Monday, October 26, 2009

Linking productivity 

I have meetings in the Twin Cities most of the day today, so a few links will have to do (maybe I grab a coffee this afternoon and post another time.) I'll at least try to relate them.

John Taylor explains to his first-year econ students the source of rising wages. Note that the measure is compensation per hour, which includes benefits. Most people bargain for the benefits they receive. Individual mandates for health insurance, Tyler Cowen explains, means that some people will be forced to buy something they don't want, so that their take-home pay will be pushed down. (Think about this -- we argue that the tax system biases health insurance to be provided by employers, and our answer to that is ... to make everyone buy it?) Ed Morrissey shows us that, when first considered in 1993, people knew this requirement that a citizen of the U.S. must buy any good was considered unprecedented. It still is.

Paul Kasriel reminds us of an important Milton Friedman lesson
If the increased government spending on retiree health care comes at the expense of business spending on capital equipment and R & D, then the productivity of the current labor force will be adversely affected and so, too, will the long-run growth rate of the economy.
(h/t: Caroline Baum, whose article should be read on its own merits.) The Wall Street Journal sounds the crowding out bell, noting non-defense discretionary spending rises 12.1% next year. Investors Business Daily cites an 8% payroll tax, a 5.4% income surtax and the fines in the mandates. Is it "stealth socialism" as they say? No, but it's certainly an expanded role of the state. Finding states that have increased productivity while expanding the public sector is about as easy as finding anything good to say about the NY Giants loss last night.