have been falling steadily since 5 May 2011.

Let's see how the President's action has affected U.S. gasoline prices since the announcement. The following chart from GasBuddy.com shows the three month average retail price for regular gasoline sold in the United states:

As best as we can tell, there was a slight dip in the downward trend in gasoline prices around the time of the announcement, which evaporated within a couple of days, as the existing trend quickly resumed its previous trajectory. And since 29 June 2011, there's actually been an increase in average retail gasoline prices across the U.S., which is likely related to travel associated with the extended Fourth of July holiday weekend in the U.S. this year.

Or in other words, the President's dramatic action has had precious little effect on the overall trend of gasoline prices in the U.S., suggesting that President Obama's effort to alter the trajectory of U.S. gasoline prices shares a similar level of impotence as the efforts of Venezuelan President's Hugo Chávez, who tried unsuccessfully to move world oil prices in the opposite direction.

In other news, U.S. retail gasoline prices have fallen to the point where we expect that we will be soon decommission the "Good Morning, White House Staffer!..." feature on our site that we first launched when average U.S. retail gasoline prices began exceeding the critical \$3.50 to \$3.60 per gallon range earlier this year. We'll be taking it down after those prices fall consistently below the \$3.55 per gallon mark, but the White House staffer who has been tasked with "monitoring the situation closely" can expect it to return should those prices rise back about \$3.60 per gallon!...

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July 1, 2011

For a Fourth of July challenge, how many pages does it take for the CCH Standard Tax Reporter to fully document the U.S. tax code as it stands in 2011?

If you answered 72,536, you're right. Note that we didn't say "you win"!...

Believe it or not, that's within 38 pages of the number of pages we predicted that the CCH Standard Tax Reporter would be this year, back in March 2010! With that being the case, we'll re-present our tool for predicting the effective size of the U.S. tax code to give you a heads up for what to expect next year....

Year in Which to Estimate or Project Tax Code Complexity
Input Data Values
Year

Number of Pages Required To Record U.S. Federal Tax Code
Calculated Results Values
Estimated Number of Pages

As for why this might be relevant on the Fourth of July, see here. Have a great Fourth!

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