"On July 26, I noted that the crucial question about Venezuela’s upcoming election was not whether Maduro would lose in a landslide, as he did according to serious exit polls and the National Electoral Council’s initial figures prior to an alleged blackout. Rather, the question was whether Maduro would accept the result. He did not.
At the time of writing, the regime, which controls the electoral council, has not produced evidence to back its claims that Maduro beat opposition candidate Edmundo González by a margin of 51 to 44 percent. Protests are erupting in Venezuela and several Latin American countries, including Chile, which is led by a left-wing president, refusing to recognize the election’s validity. It is now clear that Maduro’s plan is not to flee or negotiate, but rather to hold on to power by any means necessary.
Why are those means necessarily fraudulent, potentially also violent?
The following graphs will help explain why, according to fair calculations, around 65 percent of Venezuelan voters rejected Maduro’s government yesterday at the polls.
Inflation
Source: International Monetary Fund
Chávez took control of Venezuela’s central bank in 2007. When he died in 2013, Maduro inherited 40 percent annual inflation levels after a hefty rise in the previous decade. By 2017, the Chavista regime’s monetary mismanagement had left inflation at 438 percent per annum.
Source: International Monetary Fund
Mere triple-digit annual inflation levels—such as those that Venezuela is experiencing now— would seem low in comparison to the hyperinflationary period of 2018 and 2019, when the Chavista regime oversaw 65,000 percent and 19,000 percent inflation respectively.
Devaluation
Source: Federal Reserve of St. Louis
Chávez constantly devalued Venezuela’s currency, as did Maduro when he took over. By 2017, the bolivar had lost 92 percent of its value against the dollar since 2000. As hyperinflation raged, Maduro further devalued by 95 percent and removed eleven zeroes from the currency in two years.
By 2018–2019, Chávez and Maduro had made Venezuela’s currency worthless; street vendors at one point sold goods woven from bolivar banknotes. Maduro was forced to remove currency exchange controls. By 2021, large parts of the Venezuelan economy were de facto dollarized.
Source: Federal Reserve of St. Louis
Debt to GDP
Source: International Monetary Fund
When Chávez won his first election in 1998, Venezuela had a relatively healthy debt-to-GDP ratio of 30.7 percent. By the time of Chávez’s death in 2013, the debt had risen to the equivalent of 85.4 percent of GDP. Since 2015, Venezuela’s debt-to-GDP ratio has remained well above 100 percent, having reached a record level of 327.7 percent in 2020.
Per Capita GDP
Source: International Monetary Fund
High oil prices and Chávez’s deficit spending boosted Venezuela’s per capita GDP nearly fourfold from 2003 until 2012. A full bust would follow the boom. The Chavista model’s collapse and the oil bear market of the mid-2010’s pushed the country’s per capita GDP in 2018 to roughly the same level as 1984—this despite a population exodus. The same remains true today despite the sharp rebound in oil prices since the lows of 2020. Chavismo thus set Venezuela back four decades in terms of economic growth.
Poverty & Extreme Poverty
Source: United Nations Office for the Coordination of Humanitarian Affairs
Through his extreme fiscal profligacy, fueled by debt and petrodollar income at the height of the 2000’s oil boom, Chávez created the mirage of a nation that was defeating poverty. By the early 2010’s, the poverty rate had dropped below 30 percent of the population and extreme poverty below 10 percent. Then came fiscal, monetary, and economic collapse. By 2019, 96 percent of Venezuelans lived in poverty and 79 percent in extreme poverty. In 2021, the Financial Times reported, “for the first time, the average Venezuelan is poorer than the average Haitian.” The formerly rich Venezuela had become Latin America’s poorest country.
Oil Production
Source: U.S. Energy Information Administration
Venezuela sits atop the world’s largest oil reserves and, in the early 2000’s, was producing north of 3 million barrels of crude per day. Even after the oil-sector strike of 2002–2003, an attempt to prevent Chávez from seizing control of the state-owned oil company (PDVSA), and Chávez’s subsequent firing of 20,000 PDVSA employees (out of a total of 35,000), Venezuela produced over 2.5 million barrels per day. But decline set in as Chávez seized PDVSA, filled its ranks with his supporters, and used its resources for his “revolutionary” aims, for instance building social housing.
The poorly led company was unable to weather the oil bear market which began in 2014. Trump-era sanctions halted all oil exports to the United States, but Venezuela’s exports to the rest of the world also dropped precipitously, as did internal oil consumption. By 2019, Venezuela was producing well below one million barrels of crude per day, a figure that dropped to under 500,000 barrels per day during the COVID-19 crisis.
Chavista propaganda blames the collapse of Venezuela’s oil industry solely on US sanctions, but history has provided a curious point of comparison. Despite facing severe sanctions on its own oil exports since early 2022, Russia “has defied predictions of severe declines in its oil supply,” as Reuters reported at the end of 2023 (with Russian supply expected to remain steady in 2024). In Venezuela’s case, Bolivarian socialism, not sanctions, is the main culprit of PDVSA’s downfall.
Emigration
Source: Plataforma de Coordinación Interagencial para Refugiados y Migrantes de Venezuela (R4V)
Venezuelans began to leave their country en masse in 2014. By 2022, 6.8 million Venezuelans were residing abroad, many of them as refugees. According to R4V, a platform of the United Nations High Commissioner for Refugees and the International Organization for Migration, there were 7.77 million Venezuelan refugees and migrants in the world in early 2024, with 6.59 million living in Latin America and the Caribbean.
Neighboring Colombia is the country that has received the most Venezuelans in the last ten years, at an astounding 2.8 million; Colombia’s total population in 2013 stood just above 46 million, according to the World Bank. Peru (1.54 million), Brazil (568,000), Chile (532,000), and Ecuador (444,000) follow. Outside Latin America, the United States and Spain have received the largest numbers of Venezuelan migrants. In 2019, a UN report estimated that Venezuela had already lost 10 percent of its population due to the exodus.
Political Prisoners
Source: Foro Penal
As in Cuba, whose regime Chávez admired and emulated, political repression has been a hallmark of the Chavista era, with a sharp rise in political prisoners during Maduro’s time in power. High-profile opponents of Chavismo who have been incarcerated include Leopoldo López, a party leader and local mayor in Caracas, and former Caracas mayor Antonio Ledezma, both of whom managed to flee Venezuela.
The number of political prisoners increased drastically in 2017 when the regime violently put down massive protests that arose after Maduro’s “dissolution” of the opposition-led National Assembly and the arbitrary arrest of opposition leaders. Although the regime has used the release of certain political prisoners as a bargaining tool in its frequent negotiations with the opposition, it targeted opposition leader María Corina Machado’s staff members for arbitrary detention during the recent election campaign.
Homicide Rate
Source: World Bank (based on official figures)
Chávez had little intention of upholding Venezuelans’ liberty and property. Nor did he safeguard their right to life. Venezuela’s homicide rate rose sharply under his rule and that of Maduro, reaching a high of 63 murders per 100,000 inhabitants in 2014, according to official figures, whose accuracy has been questioned. The Venezuelan Observatory of Violence, an independent research institute, has constantly published figures that exceed those of the regime. The institute calculated the 2013 murder rate, for instance, at 79 per 100,000 inhabitants versus the regime’s 39 per 100,000.
As journalist Jeremy McDermott wrote in 2014, “Unfortunately the government claims that homicides actually dropped 30 percent in 2013 are so unbelievable that they must be discounted.” At 79 homicides per 100,000 people, he added, Venezuela “is still far away the most dangerous nation in South America, and trails only Honduras (with a rate of 86) as the most dangerous nation on earth.”
But the homicide rate has dropped considerably since the mid-2010’s, as the observatory’s own figures attest. In 2023, the institute reported 27 homicides per 100,000 inhabitants, the lowest rate since 2001. According to one theory, mass emigration has lowered the murder rate because entire criminal groups have also left Venezuela.
Human Freedom
Source: Human Freedom Index
The Human Freedom Index measures countries’ economic liberty together with the degree of civil and personal freedom that they allow their citizens. The index, which measures human freedom in 165 countries since the year 2000, has tracked Venezuela’s descent into authoritarianism since the early stages of Chávez’s rule. From its initial human freedom ranking below the middle of the pack in 2000, Venezuela steadily deteriorated. In 2019, it fell to second-to-last place. Venezuela currently ranks last in terms of economic freedom."
Wednesday, July 31, 2024
Twelve Graphs on Why Maduro Could Only “Win” by Stealing Venezuela’s Election
Vaping Around Kids Is Far Safer for Them Than Smoking
By Kiran Sidhu. Kiran is a tobacco harm reduction fellow for Filter.
"Children absorb far less nicotine from people vaping around them indoors than they do from secondhand smoking, researchers found, suggesting that any secondhand absorption of other components of vapor is also likely to be very low.
Countries with substantial uptake of vaping have seen accelerated declines in the cigarette smoking which costs millions of lives each year. Yet valid concerns about passive smoking have often morphed into largely media-driven alarm over passive vaping—despite no good evidence that it is harmful.
Such fears have fueled debates over where vaping should be permitted, and they’ve been particularly pronounced when it comes to the potential impact on children. An Alabama law passed in 2023, for example, made it illegal to vape (or smoke) in a car with a child under 15 present, with a potential fine of up to $100.
The new study—conducted by researchers at University College London (UCL) and the SPECTRUM Consortium, and published in JAMA Network Open—set out to compare nicotine absorption levels in three groups of children in the United States: those exposed to secondhand smoke only, those exposed to secondhand vapor only, and those exposed to neither.
Children were categorized based on interviews with their parents or guardians. Those reportedly exposed to both smoke and vapor were excluded.
Blood samples from 1,777 children, aged 3-11, were then sent for analysis at a Centers for Disease Control and Prevention laboratory. There, concentrations of serum cotinine in the samples were measured—long regarded as a “precise and accurate marker of recent absorption of nicotine,” the researchers noted.
“Compared with children exposed to secondhand smoke, nicotine absorption was 83.6% lower in those exposed to secondhand vapor.”
Nicotine absorption was found to be “highest among children who were exposed to secondhand smoke only, followed by those exposed to secondhand vapor only,” the authors wrote.
The difference between those two groups was actually much bigger than the difference between the vapor-exposure group and the no-exposure group.
“[C]ompared with children exposed to secondhand smoke only, nicotine absorption was 83.6% lower in those exposed to secondhand vapor only and 96.7% lower in those exposed to neither,” the researchers found.
“Our study shows, using data from the real world rather than an artificial lab setting, that nicotine absorption is much lower from secondhand vapor than from secondhand smoking,” lead author Dr. Harry Tattan-Birch said in a press release.
“Nicotine itself is of limited risk, but it shows what the highest possible exposure might be from secondhand vaping,” he continued. “Exposure to harmful non-nicotine substances present in vapor will likely be substantially lower still.”
Still, the research found that children exposed to secondhand vapor do absorb more nicotine than those exposed to neither smoke nor vapor. Is their exposure to nicotine and other substances something we should be at all worried about?
“The results show that the level of secondhand exposure to nicotine (and other harmful constituents) from being indoors while other people are vaping appears to be minimal,” Tattan-Birch, of the UCL Institute of Epidemiology & Health Care, told Filter.
From his perspective as researcher based in the United Kingdom, he noted that “this means there isn’t the same impetus to ban vaping indoors (e.g., in bars and workplaces) on health grounds alone as there was for smoking.”
Tattan-Birch and his colleagues don’t say that secondhand vapor is totally risk-free, however.
“[A]s secondhand vaping still exposes children to more harmful substances than no vaping or smoking exposure at all, it is best to avoid indoor vaping around children,” UCL’s Professor Lion Shahab, another of the authors, said in the press release.
But Shahab’s much stronger language about smoking in that situation—“should be avoided at all costs”—makes clear that parents or caregivers who switch from cigarettes to vapes are taking a big step forward. Most adults who vape in the UK and other countries previously smoked, and many people who smoke find that vaping is the only way they can quit.
“‘Passive vaping’ is unlikely to pose any health risks.”
Other experts go a little further.
“‘Passive vaping’ is unlikely to pose any health risks,” said Dr. Peter Hajek, professor of clinical psychology and director of the Health and Lifestyle Research Unit at Queen Mary University of London.
Hajek, who was not involved in the new study, publicly commented that it “confirms that, as expected, the amount of nicotine exhaled by vapers, that children and other bystanders are exposed to, is negligible.”
While cigarettes “release … a number of more serious toxicants into the environment,” he noted, vapes release “no combustion products.”
Dr. Roberto Sussman, a physicist at the Institute of Nuclear Sciences, National Autonomous University of Mexico, is also among scientists who say that risks of secondhand vapor are grossly exaggerated.
Sussman previously explained to Filter how exhaled vaping aerosol rapidly evaporates and disperses, and how particulate matter from air pollution, even in indoor environments, is a far more valid concern. Globally, almost 2,000 children under 5 die because of air pollution each day.
The study authors seem to agree that secondhand vapor is not a substantial threat.
“This paper suggests that concerns about secondhand vaping may be somewhat overstated, with secondhand exposure to toxic substances likely to be very low,” Prof. Shahab said in the release."
Tuesday, July 30, 2024
Trends in Competition in the United States: What Does the Evidence Show?
By Carl Shapiro & Ali Yurukoglu.
"Has the United States economy become less competitive in recent decades? One might think so based on a body of research that has rapidly become influential for antitrust policy. We explain that the empirical evidence relating to concentration trends, markup trends, and the effects of mergers does not actually show a widespread decline in competition. Nor does it provide a basis for dramatic changes in antitrust policy. To the contrary, in many respects the evidence indicates that the observed changes in many industries are likely to reflect competition in action. We highlight research that points to targeted interventions that can enable antitrust enforcement policy to better promote and protect competition. Throughout the paper, we identify open questions and opportunities for future research in the cross-industry evidence-at-scale paradigm, the industry-specific study paradigm, and their intersection."
Click here to see a Twitter thread on this by Brian Albrecht.
Venezuela under “Brutal Capitalism”
"Jeffrey Clemens points us to some bonkers editorializing in the NYTimes coverage of the likely stolen election in Venezuela. The piece starts out reasonably enough:
Venezuela’s authoritarian leader, Nicolás Maduro, was declared the winner of the country’s tumultuous presidential election early Monday, despite enormous momentum from an opposition movement that had been convinced this was the year it would oust Mr. Maduro’s socialist-inspired party.
The vote was riddled with irregularities, and citizens were angrily protesting the government’s actions at voting centers even as the results were announced.
The term “socialist-inspired party” is peculiar. The party in question is the United Socialist Party of Venezuela (Partido Socialista Unido de Venezuela) and it’s founding principles state, “The party is constituted as a socialist party, and affirms that a socialist society is the only alternative to overcome the capitalist system.” So, I would have gone with ‘Mr. Maduro’s socialist party’. No matter, that’s not the big blunder. Later the piece says:
If the election decision holds and Mr. Maduro remains in power, he will carry Chavismo, the country’s socialist-inspired movement, into its third decade in Venezuela. Founded by former President Hugo Chávez, Mr. Maduro’s mentor, the movement initially promised to lift millions out of poverty.
For a time it did. But in recent years, the socialist model has given way to brutal capitalism, economists say, with a small state-connected minority controlling much of the nation’s wealth.
Venezuela is now governed by “brutal capitalism” under Maduro’s United Socialist Party!??? The NYTimes has lost touch with reality. From the link we find that what they mean is that some price and wage controls were lifted, including allowing dollars to be used because the bolívar, was “made worthless by hyperinflation,” and remittances from the United States were legalized:
NYTimes: With the country’s economy derailed by years of mismanagement and corruption, then pushed to the brink of collapse by American sanctions, Mr. Maduro was forced to relax the economic restraints that once defined his socialist government and provided the foundation for his political legitimacy.
Lifting some controls does not make Venezuela a capitalist country. Moreover, the lifting of controls led to improvements:
…Seeing shelves stocked again has also helped ease tensions in the capital, where anger over the lack of basic necessities has, over the years, helped fuel mass protests.
…The transformation also brought some relief to the millions of Venezuelans who have family abroad and can now receive, and spend, their dollar remittances on imported food.
Of course, the improvements were not equally shared. If you want to call unequal improvements, “brutal capitalism”. Well, I don’t think that’s useful but if you do so be sure to note that “under Maduro’s administration, more than 20,000 people have been subject to extrajudicial killings and seven million Venezuelans have been forced to flee the country.” (Wikipedia.) That’s brutal socialism.
Lastly, I don’t expect, the NYTimes to keep up on the latest counter-factual estimation techniques so I won’t ding them too much, but it’s clear that the Chavismo regime never lifted millions out of poverty. At best, poverty fell during the good years at the rate one would have expected from looking at similar countries. It’s the later rise in poverty which is unprecedented, as the NYTimes previously acknowledged."
Monday, July 29, 2024
A Dirty Nantucket Wind Ride
A turbine-blade break pollutes the beaches of the liberal gentry
"There’s no such thing as clean energy, as the liberal gentry on Nantucket are learning after an offshore wind turbine blade snapped and littered beaches with debris. Somehow the uproar among progressives is more muted than after an oil spill or train derailment.
Beaches on Nantucket, Mass., were shut down last week after sharp fiberglass and green foam from the broken blade washed up on shore. Several truckloads of debris have been collected, and the federal government ordered the wind project to stop producing power until the cause of the break is determined. Natural gas power will have to ride to the electric grid’s rescue again.
This is the second major break in recent months involving GE Vernova’s Haliade-X turbines, which are nearly as tall as the Eiffel Tower. Another blade broke on a turbine off the coast of England. GE Vernova and Siemens Gamesa have also struggled with defective onshore turbines, with some toppling over and requiring expensive repairs.
Manufacturing defects are more common in new technologies, though one problem for wind projects is that developers are commissioning bigger turbines that can produce more power—and capture more government subsidies—at a lower marginal cost. Smaller turbines can be noneconomic, but larger ones are difficult to install and manufacture.
The inconvenient truth is that all sources of energy involve economic and environmental trade-offs. Solar and wind require far more land or ocean space than fossil-fuel production, and their components are junked after 10 to 20 years. Manufacturing solar panels and wind turbines also requires loads of energy, largely from coal in China. Wind turbines kill birds, including some endangered species, and noise from offshore turbines may affect whales.
Donald Trump mentioned some renewable power pitfalls in an interview with Bloomberg News published last week, albeit not with great clarity. “It always amazes me that people that consider themselves to be green, in terms of energy,” he said.
Meantime, Commerce Secretary Gina Raimondo last week announced $27 million in grants for removing marine debris, which she said “can present significant threats to the water quality, habitats and economic opportunity.” Too bad none will go to cleaning up the disaster on Nantucket, which Democrats are ignoring because it undermines their climate agenda."
The historical downside of tariffs
See The Antigrowth Agendas of Harris and Trump by Mickey D. Levy. He is a visiting fellow at the Hoover Institution. Excerpts:
"Every 100 years or so, the protectionist wing of the Republican Party pushes through significantly higher tariffs. The outcome is never good. In 1930, at the start of the Great Depression, Congress enacted the Smoot-Hawley tariffs. The stated purpose was to protect U.S. industries and absorb the excesses that resulted from productivity advances in the 1920s. The tariffs aggravated the dramatic global depression and were repealed two years later. The Tariff of 1828—the so-called Tariff of Abominations, which raised tariffs by up to 50%—accentuated the divide between the industrialized North and the agricultural South and was largely reversed three years later."
"the benefits of any shift are more than offset by inefficiencies, the higher costs to domestic consumers, and the foreign retaliation that usually occurs. Frequently the result is slower global trade"
"In 2018 Mr. Trump imposed tariffs of 25% on steel imports and 10% on aluminum imports, declaring, “Trade wars are good and easy to win.” China retaliated in various ways and Mr. Trump’s promise that manufacturing jobs would suddenly flood back to the U.S. proved worthless. Global trade and production declined and U.S. manufacturing jobs flattened. Tariffs violate the simple but sound law of comparative advantage."
Sunday, July 28, 2024
This Straw Man Is a Regulator’s Best Friend
‘Markets don’t always work perfectly.’ But who ever said they did?
"In support of some market interventions endorsed by the populists who today dominate the GOP, Glenn Hubbard counsels traditional conservatives to agree “with populist conservatives that markets don’t always work perfectly” (“The Economic Populists Have a Point,” op-ed, July 19).
I challenge Prof. Hubbard to identify a single serious conservative or libertarian scholar whose case for free markets rests on the belief that markets “always work perfectly.” Such a creature is imaginary. Not Adam Smith; not F.A. Hayek; not Milton Friedman; not Vernon Smith; not Deirdre McCloskey; not your frequent contributor, Phil Gramm; not anyone of any stature who supports free markets has ever grounded that support on the assumption of perfect markets.
The case for free markets—and against nearly all interventions desired by today’s populists—is that markets are less imperfect than governments. Most market imperfections are profit opportunities that in time attract entrepreneurs to experiment with ways to improve matters. Some experiments work, many fail. Unlike government officials, private market actors spend their own money and have no power to coerce.
Markets identify and correct mistakes more quickly than do governments, are less prone to be captured by interest groups and are more driven to strike trade-offs in mutually advantageous ways rather than in ways that compel some individuals to pay for the gains of others.
Prof. Donald J. Boudreaux
Mercatus Center, George Mason U.
Fairfax, Va.
Mr. Hubbard is right to seek a balance between promoting “economic growth and living standards” and “protecting jobs and communities.” But he frames the point in ways that tilt the playing field in favor of progressives.
Mr. Hubbard contends that “markets don’t always work perfectly.” This is a needless concession to a technocratic view that inherently favors bureaucratic discretion. Markets create as much wealth as possible, given the constraints of resource availability and public policy. This is neither good nor bad. It just is. As systems theorist Stafford Beer recognized, “The purpose of a system is what it does.” Insisting on market imperfection judges markets based on irrelevant standards.
This is no mere semantic dispute. Mr. Hubbard’s paradigm inadvertently empowers regulators, who can always justify their meddling by claiming they want to make our economy fairer and more competitive. A better paradigm recognizes that, although markets reliably generate wealth, there are valid national interests beyond wealth maximization. Prudent statesmen should weigh the value of additional wealth against alternative moral goods.
Mr. Hubbard proposes to “assign specific goals to particular interventions.” This is wise. But it will work only if we stop comparing real-world markets to textbook imaginings. It makes no more sense to blame markets for not protecting jobs than to condemn a hammer for not being a screwdriver.
Prof. Alexander William Salter
Rawls College of Business, Texas Tech
Lubbock, Texas"
The Baby Formula Lawsuit Raid
The plaintiff bar targets life-sustaining nutrition for premature infants
"‘Corporate greed” is a central campaign theme for both parties these days, yet strangely nobody is calling out the robber barons in the plaintiff bar. Witness their shakedown of Abbott Laboratories and Reckitt Benckiser for producing life-sustaining formula for pre-term infants, which could force the companies to pull their products from the market.
Plaintiff attorneys have filed hundreds of lawsuits against the two companies for failing to warn that their products allegedly increase the risk of necrotizing enterocolitis (NEC), a life-threatening intestinal disease afflicting premature and low-birth-weight babies. The first trial against Abbott began earlier this month in St. Louis County, Mo.
The companies produce specialized formulas fortified with vitamins and ingredients that are specifically designed to address premature infants’ nutritional needs. The formulas are administered by doctors in the neonatal intensive care units because breast milk alone often doesn’t contain sufficient nutrients to sustain infants with low birth weights.
But no good product goes unpunished by the lawyers looking for their next jackpot. The lawsuits cite studies that find infants who are breast fed have a lower risk of NEC. But it’s unclear what causes NEC. The National Institutes of Health says the condition may result from immaturity of the intestines combined with “infection and inflammation” stemming “from the growth of dangerous bacteria.”
Scientists posit that breast milk may have particular properties that help prevent NEC. Recent randomized controlled trials show that the formulas and fortifiers don’t increase the incidence of NEC. The Food and Drug Administration, which regulates baby formula and labels, hasn’t required manufacturers to warn about an increased risk of NEC.
That’s no obstacle to the plaintiff attorneys suing in friendly jurisdictions like St. Louis County. Juries are especially sympathetic to plaintiffs who have lost a child and are looking for someone to blame. In March an Illinois jury ordered Reckitt to pay $60 million to a woman whose premature infant died of NEC.
These lawsuit raids have consequences for the health of premature infants. Companies can’t change their formula or label it to avoid liability because the FDA regulates warnings, and the science doesn’t support the lawsuit claims. The only way to avoid potential liability would be to stop producing the formula.
Abbott CEO Robert Ford warned in a CNBC interview on Thursday that “if this product were no longer available,” there “would be a public health crisis.”
Abbott’s market valuation has fallen by some $30 billion since March. It makes only $9 million in revenue annually from the specialized formula, about 0.02% of its total sales last year. Reckitt’s stock price plunged 20% as investors extrapolated its potential liability from other lawsuits after the jury verdict.
The political class could help if it wanted to. FDA and NIH officials could vouch in court for the products’ safety. Congress could also create a liability shield for the baby formula, as some Members are seeking to do for Roundup herbicide to ensure the products stays on the market. Alas, the plaintiff bar owns the U.S. Senate, so parents of preemies may soon have to do without this life-sustaining nutrition."
Saturday, July 27, 2024
Despite California Spending $24 Billion on It Since 2019, Homelessness Increased. What Happened?
"Since 2019, California has spent about $24 billion on homelessness, but in this five-year period, homelessness increased by about 30,000, to more than 181,000. Put differently, California spent the equivalent of about $160,000 per person (based on the 2019 figure) over the last five years. With this level of spending, it was reasonable to expect that homelessness would decline substantially. What went wrong?
There are three major problems with California’s homelessness policies that are facilitating this increase. One problem is a significant lack of oversight and information about homelessness spending. The state auditor recently evaluated this spending and submitted a report that highlights the failure of the state to track spending and outcomes:
The State lacks current information on the ongoing costs and outcomes of its homelessness programs, because [it] has not consistently tracked and evaluated the State’s efforts to prevent and end homelessness. . . . [The state] has also not aligned its action plan to end homelessness with its statutory goals to collect financial information and ensure accountability and results. Thus, it lacks assurance that the actions it takes will effectively enable it to achieve those goals.
The auditor attempted to closely evaluate the costs and benefits for five separate homelessness programs, though they only found data that permitted this for two of those programs.
More broadly, the failure of investing in adequate information technology infrastructure and data collection within California’s state government has been a chronic problem and has been very costly. In 2020, California’s antiquated hardware and software within the Employment and Development Department (EDD) was a key factor in about $32 billion in unemployment benefits fraud. The department’s computer system is based on 1980s architecture running 1950s software.
And the EDD not only was overrun with fraudulent claims, it delayed legitimate payments for months. The former deputy director of unemployment insurance described EDD’s ability to deal with the high number of COVID claims as follows: “The best way I can describe it is like going to a gunfight with a squirt gun.”
California’s Department of Motor Vehicles (DMV) is in the process of upgrading its system, but this follows a series of tech upgrade failures over the previous 30 years that burned through hundreds of millions of dollars in the process. And the state’s annual report on its fiscal soundness is chronically late because of an IT upgrade that began in 2025.
A second key problem with California homelessness policy, one that is rarely, if ever, discussed, is that there are too many California households who simply do not earn enough to live sensibly in California, given the state’s very high cost of living. For example, nearly half of California households rent, and of this group, about 30 percent—about 1.9 million households—pay 50 percent or more of their pretax income as rent. This is far too high based on the standard recommendation that a household pay a maximum of 30 percent of pretax income as rent.
This group of people, who are considered “extremely rent burdened,” are remarkably vulnerable to losing their housing. Given that the average household size among renters is about 1.5 individuals, this group represents about 2.8 million people. If just 1 percent of this group become homeless annually because they lose their ability to pay, then the rolls of the homeless will rise 28,000 each year.
And it is not just this group who are financially vulnerable. About one-third of California households live in poverty or near poverty. This suggests the possibility of many more people falling into homelessness each year. An estimated 10,000 people became homeless between 2022 and 2023 in California. If this estimate is accurate, then California has been dodging a bullet in that the number of homeless could be much worse than it is, based on the large number of households who are on the cusp of financial exigency.
These statistics about the number of Californians who don’t earn enough to realistically live here, particularly in the expensive areas near the coast, raise important questions about the state’s approach to homelessness and how taxpayers should view its homelessness safety net. A social safety net exists to provide support for those who experience an adverse event that they cannot realistically insure themselves against. Our homelessness safety net should exist for those who become homeless as a result of family crises, such as a child running away or a family dissolution that results in a parent and children with nowhere to go. It should also exist for those who suffer disabilities and for seniors who may have a limited ability to relocate. However, there is no justification for reliance on the safety net to pay for those who do not have the resources to responsibly live in California.
Perhaps the most important reason that many Californians are financially burdened is housing affordability. The sensible policy response to this is to facilitate building housing in the state that low-income households can realistically afford without significant public assistance. This means building low-cost housing, which likely means utilizing manufactured housing (housing that is built from start to finish within a factory, and then shipped to the homesite)—which can be built at only about $100 per square foot—and building in areas where land values are not so high, which means outside of the state’s very expensive coastal areas. For example, a 1,000-square-foot manufactured home placed on a small lot that is outside of California’s highest-land-cost areas can likely be created for under $200,000. A household earning $50,000 per year, which is far below California’s median household income of over $90,000 annually, could realistically afford such housing on their own.
But the state’s policy toward building housing for the homeless is the opposite of this approach and is the third reason why our homelessness policies are not working as intended. New housing for the homeless can cost over $1million per unit, such as a recently approved Santa Monica 120-unit apartment complex that will cost $123 million to build and which will be located about three blocks from Santa Monica beach. The estimated cost of this complex does not include the value of the land, which might approach $10 million.
The state’s existing practice of building over-the-top expensive housing for the homeless is not fiscally responsible, nor is it feasible within the context of a realistic budget. And reducing building costs to a level commensurate with the budgets of those who are vulnerable to financial risk also means freeing up funds for mental health, drug addiction, and physical therapy services that can help many homeless individuals get back on track.
Investing in adequate information infrastructure, reducing building costs, and investing in low-cost housing outside of the most expensive coastal areas could significantly advance the state’s goals of addressing homelessness while respecting a reasonable budget. But I see no urgency within the state’s political leadership to implement these ideas. In fact, last week, Governor Gavin Newsom vetoed bipartisan legislation that would have required his administration to conduct an annual evaluation of homelessness spending. Without these changes, California will continue to spend enormous sums on homelessness while the number who are homeless remains very high."
Kamala Harris Might Ask: Why Have Teacher Salaries Stagnated?
"This morning, vice president and presumptive Democratic presidential nominee Kamala Harris is scheduled to speak to the national convention of the American Federation of Teachers, the country’s second-largest teachers union. She will almost certainly talk about raising teacher pay, perhaps harkening back to her 2020 presidential campaign proposal to have the federal government fund roughly $13,500 per-teacher raises.
If Harris mentions that teacher pay has been stagnant for decades, she is right. As seen in Figure 1, since 1990 inflation-adjusted salaries have been essentially flat, hovering between $69,000 and $70,000, with a big dip recently.
There is a good chance that an explanation for this that will be offered at the convention is spending cuts to public schools. But as Figure 2 shows, that has not been the case. Inflation-adjusted spending per-pupil has risen pretty steadily, from $12,272 in the 1990–91 school year to $18,614 in 2020–21. Meanwhile, real total spending rose from around $513 billion in 1990–91 to almost $927 billion in 2020–21.
Where is the money going? One place to look is total public school employees (Figure 3).
The number of teachers as a share of all employees has decreased considerably since 1990, from 53.4 percent to 47.5 percent. The employment increases have come especially in instructional aids, which rose from 8.8 percent of all employees to 13.3 percent.
There are also simply more employees. In the fall of 1990, public schools employed 4.5 million people, or 9.2 students per employee. In fall 2022, it was 6.8 million, or just 7.3 students per employee.
So why are public school teachers not getting paid better? At least in part, because public schools have chosen the path of hiring more people, and smaller shares of them teachers, rather than paying teachers more.
That is not something the federal government, which has no constitutional authority to govern in education anyway, should be encouraging."