Monday, February 22, 2010

That trick never works 

For many, price controls may seem like a tempting solution to holding down health care costs. However, past attempts at price controls teach us a very different lesson�this is one government policy guaranteed to do more harm than good. In fact, throughout history, price controls have been a notorious flop, bringing on economic stagnation and decline, rationing, hoarding, black marketing and organized crime, assaults on civil liberties, and even inflation, not to mention untold waste, graft, and human suffering.

In fact, from Babylon�s King Hammurabi to presidents Richard Nixon and Jimmy Carter, the thirty-eight-century history of price controls is a recurring economics lesson for any modern Luddite seeking a quick fix to health care costs. For instance, after he and previous emperors had debased the currency, creating rampant inflation, the Roman emperor Diocletian set maximum prices on more than one thousand products and services. Goods disappeared in legal markets, and reluctantly consumers and producers turned toward black markets despite a penalty of death for participating in these markets. After much suffering and bloodletting of the unfortunate caught violating the law, the law was revoked and Diocletian abdicated.
Thus wrote Simon Rottenberg and David Theroux in 1994 when we last debated price controls in health care. Some of the stories they tell come from overseas with regards to health care:
Price controls always lead to non-price rationing. If any of my students are reading, they will know my slogan -- all scarce goods get rationed somehow. If you aren't using price to ration, you can't say it isn't rationed, you just have to define the mechanism that does the rationing. The Fraser Institute's Waiting Your Turn annual survey is a measure of an alternative rationing mechanism called a queue, or first-come-first-served.

The Obama Administration's proposal leads to rationing of health insurance (or as Arnold Kling calls it, health insulation) that probably will not be on a queuing system. It creates a shortage, as any effective price control does. To provide the health insurance to others you will have government subsidies paid for by additional taxes. The growth-damaging effects of those additional taxes will not be recognized.

And as prices are reduced and people continue to be promised health care at near-zero marginal cost, insurance companies will slowly suffocate. Who will save us?

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Thursday, February 18, 2010

Encouraging profligacy 

My son texts me -- they never call any more -- asking about a $400 tax credit. I think he means the Making Work Pay credit. He wants to know how to file to get it. From a random site pulled up on Google that I thought he'd find useful:
The $400/$800 Making Work Pay tax credit took effect in July 2009. Workers who have taxes withheld from their paychecks will see a decrease in the federal income taxes withheld from each paycheck by about $30 per paycheck every two weeks or $60 for couples.

...The credit will phase out by two percent of any income over $150,000 for couples and $75,000 for others. Couples earning more than $190,000 and individuals earning more than $95,000 will not benefit from the credit.

Unlike the 2008 economic stimulus tax rebate checks that were mailed to taxpayers in a lump sum, the government is hoping that offering the $400 Make Work Pay tax credit as a reduction in payroll deductions will encourage taxpayers to spend the credit rather than save the money or use it to pay down debt.

We are encouraging younger people to spend rather than save. And perhaps how this works is by giving the money back in $30 dribs and drabs that they don't notice. Wasn't this how we got into trouble in the first place? Why does government think it should encourage consuming new goods rather than paying off debt?

Karl noted a few weeks ago that the government is ending this credit as well, since it was expected to spend $116.2 billion over ten years, quite an expensive program. Perhaps one reason for cutting it was that voters like my son didn't even know they were getting it. When I told my son how he had gotten this credit already, all I got was the cryptic 'K'.

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Friday, February 05, 2010

Mrs. S writes "created or saved too ambiguous" 

She writes about a place I call "Obama Road".
According to Stephen Gaetz, director of public services for St. Cloud, it is hard to answer questions about Pinecone jobs without an operational definition of �job,� especially as it concerns the seasonal nature of the construction industry.

Gaetz reported 162 workers worked �from a few hours to several weeks� for a total of 4,528 hours. That comes out to about 28 hours per worker. One can say this is good, but it�s not even close to 162 full-time jobs � 40 hours a week year-round.

Construction jobs are certainly not like all other jobs, but the administration simply uses the vague word �jobs,� blending them with other kinds of work. Overall, it�s a mistake to use an undefined term like �jobs� as a metric to measure the stimulus. It�s too ambiguous.

...without a workable definition of �job,� it is hard to unravel the question of �created� or �retained.�

I also wrote to Kristen Morrell from the Minnesota Department of Employment and Economic Development. She wrote that the money �was used to augment existing programs that help people who are unemployed and looking for work.�

She cited a public works program for water projects called the Public Facilities Authority that used $107 million and �created or retained 178 construction jobs.� For how long did those jobs last? Projects take six months to two years, she answered. Not all of the 178 workers work that long.
I'm proud of Barbara's efforts to get actual data to look at, and I for one thank Mr. Gaetz for straight answers.

To answer at least one critic in the comments on her article -- it would be a straightforward, honest answer for the Administration to say "we used $1.6 million to spread 4,528 hours of paid work over 162 people." When you say "we saved or created 162 jobs", (or 80, if I'm reading the report from right -- that's a problem) you imply that is a permanent job, not a drive-by job for a day or a week. That's the ambiguity.

There is also the question of whether the project provides some value to the area. Part of the problem I thought about for this road is that it largely lies in one community (St. Cloud) but serves another (Sartell.) If you just grant money to St. Cloud they might want to use it somewhere else of greater benefit to their own population. St. Cloud is a destination for Sartell much more than the reverse flow, I am assuming. So it may be that a higher level of government (county, state or national) solves a coordination issue. That's not the stated goal of the money, though -- the metric we get is only "jobs saved or created."

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Tuesday, February 02, 2010

When all that's left is hope 

According to reports yesterday, CEA Chair Christina Romer now expects that unemployment will be 9.8% at the end of 2010, 8.9% at the end of 2011, and 7.9% at the end of 2012. Many liberal economists are exasperated that the Administration is focused on budget reduction rather than stimulating ever more jobs. For instance, Mark Thoma:
Additional fiscal policy measures could make a difference to the unemployed, but instead the administration is proposing policies that might sell well, but only address a tiny fraction of the long-run deficit problem.

Health care reform is the key to solving the deficit problem, but reform is being held up by the party of just say no. That's the message Democrats need to hammer into public perception, that true inroads into deficit reduction through health care reform are being blocked by Republicans. In the meantime, Democrats need to take care of business the unemployed. Yes, the party of no will try to block additional stimulus, but they fight everything, and helping struggling households is worth standing toe to toe and fighting back.

When the next election rolls around and unemployment is still too high, but falling, we'll hear all about how the administration helped to put us on the road to recovery.
So we get some people deciding damn the deficit, full stimulus ahead like Rep. Clyburn, Paul Krugman's new friend. But the Administration has turned back on this beginning in October. They will freeze, and maybe make a few more cuts.

Because all they seem to have left to save this is hope. They are clearly betting on the economy improving and, stung by their unrealized optimism of 2009, are now using Dr. Romer's dour forecast to in essence undersell the program. Ryan Avent explains the dilemma that faces the Administration.
Currently, America is looking at a budget deficit around 10% of output. Mr Orszag noted in the press conference that the administration would like to cut that to 3%. But their expectations are that the bulk of the improvement in the near-term deficit�producing a decline in the deficit from 10% of GDP to 5% by 2015�will come from economic recovery, and the resulting increase in tax revenues and decline in automatic stabiliser spending.

Near-term deficit reduction is almost entirely about the strength of the economy. And nothing anywhere in the president's policies will do anything meaningful about the long-term deficit, which is almost entirely about growth in spending on health care.
So how could this possibly work? I think the Administration positions itself to benefit greatly from a positive surprise to GDP and employment with the budget. Suppose the V-shaped recovery comes true. Tax revenues soar, and the Obama budget soaks up that money and can avoid issuing quite so much debt in the early years of the decade. I don't give that a high probability, but it's greater than zero. The administration uses a 2.7% forecast on GDP while private economists are averaging 3% and there is more than one forecaster north of 4%. (As opposed to last year, I'm largely in agreement with the budget's economic assumptions.)

So balancing the budget might be easier than Obama is making this out to be. Let me leave you with one last thought. Obama will certainly get a few dollars more out of the wealthy, but did anyone catch this change? He's not only ending the Bush tax cuts, he's ending his own.
[Obama] dropped a request to make permanent the payroll tax credit that fattened worker paychecks by $400 per person in 2010. In Monday's budget blueprint, Mr. Obama proposed extending only through 2012 that credit, which was his signature tax-cut proposal for middle-class workers during his campaign.
He's willing to raise taxes on the middle class out of his fear of the deficit hawks? Glory! Another campaign promise has expired.

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Monday, February 01, 2010

Hey, I just cut 1/2 percent of the budget! 

The Obama administration has released a long document of its terminations, reductions and savings in the FY 2011 budget. Over the weekend it displayed a few of these for the Sunday news programs, calling them "tough choices." So how tough are these?

The largest three items of the $20 billion in reductions proposed are
  1. Completing the nationalization of the student loan program. Ed has already written on this one. It removes $8 billion in subsidies to banks for making student loans, using the Federal government's ability to borrow money instead of the banks using theirs. They'll argue it saves money. But it greatly expands the Federal control of education, permits the handing out of favors to students who become public sector employees, and subjects students to Congressional whim instead of financial market uncertainty. I'm not sure students will like that trade-off. The administration is calling a takeover of the student loan market 40% of its "budget cutting exercise".

  2. End the NASA Constellation program that sends astronauts back to the moon by 2020. $3.466 billion is to be saved by this. I'm usually inclined to like these privatizations, which is why I suspect it won't survive. There are states in the South that are already beneficiaries of this spending, and some people can't stand that other people are making money on space exploration. Most voters like space exploration (example) and it's just not something people will look at and want to kill.

  3. Kill the C-17 program. It's baaaack, after being rejected by the Senate last October. You want to really believe they'll change their minds this time? Fuhgeddaboudit. That's $2.5 billion of the $20 b.

The remainder is a lot of small items, from turning off the lights at the Department of Labor (you actually win an award in government for suggesting computers be powered off at the end of the workday, for saving a whole $20,000 in a budget of $3,800,000,000,000) to consolidating reports from the Bureau of Labor Statistics. The items in the Saturday list saved relatively little (the Brownfield Economic Development Initiative they mentioned is about $18,000,000, for example.

But much like those larger program above, each of the smaller programs has someone backing them in Congress. While I completely agree that the Save America's Treasures program, established to help celebrate the millennium, is about ten years past its stated purpose, it does have a purpose to someone. Many of the ideas in here were ideas that existed before this administration. Many of them will outlive his administration, as well.

And at the end of the day, what will we have? If nary a one of these proposed cuts pass, what pain will be visited on the Congress? We will have a budget deficit of $1.29 trillion rather than a budget deficit of $1.27 trillion. Would anyone notice? That's what Congress hopes. Yes, I suppose someone will want to argue that it saves additional money down the road, but spending cuts are all about maintaining an option to cut later -- and favoring friends in the meantime -- rather than cutting now and losing those friends.

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Thursday, January 28, 2010

Who Is Barack Obama? 

During the 2008 presidential campaign, I remember Shelby Steele, Senior Fellow at the Hoover Institution at Stanford being interviewed about his book, A Bound Man: Why We Are Excited About Obama and Why He Can't Win (Free Press, 2007). The election proved Dr. Steele wrong but a comment he made during one interview has stuck with me over the last two years. While I'm paraphrasing, the point is worth reconsidering: "Barack Obama does not know who he is." Well, if he doesn't know himself, how are we to know whether anything about him is real? And, if he doesn't know himself, how can he deliver on any of his dreams/policies/goals?

Then this sentence from his autobiography, The Audacity of Hope, supports the "Who is Obama?" question: �I serve as a blank screen on which people of vastly different political stripes project their own views.� Which is why people didn't know whom or what they were voting for. They all assumed he was saying what they wanted to hear.

Tonight, Alex Castellanos, an NRO commentator, indicated the same trait with these sentences: "This president defended everything tonight. Im not sure America knows who he is."

I respect the office of the President but Obama just seems to shoot shotguns - where's his focus, his accountability, his responsibility, his direction, his leadership?

Does Obama know who he is or has he spent his life trying to be something he isn't? Is his latest mantra "to fight for you..." an indication of the fighting within himself?


Wednesday, January 27, 2010

Promise only What You Can Deliver 

Tonight's SOTU speech by President Obama may or may not improve his ratings. Americans are beginning to see that scripted rhetoric, while well-delivered, does not mean follow through. Unfortunately for most Americans, what Obama promised, he had little clue as to how to implement. Does this mean I want a president to be able to dictate his wishes on demand? Absolutely not but it does mean something else: Words matter; actions matter.

Years ago I was assigned to a teacher who was not enamored with getting a rookie. She was one of those really good instructors who got the "problem kids because she could handle them" and was an excellent mentor. Within two days of my arrival, she pointed her finger at me and stated, "Don't you ever say what you can't deliver."

Some of the best advice I ever got. Obama and his handlers should have considered the delivery aspects of his campaign speeches that "meant anything you wanted." Then again, if your playground is Chicago and you own all the toys, maybe you never learned that words mean something and that not delivering on your word sooner or later catches up with you.

For the sake of the US, I hope Obama wakes up but he has a long way to go and I'm not sure if his mentors know how to help him.


Ideas for the SOTU 

A drinking game.

A different drinking game


Please drink (or write poetry) responsibly.

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Monday, January 25, 2010

Just to be sure I understand 

The president is proposing a partial budget freeze that saves $250 billion over a decade. At least from the August 2009 CBO estimate, total outlays for 2010-2019 are $41,314 billion. That comes out to about 0.6% reduction in spending over a decade, and in the early years about $10-15 billion per year. (There's a new long-term budget due this week, I think. Doubt it makes much difference.)

And somehow Sen. Evan Bayh is happy?
�The president can say in this State of the Union address, �I�m going to include in my budget a freeze on discretionary spending, I�m drawing a line in the sand, and I�m going to use my veto pen to enforce that,�� Bayh said in an interview on Bloomberg Television�s Political Capital with Al Hunt.
The president, of course, won't even be there to enforce the latter parts of this agreement. And it would be dwarfed in the out-years by the planned spending from health care.

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Wednesday, December 23, 2009

I'm shocked, shocked there's vote-trading in Casablanca 

Say then, my friend, in what manner does tyranny arise? --that it has a democratic origin is evident. -- Plato, The Republic.

I guess I had thought it was pretty well known that legislators trade votes and seek favors. Rentseeking has been around for centuries. Ever since James Madison wrote of factions in Federalist #10, we have known that we cannot remove the causes of special interests without removing liberty itself, so we have to control its effects.

Madison wrote, "When a majority is included in a faction, the form of popular government, on the other hand, enables it to sacrifice to its ruling passion or interest both the public good and the rights of other citizens." This is the situation in which we find ourselves today. The majority in the Senate prefers to gain control of the health industry, as it would any other if it found a pretense. This is the tyranny of the majority. So why did Madison think this would be nevertheless a good form of government? This is why he preferred a republic to a democracy, because a republic could better infuse the minority position into the legislative process:
In the next place, as each representative will be chosen by a greater number of citizens in the large than in the small republic, it will be more difficult for unworthy candidates to practice with success the vicious arts by which elections are too often carried; and the suffrages of the people being more free, will be more likely to centre in men who possess the most attractive merit and the most diffusive and established characters.

It must be confessed that in this, as in most other cases, there is a mean, on both sides of which inconveniences will be found to lie. By enlarging too much the number of electors, you render the representatives too little acquainted with all their local circumstances and lesser interests; as by reducing it too much, you render him unduly attached to these, and too little fit to comprehend and pursue great and national objects. The federal Constitution forms a happy combination in this respect; the great and aggregate interests being referred to the national, the local and particular to the State legislatures.

That last bit, "State legislatures", of course refers to the fact that Senators at that time were to be appointed by the state legislatures and not by popular, direct election. It seems highly unlikely that, if they were so elected today, that Sen. Ben Nelson would have an opportunity to be vote #60. But that's not how we pick them today, even though I believe it means senators do not have enough "acquaintance with all their local circumstances." A couple of paragraphs later,

It will not be denied that the representation of the Union will be most likely to possess these requisite endowments. Does it consist in the greater security afforded by a greater variety of parties, against the event of any one party being able to outnumber and oppress the rest? In an equal degree does the increased variety of parties comprised within the Union, increase this security. Does it, in fine, consist in the greater obstacles opposed to the concert and accomplishment of the secret wishes of an unjust and interested majority? Here, again, the extent of the Union gives it the most palpable advantage.
Madison clearly understood the ability of legislative leaders to vote-trade, as Harry Reid and Ben Nelson and the rest of the Democrats have now done. I don't think we should be surprised by it. Colbert King tells us to simply get over it: "My friends, dry your eyes, suck it up, and get on with it." And truly, Mr. King is right that the temptation to trade votes and to place pork in legislation is a temptation to which their has been bipartisan surrender and failure. This shock that Sen. Nelson has engaged in vote trading is a bit disingenuous. Challenge the constitutionality of the language of Nelson's bribe, or that of the binding of future Senates not to change the actions of the Independent Medicare Advisory Board. And sure you can point out who got which thirty pieces of silver. But let's not pretend this doesn't happen. It is the nature of government to logroll and always has been. (More on this in the preceding post.) James Joyner concurs:
This doesn�t mean we shouldn�t shine a light on these abuses. By all means, we should. But let�s not pretend that they�re a recent invention.
But it would be a good outcome if his most brazen legislative language -- how often do we explicitly name the state who gets the goodies? how often do we get a Senate Majority Leader so unashamed that he accuses those who don't get pork as having failed? at least Dodd had enough shame to drag a stick behind his tracks as he snuck off with $100 million for U Con -- reminded our populace of how voting out one set of pork-consumers doesn't mean you get clean government. Sometimes you get hungrier pork-consumers.

Boettke and Rogers, in a wonderful (and wonderfully thin) volume The Beginners Guide to Liberty (whole thing at that link), remind us of a story:
There is an old tale that many economists use to set up the discussion of how well the market works in comparison to government policy. A Roman Emperor is asked to judge a contest between two singers. After hearing the first contestant sing, the Emperor awards the prize to the second singer under the assumption that surely the second cannot be worse than the first.
The point of the story is that even when markets fail -- and the authors acknowledge that they do -- governments can fail too. When government failed in the second Bush Administration, people chose a different government. Perhaps next time they'll realize that when markets fail, the answer is to use markets to solve the failure.

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Friday, December 04, 2009

Death and taxes, together again (updated) 

One of the odd parts of the Bush tax cuts was that for 2010 there would be no estate tax. Republicans hoped to make that permanent, but 2008 pretty much killed that idea. So it came as no surprise yesterday that the House voted to make the current 2009 estate tax rate permanent.

The bill passed 225 to 200, with 26 Democrats joining all Republicans present in voting no. If Congress does not act, the estate tax will disappear in 2010, then return in 2011 under the higher rates -- 55 percent and a $1 million exemption -- that existed before President George W. Bush took office.

The tax is one of several bills and expiring laws that require attention from Congress by Dec. 31, even as the Senate expects to devote much of its time to the marathon health-care debate.

The Senate may decide to just patch it over for one year at the 2009 rate, leaving the threat of the higher rate and lower exemption hanging into next year. Republicans might like to have that as a campaign plank, but I can't remember when I last saw a tea party for the estate tax.

Nonetheless, this is a pretty big deal. 23% 0.23% of estates are taxed according to the article, and since there's no indexation that number would go up over time. (See below for update.) If Congress allows the tax provision to expire and does nothing, many more would come under the lower $1 million exemption. If the Senate does nothing with this bill passed by the House, there may be a few life-and-death decisions later this month that will have tax considerations in play.

The Obama Administration supported the House bill at the beginning of this year. Someone in the White House press corps should ask Press Secretary Gibbs whether they still do and if they would like the Senate to take up the estate tax bill before finishing with the health care bill.

UPDATE: Well, that was bad! I missed the decimal in front of the 23 in the Post article. For the current year, the share of filers affected would be 0.23%. But a federal report from earlier this year shows that the number would rise to 2.5% of all returns, including 10% of farms, if we revert to the 2001 rates. About 3% of farms currently have assets over $3.5 million.

Thanks to Charlie Quimby for finding my mistake.

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Tuesday, December 01, 2009

O's Speech 

Reading through O's speech on Afghanistan right now, I cannot help but wonder just where this guy got any kind of education.

Regardless, it would do him well to heed President Lincoln's phrase,
Abraham Lincoln
"You can fool all the people some of the time, and some of the people all the time, but you cannot fool all the people all the time."

To paraphrase it, you can please some of the people some of the time; some of the people all of the time; but you cannot please all the people all the time. Seems as though President O is trying the latter and he will fail miserably and take far too many troops and Americans with him. In less than one year, he has done more damage to the planet than anyone else. This speech is just pathetic.

Disclosure, we have a son in the Army.

KING ADDS (12/2): I don't think the speech was pathetic. Many have noted that the speech does not contain the words 'win' or 'victory' or reference to the evils of al Qaeda. That really wasn't what I was looking for. Last August there was a story from Iowa of a congressman saying he heard the president say he'd be willing to be a one-term president in return for passing health care reform. Asked about the comment, Robert Gibbs included Afghanistan on a list of things "he'd be comfortable with" meaning he would only be four years into.

Now, I've heard the president talk frequently about health care. Regardless of what you think of the policy particulars, I think there is little doubt of the passion the president has for that part of his agenda. What I wanted to hear last night was that same level of passion. Does President Obama care as much about Afghanistan or Iraq as he does health care reform? I wish he would care more about the war than his domestic agenda; I really don't agree with the latter. But that decision got made in November 2008. What I want to know is if I can count on him to do what he thinks is the right thing regardless of the consequences for his political future.

Read or see and decide for yourself. Compare it to the video of his health care plan. My opinion is no, but yours can be different. Here's just one thing to ask yourself: It appears that $30 billion a year matters to the President when it comes to Afghanistan. If he needed an extra $30 billion a year for health care reform, do you think he would change his mind?

JANET ADDS (12/2): Some in the comments misinterpret my original post. I am not at all opposed to sending more troops; in fact, I would have preferred meetingGen. McChrystal's full request for 40,000. My disappointment is with the tepid and flat speech itself, including the emphasis on leaving rather than on winning. That's not the right way to ask our soldiers to put their lives at risk.

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Wednesday, November 18, 2009

Waste, fraud and abuse 

Every time some report comes out about it, the White House gets all wee-wee'd up. No different this time:
The federal government made $98 billion in improper payments in fiscal 2009, and President Obama will issue an executive order in coming days to combat the problem, his budget director announced Tuesday.

The 2009 total for improper payments -- from outright fraud to misdirected reimbursements due to factors such as an illegible doctor's signature -- was a 37.5 percent increase over the $72 billion in 2008, according to figures provided by Peter Orszag, director of the White House Office of Management and Budget.

Sheldon Richman says sarcastically "Yes, a well-worded executive order should do the trick." $24 billion of the improper payments came from Medicare according to this report; another report over the weekend suggested Medicare lost $47 billion. But the Feds are now saying they are going to count as improper incomplete or illegible documentation, which the Bush administration did not. This then permits them to "multiply by 10 the number of agents and prosecutors targeting fraud in Miami, Los Angeles and other strategic cities where tens of billions of dollars are believed to be lost each year." These will be claimed as savings ... which will be spent on expanded coverage.

Got that? Define a scribble as fraud, hire more government workers, get doctors to reduce scribbling, and claim savings of $9.7 billion. (The extra $1.3 billion is payroll for those new prosecutors and agents making our health care experience better.)

No word on how many agents and prosecutors will be used to find phantom districts receiving $6.4 billion in stimulus cash. Perhaps we should get another executive order wherein Obama calls for the elimination of phantom districts. Imagine the savings!

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Friday, November 13, 2009

Supply curves slope upward 

Producers provide less at lower prices:
Kenneth Feinberg, the Obama administration�s special master for executive compensation, said he is �very concerned� about the possibility his pay cuts may drive talent away from companies bailed out by U.S. taxpayers.

�I�m very cognizant of the concerns expressed by these companies,� Feinberg said today in Washington at an event held by Bloomberg Ventures, a unit of Bloomberg LP, parent of Bloomberg News. �The law makes it clear that the determinations I render are designed, first and foremost, to make sure those companies thrive and that the taxpayers get their money back.�
If you want to maximize profits, the flow from which you would repay the loans, you set the wage where you attract the best help. Private firms try to do this all the time. Perhaps Mr. Feinberg could enlist the help of a board of directors for these firms.
The U.S. will track possible executive defections by seeking from the seven companies data on comparative pay, by obtaining independent information and requesting �anecdotal evidence of vacancies and concerns about losing people,� he said.
And what would he do if he found he had lost talent from his firms? Would he raise the pay? What do you suppose would happen then? Buses by the homes of those who left?

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Wednesday, October 28, 2009

I did not know ... 

...that Ally Bank, those people with the really annoying commercials using kids to discuss bait-and-switch tactics, is the online bank of GMAC, the financing arm of General Motors. So in essence those ads come from the government, which currently owns a third of GMAC.

I say let's make a deal: Your parent wants $2.8-5.6 billion more money in stimulus dollars? Stop the damn ads.

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Friday, October 23, 2009

Two definitions 

Corporatism is a system of economic, political, and social organization where corporate groups such as business, ethnic, farmer, labour, military, patronage, or religious groups are joined together into a single governing body in which the different groups are mandated to negotiate with each other to establish policies in the interest of the multiple groups within the body.
That's governance, Chicago style. The head of government is friends with the heads of every big business, lobby and union, and together they make decisions on how everyone else will live. Those on the inside get what they want. Those on the outside -- well, they get what the big guys want them to have. That's life in the big city. ...

[I]t appears to be the way that Barack Obama, who once aspired to be mayor of Chicago, has decided to run his administration.
My previous observations on corporatist Obama here, here and here. The bashing of businessmen is just a discipline to get them back to the bargaining table. Deciding pay is part of it. (Union leaders beware, because yours isn't far behind. Obama will need your hides for his re-election campaign.)

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Thursday, October 22, 2009

Lord make me virtuous, but not just yet 

Here are three statements from Christina Romer, head of the Obama Council of Economic Advisors, regarding the stimulus and its effects. First,
The estimates indicate that as of August, the ARRA had raised employment relative to the baseline by between 600,000 and 1.5 million jobs. (p. 7)
Since the recession began in December 2007, payroll employment has fallen by 7.2 million. Given that employment growth of nearly 100,000 per month is necessary to keep up with normal labor force growth, employment is currently about nine million below its normal trend level. (p. 11)
A second challenge that we face is clearly the budget deficit. The final numbers just released show that the fiscal 2009 deficit reached $1.4 trillion, or about 10 percent of GDP. Excessive moves toward fiscal policy tightening could lead to a return to output decline and a reacceleration of job losses. The current policies that have generated a dramatic turnaround of the economy need to be seen through to their completion. The Mid-Session review released in August predicted a similarly large deficit in 2010, and substantial structural deficits even once the recession is over and the economy is fully recovered. Such long-term deficits are unacceptable and need to be dealt with. Over the long run, sustained deficits crowd out private investment and reduce long-run growth.

Given the current precarious state of the economy, substantial near-term spending cuts or tax increases to reduce the deficit would threaten the recovery. (p. 18)
They say they are nine million jobs below trend for full employment. Regarding my post yesterday, to get back there you have to get GDP growth (at least in real terms) to be faster than trend growth (around 2.5-3%), which is why I question whether the shock to nominal GDP is permanent. But think about what this says -- the stimulus is working, but not nearly sufficient such that we can avoide the crowding out and private investment decline and decrease in real GDP. If we reduce investment you will get a permanent shock. So if they continue to keep the stimulus going they could create a permanent loss, but that would be OK in return for buying 600,000 to 1,500,000 jobs "saved or created" now. How much of a price does Prof. Romer believe we should pay for those jobs?

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Monday, October 19, 2009

From there all things look right 

I love having a seven-year-old blog, because I find some useful things on it. After reading yet another description of the Obama Administration's attack on Fox News I recalled the Groseclose and Milyo work on how liberal Fox News is. Of course that's a bit of a joke, but the study cited there found that Fox was about as conservative as Charles Stenholm, a Texas Democrat who lost to a Tom DeLay-picked candidate after serving 26 years.

Of course there was some complaining about the technique that paper used, but it was published in the peer-reviewed Quarterly Journal of Economics in 2005. A second paper was published in Critical Review the following year; their editorial policy allows for peer review at the editor's discretion, so we don't know if that one was or not, but potentially their work was vetted twice. Fox' Special Report comes off in these papers as being ideologically in the same space as Olympia Snowe, the only Republican so far to vote for the Democrats' health care plan

And let's not forget that the current president, at least on ADA scores, ranks as the most liberal. While the average Democrat legislator pulls about an 85, Obama was a cool 100. From that vantage point, even the New York Times looks a little right.

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Friday, October 16, 2009

Not the first to forget history; let's remember 

True, much of Mao's brutality has already emerged over the years, but this biography supplies substantial new information and presents it all in a stylish way that will put it on bedside tables around the world. No wonder the Chinese government has banned not only this book but issues of magazines with reviews of it, for Mao emerges from these pages as another Hitler or Stalin.

In that regard, I have reservations about the book's judgments, for my own sense is that Mao, however monstrous, also brought useful changes to China. And at times the authors seem so eager to destroy him that I wonder if they exclude exculpatory evidence.

...Perhaps the best comparison is with Qinshihuang, the first Qin emperor, who 2,200 years ago unified China, built much of the Great Wall, standardized weights and measures and created a common currency and legal system - but burned books and buried scholars alive. The Qin emperor was as savage and at times as insane as Mao - but his success in integrating and strengthening China laid the groundwork for the next dynasty, the Han, one of the golden eras of Chinese civilization. In the same way, I think, Mao's ruthlessness was a catastrophe at the time, brilliantly captured in this extraordinary book - and yet there's more to the story...

Out of the tens of millions of alleged "counterrevolutionaries" and dissidents who spent long periods of their lives in Mao's system of prison-factories and corrective labor gulags, it's estimated that 20 million died during their "re-education" into collectivism, obedience and communal selflessness.

Additionally, the human cost of Mao's ill-planned and ill-named Great Leap Forward of 1959-1961 might well have reached 40 million deaths from starvation, the result of the largest and most deadly famine in world history.

In 1968, Wei Jingsheng, 18, a Red Guard member, provided a firsthand account of how the Great Leap Forward had driven parents mad with hunger:

"Before my eyes, among the weeds, rose up one of the scenes I had been told about, one of the banquets at which families had swapped children in order to eat them. I could see the worried faces of the families as they chewed the flesh of other people's children."

What's so unusual about Emperor Shih Huang of the Chin Dynasty? He had buried alive 460 scholars only, but we have buried alive 46,000 scholars. In the course of our repression of counter-revolutionary elements, haven't we put to death a number of the counter-revolutionary scholars? I had an argument with the democratic personages. They say we are behaving worse than Emperor Shih Huang of the Chin Dynasty. That's definitely not correct. We are 100 times ahead of Emperor Shih of the Chin Dynasty in repression of counter-revolutionary scholars.
When 900 million are left out of 2.9 billion, several five-year plans can be developed for the total elimination of capitalism and for permanent peace. It is not a bad thing.

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Friday, October 09, 2009

"Gee, guys, you really shouldn't have" 

The DNC is saying that Republicans in criticizing the Nobel committee selection of President Obama has "sided with the terrorists" and criticizing Obama for "an award he didn't seek." He was nominated in February. If he's at all uncomfortable with the selection -- perhaps because it would be better to have an accomplishment recognized than a promise highlighted -- he certainly could have discouraged the committee from selecting him.


Wednesday, September 23, 2009

ABCs of Obama's Foreign Policies 

Nice and simple, people: The Obama administration has shown it knows very little about history, cultures, and basic human nature. Thus, their foreign policy boils down to this:

A - Apologize
B - Betray
C - Cave

You can find multiple examples for each verb.

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Tuesday, September 22, 2009

CARS destroyed wealth 

With per vehicle environmental benefits at $596 and the costs at $2,600 per vehicle, the clunker program is a net drain on society of roughly $2,000 per vehicle. Given the approximately 700,000 vehicles in the program, we estimate the total welfare loss to be about $1.4 billion. The welfare loss would be even greater if we fine tuned our estimate of the social cost per gallon to account for the spatial mix of clunkers. Clunkers, especially the trucks that comprise a large percentage of the traded-in vehicles, may have been retired disproportionately from rural locations where the social costs of pollutants are significantly lower. Also, if the average value of clunkers exceeds our conservative figure of $1000, then cost of the program would be higher. Even if the environmental gains were double our estimate, the net drain would still be close to $1 billion. While a more rigorous analysis would no doubt adjust these figures, we doubt that the basic conclusion would change.
Burton Abrams and George Parsons of the University of Delaware, in the newest edition of The Economists' Voice. This includes some gain to those who cashed in clunkers, who receive a transfer from taxpayers. It's hard to imagine how this program did not end up throwing taxpayer money down the rathole, but if you throw $1 down the hole for every $1 you give to the UAW, and you're an elected official with lots of money from that union, that might be a deal you'd make.

Meanwhile, the showrooms seem to have a hangover from the Clunkerparty. Still want to bank on that big third quarter surge? (h/t: John Lott)

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Monday, September 21, 2009

Mandatory health insurance vs mandatory Social Security 

STEPHANOPOULOS: You were against the individual mandate...


STEPHANOPOULOS: ...during the campaign. Under this mandate, the government is forcing people to spend money, fining you if you don't

How is that not a tax?

OBAMA: Well, hold on a second, George. Here -- here's what's happening. You and I are both paying $900, on average -- our families -- in higher premiums because of uncompensated care. Now what I've said is that if you can't afford health insurance, you certainly shouldn't be punished for that. That's just piling on.

If, on the other hand, we're giving tax credits, we've set up an exchange, you are now part of a big pool, we've driven down the costs, we've done everything we can and you actually can afford health insurance, but you've just decided, you know what, I want to take my chances. And then you get hit by a bus and you and I have to pay for the emergency room care, that's ...

STEPHANOPOULOS: That may be, but it's still a tax increase.

OBAMA: No. That's not true, George. The -- for us to say that you've got to take a responsibility to get health insurance is absolutely not a tax increase.
From the Encyclopedia of taxation at p. 375 (and I stand advised that "if you have to look it up," the President will think that "indicates to me that you're stretching a little bit right now.")
In economic terms, any appropriate of resources from individuals or firms by the government and be considered a tax. For example, economists frequently talk about the inflation tax, since inflation appropriates resources to the government. Legally, though, it is clear that inflation is not a tax since it does not involve a payment by the taxpayer to the government. Similarly, regulatory requirements can have the same economic consequence as taxes. For example, a legal requirement for employers to provide health insurance to their employees may have the same economic effect as a tax imposed on the employer; the revenues from this requirement are used to provide health benefits to employees. For purposes of economic analysis, the two are equivalent, but from a legal point of view they are not. Public finance economists therefore do not spend much time discussing whether a particular levy is a "tax" or not.
The article in the encyclopedia says the legal definition of taxes is malleable. If Obama sees something malleable, rest assured it's getting hit with a mallet.

It's worth noting from this article that, unlike the USA, many countries consider Social Security taxes to be "contributions" and not taxes, as they entitle someone to a benefit. Had Stephanopoulos wanted to press the issue, that was the question: What is the difference between being forced to buy the benefit of health insurance and being forced to buy the benefit of Social Security payments? If there's none, why is one called a tax and the other not?

UPDATE: The accountants, who might know a thing or two different from the legal scholars, say it's a tax:
"If you put something in the Internal Revenue Code, and you tell the IRS to collect it, I think that's a tax," said Clint Stretch, head of the tax policy group for Deloitte, a major accounting firm. "If you don't pay, the person who's going to come and get it is going to be from the IRS."

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Wednesday, September 16, 2009

Estimating estimates 

There is a great deal of confusion over statements about job gains from the stimulus package. This is being played out on the pages of the StarTribune this week, as Tom Steward from the Freedom Foundation of Minnesota argued that few jobs are being created, and Rep. Jim Oberstar fired back yesterday. Who's right here?

This morning's Wall Street Journal carries Carl Bialik's column on how to count stimulus jobs, and does a fine job taking you through the math. He begins:

As the $787 billion federal stimulus package was being deliberated by Congress in February, the White House estimated that the act would increase employment by 3.5 million jobs, including 24,000 combined in New Hampshire and Wyoming.

So far, though, those states say the stimulus has added fewer than 1,000 jobs.

Less than a month from now, when every state receiving stimulus funds will be required to make such a report, the numbers will fall far short of White House projections -- whether it's the original 3.5 million job projection or the latest estimate, issued by the White House last week, that one million jobs have been created thus far by the stimulus act.

So somewhere in the next 30 days we will have the state of Minnesota (through the MMB department). According to the federal site, Minnesota has so far expended $1.47 billion of the $4.72 billion approved for the state. Now once upon a time I estimated that the Administration's calculation was that if they spent $93,333 they had "created or saved" one job. So the current estimate based on that $1.47b is that currently stimulus has created or saved 15,766 jobs (rounding up). Steward notes that the original proposal from the Administration indicated the state would earn 66,000 jobs, but to be fair that was over two years. Patience, Tom!

But Oberstar is also playing funny with the data in claiming that 2900 transportation jobs in Minnesota have already been created. Using my same divisor would make the $99 million spent by the Dept. of Transportation (most of which goes to highway funds) give us 1,061 jobs. Maybe I am not calculating that correctly, so I read on in Bialik's article.

The most visible figures available to evaluate the job market are unemployment rates, which don't speak well for the stimulus package. The national rate of joblessness last month was 9.7%, up from 8.5% in March, the month after the stimulus act was passed. A week after that number was released, the White House's Council of Economic Advisers reported that the stimulus had increased employment to a level by "slightly more than 1 million jobs higher than it otherwise would have been."

That awkward wording says a lot: It reflects the tough job facing any economist who tries to estimate job creation. In every method used, economists are forced to imagine an alternate reality -- one built on assumptions that are easily challenged. For example, to compare present unemployment rates to past rates may be straightforward but it fails to account for other economic forces that were going to affect unemployment with or without the stimulus.

The White House method assumes that things were getting worse and that the stimulus is the sole factor responsible for stopping the bleeding. So economists imagined an alternative reality whereby the present would have been much worse -- to the tune of one million more lost jobs.

Here's that CEA report. The report is much more careful than Oberstar in noting the tenuous nature of these estimates. However, Bialik explains the method they use is different because the White House numbers will include the multiplier effect, which data from or the state sites will not.

To arrive at that larger projection, the White House council applied standard multipliers -- reflecting that some spending has ripple effects through the economy, such as hired people increasing their consumption -- to components of the stimulus. For instance, increasing government spending by 1% of GDP would increase the GDP by 1.57%, which is the average of the Federal Reserve's estimate and that of a private firm.

Then the council converted the projected GDP growth into job figures, assuming that a 1% increase in GDP would reduce unemployment by 0.75% -- an assumption based on historical economic figures.

That assumption is based on a decades-old principle developed by Arthur Okun, former chair of the Council of Economic Advisers under Lyndon Johnson. Though Mr. Okun's name wasn't cited in the council's projection, his famous law tying GDP to employment was clearly in effect. The economist proposed that changes in the two were directly proportional -- nearly 50 years ago.

The council had doubts about its numbers for the tax-cut portion of the stimulus, writing in its report, "We confess to considerable uncertainty about our choice of multipliers for this element of the package."

I would disagree with Bialik's characterization of the multiplier as "standard". First, the 1.57 multiplier is a long-run effect; as I've already noted, the additional jobs one would expect from, say, the lunch truck operator who hires another driver because manufacturing plants are adding new shifts, are a long-run thing. The one-quarter multiplier is 1.05 by the estimates of the Administration, and the long run takes a year. They are taking credit for jobs they expect will happen in the future. Even 1.05 might be too high, as Casey Mulligan argues, but again he's looking at an impact multiplier versus a long-run multiplier. It could be 0.2 for one quarter and 1.57 over six quarters.

Let me also point to a Time article this week regarding the CEA's use of Okun's Law. The relationship between output and employment has gotten tenuous. Bialik picks up on this as well, and ends up finding the state-by-state figures at least cleaner, if not completely covering all the good things the stimulus might have done.

One last point to make here. As Menzie Chinn noted last month, fiscal policy multipliers are much larger when the monetary authority is accommodating, and you can't be more accommodating than when you are at the zero interest bound. And so it comes as no surprise that Chairman Bernanke is also singing the praises of recovery without notice of what is happening in the local economy (my comments to the local newspaper in that link.)

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Monday, September 14, 2009


I thought the tire tariff row was bad enough, for the same reasons as discussed by many bloggers, but something in this Financial Times article jumped out at me:
Trade relations between two of the world�s biggest economies deteriorated after Barack Obama, US president, signed an order late on Friday to impose a new duty of 35 per cent on Chinese tyre imports on top of an existing 4 per cent tariff.

In his first big test on world trade since taking office in January, Mr Obama sided with America�s trade unions, which have complained that a �surge� in imports of Chinese-made tyres had caused 7,000 job losses among US factory workers.
It's the magnitude that caught my eye. We are celebrating the reduction in job losses in this country to only 220,000 workers a month. And the President is risking a trade row over 7,000 jobs?

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Wednesday, September 02, 2009

"His life is not worth Obama's morals" 

This was the last sentence in a note from the wife of someone who had served in Iraq, who has decided against doing it again. The husband had planned on making the military his career.

Not just Obama's morals, but his instincts.

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Monday, August 31, 2009

Ownership society, TARP edition 

Let me be sure I have this right:
  1. Government forces banks to take capital injections. Government gets warrants to buy common stock in the process.
  2. Government tells banks how to operate.
  3. Banks want government out, make an offer to buy their shares and warrants away.
  4. Banks raise private capital, pay off the government.
  5. Government declares victory.
Did I miss anything?

Is this a good thing?

It occurs to me that this "earned a return for the taxpayers" line is becoming the Leviathan equivalent to those annoying "it's for the children" appeals on TV. It obviates any need to really think about what was done in the first place. If earning a return for taxpayers was a criterion for government performance, let's put the whole portfolio up in Morningstar and see how many stars our elected officials earn?

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Monday, August 24, 2009

Nip the tip as public policy 

Apparently Amy Klobuchar wouldn't have taken this question, but I would like to see someone ask a Congressperson somewhere about whether circumcisions would be mandated under Obamacare.
For now, the focus of public health officials in this country appears to be on making recommendations for newborns, a prevention strategy that would only pay off many years from now. Critics say it subjects baby boys to medically unnecessary surgery without their consent.

But Dr. Peter Kilmarx, chief of epidemiology for the division of H.I.V./AIDS prevention at the C.D.C., said that any step that could thwart the spread of H.I.V. must be given serious consideration.

�We have a significant H.I.V. epidemic in this country, and we really need to look carefully at any potential intervention that could be another tool in the toolbox we use to address the epidemic,� Dr. Kilmarx said. �What we�ve heard from our consultants is that there would be a benefit for infants from infant circumcision, and that the benefits outweigh the risks.�
You think I jest about this mohel full employment act? Read on from the American Journal of Public Health (2009):
Results. The mean neonatal male circumcision rate was 55.9%. When we controlled for other factors, hospitals in states in which Medicaid covers routine male circumcision had circumcision rates that were 24 percentage points higher than did hospitals in states without such coverage (P < .001). Hospitals serving greater proportions of Hispanic patients had lower circumcision rates; this was not true of hospitals serving more African Americans. Medicaid coverage had a smaller effect on circumcision rates when a hospital had a greater percentage of Hispanic births.

Conclusions. Lack of Medicaid coverage for neonatal male circumcision correlated with lower rates of circumcision. Because uncircumcised males face greater risk of HIV and other sexually transmitted infections, lack of Medicaid coverage for circumcision may translate into future health disparities for children born to poor families covered by Medicaid.
From your mouth to the Center for Comparative Effectiveness Research's ear! Should make for some great bumper stickers for the 2012 election: Proleteriat of the world, unite! You have nothing to lose but your foreskin!

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Wednesday, August 19, 2009

These jobs weren't created or saved 

The St. Cloud Times has a breaking news item:
New Flyer, the company hailed as a St. Cloud success story, will lay off about 320 workers.

The company announced in its second-quarter report that it will cut staff by 270 in its facilities across the company, which includes St. Cloud, Crookston and Winnipeg, Canada. About 50 salaried workers will be cut, too, most of those in Winnipeg.
New Flyer was, unfortunately, the site of Sheriff-Vice President Joe Biden's local stop on the stimulus tour. The money that was supposed to flow from state budgets to New Flyer to buy new buses isn't getting there, as deliveries are being delayed by buyers not getting funding. There are approximately 1000 jobs in Minnesota and 1200 in Winnipeg. So this cuts about a seventh of their workforce. MPR explained three weeks ago that the cancellation of a bus order from the Chicago Transit Authority, which claims the cancellation was due to not being able to use federal stimulus dollars (I have read conflicting reports on this, one saying they could not use them for buses, the other saying CTA got less than half of the funds requested, and made the decision themselves to delay the order -- the latter is what MPR reported.) Canadian press says the layoffs are "indefinite" and that there will be a two-week shutdown at the end of the year for all plants.

At minimum, this is a timing problem: you can't make all the buses at once, but if people put off taking delivery you either have to build, pay workers and suppliers and hold inventory, or you have to lay off and wait for the orders to re-emerge. The second seems to be the way they've gone, but for how long will they wait?

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Monday, August 17, 2009

Exit, voice and Alinsky 

Based in large part on a post written that morning by Joel Rosenberg called "Obama's Getting Alinskied" and after talking about this with Joel in the green room, my Final Word episode (hour 1, hour 2) from August 8 carried the theme forward, that there's nothing inherently left-wing in Alinsky's Rules for Radicals. It's a schematic for running popular opposition. Anyone can play.

Last night, Andrew Breitbart joined in.
In fact, one could make the argument that the Republican Party, usually slow on the uptake, has finally figured it out. There are no major Republican targets out there opposing Mr. Obama and his aggressive agenda. The conservative movement appears leaderless, but perhaps for the best.

Maybe that is the strategy: Standing back and letting the Obama machine flail in its pursuit of its next victim.

A grass-roots movement of average Americans has stood up, making it extremely difficult to isolate and demonize an individual.

Mr. Alinsky noted in "Rule 12" that it is difficult to go after "institutions." And attacking "tea baggers" and "mobs" has only created more resistance and drawn attention to the left's limited playbook. Even Americans expressing their constitutionally protected right to free speech are open game.

Now that many people are Googling the Alinsky rule book and catching up with the way Chicago thugs play their political games, Mr. Obama and the Fighting Illini are going to be forced to create new rules - or double down on the old ones.
And everyone is joining the Alinsky vanguard.

Margaret Martin, my colleague at the Minnesota Free Market Institute and the only person that can keep David Strom in line (barely), wrote a couple of posts about my show that I should have responded to before now. Rather than a long hashing of her points, I think we can argue from her second point that because we have voice, we should use that and stop it with the mob.
But I am reminded of the concept of logos (ideas conveyed in speech) that separates adults from children and humans from animals. A baby with a full diaper can scream and cry but can't communicate it's discomfort in any useful way. Likewise a wounded animal. We aren't animals or pre-verbal children. We have logos. (Despite what you may think of the public education system.) And we don't have to act like a mob, we are citizens.
Interestingly, logos has been at the heart of a series of increasingly interesting writings by the ever-interesting Arnold Kling (which is in fact what inspired me to write after Margaret's first post "what is this democracy of which you speak?") The fisrt post that caught my eye includes this:
The exercise of voice, including the right to vote, is not the ultimate expression of freedom. Rather, it is the last refuge of those who suffer under a monopoly. If we take it as given that the political jurisdiction where I reside is a monopoly, then perhaps I will have more influence over that monopoly if I have a right to vote and a right to organize opposition than if I do not. However, as my forthcoming Unchecked and Unbalanced argues, the reality is that the amount of influence I have is shrinking while the scope of the monopolist is growing.
We suffer from monopoly in many places. Because our government grows larger and stronger, and because we do have an option to exit (in a Hirschman sense), we are left with voice. Ways to make voice more effective will be preferred, and that is what Alinsky offered his followers. The right has simply adopted George C. Scott's line from Patton: "Rommel, you magnificent bastard, I read your book!"

But in fact, Kling notes today, it is the conservative movement that is left to support democracy.
[N]ot many people like democracy. Progressives like to think that they use "the people" to fight special interests, but what progressives really want is government by elite technocrats, like the Fed or the IMAC (a proposed independent commission to set health care policy). Recently on this blog, I have argued that libertarians should favor exit rather than voice as a check on government.

If the P's and the L's don't really want democracy, then who does? At this point, the C's probably are more in favor of democracy than anyone else. We've had democracy for a long time, so keeping democracy is the conservative position.

Real freedom would be to break the employer-based link to health insurance -- something the Obama plan does nothing to solve -- and to permit you to choose and pay for health insurance like you pay for anything else. You need to solve the incentive problem, as even Democrats and organic food vendors seem to agree. But it appears nobody wants that solution either.

Real freedom, Kling says, is the absence of monopoly. Brad Taylor puts it more fittingly to this post: "exit can give you any other freedom, including voice." But with exit comes personal responsibility, and it's thus not surprising that people still want to have health care without paying for it. Getting something for nothing is better than getting something by paying for it for those who think individually rather than systemically. I am curious therefore how many of the people speaking out are willing to use exit, and accept the responsibility that comes from it?

Not that I expect exit to be available anytime soon...

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Friday, August 14, 2009

Technology, $5 million. Credibility: priceless 

It was reported this week that George Soros has tossed $5 million into the battle over health care reform. So it would not be surprising that Move On is using its technology to engineer a letterwriting campaign. Call them astroletters. I received a copy of one of their emails last night:
Dear MoveOn member,

Right-wing mobs aren't just disrupting congressional town halls�their outlandish lies are now making their way into mainstream news coverage, too.

We need to set the record straight. The majority of Americans support real health care reform. And no wonder, given the incredible cost of inaction.

In Minnesota alone, 190 people lose their coverage every day. And for those with insurance, yearly premiums will hit $22,467 in a few years if we don't act.
We can't let right-wing extremists ruin the biggest opportunity in a generation to get real reform. Can you send a quick letter to the editor of The Saint Cloud Times�or another local paper�about the urgent need in Minnesota for Congress to pass health care reform with a real public option?

Click here:

Our tool makes writing a letter really simple. You can send the letter right from our website�it only takes a few minutes.

If you've never written a letter to the editor before, now is the time to send your first. The letters page is one of the most widely read�and most important�in local newspapers. Members of Congress and their staffs read it to understand how their constituents are feeling. And since members are all home in the district this month�and paying close attention to the health care debate in particular�your letter will make an even bigger impact.

Here are some talking points specific to Minnesota you can use in your letter:

� We can't afford to wait for reform: Each day, 190 people in Minnesota lose their health care coverage. And without reform, those who still have insurance will see their yearly premiums go up by $9,300 in the next decade�to a staggering $22,467.

� Reform with a real public option is key to expanding coverage: Under current legislation, which includes a strong public health insurance option, 363,000 people in Minnesota�and 37 million Americans nationwide1�will gain coverage by 2019.

� A real public health insurance option is crucial to lowering costs: With premiums projected to hit $22,467, we need to get costs down. By spurring competition, a public plan will help bring down out-of-control costs2 for individuals, families, and small businesses.

Can you send a letter to the editor of The Saint Cloud Times, or another local newspaper, as part of our "Real Voices for Change" campaign? Just click here to get started:

Thanks for all you do.
Real Voices for Change send you to a website that sends your letter for you, just point and click. You can cut and paste your talking points right into the letter! You can see from the site all your local papers, and how many have been sent. At the time I am writing this, one such letter had already gone to the Times ... and 60 to the STrib.

I have never seen this technology before, and I wonder if our center-right organizations are up to the task of deploying this technology. I'm impressed. But look at the talking points, which draw from left-wing groups like Families USA, a pressure group, or the left-wing think tank Center for the American Progress, which leads the HCAN network. The $22k number is a projection that health insurance costs will rise 9.3% per year for the next decade -- that's a forecast, not a fact. Both are part of HCAN.

The 14,000 a day number is also a specious argument. PolitiFact traced the report to a report from CAP, and called it "mostly true". But they note that the COBRA provisions in the stimulus bill should have reduced that number. And the way CAP did the projection is to extrapolate the split between unemployment in 2007 and the number without health care to say "if 4.7% meant x people without health insurance, then 7% means x+2,600,000, 8% means x+3,700,000 and 9% means x+4,800,000." Now they have an algebra expression, and they turn the crank.
Applying Holahan's calculations to the actual rise in unemployment from November 2008 to June 2009, we came up with 3.2 million people losing health coverage, or an average of 15,238 per day, so it is close to the 14,000 Obama cited.
But that means that for it to be true for July, when unemployment fell, the number of people losing health coverage was negative? And why the unemployment rate? If health coverage is tied to employment, why use the rate rather than the payroll number? It seems to me a terribly flawed metric.

I will credit them for the 37 million number, which is confirmed by CBO analysis. It's just that it costs $6000 per person (a number CBO says does NOT include any increase in administrative cost.) To pay for that Medicare gets squeezed. Somehow this did not make it into MoveOn's talking points. (UPDATE: It may well be, however, that there aren't 37 million uninsured to cover; see Keith Hennessey's point on this.)

So newspapers are receiving thousands of letters, generated by MoveOn technology, using specious claims from left-wing researchers and campaign organizations. Sound fishy to you?

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Tuesday, August 11, 2009

A union isn't uniform 

I was reading a twitter stream from a local blogger saying that the SEIU is janitors, clerical workers, etc., basically, they're common normal people and that people who complain about the purple shirts are somehow besmirching all those good people. What to make of this?

I work in a state university; all but our top administrators are unionized by the IFO (faculty union), AFSCME, MAPE and I'm sure I'm forgetting someone (sorry). All of them have memberships that are around 70-80% of the possible members. The rest get covered as "fair share" employees, meaning they still have to pay for someone to represent them in contract negotiations even though they would rather not be. (Long-time Scholars readers will know these arguments.) So it's fair to say that when you blame my union, of which I'm a full member, for giving a large chunk of money to the party that wants to take my health care freedom away, you are smearing some 20% or more of our faculty who don't give money to the union for that purpose. (We hope.)

But it's more than this. The SEIU and other unions might not be representing their rank and file very well.
Union members give Obama wide berth on handling health care reform - they trust him over Republicans in Congress 63 percent versus 11 percent according to a Washington Post-ABC News poll conducted in late June - but there remains room for Republicans to gain among card-carrying union members. A sizable 17 percent said they trust neither to make the right decisions on health care and Obama's approval rating on the issue lags well behind his overall rating (54 percent compared with 67 percent).

The same poll found many union members wary that health care reform could bring unwelcome change. Nearly two-thirds (64 percent) said reform would require change even of those who don't want it. And majorities are deeply concerned that health care reform will reduce their coverage and sharply increase the federal deficit (59 percent), increase their health care costs (53 percent), increase government bureaucracy in the health care system (52 percent), reduce the quality of health care they receive and limit their choices of doctors or treatments (51 percent).

That poll is late June, before the details of this power grab have been made known. It's plausible to me that support has since fallen even among union workers. If it's true that not every SEIU supports the thuggery of some of its members -- and I am certain that is true -- then it must also be true that the SEIU is not representing many of its members when it shills for Obamacare. I hope some of them start wearing shirts that read "I am Ken Gladney."

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Friday, August 07, 2009

Mrs. S writes 

This month, it's the topic we all love, Cash for Clunkers:
As a businessman, it's hard to be against all the traffic it has generated, but he hopes it is not a temporary fix. "It's like priming an engine with no gas in the tank. If it helps the economy, it's a good thing".

"The tax-payer, however, is the one who will eventually pay".

And perhaps they know it. According to a recent Rasmussen survey, a majority of Americans (54%) oppose more funding for this program. A similar share opposed it last year when the idea was floated in 2008.

Will the philosophy behind �Clunk-fare� eventually be used on the housing market? Clothing market? Probably not, because the government has made this program with an eye towards increasing fuel efficiency. But the Associated Press reported this week that the amount of pollution reduced is equivalent to us not emitting any greenhouse gases for 57 minutes. The fuel economy savings equals the amount of gas we use in 4.5 hours.
In the research for her article, she sent along this piece, which includes a quote:
"As a carbon dioxide policy, this is a terribly wasteful thing to do," said Henry Jacoby, a professor of management and co-director of the Joint Program on the Science and Policy of Global Change at MIT. "The amount of carbon you are saving per federal expenditure is very, very small."
Now the program has another $2 billion in the kitty, another 400,000 or more cars going off the road. And is it stimulus? Maybe, maybe not:
Ford Motor Co., General Motors Co. and Chrysler Group LLC are weighing whether to increase output of vehicles beyond current plans, which would increase workers' hours and possibly add some jobs at their plants and those of hundreds of suppliers. But the auto makers have reason to be cautious. Big sales promotions are often followed by a slump in sales -- "payback," in industry jargon. Battered by losses in the past year, the big Detroit auto makers want to keep supply and demand in balance in order to boost profitability.
We may have just spent $3 billion to help automakers clear their inventory and created very few new jobs and little carbon reduction.

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Tuesday, August 04, 2009

He didn't walk it ALL the way back 

Q But if economists, including the President's own economists, don't necessarily think that it's possible to do so without raising taxes on the middle class, how is that dealing candidly with the American people?

MR. GIBBS: Well, again, Jake, there are a series of things that have to be done. I think you'll actually hear an announcement from Treasury later this afternoon about how much money has to be borrowed versus what they thought was going to have to be borrowed and what will have to be borrowed as a result of financial stabilization.

In terms of cutting the amount of money that's needed, again, I think the President has been clear on this. The first thing that we can do -- the most important thing that we can do right now is get our economy growing again. We know that the deficit -- part of the reason that the deficit is up right now is that the economy has slowed down so much that tax revenues -- because it's what happens in an economic slowdown -- have regressed a lot. I think the President -- obviously we're going to have to make some decisions down the road on some of the President's legislative priorities and some of the things that Congress wants to do to evaluate how we move back towards -- on a path toward fiscal sustainability.
According to CBO:
CBO estimates that under the laws in place as of March 2009, the cyclically adjusted deficit will climb from 2.6 percent of potential GDP in 2008 to 9.0 percent in 2009 before falling to 4.7 percent in 2010 and 2.2 percent in 2011. The increase from 2008 to 2009 and the decrease in 2010 are the largest on record, reflecting primarily the effects of the TARP legislation, assistance to Fannie Mae and Freddie Mac, and the American Recovery and Reinvestment Act of 2009 (Public Law 111-5), which together will increase the deficit by $812 billion in 2009 and by $445 billion in 2010. (Without those costs, the cyclically adjusted deficit would be about 3.6 percent of potential GDP in 2009 and roughly 1.9 percent in 2010.)
So when we get to 2011, even if the economy is at full employment, there would be a $350 billion deficit. And it then rises, looking at the long-term budget outlooks prepared by former CBO and current OMB director Peter Orszag and current director Doug Elmendorf. According to the latter:
Under the extended-baseline scenario, the fiscal gap [the amount needed to stabilize the debt-to-GDP ratio -- kb] would amount to 2.1 percent of GDP over the next 25 years and 3.2 percent of GDP over the next 75 years. In other words, under that scenario (ignoring the effects of debt on economic growth), an immediate and permanent reduction in spending or an immediate and permanent increase in revenues equal to 3.2 percent of GDP would be needed to create a sustainable fiscal path for the next three quarters of a century. If the policy change was not immediate, the required percentage would be greater.
$350 billion about gets you there. So which way do you think the Congress and the Obama Administration will find that $350 billion? Did Gibbs' statements yesterday make that clearer to you?

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Questions on health care for your townhall for today 

There are plenty of copies of H.R. 3200 now for Congress to read. If you are going to a townhall with your Congressperson or Senator (which means you don't live in MN-7, since Rep. Peterson has decided he doesn't want to meet with you), you should read and bring specific questions about this bill. I intend to offer one a day.

Today's comes from Secs. 141 and 142. In these sections we read:
There is hereby established, as an independent agency in the executive branch of the Government, a Health Choices Administration (in this division referred to as the �Administration�).

The Administration shall be headed by a Health Choices Commissioner (in this division referred to as the �Commissioner�) who shall be appointed by the President, by and with the advice and consent of the Senate.

(1) QUALIFIED PLAN STANDARDS- The establishment of qualified health benefits plan standards under this title, including the enforcement of such standards in coordination with State insurance regulators and the Secretaries of Labor and the Treasury.

(2) HEALTH INSURANCE EXCHANGE- The establishment and operation of a Health Insurance Exchange under subtitle A of title II.

(3) INDIVIDUAL AFFORDABILITY CREDITS- The administration of individual affordability credits under subtitle C of title II, including determination of eligibility for such credits.

(4) ADDITIONAL FUNCTIONS- Such additional functions as may be specified in this division.
Questions for your congressperson or senator:
  1. Will this commissioner have the power to terminate one's insurance plan and place one in a government plan if he or she decides the private plan does not qualify? Dr. Bernadette Healy says yes.
  2. She also says that assignment is "random". Indeed it is; see Sec. 205. Does your Congressperson support random assignment of people to plans that the Health Choices Commissioner says do qualify?
  3. What will be the relationship between the Health Choices Commissioner and the IRS as regards the enforcement of the 2.5% tax on individuals who do not have coverage, as defined in Sec. 401?
  4. Will the Commissioner hire his or her own staff to administer "random compliance audits"?
  5. If I disagree with the determination of the Commissioner, to whom may I appeal? What are the checks and balances on the Commissioner's power?
  6. We heard recently of a massive Medicare fraud case that lead to many arrests. How would this new Health Choices Administration assure us that fraud would not explode in these government exchanges?
If you go to these townhalls, take these questions on index cards and distribute to your neighbors and friends. I'll bring more as I get them.

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