Archive for March, 2009

AIG

Tuesday, March 17th, 2009

A case is made for letting the bonuses at AIG get paid. Right now, everyone is full of self-righteous rage about he AIG bonuses. And that sets off alarm bells in my head.

Never Forget

Tuesday, March 17th, 2009

The Red Cross describes the torture that the Bush Administration signed off on. This wasn’t bad eggs; this was policy.

Monday Morning Linkorama

Tuesday, March 17th, 2009
  • And people wonder why NYC has money problems.
  • Bolivia seems eager to follow the Zimbabwe example. I’m sure it will have the same merry results.
  • Yet another way big business and government are crushing competition — cattle tagging.
  • The trade wars heat up. Mexico is imposing tariffs in response to our stupid ban on Mexican trucks. Looks like Depression II is moving right along.
  • The push for a longer school year creeps me out. Can’t we let kids be kids at all? The problem with our schools isn’t that kids aren’t in them enough … the problem is that the schools are a monopoly.
  • Obama wants to spend a billion bucks helping the small businesses he’s extracting tens of billions in new taxes from. I guess it make sense, after you’ve cut off and eaten someone’s leg, to throw them the bone.
  • The piling on to Jim Cramer is just stupid. He wasn’t the one who resisted regulating Freddie and Fannie, was he?
  • Putin continues his repulsive reign. In the end, Bush’s remark that he looked into Putin’s soul may go down as the dumbest thing he ever said. And that’s saying something.
  • Healthcare Myths: IV. Competitiveness

    Monday, March 16th, 2009

    The Myth: Rising health care costs are crippling American industry and making us less competitive.

    Bad Policy Based on the Myth: I’m not really sure. This is repeated often as a motivation for healthcare reform. But most health care proposals won’t address this issue at all. Employer mandates will only make small businesses less competitive, not more. Without the forcible reduction of healthcare use, this a red herring.

    The Reality: First, as Sally Pipes points out, healthcare spending is not exactly like flushing money down the toilet. It supports an entire industry.

    Health care certainly plays a major role in the U.S. economy, and by almost any objective account a highly positive role. It employs 13 million Americans and accounts for one out of 10 jobs.

    If you cut healthcare costs, those jobs will diminish. An economic argument can be made for that — healthcare costs are, in some ways, a broken window cost. Perhaps if that money were being used to boost exports, we’d be better off in terms of jobs and GDP.

    But do we really want our government decreeing where Americans can work and what industries do and do not contribute to our economy and in what proportion?

    But there’s more. It’s highly unlikely that controlling health care costs will make our businesses competitive at all for reasons Greg Mankiw notes:

    Ultimately, what matters to firms is the compensation they pay workers. The composition of compensation between cash wages and fringe benefits like healthcare does not matter for the firms’ costs of production. In short run when cash wages are sticky, the cost of healthcare may affect competitiveness: Lower costs of fringe benefits would reduce compensation and thus reduce firms’ cost of production. But in the long run, compensation is set by supply and demand in labor markets. If more compensation is paid in the form of fringe benefits like healthcare, less is paid in the form of cash. And if less is paid in fringes, more is paid in wages.*

    Let me put the point in the context of General Motors: If, for example, the U.S. taxpayer were to assume all the workers’ healthcare costs through a policy of national health insurance, GM would immediately become more competitive. Because cash wages would not be immediately renegotiated, compensation paid by the firm would fall, so costs would fall. But in the longer run, the workers via their union would most likely not be satisfied seeing GM pay lower compensation, so cash wages would start rising. (Those higher wages would help workers pay the higher taxes that would be needed to finance the national health insurance). GM would lose the competitive advantage it temporarily enjoyed.

    Precisely. Again, you can make an argument here. Reducing healthcare costs might put more money into consumer pockets. But if these “savings” come with an overall reduction in healthcare results, that might not be a trade people are wiling to make. And even if it did make our economy more efficient to increase wages at the cost of healthcare, why should the government be making that decision? Has it shown the infinite wisdom to carefully balance the value of pocket money against healthcare?

    The thing of it is, this argument — that businesses can’t compete because of healthcare costs — is usually used to justify socialized medicine. But socialized medicine has not made France or Germany more competitive (sustained double-digit unemployment rates). Why is this? Because, ultimately, those “free benefits” industry is getting for their employees will have to paid for by taxes.

    I would add one more point. The rising cost of healthcare for private industry is creating one of the few negative pressures against healthcare costs. Firms that need to control expenses will push back in a myriad of inventive ways. Paying bonuses to employees for living healthy, purchasing insurance plans with high deductibles, finding better healthcare management, moving to HSAs — all these options are on the table.

    If, on the other hand, government steps in, we will have a one size fits all solution imposed, not for financial reasons, but political ones. Having your healthcare controlled by your boss might be bad … but why is having it controlled by government better?

    Insufficiently Stimulated

    Monday, March 16th, 2009

    Don Boudreaux fisks Paul Krugmann for arguing that the stimulus was too small.

    Krugman’s opinion piece is nothing but a piece of ideology-driven twaddle. First of all, the stimulus was only passed a month ago and most of it won’t kick in until 2010. How can he possibly know that it’s not working? He doesn’t. He just wants more spending.

    Second, is Krugman seriously arguing that the Keynsian economic multiplier is that non-linear? That it is essentially zero until it reaches a critical mass?

    They don’t make Nobel Prize winners like they used to.

    The Jetsons

    Sunday, March 15th, 2009

    Don’t ask. Just read as Posnanski riffs on being a dad and living in the future.

    Closing

    Saturday, March 14th, 2009

    I must admit to some sympathy with the sheriff who refused to enforce foreclosures:

    When did you begin to think there was something wrong with the system?

    I can’t emphasize enough how stunned people are. [Imagine] if you and your family are sitting in your house, watching TV on a Thursday night, and all of a sudden you hear a knock on the door. You go to answer it, thinking it’s a neighbor, and instead it’s me and six people in black suits and a battering ram telling you to get out of your house. It was that type of response I was getting at the door.

    I got a bunch of stories. One in particular hit all the buttons. We went in, and standing in front of me is a young man, probably early 30s; he’s holding two 6-month-olds in his hands, in their diapers, both of them have colds; he’s got a 5-year-old, and an 11-year-old with his wife. And we’re there to throw him out.

    He pulls out a lease he’d signed, which was all valid and notarized. The lease was entered into after the foreclosure had occurred—the case had gone through the courts, but this landlord was such a rotten person he kept renting the place out. If not for the steps we’d put in place, this guy was out in the street with these little kids.

    This kind of thing was happening a lot?

    I can give you a hundred anecdotes. Whereas these things used to pop up once in a blue moon, this was happening all the time. The number of places we went to where people had no idea; where the occupants were not the right people; where [the banks had] given us the wrong location—they sent us once to evict someone from a vacant lot, where the house had burned down two years before. It is numbers, situations and scenarios that we had never seen.

    What do you do about people in this situation? It’s one thing to evict someone from their own home — the presumably know they are in default and have been getting court notices. But it’s horrible to hear about renter being tossed out onto the street like this.

    One possible solution? Put in legal provisions that make it easier for the bank to take over renting the unit. As long as the renter pays their fees, they can either finish out the contract they signed, or have 90 days to move out.

    Another? Make it easier for them to simply take over the mortgage. That was how Clarke Howard bought his first house. When he found out about the foreclosure, he called the lawyers and they made a deal for him to buy the house.

    Either of those options works better — for the banks as well as for the occupants. I suspect it’s legal red tape and corporate short-sightedness that keeps it from happening.

    Predix

    Saturday, March 14th, 2009

    Is it just me or does it seem like every Tom, Dick and Harry some serious-sounding carefully worded “prediction” about the economy that contradicts every other serious-sounding carefully worded prediction? These bozos couldn’t see the crash coming and now we’re supposed to listen to them?

    Card Check

    Thursday, March 12th, 2009

    I’ve been toying with a post on card check for the last month. But I really can’t do better than Doug Bandow:

    The secret ballot is key. It protects workers from retaliation — that’s why the U.S. elects public officials, rather than allowing citizens to sign election cards. It doesn’t take a rocket scientist to tell which worker is more vulnerable to pressure and even violence: one who gets to cast a secret ballot or one who must sign or not sign a card in public view. Four decades ago a federal appeals court declared: “it is beyond dispute that secret election is a more accurate reflection of the employees’ true desires than a check of authorization cards collected at the behest of a union organizer.”

    Former union organizer Jen Jason testified before the House Education and Labor Committee: “During the course of my employment with the union, I began to understand the reality behind the rhetoric. I took in the ways that organizers were manipulating workers just to get a majority on ‘the cards’ and the various strategies that they employed. I began to appreciate that promises made by organizers at the worker’s house had little to do with how the union actually functions as a ‘service’ organization.”

    In fact, misrepresentation and intimidation are routine, as union organizers lie about what signing the care means (claiming, for example, that it certifies attending a meeting or requesting more information) and badger employees to sign (sending groups of pro-union workers to people’s homes). The National Right to Work Legal Defense Foundation has collected the stories of many employees, such as that of Mike Ivey, a South Carolina materials handler, who complained that the UAW “created a hostile work environment” through relentless pressure to sign cards. These abuses would be multiplied if card check automatically yielded recognition, foreclosing the need for a vote.

    This may be why even union members favor elections. Polls have found that eight to nine of every ten of them favor a vote. Card check is a tool for union executives and Democratic politicians, not workers.

    I would say that I can’t believe the Democrats think they are going to get away with this blatant burning of the economy to favor their political allies. But then I remember how worthless our mainstream media are. They won’t even ask the Democrats pointed questions about this. They’ll let the Democrats make their point, drag in the dumbest loudest opposition figure they can find to make the counterpoint and leave it at that.

    I wonder if someone will try to unionize Michael Moore’s studio or Ralph Nader’s groups.

    Wednesday Linkorama

    Wednesday, March 11th, 2009
  • Only the Americans with Disabilities Act would require doctors to pay $100-150 for the privilege of seeing a deaf patient.
  • These sorts of stories break my heart. I don’t know how people lived in the days before modern healthcare.
  • What do you do when you need to make homelessness seem a bigger problem than it is? Lie.
  • Cracked strikes again. Describing Gargamel:

    In addition to being an alchemist, he has the godlike ability to create life, and once created Sassette, a female smurf. If he can make his own smurfs, why does he continue to hunt the free ones? Because he’s fucking Gargamel, that’s why!

  • Let it not be said that the GOP is the one bloating the defense budget. Who knew the biggest defenders of the Military Industrial Complex would be democrats?
  • The Pot Wars

    Saturday, March 7th, 2009

    It’s strange. The last time economic conditions were this bad, we repealed prohibition. And this time around, it seems the subject of ending prohibition is up for debate again. California is talking seriously about legalizing and taxing pot. Minnesota, New Jersey and Illinois are talking about legalizing medical marijuana. Even that notorious left-wing rag, the Economist, is on board. Even more telling, those defending prohibition are growing increasingly shrill and incoherent.

    Just in the last few months, the tide seems to have turned. All of the sudden, this issue — which has been brewing for decades — is back with a vengeance.

    It gives me a reason to keep fighting on things like healthcare and taxes, I guess.

    Update: The Drug War must be over. Pat Buchanan is waving the white flag.

    Friday Nights Linksorama

    Saturday, March 7th, 2009
  • The Economist points out that Obama is being disingenuous in promising that he won’t raise taxes on the rest of us. He’s going to have to at some point. And if we’re getting universal healthcare and other goodies, I think it behooves us middle class slobs to pay at least part of our own way, no?
  • Here’s the thing about the people clamoring for more regulation of financial markets. Whistleblowers were warning us about the crooks; the SEC wouldn’t listen. Let’s try enforcing the laws we have before we pass a raft of ill-advised ones.
  • This is a perfect illustration of how stupid the GOP has gotten. They’re delaying Austin Goolsbee’s appointment because the Democrats delayed one of Bush’s. Goolsbee is a relentless free market advocate. The President needs to be hearing his voice. As Sullivan says: the Republicans always put the country last.
  • McArdle hits a point that’s been on my mind lately. Even if your debt should not have been incurred, you still have a moral obligation to pay it off. If we ever lose that, our civilization is doomed. Moral obligation is a critical cog to keeping this human machine running.
  • Healthcare Myths: III. Bankruptcy

    Friday, March 6th, 2009

    I was going to take a few days off the healthcare beat — yesterday’s post was exhausting. But then a must-read crossed my desk:

    President Obama’s kicking off his health care reform today in the worst possible way: with a mischaracterization of the data.

    “The cost of health care now causes a bankruptcy in America every thirty seconds,” Obama said at the opening of his White House forum on health care reform. The problem: That claim, based on a 2001 survey, is simply unsupportable.

    The figure comes from a 2005 Harvard University study saying that 54 percent of bankruptcies in 2001 were caused by health expenses. We reviewed it internally and knocked it down at the time; an academic reviewer did the same in 2006. Recalculating Harvard’s own data, he came up with a far lower figure — 17 percent.

    A more recent study by another group, approaching it another way, indicates that in 2007 about eight-tenths of one precent of Americans lived in families that filed for bankruptcy as a result of medical costs.

    Hope you have your floaties. The BS is about to get really deep.

    A good part of the problem is definitional. The Harvard report claims to measure the extent to which medical costs are “the cause” of bankruptcies. In reality its survey asked if these costs were “a reason” — potentially one of many — for such bankruptcies.

    Beyond those who gave medical costs as “a reason”, the Harvard research chose to add in any bankruptcy filers who had at least $1,000 in unreimbursed medical expenses in the previous two years. Given deductibles and copays, that’s a heck of a lot of people.

    If our gamble with taking two houses in two states had bankrupted us, we would have counted as being bankrupted by medical expenses, as the out-of-pocket costs of my daughter’s complicated birth were nearly $2500 and we’ve also paid over $1000 over the last few years to cover my wife’s periodic MRI’s. That’s with the good insurance that generally comes with academia, incidentally. We’ve had some big expenses.

    Moreover, Harvard’s definition of “medical” expense includes situations that aren’t necessarily medical in common parlance, e.g., a gambling problem, or the death of a family member. If your main wage-earning spouse gets hits by a bus and dies, and you have to file, that’s included as a “medical bankruptcy.”

    A last problem was sampling: The Harvard researchers surveyed bankruptcy filers in five federal districts accounting for 14 percent of bankruptcies nationally; projecting this to the other 86 percent is sketchy.

    The lead author is — in a strange coincidence — the co-founder of a group campaigning for socialized medicine.

    This really looks like garbage. This looks like someone ran the data, found it didn’t produce the number they wanted and massaged the results until it did.

    I’m well aware — as the article notes — that healthcare expenses can be financially crippling for the uninsured. My mom is digging into her savings to take care of my uninsured sister. But when you include gambling problems and deaths as “health events”, that’s not exactly ringing the bell for healthcare reform.

    (I also have a severe distaste for people who speak of bankruptcy as though it were a suffering on par with cancer. The thought of bankruptcy terrifies me — and our job/house situation would have me close if I didn’t have savings and relatives. But I ever, God forbid, get seriously ill and the doctors save my life at the cost of bankruptcy, I won’t be screaming for reform. I’ll be counting my blessings that I live in a country which such great healthcare.)

    The dissection of the Harvard study doesn’t surprise me at all. A while back, McArdle noted a study which claimed:

    According to Zhu, having a serious medical condition makes you 50% more likely to file for bankruptcy, but not because of medical bills; medical bills are only a very small percentage of the overall debt of bankrupts, and are not significantly correlated with higher credit card debt, which one would expect if people were keeping down their medical bills by charging them to Visa. Presumably it’s the income effect of disability or caretaking responsibilities.

    Job loss may precipitate bankruptcy, but bankrupts don’t report being laid off at a significantly higher rate than the control group. The difference is, the control group had savings to cover its financial emergency.

    It’s also worth noting that it’s harder to save on $25,000 a year than $75,000, and bankrupts as a group tend to be poorer, which means they have little shield from adverse events. On the other hand, the bankrupts were consuming at levels comparable to the wealthy controls. Spending as much money as those who are much richer than you is pretty much definitionally a recipe for disaster.

    In other words, a health event — like a job loss or death — puts a strain on the finances. If you’ve been responsible, the strain won’t break you. But if you haven’t been (or can’t because you earn too little), it might.

    Again, I’m not saying the healthcare system is perfect. One of the reforms I would like to see is to make it easier for people to buy cheap insurance (or HSA’s), which will have big deductibles but provide coverage in case of a healthcare catastrophe. Breaking down the laws that forbid people from shopping for insurance in other states would help that. But Obama — and most of the Congress — are opposed.

    Yup

    Thursday, March 5th, 2009

    That’s about the size of it.