The Smartest/Creepiest Car Insurance Idea (For Now)

It even looks like R2D2
The man is watching. But don’t worry, he wants to save you money.

We all hate insurance companies – about as much as we hate banks, airlines and cell phone service providers. Car insurance companies, however, have a new way to save you money, but it takes us one step closer to 1984.

Progressive offers its customers a device called Snapshot that monitors the number of miles driven, and how fast the car is driven. The reason is simple – people who drive more, and people who drive faster are involved in more accidents. These folks are the reason that everyone else’s insurance premiums are higher than they would otherwise be.

Insurance companies already gather mountains of information on our age, gender, geography, marital status, income and credit score (and probably a lot of things we aren’t aware of) in order to determine who is a greater risk and thereby deserving of a higher premium. But these call into questions issues of sexism, ageism and classism. Charging more to those who drive more makes a lot more sense morally and financially.

Check out this graph from The Atlantic showing the relationship between miles driven and crashes/damages/injuries.

It doesn’t get much clearer than that.

And sure, Progressive, and its competitors who offer similar but less advanced products, have intentionally left out a GPS tracking systems in the monitoring device. They rightly assumed customers would not use the product with Big Brother knowing so much. But it’s only a matter of time before we cross that line. Once the system is in place, it will only be a matter of adding (or merely activating) one feature.

Surely there are lives and money to be saved if companies could track our every motion. Certainly there are some roads that are more dangerous than others; people who drive on the safe ones who want to save. How about breathalyzers as standard equipment in order to save money on insurance?

What other information can we use to draw correlations? Level of education? Criminal record? Gun ownership? Body mass index? Religion? Race? That last one is prohibited under the Constitution, but when you make a list of all the factors, you see how ridiculous it might seem to (1) exclude it, or (2) even consider all the other bits of information in the first place.

As technology improves we are going to be confronted with more of these dilemmas over privacy and common sense approaches to saving money and lives. I’m not sure where to draw the line. In fact, I would install such a device in my car. The way I see it, the war with the machines/robots/cyborgs/mutants/whatever is coming one way or another. The only question is whether it will be my grandchildren or their grandchildren who will wage that battle.

The Importance of Texas

Yes Virginia, there are liberals in Texas, and not just in Austin. 

Quick question (and don’t look it up on Wiki) – what percentage of Texas voted for Barack Obama in 2008? Given that Texas is often seen as the “role model for red states”, it may surprise many to know that four years ago, Obama won nearly 44% of the vote. While Obama’s numbers declined by about 2% in 2012, this level of support still shows a state that is much more complicated than the caricature that it is often presented as. Convincing a small percentage of the state to turn blue can change the country for decades.

Let’s not kid ourselves – Texas is most certainly a conservative state. But even in the most ideologically extreme states, at least a third of the electorate goes against the prevailing wind. When we say that a state is really red, that just means that the state isn’t a tossup in the election. A shift of a few percentage points can change all of that. In Texas, the margin of difference is small enough to flip the state, or at least color it purple.

Texas is the second largest state in the country and has 38 electoral votes – almost 20% of Romney’s electoral vote haul. If a big blue state like New York flipped, it would be a big deal too. But electorally speaking, New York is much bluer than Texas is red (Romney won only 36% of vote there) and more importantly, the demographic trends do not bode well for future Republican gains.

Texas on the other hand is at the heart of one of the most dramatic demographic shifts in our nation’s history. I hate breaking things down in terms of white and non-white, but for what it’s worth, much of the country votes that way. As Texas becomes more racially and ethnically diverse, the greater the likelihood of a flip.

I doubt any monumental shifts will occur by 2016, but beyond that, it’s certainly a possibility. It would be foolish for Democrats to ignore Texas, and it would even more foolish for Republicans to take it for granted. With Texas, Dems are more or less guaranteed Presidential victory; without it, Republicans are guaranteed defeat. There are plenty of skeptics, but for the first time in more than a generation, Texas is being viewed as a real battleground for national elections.

Read more:

Human Development Index among red and blue states

It’s easy to get confused by the endless red-state blue-state rhetoric during this election season (which is to say, the past six years). It’s worthwhile to take a look at how people live across the divide.

In this week’s New Republic, Jonathan Cohn’s Blue States are from Scandinavia, Red States are from Guatemala explores the historical roots of this great American divide. Cohn argues that there are affectively two countries in the United States. In one, government is seen as a mechanism to ensure that as many people as possible have their basic necessities taken care of. This is expensive. In the other “country”, government costs very little and provides very little.

What are the consequences of this divide? As Cohn points out “by nearly every measure, people who live in the blue states are healthier, wealthier, and generally better off than people in the red states…The four states with the highest poverty rates are all red: Mississippi, Louisiana, Alabama, and Texas. And the five states with the lowest poverty rates are all blue. Since it’s difficult to measure “nearly every measure” the next best thing is to look at the American Human Development Index developed by the Social Science Research Council, and inspired by the global HDI commissioned by UNDP. The AHDI takes into consideration things like health, education and overall standard of living.

The following is a list of the states (and DC) with the highest AHDIs and the states with the lowest AHDIs.

American Human Development Index 2010/11
12 Highest 12 Lowest
Connecticut  6.30 
 North Carolina  4.64
Massachusetts  6.24  New Mexico  4.56
Washington, D.C.         6.21  Montana  4.49
New Jersey  6.16  South Carolina         4.36
Maryland  5.96  Tennessee  4.33
New York  5.77  Kentucky  4.23
Minnesota  5.74  Oklahoma  4.15
New Hampshire  5.73  Alabama  4.09
Hawaii  5.73  Louisiana  4.07
Colorado  5.65  Mississippi  3.93
Rhode Island  5.56  Arkansas  3.87
California  5.56  West Virginia  3.85

With the exception of two swing states, every single one of the top AHDI states is blue. There are zero red states at the top – the highest ranked red state is Alaska, coming in at number 17. Continue reading “Human Development Index among red and blue states”

About the 47%

Mitt Romney’s recent remarks, secretly recorded and obtained by Mother Jones, in which he refers to 47% of the American population as self-victimizing moochers, has led to a chorus of criticism for his ineptitude as a campaigner. But what about his perception of reality? Is it true that 47% of Americans pay no federal taxes? Is it true that these non-contributing victims form the base of President Obama’s support? The following chart from the Tax Policy Center helps answer these questions.

While it’s true that almost half of Americans technically pay no federal income tax, more than 28% pay federal payroll taxes, which are basically federal income taxes that are collected separately for social security and medicare. It should be noted that payroll taxes are highly regressive and are almost always ignored in the national conversation about tax burdens. So suddenly the 47% shrinks to 18% who don’t pay taxes.

The next biggest group in the 47% are retirees who have exemptions because of their fixed (and often low) incomes. It should be noted that retirement income is still taxable – the 10.3% who pay no taxes represent the poorest of our elderly – hardly a demographic to target for being lazy moochers. Excluding the payroll tax payers and the elderly poor, the 47% collapses to 8%. Continue reading “About the 47%”

Tax the Rich More (Like We Used To)

It’s taken for granted that taxes are too high. We forget that by historical standards, taxes on the rich are low – very low.

It’s common to hear that taxes are too high. Nobody enjoys parting with their money, so it’s no surprise that we almost never hear people asking to pay more to the government. Even when politicians suggest tax increases, they use euphemisms and circuitous language, arguing for fair taxation or and end to subsidies for the rich.

The premise of the current narrative is simple: the rich (job creators) must not be taxed too much, otherwise, they will not hire people and make the investments necessary for economic growth. Neither the Democrats nor Republicans are proposing an increase in taxes for the lower and middle classes, so for this election cycle, a fundamental question is, how much should the rich pay in taxes?

The US federal government operates under a marginal income taxation system. This means that, assuming you are single, for the first $8,700 of income, everyone pays 10%. Everything in between $8,700 and $35,350 is taxed at 15%. The highest tax rate of 35% does not even kick in until you are making more than $388,351. There are currently six tax brackets and corresponding rates, as shown below.

Let’s take a look at the historical data as provided by the non-partisan Tax Policy Center. A top marginal tax rate of 35% is about as low as it has ever been. The only other time (since the Great Depression) that the rate dipped below our current levels, it was clear that the rate did not generate enough revenue and had to be increased. In hindsight, the relatively successful presidency of George H. W. Bush was cut short because he, in order to have a more balanced budget, reneged on the promise not to raise taxes. The following graph is a bit of a wake-up call to all the fear mongers that equate a return the a 39.6% top marginal tax rate with socialism.

If a 39.6% top marginal tax rate is socialism, then the Greatest Generation were a bunch of left wing radicals (what with their 91% top marginal income tax rate and all) and the post WW2 economic boom was an accident. Our country’s Golden Age was exemplified by a federal government that was active in the redistribution of wealth and the promotion of economic growth. And there was tremendous economic growth, in spite of high taxes.

I am not arguing for a return to 91%, but we must stop pretending that increasing the top marginal rate by a few percentage points is going to be the end of the world. Even 39.6% is low by historical standards. Any realistic conversation about deficit reduction must be accompanied by plans for tax increases.