In 1978, California voters passed Proposition 13, which set property taxes at 1 percent of purchase price and limited increases in assessed value to 2 percent. Only when the property was sold could the property be reassessed to market value. Proposition 13 allows businesses to avoid such reassessment if no single entity acquires majority ownership in the property. As the Los Angeles Times recently noted, computer magnate Michael Dell did that in 2006 when he bought the Fairmont Miramar Hotel in Santa Monica. He brought in three partners and none held more than 49 percent ownership. So the property remained at the 1999 assessment and Dell saved about $1 million a year in property taxes.
Christopher Thornberg of Beacon Economics told the Times “He [Dell] didn’t do anything wrong. He’s saying to California: Look, idiots, I just robbed you blind, and it’s your own fault.” That comment is revealing.
If Mr. Dell took $1 million out of the general fund then one could say he robbed the state. In reality, he will pay less tax than he would have before Proposition 13, which state legislators are now targeting. It has escaped their notice that perhaps the tax-limitation measure encourages business owners to buy property, hire more workers, and boost the economy.
The notion that lower taxes somehow rob the state is far from the only abuse of language in current discourse. When bureaucrats get a 7 percent budget increase instead of 12 percent, they protest a budget cut. In the rare event that government lowers income taxes, politicians portray that as a gift. Actually, it only allows workers to keep more of what they have already earned.
In his first stint as governor Jerry Brown opposed Proposition 13 then after it passed proclaimed himself a “born-again tax cutter.” Now through Proposition 30 he has made California the highest-tax state. Even so, California legislators still seek to shake down the workers for more of their hard-earned money.
Meanwhile, Los Angeles County cried foul over Mr. Dell’s hotel deal and hiked the property taxes. The case wound up in court and a judge ruled that Dell had acted lawfully. The county knew that from the beginning but remained willing to waste more taxpayers’ money by filing an appeal.
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Paul C. "Chip" Knappenberger and Patrick J. Michaels
Global Science Report is a weekly feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”
As the earth’s climate sensitivity is perhaps the key factor in what climate lies ahead, we’ll often report on scientific findings that enhance our understanding of this important parameter.
Recall from our previous discussion, that the earth’s “climate sensitivity” is the amount that the average global surface temperature will rise, given a doubling of the concentration of atmospheric carbon dioxide (CO2) from its pre-industrial value. This metric is the key to understanding how much global warming will occur as we continue to burn fossil fuels for energy and emit the resultant CO2 into the atmosphere.
And as we mentioned, the big problem is that scientists don’t know what the true value of the climate sensitivity really is. The U.N.’s Intergovernmental Panel on Climate Change (IPCC) summed up its assessment of the science regarding the value of the climate sensitivity in its 2007 Fourth Assessment Report (AR4) thusly:
It is likely to be in the range 2°C to 4.5°C with a best estimate of about 3.0°C, and is very unlikely to be less than 1.5°C. Values substantially higher than 4.5°C cannot be excluded…
New findings seem to be coming in with some regularity since the publication of the AR4 that the IPCC’s estimate is on the high side of reality. We discussed some of these findings in our publication Addendum: Global Climate Change Impacts in the United States (p.26-27) and more recent ones in a Global Science Report last month.
Now we have another new, lower estimate, to report on.
Just published in the journal Geophysical Research Letters is a paper by Julia Hargreaves, James Annan and two Japanese colleagues titled “Can the Last Glacial Maximum [LGM] constrain climate sensitivity?” While Hargreaves et al. don’t really answer that question directly, they use a new determination of the cooling during the Last Glacial Maximum to derive estimates of the climate sensitivity (although their estimates come replete with caveats). So, they must think they are on to something.
Their estimates are derived using two different statistical techniques, one employing regression relationships between tropical temperatures during the LGM and climate model climate sensitivity, and another using a Bayesian approach weighting each climate model based on how well it matches the new LGM data. The two methods produced very similar results, with a mean equilibrium climate sensitivity of about 2.5°C with a 90% confidence range of about 1°C to 4°C. This result is more tightly constrained than the IPCC estimate and also shifted a bit towards lower values.
One of the caveats from the Hargreaves et al. is that the climate models whose results they tried to match with the LGM conditions did not include the influence of atmospheric dust and vegetation changes, influences which the authors note “while these are poorly constrained, they are likely to be net cooling influences.”
They made a “rather simplistic” attempt to approximate the influence of atmospheric dust and found that it dropped their sensitivity estimates even further, to about 2°C, with the low end of the 90% confidence range falling below 1.0°C. Recall that in the AR4, the IPCC stated that it was “very unlikely” that the equilibrium climate sensitivity was below 1.5°C. In IPCC parlance, “very unlikely” means with less than a 10% chance of occurrence. We would venture to say that Hargreaves, Annan and colleagues found a substantially greater chance that the true climate sensitivity lies below 1.5°C.
While this will almost surely not be the last we hear from these authors on this matter as they indicate that there is still plenty of work to be done using newer climate models and improved climate forcing and paleo-temperature estimates, it is definitely an interesting initial effort/result.
In Figure 1 (below), we’ve added the two sets of climate sensitivity estimates from Hargreaves et al. into our chart of new, lower, climate sensitivity estimates published in just the last 2 years or so (our initial chart was first reported here).
Over time, our guess is that this chart will continue to expand with the addition of new studies.
Hargreaves, J.C., et al., 2012. Can the Last Glacial Maximum constrain climate sensitivity? Geophysical Research Letters, 39, L24702, doi:10.1029/2012GL053872.
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Dan Kahan points to empirical evidence suggesting a sure-fire way to dramatically lower gun homicides: repeal the drug laws.
I now want to point out that in fact, while the empirical evidence on the relationship between gun control and homicide is (at this time at least) utterly inconclusive, there certainly are policies out there that we have very solid evidence to believe would reduce gun-related homicides very substantially.
The one at the top of the list, in my view, is to legalize recreational drugs such as marijuana and cocaine.
The theory behind this policy prescription is that illegal markets breed competition-driven violence among suppliers by offering the prospect of monopoly profits and by denying them lawful means for enforcing commercial obligations.
Here inside the Beltway bubble, the policy discussion does not revolve around reducing the risk of gun homicides. It instead revolves around questions like which gun control regulations will Obama enact by executive order, and which gun control regulations will be voted on in the Congress? Once we know the answers to those questions, we are told, we can then assess the performance of policymakers. The notion that repealing a law might be helpful is an utterly foreign concept here in D.C. Lawmaking and spending money on programs = progress. The media drum beat for new laws was captured when reporter Jake Tapper taunted President Obama at a news conference, “Where have you been?” The taunt was, basically, “You failed to enact new gun restrictions during your first term, didn’t you!?” The implication, understood by all inside the Beltway, is that there are so many proposed laws in limbo because the president and Congress dither.
Note also that the current discussion seems dominated by the phrase “gun violence.” That’s a sleight-of-hand designed to blur the distinction between self-defense and murder. Vice President Biden, for example, has a task force looking at ways to curb “gun violence.” Question: If a police officer had been able to get to the Newtown school sooner and shoot the deranged killer, would anyone say that the killer was a victim of “gun violence”?
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Portugal May Become the First of Europe’s Bankrupt Welfare States to Stumble upon a Genuine Recovery Formula: Less Spending AND Lower Tax Rates
Daniel J. Mitchell
There aren’t many fiscal policy role models in Europe.
Switzerland surely is at the top of the list. The burden of government spending is modest by European standards, in part because of a very good spending cap that prevents politicians from overspending when revenues are buoyant. Tax rates also are reasonable. The central government’s tax system is “progressive,” but the top rate is only 11.5 percent. And tax competition among the cantons ensures that sub-national tax rates don’t get too high. Because of these good policies, Switzerland completely avoided the fiscal crisis plaguing the rest of the continent.
The Baltic nations of Estonia, Lithuania, and Latvia also deserve some credit. They allowed spending to rise far too rapidly in the middle of last decade – an average of nearly 17 percent per year between 2002 and 2008! But they have since moved in the right direction, with genuine spending cuts (unlikely the fake cuts that characterize fiscal policy in nations like the United States and United Kingdom). Yes, the Baltic countries did raise some taxes, which undermined the positive effects of spending reductions, but at least they focused primarily on spending and preserved their attractive flat tax systems. No wonder growth has rebounded in these nations.
The situation in the rest of Europe is more bleak, particularly for the so-called PIIGS. To varying degrees, Portugal, Italy, Ireland, Greece, and Spain have lost the ability to borrow, received bailouts, and been mired in recession.
The silver lining is that the fiscal crisis has forced them to finally cut spending. All of those nations implemented real spending cuts in 2011 according to European Commission data, bringing spending below 2010 levels. Final figures for 2012 aren’t available, of course, but the International Monetary Fund estimates that spending will drop in every nation other than Italy (where it will climb by less than 1 percent).
That’s the good news. The public sector finally is being subjected to some long-overdue fiscal discipline.
The bad news is that politicians also imposed very significant tax increases on the private sector. Income tax rates have been increased. Value-added taxes have been hiked, and other taxes have climbed as well. These penalties on productive activity undermine potential growth.
The politicians say that this is a “balanced approach,” but this view is misguided, First, as Veronique de Rugy has shown, it generally means lots of new taxes and very little spending restraint. Second, it is based on the IMF view of “austerity,” which mistakenly focuses on the symptom of red ink rather than the underlying disease of too much spending.
What Europe really needs is a combination of lower spending and lower tax rates.
Portugal may actually be moving in that direction, according to a report in the Wall Street Journal.
The Portuguese government is seeking to cut its corporate tax rate for new businesses to one of the lowest in Europe as part of a plan to attract investment and revitalize ailing industries, the minister of economy said. The government is in talks with the European Commission’s competition agency in Brussels to get approval to cut the tax on corporate income for new investors to 10% from the current 25%, the minister, Alvaro Santos Pereira, said in an interview. …”We want to make Portugal one of the most attractive countries in Europe for new investment,” Mr. Santos Pereira said. “We believe that by providing very strong fiscal incentives to new investments we will safeguard the budget side and at the same time become a lot more competitive,” he added. …While wealthy euro-zone countries and the IMF are beginning to recognize the need for measures to boost growth in austerity-hit countries, they have been reluctant to endorse tax cuts in countries under bailout programs. If implemented, the proposed tax cut would be a departure from a series of tax increases that countries including Portugal, Greece and Spain were forced to take as part their bailout conditions.
Before getting too excited, it’s important to note that the Portuguese proposal is a bit gimmicky. It’s not a corporate tax rate of 10 percent, it’s a special rate of 10 percent for new investment, however that’s defined.
But at least it might be a small step in the right direction. As the article indicates, it “would be a departure from a series of tax increases.” And Portugal definitely has been guilty in recent years of raping and pillaging the private sector.
To be fair, though, this chart shows that government spending in Portugal did decline last year. And the IMF is projecting that it will fall again this year and next year.
But the key to good fiscal policy is reducing government spending as a share of economic output. And if tax increases keep the private economy in the dumps, then the actual burden of government spending doesn’t change much even when nominal outlays decline.
A pro-growth policy is needed to boost economic performance. Portugal’s corporate tax rate proposal, by itself, won’t make much of a difference. But if it’s the start of a trend, that could be significant.
By the way, it’s amusing to see that one of the bureaucrats from the European Commission is pouring cold water on the plan, implying that a decision to take less money from a company somehow is akin to government assistance.
“We would want to be sure that anything proposed would help the competitiveness of the economy,” said spokesman Simon O’Connor, “but at the same time it would have to be in line with state aid rules,” referring to EU regulations that limit the assistance governments can give to the private sector. “There really isn’t any scope for them to reduce revenue,” he added.
But I guess that’s not too surprising. Along with their tax-free colleagues at the Organization for Economic Cooperation and Development, the European Commission has been trying to undermine tax competition and make it easier for nations to impose bad tax policy.
Returning to our main topic, what’s next for Portugal?
Your guess is as good as mine, but Portugal’s leaders already have acknowledged that Keynesian fiscal policy is ineffective. Perhaps they’ve gotten to the point where they realize punitive tax systems also are destructive.
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About That Gold Stored in Flood-Prone Lower Manhattan
By Nick Summers on November 04, 2012
As New York City continues to dry out in the aftermath of Hurricane Sandy, the financial world is reconsidering just how smart it is to place critical pieces of infrastructure in flood-prone areas. Citigroup’s (C) waterlogged building at 111 Wall St. will be unusable for several weeks, and two critical Verizon Communications (VZ) facilities suffered extensive flooding during the storm.
At least the material at those sites is replaceable. What about the nearly 15 million pounds of gold bricks stored at the New York Fed?
They’re safe—and will be, in theory, should floodwaters return. The bullion is so heavy that its vault sits 80 feet below street level, and 50 feet below sea level, on the bedrock beneath Manhattan. Though the bank’s fortress-like building is located far downtown, close to where other financial institutions sustained water damage, the property at 33 Liberty St. sits in the city’s evacuation zone C, where residents are told to expect storm-surge flooding only from major, category 3 or 4 hurricanes that hit the New York harbor.
The New York Fed is tight-lipped about how it secures the planet’s largest concentration of gold, referring questions on the subject to a brochure (PDF) published on its website. The pamphlet claims that the vault is protected by an “airtight and watertight seal” created by lowering a 90-ton steel cylinder just three-eighths of an inch into a 140-ton steel-and-concrete frame—an effect “similar to pushing a cork down into a bottle.” Other security measures include closed-circuit video feeds, firearms training for guards, and the weight of the gold itself. At 27 pounds per bar, it’s hard to smuggle one out in a pocket. “The Bank’s security arrangements are so trusted by depositors that few have ever asked to examine their gold,” the New York Fed writes.
That, obviously, has helped fuel a string of conspiracy theories—the gold isn’t really there, isn’t really gold, or is otherwise suspect. The Los Angeles Times reported in August that the federal government was conducting its first-ever audit of the bullion it stores beneath Liberty Street, drilling tiny holes into selected ingots and analyzing the metal.
Ordinarily, you’d be able to eye the gold bars yourself. Some 25,000 visitors tour the bank’s vault each year. Those visits, the bank says, have been canceled indefinitely “due to the aftermath of Hurricane Sandy.”
Statistics: Posted by DIGGER DAN — Mon Nov 05, 2012 2:50 am
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By Chip Knappenberger
Global Science Report is a weekly feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”
The good news keeps coming in about sea level rise—or more precisely, Antarctica’s (minimal) contribution to it. Last time, we reviewed recent scientific findings indicating Antarctica was on the verge of gaining ice mass (and thus acting to draw down global sea level) as a slightly warmer Southern Ocean results in increasing snow accumulation which acts to offset ice loss from its peripheral (marine-terminating) glaciers. Without a contribution from Antarctica, alarming visions of a large and rapid sea level rise this century—upwards of a meter (and by some reckoning up to 6 meters)—are pretty much out the door. Sans Antarctica, we are looking at a foot to foot-and-a-half of rise, give or take a few inches. Such an amount will undoubtedly require some adjustment and adaptation, but will not involve a wrenching transformation of society. Most of us probably wouldn’t even notice. Consider that, due to a combination of geology and oceanic warming, this same amount (or more) has been experienced in many East Coast locations in the last 100 years.
The good science news may be one reason why global warming has been so absent in the election debates. In response, last week, the Union of Concerned Scientists helped a collection of local government officials and scientists from Florida pen an open letter to the candidates imploring them to address the issue of sea level rise during their third and final debate (held in Boca Raton). They didn’t.
It is a good thing that they left the issue alone, for in this week’s Nature magazine comes more evidence that Antarctica is perhaps not going to be the great sea level rise contributor that other research as made it out to be (e.g. Velicogna et al., 2009; Rignot et al., 2011).
Matt King, from Newcastle University, and colleagues set out to refine the Antarctic ice mass change calculations that have been performed using data collected by the Gravity Recovery and Climate Experiment (GRACE) satellite. GRACE determines how the mass is changing underneath the satellite by measuring temporal variations in the pull of gravity. If the strength of the local gravitational attraction increases over time, then it is inferred that the local mass must be increasing (and vice versa). This is a handy tool for assessing trends in dynamic ice/snow mass in places like Greenland and Antarctica.
But, variations in the ice/snow burden are not the only thing that can change the gravitational pull observed by the GRACE satellite. The ground underlying the ice and snow may be changing as well. And, in fact, it is. The ground in many places around the world is still adjusting to the burdening and subsequent unburdening from the coming and going of the massive amount of snow and ice from the last ice age (and its termination). This process is known as glacial isostatic adjustment (GIA).
The problem is that while we understand that GIA is taking place, we really don’t precisely know the details, like where, when, and how fast—especially over sparsely monitored and studied places like Antarctica.
Two years ago, a study was published that showed that the GIA model used in most GRACE-based studies was in error, and that when it was corrected, the rate of calculated ice mass loss from across Antarctica declined by some 40 percent (from ~150 gigatons/yr to ~87 Gt/yr). Since it takes about 374 Gt of melted ice to produce 1 millimeter of global sea level rise, these findings indicated that Antarctica was contributing to sea level rise at a rate of about one-quarter of a millimeter per year (or about 1 hundredth of an inch per year). We detailed that finding, by Xiaoping Wu and colleagues, in a Cato Current Wisdom article in October of 2010.
Now along comes the new study Matt King et al. (2012) that further refines the local GIA over Antarctica. Here is how they did it:
Here we applied a new GIA model (W12a) to GRACE data to estimate the ice-mass balance for 26 independent Antarctic drainage basins from August 2002 to December 2010. The W12a model comprises a glaciologically self-consistent ice history constrained to fit data that delimit past ice extent and elevation, and an Earth viscosity model chosen such that GIA predictions from W12a best fit a suite of relative sea-level records around Antarctica. The advance of W12a on previous models applied to GRACE data is illustrated by the misfit to GPS uplift rates being halved. Our use of W12a addresses the dominant GRACE-related error in previous Antarctic analyses.
With this new model in hand, they were able to produce a new estimate of the rate of ice mass change over Antarctica from 2002 through 2010. That estimate is a loss of only 69 Gt/yr (+/- 18Gt/yr). And further, they found no statistically significant change in this rate when averaged over the whole continent—in contrast to other prominent studies (e.g. Rignot et al., 2011) which claimed a significant acceleration was taking place.
So King and colleagues’ latest refinement puts the Antarctic contribution to global sea level rise at a rate of about one-fifth of a millimeter per year (or in English units, 0.71 inches per century).
Without a significantly large acceleration—and recall the King et al. found none—this is something that we can all live with for along time to come.
King, M., et al., 2012. Lower satellite-gravimetry estimates of Antarctic sea-level contribution. Nature, doi:10.1038/nature, http://www.nature.com/nature/journal/vaop/ncurrent/full/nature11621.html
Rignot, E., et al., 2011. Acceleration of the contribution of the Greenland and Antarctic ice sheets to sea level rise. Geophysical Research Letters, 38, L05503, http://www.agu.org/pubs/crossref/2011/2011GL046583.shtml
Velicogna, I., 2009. Increasing rates of ice mass loss from the Greenland and Antarctic ice sheets revealed by GRACE. Geophysical Research Letters, 36, L19503, http://www.agu.org/pubs/crossref/2009/2009GL040222.shtml
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US wheat farmers raise bet on rains coming good
US farmers upped their gamble that rains will refresh winter wheat, catching up on seedings, even as lingering dryness slowed crop development and worsened the condition of seedlings in the top growing state.
Growers sowed 10% of their winter wheat last week, putting themselves, at 81% completion, narrowly ahead of the average for the time of year, despite a slow start, US Department of Agriculture showed.
However, crop emergence, at 49%, remained behind the typical pace, particularly in more northerly areas.
In Nebraska, emergence was 29 points behind average "due to dry soils", USDA officials said, while the South Dakota crop was lagging by 67 points.
At Commonwealth Bank of Australia, Luke Mathews said: "The slow rate of emergence is of particular concern in the dry northern hard red winter wheat belt.
"These crops will be poorly established leading into winter dormancy."
‘Dry, windy and warm’
In Kansas, the main US wheat-growing state, the "dry, windy and warm" weather last week which USDA scouts said allowed farmers to "start wrapping up wheat planting" also tested the condition of the emerging crop.
Wheat emergence in selected US states and (difference from average)
Missouri: 34%, (+12 points)
Kansas: 62%, (+1 points)
Colorado: 66%, (-16 points)
Nebraska: 58%, (-29 points)
Montana: 36%, (-31 points)
South Dakota: 13%, (-67 points)
National: 49%, (-7 points)
The Kansas crop was rated 40% in "good" or "excellent" condition, down two points on last week’s initial reading, and below the 43% a year ago which was itself considered a historically low number.
While still early in the growing period, and following a season when Kansas achieved a strong wheat yield despite a poor start, October condition data can be a guide to future prospects.
In the previous 11 years, Kansas wheat did not improve post-dormancy compared with its condition at the end of October, research by Australia & New Zealand Bank shows.
Indeed, the extent of the challenge facing winter wheat seedlings is highlighted by official data showing that 100% of Kansas is in at least moderate drought, with 78% suffering dryness deemed "exceptional" or "extreme".
"Wheat conditions have grown dry in the main US bread wheat states in October," Gail Martell at US-based Martell Crop Projections said.
"Some areas in Oklahoma and southern Kansas have received less than 15% of normal rainfall.
"Gusty winds last week whipped up dry fields producing a dust veil from southwest Nebraska through Kansas into Oklahoma."
In Nebraska and South Dakota too, 100% of area is suffering drought, according to official data, although dryness is easing in some southern states, such as Texas, where the proportion has eased to 62%.
In the Corn Belt, 100% of Iowa, the top corn and soybean state, is in drought, but 63% in Illinois, and 25% in Indiana, where growing conditions were especially poor earlier in the year.
Statistics: Posted by yoda — Tue Oct 23, 2012 9:45 am
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Black Monday for stocks as lower profits and higher taxes menace US equity outlook?
Posted on 20 October 2012
The biggest fall in US stocks since June on Friday could well be a decisive reversal point for US equities, with the broadest measure up 18 per cent this year. It is not just that the rise in the stock market has happened against the background of a worsening global economy. It’s the outlook now for lower profits and higher capital gains taxes.
While the US ‘fiscal cliff’ coming on January 1st is feared mainly for the instant recession it would bring to the US economy, investors are also being warned of the implications of a surge in capital gains taxes from 15 to 40 per cent. Cash-out before the end of the year and you will certainly avoid that penal rate of tax. So why not sell now?
At the same time the Q3 profit reports from majors like Microsoft, Google, General Electric and MacDonalds have all been a disappointment over the past week. Next week the results season goes into top gear and we can expect more of the same.
The profits cycle for US corporations has peaked. They are struggling now with falling revenues and more job cuts are inevitable across the board. But headcount reductions will not be as effective at boosting the bottom line as before. Smaller businesses will make smaller profits.
The downcycle is self-fuelling. As one business contracts that is less business for another. Staff fired by one company mean less customers for another. Redundant workers cannot pay their mortgages and that is another bad debt for a bank.
Major US corporations cannot avoid the recession and slowdown in the rest of the global economy that is so obvious everywhere you look this year, except in the Oil States. If you sell software or hamburgers outside the US then there is a hit on revenues and a second hit from the stronger dollar as you bring those revenues home.
Given that the US economic recovery is very shallow it is not able to provide the business to compensate for the global downturn. The US economy has just not reached take-off speed in time and faces a ‘fiscal cliff’ of its own with automatic spending cuts and tax rises from the year-end.
These fiscal adjustments are actually required if the US is to get its ballooning debts under control and avoid a disastrous loss of confidence in the US dollar later. The new Congress may not repeal all these adjustments immediately as expected by over-optimistic Wall Street investors. Recessions are a normal part of the business and electoral cycle.
Will Wall Street finally wake up this weekend and push the panic button for Monday? Really the warning flashed with Friday’s sell-off and the smart money is already out of the exit.
Statistics: Posted by yoda — Sat Oct 20, 2012 12:57 am
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Drought Pushes Borrowing Higher, Land Prices Lower
Aug. 30, 2012Burt Rutherford
Drought Pushes Borrowing Higher, Land Prices Lower
Bankers See Farmland Values Moderate
“The drought is dampening economic activity across the region,” says Creighton University economist Ernie Goss. “Companies with close ties to the farm, such as ethanol, and agriculture equipment sellers are experiencing pullbacks in growth. I expect food processors to take a hit later in the year as higher food prices work their way through the system.”
In his monthly survey of rural banks throughout the heartland, 31% of bankers say the drought is negatively affecting business activity in their area for August. The Rural Mainstreet Index (RMI), which ranges between 0 and 100 with 50.0 representing growth neutral, declined for the third straight month to 47.1, from 47.9 in July.
RMI is a unique index covering 10 regional states, focusing on approximately 200 rural communities with an average population of 1,300. It gives the most current real-time analysis of the rural economy.
According to Jim Eckert, Anchor State Bank president, Anchor, IL, “Uncertainty over future tax policy and the costs of ‘Obamacare’ have many of our farm and commercial customers sitting on the sidelines in borrowing and hiring staff.”
However, rural banks have ample money to loan, according to a survey by the Kansas City Federal Reserve Bank. “Bankers indicated ample funds were available for farm loans, and interest rates edged down further,” the survey indicates.
Here’s a look at how the RMI breaks down:
Farming: According to surveys for the past several months, farmland price growth has weakened significantly. However, there is a great deal of variance across the region with irrigated areas and those not impacted by the drought continuing to report solid growth. The August farmland price index (FPI) weakened with an August reading of 52.8, down from July’s 58.6, the lowest level since July 2009.
The Kansas City Fed survey found similar results. “After surging at the beginning of the year, district farmland values rose less rapidly during the second quarter,” says Jason Henderson, Omaha branch executive. “District farmland values rose less than 3% during the second quarter, roughly half the rate of growth at the beginning of the year,” Henderson says. Non-irrigated cropland values rose solidly, while irrigated cropland values held steady and ranchland values edged up.
In spite of weakening land values, this is the 31st consecutive month that Creighton’s FPI for farmland values has been above growth neutral. The farm-equipment sales index sank to 38.3, its lowest level since October 2008, and was down from July’s 46.1.
“The drought is putting a dent in farmland price growth and the purchase of agriculture equipment, including trucks,”says Goss, the Jack A. MacAllister Chair in Regional Economics at Creighton, Omaha, NE.
This month, bank CEOs were asked about the drought’s impact on farm borrowing. About 41% said the drought has encouraged greater agriculture borrowing. This is up significantly from July when only 29% of bankers reported an increase in borrowing as a result of the drought.
Additionally for August, 46% of bankers reported that livestock producers in their area were reducing their herd size in response to the drought. Last month, only 13% of bankers reported that livestock producers were doing so.
Bill Hess, CEO of Iowa Savings Bank in Carroll, IA, reports that the drought and high grain prices have caused livestock finishers to reduce risk by cutting numbers.
Banking: Farmers increased their demand for loans with the loan-volume index climbing to 67.6 from July’s 65.3 – the sixth consecutive month that the index has risen.
The checking-deposit index advanced to a weak 49.1 from 47.9 in July, while the index for certificates of deposit and other savings instruments slumped to 33.0 from July’s higher 41.7. “The drought appears to be increasing the cash needs of farmers in the region. We have been tracking a reduction in the percent of farmland and farm equipment cash sales and upturns in the degree of bank financing,” Goss says.
Hiring: August’s hiring index declined to 51.9 from July’s 52.8. “Even though we tracked hiring growth for the month, the index was down from July and June. I expect hiring to drift lower with job losses in the months ahead as the impacts of the drought spread to more and more rural mainstreet businesses,” according to Goss.
Confidence: The confidence index, which reflects expectations for the economy six months out, sank to 39.6 from July’s 40.9 and June’s much stronger 58.5. “The drought has definitely lowered the economic and business confidence of bank CEOs in the area,” Goss says.
Home and retail sales: The August home-sales index rose to 60.2 from July’s 58.6, with the August retail-sales index rising to 45.2. That’s below growth neutral, but up from July’s 44.4. “The pace of sales for homes in the area remains positive. On the other hand, for a second straight month, drought conditions weakened retail sales,” Goss adds.
Statistics: Posted by yoda — Thu Sep 13, 2012 9:46 pm
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A Third of Americans Now Say They Are in the Lower Classes
by Rich Morin and Seth Motel
The percentage of Americans who say they are in the lower-middle or lower class has risen from a quarter of the adult population to about a third in the past four years, according to a national survey of 2,508 adults by the Pew Research Center.
Not only has the lower class grown, but its demographic profile also has shifted. People younger than 30 are disproportionately swelling the ranks of the self-defined lower classes.1 The shares of Hispanics and whites who place themselves in the lower class also are growing.
Among blacks, the story is different. The share of blacks in the lower class has not changed in four years, one of the few demographic groups in which the proportion in the lower classes did not grow. As a consequence, a virtually identical share of blacks (33%) and whites (31%) now say they are in the lower class.
When it comes to political affiliation, more Democrats than Republicans place themselves in the lower classes, but Republicans saw a sharper rise over the past four years. Some 23% now call themselves lower class, up from 13% in 2008. Among Democrats, 33% now call themselves lower class, compared with 29% in 2008.
The survey finds that hard times have been particularly hard on the lower class. Eight-in-ten adults (84%) in the lower classes say they had to cut back spending in the past year because money was tight, compared with 62% who say they are middle class and 41% who say they are in the upper classes. Those in the lower classes also say they are less happy and less healthy, and the stress they report experiencing is more than other adults.
As they look to their own future and that of their children, many in the lower class see their prospects dimming. About three-quarters (77%) say it’s harder now to get ahead than it was 10 years ago. Only half (51%) say that hard work brings success, a view expressed by overwhelming majorities of those in the middle (67%) and upper classes (71%). While the expectation that each new generation will surpass their parents is a central tenet of the American Dream, those lower classes are significantly more likely than middle or upper-class adults to believe their children will have a worse standard of living than they do.
A Note on Measuring Social Class
To measure social class, the Pew Research surveys in 2012 and 20082 asked respondents this question: “If you were asked to use one of these commonly used names for the social classes, which would you say you belong in: the upper class, upper-middle class, middle class, lower-middle class or lower class?” Few respondents in either survey placed themselves in the “lower class” or “upper class” categories. So for this report “lower class” constitutes those who placed themselves in the lower or lower-middle class. Those who identified themselves as upper or upper-middle class are combined to form the “upper class” group.
The Demographics of Class Change
About a third of all adults (32%) now say they are in the lower class, up from 25% in a Pew Research Center survey conducted in early 2008.
This increase can be seen to one degree or another in most—but not all—demographic groups analyzed for this report. But it is particularly striking among young adults, who by their own self-definitions have moved into the lower classes at nearly twice the rate for the population as a whole.
Fully 39% of adults ages 18 to 29 now say they are in the lower class, a 14 percentage point increase since 2008. Four years ago, young people were no more likely than other age group to identify as either lower or lower-middle class. Today, about twice the share of young people than adults ages 65 and older say they stand on the bottom rungs of the social ladder (39% vs. 20%).
Larger shares of whites (31% vs. 23%) and Hispanics (40% vs. 30%) today than in 2008 also say they are in the lower class. In contrast, there has been no increase in the proportion of blacks who identify as lower class (33% in both surveys).
As a result, whites today are no more likely than blacks to say they are in the lower class (31% vs. 33%), a change from four years ago when a significantly larger share of blacks identified with the lower classes (23% vs. 33%).
The survey also found that a good education offered some protection from falling into the lower class. Among those adults who attended college but did not graduate, the share who place themselves in the lower class increased by 12 percentage points to 36% in the past four years. At the same time, the proportion with no more than a high school diploma who say they are in the lower class rose by 9 points to 41%.
In contrast, the share of college graduates who place themselves in the lower class grew from 12% to 17%. This finding echoes the results of other Pew Research surveys that found those with a college degree as a group experienced relatively fewer financial problems during the Great Recession than those with less education.3
The increase in the proportion who say they are in the lower class has been somewhat more uniform in other core demographic groups. For example, roughly a third of all men (34%) and women (31%) say they are in the lower class, an eight- and seven-percentage point increase, respectively, from 2008.
More Republicans, Conservatives Say They Are in the Lower Class than in 2008
Nearly twice the proportion of Republicans now place themselves in the lower class than did so four years ago (23% vs. 13%).
The share of political independents who say they are in the lower classes also increased to 37%, a 10 percentage point increase over 2008. About a third of all Democrats say they are lower class (33%), compared with 29% four years ago, a change that is not statistically significant.
While the share of Republicans who place themselves in the lower class has increased, the GOP is still underrepresented among the lower classes relative to their numbers in the overall population. Overall about 16% of the lower class identifies with the Republican Party, while the GOP makes up about 22% of the population. In contrast, the percentages of the lower class who identify as Democrats and independents mirror their overall proportions in the country as a whole. A third (34%) of the lower class are Democrats and 43% are independents, while nationally a third of adults (33%) say they are Democrats and 38% are independents.
The survey also finds that the proportion of self-described conservatives who are in the lower class also has surged, rising from 19% in 2008 to 32% in the latest Pew Research survey. In contrast, the proportion of moderates increased from 24% to 30%. A third of all liberals (33%) placed themselves in the lower class, while 29% did in 2008, though this change was not statistically significant.
As a result of these shifts, roughly equal shares of conservatives (32%), moderates (30%) and liberals (33%) say they stand on the bottom rungs of the social ladder now.
Are either the Republicans or Democrats the “party of the poor?” Some have claimed that the Democrats mostly favor the poor and disadvantaged over the interests of other Americans. Those in the lower class disagree—and so do adults in the middle and upper classes. Overall, only about three-in-ten adults in the lower, middle and upper classes say the Democrats favor the poor. In contrast, only about 3% of all adults say the GOP is primarily concerned about needs of Americans living in poverty.
Moving Up, Moving Down and Staying in Place
Another set of survey questions underscores the difficulty that many of those in the lower class face moving into the middle or upper classes. At the same time, these results document considerable movement up the social ladder among those raised in lower-class households.
To measure social mobility, the survey asked two questions. The first one asked respondents which class they currently belonged to: the lower, lower-middle, middle, upper-middle or upper class. A follow-up question asked where they would place their families when they were growing up. By comparing respondents’ answers to the two questions, it is possible to see who has moved up the social ladder from where their families stood, who moved down and who stayed in place.
The findings indicate that a majority of those in the lower class (61%) were raised in families that were themselves lower class; in other words, they have made no progress up the social ladder from where they started. Roughly four-in-ten (38%) have experienced downward mobility since their childhood: 26% who say they were raised middle class and 12% who say they grew up in upper-class families.
In contrast, 44% of those in the middle class say their parents were middle class and an additional 40% say they were from a lower-class background. About a third (34%) of upper-class adults say they were raised in upper-class households. But about two-thirds say they had risen from humbler backgrounds: 34% say their families were middle class, while a roughly equal share (32%) says they were raised in lower-class families.
Analyzed a different way, some 43% of those raised in lower-class families remain in the lower class, while 60% of those from middle-class backgrounds stay middle class and 33% of those from upper-class families remain in the upper class.4
Hard Times and the Lower Class
Americans in the lower class are more negative about their current financial standing and more pessimistic about their economic future than adults who place themselves in the middle or upper classes. Those in the lower classes also are significantly more likely than other Americans to doubt that hard work brings success.
According to the survey, about six-in-ten (63%) adults in the lower class say they are less financially secure today than they were 10 years ago. In contrast, about four-in-ten middle-class adults (42%) and a quarter (24%) of those who say they are in the upper class say their financial situation is more precarious now than it was a decade ago.
Their experiences in the past decade are echoed in their views of the current economy. About half (52%) of those in the lower classes say the current economy is “poor.” In contrast, only about half that share of those in the upper class (27%) and 34% of middle-class adults have a similarly downbeat view.
The lower class is equally gloomy when looking ahead. About six-in-ten (58%) say they have little or no confidence that they will have enough money to live on in retirement. About three-quarters (77%) of those in the lower class also say it’s harder to get ahead today than a decade ago.
The lower class also is sharply divided over whether hard work is the path to success. About half (51%) agree that “most people who want to get ahead can make it if they’re willing to work hard.” But nearly as many (45%) hold the contrary view that “hard work and determination are no guarantee of success.” In contrast, big majorities of the middle and upper classes (67% and 71%, respectively) endorse the view that hard work is still a viable path to success.
Lower Class Less Satisfied
By significant margins, those in the self-identified lower classes say they are less satisfied than others with their family life, housing, education and finances. On many responses, the gap between the lower and middle classes is much larger than that between the middle and upper classes.
About four-in-ten (42%) people in the lower class say they are satisfied with their personal financial situations, compared with 72% of those in the middle class and 85% in the upper class. In regard to housing and education, about seven-in-ten in the lower class express satisfaction, compared with about nine-in-ten in both the middle and upper classes. The difference among classes extends to their family lives as well. About eight-in-ten (81%) in the lower class are satisfied with this aspect of their lives, compared with nearly 95% of those in the other classes.
Wider gaps emerge when measuring only those who are “very satisfied.” Only 13% of lower-class adults say they are “very satisfied” with their financial situation—less than half the rate of other Americans. About one-third of middle-class adults (32%) say they are very satisfied with their finances, and roughly half (49%) of the upper class say the same.
When it comes to housing, only 39% of lower-class Americans are very satisfied, well below the two-thirds of the middle class (67%) and three-quarters of upper-class adults (75%) who express that view. A similar gap exists regarding education. The percentage of lower-class
adults who say they are “very” satisfied” is 34%, compared with 61% of the middle class and 79% of the upper class who express strong satisfaction with their education. The gap in strong satisfaction also exists in people’s family lives. About six-in-ten (57%) adults who said they were in the lower classes are very satisfied, below the levels for the middle class (78%) and the upper class (85%).
Some differences emerge within the lower class, as well. On the issue of housing, 87% of owners are satisfied, but just six-in-ten (62%) renters agree. About three-in-four whites who say they are lower class (78%) are satisfied with their housing, a higher share than Hispanics (65%). Among blacks who place themselves in the lower classes, 69% are satisfied.
A similar pattern holds for views on their education. Among the lower class, about nine-in-ten college graduates (92%) say they are satisfied with their education, compared with 67% of those who do not have bachelor’s degrees. More than twice as many college graduates (73%) as non-college graduates (27%) say they are “very” satisfied on this measure. Three-quarters of lower-class whites, 69% of blacks and only 57% of Hispanics say they are satisfied with their education. Additionally, education is the one measure in which an age gap emerges. Among the lower class, about eight-in-ten (78%) adults ages 50 and older are satisfied with their education, compared with 66% of younger adults.
The survey also found that family satisfaction varies somewhat by race and ethnicity. Nine-in-ten blacks (90%) in the lower class say they are satisfied with their family lives, compared with about eight-in-ten Hispanics (83%) and whites (79%).
Many Struggles in the Past Year
Those in the lower class are much more likely than those in the other classes to have faced economic hardships in the past year, such as cutting back household spending in general; having trouble paying for rent, mortgage, medical care or bills in general; or having been laid off or lost their job. Just 11% of lower-class adults said none of these situations had occurred in the past year. Middle-class adults are three times as likely (33%) and upper class adults five times as likely (54%) to have escaped these problems.
One-in-three (34%) people in the lower class faced four or all five of the problems asked in the survey, compared with 10% of middle-class adults and just 3% of the upper class.
With each of the five experiences, those in the lower class were at least twice as likely as the upper class and often the middle class to have encountered them in the past year. About eight-in-ten people in the lower class (84%) cut back their household spending, compared with 62% of the middle class and 41% of the lower class. Six-in-ten lower-class adults (64%) had trouble paying their bills, more than twice the rate of the middle class (29%) or the upper class (13%). Fully 45% had difficulty paying for medical care for themselves or their families. Just two-in-ten (18%) middle-class adults and one-in-ten upper-class adults (11%) faced a similar problem.
The same gap exists for problems with rent or mortgage—45% of the lower class said they had trouble paying for housing in the past year, as did 16% of the middle class and 7% of the upper class. One-in-four people (25%) in the lower class lost their job in the year prior to the survey, twice the rate of the middle class (12%) and about three times the rate of the upper class (7%).
Some of these problems have grown for the lower class since a 2008 Pew Research survey on the social classes. The 45% figure today that had trouble paying their rent or mortgage is up from 33% four years ago. Since that time, there also has been an increase in people who cut back on their household spending, from 75% then to 84% today.5
Some demographic groups in the lower class fared differently than others in the past year. Men were twice as likely as women to have faced none of the five problems. Those ages 65 and older were also more than twice as likely as other age groups to have avoided those hardships. Non-college graduates, unmarried adults and renters are also somewhat more likely than college graduates, married adults and homeowners to have had two or more problems in the last two months.
On each of the five problems, adults 65 and older said they had been better off than younger adults in the lower class. On average, they experienced about one less problem than other groups.
With one exception, college graduates in the lower class were less likely to have faced these problems than those without a college degree. The trouble in the last year that affected college graduates equally as non-college graduates was losing a job, which happened to about one-in-four people in both groups.
Women fared worse than men in the lower class in three of the five categories. They were more likely than men to have had to cut back on spending, had trouble paying the bills and had trouble paying for medical care. They were not significantly different when it came to paying rent or mortgage or losing a job.
Health and Wellness Woes
Overall, those who say they are in the lower or lower-middle class are less happy, less healthy and more stressed than other social classes.
Compared with the upper class, the lower class is four times as likely to be in subpar health, three times as likely to be unhappy and twice as likely to be frequently stressed.
Four-in-ten (40%) lower-class Americans say their health in general is only fair or poor. Only about half as many middle-class Americans say the same (22%) and just one-in-ten (10%) in the upper class concur. In the lower class, two-in-ten (19%) are in “excellent” health, compared with three-in-ten (32%) in the middle class and roughly four-in-ten (44%) in the upper class. These results are largely unchanged from a 2008 Pew Research study on the social classes.
Not surprisingly, older people in the lower class register less satisfaction with their health. Among those ages 50 and older, 51% are in “only fair” or “poor” health, while 41% are in good health and 7% are in excellent health. By contrast, one-third (34%) of people younger than 50 are in only fair or poor health, and one-quarter (26%) register excellent health.
In addition, men in the lower class are more likely than women to say they are in “excellent” health (23% vs. 14%). There is little significant difference among races and ethnicities.
About one-in-three people in the lower class (31%) say they are not too happy with how things are in their life, more than the middle class (18%) and three times as much as the lower class (10%). And only two-in-ten say they are “very happy,” compared with three-in-ten in the middle class (32%) and four-in-ten in the upper class (42%).
Inside the lower class, those ages 50 and older (41%) are more likely than younger generations (26%) to say they are “not too happy,” although similar percentages say they are “very happy” (19% of those 50 and older and 21% of those younger than 50). Whites are less likely than minorities to say they are “very happy” with their lives. Just 17% of whites in the lower class say this, which is less than blacks (28%) and Hispanics (29%).
About six-in-ten (58%) people in the lower class say they are “frequently” stressed. Only four-in-ten in the middle class (37%) and three-in-ten in the upper class (29%) say the same.
Whites in the lower class were particularly likely to say they were frequently stressed. About two-thirds of whites (65%) are frequently stressed, significantly more than blacks (46%) and Hispanics (37%). Adults ages 18 to 64 are more likely to be often stressed than older adults (61% vs. 31%).
Dissatisfied and Not Making Progress at Work
About three-in-ten employed lower-class adults (28%) say they are dissatisfied with their jobs, and they are several times as likely as those in other classes to say that. About seven-in-ten (71%) say they are satisfied, and an overwhelming 93% of the middle and upper classes express job satisfaction.
Employed women in the lower class are more likely than men to express dissatisfaction (35% vs. 23%). Employed adults in the lower class ages 18 to 49 are twice as likely as those 50 and older to say they are not satisfied with their jobs (32% vs. 16%).
People in the self-described lower class also are much more likely than others to say they are not advancing in their careers. Among those who are not retired, four-in-ten in the lower class (39%) state that they are not making progress in their work or career goals. This is about twice the rate of those in the middle class (18%) and nearly four times the rate of those in the upper class (10%).
Among those who say they are in the lower class, women are twice as likely as men to say they are not making progress. About half (53%) say they are not meeting their career goals, compared with 26% of men. Additionally, about six-in-ten (59%) non-retired adults ages 50 and older say they are not making progress, as do 32% of those younger than 50.
Similar proportions of each class are currently employed, but the lower class has more part-time workers who would prefer to work full time than the other classes and also higher rates of unemployed people looking for work.
In the lower class, 37% of adults say they do not have a job, compared with 36% of the middle class and 30% of the upper class. But three-in-ten (31%) of those in the lower classes who are not employed are currently looking for work, while two-in-ten (21%) of the middle class and 16% of the upper class are not employed and looking for a job.
About two-in-ten (17%) in the lower class work part time, roughly equal to other classes. However, part-time workers in the lower class are much more likely to want full-time employment than others. Eight-in-ten (82%) say they would prefer to be working full time, while only 36% of part-time workers in the other classes say they want a full-time job.
Some Optimism for the Next Generation
There is a mixed verdict when people are asked about their children’s future standard of living. Four-in-ten lower-class adults (41%) expect their children to be better off than them at their current age, which is similar to the percentage of the middle class and upper class. However, roughly one-third of the lower class (35%) believes that their kids will be worse off than they are. That share is greater than the middle class (26%) and about twice as large as the upper class (18%).
Blacks and Hispanics in the lower class are much more optimistic about the next generation than whites. Hispanics in the lower class are much more likely to think their children will be better off than worse off, by 63% to 19%. Blacks are in agreement, 56% to 25%. However, many whites in the lower class are pessimistic. Just three-in-ten (31%) think their children will be better off, and four-in-ten (42%) think their future standard of living will be worse than theirs.
Statistics: Posted by yoda — Wed Sep 12, 2012 10:30 am
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