27/5/19: Which part of the Federal spending poses a greater fiscal threat?

An interesting chart via Cato on the number of Federal state aid programs in the U.S.

The grand total of these programs in terms of annual spending is roughly US$697 billion. The issue here is that these programs are continuing to increase in scale and scope despite the so-called 'strongest economy, ever' (excluding the recent changes under the Trump Administration that propose significant cuts to some of these programs on the social welfare, public health and education sides for Budget 2020) .

Here is the summary of the main program headlines and outlays:

Source for both charts: https://object.cato.org/sites/cato.org/files/pubs/pdf/pa868.pdf

Nonetheless, whether or not the state supports and welfare entitlement programs can be afforded into the future (yes, demographics of ageing are driving up the demand for many of these programs, while also making them more politically feasible with older voters, yet reducing the capacity of the economy to carry these increases), the major issue that is left un-addressed by the American analysts is the overall composition of the U.S. Federal spending.

As discussed in this article: https://bit.ly/2VU39Hj, current 2020 budgetary outlook envisions a massive increases in military spending, offset by the reductions in assistance to the low income families, education and public health. Here is the summary slide on this from my new course slides on the subject of the Twin Secular Stagnations:

The key quote from the above: "In fact, the proposed FY2020 military and war budget makes up $989 billion of the Federal Government’s $1,426 billion Discretionary Budget. This represents a staggering 69 percent of the total Federal Discretionary Budget for FY2020!"

No matter how concerned we might be with the sustainability of the Federal fiscal policies, transfers to the States from Washington are, de facto, a form of local monetization of the Fed monetary policies, some of which is being cycled into state-level investments in public infrastructure and education, as well as public health. Pentagon's spending, in contrast, carries virtually no investment-like benefit for the rest of the society, and much of the 'securing our nation' argument in favor of spending almost a trillion dollars on weaponry and military personnel is bogus as well (unless you still, for some unfathomable reason, believe that demolishing Libya or Syria are of some benefit to the actual American society or that the likes of Iraq and Iran pose a truly existential threat to America).

16/12/2012: Europe's Social Welfare State gets German Warning

"If Europe today accounts for just over 7 per cent of the world’s population, produces around 25 per cent of global GDP and has to finance 50 per cent of global social spending, then it’s obvious that it will have to work very hard to maintain its prosperity and way of life."

Wonder what 'extremist' right-wing 'demagogue' said this? Why, Angela Merkel...

Read the full story here.

But here is some data from the OECD


Estimates of real public social spending and real GDP (Index 2007=100) and public social spending in percentage of GDP (right scale), 2007-2012

Source:

Projected public social spending as a % GDP and as a % “trend GDP” and real GDP, 1980-2012  (select countries):

Source for above: http://www.oecd-ilibrary.org/social-issues-migration-health/is-the-european-welfare-state-really-more-expensive_5kg2d2d4pbf0-en

And here is the latest OECD data (2009, published 2012):

Back in 2009, Ireland ranked 18th in the OECD in terms of private spending on Social Expenditures as % of GDP and 14th in the OECD in terms of public spending. We ranked 15th in terms of overall Social Expenditures. In comparison, Swiss spent 19.4% of their GDP, against Ireland spending 25.8%.

Setting aside Irish case, Ms Merkel has a point. EA12 average public spending is 26.8% of GDP against the OECD average of 22.1%, while private spending average is 2.4% against the OECD 2.5%. In other words, EA12 spend more publicly, less privately, on social expenditure.

15/01/2011: Family and siblings achievements

Correlations in achievement between siblings in general reflect the impact of family and community on individual outcomes. More importantly, since the siblings achievements are contemporaneous, these correlations can tell us much more about social and family effects than intergenerational correlations, since the latter effects are clearly a function of constantly changing circumstances.

An interesting paper from Swedish researchers (What More Than Parental Income, Education and Occupation? An Exploration of What Swedish Siblings Get from Their Parents, by Anders Björklund, Lena Lindahl, and Matthew J. Lindquist – available here) looked at the determinants of siblings performance in terms of future earned income.

Estimates of such siblings-linked correlations in income, per Björklund et al show that more than half of the family and community influences shared by siblings are independent of parental income. This is a powerful result as it suggests that:

• within-family and within-social group factors determining the outcomes for siblings are more important than much-talked about income poverty; and
• positive effects of the family on raising children can potentially partially (but with strong effect) offset adverse effects of income poverty.

“Measures of family structure and social problems account for very little of sibling similarities beyond that already accounted for by income, education and occupation.” In other words, it appears that the measured aimed at directly influencing the actual form of the family structure (a traditionalist family focus etc) and the core social welfare policy instruments (policies aimed at alleviating social disadvantages) hold little promise in enhancing future performance of children beyond the already recognized income and education components.

Unless, that is, these policies are incentivising more parental inputs into raising children: “…when we add indicators of parental involvement in schoolwork, parenting practices and maternal attitudes, the explanatory power of our variables increases from about one-quarter (using only traditional measures of parents’ socio-economic status) to nearly two-thirds.”