The AHCA: Warren Buffett’s view


If you haven’t seen this, Bloomberg quotes Buffett as saying:

The AHCA bill is a “huge tax cut for guys like me. And when there’s a tax cut, either the deficit goes up or they get taxes from somebody else.”

Mr. Buffett said healthcare’s high costs put the United States at a disadvantage relative to other countries.


The US Economy: Lessons from NASCAR


Apparently the government isn’t the only group subject to “alternative facts.”

Some web sites selling tickets hype the popularity of NASCAR. However, do you see the irony in this excerpt from the Ticket City website?

In the world of auto racing, NASCAR ranks as one of the sport’s most popular form. The $3.1 billion organization has been filling speedways to capacity for decades and the NASCAR following is only getting stronger. With an average NASCAR ticket price ringing in at $107 for the 2017 season, the sport has made attending races a reasonable feat in comparison to its racing counter parts like Formula 1, and the 2017 season is one of the most affordable in recent years..

The most iconic of all the NASCAR races, the Daytona 500, or the Super Bowl of NASCAR as it has become known, carries NASCAR’s highest priced ticket, but it may not be as pricey as you would think. In 2017, the Daytona 500 average ticket price settled in at $137 a pop. While the Daytona International Speedway currently holds nearly 101,000, following renovations to the track which reduced the number of available seats. (1)

Yep, the sport is so popular that we’re reducing the number of seats available.

USA Today has a different take:

Think NASCAR’s falling attendance and last season’s low TV ratings have lessened the cost of race tickets this season? Think again. (2)

Even with the reduced seating at Daytona, the track failed to sell all the seats this year. Bristol had sold out 55 consecutive races until 2016. Further, there are third party websites that are advertising 75% discounts on ticket prices. (4)

The bottom line is disposable income. Some US households have money left after spending on necessities; many don’t. Ultimately, the government owns the issues that are draining consumer wallets: health insurance and care costs, education cost and the burden of student loans, home financing. Until consumers are provided some relief, these issues will continue to strangle economic growth.



Your Health: The Right to Life?


The US was founded on the promise of “the Right to Life, Liberty and the Pursuit of ben_franklinHappiness” in Jefferson’s Declaration of Independence.

From the start, the relationship between the country and this promise has been at best inconsistent and sometimes ironic. After all, the principal writer of the Declaration, Jefferson, was a slave-owner.  So for whom was this promise made? Everyone? Or the wealthy, the planters, the slave-owners and the merchants? (Remember, there were no factories — that was before the industrial revolution.)

The inconsistency continues to this day.

We have groups concerned with whether babies or born, but not with what happens to them after they are born. How long do they live? What’s their quality of life? As Ed Cara notes, in some areas of the US, children will now have shorter lives than their parents. (2)

A new study in the Journal of the American Medical Association talks about discrepancies in life expectancy. I’ve blogged about this before, but it’s nice to see authoritative sources recognizing the issue.

The new statistical analysis shows that there is a difference in life expectancy of up to 20 years based on the county in which you live. In this analysis, the issues affecting life expectancy are

  • Income and poverty
    • The wealthy live longer
  • Race/ethnicity
    • Both Native Americans and African Americans have a shorter life expectancy
  • Regular exercise
    • Those who do live longer
  • Obesity, Diabetes and Hypertension
    • Shorten life expectancy
  • Education
    • Each level completed adds to life expectancy
  • Quality of health care
    • Higher quality is associated with living longer
  • Having health insurance
    • Having health insurance promotes longer life
  • Access to physicians
    • Having more physicians in an area helps

These factors translate into differences in life expectancy in the US based on where one lives:

  • Residents of central Colorado, coastal California and the New York Metro area live longer
  • Residents of eastern Kentucky and much of the Old South, especially along the lower Mississippi River, have a shorter life expectancy
    • The Old South in this case includes Alabama, Arkansas, Georgia (outside of Atlanta), Louisiana, Mississippi, Oklahoma and Tennessee (outside of Nashville)
    • The two metro areas, Nashville and Atlanta, offer much better life expectancy than the rest of their states

The states with the lowest life expectancy are those with the lowest spending on public health and health education.

One limitation of this study is that the analysis is at a county level, and there is only selected data available at that level regarding health. In particular, suicide is now one of the top 10 causes of death in the US. Suicide isn’t reported accurately or consistently, and there is limited data available on the causes of suicide.

A second limitation is the inter-relationships between some of the factors measured. For example, wealth is associated with having health insurance, with less use of cigarettes, and with living in an area with better access to medical professionals. By breaking the analysis into this much detail, does the report understate the role of wealth in life expectancy?

By the way, I use the image of Ben Franklin on some of these posts for the following reasons:

  • His brilliance
  • His common sense
  • His skill at negotiation
  • And among the Founding Fathers of the US, he became a profound opponent to slavery


  1. Laura Dywer-Lindgren, et. al., “Inequalities in Life Expectancy Among US Counties,1980 to 2014,” JAMA Intern Med. Published online May 8, 2017. doi:10.1001/jamainternmed.2017.0918.
  2. Ed Cara, “Kids Will Die Younger than Their Parents in Some Parts of the US,” Vocativ. 9 May 2017.



Universities and International Students


The world is complex. One of the problems in making public policy is that for every action, there is a reaction that isn’t anticipated and usually isn’t desired.

Rules about immigration and visas are a case in point.

International students have formed a core resource for many smaller, private colleges in the US as well as for graduate programs at larger universities.  That core is eroding, leaving the future of some schools and programs in doubt. (7)

Education isn’t factored into the US balance of payments, but it should be. It’s been a major source of funds for the US economy. Students from elite families in Europe, the Middle East, Latin America and Asia don’t get financial aide at US schools. Instead they pay full freight, bringing hard cash into the US economy. Overall, more than 85% of all college students in the US receive financial aid, as compared with 20% of international students studying in the US. (2,)

In 2015, there were over 1 million foreign students in US colleges and university, accounting for 5% of the total student population. The top schools for hosting international students (undergrad and graduate) were

  • NYU
  • USC
  • Columbia
  • Arizona State
  • Univ. of Illinois
  • Northeastern (3)

The top schools in terms of the percent of undergraduate enrollment from outside the US are

  • Florida Institute of Technology (32.9% from outside the US)
  • New School (31.7%)
  • Illinois Institute of Technology (29.8%)
  • Univ of Oklahoma (26.7%)
  • Lynne Univ (23.0%)
  • Carnegie Mellon Univ (20.9%)

While domestic applications for graduate school have declined over the last 10 years, until very recently, growth in international applications had increased. In 2015, 2/3 of the applicants for graduate programs at Cornell were international students.

The US is experiencing a troubling drop-off in applications from international students for graduate and professional degrees at US universities. The slowdown started in 2015, and may have been exacerbated by election campaign rhetoric and travel bans.

Demand for MBA degrees started to slide domestically almost a decade ago. Schools changed their product offerings — basically reinventing themselves — to survive financially. (8) As tuition and fees have soared, fewer Americans could afford or found adequate value in these degrees. Online courses created new options. They weren’t necessarily better than traditional classroom instruction, but they were (and remain) cheaper.

Like many smaller private colleges, some MBA programs turned to foreign students to fill enrollment gaps left by the flagging demand in the US. In the example of the University of Rochester’s Simon Business School,

The school recruited in more than a dozen countries last year, holding events in Buenos Aires, Cairo, Taipei, and Istanbul, among other cities. The efforts reflect the school’s “very strong commitment to global diversity within its student body,” says Rebekah Lewin, assistant dean of admissions and financial aid at Simon, where about half of the 98 full-time MBA students in the class of 2017 are from overseas. (6)

However, the international market for the US MBA is now easing. In 2014, 60% of MBA programs saw growing applications from overseas. That fell to 39% in 2015, and to 31% in 2016.

STEM programs rely on international students, and there has been a worrying drop in applications. (5)

  • UMass has seen a 30% drop in international applications for electrical and computer graduate programs this year.
  • Vanderbilt has seen an 18% drop in international student applications for its graduate engineering school.

A decline in international students will affect universities financially. As noted in the Science article,

Such declines could have a major impact on a university’s bottom line, although calculating its magnitude is not straightforward. The federal government heavily subsidizes graduate education in the sciences and engineering, so most doctoral students don’t have to worry about tuition bills. But universities generate considerable revenue from professional master’s degree programs, a subset of all master’s training. And in those programs, international students at public universities pay tuition rates that are much higher than for in-state students. (5)

So, one of the unintended consequences of the current anti-immigrant hoopla may be a hit on the value of the US dollar as well as a weakening of higher education in the US. Whether we see a demand for taxpayer bailouts, or we see programs and schools simply close, remains to be discovered.

That  makes the decision by New York State to make college free to residents earning less than $125,000 per year triply smart:

  • The action alleviates pressure on schools from declining overseas applicants;
  • It provides a major incentive for the workforce to stay in the state;
  • It frees up money that consumers can use to fuel the local economy.


  1. Reem Heakel, “What Is the Balance of Payments?” Investopedia, 19 April 2017.
  2. National Center for Education Statistics, “Fast Facts.”
  3. Laura McKenna, “The Globalization of America’s Colleges,” The Atlantic, 18 November 2015.
  4. Caroline Howard, “50 Best Colleges for International Students 2016,” Forbes, 28 Sept. 2016.
  5. Jeffrey Mervis, “Drop in foreign applications worries US engineering schools,” Science, 14 February 2017.
  6. Nick Lieber, “The Selling of the American MBA,” Bloomberg, 26 March 2016.
  7. Stephanie Saul, “Amid ‘Trump Effect’ Fear, 40% of Colleges See Dip in Foreign Applicants,” 16 March 2017.
  8. Sherrie Negrea, “The new business of b-schools,” University Business, 22 January 2016.
  9. Ferran Powell, “10 Universities That Attract the Most International Students,” US News and World Reports, 5 July 2016.


Disposal Income = (Economic Growth)squared


That’s not quite Einstein’s formula, but it’s worth remembering.

The front page of the Tuesday Wall Street Journal included a story, “Parents Are Drowning in College-Loan Debt.” (1) Subsequent days brought reports of subpar GDP growth (2), disappointing job creation numbers (4) and very low levels of consumer spending (5). Duh.

People spend money when they have money to spend. Really.

Apparently, that’s a difficult concept for retailers and many government officials. When you

  • Increase health care costs (doing away with subsidies and driving insurers to sharply higher premiums),
  • Increase taxes (doing away with tax deductions for state and local taxes will  wipe out any benefit from tax reform that most people get),
  • Cut back on Federal assistance with student loans, and
  • Get into trade wars that drive up the cost of things Americans buy

you reduce the ability of Americans to spend money on cars, vacations or anything else non-essential that helps to drive the US economy.

The stock market and the economy got a modest boost from the election. Now reality is rearing its ugly head.

  • Layoffs aren’t just for the retail sector; they’re reportedly happening even in big pharma companies like BMS.
  • Auto inventories are piling up and there have been reports of planned factory shut downs this summer.
  • Airline passenger load factors (passengers versus capacity) are down from a year ago.
  • There’s a new crop of college graduates with the wrong skill sets for what business needs.

The unemployment figures are political. The Bureau of Labor Statistics report from 7 April lists 7.2 million people as unemployed. However, there’s another 1.6 million who are unemployed but haven’t looked for work in the last four weeks and who aren’t counted as unemployed. Add them, and the unemployment rate shoots up, not down.

The most recent jobs report showed 98,000 people gaining work in March. Prior to the 2008 recession, the benchmark for a robust economy was 300,000 jobs per month — enough to keep up with growth in the workforce.  The last time the US came close that 300,000 figure was in June 2016. The last time the US surpassed that target was in September 2015.

Disposable income means everyone. It’s the ability of Joe Sixpack to buy a car that drives the US economy. Giving tax breaks to the Walton clan doesn’t help Wal-Mart sell anything.

Are we about to start the next recession?


  1. Josh Mitchell, “Parents Are Drowning in College-Loan Debt,” The Wall Street Journal, 25 April 2017, p.1.
  2. Trading Economics, “United States GDP Growth Rate,” 28 April 2017.
  3. US Dept of Transportation, Bureau of Transportation Statistics, “U.S Air Carrier Traffic Statistics through January 2017.”
  4. US Dept. of Labor, Bureau of Labor Statistics, “The Employment Situation — March 2017,” 7 April 2017.
  5. Douglas Gillison, “US growth hits 3-year low in Trump’s first quarter,”

Equality of Education; Inequality of Teacher Pay


In theory, the quality of teacher impacts the quality of education students receive. In the Brown v. Board of Education of Topeka decision in 1954, the USSC rejected the argument that students in unequal schools could receive equal education. However, if teachers are important, then how do we reconcile the Court’s decision with these findings:

  • There’s a huge disparity in teacher pay between school systems. Affluent districts pay much higher salaries than others.
  • Charter schools, which are supposed to be the road to improve education, pay much lower salaries than most public school districts.

New Jersey treats teachers as public employees, and their salaries are public information. Without going into detail on all 650 public school districts and charter schools in the state (available at reference 1 below), here’s the outlines of the situation:

  • The median salary in 2016 for a school teacher in NJ was $66,117 per year.
  • Northern Valley Regional district in affluent Bergen County paid the most, with a median salary of $105,650.
  • Teachers in the Edison Township school district in Middlesex County had a median salary of $95,432.
  • At the other end, Milford Township in Hunterdon County had a median salary of $48,007.

New Jersey just isn’t that large geographically. The cost of living is relatively uniform across the state.

Many/most of the charter schools are worse: for example the Jersey City Global and Red Bank charter schools both have median salaries of $42,000. Of course, the charter schools haven’t been around as long. We could expect salaries to increase with teacher seniority. However, the need to generate profits at many of these schools may restrict what goes into the classroom.

If you were a capable teacher, where would you want to teach? Where would you expect the best teachers to go? How does this reconcile with equality of educational opportunity?

By comparison, NJ is one of the best-paying states for teachers in the US. The only states that pay as much or more are Alaska, California, Connecticut, District of Columbia, Massachusetts and New York. Maryland pay is lower than NJ, but close. (2) Conversely, South Dakota and Mississippi are at the low end of teacher pay, paying less than 65% of what New Jersey pays.

Again, where would the best go?


  1. Tom Davis, “NJ Median Teacher Salaries, Highest To Lowest: How Much Does Your District Pay?” NJ Patch, 24 April 2017.
  2. National Center for Education Statistics, 2013.

US Economy: the incredible shrinking farmer


The US has lost its dominant position in global agriculture. The Wall Street Journal reports that since 1985, the US share of global sales has shrunk from

  • Soybeans: 77% down to 38%
  • Corn: 56% down to 37%
  • Wheat: 30% down to 15%

Brazil alone farms the same amount of land for soybeans as does the US, and has almost matched the US in annual production.

US farmers are now watching weather and crop reports for Brazil in order to time when to sell crops.

While farming is much less important to the US economy than it was in the 1920s, weakness in the sector was cited as a contributor to the Great Depression. It certainly contributes to balance of payments issues today.


  1. Jesse Newman and Jacob Bunge, “U. S. Farmers Fall Behind New Powers,” The Wall Street Journal, 11 April 2017, p.1.