Tuesday, September 29, 2015

U.S. Economy Is Worse Than Claimed

            Courtesy of ShadowStats.com
The above chart shows a growing divergence between the Consumer Price Index and what it would be if the method of calculation had remained consistent. Beginning in 1983 the government changed its method of calculation to show lower inflation by excluding food and energy, claiming they were too volatile to be reliable indicators. The result is the so-called “core inflation” CPI which is a favorite of the Federal Reserve. The latest figure for the CPI reported by the Bureau of Labor Statistics is 0.4% (for August and also July), but if calculated by the method used in 1980 the inflation rate would be 7½ percent, as shown by Shadow Government Statistics (ShadowStats.com).

The chart shows the difference in the inflation rate only from the change in 1983. The divergence would be even greater if the effects of several later adjustments were also included. For example, a reconfiguration of this statistic by the 1995/96 Boskin Commission made the CPI an even worse indicator of the cost of living for most Americans. It has been estimated that from 1996 to 2006 this adjustment saved the U.S. Government over $680 billion in salary increases, social security, federal employee pensions, and other benefits.
It seems no one attempted to objectively determine the real cost of living without the influence of the flawed government model. The Chapman Index sought to remedy that. Its founder, Ed Butowsky, said it is “our attempt to help people understand why they feel like they aren’t keeping up and why, as they get older, they feel as though their money does not go as far – even when they’re following the rules, working hard and supposedly beating inflation.”

The Chapman Index reports the unadjusted actual cost and price fluctuation of the top 500 items on which Americans spend their after-tax dollars in the 50 largest cities in the nation. The latest average price increase of the 50 cities is 8.9%. Not a single one of the cities was even close to the near zero inflation of the CPI reported by the U.S. Bureau of Labor Statistics. The lowest of the 50 cities in the Chapman survey was Tucson, Arizona, at 5.7%. http://www.chapwoodindex.com/

Butowsky notes that routine salary increases and corporate pensions are often keyed to the CPI. “The middle class has seen its purchasing power decline dramatically in the last three decades, forcing more and more people to seek entitlements when their savings are gone. And as long as pay raises and benefit increases are tied to a false CPI, this trend will continue.” The Chapman Index shows where people actually spend their money. The CPI is not a true indicator of the cost of living since it excludes food and energy, which are not only necessities but for many people their largest expenditures.

Like the inflation numbers, the unemployment statistics have been manipulated by the government to present a more favorable picture.

John Williams, founder of Shadow Government Statistic, says, “The seasonally-adjusted SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994. That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers. The U-3 unemployment rate is the monthly headline number [Note that this is the least complete category—has the most exclusions—and thus shows the lowest, most favorable unemployment numbers]. The U-6 unemployment rate is the Bureau of Labor Statistics’ (BLS) broadest unemployment measure, including short-term discouraged and other marginally-attached workers as well as those forced to work part-time because they cannot find full-time employment.”

Notice that the most complete measure of unemployment (SGS) places today's unemployment rate at 23 percent. That is not only worse than in the recession of 2009-10 but comparable to what occurred in the Great Depression of the 1930s


Monday, August 31, 2015

Why Laws Fail To Make Us Healthier

Why do so many laws passed with good intentions and seemingly desirable goals so often fail? And why do they so often worsen the problems they are supposed to solve—and hurt people they are supposed to help? In previous postings we noted: 1) government programs to reduce intake of fats in the name of lessening heart disease actually led to weight gains and increased danger of diabetes and heart disease, 2) government efforts to improve the federal school lunch program by increasing consumption of milk, fruit and vegetables led to fewer students drinking milk, many skipping meals entirely, more “junk” food snacks being eaten, and vast quantities of fruits and vegetables being thrown away, and 3) government policies to reduce salt consumption are more dangerous than the salt Americans devour. The government recommendation for daily sodium intake is 1,500 to 2,300 milligrams or fewer. But people consuming fewer than 3,000 milligrams of sodium were found to have a 27% higher risk of heart problems, stroke or death than those consuming 3,000 to 6,000 milligrams.

Now the issue is banning plastic bags in grocery stores and other retail establishments. More than a hundred cities and counties have already done so, and others are considering it to reduce litter, disposal in landfills, and other environmental concerns. The bans are done with the implied or expressed intent that consumers will switch to reusable bags.

The effects of the bans, however, have not been what the advocates expected. A study from the Institute of Law and Economics of the University of Pennsylvania Law School found reusable grocery bags contained potentially harmful bacteria. Examining hospital emergency room admissions related to these bacteria, Professors Jonathan Klick and Joshua D. Wright found emergency room visits spiked when the ban went into effect. “Relative to other counties, ER admissions increased by at least one fourth, and deaths exhibit a similar increase.” Using standard statistical estimates, they found the associated health costs “swamp any budgetary savings from reduced litter. This assessment is unlikely to be reversed even if fairly liberal estimates of the other environmental benefits are included.”

In May 2013 the Los Angesles Times reported, “A reusable grocery bag left in a hotel bathroom caused an outbreak of norovirus-induced diarrhea and nausea that struck nine of 13 members of a girls’ soccer team in October.”

Researchers at the University of Arizona and the Loma Linda University School of Public Heath randomly tested reusable grocery bags carried by shoppers in Tucson, Los Angeles and San Francisco. They reported, “Bacteria levels found in reusable bags were significant enough to cause a wide range of serious health problems....Bacteria was found in 99 percent of the tested bags, nearly all of which were made of woven polypropylene. Half carried coliform bacteria; eight percent carried E. coli.”

Various studies state that nearly all dangerous bacteria in reusable bags can be removed by washing them, but 97 percent of the people using them don't wash them. The San Francisco ordinance states that reusable bags must have a usable life greater than 125 uses and, furthermore, must be durable enough to be washed and disinfected at least 100 times. Because the usable life requirement exceeds the number of washes requirement, the ordinance assumes the bag will not be washed after every use. The Klick and Wright study notes that “washing such bags will itself have negative environmental consequences through excess water use. Further, the detergents necessary to clean the bags add to the environmental costs, as does the use of water hot enough to kill the bacteria.” Kofi Aidoo, Professor of Food Science at Glasgow Caledonian University, is a leading expert on bacterial toxins and food-borne diseases. He says, “If people are going to have to pay for bags and re-use them my concern is we're creating a high risk of food poisoning. At the very least people have to be given advice to clean these bags every time they use them." 

Common plastic bags are environmentally superior to reusable ones in many ways. Manufacturing them requires less than half the energy needed for compostable plastic or cloth bags and less than a third of what's required for paper bags. A higher percentage of energy can be recovered (through combustion) from the single-use plastic bags than from the other two types. Making plastic bags requires less than 6 percent of the water needed to make paper bags. And cloth bags are much more challenging to recycle since they contain a combination of materials including metal, cotton and other fabrics.

In a comparison of quantities of municipal waste by weight, the production, use and disposal of single-use plastic bags produced a net 15.51 pounds of municipal solid waste; compostable plastic bags, 42.32 pounds; paper bags, nearly 75 pounds.

A report from the National Center for Policy Analysis states, Studies show that plastic bags represent a tiny portion of litter and that banning them has not reduced the amount....According to the Keep America Beautiful campaign, plastic bags are not one of the top 10 sources of litter nationwide.” In Austin, Texas, plastic comprised 0.6 percent of the city's total litter—but that is high because it included other types of plastic, not just plastic bags. A statewide study in California found plastic bags were only 0.3 percent of the waste. In San Francisco, plastic bags accounted for 0.6 percent of the city's litter before the ban—and 0.64 percent after the ban. 
The United Kingdom’s Environmental Agency found paper bags were more environmentally harmful than plastic bags in every category: global warming potential, abiotic depletion, acidification, eutrophication, human toxicity, fresh water aquatic ecotoxicity, marine aquatic ecotoxicity, terrestrial ecotoxicity and photochemical oxidation. It also found plastic bags were environmentally superior to reusable cloth bags. It said cloth bags would have to be used 104 times to surpass the environmental performance of plastic bags.

The campaign to outlaw plastic bags in the name of improving the environment is based on ignorance and misinformation. It will do the exact opposite. It will waste energy, water, and money. It will create inconvenience, waste people's time, and impose health risks. It will deprive people of the liberty to exercise choice which has produced a more efficient, economical and safer product—and with less residual municipal waste—than alternatives favored by the ban. Banning plastic bags is an attempt to achieve by political means what cannot be achieved by economic means, because it is unrealistic. It means government against the economy! Which means government against reality. There is nothing government can do to make an economic function more efficient than a free market; its only power is to make it less efficient and more costly—and, yes, environmentally inferior.

If government sacrifices even small measures of individual liberty in hope of some small economic gain deemed more important, the liberty disappears but the gain proves illusive. If government instead regards safeguarding liberty and individual rights as preeminent—not to be sacrificed to anything—the result is a free market that provides economic benefitsincluding environmental and health benefits— unattainable by political action.