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Sunday, November 20, 2011

Picking on Parker

I went to college and all I got was this silly sceptre

Dr. Parker's (chair of the economics department at the University of Nevada, Reno) pens another column in the Las Vegas Sun. Perhaps trying to play the moderate he seems to think we need a combination of small budget cuts and a return to the pre-Bush tax cut levels (which would actually hit those with the least income the hardest).

In the article, Dr. Parker claims government spending is only "half the problem." He states,

But federal spending is only responsible for half of the deficit [emphasis added]. Tax revenues have gone down significantly. This is partly because our incomes fell due to the recession, and incomes will eventually recover. But mostly it was because federal income tax rates fell.

Like many of Dr. Parker's claims about government spending, this is mostly nonsense (I've also worked over Dr. Parker here, here and here, if you are interested). Yes, it is true tax revenues have declined. It is also true that revenues declined because our own incomes (from which personal and corporate income taxes are derived) also declined. It is NOT true that government spending is responsible for just half the deficit. It is responsible for much more than that because government spending dramatically increased.

First, let's review the U.S. government revenues and spending. I've chosen to use data from the left-of-center Brookings Institution starting with 2007 (when the recession starts) and their estimate for 2011.

REVENUES (constant 2005 dollar values)

2007: $2.414 trillion
2011: $1.901 trillion

Revenues declined $513 billion or 21.3 percent

EXPENDITURES (constant 2005 dollar values)

2007: $2.565 trillion
2011: $3.341 trillion

Expenditures increased by $776 billion or 30.4 percent

 Federal, State and Local governments are spending more than ever and that includes WWII

In other words, expenditures make up, by far, the biggest part of the problem...and I'm giving Dr. Parker the best evidence possible to make his case. The Brookings Institution is far more pessimistic about revenues than the U.S. Government. The U.S. government estimates revenues (Government Accounting Office) will be about $394 billion higher for 2011 than the Brookings' estimates. If the government estimates are correct, then the revenue would have only declined about 7 or 8 percent between 2007 and 2011 while spending still increased about 30 percent.

The debate isn't over yet. Dr. Parker wants higher taxes. He states, "If all taxpayers had paid the same rates in 2008 as they had in 2000, the budget deficit would have been almost $300 billion smaller." Essentially, (assuming no productivity losses or that no one tried to avoid paying higher taxes) the deficit would drop from $1.3 trillion to about $1 trillion.  In other words, eliminating the Bush tax cuts (for everyone) would only take care of about 23 percent of the deficit and make no dent in the national debt. If the more pessimistic Brookings' data is correct, then eliminating the Bush tax cuts can't even take care of a fifth of the current deficit.

Note: even if revenues never fell, spending still increased by $776 billion and the deficit would still be around $900 billion for FY 2011. So at best, revenues account for about 1/3rd of the deficit problem and at worst 1/5th.

So how can Dr. Parker claim spending is only half the problem when raising taxes can't even take care of a quarter of the deficit? He can't...not if he's being honest or thinking clearly.

Raising taxes and making minor cuts to the budget will not reduce deficits or shrink the national debt. We will need major budget cuts - and significantly more than $1.5 trillion over 10 years. Heck, $1.5 trillion over 10 years won't even take care of half the debt racked up by Obama in his first 3 years alone.

Wednesday, November 16, 2011

Mostly nonsense

Jon Ralston and Patrick Coolican at the Las Vegas Sun are busy trumpeting a recent Brookings Institute study about Nevada (note: Brian Greenspun, editor and owner of the Las Vegas Sun, is a board member of the Brookings Institution).

Sadly, from what I've heard the report is mostly nonsense.

Mostly dead too

Regarding higher education and referencing the Brookings report Ralston writes,

With $558.9 million of state funding for higher education in fiscal year 2010-2011, Nevada provided the lowest amount of public support for higher education among states of a similar size (2-3 million people), and it ranked 35th among all 50 states for its level of state higher education funding on a per-capita basis ($211.44). ”

How low can it go? Nevada spends 0.44 percent of its gross state product on higher education compared with 0.88 percent in Arkansas and 0.96 percent in Mississippi, the study found. Oh to be the Mississippi of the West in this metric.

Unfortunately, there are major problems with these statistics that ultimately mislead the reader. First, every state has varying levels of support but state support because every university has multiple sources of revenue. In Nevada, state support makes up about 1/3rd of all revenues for our university system.  Some states give very little and charge students a lot (in fact - there is a statically significant correlation between high student fees and college graduation rates...hmmm). It is entirely possible that state support is low but the combination of tuition, fees and other revenue sources is quite high.

Nevada's higher education spending per pupil is actually ABOVE AVERAGE

As it turns out, Nevada's per pupil spending on higher education is quite high. In fact, the recent report "Trends in College Spending" ranks Nevada 19th in the nation. Total spending on "higher education and research" in Nevada amounted to $17,171 per pupil! That is more than Utah - a state Nevada's higher education leadership consistently desires to emulate.

This fact makes those last statistics Ralston cite even more bogus in appearance. Claiming our higher education system is underfunded by using spending as a percent of GSP is intellectual dishonesty at best and intellectual incompetence at worst. If you want to learn why, I eviscerate Dr. Parker, an economist at UNR for using those statistics in this blog post here.

Next, Cooligan makes the argument (based on the Brookings report) that we need a Medical school in southern Nevada. Coolican writes,

Experts told my former colleague Marshall Allen that academic medicine — med schools — promote a culture of quality across a community’s health care sector.

This statement is laughable. According to the U.S. Department of Health and Human Services one of the worst hospitals in Nevada is routinely our government run University Medical Center. If med schools promote a culture of quality, where is it?

Tell me you're joking Coolican!

Marshall Allen, referenced by Coolican above, wrote a series of articles attempting to prove "profits [were] being put before patients" despite finding more evidence of harm done by the government run hospital than the private sector hospitals. I tear apart Marshall Allen for his highly biased report in my blog post "The Marshall Plan."

So why won't building a medical school in southern Nevada help rebuild our economy? Other than already having University Medical Center in Las Vegas (where is our economic growth guys?), it is simply cheaper to hire doctors from other states than spend taxpayer dollars educating them here.

Think about this...

According to U.S. News and World Report, UNR Medical School has 246 students. According to the Nevada System of Higher Education UNR Medical School collected and likely spent $74,757,215 in FY2011. Total revenues came to $303,891 per pupil. Granted, some of that revenue comes from student tuition and fees (about $15,000 for in-state students and $37,000 for out-of-state students) as well as research grants, and surgical procedures. Just looking at the state support, the amount comes to $122,025 per pupil. So how is spending that much money going to help? Let suckers from other states spend that money and let us buy the graduates once they've been educated and become useful.

And don't get me started on spending that much money to subsidize the education of individuals who will be making enough money to be in the top 5 percent of income earners.

The only people benefiting from building a medical school in southern Nevada will be members of the medical cartel who get to teach at the university and the students who have their future wealth subsidized by the rest of us poorer saps.

Coolican and Ralston want what is best for Nevada - but too bad they keep promoting failed ideas and bogus thinking.