Americana

Hoopster Demographics

DUNCAN CURRIE 03/06/2008

Is your typical NBA basketball player from the inner city? That may be a common assumption, but new statistics published in ESPN The Magazine suggest it simply isn’t accurate.

“In fact,” writes Tommy Craggs, “when we ran our research findings by William Frey, a demographer at the Brookings Institution, he had this to say: ‘You’ve exploded the city myth. The NBA is much more of a suburban population than most would have thought.’

“How did we produce our myth-busting results? We pulled 2000 U.S. Census data for the hometowns of all active American-born players from the previous five drafts. (Thirty-four players were foreign-born.) That left us with 158 guys, roughly a third of the league....

“The median population of our sample was 112,017, a shade larger than Springfield, Ill., which is home to Sixers swingman Andre Iguodala. And while 14 players hailed from areas with more than two million residents, 54 came from towns with fewer than 50,000,” Craggs reports. “The median household income of our draftees’ hometowns was $38,127, which tracks closely with the national average of $41,994. Benton Harbor, Mich. ($17,471), the poorest, was the home of Knicks forward Wilson Chandler. The wealthiest? Sugar Land, Texas ($81,767), the Houston suburb where Raptors guard T.J. Ford grew up.”

What about the racial makeup of these towns? “Our typical town was 59.3 percent white (compared with 75.1 percent for the nation) and 26.8 percent black (versus 12.3 percent). But 18 hometowns were more than 90 percent Caucasian, the whitest being Hornets guard Adam Haluska’s Carroll, Iowa (98.6 percent). Only three towns were more than 90 percent black and seven more than 80 percent.”

As for education levels: “In the players’ hometowns, 78.6 percent of people 25 and older had a high school degree or higher, close to the 80.4 percent national figure.”

Craggs acknowledges that, “yes, we know there are bound to be neighborhood disparities within any town. That doesn’t change the fact that the NBA clearly isn’t just a big-city league. ‘When you look at the distribution,’ says Frey, ‘there’s a broad spectrum of areas the players come from, and a significant number come from white, middle-class suburbs.’”

Lessons from Japan’s ‘Lost Decade’

DUNCAN CURRIE 03/06/2008

In a new report, American Enterprise Institute visiting scholar John H. Makin discusses Japan’s “disastrous decade of economic stagnation and deflation from 1991 to 2001,” which became known as the “lost decade,” and explains what lessons U.S. policymakers should draw from it. In Japan, the lost decade followed a massive asset price collapse. In the United States, the fear is that a severe housing slump and credit crunch will trigger a recession.

“A detailed examination of Japan’s lost decade may lead some to conclude that America’s current problems are not that serious,” Makin writes. “The lessons for American policymakers in 2008, however, are clear, and it would be unwise to ignore them. An economic cycle driven by a collapse in the market for an asset—such as land or housing—to which the banking system is heavily exposed is a dangerous beast. One lesson that we shall probably be learning this year is that conventional measures like prompt policy interest rate reductions by the central bank and some fiscal relief for households and firms are necessary but not sufficient conditions to return the economy to health.”

Here are two other lessons from Japan: “do not allow deflation to take hold,” and “avoid the temptation to raise taxes in the midst of a rapid economic slowdown driven by deteriorating credit conditions.”

Read the whole thing.

How Hillary Did It

DUNCAN CURRIE 03/05/2008

As usual, RealClearPolitics blogger Jay Cost has written the sharpest day-after analysis of a big political night. Here’s a taste:

“It should be clear that Texas and Ohio performed in a manner roughly consistent with the states prior to Wisconsin. From this, we might infer that any momentum that Obama developed after the Potomac Primary was not carried through yesterday. Wisconsin did not help him in Texas and Ohio—as Virginia, Maryland, and DC seemed to help him in Wisconsin. The states voting yesterday seemed to vote ‘normally.’”

Read the whole thing.

Mr. Howard Goes to Washington

DUNCAN CURRIE 03/05/2008

This past November, Australians finally voted out John Howard, who had served as prime minister since 1996 and as head of the center-right Liberal Party since 1995. During his tenure as PM, Howard revamped Australia’s tax code, expanded its foreign trade, eliminated the government’s debt, reformed workplace law, piloted a robust economy, boosted relations with China, India, and other Asian powers, and strengthened the U.S.-Australia alliance—an impressive litany of achievements by any standard. Indeed, Howard must rank among the most consequential prime ministers in Australian history and among the most successful democratic politicians of the past decade.

Last April I traveled to Australia in the course of writing a piece on Howard’s success. In the end, he was voted out despite his stellar economic management. It was a crushing defeat for Howard—he even lost his own Sydney-area parliamentary seat—and for the Liberal Party, which emerged from the election in disarray. Still, Howard left behind a considerable legacy.

Tonight, the former Aussie PM will be in Washington to speak at the American Enterprise Institute’s annual dinner and to receive AEI’s Irving Kristol Award.

Funny Money or Sunny Money?

NICK SCHULZ 03/05/2008

Here is an interesting discussion of “solar thermal power,” which is basically solar power without the expensive photovoltaics (see page 2 for an eye-grabbing picture of such a plant). Pacific Gas & Electric Company and Florida Power & Light Company are both exploring the technology.

Its appeal? “Severin Borenstein, director of the University of California’s Energy Institute, notes that solar thermal power will become cost competitive with other forms of power generation decades before photovoltaics will, even if greenhouse-gas emissions are not taxed aggressively.”

Phone Fight

NICK SCHULZ 03/04/2008

Telecommunications firms that aided government wiretapping efforts after 9/11 are being sued by civil liberties activists. As The Washington Post notes, the Bush administration is hoping to grant those phone companies retroactive immunity for their assistance. Here is what a bipartisan Senate Select Committee on Intelligence report had to say in October:

“Electronic communication service providers play an important role in assisting intelligence officials in national security activities. Indeed, the intelligence community cannot obtain the intelligence it needs without assistance from these companies. Given the scope of the civil damages suits, and the current spotlight associated with providing any assistance to the intelligence community, the Committee was concerned that, without retroactive immunity, the private sector might be unwilling to cooperate with lawful Government requests in the future without unnecessary court involvement and protracted litigation. The possible reduction in intelligence that might result from this delay is simply unacceptable for the safety of our Nation.”

Standing By Colombia

DUNCAN CURRIE 03/04/2008

Over the past six years, the progress in Colombia has been one of the most encouraging stories in all of Latin America. President Álvaro Uribe has achieved enormous reductions in terrorist and drug-fueled violence, and he has revived the Colombian economy. It was no surprise when Uribe won a landslide reelection victory in 2006.

This past weekend, Colombian military forces launched a cross-border raid into Ecuador in pursuit of guerrilla fighters from the Revolutionary Armed Forces of Colombia (FARC), the leftist rebel group whose terrorist activities have plagued Colombia for decades. They wound up killing a high-ranking FARC leader.

This was a huge victory in Colombia’s war on terrorism. It also yielded some valuable intelligence information. As the Colombian national police chief explained, the captured FARC documents provide evidence that the guerrillas have been funded and supplied by Hugo Chávez, the radical Venezuelan president. Chávez responded with typical bravado, calling Uribe a “liar” and threatening to start a war if Colombian troops ever crossed into Venezuela the way they had crossed into Ecuador.

“Such a conventional war isn’t likely,” The Wall Street Journal notes in an excellent editorial today. “Colombia today has a superior military force, thanks in part to Mr. Chávez’s purge of his own officer corp as a way to minimize risks of a coup d’etat against him. The war bluster is especially phony because Mr. Chavez is already waging his own guerrilla campaign against Colombia through his support for the FARC. The FARC’s ‘foreign minister,’ Rodrigo Granda, was nabbed three years ago by bounty hunters in Caracas, where he was living comfortably, and a former Venezuelan military officer told us years ago that the army was instructed not to pursue the FARC in the Venezuelan jungle.”

President Bush has spoken to Uribe by phone and affirmed his support. Congress should take this opportunity to approve the U.S.-Colombia free trade pact, which was signed way back in November 2006. Our ally deserves it.

How to Tax the ‘Munis’

NICK SCHULZ 03/04/2008

Harvard economist Jeffrey Frankel makes an interesting point about an always sexy topic—municipal bonds!

“One U.S. asset class strikes me as undervalued relative to the rest: municipal bonds. AAA-rated munis of each maturity pay a higher yield than Treasuries of the same maturity. The differential is as high as 50 basis points for the 2-year and 30-year maturities. Yet state and local bonds are tax-exempt while treasuries and corporate bonds are not. (I am only recommending munis for the taxable part of the portfolio of a taxed investor, of course. Put equities in the tax-exempt part.)

“The obvious reason why state and local governments might have to pay more to attract investors is risk of default. But it is likely that investors fear default on munis more widely than they should. Default is rare, notwithstanding the long memories left by financial troubles in New York City and Orange County in decades past. (Furthermore, when there is a default, holders of munis usually enjoy a higher recovery rate than holders of corporate bonds.)”

On the taxation of “munis,” American Enterprise Institute resident scholar Alan D. Viard has highlighted their tax status in the context of an important Supreme Court case “in which the taxpayer-plaintiffs contend that Kentucky violates the dormant commerce clause (DCC) of the U.S. Constitution by granting its residents a state income tax exemption for interest on home-state municipal bonds while taxing out-of-state municipal bonds. This selective exemption for home-state municipal bonds, also practiced in some form by 42 other states, is a significant barrier to interstate commerce and has balkanized the municipal bond market. The Supreme Court should affirm the Kentucky Court of Appeals’ ruling and strike down the exemption under the DCC.”  

Don't Go Changin'?

NICK SCHULZ 03/03/2008

Sociologist and political scientist Lane Kenworthy makes an insightful point about the current political season. There is much enthusiasm for “change,” triggered mainly by the rhetoric of Barack Obama but also embraced in various forms by other candidates. Yet as Kenworthy points out:

“The change they’ve embraced is political change. When it comes to economic change, enthusiasm is decidedly more muted. Many Americans would be happy with a change in our economic policies. But the notion that we should get used to—and perhaps even welcome—continuous, regular economic change is a tougher sell. This is particularly evident with respect to globalization.”

Kenworthy offers several suggestions for making such change more palatable to voters of both parties.

Liquid Gold? Maybe Not

Karen Porter 03/03/2008

The Energy Independence and Security Act, signed by President Bush in December, sought to encourage the production of biofuels such as ethanol. But it may be having some unintended consequences. 

As Fortune’s Jon Birger reports: “Spurred by the ethanol plant construction binge, corn prices have gone stratospheric, soaring from below $2 a bushel in 2006 to over $5.25 a bushel today. As a result, it’s become difficult for ethanol plants to make a healthy profit, even with oil at $100 a barrel.” 

Consequently, the “construction binge” may soon be over. “Plans for as many as 50 new ethanol plants have been shelved in recent months, as Wall Street pulls back from the sector, says Paul Ho, a Credit Suisse investment banker specializing in alternative energy. Financing for new ethanol plants, Ho says, ‘has been shut down.’”

This is only the latest bad news for ethanol boosters. American Enterprise Institute resident scholar Robert W. Hahn recently weighed the costs of ethanol production against its environmental and security benefits. He concluded that, by 2012, the costs will exceed the benefits by between $1 billion and $2 billion per year.

An Inconvenient Truth About China

Duncan Currie 02/29/2008

Science magazine has published a fascinating article on the explosive growth of China’s carbon dioxide emissions. Measuring the volume of emissions in gigatons of carbon, or GtC—1 GtC equals 1 billion tons— authors Ning Zeng, Yihui Ding, Jiahua Pan, Huijun Wang, and Jay Gregg lay out the figures: 

“China has one of the largest coal reserves in the world, and coal accounts for 67 percent of its primary energy use, compared with 24 percent for the world average. China is currently bringing two additional coal-fired power plants to the electric power grid every week. Although the government had set the goal of 20 percent reduction in energy intensity (energy consumption per unit GDP) in the 11th Five-Year Plan period (2006-10), the goal looks unlikely to be met, as energy intensity has decreased by only 1.23 percent in 2006. In a hypothetical scenario in which carbon intensity keeps pace with a GDP growth rate of 7 percent, by 2030, China would be emitting as much as the world as a whole is today (8 GtC/year). If China could limit carbon intensity at half of the economic growth rate, as was done in the 1980s-90s, a quadrupling of GDP in 20 years would still lead to CO2 emissions of 3 to 4 GtC/year.” (Emphasis added.) 

The full article can be found here (though it is hidden behind a subscriber/pay firewall). In the May/June 2007 issue of THE AMERICAN, Rowan Callick wrote an excellent piece on the bevy of environmental problems caused by China’s coal industry.

‘From Violence to Voting’

Duncan Currie 02/29/2008

In a recent paper, Yale University economist Chris Blattman “employs new data and an unfortunate natural experiment in Uganda to show that combat experiences and exposure to war violence lead to greater political participation and engagement among young men formerly in an armed group. This is potentially good news for policy makers in civil war-torn nations. For social scientists, however, it presents a puzzle: why should violence influence political participation? The answer can expand our understanding of the determinants of individual political behavior more generally, and test competing theories of participation.”

Read the whole thing.

Who’s for Free Trade?

Karen Porter 02/27/2008

In recent weeks, Barack Obama has criticized Hillary Clinton for her past support of the North American Free Trade Agreement, which created the largest free trade bloc in the world. Rhetoric aside, where do the presidential candidates really stand on trade?

An interactive web tool created by the Cato Institute may help provide the answer. The tool tracks trade-related votes between 1999 and 2008, evaluating senators and congressmen based on their support for or opposition to trade barriers and subsidies. Those who both oppose barriers and subsidies are classified as “free traders”; those who oppose barriers but favor subsidies are “internationalists”; those who favor barriers but oppose subsidies are “isolationists”; and those who favor both barriers and subsidies are “interventionists.”

Despite her husband’s rather robust free trade record, Hillary Clinton falls into the “interventionist” category. Since being elected to the Senate in 2000, she has cast only ten votes (out of 36) in favor of free trade. Obama’s record is less extensive but similarly interventionist: just four of the 13 trade votes he has cast since his election in 2004 have supported free trade.

On the Republican side, John McCain falls squarely in the “free trader” camp, with 42 votes (out of 50) in favor of free trade. Since he has only been a state politician, former Arkansas governor Mike Huckabee is not tracked by Cato’s tool.

Ch-ch-ch-ch-changes

Duncan Currie 02/27/2008

A few days ago, Forbes publisher Rich Karlgaard had a sharp blog post on the underlying sources of Americans’ economic anxiety. “I think there are two deeper causes,” Karlgaard writes. “One is a rate of inflation that has jumped ahead of most people’s annual pay raises. The widely quoted consumer price index figure excludes gas, health care and education, all of which have climbed at rates higher than the CPI.

“The other really deep reason is the underlying rate of economic change. That rate is accelerating. Companies that are leaders in their industries—and this applies to leaders in all industries—are falling out of leadership faster than before. New and disruptive companies are popping up everywhere, like jaguars amid elephants….

“Cheap production technology combined with vast pools of talent, capital and consumers around the world guarantee a world of “extreme competition” (to borrow a McKinsey phrase) and ever-accelerating business-model evolution. What could slow it down? Nothing I see. Not even war.

“What goes for companies goes for careers. Your career and mine can be disrupted more easily than before. The best personal career strategy is to assume that our jobs will be disrupted. Everyone needs a Plan B.

“If you and I face up to these facts and trends and likelihoods, the world will look scary but thrilling, and full of opportunity, too. If we cover our eyes or imagine that politicians can protect us from change, the world will look scary, period.”

The Trouble with Income Inequality

Duncan Currie 02/27/2008

As Barack Obama and Hillary Clinton battle for the Democratic presidential nomination, their economic rhetoric has turned increasingly populist. In particular, both candidates have railed against income inequality, which is easy to demagogue but far more complex than it appears on the surface. In the May/June 2007 issue of THE AMERICAN, economists Gary S. Becker and Kevin M. Murphy of the University of Chicago put rising income inequality in perspective. We would also recommend a recent New York Times article by W. Michael Cox and Richard Alm of the Federal Reserve Bank of Dallas, which explains why “consumption is a better guideline of economic prosperity than income.”

Geldof for Bush

Duncan Currie 02/27/2008

Speaking to reporters last week, Irish rocker Bob Geldof (organizer of the 1985 Live Aid and 2005 Live 8 concerts) praised George W. Bush’s record of increasing U.S. aid to Africa, saying that Bush “has done more than any other president so far,” even though the press hasn’t taken much notice. “This is the triumph of American policy really,” Geldof said. “It was probably unexpected of the man. It was expected of the nation, but not of the man, but both rose to the occasion.” Unfortunately, Geldof told the assembled reporters, “You guys didn’t pay attention.”

His admiration for Bush’s Africa policy dates back several years. For example, in a May 2003 interview with The Guardian, Geldof lauded Bush’s work in the fight against poverty and disease. “You’ll think I’m off my trolley when I say this, but the Bush administration is the most radical—in a positive sense—in its approach to Africa since Kennedy,” he said. He contrasted U.S. humanitarian assistance under Bush with the “pathetic and appalling” efforts of the European Union.

Last month, American Enterprise Institute visiting scholar Arthur C. Brooks wrote a smart piece on Bush’s legacy in Africa.

Welcome to Americana

THE AMERICAN 02/27/2008

You are reading the latest addition to our website—what we call Americana. It will be a running compilation of news, ideas, links, and commentary, updated constantly throughout the day. Much like the magazine, it will cover a wide gamut of issues, from politics and foreign affairs to culture and sports, all viewed through the lens of business and economics. Think of it as an expanded version of our Marketplace of Ideas feature.

You probably have also noticed that our homepage has been slightly redesigned. The new DataPoints section is an accumulation of the polling statistics we publish in our daily email newsletter. It is put together by American Enterprise Institute senior fellow Karlyn Bowman, also a contributing editor to THE AMERICAN, and by Karen Porter, an AEI research assistant and an editorial assistant at THE AMERICAN.

We encourage feedback on all our new features. (Comments can be sent to editor@american.com.) Enjoy!