Robert Waldmann

wonders why ROBERT PEAR and DAVID M.HERSZENHORN of the New York Times broke the main rule of fair and ballanced journalism -- one must never question the honesty of a Republican. Out of some residual respect for journalistic standards, they put their gasp reporting after their jump.

On the Senate side of the Capitol, where efforts to produce a bipartisan health care measure continued in the Finance Committee, top Republicans seemed eager to avoid early compromises that would let Democrats head to their home states for the August recess boasting of any progress.

[snip]

Mr. Grassley and Mr. Enzi clearly face a tough balancing act, as their party’s leadership maneuvers to torpedo any emerging compromise and force Democrats to start over.

[snip]

Mr. Grassley angrily dismissed suggestions that he and Mr. Enzi were being pressured by party leaders.

“What you are observing is a continuation of where we have been for a doggone long time,” he said. “The trouble is you all are looking for news and there ain’t no news.”

Some Republicans have begun to warn that Mr. Grassley should tread carefully on the health care bill if he wants to become the senior Republican on the Judiciary Committee, a post that he is in line to take in the next Congress, when his term on the Finance Committee will be up.

And there have even been suggestions that Mr. Grassley, who is up for re-election next year, could face a primary challenge ...

Then they close with a sentence whose clear meaning is, I think, not changed in the slightest by my edit in [brackets]

"Earlier in the day, Mr. Enzi said the legislation was simply not finished. 'The bill is not ready for prime time, so I don’t know any way that it could be completed today or next week and then we are at the August break,' he [lied].

Before the jump, their article notes that Waxman, top blue dogs and progressives have reached so, Sen Grassley, you aint got an excuse left with support from the top blue doggone.

by reader Sammy

“Are Per Capita Spending and Life Expectancy Statistics an accurate measure of US Health Care Efficiency?”

Proponents of some degree of nationalization of health care generally cite some variation of the following "The US spends more per capita on health care than any other country, and yet has one of the lowest life expectancies of any developed country" as proof of the need for government intervention. But is that statement meaningful?

This University of Iowa study provides some data that casts some serious doubt.

Let's break the statement into it's two parts.

1) "The US spends more per capita…

Yes, but the US makes more per capita. They spend more per capita on LOTS of things as GDP increases.

So the question is, does the US spend more than “expected” given higher GDP. The study conclusion: “Not Obvious” as seen by the graph below.


(rdan...graph corrected)
2) “….. and yet has one of the lowest life expectancies of any developed country.”

(Rdan...My impression is in comments)


This is even more interesting. The US has far higher fatalities from homicide and traffic accidents than other countries which impact the life expectancy statistics.



While this might have some implications regarding crime or traffic legislation, it does not on Health Care, unless one were to assert that US trauma care is dramatically inferior.

So the authors controlled for the differing non-health care related deaths to develop a life expectancy table that could more accurately reflect the relationship between health care quality and life expectancy:



The US jumps from 15th on the list with a life expectancy of 75.3 to 1st with a life expectancy of 76.9.

So one of the central and oft-quoted motivations for government control of health care "The US spends more per capita on health care than any other country, and yet has one of the lowest life expectancies of any developed country" is quite misleading.

rdan

A reader complained of lack of coverage of the ME at AB now compared to a few years ago, and charged it was a 'pass' on President Obama because he was our darling messiah. And of course ignoring the build up in Afganistan. Now this memo could be used to declare victory of the Bush planning and eventual response to realities of Iraq via General Patreaus and his policies. So here we go again.

Colonel Reese is reported by the NYT to have issued a memo recommending withdrawal from Iraq within 15 months, assuming all things remaining the same.

For all of these problems, however, Colonel Reese argues that Iraqi forces are competent enough to hold off Sunni insurgents, Shiite militias and other internal threats to the Iraqi government. Extending the American military presence in Iraq beyond 2010, he argues, will do little to improve the Iraqis’ military performance while fueling a growing resentment.

“As the old saying goes, ‘Guests, like fish, begin to smell after three days.’ ” Colonel Reese wrote. “Since the signing of the 2009 Security Agreement, we are guests in Iraq, and after six years in Iraq, we now smell bad to the Iraqi nose.”

The memo continued, referring to the Iraq Security Forces: “The massive partnering efforts of U.S. combat forces with I.S.F. isn’t yielding benefits commensurate with the effort and is now generating its own opposition. We should declare our intentions to withdraw all U.S. military forces from Iraq by August 2010. This would not be a strategic paradigm shift, but an acceleration of existing U.S. plans by some 15 months.”

Before deploying to Iraq, Colonel Reese served as the director of the Combat Studies Institute at Fort Leavenworth, the Army’s premier intellectual center. He was an author of an official Army history of the Iraq war — “On Point II” (warning...pdf) — that was sharply critical of the lapses in postwar planning.

The book is a usefull read too. See this announcement 7/31 by Defense Sec. Gates.

rdan

Wendall Potter in his new position at the Center for Media and Democracy will hopefully provide insights into the inner workings of his former employer, health insurance company CIGNA corporation. Bill Moyers has a series of interviews scheduled where Wendall Potter lays out his case.

As a consumer, if predictions come true that premiums double in the next ten years if we leave the current system in place, (?$30,000 a year? for a family plan), and my wages increase about 15%, rationing and lack of coverage are guaranteed, including the predictions of reducing treatment for old people....except it would be done privately by companies like BC/BS, by a faceless employee. Intelligent cost control anyone???!!

Update: A national average is about 12,800, so a doubling would be less at $25,600/year.

Update 2: Reader Wasaa says: "Your rate of doubling from $12,800 to $25,600 a year assumes that the same percentager of businesses will offer health insurance benefits to their employees. What we have seen over the past 10 years is the % of small businesses providing health insurance to their employees has plummeted to around 30%. Small businesses get whacked very hard because there is no adequate pool in which to be a member that will drive costs down. My insurance is $18,000/yr for the family (with a pre-existing condition clause and a $5K individual/ $10K family deductable). As insurance becomes more expensive, less businesses will provide it causing even higher costs to be born by the individuals who still have insurance."

BLS offers these stats on who pays: BLS

rdan

SIGTARP's Niel Barofsky and his staff have issued a first try at a cohesive description of funds expended for the fifty or so programs handing out money, but also a description of the potential expenditure (unlikely to happen). The link is to the site, which contains the report and the data in two separate, large pdf documents.

OMB has a good starting description of the attempt at transparency. The Inspector General's office might be put under direct Dept. of Treasury control...I understand the impulse, given the trash talk flying around the medias in healthcare, tax policy, citizenship, and other advertizing endeavors, but best to keep the data flowing. I am sure the sheer volume of docs will keep people from actually reading it...most of us will rely on trusted sources to interpret the data. Please avoid simply repeating slogans if you comment.

by Bruce Webb

I haven't posted on Social Security for a while for a pretty simple reason. Nothing has been going on. Until today when Social Security released the following Policy Brief: Distributional Effects of Raising the Social Security Taxable Maximum.

This policy brief analyzes the effects on taxpayers and Social Security beneficiaries of either eliminating the taxable maximum (tax max) for Social Security or raising it to a level so that 90 percent of all Old-Age, Survivors, and Disability Insurance (OASDI)–covered earnings would be subject to the payroll tax. Under both scenarios it is possible to either calculate benefits based on the current-law tax max (no max and max 90) or to credit the new taxable amounts toward benefits (no max plus benefits and max 90 plus benefits).

Historically Social Security had tapped the top 90% of income. Due to the skewing of income we have seen over the last couple of decades that percentage is down to about 84%. Various plans including LMS and the Obama preliminary plan have suggested adjusting the cap upwards, with or without a donut hole, either to the traditional 90% level or following Medicare with no limit at all. Additionally there has been debate whether this cap increase should be accompanied by additional benefits. This study finally, thankfully puts some numbers in play. Those interested should read the whole thing. The current projected payroll gap is 2.00%. An increase to a 90% level with no increase in benefits, which is in the range of what both LMS and the Obama cap increases propose, fills only about half of the gap. On the other hand extending FICA to all income with no increase in benefits backfills the whole thing. Personally I still favor the Northwest Plan that would leave the capp unchanged, but for those who would like to play mix and match here is your opportunity. (The tables are easier to read in the HTML version, these are copied from the PDF).

by Bruce Webb

Max Baucus of Montana (pop 935,670- 89.2% white)
Kent Conrad of North Dakota (pop 636,677- 90.1% white)
Jeff Bingaman of New Mexico (pop 1,928,384- 42.8% white)
Michael B. Enzi of Wyoming (pop 509,294- 88.8% white)
Charles E. Grassley of Iowa (pop 2,966,334- 91.5% white)
Olympia Snowe of Maine (pop 1,321,505 - 96% white).

Most people following the Health Care debate are aware that progress is now under the effective control of six senators who in aggregate are clearly center-right, and from small mostly rural states as seen here (table lifted from Nathan Newman at TPM Cafe). And most of us are equally aware that the party split of what is being called the Baucus Committee is 3 Dem to 3 Repub while the overall makeup of the Senate would suggest a ratio of 3 to 2. All of which has implications of their own, it is a funny kind of democracy that freezes out the representatives of the vast majority of Americans and the whole political spectrum from the center leftward (though I don't know a lot about Bingaman, I hardly think he is a Russ Feingold type, please comment.)

So please lets talk about all of this. I just want to throw in one last morsel. Last week it was widely reported that Republican Hatch Leaves Bipartisan Health-Care Talks, which as a supporter of health care reform with a public option I regarded at least as a small positive sign that the balance might have swung a little. But given what we are being told now about the makeup of the Baucus Committee this seems to mean that the original 'Bi-Partisan Committee' was made up of FOUR REPUBLICANS and three democrats, and those latter three including a chairman hostile to progressive solutions and the author of the Social Security/Medicare gutting Conrad-Gregg legislation. What the hell is up with that?

I understand that it is hard to avoid people taking a least a little bow towards the Pete G. Peterson crowd, but given a 60-40 split turning over negotiations to a group split on paper 4-3 the other way, and given ideological predilections even farther than that is to turn the term 'bi-partisan' from an inside joke to an outright laugh riot.

Am I missing something here? Was it somehow not a Republican majority Gang of Seven that appointed itself to be the mediators on this issue? And if so why is Harry Reid even listening? What kind of a Majority Leader just abdicates leadership to the other side on what might be the defining piece of legislation of the decade?

by Bruce Webb

On Sunday the CBO released a letter addressed to Rep. Dave Camp, the Ranking Member on Ways and Means, which among other things measured the impact of HR3200 (the House Tri-Committee Health Care Affordability bill) and a public option on employer covered insurance. On net it turns out that they project more people on employer paid insurance than current law. Additional Information Regarding the Effects of Specifications in the America’s Affordable Health Choices Act Pertaining to Health Insurance Coverage

I provide the link for anyone who wants to explore some of those issues. But in this post I want to explore one provision that seems to have contributed to this outcome. Now there has been much wailing and gnashing of teeth among the Single Payer Now! contingent that HR3200 with or without a public option just is a huge windfall to the private insurance companies by providing them with a individual mandate that delivers millions of new customers without cost controls with the end result that insurance companies will just cherry pick their way to billions in profits. Now if they would have paused for a second to wonder why people like Kennedy and Waxman would just sell them out this way they might have been tempted to examine the bill language. But since there was no such pause I guess I will have to step in. So in re-examining the bill yesterday I came across this section whose import I had kind of missed before.
http://edlabor.house.gov/documents/111/pdf/publications/AAHCA-BillText-071409.pdf pg. 24-25

SEC. 116. ENSURING VALUE AND LOWER PREMIUMS.

(a) IN GENERAL.—A qualified health benefits plan shall meet a medical loss ratio as defined by the Commissioner. For any plan year in which the qualified health benefits plan does not meet such medical loss ratio, QHBP offering entity shall provide in a manner specified by the Commissioner for rebates to enrollees of payment sufficient to meet such loss ratio.

(b) BUILDING ON INTERIM RULES.—In implementing subsection (a), the Commissioner shall build on the definition and methodology developed by the Secretary of Health and Human Services under the amendments made by section 161 for determining how to calculate the medical loss ratio. Such methodology shall be set at the highest level medical loss ratio possible that is designed to ensure adequate participation by QHBP offering entities, competition in the health insurance market in and out of the Health Insurance Exchange, and value for consumers so that their premiums are used for services.

Why is this the Golden Bullet for those of us pushing the Public Option? And why contrawise is it reason for the insurance companies to go ballistic? Well a little discussion of that under the fold.


This provision, if implemented correctly, almost totally strips the ability of insurance companies to combine cherry picking and premium increases to continue the huge profits they garner today. What it does is to establish a minimum 'medical loss ratio' which in simpler terms means a set ratio of care actually paid for to premiums collected. If by whatever means whether that be gaming the risk pool so an to only insure people unlikely to make claims or by denying coverage to insurees on a case by case basis your medical loss ratio drops below an established level the insurance company has to rebate the difference. In practice this prevents insurance companies from just arbitrarily jacking up rates and simultaneously takes the profit out of cherry-picking the risk pool. In a word this Sec automatically limits profits by establishing indirect price controls. Which is not going to make the insurance industry happy.

To see how this works. Under HR3200 Sec 111 bans limitations based on pre-existing conditions, Sec 114 mandates equal coverage for mental health and substance abuse treatment (p. 23), Sec 113 establishes strict limits on varying premiums across the risk pool (p.21), while section 112 guarantees enrollment and renewal, i.e. no more canceling people who actually dare to claim coverage for getting seriously ill. Now cynics can and do argue that insurance companies are extraordinarily skilled in working their way around these kind of restrictions and this is true enough. On the other hand the better they are at ducking the requirements of Secs 111-114 the more exposed they are to our Sec 116.

Lets say you have a company that against all law and regulation manages to have a plan that only in practice enrolls healthy adults aged 25-35 who rarely if ever use much health care. Under the current system this result yields ideal profits with collections but no payouts. Under Sec 116 your profits would be limited to the medical loss ratio. The answer for the insurance companies is to make up the difference with volume, the incentives are there to provide insurance as opposed to denying it.

Sec 116 would not eliminate all gaming as companies would still have an advantage if they shift their very high cost insurees over to the public option. But from the perspective of the government these are exactly the pool of people likely to end up on medicaid or qualifying for Medicare under Social Security disability anyway, for them the Public Option may just be a way station while they wait to qualify for DI.

What does this have to do with the CBO Report cited? Well Sec 116 prevents the Public Option from drawing too much of the overall pool away from the private plans not because it doesn't have the ability to undercut them on cost, but because it forces them to compete for their share of the overall pool or risk seeing their gross profits squeezed.

I am still trying to work out in my head where the limits are here, and where the sweet spot for balancing the size of your coverage pool vs level of care the company ends up having to pay, but on a top down look it seems like insurance companies under something close to HR3200 end up making money by insuring people and not by denying coverage in whole or in part. It transforms the industry into a straight service industry from its current predatory model.

Sec 116: Golden Bullet for coverage, Smoking Gun for profits. It just depends which side of the divide you come down on.

rdan
Birth and Hawaii at TPM.

The House resolution to celebrate the 50th anniversary of Hawaiian statehood -- which included language recognizing the state as President Obama's birthplace, in a none-too-subtle jab at the Birthers -- passed this evening by a 378-0 vote.

Among the Yes votes: Rep. Bill Posey (R-FL), the lead sponsor of the infamous "Birther Bill" to require presidential candidates to present their birth certificates, and who had previously said he wouldn't "swear on a stack of Bibles" that Obama is a natural-born American citizen. Several other co-sponsors of the Birther Bill also voted yes: Marsha Blackburn (R-TN), Dan Burton (R-IN), John Culberson (R-TX), Bob Goodlatte (R-VA), Randy Neugebauer (R-TX), and Ted Poe (R-TX).

Robret Waldmann

Gang of 6 senators who correspond to 6.5 representatives.

The US senate has an extreme rural bias. It has outdone itself by allowing Max Baucus to empower a bipartisan group of 6 senators to redesign health care reform. The states represented by the 6 senators (Iowa, Maine, Montana, New Mexico, North Dakota and Wyoming) have a total of 13 representatives so the committee consists of half of the senators from states with 13 representatives and corresponds to 6.5 representatives, that is, less than 1.5% of the house and roughly 1.5% of the population.

The 6 are a tad embarrassed by this and say they have tried to take urban concerns into account (that's Democracy at its best -- people counting on the consideration of people they didn't elect). According to Washington rules it is much more important that the bill have bipartisan support than that it have input from people elected by a significant fraction of the population.

Given that priority, it's not all that surprising that they have come up with the worst financing idea ever.

Robert Waldmann

The AP writes on the current state of negotiations in the 6 member Baucus Bipartisan ad hoc committee. Their plan includes an idea that is worse than I imagined possible. I mean that literally.

Officials also said a bipartisan compromise would not subject companies to a penalty if they declined to offer coverage to their workers. Instead, these businesses would be required to reimburse the government for part or all of any federal subsidies designed to help lower-income employees obtain insurance on their own.

This would be the most regressive tax ever. If I am an employer and I don't provide health insurance then my tax liability is higher if the family income of my employee is lower. More regressive than a poll tax (Baroness Thatcher must be put out that she didn't think of it). What's worse it depends on family income.

Let's say I don't provide insurance and have two job applicants, one who is a single mother and the other a man with a low salary but a high income wife (say Bill Clinton when he was working as governor of Arkansas for $30,000 per year). I hire the guy, because he can't get subsidized health insurance, so I don't have to give him insurance or pay him a dime.

This is the Baucus Grassley jobs only for people who don't need jobs preliminary draft bill of 2009.

I swear even if I tried, I couldn't come up with an policy proposal that bad.

Oh gracious conference committee save us from the idiocy of these Northmen (and Snowe).

I have generally decided that the NYT's attempt at becoming the WSJ on its editorial page is not worth the trouble of discussing. An editorial staph that replaces the despicable but somewhat coherent Bill Kristol with the execrable incoherence of Ross Douthat is clearly suffering a fatal infection, and therefore not deserving of support.

But then the Lovely and Talented Susan of Texas gets loose. And, while there is still no reason to bother with the original, the interpretation is a standard against which all others should be judged:

Shorter Ross Douthat: I tried to have some sort of intercourse about Iraq but the Left was like a chunky Reese Witherspoon, masticating on Colin Powell's UN presentation and spilling its breasts out of its protests. I wanted to surge into Iraq but the Left wanted a premature withdrawal. If we withdraw, Iraq will swell into violence and give birth to a Middle Eastern abomination, one that even the Left can't abort.

If you can't do that, folks—and most of us cannot—don't bother with the backlinks. It will only delude the NYT that they have some reason to exist that is not named Bob Herbert or Paul Krugman.

Robert Waldmann

A courageously anonymous blue dog explains to Shailagh Murray and Paul Kanewhy they are blocking health care reform

several dozen anxious House Democrats who are wary of the more liberal course their leaders have taken on health care. Feeling burned by a tough vote on climate-change legislation that is languishing in the Senate,

What a pile of Bulldog Sh*t. Most blue dogs voted against H.R.2454, that is, Cap and Trade. Only 17 of 52 voted yes, 34 voted no and one didn't vote at all.

Diatribe and documentation after the jump




The vote enabled them to reassure their constituents that they are on the side of global warming. If they let the bill reach the floor, they can reassure their constituents that they support keeping the uninsured uninsured too.

What they mean is that they could have blocked Waxman Markey in committee (it was marked up by the energy and commerce committee) and only demanded that it be 80% giveaway in exchange for graciously allowing a floor vote.

This tells us three things. First US legislators are acting as if it is a gesture of support to allow an up or down vote, and as if it is normal to use parliamentary tricks to thwart the majority in their house. Second it shows they mean "special interest contributors" when they say "constituents;" It is obvious that ordinary voters do not even check the roll call (as I did) let alone keep track of parliamentary tactics. Third it means they don't want any compromise at all in energy and commerce. They had a huge impact on Cap and trade and are still complaining.

Of course the fact that they haven't presented an alternative plan (and couldn't) and make contradictory demands, makes it clear that they want the issue to just go away. For sure they don't just want to keep their hands untainted by reform, because they were outraged at the possibility of a vote on the bill already reported out with no input from energy and commerce.

This means that most of them could just vote no again (they can take turns voting yes or they can wait until there are 218 yes votes before they vote no as they did on Waxman Markey). They don't want cover. They want attention. They aren't even hacks they are immature egocentric egomaniacs.

Here is the annotated blue dog caucus. The caucus is from Melancon's site. The votes are from the official roll call.

By the way, Rep Melancon (???-LA) might want to brush up on his arithmetic as his site says "Currently there are 51 members of the Blue Dog Coalition." and provides a link to a list of 52 names.

Also he wants to be a senator, so he is vulnerable to pressure. It's important that at least some of the pressure comes from the left. Obviously no angrybears are going to support diaper Dave Vitter (now Sotrmy Daniels is another matter hmmm) but a contest on the Democratic side is possible.

We have Erick LeFleur whose main accomplishment is a shoot to kill to defend your homestead bill supported by the NRA (NO).
Chris John, lost to Vitter six years ago. Currently top lobbyist for The Louisiana Mid-Continent Oil and Gas Association (NO)
J.M "Jim" Bernhard Jr who appears to be CEO of the Shaw Group construction company which appears to be under investigation by the SEC (Definitely no)

Rats. Looks like the only way I can put pressure on Rep[rehensible] Melancon is to send money to Stormy Daniels without even getting a DVD in return (I have never watched a Stormy Daniels DVD and would watch them only to learn about her policy positions).

Blue dogs

Blue Dog Members votes on H.R. 2454 = American Clean Energy and Security Act = Waxman-Markey = Cap and Trade
"n" means no "y" means yes "a" means did not vote

17 y 1 a 34 n

Altmire, Jason (PA-04) n = voted no on hr2454
Arcuri, Mike (NY-24) n
Baca, Joe (CA-43) not n
Barrow, John (GA-12) n
Berry, Marion (AR-01) n
Bishop, Sanford (GA-02) y = voted yes on hr2454
Boren, Dan (OK-02) n
Boswell, Leonard (IA-03) y
Boyd, Allen (FL-02) y
Bright, Bobby (AL-02) n
Cardoza, Dennis (CA-18) y
Carney, Christopher (PA-10) n
Chandler, Ben (KY-06) y
Childers, Travis (MS-01) n
Cooper, Jim (TN-05) y
Costa, Jim (CA-20) n
Cuellar, Henry (TX-28) a means no vote on hr2454
Dahlkemper, Kathy (PA-03) n
Davis, Lincoln (TN-04) n
Donnelly, Joe (IN-02) n
Ellsworth, Brad (IN-08) n
Giffords, Gabrielle (AZ-08) y
Gordon, Bart (TN-06) y
Griffith, Parker (AL-05) n
Harman, Jane (CA-36) y
Herseth Sandlin, Stephanie (SD) n
Hill, Baron (IN-09) n
Holden, Tim (PA-17) n
Kratovil, Jr., Frank (MD-01) y
McIntyre, Mike (NC-07) n
Marshall, Jim (GA-03) n
Matheson, Jim (UT-02) n
Melancon, Charlie (LA-03) n
Michaud, Mike (ME-02) n
Minnick, Walt (ID-01) n
Mitchell, Harry (AZ-05) n
Moore, Dennis (KS-03) y
Murphy, Patrick (PA-08) n
Nye, Glenn (VA-02) n
Peterson, Collin (MN-07) y
Pomeroy, Earl (ND) n
Ross, Mike (AR-04) n
Salazar, John (CO-03) n
Sanchez, Loretta (CA-47) y
Schiff, Adam (CA-29) y
Scott, David (GA-13) y
Shuler, Heath (NC-11) n
Space, Zack (OH-18) y
Tanner, John (TN-08) n
Taylor, Gene (MS-04) n
Thompson, Mike (CA-01) y
Wilson, Charles (OH-06) n

by divorced one like Bush

Via Glenn Greenwald and his article The war being waged on the TARP watchdog's independence comes an interview with Neil Barofsky the man charged with over seeing TARP. It appears the White House is not keeping true to the President's campaign of a more transparent government.

...the Obama administration is now attempting to induce the Justice Department to issue a ruling that Barofsky's office is not independent at all -- but rather, is subject to, and under the supervision of, the authority of Treasury Secretary Tim Geithner.

Seems Mr. Barofsky's latest report states that the grand total of all money currently paid out and pledged totals $23.7 trillion.

This is the original article to go along with the interview.
Click here to download and listen.

Via Naked Capitalism comes Rep. Alan Grayson asking Ben Bernanke who got the 1/2 trillion in US dollars as part of a swap. He notes $24 billion in 2007 is now $553 billion yr end 2008. Who got the money? "I don't know...the loans go to the centeral banks and they then put them out...We are lending to all US financial institutions in exactly the same way." That is, the fed is making no distinction between our nation and the rest of the world. Bernanke notes the law gives them the right to do this. (Sec 14 of the Federal Reseve Act.) Rep. Grayson issue is; at what point is using this "power" to move 1/2 a trillion dollars is infringing on Congresses control of the Treasury.

(Rep. Grayson has further comment at the link regarding this video.)

Transparency. The Federal Reserve and the Treasury say this money can't be traced after it passes to the first receiver. Mr. Barofsky has shown that it can be by simple sending out a questionnaire. Bernanke is treating the lending, regardless of recipient as all the same and thus none of it can be traced and that they have a right and authority to use the Peoples Money as they see fit. Rep. Grayson thinks they are overstepping Congress.

Who was it here that noted we had not bailed out the banks, but instead the banks just bought the Treasury?

Robert Waldmann

Looks like there are still people interested in Marx.

I guessed Brad would be interested (OK so I link begged but just a little) but I wouldn't have guessed that James Wimberley would be.

Mainly this post is about an e-mail from Ben Ross which I print (with permission) after the jump


Ben Ross to me
show details 11:15 PM (2 hours ago) Reply



I was very taken by your post on Marx's "to each according to his needs."
It sounded plausible - I'm nowhere near enough of an expert on this stuff
to say for sure whether you're right - but if you're correct about the
direction that Marx was pointing, I'd like to suggest that he was
pointing there in a somewhat different way than you indicate.

I went back to the Critique of the Gotha Program which I read, of course,
a very long time ago. I couldn't make sense of Marx's arguments against
the "Iron Law" then and I didn't have the time to try now. My history
books suggest that maybe nobody else can figure them out either - Michael
Harrington says Engels later conceded that Lassalle had gotten the Iron
Law from the Communist Manifesto.

If you're right that Marx is arguing here *against* utopianism, here's
what I think is going on. Marx is not explicitly saying that "to
each..." will not come until a year after never. What he's doing is
critiquing Lassalleanism from the right - pointing out how Lassalle's
slogan of equal division is impractical - and dressing it up as a left-
wing argument. He's saying that Lassalle falls short because his version
of the ideal future is still contaminated with the left-overs of
capitalism. But he's twisting that argument into a condemnation of
Lassalle's immediate program, by concealing the even less utopian nature
of his own immediate program.

Helga Grebing's History of the German Labour Movement has a somewhat
similar read on the Critique. She doesn't discuss "from each..." at all,
but points us to the last section where Marx conceded that "we have not
the courage - and wisely since the circumstances demand caution - to
demand a democratic republic..." and then criticized the Gotha Program
for making demands that are tantamount to a democratic republic. Surely
that's not a utopian critique! Grebing goes on to observe that "These
contradictions cannot be resolved; at best, we may try to explain them."

The left-wing debate tactic of dressing up a critique from the right
as if it came from the left is not rare. Readers familiar with French
history may recall Leon Blum's use of the concept of "occupation du
pouvoir" during the popular front. He fended off calls for more left
policies with the argument that his opponents are satisfied with
a mere "occupation du pouvoir" and are abandoning the ultimate goal of
"conquete du pouvoir."

There are many other examples. I'm personally sensitive to it from
long-ago arguments with proto-neoconservatives who made Marxist
arguments in favor of the Vietnam War. I imagine one could find some
astonishing intellectual gymnastics used to justify China's post-1980
economic policies.

Ben Ross

All I can say is that Marx had it easy. Marx had to deal with social democrats who thought they could compromise with Bismarck, but Ross tried to reason with Social Democrats who supported the US involvement in the war in Vietnam. Lassalle would never have done that. Hell Bismarck would never have done that, he was ruthless and cynical but he was not stupid.

rdan

The term small business is bandied about a lot, and often includes employers with 10 employees as in here and similar with Republicans.

Yet it appears these little companies are not represented by SBA, nor Manufacturers of America, yet account for a large portion of our economy. Is that accurate??

A small business is

A small business is an concern that is organized for profit, with a place of business in the United States, and which operates primarily within the United States or makes a significant contribution to the U.S. economy through payment of taxes or use of American products, materials or labor. Further, the concern cannot be dominant in its field, on a national basis. Finally, the concern must meet the numerical small business size standard for its industry. SBA has established a size standard for most industries in the U.S. economy. The most common size standards are as follow:

500 employees for most manufacturing and mining industries
100 employees for all wholesale trade industries
$6.5 million for most retail and service industries
$31 million for most general & heavy construction industries
$13 million for all special trade contractors
$0.75 million for most agricultural industries
About one-fourth of industries have a size standard that is different from these levels. They vary from $0.75 million to $32.5 million for size standards based on average annual revenues and from 100 to 1500 employees for size standards based on number of employees.

Stats about small business include more below the fold:

The estimated 27.2 million small businesses in the United States:

Employ about half of the country’s private sector workforce

Hire 40 percent of high tech workers, such as scientists, engineers and computer workers

Include 52 percent home-based businesses and two percent franchises

Represent 97.3 percent of all the exporters of goods

Represent 99.7 percent of all employer firms

Generate a majority of the innovations that come from United States companies

Source: U.S. Small Business Administration Office of Advocacy, September 2008

by Tom aka Rusty Rustbelt

Useful Models for Reform?

President Obama often cites the Mayo Clinic and the Cleveland Clinic as models for providers in a new era of health care reform.

Question: Can these two models be replicated throughout the country?

Answer: Not likely.

The Mayo Clinic is unique but has replicated itself a few times, and the Cleveland Clinic is unique and to the best of our knowledge has not been replicated.

Even if these models could be replicated, it is unlikely they could be replicated in any but some urban areas. And if they could, the transition cost in most markets would be immense, and who would pay for that? (the new Mayo Clinics are in high growth and very prosperous areas, Florida and Arizona) The cost of merging tens of thousands of physician groups into hospital entities would be gi-normous.

Can we learn anything from these organizations. Yes. Can we duplicate these models in other areas? Not likely, and certainly not in the near term.
___________________________________________
Tom aka Rusty Rustbelt

rdan

Health care in Canada from 1983, hat tip Mark Thoma at Economist View, is worth reading.

by divorced one like Bush

As we are talking about taxes and health care this is The Real News Network article regarding raising taxes on the wealthy to pay for health care. (The Real News Network is a global online video news network that listens to and is dependent on its audience. No ads. No government subsidies, no corporate sponsorship. Check out our site.)

Make sure you catch Presidents Obama's response to the obligatory question framed as "punishing the rich". The article interviews Professor Richard Wolff, economist, U of Massachusetts.


If President Obama and Professor Wolff have piked your interest, or you would like to understand why they talked about taxing the rich as they did, you can read my series on taxation starting here, moving to the second one, moving to the final post.
Then you can go here and read Linda Beale's appeal for support of eduction regarding tax literacy.

by Bruce Webb

Waxman: Blue Dogs must relent on health reform"
(UPDATE: the linked article has subsequently been rewritten and expanded. What follows is the version from earlier this morning)

House Energy and Commerce Committee Chairman Henry Waxman (D-Calif.) says there is "no alternative" to having healthcare legislation bypass his committee if Blue Dog Democrats don't agree to legislation.

Waxman said if the seven Blue Dogs on his panel do not relent, they could join with the committee's Republicans to "eviscerate" healthcare reform.

"I won't allow them to hand over control of our committee to Republicans," Waxman told reporters.

"I dont see what other alternative we have, because we're not going to let them empower Republicans on the committee."

I have been wondering about this for a while now. Do you actually need the approval of every committee with jurisdiction over the matter to move a particular piece of legislation to the floor? I don't mean practically, you don't want to bigfoot some other committee chairman, I mean legally. I don't see why and this seems to prove it. We have a bill that passed out of Ways and Means where the tax experts had a look at it and out of Education and Labor where the policy people had their whack plus the committee staff and the Chairman of Energy and Commerce are on board, why would we just concede veto power to a small group of Blue Dogs who have disproportionate representations on that particular committee. And it would appear that the answer is "we don't have to".

This is a very promising development for those of us who want to have the whole House pass a bill and so put pressure onto Senate Finance to respond.

rdan

A reader commented that market share statistics do not reflect whether competition occurs in a health insurance market. To stress a point he stated competition occurs when companies >1, and many states have competition of >2 major players, which makes for a more competitive market than a monopoly allows.

Competition to me means that at the least there is/are 'forces' in the market that somehow impact prices and quality of product or service, and in common usage implies lowering prices overall with some attention to quality. Many of us have cars in mind as a mental picture, and electronics.

Health Care for America Now has put together information compiled by the American Medical Association on market share enjoyed by insurers by state, and on the DOJ interest in the increasing concentration of ownership, again using AMA figures going from 33% highly concentrated in year 2000 to 51% in year 2007 as median % of market share nationally (Blue Cross/Blue Shield mainly). The trend for increasing consolidation within each state is clear.

The Department of Justice disagrees that anything less than a monopoly makes for effective competition in the health insurance market, as does economic theory in the form of an Herfindahl index. In fact, since 1982 anti trust law has used this measure along with a concentration ratio of an industry as an indicator of the relative size of firms in relation to the industry as a whole in evaluating 'competition'.

DOJ states that in the state-based system of health insurance currently practiced:

If one company holds more than a 42 percent share of a market the U.S. Justice Department would consider that market “highly concentrated.” This means that an insurer, with impunity, could raise premiums and/or reduce the variety of plans or quality of services offered to customers.7

(7. US Department of Justice, “The Herfindahl-Hirschman Index.” Accessed here; American Hospital Association, “The Case for Reinvigorating Antitrust Enforcement for Health Plan Mergers and Anticompetitive Conduct to Protect Consumers and Providers and Support Meaningful Reform,” May 11, 2009. Accessed here.
This report makes use of data published by the American Medical Association (AMA), which is not a member of the Health Care for America Now coalition. The AMA did not collaborate with HCAN on this report.)

Without necessarily getting into health insurance competition only, since the competition meme is invoked often in many places, what are market rules that demonstrate whether competition is working or not?

Several thoughts occur, to fit the meme:

1. Competition is defined as the way to lower prices and better product by many. Does this occur naturally, freely, when two companies share 75% of a market? Or if one company has 50% market share, with more players (as in MA)?

2. When prices double for a product in 8 years, how is competition working to control costs? How is this claim for competition proved?

I have in mind a different post on market share for health insurance companies, and the nature of health care for another. This could be a post to come to terms with readers notions of competition.

Chart below the fold.

Robert Waldmann
dares to debate Nate Silver

Nate Silver argues that health care reform might be in more danger in the House than the Senate. He notes that there are, by the standard DW-NOMINATE rating system, many conservative Democrats in the House and none (zero) in the Senate (Ben Nelson rates marginally marginally left of center). More importantly, there are many centrist Democratic Representatives and very few (arguably exactly one) centrist Democratic Senator[s].

This means that the 60th percentile of DW-NOMINATE scores in the Senate is about the same as the 50th percentile of DW-NOMINATE in the House (coincidentally 0 that is exactly centrist). Mechanical application of this calculation suggests that the vote in the House is about as tough as a cloture vote in the Senate.

So far so good. Then Silver argues that the vote in the House is, in fact tougher. I find this argument totally unconvincing. More after the jump.





1. Silver argues that the bill on the House floor will be to the left of the Senate bill. He assumed that the bill will be the Appropriations/education and labor bill. This makes no sense. Republicans plus blue dogs have a majority (of one vote) in the House energy and commerce committee. The bill that gets to the floor from that committee will be acceptable to blue dogs. Now the leadership can force a vote on the other bill, but only a gross failure at nose counting would cause them to force such a vote and lose (plus then they could go to the energy and commerce bill no ?).

2. He notes correctly that a vote for cloture is not identical to a yes vote. This is true and important and I agree with his second argument.

My real quarrel is with the third -- where can arms most easily be twisted. Silver argues that it is harder to whip 40 representatives than one or two senators. I think he is totally totally wrong and has it backwards. He writes

But while you might be able to muscle one or two or three hedging members into a yea vote on health care (or a vote against a filibuster in the Senate's case), it's much harder to do that 40 or so legislators, where there is less individual accountability.

This is crazy. Pelosi can singe out individuals and say she will hold them responsible and punish them if they vote no. Nothing forces her to threaten all blue dogs equally. Selection can be based on who is likely to need money from the DCCC, who has constituents who support the house bill (I'd guess they all do and they are simply ignorant or lying when they say their constituents oppose soaking the rich).

But the key point is that Reid can't threaten Nelson et al with much. They are immensely powerful and they know it. He's going to have to beg Nelson for votes on cloture for the whole 111th congress. To eliminate Nelson's power one would have to change the rules of the Senate -- that takes 60 votes and Nelson and the Republicans will vote no.

In contrast, Pelosi can uhm fix ten blue dogs chosen at random any time she wants. Legislation is really written in conference committees. The House leadership decides who is on a conference committee. "Vote no and you will not be on a conference committee while I am speaker" should work. Also how many Representatives are eager to serve only on the Indian Affairs committee.

Recall that DeLay forced unanimity on the Republican caucus including the very few moderate Republican representatives. In the House, the whip really stings.

More broadly, can anyone remember a time when a Presidents initiative was blocked in the House and not the Senate ? Ever in US history ? I can't and ask for information.

Robert Waldmann

In an even with some possible relevance to the ongoing health care reform debate

Bayonne Hospital Center just sued Horizon Blue Cross Blue Shield accusing it of "Life-Threatening Business Practices"

via John Aravosis

Any thoughts ?

This graphic offers perspective

edited 072909 to correct link for giving online, by Linda Beale

One of my big gripes (in case you haven't noticed) is the ease with which ordinary Americans can be fooled about tax issues by organizations, often ones with greedy purposes of furthering their own interests in lower taxes for themselves, that publish misleading or downright untruthful information and just keep repeating it. This has been a special problem with estate taxes, which hit only the very wealthiest amongst us and for a relatively small amount even for the large estates. It is also true of income taxes in general, the way flat taxes would work, the rationales for the corporate tax and many other key tax policies. Lobbyists frame the issues with inflammatory language, and most are too unknowing about the way tax really works to recognize the ruse for what it is.

Here are two of my pet peeves. (Many tax practitioners--and lots of tax academics--disagree with me on these.) Some of the worst phrases that have furthered the cause of cutting taxes for the wealthy so that the majority of Americans can either pay higher taxes themselves or do without the kinds of things that governments, not private enterprises, do best are "death taxes" and "double taxation" .

Much of the estate that is taxed when a decendent passes it along to his heirs as an unearned windfall has never been taxed at all during the decedent's lifetime, in the case of wealthy people with mostly financial assets. If there is not a good-sized bite out of the estate upon the transfer to beneficiaries, there'll be very little contribution to taxes from an agglomeration of wealth that has benefited enormously from the US legal system. And the heirs won't have any taxes to pay either--they'll just keep holding or will have a stepped up basis when they sell. All that is is a system for perpetuating or creating oligarchy--letting the wealthy become a ruling class with all the money and all the power without contributing anything much to help pay for the system that made all the wealth possible in the first place.

Similarly, the phrase "double taxation" is used to make people think that taxing corporations is unfair. But the decision about whether we tax entities or not is a reasonable one for societies to make. We made it a long time ago--deciding that we should treat corporations as taxpayers and thst we should tax capitalist owners of corporations on the income they are paid out of their corporate ownership as well. It is one of the most progressive parts of the federal income tax when it works, and it makes a lot of sense from a democratic egalitarianism perspective. Corporations can horde money and have enormous power because of their ability to lobby for their own benefit. Look at the way Big Pharm and Big Insurance has gotten Max Baucus in their pocket--putting money in his, and getting out of that a watered down health bill that doesn't do half of what we should be doing to move towards a single payer, single provider system like the most advanced countries already have. The presupposition behind the term "double tax" is that you are overtaxing and that you are taxing somebody that shouldn't be taxed. Yet corporations get to deduct salaries and purchases paid for with their own stock, which doesn't cost them a thing to issue. Corporations get basis in property transferred to them by shareholders in exchange for issues of corporate stock, even though that stock does not represent an after-tax investment by the corporation. So the taxable income of a typical corporation is generally much less than the corporation's actual economic income, and in addition to these provisions that are basic to the way the corporate tax is set up there are lots of provisions for reducing corporate tax--too fast depreciation, deferral of income through matching rules coming from court opinions where judges have been unduly influenced by financial accounting (the seventh circuit, in particular), depletion allowances and myriad other tax expenditure items favoring corporations, etc. Since Reagan, there has been a huge push by the same economic thinkers that brought us our current Great Recession to undo the US classical corporate tax system. It's really a push for giving more money back to the wealthy and cutting the size of government. (Of course, the push for lower corporate taxes, more uneconomic credits like the R&D credit, etc., and the push for zero taxation of corporate dividends have been coordinated and have the same effect of huge reductions in taxes on the wealthy.) But it's all argued in the name of economic efficiency--a theory without basis in reality that is probably more to blame for the greed that dominates today's society and the consolidation of huge megafirms--Big Pharm, Big Oil, Big Banks, Big multinationals in general--than anything else. And strangely, no one makes the same "horrid double tax" arguments about the maid being taxed on her salary paid out of already-taxed compensation income of her lawyer-employer...

Of course, even for those who don't pay much attention to the various organizations that are peddling particular views of tax issues and haven't been particularly swayed by the push for repeal of the"death tax" or repeal of "double taxation", there is a huge gap in information that isn't filled in by the media. Most schools, for example, don't teach much of anything about the tax system in the basic civics course. Most students don't take a finance course in college, much less a course that teaches the basics of tax law. In fact, most law schools don't even require that their graduates have a basic course in federal income tax law before graduating. (That is a major problem, I think, since almost every legal issue has tax consequences, one way or another, that a competent attorney should be aware of.) As a result, we are frighteningly ignorant, as a society, about how tax works, why it works that way, and what other possibilities there are. And as a consequence of that ignorance, it is all too easy for citizens to be in the dark about the consequences of tax legislation under discussions, for lobbyists to influence members of Congress to vote in their favor on bills (the public won't know the difference), and for members of Congress to fail to fully inform their constituents about the tax issues they are voting on (or even, in far too many cases, for the members of Congress to understand, as when a certain person from Colorado supported windfalls in the agricultural bill based on his apparent failure to understand the difference between gross income (revenues without business or other deductions) and adjusted gross income (revenues with business deductions taken into account)).

So I'm glad to see Marjorie Kornhauser's project take off. Maybe others won't agree with me on these pet peeves, but if we have better educated citizens who have more basic knowledge about taxes and how they work, it won't be so easy to bamboozle them into voting against their interest to support tax cuts for the wealthy and service cuts for everybody else while the boondoggles for the big corporations just keep pouring out (like an agreement that the government can't use its bargaining power to get cheaper drugs, or that Big Pharm can prevent generics being sold for 12 years and other crap that is getting put into the "health reform" bill that is becoming, like so much else these days, a corporate giveaway).

What's her project? It's called The Tax Literacy Project--"a non-partisan effort to informally educate the public about taxes through popular methods such as web-based games and other internet activities.

Want to help? Donations are being accepted. What follows is the appeal, direct from Kornhauser and the ASU Foundation.

Money from Taxes Helps Every Person Every Day!

But polls show most of us do not understand anything about our taxes.

Why should we bother learning about taxes? Because:

Tax ignorance costs each of us money. Many of us pay more tax than we actually owe.

Because tax ignorance makes it hard to discuss and enact sound tax policies, we are not able to raise money in the fairest and most efficient manner possible.

Why do we need taxes?

Taxes support democracy. They fund government services and goods such as court systems and national defense that protect your life, your property, and your constitutional rights.

Taxes support economic growth. Governments use taxes to encourage economic growth in numerous ways such as maintaining a stable currency, enacting and enforcing laws that protect both workers and employers (their lives and proeprty), and helping to build and maintain large and dependable energy, transportation and communication systems.

Taxes support your daily quality of life. They help you and your family buy a house, breathe clean air, have safe food and drugs, travel safely and efficiently on highways, trains and planes. Taxes help pay for your health care (in the form of tax benefits or direct care) and they pay to educate you and your family. Taxes help you at work (e.g., enforce contracts, provide a safe workplace) and help you at play (e.g., national parks).

Become a part of a solution to the problem of tax ignorance by contributing to the Tax Literacy Project.

What is the Tax Literacy Project?

It is a non-partisan effort to informally educate the public about taxes through popular methods such as web-based games and other internet activities.

Can you support the Tax Literacy Project regardless of your political outlook?

Yes, the Project's only pupose is to help provide information about tax, not to support any particular type or amount of taxes. No matter what kind of government people want, that government will cost money. Americans must understand how that money can be fairly and efficiently raised.

How can you make a charitable contribution?

Make your donation payable to the Tax Literacy Fund at https://secure.asufoundation.org/giving/online-gift.asp?fid=418 (no appeal code necessary) or Make your check payable to the ASU Foundation and mail to the Sandra Day O'Connor College of Law, Arizona State University, PO Box 877906, Tempe, AZ 85287-7906. Please write Tax Literacy Fund (3000 4788) in the memo line of your check. Thank you in advance for your support.

For more information or to become involved--

Please contact the project director: Marjorie E. Kornhauser, Professor of Law, Sandra Day O'Connor College of Law, Arizona State University, Marjorie.kornhauser@asu.edu, 480.965.0396.

All funds will be deposited with the ASU Foundation, a separate non-profit organization that exists to support ASU. YOur payment may be considered a charitable contribution. Please consult your tax advisor regarding the deductibility of charitable contributions.

by Bruce Webb

Last week was kind of a busy time for CBO scoring with the result that some stories got over-reported and others not reported at all. So lets back up a little.

Tuesday July 14. CBO scores the coverage costs of HR3200, the House Tri-Committee Bill. The CBO Director's Blog puts this announcement out House Democrats’ Health Reform Proposal: Preliminary Analysis of Major Provisions Related to Insurance Coverage Bottom line: increasing coverage to 97% of legal non-elderly residents will cost $1.048 trillion over ten years. Spending and revenue provisions of the bill not yet scored.

Thursday July 16. CBO director testifies to Senate and House Committees. The Director's Blog describes this here: The Long Term Budget Outlook. And from the graphs included this seems to be mostly just another presentation of the LTBO released on June 25th and announced on the Director's Blog under the same title as that on the Senate testimony Long Term Budget Outlook. The rest of this post will be exploring what Director Elmendorf actually said here as compared to how it was reported.

Friday July 17. CBO releases a new score for HR3200 which now includes the spending and revenue provisions not scored on Tuesday. PRELIMINARY ESTIMATE OF THE EFFECTS ON THE DEFICIT OF H.R. 3200, THE AMERICA’S HEALTH CHOICES ACT OF 2009 . New bottom line? $239 billion over 10 years.

Saturday July 18th. The CBO Director's Blog announces the release of the above report released the night before. The delay between the release Friday night and CBO and Ways and Means Committee public announcements creates a major kerfluffle on dKos with accusations of hoaxing. The dust settled a little after the Director's Blog put out this: Preliminary Analysis of the House Democrats’ Health Reform Proposal confirming the numbers above.

Saturday July 18th to Monday July 20th, the Speaker and various Chairmen release Press Releases saying that the CBO confirmed that the House Bill in combination with an additional piece of legislation actually would produce a $6 billion surplus over those same ten years. This created a lot of confusion over the weekend, did CBO report $239 billion deficit? Or confirm a $6 billion surplus? Well both and for those who wish please revisit some of the past posts here at AB from last weekend.

But I want to focus on the reporting, in particular how sound bites from the Thursday testimony seem to have overwhelmed anything else. That coming below the fold.
(UPDATE: There is some weirdness in the HTML at this point that I can't find. The page is supposed to break, and a link from CNN display. Neither happens. The title of the CNN article is "Health Reform Bill Won't Reduce costs, and it is datelined on Friday. I give up. It works fine in Preview).

Health reform bills won't reduce costs and summarized with this opening:

The health reform bills released so far would increase government spending on health care without sufficiently reining in health care costs.
And at least initially they aren't likely to significantly lower premiums for the majority of Americans with employer-sponsored health insurance.
That's the sobering takeaway from testimony Thursday by Congressional Budget Office Director Douglas Elmendorf.
Elmendorf's preliminary conclusions were based on a bill jointly released by three committees in the House this week and another bill passed by the Senate health committee on Wednesday.

The WaPo reported on it in much the same tone: Lawmakers Warned About Health Costs: CBO Chief Says Democrats' Proposals Lack Necessary Controls on Spending

Congress's chief budget analyst delivered a devastating assessment yesterday of the health-care proposals drafted by congressional Democrats, fueling an insurrection among fiscal conservatives in the House and pushing negotiators in the Senate to redouble efforts to draw up a new plan that more effectively restrains federal spending.
Under questioning by members of the Senate Budget Committee, Douglas Elmendorf, director of the nonpartisan Congressional Budget Office, said bills crafted by House leaders and the Senate health committee do not propose "the sort of fundamental changes" necessary to rein in the skyrocketing cost of government health programs, particularly Medicare. On the contrary, Elmendorf said, the measures would pile on an expensive new program to cover the uninsured.

. (Before going on we could note that it really isn't the business of news reporters to insert editorial comment like "devastating", but then again that is characteristic of much of Lori Montgomery's reporting.) At this point lets take a little stock. The Director's Blog informs us that the topic of the testimony Thursday was on the Long Term Budget Outlook and not explicitly on the Health Care bills themselves. Moreover we know now, as Director Elmendorf knew then his staff was still working up the numbers on the full cost of the Tri-Committee Bill and wouldn't release them for a full day plus after his testimony. Yet the WaPo story immediately drops any substance of the testimony and launches right into process questions and reactions by the political players with Elmendorf's actually testimony reduced to out of context snippets.

The CNN reporting has a little more substance and focuses on testimony by Elmendorf that claims the current bills do not do enough to reduce the bend points in the CBO trendlines, trendlines themselves the product of the Long Term Budget Outlook. Well fair enough, on the other hand it is not at all clear that that end was the particular focus of these bills to start with, that is I don't know where anyone promised that simply providing a public option would solve long-term health care cost trends, only that they would produce a bill that was paid for under CBO scoring criteria. Plus the reporting was spun in a way that confused 'doesn't subtract from' future deficits transforms to 'adds trillion to' without acknowledgement of scoring from Friday and announcements from Saturday end up with a House Bill at least that is fully paid for.

I guess my real point is that you have to parse the claims you see closely. Not slowing the growth rate of health care is not the same as adding to the deficit. Nor are the goals of bringing coverage to the uninsured and controlling overall costs the same. To the extent we could achieve both goals great, and in the current political climate maybe we can't get the first without some claims to be addressing the second. But that is a political calculation and not a policy consideration per se.Instead the question should be moving forward is as the President said in somewhat different words, how does it measure against the status quo, and our we measuring that as a percentage of national health care costs or as a percentage of the federal budget?

In my opinion Director Elmendorf blurred the line between two roles: one as the scorer of the impact of legislation over the next ten-years, in which case the House Bill does very well, and two as the evaluator of the long-term economic outlook. Credulous reporters and cynical politicians (or perhaps the other way around) seem to have seized on Elmendorf's conclusion on the latter to implicitly judge the former.

So yes the Tri-Committee Bill adds a trillion dollars to federal health care spending to achieve coverage, on the other hand it has direct spending savings, proposed revenues, and a change to Pay-Go rules to make it officially budget neutral over the official scoring period. We should not let those concepts get fatally confused.

by divorced one like Bush

Responding to a couple of comments to my post yesterday, I want to present some history. PARCA. Patient Access to Responsible Care Act. 1997 by Alfonse D'Amato (R-N.Y.) and Rep. Charlie Norwood, a Georgia Republican and licensed dentist who argues: "If we can protect trees and animals, why can't we protect patients?" (Well there is a long extinct animal!)

PARCA had this in it: PARCA states, "No insurance issuer may discriminate...in any activity that has the effect of discriminating against an individual on the basis of race, national origin, gender, language, socioeconomic status, age, disability, health status or anticipated need for health services."

The bill was defeated. The bill was part of a response by consumers and providers to what managed care was doing in the late 90's. People were not happy at all.

From the Frontline article:

According to a recent survey by Robert Blendon at the Harvard School of Public Health, some 48% of Americans say they personally have experienced problems with HMOs' care, or have close friends or relatives who have run into such difficulties. Complaints include difficulty getting access to medical specialists, problems with emergency care, and excessive red tape when trying to file grievances or appeals.

From: A report from Families USA, April 1998:

...almost three out of five Americans say that managed care plans make it harder for sick people to see medical specialists. Over half say managed care has decreased the quality of care for people who are sick. More than three out of five say managed care has reduced the amount of time doctors spend with patients. And 55 percent say they are at least "somewhat worried" that if they are sick their "health plan would be more concerned about saving money than about what is the best medical treatment."

Yet, with nothing really changed other than consolidation of the health insurance industry, we hear arguments that people are happy? Bull! Come on people, don't you remember?

From Duke University, Marc A. Rodwin: Backlash as Prelude to Managing Managed Care, is this summary of the then accepted pro managed care thoughts:

Managed care organizations (MCOs) and the private sector, so the story goes, are not perfect, but the alternative--having legislatures manage health resources and bureaucracies make health care decisions--is even worse. Experts in the private sector should manage health care... Over the long run, however, the market will ensure that MCOs deliver high quality health care. Consumers will leave poorly performing MCOs for ones that respond to their concerns (Enthoven 1993).

A summary of the potential defeat of PARCA presents the arguments against it as this:

Insurers and employers also are lining up to defeat the bill, claiming that its provisions could drive up the cost of insurance by 23 percent to 39 percent. The naysayers argue that if this bill became law, it would cause “thousands” of employers to stop offering insurance. They also maintain that the higher cost of premiums will force millions of lower-income workers to drop their insurance... The insurance companies are obviously concerned because PARCA will hold them liable.

Same story today. Government bad, regulation not needed, don't worry the market will fix it. Mr. Rodwin's closing statement:

Backlash is unlikely to disappear until the industry matures and thoughtful regulatory authority protects the public, and the industry from itself.

Prophetic?

We even were concerned in 1998 about CEO compensation for the insurers. From the Families USA 1998 report:

In keeping with the industry's accentuated focus on costs, this report analyzes a very different facet of managed care costs--namely, the costs associated with compensation for high-level HMO executives. The report examines 1996 executive compensation for the 20 for-profit, publicly traded companies that owned HMOs with enrollments over 100,000.7 These 20 companies owned 64 of the nation's largest HMOs in 1996.
The 25 highest paid executives in the 20 companies studied made $153.8 million in annual compensation, excluding unexercised stock options, in 1996. The average compensation for these 25 executives was over $6.2 million per executive. The median compensation for these 25 executives was over $4.8 million.
The 25 executives with the largest unexercised stock option packages in 1996 had stock options valued at$337.4 million. The average value of unexercised stock options for these 25 executives was $13.5 million. The median unexercised stock option package for these executives was over $7.2 million.
(Go here to see what it's worth today.)

In fact, we are so having the same debate again, yet, still that, I found this regarding the 1998 congressional timing for the health care issue:

All sides in the Senate debate have used the August recess to push their managed care proposals...

We are soooooooo doing it again that we are right down to the same time of the year! AHHHHHHHHHHHH!

Which brings me to Save the Rustbelt's comment "...but it is not some conspiracy to drive up administrative costs." My point was not that there is a conspiracy regarding administrative costs, certainly not by Massachusetts. It is that in order to fix what was fixed they are reaching for more of the same reasoning: Control the cost via administration of the costs. It is the very reasoning that has allowed the insurance industry (just look at the sub corps that UHC owns) to develop an entirely new business that is only expending but is not delivering the product results as advertised as it adds costs. And now, we will shift the cost by shifting the administrative model to the providers via a model that is questionable.

This Massachusetts model of capitation via "accountable care organizations" (ACO) is really just a new twist on the staff model HMO. Only now the insurer will collect the money and just pass it on according to the state fee schedule (yes it is still a fee schedule whether fee for service or fee for head count), and keep the difference. If there is not state setting of premiums, then where is the cost savings to the purchaser of insurance. If there is state setting of premiums, then why go through all this when we could just have a single payer system and cut out the profit and reduce the duplication of claims management to obtain our savings?

Also, to make this work, a patient will have to remain with the same "accountable care organization" at least through to the conclusion of their health problem. Being that the new fix is just a rehash of some old models, it is reasonable to assume that there will be some limiting of the consumer of health insurance to change ACO's. Bet it will be like the Medicare drug program; one year, which I believe is already part of the Massachusetts insurance program. I doubt that locking a consumer into a program for 1 year is long enough for an ACO to have affected a change in the consumption of health care services by the consumer. In fact, you will not know unless that consumer gets sick in such a way that there are lifetime residuals and then starts ACO shopping. Will the consumer put up with having to be locked into the ACO for more than a year? Consider that health care outcomes are looked at over 3 and 5 year periods to determine success. Can you say "administration of cost"? How will the consumer know which ACO is actually getting the product of health and healing correct for the least price without more administration? How will the consumer come to appreciate value before actually having to purchase?

Which leads me to Vtcodger's comment: "About the best I can say for this idea is that it is new." I hope I am making clear that this is not new. Nothing about the current discussion of the health care problem is new. It is just the game of hot potato. It is just a shifting of the costs down the line. (An approach we seem to have been using since "trickle down" theory was created.) I do agree and it is why I believe capitation did not catch on and staff model HMO's declined, when Vtcodger states: " I don't think that your average primary care physician wants to be an insurer...".

But, let me correct one assumption that like the myth of Reagan lives on regarding managed care. Again Vtcodge: Actually, HMO/PPOs etc did and do seem to work to some extent. When they were first introduced, increases in health care costs did moderate for a while.

Yes, cost did seem to moderate. But there were very specific reasons and it had little to do with manage care actually reducing the "unneeded tests and procedures". From the Frontline article:

In the mid-1990s, HMOs made some people think that they had vanquished medical inflation -- as rates to big employers increased just 0.5% to 2% a year. But the managed care plans "paid dearly for competitive pricing in 1997," says John Erb, a benefits consultant at William M. Mercer Inc. "Many lost money and margins were slim for most of the rest.

It was the old business model to market share, cut your pricing and hope your competition folds first. It's the big box store model. It worked. In RI land we were reduced to BC and UHC. Two years ago, UHC undercut BC to win the state contract. Prices are up.

There was a report put out by Muse & Associates for the pro PARCA coalition. In it they noted two other reports when making a conclusion about costs. Quoting from an article from my national association's journal 4/98 (I have no link):

"Private sector average premium costs, for HMOs, the most tightly controlled form of managed care, are 18.4 percent lower than traditional indemnity plans.
Other researchers have come up with estimates reassuringly similar to the Towers Perrin figure. For example, the Lewin Group, in a 1997 report, estimated direct savings from managed care at 19 percent.
So, Muse & Associates are on sound footing in concluding: "Clearly, overall managed care savings could not exceed 20 percent. The best evidence strongly suggests that 15 percent of the 20 percent savings comes from managed care organizations reducing provider prices..."

We're talking the same old approach to what really is a problem with the product. At least in the bad socialist health care programs they recognize that a for profit third party only adds cost and thus do not have to account for that part of our problem (it's called savings). They just need to resolve the product quality issue. It is the only common issue to all nations.

I'm taking bets on the date of the new fix of the newly fixed, fixed system.

by cactus

Since I just had a post on Bailout Nation, the book Barry Ritholtz co-wrote with Aaron Task, I figured, why not have another post about Ritholtz. See, something I read on his blog has been botheirng me for a few weeks now.

Ritholtz has done a great job pointing out over and over that the Community Reinvestment Act (CRA) had just about nothing to do with the economic meltdown. Finally, he got pissed and issued a challenge:

Well, its time to put up or shut up: I hereby challenge any of those who believe the CRA is at prime fault in the housing boom and collapse, and economic morass we are in to a debate. The question for debate: “Is the CRA significantly to blame for the credit crisis?”
A mutually agreed upon time and place, outcome determined by a fair jury, for any dollar amount between $10,000 up to $100,000 dollars (i.e., for more than just bragging rights).

I don't think that was a good idea. Here's my reasoning...

1. There's no such thing as a fair jury. And even if there was, being fair doesn't mean the jury can't be bamboozled. Presentation matters a lot. If that wasn't the case, there'd be no need for attorneys. Most people would present their own case and save the expense of having an attorney.

2. That means a jury could get it wrong.

3. While Ritholtz' challenge may have a commendable outcome in this instance, it has a deleterious effect in the long run, putting the debate out of reach of most people who cannot afford to take the risk of losing the same amount of money that Ritholtz can. And what if Steve Forbes puts up a similar challenge for a few tens of millions? Even if Forbes' position is buffoonish - and in my opinion, if Forbes has a position on whatever subject, it probably is buffoonish - very, very few people could afford to have that debate on the offchance that the jury got the wrong conclusion. Probably even Ritholz would be priced out. The end result is that realistically, only folks like Bill Gates would be entitled to an opinion.

I'm all for holding people responsible for the consequences of their inanity, including whatever silly notions they propagate, but I think Ritholtz has the wrong target here. As bad as the clowns who just won't get the facts right after the fact are, they pale in comparison to the schmucks who perpetrated the fraud. Its the fraudsters who should be held liable for all this mess.

To close in Barry Ritholz fashion, what say ye?
______________________________________________
by cactus

The first item on Charlie Stross's World Science Fiction Convention schedule:

Thursday August 6th, 5pm (Location: P-511CF)
Title: In Conversation: Paul Krugman and Charles Stross
Description: 90 minutes of Charles Stross discussing SF, economics, and other topics with Paul Krugman. [link in original]

Those who might wonder why Krugman would be an appropriate guest at Anticipation (this year's WorldCon, being held in Montreal starting six yearsdays [h/t Loyal Reader] after we move back to NJ*) are referred to this paper [PDF], which I previously discussed at Tom's place.

*Which is why Shira doesn't want to do the eight panels on which she was scheduled.

but it doesn't do that much for the rest of us. Via The Ambrosini Critique, Scott Sumner discovers there was no housing crash:

The BLS claims that housing prices are up 2.1% in the last 12 months....According to the BLS, housing makes up nearly 40% of the core basket of goods and services.

Further reading gets us to the base of the claim: Owner-Equivalent Rents went up 2.7% in the past year. CR was all over this in April and May. Take a gander at this chart--from the CR posting in May:


So while the ratio has gone from 1.4 to 1.1 (which would be more than a 21% decline), almost a whole 10% of that change has been because the base (rent) has gone up. The other 19% of decline doesn't matter for BLS in(de)flation calculation purposes.

No one better tell David Malpass or his investors at Encima Global (motto: "Failing Up is Always an Option"; see the Forbes article link at the left side of the Encima page).

from Baseline Scenario


Three myths about the consumer financial product agency by Elizabeth Warren is well written and timely at Baseline Scenario.

I’ve written a lot about the creation of a new Consumer Protection Financial Agency (CFPA), starting with an article I wrote in the Democracy Journal in the summer of 2007. My writing has helped me work through the idea and has advanced a conversation about what kind of changes in financial products would be most effective. A couple of weeks ago, I testified before the House Financial Services Committee about why I think a new consumer agency is so important, and I’ve argued the case many times.

Today, though, I’d like to post specifically about some of the push back that has developed on this issue. In particular, I’d like to focus on three big myths – myths designed to protect the same status quo that triggered the economic crisis.

MYTH #1: CFPA Will Limit Consumer Choice and Hinder Innovation

At a recent hearing on the CFPA, Rep. Brad Miller challenged an industry representative to identify one consumer who chose double-cycle billing to be included within the terms and conditions of his or her credit card contract. It was a great moment. If the status quo is about choice, then explain why half of those with subprime mortgages chose high-risk, high-cost loans when they qualified for prime mortgages. If the status quo is about choice, then explain why Citibank declared itself consumer friendly, dropped universal default, then quietly picked it up again the following year because they said consumers couldn’t tell whether they had the term or not.

The truth, of course, is that no consumer “chooses” to accept the tricks and traps buried within the legalese of financial products. Rather, consumers must choose among various products with one feature in common: dozens of pages of incomprehensible fine print.

The CFPA will not limit consumer choice. Instead, it will focus on putting consumers in a position to make choices for themselves by streamlining regulations, making disclosures smarter, and making financial products easier to understand and compare. The Agency will promote plain vanilla contracts—short, easy to read mortgages and credit card agreements. The key principle behind the new agency is that disclosure that runs on for pages is not real disclosure—it’s just a way to hide more tricks. Real disclosure means that a lender has to be able to explain what it is selling so that the customer can read it and understand it. Once consumers can understand the risk and costs of various products – and can compare those products quickly and cheaply – the market will innovate around their preferences.

Daniel Carpenter, a Professor of Government at Harvard University, has written a great deal about the modern pharmaceutical industry. While anyone with a bathtub and some chemicals could be a drug manufacturer a century ago, Carpenter points out that drug companies were willing to invest far more in research and development to bring good drugs to the market once FDA regulations drove out bad drugs and useless drugs. Good regulations support product innovation.

MYTH #2: The CFPA Will Add Another Layer of Regulation and Increase Regulatory Burden

Current regulations in the consumer financial area are layered on like pancakes—see a problem and fry up a regulation, but don’t integrate it with the earlier regulation. Today, seven different federal agencies have some form of regulations dealing with consumer credit. The result is a complicated, fragmented, expensive, and ineffective system. With consolidated and coherent authority, the CFPA can harmonize and streamline the regulatory system—while making it more effective.

But the real regulatory break-through for the CFPA would be the promotion of “plain vanilla” contracts that would likely meet the needs of about 95% of consumers. These contracts would have a regulatory safe harbor. By using an off-the-shelf template for a plain vanilla contracts and filling in the blanks for interest rates, penalty rates and a few other key terms, a financial institution can legally satisfy all its federal regulatory requirements—no need to do more.

Of course, some banks would want to offer more complicated products. For many, they could file-and-use, so long as they met the same regulatory standards of adequately disclosing risks and explaining costs—briefly enough and clearly enough for people to understand them.

A streamlined new regulatory regime would have a serious impact on the credit industry. Today’s complicated disclosure system favors big lenders that can hire a legion of lawyers to navigate the rules—and spread the costs among millions of customers. Those complex rules fall much harder on a smaller institution that must navigate the same regulatory twists and turns, but with far smaller administrative staffs. Plain vanilla contracts will be particularly beneficial for community banks and credit unions that will be able to divert fewer resources toward regulatory compliance and more toward customer service and innovation.

MYTH #3: Prudential and Consumer Regulation Cannot Be Separated

Make no mistake: This is a fancy claim for the status quo. If the CFPA can be left with the current bank regulators, then it can be smothered in the crib. For decades, the Federal Reserve and the bank regulators (the OCC and the OTS) have had the legal authority to protect consumers. They have brought us to this crisis by consistently refusing to exercise that authority.

The agencies’ well-documented failures – discussed in detail by Travis Plunkett and Ed Mierzwinski here and by Professor Patricia McCoy here — are largely the result of two structural flaws. The first is that financial institutions can now choose their own regulators. By changing from a bank charter to a thrift charter, for example, a financial institution can change from one regulator to another. The regulators’ budget comes in large part from the institutions they regulate. If a big financial institution leaves one regulator, the agency will face a budget shortfall and the agency will likely shrink. Knowing this, financial institutions can shop around for the regulator that provides the most lax oversight, and regulators can compete by offering to regulate less. Regulatory arbitrage triggered a race to the bottom among prudential regulators and blocked any hope of real consumer protection.

The second structural reason that prudential regulators failed to exercise their authority to protect consumers is a cultural one: consumer protection staff at existing agencies find themselves at the bottom of the pecking order because these agencies are designed to focus on other matters. At the Federal Reserve, senior officers and staff wake up every morning thinking about monetary policy. At the OCC and OTS, agency heads wake up thinking about capital adequacy requirements and safety and soundness. Consumer protection issues are—at best—an afterthought. The CFPA would create a home in Washington for people who wake up each morning thinking about whether American families are playing on a level field when they buy financial products. By bringing economic experts who care about consumer financial issues under one roof, CFPA can develop as a smart agency that develops real expertise.

A single consumer agency would also be able to make sure that the same products face the same regulations. Today, mortgages are regulated differently depending on whether they are issued by a bank, a nationally-chartered thrift, a nationally-chartered credit union, and so on. Imagine for a moment if toasters or toys had different safety standards depending on who manufactured them. Or, even worse, imagine if some manufacturers could bypass safety standards almost in entirety – as is now the case for non-depository financial institutions. It is time for one Agency to regulate financial products in a consistent manner across the board.

In 2001, Canada created an independent agency much like the proposed CFPA. I recently spoke with some Canadian economists, and they not only said the system works, they also expressed bewilderment about the idea that prudential and consumer regulation would be combined. As one said, they “have different ways of thinking about the world.”

At the end of the day, industry lobbyists try hard to invent myths and make things sound confusing to intimidate the public and to keep policymakers from acting. But this issue is simple: keeping safety and soundness and consumer protection together has not ensured safety and soundness, has not protected consumers, has not fostered choice and innovation, and has not minimized regulatory burden. In fact, the current regulatory structure that combines consumer protection with other bank oversight responsibilities has led to the kind of bad regulatory oversight that has led us to this crisis. The CFPA would put someone in Washington—someone with real power—who cares about customers. That’s good for families, good for market competition, and good for our economy.

Update: Fixed link to Democracy article in first paragraph. Thanks to Uncle Billy vs. Mont Pelerin.

By Elizabeth Warren

by divorced one like Bush

In this debate on how to finance health care, we are hearing about the costs to deliver health care and how to bring them down. Mass is now proposing a capitated payment system that will be government created. It is the latest fix to a herald "fixed" problem. Which begs the question, why do they need to fix it again, yet, still?

The 10-member commission... voted unanimously to largely scrap the current system, in which insurers typically pay doctors and hospitals a negotiated fee for each individual procedure or visit. That arrangement is widely seen as leading to unneeded tests and procedures.
A state commission recommended yesterday that Massachusetts dramatically change how doctors and hospitals are paid...the group wants private insurers and the state and federal Medicaid program to pay providers a set payment for each patient that covers all that person’s care for an entire year and to make the radical shift within five years. Providers would have to work within a predetermined budget, forcing them to better coordinate patients’ care, which could improve quality and reduce costs.
The plan would require significant restructuring of the healthcare system, and some of its components would need legislative approval. Primary-care doctors, specialists, hospitals, and home healthcare agencies would have to form so-called accountable care organizations. Patients would choose a primary care doctor to coordinate their care, mostly within the organization. Insurers would pay the accountable care organization a flat yearly per-patient fee to be divided among the providers.

Read the above again: recommended...that Massachusetts dramatically change... to make the radical shift... The plan would require significant restructuring of the healthcare system, and some of its components would need legislative approval... to form so-called accountable care organizations.

Deja vu?

Dramatically? Radical? Significant? Legislative approval? An entirely new thingy called "accountable care organizations? What? IPA, HMO, PPO, POS, EPO, Self Directed, HSA, Capitated, IME, Primary Care, Fee-for-service, PCP, CAM, and for Massachusetts specifically; Commonwealth Connector just didn't do it for you. We need more? "Doctor", "insurer", "patient", "government" were not enough?

I want to know, just how much in administration cost will this new fix add? Is this the old promise of managed care, that the savings will accumulate enough to pay for the cost of administration plus a profit? Hasn't worked yet.

It may work I guess, if we just add enough superlatives in our sentences while we present the new and improved Model T. Or maybe not. From the journal, Medical Care: Managed Health Plan Effects on the Specialty Referral Process:

Results. The percentages of office visits resulting in a referral were similar between the two gatekeeping groups and higher than the no gatekeeping group. Patients in plans with capitated PCP payment were more likely to be referred for discretionary indications than those in nongatekeeping plans (15.5% v 9.9%, P <0.05). The frequency of referring physician coordination activities did not vary by health plan type. The proportion of patients in gatekeeping health plans within a practice was directly related to employing staff as referral coordinators, allowing nurses to refer without physician consultation, and permitting patients to request referrals by leaving recorded telephone messages.

Massachusetts states: That arrangement is widely seen as leading to unneeded tests and procedures. They were referring to the method of paying a doctor. Yet the study shows that the referral patterns don't change with changing the method of payment. Well, does Massachusetts think the unneeded tests and procedures are happening without referrals?

Pick the approach, it didn't change the referral pattern and, systems were set up by those being managed to make the referral process more efficient. So, either the patients need the referral (thus tests and procedures) and none of these money managing approaches are going to ultimately stop it, or the PCP finds a way to keep the traffic moving through the office because the more patients served the more money collected. (Deja vu) It's a solution to a head-count/ piece-work payment system that still does not get the doc to do the job of applying the knowledge of health and healing to a given person's presentation. (I'm accepting bets on how long it will be before we hear about the next fixing of the latest fixed Mass health care system. Post your bet in comments.)

This gets us to the one area that has been rolled out many times, but is often excused off as not being reliable as to achieving real savings and thus why we really don't want a government funded single payer solution (other than our pride of not thinking of it first): Administration costs. It is the old medicare is cheaper than private insurance because of administration cost argument.

We're hearing of the new plan being modeled on the Massachusetts system. It's not working as noted by the need to fix it again (though past experience with other states showed it would not work). The fix is more administration costs on top of more administration costs. If they keep going this way, soon a medicare modeled administration system's costs will be comparable to the private insurer, thus defeating the need to fix health care. So lets just accept that health care costs a lot to administrate, stop wasting time trying to reduce the cost and let the private system stay?

NOT!

From this article: Costs of Health Care Administration in the United States and Canada, NEJM 2003, we learn that administrative costs have been rising faster in the US than in Canada.

We investigated whether the ascendancy of computerization, managed care, and the adoption of more businesslike approaches to health care have decreased administrative costs.

For the United States and Canada, we calculated the administrative costs of health insurers, employers’ health benefit programs, hospitals, practitioners’ offices, nursing homes, and home care agencies in 1999.

In 1999, health administration costs totaled at least $294.3 billion in the United States, or $1,059 per capita, as compared with $307 per capita in Canada. After exclusions, administration accounted for 31.0 percent of health care expenditures in the United States and 16.7 percent of health care expenditures in Canada. Canada’s national health insurance program had overhead of 1.3 percent; the overhead among Canada’s private insurers was higher than that in the United States (13.2 percent vs. 11.7 percent). Providers’ administrative costs were far lower in Canada.

Between 1969 and 1999, the share of the U.S. health care labor force accounted for by administrative workers grew from 18.2 percent to 27.3 percent. In Canada, it grew from 16.0 percent in 1971 to 19.1 percent in 1996. (Both nations’ figures exclude insurance-industry personnel.)

You know, I think maybe administration has become a growth industry for the health insurance industry? Was this part of the plan to shift us to a service economy?
Understand what the authors are saying here. It's not just administrative costs related to the job of getting the patient's dollar to the provider (medicare vs private), it's the overall costs to the entire health care system as a results of the "administrative" systems the private insurance industry has put in place to "save us money". No one is immune from paying these costs. They are part of the premiums charged, fees withheld, claims refiled, etc. All this administrative labor to control the costs, and yet the cost of health care keeps rising. Well, if the insurance employees can't stop the rising costs, then what are we paying them for?

This is starting to make me think that Bruce Webb's "do nothing plan" for Social Security should be applied to fixing health care. In this case the "do nothing" plan would be to get rid of the paper chase and achieve real savings. That is, do nothing regarding active management of health care costs via administrative systems. Don't try to manage the doc's, just let them do what they do and save money by eliminating all the systems that try to manage them. Though, there is a way to manage the doc's that would not cost us in administration: competition among provider types. Let the various algorithms of applying the knowledge of health and healing compete. Thus, research such as this needs to be considered regardless of one's opinion of the group studied.

Clinical and cost utilization based on 70274 member-months over a 7-year period demonstrated decreases of 60.2% in-hospital admissions, 59.0% hospital days, 62.0% outpatient surgeries and procedures, and 85% pharmaceutical costs when compared with conventional medicine IPA performance for the same health maintenance organization product in the same geography and time frame.

How about that, a reduction in "unneeded test and procedures" without adding administration costs. Let the doc's be but, use the clinical practice approach that actually cuts the "unneeded" because it is unneeded. I think there is a lesson here? Something along the lines of free market capitalism only the market is not the types of insurance competing for the patient, it's the types of doctors that need to compete for the patient.

I got side tracked. Lets stay with the one area for cost reductions: Administration. The authors:

Conclusions
The gap between U.S. and Canadian spending on health care administration has grown to $752 per capita. A large sum might be saved in the United States if administrative costs could be trimmed by implementing a Canadian-style health care system.

Despite these imprecisions, the difference in the costs of health care administration between the United States and Canada is clearly large and growing. Is $294.3 billion annually for U.S. health care administration money well spent?

Well, is it? Did they even ask?

rdan

Jeff Sharlet and The Family from a Salon post:

Today's roll call is just as impressive: Men under the Family's religio-political counsel include, in addition to Ensign, Coburn and Pickering, Sens. Chuck Grassley, R-Iowa, and Jim DeMint and Lindsey Graham, both R-S.C.; James Inhofe, R-Okla., John Thune, R-S.D., and recent senators and high officials such as John Ashcroft, Ed Meese, Pete Domenici and Don Nickles. Over in the House there's Joe Pitts, R-Penn., Frank Wolf, R-Va., Zach Wamp, R-Tenn., Robert Aderholt, R-Ala., Ander Crenshaw, R-Fla., Todd Tiahrt, R-Kan., Marsha Blackburn, R-Tenn., Jo Ann Emerson, R-Mo., and John R. Carter, R-Texas. Historically, the Family has been strongly Republican, but it includes Democrats, too. There's Mike McIntyre of North Carolina, for instance, a vocal defender of putting the Ten Commandments in public places, and Sen. Mark Pryor, the pro-war Arkansas Democrat responsible for scuttling Obama's labor agenda. Sen. Pryor explained to me the meaning of bipartisanship he'd learned through the Family: "Jesus didn't come to take sides. He came to take over." And by Jesus, the Family means the Family.

I am not sure how to put this in context, and the performance of some of the players involved is quite disturbing, especially if most is still secret.

Nationality Act of 1940: Nipping wingnut memes in the bud

by Bruce Webb on Dec. 7, 2008.

I guess flowering happens.

OR; HR3200 Sec 102 revisited. by Bruce Webb

We first visited the health care reform meme sweeping the right wing of the Blogosphere with this post HR3200 abolishes private health insurance. This seemed at first to be a simple confusion of the limits of the following from Sec 102 of the legislation:

1) LIMITATION ON NEW ENROLLMENT.—
(A) IN GENERAL.—Except as provided in this paragraph, the individual health insurance issuer offering such coverage does not enroll any individual in such coverage if the first effective date of coverage is on or after the first day of Y1.

I pointed out that Sec 102 only refers to 'Grandfathered' plans and not to 'Qualified' plans eligible to be included in the new Exchanges. But regular commenter Movie Guy showed that the confusion might be on my part and the result of inadequate attention to Sec 123-144. As he put it in comments:

Section 102 can't be viewed in isolation. Moreover, Section 102 can't simply be compared to Section 101 as the magic answer. There is far more involved than Webb's explanations and opinions expressed in the comment posts on the open thread and this main post and related comments. Aside from reading the entire bill, one would need to read some provisions in existing U.S. Code as cited by the bill. This provides the broader picture.

The problem with Section 102 is the clock.

If this provision of the bill is also adopted by the U.S. Senate and a conference bill is passed and subsequently signed by the President, there will be a gap period that isn't being addressed. The cutoff dates are specific. Yet, the Administration will not have a "Commissioner" until the individual is nominated and confirmed by the U.S. Senate. The "Health Benefits Advisory Committee" will not be in place until the members are selected; the Committee has 18 months to make its initial recommendations. Moreover, the Committee will be advising the Secretary of Health and Human Services. And you can't call the "Health Insurance Ombudsman" until the "Commissioner" appoints one. Recommend reading some of the other sections, including Sections 123-144.

During the interim period, who will be approving the plans acceptable for the "Health Insurance Exchange" under subtitle A of title II? Based on what criteria? Those are responsibilities identified for the "Commissioner".

If you lose your job on or after day 1 of the enacted legislation and your company insurance is terminated, what will you do until such time as the "Commissioner", "Health Insurance Exchange", Commissioner identified criteria, and accepted list of insurance providers are identified? Who will be able to get new health insurance until that system is up and running? Not Cobra. That won't be allowed.

If you're starting a business and need health insurance for yourself and a few employees during the gap period, what are your options for health insurance?

That's why Section 102 is insane.

Well after wading through a lot of the text of the Bill I came to the conclusion that much of the problem was terminological. Bur rather than waste the research that got me to that point I will include it after the fold. If nothing else it clarifies the proposed timeline.
(UPDATE: in comments on the previous post MG has conceded that if my reading below is correct that his concerns have been largely addressed. But given that there are others out there with this same take, I am going to leave this post up as is.)


First from the Bill text:

p.32 DEADLINE.—The Health Benefits Advisory Committee shall recommend initial benefit standards to the Secretary not later than 1 year after the date of the enactment of this Act.

p.35 (1) REVIEW OF RECOMMENDED STANDARDS.—
Not later than 45 days after the date of receipt of benefit standards recommended under section 123 (including such standards as modified under paragraph (2)(B)), the Secretary shall review such standards and shall determine whether to propose adoption of such standards as a package.

p.36 (b) ADOPTION OF STANDARDS.— (1) INITIAL STANDARDS.—Not later than 18 months after the date of the enactment of this Act, the Secretary shall, through the rulemaking process consistent with subsection (a), adopt an initial set of benefit standards.

p. 72 (a) ESTABLISHMENT.—There is established within the Health Choices Administration and under the direction of the Commissioner a Health Insurance Exchange in order to facilitate access of individuals and employers, through a transparent process, to a variety of choices of affordable, quality health insurance coverage, including a public health insurance option.

p. 88-89 2) SOLICITING AND NEGOTIATING BIDS; CONTRACTS.—The Commissioner shall— (A) solicit bids from QHBP offering entities for the offering of Exchange-participating health benefits plans; (B) based upon a review of such bids, negotiate with such entities for the offering of such plans; and (C) enter into contracts with such entities for the offering of such plans through the Health Insurance Exchange under terms (consistent with this title) negotiated between the Commissioner and such entities .

At risk of spoiling the punchline it is necessary to maintain a clear distinction between "date of the enactment of the Act" and day one of "Y 1". Which latter is defined as follows:
(25) Y1, Y2, ETC..—The terms ‘‘Y1’’ , ‘‘Y2’’, ‘‘Y3’’, ‘‘Y4’’, ‘‘Y5’’, and similar subsequently numbered terms, mean 2013 and subsequent years, respectively.

Before returning to the point lets examine the implementation timeline (from comments)

First unless the Blue Dogs get their way the current plan by the President and House Leadership is to get this bill enacted this year. So lets take the effective date as Jan. 1, 2010.

Second the clock for the Health Benefits Advisory Committee is not 18 months it is one year and the clock starts not when the members are appointed but at the date of enacting of the bill. Meaning that standards will be in place by Jan 1, 2011.

Third this gives the Senate a full year to confirm the Commissioner. Nor do I see that the appointment of the Ombudsman makes much difference here, his role seems relatively minor for implementation.

Fourth, the Commissioner is limited to 45 days to review the standards once received and must have them through the Rule process within 18 months of enactment. Meaning that adopted standards would be in place no later than June 30, 2011.

Fifth the general outlines of the standards are well established in the bill itself, and if the Advisory Committee develops its specific recommendations in a publicly accessible form (and note that insurance companies have representation on the Committee) insurance companies have almost two years to prepare themselves for contract negotiations in the summer of 2011.

Sixth which gives the Commissioner and the companies another 18 months for contract approval and administrative implementation.

So to repeat the question:

If you lose your job on or after day 1 of the enacted legislation and your company insurance is terminated, what will you do until such time as the "Commissioner", "Health Insurance Exchange", Commissioner identified criteria, and accepted list of insurance providers are identified? Who will be able to get new health insurance until that system is up and running?

Well on my reading if you lose your job and so your insurance between "day 1 of the enacted legislation" and "day 1 of Y 1" you can get insurance just where you always would have if you lost your job between tomorrow and the date of enactment. As a matter of personal convenience you might ask if the company plans to participate in the Exchange after it goes into operation Jan 1. 2013 but I just am not seeing the inherent insanity some others do. Instead I see two fundamental mistakes. One the belief that the clocks start from the point that the Commissioner and Committee members are confirmed rather than the date the act is enacted. And the second a confusion between that date and Y 1 as referenced in Sec 102, i.e. 2013..

Robert Waldmann

is honestly puzzled by this post by Brad DeLong. Brad notes that firms don't seem to be hoarding labor and goes on to predict a jobless recovery.

We Are Live at The Week with "The Jobless Recovery Has Begun"..

"Okun's Law." Here is the gist: if GDP (production and incomes, that is) rises or falls two percent due to the business cycle, the unemployment rate will rise or fall by one percent. The magnitude of swings in unemployment will always be half or nearly half the magnitude of swings in GDP.

Why?

Four reasons: (a) businesses will tend to "hoard labor" in recessions, keeping useful workers around and on the payroll even when there is temporarily nothing for them to do;

[skip]

Okun's Law is broken—especially with regard to the retention of workers in a downturn.

[skip]

Manufacturing firms used to think that their most important asset was skilled workers. Hence they hung onto them, "hoarding labor" in recessions. And they especially did not want to let go of their prime productive asset when the recovery began. Skilled workers were the franchise. Now, by contrast, it looks as though firms think that their workers are much more disposable—that it's their brands or their machines or their procedures and organizations that are key assets.

now out of order

"get ready for another jobless recovery."

Huh ? Okun's law was symmetric. Why isn't the new broken-Okun law symmetric ? If the Okun's law coefficient has shifted from 0.5 to over 1, wouldn't that suggest that there will be a huge increase in employment when GNP recovers ?

Semi theory after the jump.




To get a bit almost theoretical, if firms don't have hoards of hoarded workers, they will have to hire new workers in order to incrase production.

I think that Brad's model, in which the change is caused by a reduction in the value of trained workers perceived by managers, should imply a prediction of a recovery with unusually an rapid increase in employment.

My guess is that Brad is not allowing his theoretical speculation blind him to the fact that the last two recoveries were jobless. Based on atheoretical empiricisms (which is as Paul Krugman notes always accidental theorizing) I too predict a jobless recovery, but I think that Brad's informal model implies the opposite prediction.

I can reformulate Brad's model. The key variable is managers perception of the persistence of shifts in demand for their products. If they think that demand for their products will recover soon, they hoard labor. If they think that it will stay low, they lay off workers until they can just meet current demand.

this means that a recession accompanied by a sectoral shift will cause a larger decline in employment. During the recovery, firms in the expanding sector will increase employment slowly as they can only train so many new workers (workers recalled from temporary layoff don't have to be re-trained). The story is that asectoral shift causes high unemployment, a drop in demand causes high unemployment and the combination causes a sharp decline in employment followed by a jobless recovery.

Oddly, however, Brad and I have co-authored a paper with a third explanation.
http://ideas.repec.org/a/fip/fedfer/y1997p33-52n1.html


Our claim is that in the USA the Okun's law coefficient is an increasing function of the unemployment rate. The story is simple, if there is high unemployment, firms can lay workers off and then rehire them later, because the workers won't have found new jobs and will just have to wait to get their old jobs off. This suggests that the modified Okun's law gives a nonlinear and in particular concave relationship between unemployment and GNP minus trend (or GNP minus peak or GNP minus last years GNP). This means that the drop in GNP wich corresponds to an increase of unemployment form say 5 to 9 % is less than twice the drop in GNP which corresponds to an increase from 5% to 7%. A model in a published paper predicts well out of sample. So why is Brad psychoanalyzing businessmen ?

Of course the accidental theorist might be attracted to the accidental theory which says recoveries are jobless when the President is named George Bush. Fits the data and implies a normal recovery.

by cactus

A Review of the First Half of Bailout Nation

Barry Ritholtz is on my mind. I started reading Bailout Nation, Barry Ritholtz's book (with co-author Aaron Task) about the mess we're in, and I'm about half through. Its an easy read, and yet very informative, even though I've been following the whole mess for a while (and reading Ritholtz's blog). The book ties together a lot of what look like disparate facts into a coherent and plausible story that nicely fits the facts better than any alternative presentation I've read. I only really have two quibbles so far - one is that the book repeats \a few points a number of times.

Another is that it seems to me that the book does not ascribe sufficient, er, richness or texture to the behavior we saw in Alan Greenspan. It assumes that Greenspan was little more than a bumbling buffoon behaving in a self-contradictory fashion, a Randian free marketeer whose primary goal was to keep equity prices up. I believed all that about Greenspan before I read the book, but Ritholtz and Task do a fine job of making the case to those who haven't been following Greenspan's antics all that closely. The problem, though, is that Greenspan has other motivations that should be equally obvious from the very information that the book presents.

For instance, in pages 84 and 85, the book indicts that the collapse of the NASDAQ "prodded the Federal Reserve into action. Greenspan began unprecedented mop-p operation after the bubble popped.... In January 2001, the federal Reserve started an extraordinary rate-cutting process, one for which there is no comparison." At the bottom of the page is a table showing how the Fed made 11 rate cuts in 2001, dropping the FF from 6.5% to 1.75%. Over the subsequent pages, we are told about how the Fed then proceeded to keep rates extraordinarily low for years... and we're told how what the degree to which the Fed acted and kept rates down was unprecedented in the Fed's history.

All true, from Greenspan's goal of propping up equities to the rate cuts, but there's one thing... the NASDAQ bubbled popped in March of 2000. Greenspan only sprung into action in January of 2001. The bumbling buffoon full of self-contradictions could have sprung into action at any point, but he chose not to do so until it was evident that the next President was going to be someone he thought he agreed with ideologically, someone he felt was a fellow traveller.


Ritholtz has used the term nonfeasance (both in his blog and in the book) to describe the behavior of entities like the Fed (and the SEC and the CFTC and the rest of the clowns) toward regulating the financial sector. That is, those regulators chose to look the other way rather than step in and prevent the Wall Street circus from running amok. But Ritholtz is only partly right about the behavior of the so-called regulators, and most especially Greenspan's Fed. See, there was nonfeasance until GW took over. After that, there was antifeasance. The cops that had previously looked aside while a gang of their buddies broke into stores in the middle of the night graduated to driving the getaway car and knocking off rival gangs. And Greenspan, at least, seems to have graduated about the time we got a President who was singing his tune. I personally don't see that as a coincidence.
__________________________________
by cactus

rdan

Pujo Committee (1912-13) transcripts at the St. Louis Fed look interesting.

In 1912, a special subcommittee was convened by the Chairman of the House Banking and Currency Committee, Arsene P. Pujo. Its purpose was to investigate the "money trust," a small group of Wall Street bankers that exerted powerful control over the nation's finances. The committee's majority report concluded that a group of financial leaders had abused the public trust to consolidate control over many industries. The Pujo Committee report created a climate of public opinion that lead to the passage of the Federal Reserve Act of 1913 and the Clayton Antitrust Act of 1914.

The hearings were conducted between May 16, 1912 and February 26, 1913. The transcript of the hearings was published in three volumes. It is presented in the original 29 parts with the index, a table of interlocking directorates of 18 financial institutions, and the majority/minority report of the committee.

rdan

McClatchy reports:

The final installment of a three-part increase in the federal minimum wage is proving to be the most controversial.

Two previous wage hikes, one in 2007, the other in 2008, pushed the federal wage to $5.85 and then to the current $6.55 an hour. The third, which goes into effect Friday, will push it to $7.25 an hour.

That's not a life-changing raise — an extra $28 a week for a fulltime worker earning the federal minimum — though low-wage earners like Kendell Patterson in Oklahoma City, Okla., say it'll help.

But some economists worry that the wage hike is coming at the worst possible time and will only make the recession-battered job market tougher for the very workers it's intended to help.

The increase will have minimal impact in most states. Eighteen states and the District of Colombia already have minimum wages that are higher or equal to $7.25 an hour. In nine more, the minimum wage is higher than $6.55 an hour and so workers in those states will see their wages rise by only a fraction of the 70-cents-an-hour increase, from four cents an hour in Florida to 40 cents an hour in Nevada.

That leaves 23 states where minimum wage workers covered by the federal Fair Labor Standards Act will enjoy the full 70-cents-an-hour increase.

Oh boy....another round of complaints about the destruction of the economy for $28.00a week per increased wage. God help our stingy little hearts when it comes to everyman, and not the Sachs bonuses.

Update: I think some of the commenters forgot who funded the recent bonuses...see write up here at Naked Capitalism...

Update 2: Those who claim to know econ 101 thinking on this topic should start here on the MAW and here and here by age.

by Bruce Webb

Press release from the House Ways and Means Committee dated Saturday July 18th. CBO Scores Confirms Deficit Neutrality of Health Reform Bill

Washington, D.C. -- The Congressional Budget Office (CBO) released estimates this evening confirming for the first time that H.R. 3200, America’s Affordable Health Choices Act, is deficit neutral over the 10-year budget window – and even produces a $6 billion surplus. CBO estimated more than $550 billion in gross Medicare and Medicaid savings. More importantly, the bill includes a comprehensive array of delivery reforms to set the stage for lowering the future growth in health care costs.

Net Medicare and Medicaid savings of $465 billion, coupled with the $583 billion revenue package reported today by the House Committee on Ways and Means, fully finance the previously estimated $1.042 trillion cost of reform, which will provide affordable health care coverage for 97% of Americans.

“This fulfills the strong commitment of the President and House leadership to enact health reform on a deficit-neutral basis,” said Chairman Henry A. Waxman, Chairman Charles B. Rangel, and Chairman George Miller. “The reforms included in this legislation will help control health care costs and expand access to quality, affordable coverage to all Americans in a fiscally-responsible manner.”

The estimates also cover important reinvestments in Medicare and Medicaid, including phasing in the closing of the “donut” hole in the Medicare drug benefit. The bill’s long-term reform of Medicare’s physician fee schedule to eliminate the potential 21 percent cut in fees, and put payments on a sustainable basis for the future, will cost about $245 billion. Those costs, however, are not included in the net calculations above, as they will be absorbed under the upcoming statutory “pay go” legislation that is pending in the House.

Good news as far as it goes, at least if you want to get as close to universal health care coverage as possible, and certainly you can expect progressives to run with it. But it raises some questions about the differences between 'budget neutrality', 'surplus', and savings. Rather than spoil the party I'll move that discussion under the fold.


People who have been following this debate may be scratching their heads. On Tuesday the CBO scored HR3200 as adding $1.048 billion to the deficit over ten years. Late Friday that score was changed to adding $239 billion over that same period, that is over the course of three days we somehow cut $809 billion off the cost. By Saturday night all of a sudden we now have a score of a $6 billion surplus, as close to dead even as makes no difference. So what happened? Did the bill change? Did CBO cave and change its methods? Well 'No' and 'No'. It turns out that the answers CBO returns depend, as they should, on the precise nature of the question.

The first thing of note is that while these numbers are perfectly accurate in that if you score the impact of HR3200 and some accompaning legislation related to Pay-Go to be voted on soon you will get the $6 billion surplus, but under the cautious methods used by CBO this is somewhat to put the cart before the horse. Because the latest message from the CBO Director's Blog, released early Saturday morning still puts the matter as follows:

Yesterday CBO released a preliminary analysis, conducted with the staff of the Joint Committee on Taxation (JCT), of H.R. 3200, the America’s Affordable Health Choices Act of 2009, as introduced by several House committees on July 14. Earlier this week, CBO released a preliminary report on the health insurance coverage provisions of the bill; this latest report added analysis of the other provisions.

According to CBO’s and JCT’s assessment, enacting H.R. 3200 would result in a net increase in the federal budget deficit of $239 billion over the 2010-2019 period. That estimate reflects a projected 10-year cost of the bill’s insurance coverage provisions of $1,042 billion, partly offset by net spending changes that CBO estimates would save $219 billion over the same period, and by revenue provisions that JCT estimates would increase federal revenues by about $583 billion over those 10 years.

By the end of the 10-year period, in 2019, the coverage provisions would add $202 billion to the federal deficit, CBO and JCT estimate. That increase would be partially offset by net cost savings of $50 billion and additional revenues of $86 billion, resulting in a net increase in the deficit of an estimated $65 billion.

First thing to note is that the last sentence is awkwardly phrased. That $65 billion is NOT the ten-year score but instead the score in Year 10, i.e. 2019. It basically represents the continuing cost of HR3200 going forward. But more importantly CBO is here sticking to the $239 billion figure (as bolded by me).

But whether you start from a $239 billion 10-year deficit or a $6 billion 10-year surplus this is quite a remarkeable achievement. Republicans who just days ago were crowing that the cost of providing near universal coverage was going to mean trillions added to the deficit are going to see that message stomped on. For example McConnell was reduced on Meet the Press to claiming this would cost "a quarter of a trillion dollars" perhaps hoping people are still scared by the label rather than the number. Because in the context of a $750 billion TARP package it is hard to scare someone with '$30 billion a year'.

Okay. So lets back off a little. Is it really fair to say that the changes to health care under HR3200 really save money compared to the status quo? Maybe yes, and maybe no, it all depends on where you are situated. The reality is that it is going to cost a bunch of medium term money to extend our current health care system in a way that covers 97% of the legal non-elderly population. On a national basis a good part of that will be offset by moving care delivery that is now non-compensated to being compensated. Just as a minor example we should be spending significantly less on collection agencies and medical bankruptcies. And billions of dollars formerly drawn from charity to run various hospitals can be directed other places. Plus we can save tens of billions of dollars if we just had every American on the right combination of blood pressure and cholesterol medication right from the git-go rather than after that heart attack or stroke. So there will be savings, and nationally there should long-term be net savings, and ultimately maybe huge net savings as we get per capita costs in line with other developed countries.

But the key point is that little to none of that is captured using CBO scoring methods. Savings to states, hospitals and individuals simply don't register, nor do things like increased productivity from fewer lost work days. Now these kind of macro changes may well show up in CBO productions such as their Long Term Outlook but don't register at the ground level of bill scoring.

In the cold light of day a big chunk of this is going to have to be paid for with a tax increase of around $500 billion dollars over ten years. And for the people tasked to pay it this isn't going to save them anything over the status quo, not near term. Meaning that progressives shouldn't get too far ahead of themselves crowing about a $6 billion net paper surplus.

I am warning about this because there is quite the excitement brewing in places like dKos among people who have confused the concepts of budget accounting and cash flow. Budgets and budget scoring are mysterious beasts and neither deficits or surpluses necessarily mean what they suggest once reported in the media.

In other words "I don't think that $6 billion surplus means what you think it means".

by Bruce Webb

Did you know that the House Tri-Committee Bill HR3200 openly and brazenly outlaws new private individual health insurance plans after Year 1 (now set for 2013)? Well me neither, mainly because it is only not true but in total context absurd. Not quite as absurd as the idea that the Moon landings were faked, that walking into a court with a gold fringed flag means you have lost all protections under the Constitution, that you can make yourself exempt from Federal Income tax by declaration, or any of the other engrained notions floating around Wingnuttia. But since somehow Flat Earthers, and Young Earthers and Birthers never go away it is worth examining this particular theory before it goes even more viral, I have already seen it on multiple sites.

What is the origin of this? Well it is from some seemingly clear language in the text of the bill, the entirety of which can be found here: HR3200: America's Affordable Health Choices Act. This language is not hidden deep within the bill, which is what you would expect if something sneaky was going on (which should have given these guys pause for thought), nope it is right up front on page 16 of the bill, indeed it is in the second section of the bill's Title 1, that is 'SEC. 102. PROTECTING THE CHOICE TO KEEP CURRENT COVERAGE' The language itself:

(1) LIMITATION ON NEW ENROLLMENT.—
(A) IN GENERAL.—Except as provided in this paragraph, the individual health insurance issuer offering such coverage does not enroll any individual in such coverage if the first effective date of coverage is on or after the first day of Y1.

Which for some is the "insane" smoking gun, no new individual insurance after 2013. To understand why this is just a profound misreading of the bill (if you don't already) you can follow me below the fold as I try to explain.


First thing to need to understand that Congressional language is a little tortured to start with. For one thing it is nested, that is you have to work your way up from the language of any given paragraph to the higher level organization and purpose. Second as here you always have to look out for language indicating exceptions.

The top level of this section is titled 'Protecting the Choice to Keep Current Coverage' in keeping with Obama's promise that if you like what you have you get to keep it. But this right is not totally unlimited, there are constraints that both keep employers from gaming the insurance pool and individual employees from evading the individual mandate by buying inadequate (but cheap) coverage. So the legislation sets out some terms and parameters. Right after the title we get sub-section (a) itself titled 'Grandfathered Health Insurance Coverage Defined'. (Those of you not aware of the term 'grandfathering' is the principle that a property right once exercised can not arbitrarily taken away and in some cases is inheritable). Sub-section (a) lays out three limitations (1) Limitation on New Enrollment, (2) Limitation on Change in Terms or Conditions, (3) Restrictions on Premium Increases all of which taken together has led our conspiracy bugs to believe they are hiding a plan to strangle the individual insurance market out in favor of a public plan (which then I guess is free to destroy Tokyo unchecked.)

To understand why this is not so, or at least not so in the sense opponents would like to take it you need to back up and see what Sec 102 was opposing Grandfathered coverage AGAINST. Meaning that to fully understand Sec 102 you need to understand Sec 101 and in particular the meaning of 'Qualified Health Benefit Plan' as set out in Sec 101 (b). In order to offer new coverage under HR3200 private insurers simply need to offer a product that meets the new requirements. This is no different than requirements in past legislation that car manufacturers had to include such things as turn-signals, back up lights, seat belts in new model years, but in most cases grandfathered existing cars already on the road.

Backing up a little more. In order for a new plan for individual or group insurance to be offered it has to meet three tests under 101 (b):those of Sub-title B: Affordable Coverage, Sub-title C: Essential Benefits, and Sub-title D: Consumer Protection. If you meet those tests you are allowed to write new individual policies. Nothing is outlawed except the right to sell inadequate plans to new customers.

Now you don't need to dig into the legislative language to see why this wingnut reading of Sec 102 had to be wrong. For example you could have just examined the CBO estimates of who would be covered by whom in the year 2019.
Insurance Coverage Specifications and associated text. If CBO estimates that in 2019 30 million people will bet getting insurance through the exchange and only 9 million of them covered by the pubilc options, who is left to write the other 21 million mostly individual policies? Private insurance. How can they do that if Sec 102 of the bill plainly makes writing any such coverage after 2013 illegal? Well they couldn't. Which should suggests that the 'simple' reading of Sec. 102 that apparently sets up this paradox was not the correct reading, that in reading it that way that those readers just missed something. Something I suggest was Sec 101, the overall context of the unfolding debate, and CBO scoring.
__________________________________
While I am here. A good part of the progressive blogosphere is rending their clothes and gnashing their teeth because the current plans limit people with employer supplied insurance from resorting to the pubic plan. This too is a profound mis-understanding of the bill, though here from the other side.

For one thing current enrollees in employer plans are protected by the provisions of Sec 102 (b) which provides that they are not bound by a 'unacceptable' plans as defined, moreover employers are only given a five year grace period after Y 1 to upgrade their current plan to qualified plan standards. Additionally there are restrictions which keep your employer paid plan from costing the individual employee more than 11% of gross pay and which allow employee opt-out from being stuck in a lower cost plan just to meet that test. In fact I am not seeing in Title II or Title III anything that would keep an employee from choosing individual insurance from the exchange after Year 2 whether that coverage be private or through the public option. Nor am I seeing any 'firewall' keeping the employer out of the exchange, or in exchange for a fee amounting to 8% of payroll from simply dropping employer coverage at all.

Now it is more than possible that I am missing something here, and any help would be appreciated. But please if you can supply citations to the particular section of the bill containing the actual controlling language. Because while I can see restrictions that keep EMPLOYERS from shoving people against their will onto the public option, I am not seeing much to keep EMPLOYEES from freely choosing that.

Although even if there were such restrictions they would under some circumstances be defensible. What you don't want is a situation where the employer sets up what is in effect two plans, one for favored employees and/or low cost insurance needs and another for less-favored employees and/or high cost insurance needs. There are some protections built in by salary, you can't openly have two vastly divergent systems, but what you need is some protections against employers covertly and selectively pushing some people out the door. For example I would think it would be profoundly illegal to tie decisions on retention of probationary employees by the type of coverage they 'freely' chose. But employers know how to pass hints that suggest that people over 50 or who have lots of kids have problems passing probation if they insist on being on the employer plan, hint, hint, nudge, nudge. On my reading the bill attempts as best it can to limit this, but realistically it is hard to remove game playing from any complex system.
___________________________
On a final note. Those who claim this plan is a blatant, open attempt to drive private insurance out of the market starting on Day 1 are totally off-base. On the other hand there are pretty good possibilities that that will be the effect by say year 20. Because the legislation is wittingly or not set up as a one-way valve, there are incentives in place to let some or all of your employees pass through that valve into the public option, while there is not much incentive to draw them back out. Which is the outcome that some of us dirty socialist DFHs are ultimately hoping for, Universal Single Payer through the back-door.

So people mis-reading Sec. 102 may well have identified the motive and the goal even as they mis-identify the actual mechanism.

by Bruce Webb

h/t to dKos poster Pronin2.


http://www.cbo.gov/ftpdocs/104xx/doc10464/hr3200.pdf

New scoring released Friday night shows the ten-year net increase to the deficit from the House Tri-Committee bill down to $239 billion with an actual five year surplus of $44 billion. I guess we will have to see whether the AP and the Republicans cling to that $1.5 trillion figure or not. And to be fair while the Press Release of the Committee claims CBO scored this actually as a 10 year surplus of $6 billion this was just accomplished by setting the $245 billion it will take to fix Medicare aside on the basis that that will be the result of separate legislation. This seems to be a dodge to me, I prefer to just stick with the numbers as they show in the table.

Either way ($239 billion 10 year deficit or $6 billion 10 year surplus) it gets harder for people to claim that covering 97% of Americans with health insurance is just too heavy a lift.

UPDATE: Hoo boy, this set off multiple hissy fits at dKos with competing diaries and claims of hoaxing to the point that both Pronin2's and Dartagnan's diaries got taken down. Bottom line?
1) The original 'Press Release' does not seem to have actually been officially released. The latest official release on HR3200 seems to be this: http://waysandmeans.house.gov/News.asp?FormMode=release&ID=918 It does not claim a surplus but does say the ultimate result will be paid for.
2) This morning the CBO Director's Blog was updated with this: http://cboblog.cbo.gov/?p=332

As noted above I would not have run with the $6 billion surplus of that purported Press Release and would have just stuck with the official CBO score, but the number just didn't come out of nowhere. I suspect that someone drafted up a Press Release that never actually went out because it was mis-leading. Anyway the $239 billion 10 year number stands.

by Noni Mausa

Dear Journalists -- You can Smarten Up Now

Oh snap. Once again the papers demonstrate that when it comes to
dogs, the First Law of Journalism goes right out the window without
regret or even apparently noticing it.

That law? "First, Do Your Homework."

What annoyed me today was an editorial in the NYT, here: Here
it is:

When Dogs Fly
Published: July 16, 2009

The only objection we have to Pet Airways, the new airline devoted
just to pets, is the fact that we can’t book space on it ourselves.

Think of it: separate compartments — dog crates, that is — with plenty
of room to stretch out, flight attendants, a pet lounge, escort from
check-in to the plane and preboarding walks. We wouldn’t recommend it
for business travelers. The trip from New York to Los Angeles — $250
one way — does take about 24 hours. But that includes dinner, play
time and a sleepover in Chicago. No security hassles, no in-flight
movies, just the luxury of one’s doggie dreams in one’s private cabin.

Yes, Pet Airways is yet another stage in the humanizing of our pets, a
process that has resulted in, among other things, Rachael Ray pet food
and animal health care and lifestyles beyond the means of most of the
humans on this planet.

[...]

The immediate overbooked success of Pet Airways suggests a growing
intolerance for the sometimes haphazard care of pets on the national
airlines. If Pet Airways succeeds, there may be an economic lesson as
well for the foundering human airlines. If we had less stress at the
airport and dinner on board, we, too, would feel a lot happier about
flying.

My opinion below the fold

============


"Another stage in the humanizing of our pets." Oh, gimme a break.
That's not what this is about.

Anyone who has tried to ship a pet by air has met a nightmare network
of local and federal laws. But much worse are internal airline
policies and price structures which can change overnight.

For pet owners this is bad enough. For breeders it's a constant
source of stress and expense.

By "breeders" I mean the dedicated people who spend decades or more in
the difficult task of maintaining their chosen breed. Unlike a
species, a breed is separated from other animals of its species only
by careful choice of breeding stock and monitoring and exclusion of
unwanted qualities. Breeding dogs is like maintaining topiary
hedges. It doesn't happen all by itself.

A lot of this maintenance has to do with travel. People travel with
their dogs to dog shows, which are essentially conventions where
breeders can learn from each other and see (and touch) the
up-and-coming breeding stock. (The breeding element trumps the beauty
pageant element -- neutered dogs may not be exhibited.)

But also, dogs travel on their own. Again, this is tied to breeding.

Purebred puppies go to their new homes. These homes may be hundreds
of miles away, because not all breeds are common in all areas. Some
are so uncommon that the good breeders may be overseas or clear across
the country. People wait months or years for one of these puppies and
may pay $1000 to $3000 for one of them at eight weeks of age. Should
these toddlers be sent as freight? (Hint - airline insurance for lost
or damaged freight isn't sufficient either.)

Grownup dogs are also shipped. Part of responsible breeding is to
outcross (or else line-breed) to good bloodlines whose examples might
be, again, clear across the country. Breeders send their females to
exemplary males (otherwise the hapless males would never be home.)
Either she might travel for a one night stand, or she might be placed
for a year or more with the receiving breeder. (AND be just as
pampered there as she is at home -- the calculations of pedigrees do
not prevent breeders from spoiling the objects of their
gene-juggling.)

It is not too much to say that for all practical purposes, breeds
exist because they can travel. If you love wide-eyed Cocker Spaniels,
or clownish Pugs, or big white Maremmas, then dog travel concerns you
even if you're just a pet owner.

Why is this new airline sold out? I looked at the price and did a
cartwheel. Safety in a pressurized compartment, continuous care by
experienced people, feeding, watering and exercise -- at $250 this
service is a big fat bargain in dollars and in peace of mind. And 24
hours to make the trip is nothing -- nothing -- compared to the
Byzantine scheduling sometimes required for freight shipping of dogs.

One final note -- to all you journalists out there, you can skip the
puns, the jokey headlines, and the stories which either paint dogs as
precious toddlers or else as frothing monsters. Part of knowing a
beat is knowing the field from the inside, and you won'f find either
stereotype to be especially true. Don't let rules of evidence and
worries about slander go out the window just because the target
happens to be a dog. Make sure what you're writing isn't just
someone's ignorant or malicious opinion. Do your homework.
_____________________________
by Noni Mausa

by divorced one like Bush

Time for an update on real world business. I posted back in 12/08 about the costs of a flower shop being in a wire service. The costs should matter, as it is what happens when one buys on line from a non-real florist. It is also a lesson as to what a real small business is dealing with. Sales are off 25% for the year on top of 8% for last year.

This morning my sweetie stated that "they" are screwing up health care for us. Her concern was that we would now have to be offering insurance for our employees. I informed her that the cut off was 25 employees. We are safe regarding this issue. Unfortunately, nothing proposed will help with our health care costs (currently $7800for insurance and $4028 out of pocket with an additional $3500 still owed to the hospital and the need for cataract surgery and about $1500 in dental for the daughter).

So, here is what has happened regarding the wire service aspect of our business.
June's Teleflora statement.
Total value of in and out orders: $974.78

Processing costs (membership, Dove, Quality program, Sending fee): $301.15
Advertising (directory, Co-op): $206.00
Publications: $3.75
Commissions due (orders in 27%, orders out 80%): $455.46
Total paid to Teleflora: $966.36

Balance of order value - costs: $8.42

Total value of orders to be filled: $614.78 That is, I had $8.42 to work with to fill orders that valued $614.78. In a nutshell, this is how it is that bigger business have via financialization, sucked money up hill from the smaller business.

Percent of order value out to orders in 59% June 09. (Year to date: 50%, Last year to date: 60%)
Compared last year to date incoming value down 14%, outgoing value down 42%.

I can't convince the sweetie to drop at least one of the wire services as she sees it as work and thus a cash flow perspective verses an accrual. Overall regarding our net profit as of the end of the first half of the year, (you know, money in the pocket) on a cash flow basis, we are off 43.9% on an accrual basis we are off 88.1. Far cry from Goldman Sachs No?

And, we are now in the slow period of the flower business cycle.

by cactus

The other day I had a post about a book I'm co-authoring; the book is slated to come out in the spring. As I noted then, the book looks at

at how a large number of variables - everything from abortion rates to economic growth, evolved over the length of each presidential administration beginning with Ike and running through GW.

We do that by looking at how each of these issues - say, real GDP per capita as an example - changed over the length of each administration, from right before an administration took office to right before it left office. We note the results graphically, and then try to understand why we saw the results we did. Many of the chapters parallel posts that were written for Angry Bear; the posts in Angry Bear were, in fact, a dry run for some of the later versions of many chapters. Kind of like making notes for a speech, then giving that speech a few times at Toastmasters, learning what works and doesn't, and then rewriting the speech before standing up in front of a larger, potentially less forgiving crowd. The Ex-GF is a member of Toastmasters, and I've seen her do just that.

In comments a few people indicated the book is going to be biased. These are mostly long-time readers who've seen the posts I wrote on the results on economic growth... and don't like them. I put up a response in comments, but I'd like to expand on that response a bit below. So here goes...

Say I told you I was co-authoring a book about Switzerland, in particular how Swiss Chancellors had performed on a wide range of issues from abortions to crime to the economy. The goal would be not just to see how these chancellors did on each of those issues, but to see if there were lessons that could be learned. Now, say, further, that:

1. the book would look at how each issue evolved over the length of each chancellor's stay in power
2. the book would treat the growth rate of each issue the same - namely from right before each chancellor took office to right before he left office
3. the book would present all the results graphically and try to explain any patterns that arose
4. the data used would come from an unimpeachable source - official Swiss government statistics

A book that did that would be lauded as attempting to be unbiased by most people who came across it. And if it turned out that chancellors from one party or another tended to do worse than chancellors from other parties on, say, economic issues, you might conclude that perhaps something was wrong with the policies they pursued. Now say the book then considered the objections that thoughtful people might bring up (e.g., noting how results change or don't leaving out the first year of each chancellor's term, considering the effect of the Swiss central bank's actions or the make-up of the various Houses of the Legislature, etc.), and found that a) the difference between the parties remained and b) there was a specific set of policies that was followed by chancellors from the party that underperformed, and the other parties always followed the opposite set of policies. Most Americans who read such a book would conclude that

a. the authors had specifically sought out the approach to writing the book that was least likely to impose their biases on the outcomes
b. the policies followed by the economic underperformers should, at a minimum, be handled with care, if not avoided altogether in Switzerland

The only Americans who would conclude that the book was not written in a way as to be unpartisan as possible would be folks who either had some prior biases about Switzerland and its politics, or found some sort of analogy between the not-very-successful policies in Switzerland and policies they happen to like here in the US.

Furthermore, they would have to be the sort of people who would not abandon their prior beliefs just because it was contradicted by data. Put another way - there is no way to satisfy those who are truly partisan except by also being partisan.
____________________________________
by cactus

rdan

WASHINGTON, D.C. – U.S. Sen. Sherrod Brown (D-OH), chairman of the U.S. Senate Banking Subcommittee on Economic Policy, will conduct a hearing tomorrow on how best to establish a national manufacturing policy. Brown is a leading advocate in Congress for a manufacturing policy to strengthen the industry and ensure its future global competitiveness. Brown’s hearing, entitled “The U.S. as Global Competitor"...

by cactus

Progress Report, and a Plea For Help

Regular readers may recall that together with a co-author, I've been writing a book. The topic should be familiar to the coterie of merry madmen/madwoman who lurk at the blog as writers or readers or both: we look at how a large number of variables - everything from abortion rates to economic growth, evolved over the length of each presidential administration beginning with Ike and running through GW.

I thought I'd share a bit of information about the process of getting a book "out there" given that we've recently crossed a milestone, namely the receiving and cashing of an advance check. Until this process began, I knew absolutely nothing about the process of writing and publishing a book, so its been very interesting. We (my currently still nameless co-author and I) have been extremely lucky, but I think the path we followed may be somewhat representative of that you might go down should you have the same delusions of literary grandeur that got us started.

So here's the process, summarized:

1. Have vague but exciting idea for book.
2. Flesh out the idea - in our case, with data as well as some early drafts.
3. Realize that the drafts suck. Rewrite multiple times. I've heard it said that "writing is rewriting." This saying should be amended to "writing is rewriting way more times than you would expect."
4. Find an agent. This process for us involved writing letters to different agents who represented authors who wrote books that could conceivably be considered in the same space as ours.
5. A good agent - and I believe we were very lucky - has a good idea of what publishers are after and is willing to tell you straight out where your book deviates from that model. Our agent read a few chapters, told us the concept was good but the execution sucked. He made us rewrite the first few chapters multiple tmes. Eventually he was happy, and he told us to rewrite the rest of the book the same way.
6. The agent begins shopping the book around. Interestingly enough, we caught a break here too. The Ex-GF had just reconnected with a former high school classmate on FaceBook who was the editor at a publishing company. They had a book on US presidents in their portfolio, and were looking for another one. Anyway, the Ex-GF and her classmates somehow began discussing the book... which led to files being sent back and forth, and a request that our agent negotate a contract.
7. The contracts generally stipulate some sort of an advance. If you're famous or have a history with the publishing company, the advance can be huge and I guess requires merely signing on the dotted line. In our case, we got the advance after turning in something that qualified as a rough draft.
8. At this point, we're waiting for comments back from the editor. Once they come back, we're going to have a week or two to tighten everything up and the book will be out of our hands to some extent somewhere in August.
9. Meanwhile, we've been getting first looks at some of the art work that the illustrator is doing for the book. All of the graphs we made for the book were in Excel, and looked the part. The illustrator is a real artist who works well with data, and he is redoing all the graphs.
10. Meanwhile 2, the sales staff at the publishing house has been prepped. They vetoed the title we had for the book (more on that later). Sometime soon they start talking to bookstores; it seems that many bookstores line up their shelf space to some extent nine months or so in advance.

It should be noted that the process is lengthier than it looks, or at least it was for this book. The first genesis of the book, the first attemnpt to write anything down, came (and I remember this specificially) when Bill Simon was running for governor of CA. That would be 2003. Something Simon said (and sadly I cannot remember what, except that it involved taxes and economic growth and Ronald Reagan) sounded so absolutely implausible to me that I had to check the data. After running down the data and concluding to my satisfaction that Simon was dead wrong, I thought to myself, "someone should write a book."

Then I thought about making it about Presidents and scrawled out some notes. Those first attempts were as mediocre as it seemed to me Bill Simon would have been as governor, so I put them aside. But I kept pulling them out and again every so often.

Another comment... family and friends are always telling me I don't toot my own horn enough, so I'll say this... I'm really proud and pleased with the book. After a zillion re-writes, going back and re-reading pieces of it now, I'm amazed at how much is covered in the book. Not just in terms of topics, but also (when it comes to economic issues) the reasons and the excuses that would otherwise be put forward by those who don't like the outcomes, and why those excuses don't fly.

I've had friends of mine give random chapters of the book to people who don't normally read anything that resembles economics or contemporary American politics or anything with numbers in it. (Having third parties who don't know us at all read a piece is an easy way to get something resembling an unbiased comments, I hope.) The comments that typically came back generally were of this nature: "X wouldn't buy a book like this if he/she passed it in the bookstore, but he/she read the chapter and said he/she would enjoy reading more of it. Got any more chapters to share?"

I think we managed that without watering it down so it loses its value to folks who do have an economic background. Lord knows, making the book accessible was the single most difficult thing about the whole process.

Here's the current outline of the book:

Chapter 1. Real GDP per Capita
Introduction to GDP, What the Data Says, Excuses and Explanations

Chapter 2. Fiscal ResponsibilityGovernment Spending, Tax Receipts, The Deficit (or if We’re Lucky, the Surplus!)

Chapter 3. The National Debt and the Real Real GDP per CapitaWhat Real GDP per capita leaves out, The National Debt, Net Real GDP per capita

Chapter 4. Employment Issues
Employment, The Employment to Population Ratio, Real Wages, Employment Related Health Insurance

Chapter 5. Income and Wealth
Real Median Income, Net Real Disposable Income, Real Net Worth, Homeownership, Owner’s Equity

Chapter 6. Traditional Republican IssuesNational Defense, The Size of Government, Taxes, Washington v. the States, The National Endowment for the Arts,
Welfare

Interlude: What Is the Effect of Taxes On Growth?

Chapter 7. Traditional Democratic Issues
Social Issues, Poverty, Income Inequality, Tax Progressivity, Protecting The Environment
Democratic Issues Conclusion

Chapter 8. HealthcareHealthcare Costs, Infant Mortality, Health Insurance

Chapter 9. Crime
Spending on the Administration of Justice, Murder, An Interlude: Explaining the Murder Rate, Public Corruption

Chapter 10. The Public Mood
Consumer Confidence, Suicide, The Stock Market, The Value of the Dollar

Chapter 11. Family Values
Abortions, Marriages and Divorce, Unwed Mothers

Chapter 12. Investing in the Future
Education, Research and Development, Building Infrastructure, Energy Independence

Conclusion. Ranking the Presidents, and What We Can Learn

Bonus Chapter 1: Is it Congress?
(I really like this one a lot. I think we came up with a very simple and elegant way to look at the question of whether the President is really causing these changes by looking at an alternative, namely that Congress is doing it. Our approach quickly shows that Congress is not generally in the driver's seat. In so doing, it also provides readers an easy contrast between what is having a minimal effect and what the President is doing.)

Bonus Chapter 2. Explaining Economic Growth
(Megan McArdle is going to be very critical!)

Bonus Chapter 3. The Office of the President

Bonus Chapter 4. Please Try This at Home!!!!

So that's roughly what it looks like. Now, a few issues. The first is that we haven't entirely satifactorilly come up with a title. The topic is a hard one on which to pin a name. We've got it tentatively down to:

RANKING THE PRESIDENTS
A Statistical Look at How Recent Presidents Really Performed on the Issues that Matter Most

and

The Best President
A Statistical Look at How Recent Presidents Really Performed on the Issues that Matter Most

Any thoughts on the titles? Any better ideas?

We've also got one more issue.... the publisher has put a lot of time and effort and resources into the book, and the next step is to corral some luminaries into reading the manuscript and ideally write up a positive blurb to put on the jacket or someplace. Ideally, one of them could be coerced into writing a forward. While the publisher has some ideas, I was wondering if you have any... not just of the people we should try to hunt down (particularly for the forward), but how to reach them. I'm thinking the ideal folks are prominent economists in the public sphere (e.g., Krugman) or journalists who the public associates with gravitas (e.g., Tom Brokaw). Names like that are probably overly ambitious to unknowns like my co-author and I, but since this whole process has required a degree of chutzpah, plus I've been worked into the tooting my own horn frame of mind, so what the heck?

Questions? Comments? Thoughts?
__________________________________
by cactus

Robert Waldmann

on Karl Marx, Arthur Laffer and Simon Peter.

Which one here is not like the others, because he was a lunatic extremist egalitarian not an ambitious sophist ?

Marx famously declared "From each according to his ability, to each according to his needs." This is quite probably the grossest distortion of a quote by removal of context in human history. The words are (a translation from German) of two prepositional phrases from a sentence from The Critique of the Gotha program (the absence of a verb is a hint that maybe some relevant context may have been removed). The grossest possible distortion based on removal of context is removal of the word "not" and, lo and behold, it appears in the (English translation of the sentence). A more accurate but still partial quotation (of a translation) is

"not ... inscribe on our banner "from each according to his ability to each according to his needs")". I mean there ought to be an absolute rule that, while many words can be decently elided we can all agree that "not" is not one of them (or to repeat with a minor edit "while many words can be decently elided, we can all agree that not is ... one of them).

more antiquarian exegesis and atheist theology after the jump.



The full (translation of) the quote is IIRC "It is not until work ceases to be a burden on life and becomes it's chief joy and purpose that we can inscribe on our banner "from each according to his ability, to each according to his need." Which I, quite honestly, interpret as meaning "from each according to his ability, to each according to his needs from the first of never and not before."

Marx believed that "from each according to his ability, to each according to his needs" to the same extent that he was an anarchist -- that he wanted to eliminate the state, that is, rather less than not at all. IIRC Marx wished for the state to seize ownership and control of the means of production, rather a huge expansion of the power of the state than an elimination of same.

To make an analogy, I think that Marx considered it a good proposal to eliminate the state *and* give to each according to his abilities to exactly the same extent that Arthur Laffer aims to increase the amount of money the federal government has to spend. Marx said expand the power of the state and it will disappear, Laffer said cut taxes and revenues will increase. I think Marx was devoted to the reduction of the power of the state to exactly the same extent that Arthur Laffer is devoted to expanding the federal budget.

Over at the first international, Marx had a problem called Bakunin. The guy promised people no capitalists, no private property and no state. Marx claimed that you could get everything Bakunin was promising from Marx, because in the long long long run the state would wither away. So,. sure it looks like communism implies a huge expansion of the power of the state but nope that's just socialism which will lead to the communist utopia of now bosses neither capitalists nor bureaucrats -- just trust me.

Later Marx had this problem that his few German followers (the Eisenachers) decided to join with the Social Democrats who had the inexcusable fault of being led by Ferdinand Lassale not Karl Marx. Hence the Gotha program and its only lasting fruit "The critique of the Gotha program." The phrase was torn from the context of the proposal that all workers be paid the same equal wage. Marx said that was nonsense. He made an argument which was a bit ahead of his time asking if this mean all workers get the same wage so single workers are rich and large families supporterd by one worker are poor ? Makes no sense (he actually didn't even mention compensating differentials so he was ahead of his time but behind Smith who was way ahead of his time and, come to think of it, ours). So he was arguing *against* equal wages. He said no way so long as we need wages to convince people to work. Only when (not if -- when) people just work out of public spirit and joy in labor can we even think about demanding perfect equality (and then we will have to find someone whose love of labor is extreme insane and humanly impossible enough that he or she will calculate equivalence scales without being paid to do so).

Please please please follow this rule "Do not elide the word 'not'" that is "Do ... elide the word 'not.'"

I don't believe Marx's promises about the withering away of the state and the joy of work (comparing our work efforts one can at least understand how Karl and I have very different views about work). I therefore interpret the Critique of the Gotha Program as implying, in practice,
"from each according to his ability, to each according to his needs, starting on the first of never."

OK so what about those apostles. Fact is that The Gotha Program is extreme but that Marx is deliberately conflating it with a much much more egalitarian and extreme program as a rhetorical trick (so if he were to complain as I do about the elision of "Not" one might reply that what goes around comes around and chi lo fa l'aspetta). Basically the man was trying to insult the united Social Democrats and Eisenachers by conflating them with a bunch of lunatic extremists -- the Christians.

update: Chapter and verse references added plus when looking for chapter and verse for "to each according to his need" I found "from each according to his ability too."



The phrases which can be translated (from Greek not German) as "from each according to his ability" and "to each according to his need" and fairly quoted without distortion due to removal of context comes neither from "The Critique of the Gotha Program" nor from "The Gotha Program" (as quoted in the critique) but from the Bible and, in particular from "The Acts of the Apostles" which, quite frankly, makes "The Communist Manifesto" look like the McCain platform (with all due respect for McCain, Marx and the Apostles).

The Bible, New King James Version

Acts Chapter 4 Verse 35
"...; and they distributed to each as anyone had need."

Acts Chapter 11 verse 29
"Then the apostles, each according to his ability, determined to send relief to the brethren dwelling in Judea."

OK so history is a prankster and karma is a bitch. Driven by envy and ambition, Marx decided to claim that, when it came to wages, Ferdinand Lasale was an impractical impossiblist extremist just like Simon Peter. As a result, many people have decided that Karl Marx was an impractical impossiblist extremist egalitarian just like Simon Peter. This is crazy. Not quite as crazy as the idea that one can be both a Christian and a crusader or both a Christian and a Republican, but crazy.

In closing, I note that I am both an atheist and a reasonable moderate, so I agree with Karl Marx and, like Marx, reject the impractical dreams of St Peter (at least for the foreseeable future).

Robert Waldmann

Kevin Drum writes

Conor Friedersdorf has three reasons he doesn't think he'll be able to support any of the progressive healthcare reforms currently on tap.

Argument #3:

I keep seeing the argument that America is the leading health care innovator, and that if our system looks more like what Europe has, there won't be anyone left making strides in research and development. I haven't seen a convincing rebuttal, though there may well be one. Links?

NIH is a 3 letter response to argument number 3. The USA does not just spend huge amounts on health care, it also spends huge amounts on investigator initiated peer reviewed grants.

The budget of the National Institutes of Health is similar to the combined R&D budgets of all pharmaceutical companies in the USA. The US public sector spends huge amounts of money funding medical research.

The NIH budget is just gigantic compared to all other sources of funding for independent scientific research (except maybe the DARPA budget which is spent on top secret research & development so I don't have much to transmit about its contribution to total research along the internet AKA grandson of ARPAnet). It dwarfs the NSF budget (much of which goes to biology too) and makes researchers around the world drool with envy.

Claiming that US leadership medical innovation proves the superiority of the private sector to the public sector is like claiming that US leadership in flights to the moon shows the superiority of the private sector to the public sector.

by Bruce Webb

House Education and Labor:: America's Affordable Health Choices Act all links from the Committee web page.

Summary

Bill Text (1.7 MB PDF)

CBO-Preliminary Analysis: Tri-Committee Health Care Bill




Compare to the tables scoring the Senate HELP Bill Kennedy-Dodd Bill with CBO Scoring

House Tri-Committee: Ten year addition to budget $1.082 trillion. Total coverage non-elderly: 94%. Coverage for legal non-elderly: 97%
Senate HELP: Ten year addition to deficit: $597 billion. Total coverage non-elderly 88%. Coverage for legal non-elderly 90%.

Over to you.

To often, we talk about models as if they are reality, instead of reflecting a reality that was approximated. At least forty economists, including at least three 'Nobel' Prize winners, know that:

A rising tide lifts all boats only when labor and management bargain on relatively equal terms.

by Bruce Webb


The MSM and the blogosphere alike are ablaze with speculation about exactly what secret program the CIA kept concealed for eight years. Assasination squad targetted at al-Qaeda? Well since we have been firing Hellfire missiles from Predators whenever we suspect the presense of high level al-Qaeda for years now that news would not have shocked anyone, still less people like Peter Hoekstra. Domestic surveillance? Well the Patriot Act already authorized cetain types of secret searches and we have spent the last couple of years debating domestic wiretapping. That would not have shocked Congress on either side of the aisle. No it had to be something pretty shocking, and I am suggesting it may be as easy as transforming the CIA into USA-TIA at the behest of one Richard Bruce Cheney.

The graphic attached to this post drew some ridicule at the time but it really was the official logo of the proposed Information Awareness Office. Its projected task:

The Information Awareness Office (IAO) was established by the Defense Advanced Research Projects Agency (DARPA) in January 2002 to bring together several DARPA projects focused on applying information technology to counter asymmetric threats to national security. The IAO mission was to "imagine, develop, apply, integrate, demonstrate and transition information technologies, components and prototype, closed-loop, information systems that will counter asymmetric threats by achieving total information awareness".
Following public criticism that the development and deployment of these technologies could potentially lead to a mass surveillance system, the IAO was defunded by Congress in 2003, although several of the projects run under IAO have continued under different funding.

The version of TIA revealed to the public was limited to overseas targets but even so drew much critical attention and attempts by Congress to impose strict limits on it, and ultimately it was largely defunded.

On January 16, 2003, Senator Russ Feingold introduced legislation to suspend the activity of the IAO and the Total Information Awareness program pending a Congressional review of privacy issues involved.[4] A similar measure introduced by Senator Ron Wyden would have prohibited the IAO from operating within the United States unless specifically authorized to do so by Congress, and would have shut the IAO down entirely 60 days after passage unless either the Pentagon prepared a report to Congress assessing the impact of IAO activities on individual privacy and civil liberties or the President certified the program's research as vital to national security interests. In February 2003, Congress passed legislation suspending activities of the IAO pending a Congressional report of the office's activities (Consolidated Appropriations Resolution, 2003, No.108–7, Division M, §111(b) [signed Feb. 20, 2003]).

. We KNOW that the Bush/Cheney Administration wanted this capability developed. That was public. We also KNOW that the Bush/Cheney Administration claimed the ability to do warrantless domestic wiretaps. It is not a huge step to add one plus one and speculate that Richard Bruce Cheney wanted to transform a portion of the CIA into a domestic USA-TIA organization that would gather all information on everybody in the country and have it available under the sole control of the one office in government that was neither part of the Executive Branch nor part of Congress and as such categorically exempt from Congressional oversight, i.e. the 'Fourth Branch' OVP.

Which is to say the CIA turned into an electronic version of the STASI and reporting only to Cheney and Addington (with legal advice from John Yoo.) Sure it sounds crazy, but it is consistent with every bit of public information we have about the past Administration's policies and desires.

'Scientia est potentia': Knowledge is Power. Why yes it is, and a handy way to deliver an Arbitrary Executive with a Permanent Majority.

by cactus

The inimitable TBogg sums up one of the big arguments against having the gubmint involved in healthcare:

Because, when it's on the governments tab, innovation dries up, which might explain why our military men and women are currently fighting in Iraq and Afghanistan with pointy sticks and small but sharp-edged pebbles.

A few years ago I had a similar post, noting that when push comes to shove, such as when we have to deal with a formidable threat such as Nazi Germany, the Empire of Japan, the USSR, the People's Republic of China, or even Grenada (for crying out loud), we don't mess around and stick the gubmint, and in particular, perhaps the most socialist organization in the entire gov't (the US Military), in charge of the whole shebang. Funny that.

Back to TBogg's post... One of TBogg's readers, AirportCat, in comments, adds this quote from a Pew Research piece:

There also is common ground between the public and scientists regarding the pivotal role of government in funding scientific research. Government institutions and agencies are the dominant funders of research, according to scientists: 84% list a government entity as an important source of funding for their specialty, with nearly half specifically citing the National Institutes of Health (49%) or the National Science Foundation (47%). Half of the scientists (50%) cite non-government funding sources as among the most important in their field.

AirportCat goes on:

So all that government-funded medical science will just evaporate if … what? huh?

One more of his readers, jenniebee has this:

As a matter of fact, the only innovations I can think of that the insurance industry has come up with are in creative accounting, PR, & marketing. Gotta give it to them though, that rescission idea? That was pure genius.

________________________________
by cactus

by Bruce Webb

Over at TPM Justin Fox is launching a discussion of his new book The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street which feeds right into some discussions we have had here at Angry Bear. So I propose to give his set-up here and then suggest people comment in either or both places.

(But) a couple of seeming certainties that emerged from academic economics and finance in the 1960s and 1970s have been showed by experience to be mighty uncertain. One was the contention that financial market prices were in some fundamental sense correct, or at least fluctuated in a reasonably narrow band around their fundamental values. The other--and the two don't have to be linked, although they often were--was that it was relatively easy to model the movements of markets and manage the risks thereof.

If you believed these two things, then the spectacular growth in power of financial markets (at the expense of government, of corporations, of commercial banks) over the past three or four decades was great news. I'm pretty sure, in fact, that rational-market economic theories fueled this rise--although it's awfully difficult to sort out cause and effect.

Now that this financialized economy has proved to be extremely fragile, we're due for an extended period of rethinking--of financial economics, of regulation, of taxes, of how we think about economic growth (clearly, growth fueled purely by rising asset prices isn't such a great thing). I'm of the opinion that it's not as simple as, say, putting the regulators back in charge, given that there's no reason to think financial regulators are more likely to be rational and right than financial markets are. But clearly we can do better. Got any ideas?

(My TPM Cafe comment is reproduced under the fold.)

My take:
Well we might start by recognizing that market participants are intent on maximizing their own interest and where possible will exploit asymmetrical information to achieve that end. Moreover unless restrained they will also exploit power imbalances.

I think we would all be well served by having all economists study the way markets actually operated back in the Gilded Age. What happens to a market when insider trading is not only not illegal but valued as a best business practice? The old adage "What the market will bear" implies a lot more than a simple affair of supply and demand setting price, not when the vendor has the ability to control supply and influence demand.

And then after mastering the methods of Cornelius Vanderbilt they could move on back and study the history of wage setting in industrializing England from 1790 to say 1848. I am currently re-reading E.P. Thompson's 'Making of the English Working Class' and can say that the reality of the wage market in those years bears no resemblance to the sanitized market models found in text books. The notion that some Invisible Hand was busy adjusting compensation to marginal productivity is belied by facts on the ground, wage suppression was a national policy backed as necessary by the use of State force (see Peterloo Massacre).

I firmly believe that much of the problem with the classical liberal economic model is that it was formalized in a time and a place where political democracy based on universal suffrage was not only not the norm but conceived to be a positive danger to society at large. Give all workers and (shudder) women the vote and who knows what might happen. Well now we know, it gave Britain the Labour Party and the U.S. the New Deal and with them reverberations that shook old ideas about how markets should work to the core.

Caplan's book 'Myth of the Rational Voter' whose title I assume is at least an ironic inspiration to that of the book under discussion is I think at root the product of frustration. Don't the proles understand that everything was better back when the world was run by J.P. Morgan and a handful of associates?

It is no wonder that both the political and economic right look back at the McKinley Era for their ideal. No income tax, no universal suffrage in England, no popular election of Senators in the U.S., no insider trading rules, no restrictions on wage suppression. Now that is freedom!!

Prof. Thoma told me a few years ago that "Economics does not handle equity well". And after giving that some long thought I figured out why. Because classical economics does not handle popular democracy well. That is for some people in England everything was downhill after the Reform Act of 1832 with ultimate disaster delivered with Representation of the People Act of 1918, while in the U.S. it was the changes introduced with the 16th, 17th and 19th Amendments.

Damn democracy! Always screwing with this nicely designed business plan!

Robert Waldmann

It sure looks like the US economy would benefit from a second stimulus. However, it also looks clear that congress will not pass an optimal second stimulus. Getting my thoughts on economics and politics from a philosophy major, I note that Matthew Yglesias notes that it would be very hard for congress to say no to a tax cut only second stimulus.

So would a tax cut only second stimulus be better or worse than no second stimulus ?

Robert Waldmann

There is something which I genuinely don't understand about US journalism. Why don't US journalists cite Seymour Hersh more ? I have never heard anyone rank him as an investigative journalist lower than number one, yet his stories vanish for months or years until someone else reports them.

For example, yesterday the Wall Street Journal reported on page 1 that Cheney ordered the CIA to set up an assassination team to kill top al Qaeda leaders. This is sortof a scoop as people have been wondering what super secret program was hidden until late June not only from congress but from Leon Panetta, the director of the CIA.

Except for the fact that Hersh described this program months ago. The fact that he knew about a CIA program months before the director of the CIA tends to support his number 1 ranking of course.

But why didn't people including, say, Leon Panetta, pay more attention to Hersh.
Has he made inaccurate claims in the past ? His articles report claims by anonymous sources and are not supported by official documents. One might assume that, given that sort of evidence, he is often wrong. I can't recall a case in which he was wrong. I am almost forced to conclude that reliable investigative reporting is possible if one demands confirmation from multiple sources.

I am also forced to conclude that the very strong evidence about Mr Hersh based on his track record is being ignored by other reporters. This isn't really surprising, since admitting that Hersh reports at a level above everyone else is humiliating, but reporters shouldn't allow their pride to keep them from informing the public.

by cactus


We all know the Fed has been pumping money galore into the economy lately. It makes sense, after all – the economy sucks right now and will for the foreseeable near future. Even if the NBER concludes in a few months that the Great Recession ended in the first half of the year, we aren’t about to see a booming economy in the near future.

Another reason for the Fed to pump money into the system is the CPI – right now, deflation seems to be a bit more of a risk than inflation.

There’s also one very bad reason for the Fed to keep shoveling money out of the helicopter door: the mistaken but widely held belief that the system is suffering from a lack of liquidity. (The lack of liquidity belief is clearly false - as it happens – as Dean Baker has noted a zillion times, that lousy business models can’t get funding any more speaks to the demise of a particular widespread delusion rather than a lack of liquidity).

But here’s the problem. As is often the case, what we all know is false. Wrong. Bull$#%&. The Fed has not been pumping money into the economy lately, at least if you define lately as being “since December” and going through May, the last date for which data is publicly available in FRED, the Federal Reserve Economic Database maintained by the St. Louis Fed. Check out the following graph from FRED, which shows M1, the narrowest of the monetary aggregates, and the one most perfectly controlled by the Fed:



Regardless, the peak in the graph came in December. Its not unusual for the Fed to prime the pump in December – that’s the Christmas shopping season, after all... but the timing seems awful this year, what with the fact that the Fed only seemed to realize the economy was in major doo-doo toward the end of last year.

So during one of the lowest points for the US economy in decades, only the North Korean counterfeiting machine was doing anything to keep the money supply loose. I don’t have a copy of Bernanke’s textbook handy, but I’m pretty sure I’d remember if “let Kim Jong Il handle it” was the recommended prescription for dealing with a recession. It makes me wonder what other stupidity surprises Bernanke has in mind.
__________________________________
by cactus

by Tom aka Rusty Rustbelt

Battle of the (Senate) Titans

Senators Kennedy (Chairman of the Senate Health, Education, Labor and Pensions Committee) and Senator Dodd (Kennedy’s wingman while he fights cancer) are seemingly lined up as opposition forces to Senator Baucus (Chairman, Senate Finance Committee ) on some aspects of health care reform legislation. Various theories are evolving:

1) this is a real dispute
2) this is a clever ruse to allow a compromise that gives political cover to all types of Democrats
3) this is just some foreplay designed to allow Kennedy to be a hero one more time, while providing some serious cred to Baucus, a rising Senate power
4) some combination of #1 - #3

Any thoughts from my Democrat friends?

Kennedy and Dodd’s latest here.

by Linda Beale

This is one of those weeks when almost everything has a tax angle. Let's survey.

Michael Jackson's funeral

Should taxpayers have to foot the bill for the extra security surrounding celebrity memorial services? Does an estate get to deduct the costs of gala receptions connected with a memorial as part of the funeral?

International relations and UBS

The Swiss have announced that they may seize the 52,000 account records that UBS holds in Switzerland for what are likely many American tax cheats if the federal court in Florida orders the bank to turn them over in response to the government summons. I've already written about that on A Taxing Matter, here. This is a game of chicken, where either the US or UBS/Swizterland will blink. UBS has substantial assets in this country in connection with its banking license here. The US has jurisdiction over UBS for various reasons and UBS has already admitted to criminal violations and given up about 250 names. Looks like UBS clearly violated its qualified intermediary agreement with the US. If I were betting, I'd bet that the Swiss will be the ones to blink, if the US only has the backbone to stand firm.

Health Care Reform

Democrats are wrangling over how to pay for much needed health care reform. On the Senate side, they are apparently taking very seriously the proposal by Citizens for Tax Justice that the Medicare tax be extended to all types of unearned income, not just compensation. (This proposal, of course, has been around, and I've made it quite often myself. CTJ has a specific version, and provides state-by-state figures on what it would mean.) Obviously, since the top quintiles own most of the capital assets, this would be primarily a tax increase on them (resulting in a slight increase to the capital gains rate from 15% max for most types of gains to 16.45%).

Defense of Marriage Act

Back in the 1990s, Congress caved to the "values" lobby (i.e., the group that wants to impose its "values" on all the rest of us, and whines about having others' values imposed on it if it thinks anybody wants to do anything differently from the way it thinks they ought to want to do it) and passed the so-called "defense of marriage act" (DOMA). DOMA says the terms "spouse" and "married" in federal law can only refer to legal ties between a man and a woman --i.e., "traditional" marriage. Of course, there are lots of references to spouses and marriage in the Internal Revenue Code--spouses can transfer property to one another without tax. Spouses can receive alimony when they divorce. Spouses can file joint returns. Spouses can exclude medical benefits from their spouse's medical insurance. And etc. When DOMA was passed, no state permitted gay marriage. Now, several states do. And finally, one of them is challenging the law as unconstitutional (which, you won't be surprised, in my view it clearly is) because it "interferes with the Commonwealth's sovereign authority to define and regulate marriage" and "constitutes an overreaching and discriminatory federal law." See complaint; AG files first suit challenging DOMA, Mass. Lawyers Weekly, July 13, 2009. Good for Massachusetts.

Developers and tax-exempt bonds

A retirement community in Central Florida may owe millions in back taxes. The Villages is made up of "community development districts" that have been used to pay for roads, sewers and water lines that are essential to the developers' being able to sell their developments. The IRS examiner has concluded that $64 million of bonds issued in 2003 shouldn't have been entitled to tax exemption because the board members were all affiliated in one way or another with the developer, and the developer (an ardent Republican, natch) had gotten about $60 million from the district for golf courses and small parks that cost the developer less than $8 million to build. A pretty solid return, in a period of not so solid returns for people conducting their business without the aid of the US government. Other bonds are also being investigated. See Fineout, Florida Communities Pay Attention to a Tax Case, NY Times, July 10, 2009.

Banks, TARP purchases of toxic waste, derivatives regulation (or not)?

Obviously, the entire economy is impacted by the credit crunch and the huge amounts of money the federal government has put on the line for banks, including its plans for "partnerships" with private equity to buy up toxic waste, with the government standing to get a pittance of the up side (if there is any) but to lose most of the downside (which there will likely be a good deal of). Meanwhile, proposals for regulation of derivatives are tepid at best. "Standard" derivatives would be sort of regulated, but "exotic" ones (the ones, by the way, that have been customized to use in tax shelter deals, or to fool accounting regulators) won't be. You can create a customized derivative to do anything the standard one would do, so who would do a standard derivative if both options exist? (nobody) And why do banks need to be doing exotic derivatives in the first place? (they don't). Derivatives have been just one other way to manipulate tax burdens and get the right bundle of features at the right point to claim the right application of a particular part of the Code. Swap away the taxes. But here we are, letting banks continue without restructuring, aiding them with more US dollars on the line, and doing it in a way that allows big aid recipients in the bailout (like GE) to get bigger on more bailout-related dollars from the government, while continuing to engage in the same behavior as before. What part of this makes sense?

More tax shelter enablers biting the dust

This week, another of the BDO Seidman "tax solutions group" (that ended up being a euphemism for tax fraud promotional group) pled guilty to various charges in connection with the son of boss type deals done with defunct law firm Jenkins & Gilchrist. You can read all about that on A Taxing Matter here and more about the shelters and other cases, here and here. Will these guilty pleas help put a stop to the overzealous "tax minimization" norm. For a little while, I suspect. And then the race will be off again in a new cycle of tax shelters.

And being in Michigan, I can't leave out Ave Maria (hat tip to Paul Caron at Tax Prof)

Ave Maria Law School, a Catholic school founded and funded by Tom Monaghan (of Domino's Pizza wealth), is being moved lock, stock, barrel and faculty to a new city and campus in Florida. A number of tenured faculty objected to the apparent high-handed way in which Mr. Monaghan was able to control the school's decision making on the matter. They are no longer at the school and are contesting their termination. Monaghan claims that they are Catholic ministers and therefore the school is exempt from suit in civil court under the First Amendment religious protections. See Baldas, Ave Maria claims 'ecclesiastical abstention' over termination of three law professors, National Law Journal, July 9, 2009. As one commenter on the Tax Prof posting on this noted--so do the faculty take the ministerial housing allowance exclusion?

Enjoy, and have a great weekend.....

From Lenny Dyksytra's letter to friends about his bankruptcy filing yesterday:

William McKinley filed for protection while serving as Ohio's governor in 1893. He was in debt to the tune of $130,000 (an insurmountable sum in those days!) before some friends eventually helped to bail him out. Three years later, he occupied a desk in the Oval Office. [emphasis mine]

That seems much clearer than declaring you're "not a quitter" while wearing hip-waders while your lawyer claims your multimillion dollar book deal (and private fortune) aren't enough to deal with the cost of ethics charges against you.

Also, Jim Cramer may want to avoid Lenny for a while:

Ulysses S. Grant went bankrupt after leaving office when a partner in an investment-banking venture swindled him. (I can certainly identify with this one.) [emphasis mine]

Good thing Dykstra doesn't pretend to be an investment advisor.

Oh. Well, at least no one ever sang his praises in the mass media, right?

Oops.

Dykstra in 2012, on a platform of Fiscal Responsibility. "Returning to the Glory of the McKinley Era."

Seems as likely to work as anything else.

by Bruce Webb

In comments to his last post A Response to Megan McArdle, Again Cactus put the following up as a summary of the Economic Right's approach to tax cuts:
1. tax cuts mean people are encouraged to work harder
2. people work harder
3, growth

Another version of this was posted, without apparent irony, on a MY post on the soda tax. How to Think about Public Health Taxes (bolding mine but actually echoed when MY later quoted himself)

Think about the case for taxing income, via the income tax and FICA. Why do it? Well, to get the money. That’s how we finance Social Security, the Department of Defense, Medicare, interest payments on the national debt, Medicaid, federal aid to schools, veterans’ health care and benefits, the FBI, etc. Now what’s the case against taxing people’s income? Well, it’s that it discourages work and it discourages investment. And that’s bad for the economy. Now we go back and forth over whether any given expenditure has a value that outweighs the economic costs. Liberals, like me, tend to think that a relatively high level of expenditure is justified whereas folks on the right tend to disagree.

But that simply shows, and not for the first time that some of our progressive wunderkinden have simply internalized the central tenet of supply side voodoo, the idea that income taxes are a tax on work and capital gains taxes are a tax on investment, and that like proposed taxes on soda or existing taxes on liquor and gasoline the more you tax something the less people are inclined to expose themselves to that tax.

This I think is a profound misunderstanding of the psychology of work and investment. Those who care about why I would think that and those who are just dying to mock the whole idea can follow me below the fold.


Now there are some people who work just for the sake of work itself. In fact a lot of people will spend many hours on work that comes with no monetary compensation at all. We call these people 'hobbyists' and 'unpaid volunteers'. And I suppose if you taxed these people directly on their time there would be some tendency to reduce that time, or at least the time reported to the tax man. But most people do not approach work as some sort of dispensable hobby, instead work is the means to some other desired end whether that end be subsistance, or fame, or fortune with its attendant material objects, or in some cases simple sociality (e.g. some people live to organize office birthday parties). Mostly though people are one way or another working for the paycheck.

But even the paycheck amount is not an end in itself, at least not for everybody, and particularly not for those people who work outside the hyper-competitive world of Wall Street, not every clerk dreams of being office supervisor, not every framer dreams of being site superintendent. some times what you have is good enough.

And when we examine history we can see that in most times and most places this is the norm, sure there are always strivers and always some measure of economic mobility but particularly in largely pre-industrialized societies people tend to end up at some equilibrium. And that equilibrium point is mostly established by a desired level of consumption.

I first came across a formalized version of this in Chayanov's The Theory of Peasant Economy. I just now ran across a pretty good version of Chayanov's overall thesis here Russian History Encyclopedia: Peasant Economy

Perhaps the greatest theorist of the peasant economy was a Russian economist named Alexander Chayanov, who lived from 1888 to 1939. Chayanov published a book entitled Peasant Farm Organization, which postulated a theory of peasant economy with application for peasant economies beyond Russia. He argued that the laws of classical economics do not fit the peasant economy; in other words, production in a household was not based upon the profit motive or the ownership of the means of production, but rather by calculations made by households as consumers and workers. In modern terminology, the family satisfied rather than maximized profit.

According to Chayanov, the basic principle for understanding the peasant economy was the balance between the household member as a laborer and as a consumer. Peasant households and their members could either increase the number of hours they worked, or work more intensively, or sometimes both. The calculation made by households whether to work more or not was subjective, based upon an estimate of how much production was needed for survival (consumption) and how much was desired for investment to increase the family's productive potential. Those estimates were balanced against the unattractiveness of agricultural labor. Households sought to reach an equilibrium between production increases and the disutility of increased labor. In short, households increased their production as long as production gains outweighed the negative aspects of increased labor. This principle of labor production in the peasant economy led Chayanov to argue that the optimal size of the agricultural production unit varied according to the sector of production at a time the official policy of the Communist Party of the Soviet Union was pushing for large collective farms. As a result of this disagreement with Marxist economists and the Party line, Chayanov was arrested in 1930 and executed in 1939.

Chayanov came to his understanding not from a position of armchair theorist but by doing some serious data analysis of the surprisingly (to us) abundant documentation of peasant work life in Czarist Russia. And the result was that he found some very large divergences in work effort over the course of the standard peasant work-life with the peasant couple stepping up their work hours during some periods (for example while children are small and when setting up children with their own holdings) and then dialing it back.

Now even in the Peasant Economy there are strivers who undertake to raise their equilibrium point, your German 'kleinbauer' maybe wanting to rise to the status of 'bauer' and your 'bauer' to 'grossbauer', but equally the shift could go the other direction in any given generation, but the whole effort was not particularly driven by the profit motive but instead by the desired outcome.

Which is where supply siders get their psychology reversed. They see the income tax as a tax on work and as such a disincentive to work itself. Just as they see a tax on capital gains as a tax on capital and so a disincentive to invest. The historical reality generally shows the exact opposite, the higher the tax the more you have to work to achieve your desired consumption outcome, and similarly the same is true for investment, more tax means more intensification of investment activity. Now certainly there are limits to how far this process can go, if you tax labor output down to subsistence and sub-subsistence levels you risk your serfs and/or wage employees simply running away, and contrawise if you tax capital at rates up to 98% it is no wonder that the Beatles ran away from England as well. But there is no evidence that current levels of taxation are actually above the sweet spot where taxes mean more work and more capital investment rather than less.

Meaning we need to redraw that Laffer curve to include consumption equilbrium points for various income levels. If a person's current income is above his own personal equilibrium point he might well react to a tax cut by reducing his hours of work. If instead a tax increase takes him from above equilibrium to below he might react by increasing hours. And the same is true for the investor. If as a group a society's top 5% or top 1% are living large at current returns and rates, a tax cut might just lead to them commissioning artists or patronizing writers and scholars. Traditionally aristocracies have sought to reduce or eliminate their overall tax burdens, and it was not because they had a burning desire to spend every day working their fingers to the bone. Instead that tax exemption enabled them to maintain or even expand their consumption.

Supply side psychology treats 'work' and 'investment' as ends subject to direct incentives or disincentives from taxes. But historical reality shows they the are instead means to other ends that include such things as consumption and display. Calculating the impact on any given tax change on any given group requires some deeper understanding of the sociology involved among that group. History is full of instances where people scraped and scrapped behind the scenes simply to maintain appearances at Court or its socio-economic equivalent (think 'Sunday Go to Meeting Clothes' among the working classes).

How hard are you willing to work to keep that Bass Boat and the Lake Cabin even as the taxes on them are "killing you"? Are you really going to cut back your overtime in response to a tax increase if it means giving up your Season Ski Pass?

by divorced one like Bush

Well, well, well, seems our Robert will have some more thinking to do. Via C & L to Radamisto who want's to know if we have ADD or what comes the Bloomberg story that the money from money machine is being restarted.

Morgan Stanley plans to repackage a downgraded collateralized debt obligation backed by leveraged loans into new securities with AAA ratings in the first transaction of its kind, said two people familiar with the sale.

Morgan Stanley is selling $87.1 million of securities that it expects to receive top AAA ratings and $42.9 million of notes graded Baa2, the second-lowest investment grade by Moody’s Investors Service, according to marketing documents obtained by Bloomberg News. The bonds were created from Greywolf CLO I Ltd., a CDO arranged in January 2007 by Goldman Sachs Group Inc. and managed by Greywolf Capital Management LP, an investment firm based in Purchase, New York.

Gee, Morgan Stanley, Goldman Sachs? Two totally separate companies, just happen to be mentioned together implimenting the same strategic plans.

8/18/08 Morgan Stanley, Goldman link lending to their own creditworthiness

The Financial Times is reporting that Morgan Stanley is implementing systems that tie the prices of credit insurance on their own debt to their commitment to provide financing to their hedge fund clients. The shift would allow the bank to pull out from its funding commitments should it run into a crisis of confidence like that which wiped out Bear Stearns in only a matter of days. Goldman uses a similar arrangement that ties its lending commitments to the firm's own bond prices.

9/21/08
WASHINGTON (Associated Press) -

The Federal Reserve said Sunday it had granted a request by the country's last two major investment banks - Goldman Sachs and Morgan Stanley - to change their status to bank holding companies.
The decision means that the Goldman and Morgan Stanley will be able not only to set up commercial bank subsidiaries to take deposits, giving them a major resource base, but they will also have the same access as other commercial banks to the Fed's emergency loan program.

3/9/09 UPDATE 2-Barclays cuts price targets on Goldman, Morgan Stanley

March 9 (Reuters) - Barclays Capital cut its price targets on Goldman Sachs (GS.N: Quote, Profile, Research) and Morgan Stanley (MS.N: Quote, Profile, Research) and said it expects the former investment-banking giants to post losses for December, mostly due to asset markdowns, investment losses and "very subdued" core earnings.

5/19/09
Goldman Sachs and Morgan Stanley have formally asked the Federal Reserve for permission to repay a combined $20 billion in federal bailout money.

6/17/09 JPMorgan Chase, Morgan Stanley cut ties with government

In separate statements, Morgan Stanley and JPMorgan Chase said they will not issue bonds backed by the Federal Deposit Insurance Corp. The banks are striving to show they can raise funds without help from the government. Goldman Sachs and other financial institutions might follow suit.

Continuing the July 8, 2009 Bloomberg article:

A lot of banks and insurers “cannot buy anything but AAA,” said Sylvain Raynes, a principal at R&R Consulting in New York and co-author of “Elements of Structured Finance,” which is due to be published in November by Oxford University Press. “You’re manufacturing AAA out of not AAA, therefore allowing those people who have AAA written on their forehead to buy.”

While the Morgan Stanley deal is the first to involve CDOs of loans, banks have been doing the same with commercial mortgage-backed securities in recent weeks.

Jennifer Sala, a spokeswoman for Morgan Stanley, and Gregory Mount, a Greywolf partner, declined to comment.

Banks are using re-REMICs to protect against losses on residential-mortgage securities during the worst housing slump since the Great Depression...Re-REMIC stands for “resecuritizations of real estate mortgage investment conduits,” the formal name of mortgage bonds.

Nice to know We the People have their backs huh?

by cactus

Megan McArdle responds to a post I wrote:

So Obama doesn't count because he's not really a Democrat. But Bill Clinton was. But Richard Nixon--the chap who implemented price controls and massively expanded Social Security and Medicare--was definitely a Republican. Jimmy Carter, who deregulated like mad: definitely a Democrat.

What are these policies that neatly define Democrats to exclude only the ones who happen to have crappy growth? On what metric does Barack Obama register as farther to the right than Bill Clinton? Because from what I remember of the 1990s, I spent most of the decade listening to my genuinely left-wing friends weep that he'd betrayed them. Remember Edelman's resigning in protest of welfare reform?

I thought it was unnecessary at this point to explain the one thing I've pointed out time and again differentiates Republicans from Democrats. I think the first time was here. (I tend not to break out JFK from LBJ, or Nixon from Ford because JFK and Ford only served a short time, but the post that is attached is illustrative of behavior, not performance.)

The difference is the tax burden - that is, the percentage of people's income that gets collected in taxes. Not the marginal rate - the amount people actually pay divided by the amount they make. And there is a difference, a big difference. As an example: George Herbert Walker Bush famously raised marginal rates. It might have cost him an election. But GHW Bush also quietly lowered the tax burden. He did it through the people he appointed to the IRS, through the degree of compliance he sought, through the way his IRS interpreted existing rules and regulations and through how the body of tax rules and regulations changed while he was in office.

Going back to 1952 at least, every Democrat, every single one, has increased the tax burden. Every single Republican raised lowered [h/t Bruce Webb] them. The data in the attached post is from the IRS and goes back only to 1952, but one can wander over to the BEA's NIPA Table 2.1 and compute the tax burden ourselves with National Income data going back to 1929, and whaddaya know, the rule also works for Hoover, FDR, and Truman. Just barely for Truman... but then he is the exception on performance too, right?

Now, I doubt you could find a single person on the right of the political spectrum who would tell you that taxes don't affect economic growth. They all believe taxes affect growth. Of course, the story they tell is that cutting taxes produces faster economic growth. The fact is, however, the Presidents who cut tax burdens tended to produce slower economic growth than those who raised taxes. (I've discussed why in a number of other posts, and I don't feel like rehashing or looking for those posts now. I also note this isn't just true of Presidents. My fellow Angry Bear, Spencer, once pointed out that there are a lot of people out there who seem to think we'd all be better off if the country was Alabama than if it was Massachussetts.)

Unfortunately, tax burden data, like any other bit of real world data, fluctuates somewhat from year to year, so its really going to be a while before we know what direction they're really headed over O's administration. As in, several years. And most of us are impatient. So we'd like to have some leading indicators, so to speak, of what Obama is going to do, of where he's going to fall on the one R v. D divide that really matters. And right now, he's behaving like the folks who have cut tax burdens in the past. He's also talking like them. His bail-out is identical to GW's, and when he talks about taxes, it doesn't sound like Clinton, it sounds like GW. So its reasonable to wonder whether he's going to stick to the R v. D rule. And the next test coming up is healthcare; a D would be putting his political capital on the public option right now. An R wouldn't. What's it gonna be, we'll soon see.

More below the fold.

Now, in Megan's post, she refers to "Cactus and his merry band of madmen." I'm not sure the merry band of madmen over here truly have a leader, much less that I'm the one (Dan is the official grand poobah in charge of the blog, after all!!) but I'm guessing you aren't a part of that merry band of madmen if any of the following apply to you:

1. You do not believe that since 1929 at least, every single D has increased the tax burden and every single R has decreased the tax burden, despite the fact that the data shows precisely this, and despite the fact that it fits the caricature of Ds and Rs to a T, so to speak.
   
2. You do not believe that since 1929, Ds have generally outperformed Rs when it comes to real economic growth, despite the fact that the data shows precisely this.
   
3. You do not believe that administrations that cut the tax burden have also generally been the administrations that grew more rapidly, despite 1. and 2.
   
4. You do not believe that the tax burden could possibly have anything to do with growth.

If you do believe these things, if you believe what the data shows , I'm sorry to say but you're one of us, one of the merry band of madmen. On the other hand, if you fit these rules, there are a whole lot of folks out there, Megan McArdle included, who would consider you sane.

Curv3ball at The Poor Man warms the cockles of this Northeast Philadelphia native's heart.

Go Read the Whole Thing.

Gary Becker must be rolling over in his grave.

Robert Waldmann

The absolutely brilliant and almost reliably reasonable Kevin Drum quotes the very smart and usually reasonable Dan Drezner and writes

In a speech today in Russia, Barack Obama said that "the pursuit of power is no longer a zero-sum game." Dan Drezner isn't so sure:

If he had said, "The pursuit of prosperity is no longer a zero-sum game," I'd be fine with the passage. I still think power is a zero-sum concept, however. The two ideas are linked but hardly the same.

I suppose that's true. Even in a Thomas Barnett-ish world where all the big players gang up to police the world, it's prosperity and security that are positive sum, not raw power. Anyone care to try and come up with a counterexample?

Power is not at all a zero sum game. If different powers are united in one pair of hands, there isn't the same total power. Instead there is much more power.

Consider an obvious mild example. If there is a competitive market no one has power over me. If you refuse to sell to me, I just buy from someone else at the same price.
But if you are a monopolist I just can't get the product if you refuse to sell to me. If you have a monopoly on, say, water, I must beg you on bended knee or die of thirst. The total amount of power in the world is completely different if many many people have water or if only one does.

More generally the whole point of, say, the US constitution is to reduce total political power by dividing it. If the President, congress, the supreme court and the armed forces worked together, then together they would have absolute unlimited power. The US goverment had much more power over people in the US in 2006 than in 1996. That was what was so terrible about 2006.

If we take Obama literally, he is saying that he will cooperate with Putin to dominate the world which would be relatively free if they didn't cooperate. I trust he was lying. I really have no choice. If the quest for power ceases to be played as a roughly zero sum game, we will all be slaves.

What the hell is going on ? I think that Drezner and Drum are using "zero sum" to mean harsh, red in tooth and claw, not suited to utopian dreams. Their view is that cooperation can't make the outcome of the power game better for everyone. That doesn't mean that it can't make things worse for almost everyone.

Worse even than disagreeing with Drum, my argument is a clumsy verbose attempt to paraphrase an argument made by Hayek. Pro Hayek, contra Drum -- what is happening to me ?

Robert Waldmann

I almost feel I might disagree with Paul Krugman about international economics with imperfect competition. In particular Krugman confidently asserts that the wild swings in the the price of petroleum are the result of simple supply and demand curves (which are both extremely price inelastic so almost vertical) and not of speculation. He argues that speculation can only affect the spot market price via hoarding. Given supply and demand curves, the only way to affect the spot price is to take product off the market. This didn't happen during the period of increasing petroleum prices so it was peak oil not speculation.

Given supply and demand curves.

So what do we have to assume to get supply and demand curves ? After the jump I wonder.


update: Well that was quick. Rule number 1 never debate Paul Krugman. Rule number 2 when Krugman seems to be wrong, look at rule number 1.

Krugman has a new post on oil prices and speculation. He notes that this time the price increase is clearly being caused by speculation (which might be perfectly rational) as is shown by the build up of inventories of stored oil above the ground. This means that my theory (after the jump) about how speculation can affect oil prices without causing large inventories of oil above the ground is false unless I can explain what is different now compared to a year ago. This is possible (spare oil tankers not required for shipping are being used for storage) but does sound like special pleading.



To have supply and demand curves it is sufficient (but not necessary) that there be perfect competition. The fact is that some economists tend to accidentally assume perfect competition without thinking. Paul Krugman is not one of those economists and, besides, competition in the market for petroleum is very famously not perfect (remember OPEC ?).

It is also possible to derive a supply curve for a monopolist or for a Cournot oligopoly. To get a supply curve from a cartel one has to consider game theory, but I'd say OPEC can be considered to be Saudi Arabia plus free riders.

However, and crucially, the derivation assumes that the suppliers maximize the present value of revenues. Perfect competition is not needed, but rationality is.

Clearly the fact that Saudi Arabia has oil and wants other things can't imply anything including a supply curve. If they are total crazy fools they might do anything.

Also, importantly, under imperfect competition the cost of a small deviation from the optimal present value of revenue maximizing price is small squared. The cost of huge pricing errors is huge squared, but after decades of near price stability a boundedly rational non fool might have little idea about pricing as the costs of mistakes are tiny even calculated with the benefit of hind sight.

So how about this model. Saudi Arabia charges a spot price which is a simple function of the futures price and pumps enough to meet demand. They follow this rule unless they are pumping at capacity, in which case they charge a higher price, or less than half of capacity, in which case they charge a lower price.

The futures price would then feed right into the spot price so long as Saudi Arabia is pumping between half and full capacity.

The hoarding of oil is all under the Saudi desert.

The only difference between my model and Krugman's is that Krugman believes that Saudi Arabia has long been pumping all it can. True Saudi pumping capacity is, in fact, an unobservable variable. One can't tell if futures market speculation controls the spot price of petroleum without knowing how much oil Saudi Arabia can pump. They are telling us a number, but they are presumably lying so we just don't know.

by cactus


Megan McArdle Has a Question

Megan McArdle has a question:

What happens to the cottage industry among Democratic-leaning armchair economists grinding out analyses proving that Democratic presidents are, like, totally awesome for the economy? Presuming that we're stuck--as seem very likely--in at least a couple of years of really grinding low-to-no growth, Obama is going to destroy their figures. Are we in for a resurgence of belief in exogenous growth factors?

Given my co-author and I will have a book out next year that McArdle and her readers would consider "analyses proving that Democratic presidents are, like, totally awesome for the economy" I figure I'm qualified to respond. (BTW - regular readers of this blog know how hard I have tried to get across the not so subtle and one would think completely obvious point that if one band of sorry oafchucks is less bad for the economy than the other band of sorry oafchucks, that doesn't in any way imply that the less sorry oafchucks "are, like, totally awesome.")

So here's my response: it depends on the motivations of those Democratic-leaning armchair economists, doesn't it? The right is not the only side with its Mankiws and its Sowells. There are plenty of those on the left too, and they're no different than their right wing counterparts. They believe that a (D) following some politician's name is short-hand for "that human being is somehow laudable."

But there are others who believe that a (D) is short-hand for something else, namely that the politician generally hews a bit more closely to a particular set of policies that have worked a little better than the policies adhered to by people who have an (R) after their name. Its not a guarantee of performance.


I have noticed that many people who take the second approach have been criticizing Obama's approach even before he took office. I for one have posted (over and over and over) on the folly of bailing out the financial institutions that have caused this mess (since when is taking from the poor and middle class and sending to the fabulously wealthy compatible with the policies that generally define Democrats?), and I've had a few posts noting that Christina Romer was a very poor choice for CEA chair (Mankiw's endorsement alone should have been a tip-off even to someone who never read her "narrative economic history" paper).

Sure, exogenous factors do matter. Truman was a Democrat, but the economy was awful for the first few years of his administration; transitioning from WW2 to a peacetime economy ain't easy. And it sucked in 1933 too, which was FDR's first year. This despite the fact that annualized, real GDP per capita grew much faster under FDR than any other President over the time period for which the BEA computed GDP, even leaving out the War years. Which also indicates something else - the economy might still turn out alright despite the many Obama mis-steps. Time will tell.

But there are a few other things - for one, you don't have only one (R) or (D) administration to look at. You have probability and statistics. (And to forestall the point that inevitably gets brought up again and again and again and again, that's what degrees of freedom are for.)

And while no theory is perfect, the better ones require fewer exceptions. If Obama starts acting like a Democrat and the economy still sucks by the end of his term, that means Democrats have to explain away Obama and Truman. Republicans still have to explain why Republicans generally do so much worse when it comes to real GDP per capita growth rates. The BEA has only been calculating real GDP per capita since 1929, and yet the best performing Republican, Reagan, is beat out by four Democrats, and all but one of the entire bottom half of the sample is taken up by Republicans. Tip to Megan McArdle: nobody can tell you for sure who's going to win next year's World Cup in South Africa, but betting on Grenada to pull it off is a bad idea.

And then there's the question that McArdle herself keeps bringing up - the mechanism. The mechanism doesn't apply if you don't have the right inputs. As I noted above, Obama has not yet behaved like a Democrat; his policies on the bail-out have been essentially the same as those of his predecessor who most certainly was no Democrat.

So in the end, here's what I say to Megan McArdle: ask your question again when Obama starts doing things a Democrat would do. Pushing through the "public option" on a healthcare would be a start.

Andrew Samwick states the obvious, clearly and well:

I think we are now 18 months behind where we should be in moving forward with sensible government spending plans. We should have pulled the fiscal policy ripcord in January 2008 with a public investment plan designed to repair our aging infrastructure. I'd rather have the 18 months back -- as would the millions of unemployed workers who could have been collecting a paycheck if we had started sooner -- but the proper course of action today is the same as it was then.

You know what's coming next, don't you?

Credit crunch, followed by asset deflation.

See also Robert's series of essays in December/January.

Gary Farber lays out the details of who the real "silent majority" were in the Nixon Administration's approach to Viet Nam, using Nixon's own words.

Such as this, from 20 January 1973—two years and three months before the ultimate U.S. withdrawal:

Nixon realized that the Communists were going to win in Vietnam. "I look at the tide of history out there," he said in the Oval Office, "South Vietnam probably can never even survive anyway."

Go read the whole thing.

by cactus

In Defense of Sarah Palin

I don't know what Sara Palin's plans are, nor do I know precisely why she resigned. If I had to guess, there's a scandal waiting to erupt. Perhaps not - she isn't leaving her job for several more weeks, and if a scandal is about to erupt, she might not be out of the limelight in time.

But be that as it may, whatever her reasons, I think Palin is doing the right thing. She's become something of a laughingstock to much of the country. More importantly, to her constituents, she's gotten herself embroiled in a number of scandals and her approval rating has started to drop (though she's still above 50% from what I can tell) and her effectiveness is starting to drop. At some point, the naif who came to the capital city and got some stuff that obviously needed getting done but that only an outsider would do mantle fades away to be replaced by "holy $#%^, we're governed by a nincompoop." Leaving now, she gets out the door before that transition is accomplished in the minds of many Alaskans and she may be remembered fondly going forward.

That rarely happens in public life. More common is the model followed by our illustrious recently retired President. He accomplished his main goal early - cutting taxes. It didn't accomplish what he had in mind, of course:

The President’s plan will accelerate this trend to record rates by retiring an historic $2 trillion in debt over the next 10 years. Under the President’s budget, the national debt will be only seven percent of Gross Domestic Product (GDP) in 2011, its lowest share in more than 80 years. (See Chart 1–1.)
Indeed, the President’s Budget pays down the debt so aggressively that it runs into an unusual problem—its annual surpluses begin to outstrip the amount of maturing debt starting in 2007. This means that the United States will be effectively unable to retire any more debt than what is assumed in the Administration’s Budget over the next 10 years—the President achieves ‘‘maximum possible debt retirement’’ in his budget.

And the longer he stuck around, the more failures he accumulated... nobody said anything about turning over Iraq to kleptocrats or Afghanistan to fanatics, the jobs we were promised never came about, the ownership society turned out to be a joke, and the so-called comprehensive energy policy we were going to have turned out to be pretty good for Exxon, but not so much for the rest of us.

But there was a sweet spot - somewhere around 2003 or at most 2004 when his popularity was still high, when his accomplishments still hadn't fallen apart - had he resigned at that point, he'd be remembered fondly. And it would have been the patriotic thing to do; if he had managed to noodle out that he was way over his head (despite the fact that the more oblivious believers would still be talking Mount Rushmore for a few years to come) and put someone else in charge, the country would probably have been better off. But he stayed on past the point where even some of the folks not bright enough to avoid soiling themselves through the National Review had realized he was a disaster. By doing so, GW dishonored the Office of the President. Had he quit before that, things would be very different. He would have left a message to posterity that it is better to walk away than continue to inflict his incompetence upon the nation.


That would have been an act of greatness.

But its not just morons who have such a historic opportunity. Carter was generally regarded as a smart guy, and he accomplished some positive things while in office, but after a few years, it was fairly clear he simply wasn't up to the job. He should have been smart enough and patriotic enough to step aside. Nixon was another smart guy, and he too had some early accomplishments, but he was also out of his league; had he resigned for that reason, rather than as a result of Watergate, we'd remember him well today, despite the economic disaster he spawned.

Unfortunately, we haven't had enough Presidents who are humble enough to admit they are out of their league and patriotic enough to walk away on their terms. LBJ came close; he achieved a lot in 5 years - the fastest annualized growth in real GDP per capita of any President since FDR, the Great Society, cutting poverty significantly, moving Civil Rights forward, etc., but he simply could not solve Vietnam, and the economy was starting to strain. LBJ could have run once more, and perhaps he could have won, but he was done.

Of course, it isn't just Presidents who can't come out and admit their incompetence; we have no shortage of imbeciles running everything from big corporations to school boards. So here's to Sarah Palin, who had the strength, for whatever reason, to tell her constituents they'd be better off if she gave up the top spot to someone else.
_________________________

by cactus

rdan

After looking at Spencer's charts on job loss for the month, and the decrease in hours worked in a week I felt bad. However,the WSJ announces that:

Business is back on Wall Street. If the good times continue to roll, lofty pay packages may be set for a comeback as well.

Based on analysts' earnings forecasts for 2009, Goldman Sachs Group Inc. is on track to pay out as much as $20 billion this year, or about $700,000 per employee. That would be nearly double the firm's $363,000 average last year, and slightly higher than the $661,000 for the average Goldman employee in fiscal 2007, according to analyst estimates reviewed by The Wall Street Journal.

Rolling Stones's Matt Taibbi discusses Goldman Sachs Group Inc. influence and apparent ability to profit from a variety of situations. It also does not take a 'conspiracy' to accomplish...(hat tip MG) .

A fine American tradition continues. No false modesty there. How did they do that?

by Bruce Webb

The blogosphere is alive with news that Joe implicitly green-lighted an Israeli attack on Iran. Well I had my say here and there. I just want to share a map from Cordesman and Toukan's Study on a Possible Israeli Strike on Iran’s Nuclear Development Facilities in part because it tells its own story. Plus it's pretty damn cool looking.

"
Gosh if a 'sovereign' Israel just decides to bomb Iran who could possibly blame the U.S.? It is not like we totally control Iraqi air space.

Oh wait.

Israel cannot attack Iran without material assistance from the U.S. which at a minimum means refueling assistance and emergency landing fields. Full stop.

Update 2. Well the map apparently didn't tell the whole story. So here is Cordesman and Toukman's 'Mission Analysis'. Note the mismatch between refueling requirements and actual refueling planes in the Israeli fleet. Note too that the analysis assumes zero effectiveness among Iranian Air and Ground Defense. Iranian pilots may be as bad as Buff assumes, but I don't think we can say the same thing about Iran's large supply of Soviet built surface to air missiles.


(update- JS Kit doesn't recognize my phone. So I will respond to comments here

The Sunday Times (UK) released a very short report based on a supposed secret briefing by Mossad to Netanyahu about some clearance by Saudi Arabia. The only source actually named in the story is John Bolton and considering the J Post/Sunday Times/Murdoch/AIPAC nexus I am waiting for some more authoritative sourcing. For example Haaretz is today reporting an official government denial.

As for the Eitan it is an unmanned turbo-prop more designed for surveilance than bombing hardened targets with its negligible payload. It would be shot down the instant it went under 20000 feet. At 40000 ft it is practically untouchable. Then again so was the U-2-we thought.

By Spencer,

Every month the various economic indicators are released and various people comment on them-- usually in isolation.

So I thought it would be informative to look at some of the key releases since the December, 2007 peak together. As the chart shows, industrial production and real imports have fallen much more than real retail sales.




At least my first reaction to this chart would be to think that this combination should generate a major decline in the I/S ratio. But, as the second chart shows all the sharp drop in industrial production and collapse in real imports has done is to keep the I/S ratio from continuing to deteriorate. The I/S ratio is barely below its cyclical peak. The normal cyclical pattern is for the I/S ratio peak to coincide with a bottoming and strong rebound in consumer spending. Consequently, the I/S ratio normally improves as much or more because sales are rising as inventories are falling. But this cycle sales are just bottoming and not rising sharply --partially because of the rebound in savings. So further improvements in the I/S ratio is likely to require continued declines in industrial production and real imports.

From the coolest possibly-corporate-espionage story of the week:

If only the FBI were to tackle cases of national security and loss of life with the same speed and precision as they confront presumed high-frequency program trading industrial espionage cases... especially those that allegedly involve Goldman Sachs.

The original is from Reuters.

rdan

Pentagon's list shows 865 military bases worldwide, plus bases in Iraq and Afghanistan. There is current funding to build a giant fortress in Islamabad, Pakistan on the order of the 'embassy' in Iraq to the tune of 785 million USD (corrected number..rdan) (cost overuns excluded but guanteed so perhaps about 1 billion USD). The US spends about 102 billion/year USD on maintaining bases throughout the world.

Could someone explain to me the rational for this kind of military base/embassy? How does it accomplish whatever goals it is designed for?

by reader Denis
(lots of links)

Me: $1.2 million is the average income for top 1 percentile households (2006 figure). You must have made at least a couple of million last year, right? I mean you are a doctor – and you are with Columbia Presbyterian hospital.

Doctor Levine: “[Laughs].”

Me: You mean that the 15% of share of income (correction from GDP) that slipped out of the pockets of bottom 90 percentile earners and into the buckets of top 1 percentile earners over the past few decades slipped right past you doctors?

Doctor Levine: “[Smiles ruefully].”

Me: Still, with the US having 135% of the per capita GDP of comparable modern economies we should no trouble devoting 15% of GDP [.15 X 1.35 = .2025] to health care, right (note parallel with 15% of income shifted to pockets of folks who earn lots more than doctors)? Unless we have too deeply gutted much of our workforce’s pay – with something like 30% of families living below the poverty line.

A plausible poverty line for a family of three (on the "minimum needs" table on p.44 of the 2001 book Raise the Floor) is $33,345 in 2008 dollars -- if health care is otherwise covered(not the $20,000 government calculation based on three times the price of an emergency diet – premiums alone exceed $12,000 yr.!). If you look at the Census, median family income is about $62,000. The real minimum needs line would hover somewhere around 37 percentile – 37 percentile if we didn't count families with paid health insurance. Knock off 7 points (guesstimate) for families on the top end with paid insurance (not those on the bottom with Medicaid) and we can reckon – it turns out very reliably -- about 30% of American families’ incomes are below minimum needs without government helps like food stamps.

Sounds like a quarter of the country must be earning less than the minimum wage or something equally crazy, right? Nearly a quarter of the workforce is earning less than the minimum wage – if we are talking about Lyndon Johnson’s 1968 minimum wage of $10/hr [$1.60/hr adjusted] – back when average income was half today’s. (FYI, tech improvement, like how much better today’s Timex is, generally not counted in inflation estimates.)

Doctor Levine: “How can something like this happen; why can’t we straighten it out?”

We can straighten out our labor market any time we wish – nothing like this happens anywhere else in the first-world. Simply institute the same labor market structure in place in virtually every modern economy (and many not so modern like Argentina and Indonesia): sector-wide labor agreements – wherein everybody with the same job description within the same locale works under identical collectively bargained terms with all the different firms – legislation required. [Note: check out French-Canadian “lite” version.]

Medical Doctor (not psychiatrist) Levine: What is holding back our big wig progressives from pushing – or at least mentioning out loud – such apparently badly needed and promisingly efficacious labor market changes?

Me: Something I call “pack check.” Males instinctively check in with what everybody else is thinking on any economic or political – or metaphorical “hunting pack” -- issue. And as long as they stay fix-focused on what everybody else is thinking it can seem impossible to them to make headway in an entirely new policy direction: so many different people require so many different approaches – and whom did we ever convert before with our most reasonable (we thought) arguments. Impostavazoo!

Sociobiology time – my lay opinion anyway: chasing wild pigs (what human males evolved doing) required a kind of perfect awareness of what every other hunting pack member was doing (pigs, as anyone who owns one can tell you, are not stupid) – was an essential survival mechanism. Without awareness of the need to break free from this innate focus-on-everybody-else’s-focus, at least for short breaks, all the economic male geeks in all the world may never initiate any new solution to the uniquely lop-side bargaining power ruining the American labor market – nor anything else – no matter how obviously practical, no matter how desperately (!) needed.

Human males are not so much pig headed as we are “pig-chase” headed.

Doctor Levine: “[Makes excuse; finally escapes].”

By: Divorced one like Bush

This is a heads up. Fox news has a report out that there is a rise in private insurance activity in Canada. The article suggests that it is because of all the wait time that people are tired of do to a shortage of doctors and possibly the low fees. And, that may be true, especially being there was a Quebec Supreme Court ruling on it.

If you google the headline, you will find many a posting touting this article as a sort of proof that the Canadian system really is bad stuff.

But, and with Fox there is always a butt, what they do not tell you is that their article is based on a report in the CMAJ – JAMC article from 2008: Canada Health Act breaches are being ignored, pro-medicare groups charge

Private for-profit medical clinics are proliferating across the country, according to a detailed report by pro-medicare groups.
The number of such clinics has increased significantly over the past 5 years and there's evidence "to suspect that 89 for-profit clinics in 5 provinces appear to be in breach of the Canada Health Act," states the 169-page Eroding Public Medicare: Lessons and Consequences of For-Profit Health Care Across Canada report.
But federal and provincial officials "have fallen down in their responsibility to protect patients against extra billing and 2-tier care," says report author Natalie Mehra, director of the Ontario Health Coalition.

The Fox article quotes the same Natalie, but not those quotes.

The CMAJ article continues:

Researchers also found evidence of physicians practising in hospitals but referring patients to their private for-profit businesses, where medically necessary services would be provided more quickly, for an out-of-pocket fee...

So, some illegal stuff is going on (boom in private activity), the government was suppose to do something about it, but it didn't. Can you say “conservative, Milton Freedmon governance”?

Continuing:

In 1995, then-federal health minister Diane Marleau issued a policy interpretation letter calling on provinces to introduce “regulatory frameworks” to govern the operation of private clinics, and make illegal the “facility fees” charged by private clinics which provide publicly-insured services.

Basically as I read the real article, the boom is actually starting to create what we have here in the USA. A two class society regarding health care access with rising expenditures as doc's have the market opportunity to charge more via cash deals. Kind of a black market situation? Is the solution to be more like us, or is the solution to solve the bottle neck of not enough doctors? Or maybe the problem is that once you let people who can pay for them self do so (choice?), you begin the destruction of what was a system that treated everyone equally. That is, for a basic human need such as health care, everyone is of the same stature.

We have a great opportunity here with Canada. What happened in our banking system is what has happened to Canada's health care funding system. Same ideology implimented, same distruction for the benefit of the few.

We are seeing the effects of what happens when the ideology of individual freedom is made predominat in an economic system that assured equality regarding basic needs. That is the key: Basic Needs. Not wants, not money beyond autonomous consumption, but money at autonomous consumption. It is libertarian economics vs Jefferson democracy economics. Personal economic freedom for needs funnels down the benefits of human progress to fewer people instead of expanding the benefits to every more people.

There was one letter responding to the CMAJ article. An open letter to the minister of healthPaul C. Hébert, MD MHSc, Editor-in-Chief

After more than a decade, the health system has not fully recovered from the last round of federal cuts in the mid-1990s. The large reduction of about 10% in federal funding for health forced provincial governments to axe many health care programs, close some hospitals and reduce the number of beds in the remaining institutions, as well as slash training positions for physicians and other health care providers... Provincial governments have become much more autonomous and, in many instances, unwilling to adopt new programs and standards in the interest of all Canadians. The ongoing jurisdictional battle between federal and provincial governments, whether over First Nations health, public health, access to care and expensive medications or the setting of national standards, suggests that the federal government has little influence on Canada’s health systems. The ability of the provinces to offer private services1 and mount administrative barriers to portability of services without consequences is a constant reminder of this weakened federal authority...Canada’s health care systems seem to be moving further and further away from fulfilling the promise of the Canada Health Act.

The reason for limited progress is an erosion of national leadership in health. Successive federal governments have either decreased investments or, through inaction, allowed health to be a purely provincial matter. Despite the importance of health in the minds of the voting public, we remain very concerned that health has slipped entirely off the federal agenda.

Get it? What is actually happening in Canada is the results of the Grover Norquist training manual for conservative governance, the goal of which is the drowning of anything that suggests a social conscience.

rdan

Tax advantaged "sale-leasebacks" with strapped-for-cash municipalities (SILOs, in the ever-present tax acronym set) came back to light when the Washington Metro train crashed a week ago. The cars were ones that were involved in the metro authority's SILO deals with various banks, and the authority didn't have any spare cash left to fund replacements. See this A Taxing Matter posting on the Metro SILOs, Jun 25, 2009.

I won't rehash the entire discussion of SILOs covered there. Just note that the transit SILO deals were contrived to permit banks to "buy" the federal income tax depreciation deductions on municipal equipment. The municipalites couldn't use the deductions, since municipalities are tax-exempt entities. The buying corporations were subject to US tax (usually, a bank) and they were looking for every way possible to avoid paying tax--they would essentially pay a fee to the municipalities, sharing part of their tax savings, for serving as an accommodation party in these deals. They "purchased" the municipalities' property with nonrecourse debt, and then had "lease income" that was offset by both interest deductions and depreciation deductions, generating artificial losses from the accelerated depreciation. Most of the purchase price was set aside to defease the seller's obligation under the lease, with the excess the fee for accommodating the tax shelter.

Jim Lehrer covered transit agency SILOs in the March NewsHour, depicting many of the transit agencies as motivated by their desperate need for capital--and encouraged by the federal Dept. of Transportation to use these means to get some. So there is a vicious double circle of irony here, that as states and localities cut taxes during the GOP years, under the flawed assumption that lower taxes means higher revenues, the states and municipalities also cut back on the funding needed by these important public service agencies, and an arm of the federal government encouraged these transit agencies to enter these deals, and at least 30 of them did, serving as accommodation parties in tax shelter deals with banks, so that banks would pay even less taxes than they already did.

Future SILOs were generally undone by new section 470, one of the few revenue raising provisions in the 2004 tax act. (The 2004 Act otherwise amounted to a pile of tax breaks for US corporations, such as the rate cut on repatriating offshore profits. It was misleadingly labeled the "American Jobs Creation Act" to signal the purported justification for all the corporate tax breaks. It didn't lead to the creation of many jobs.) The new section disallowed to U.S. taxpayers a "tax-exempt loss", defined as the excess of deductions other than interest and interest deductions allocable to tax exempt use property over the aggregate income from the property. Exceptions allowed certain "true" leases--essentially, ones in which the obligation of the seller-renter had not been defeased by the payment from the buyer and where the buyer had actually put some equity into the deal (the provision requires only 20% of genuine, at-risk equity). There are fewer tax benefits to true leases, so even with the exception, the provision deters leasing deals.

One hitch--the act only applied prospectively, and the transit deals (just one of the varieties of SILOs that were being done at the time of the 2004 change) got special treatment, in that any deals in the pipeline were allowed to be grandfathered in as long as they were done by 2006!

The IRS pursued the old deals with pre-2004 Act tools and won SILO (and LILO--the earlier "lease in, lease out" deals) cases against Fifth Third Bank, BB&T, PNC and other banks. See, e.g., IRS Wins AWG SILO Tax Shelter Case, TaxProf Blog (May 28, 2008) (dealing with the Ohio court's decision in 2008-1 USTC 50,370, in favor of the IRS in a SILO case involving two US national banks' "purchase", with nonrecourse loans from German banks whose proceeds were used by the "seller" to defease the lease obligation, of a German waste facility used to acquire beneficial tax deductions); Ohio Judge Rejects Tax Claims on $423 Million Alleged Purchase of German Facility Made by Cleveland & Pittsburgh-Based Banks, DOJ (May 30, 2008); DOJ, Ohio Jury Finds Cincinnati-based Bank not Entitled to $5.6 Million Tax Refund (LILO transctions); BB&T Corp, 2008-1 USTC 50,306 (4th Cir.) (striking down tax treatment of financial service company's lease of Swedish wood-pulp manufacturing equipment as a LILO shelter); DOJ, Statement of Assistant Attorney General Nathan J. Hochman on Today's Decision in BB&T Corporation v. United States (Apr. 29, 2008).

After the court victories, the IRS offered a SILO settlement for these deals that permitted them to keep 20% of their claimed tax losses and waived the penalties, if they terminated the transactions. IRS Commissioner's Remarks Regarding LILO/SILO Settlement Initiative (Aug. 6, 2008); Donmoyer, IRS Offers to Settle 45 leasing Tax-Shelter Disputes, Bloomberg.com (Aug. 6, 2008); Service Launces LILO, SILO Settlement Initiative, J. Acct. (Oct. 13, 2008). It later announced that "hundreds of taxpayers settled similar cases involving tens of billions of dollars." DOJ, Justice Department Highlights FY 2008 Tax Enforcement Results (Apr. 13, 2009). On leaving office, Korb statedthat "taxpayers representing over 80 percent of the dollars involved have elected to take advantage of the settlement initiative." See Korb Interview. (Dec. 19, 2008).

The settlement offer required taxpayers to terminate the transactions by Dec. 31, 2008, else they would be deemed terminated by that date, with taxpayers still able to claim the partial loss benefit through the actual termination date if they terminated the transaction by Dec. 31, 2010. That's a fairly strong incentive for termination, but the municipalities may be on the hook for hefty termination payments under their contracts. Even worse, the AIG situation provided a perfect trigger for causing a technical default to apply. AIG guaranteed these deals, so when its credit rating went down, the transit agencies are in technical default and liable for hefty penalty payments. (see NewsHour video, above).

There are real problems here, including the idea of one agency of the government supporting its "clients" (transit agents of municipalities) entering into deals like this that result in corporate tax cheats robbing the government of important revenues. Another problem is the idea of the banks that were instrumental in causing the fiscal crisis--by risky, speculative behavior that disregarded the systemic risks--using AIG's collapse because of that fiscal mess as an excuse to get municipalities that are especially cash-strapped because of the fiscal crisis (and finding their ability to borrow or get tax revenues severely restricted) to pay over large penalty amounts under their shelter contracts. It seems like an unfair windfall for tax cheating Big Banks at the cost of the people.

And of course, just extending the 2004 provision to make grandfathered SILO/LILO transactions illegitimate and their tax deductions disallowed doesn't solve this problem, since these are windfalls that the tax cheaters would get under their "lease" contracts.

Rep. Menendez of NJ has proposed a potential solution--the "Close the SILO/LILO Loophole Act" S. 1341, introduced in late June. His bill, he says, would "help protect WMATA and other transit agencies who are being threatened by banks seeking to gain a windfall from the current economic climate while potentially putting transit agencies at risk." See press release, As Lease-Back Deals Are Raaised as an Issue in Metro Crash, Menendez Says legislation Can help Unwind Deals, PolitickerNJ.com (Jun 26, 2009); Davis, Bill Would Tax Banks that Sue Agencies , Star Ledger (Jun 24, 2009); Letter from Menendez to Hoyer (Jun 26, 2009) (noting a need to "protect transit agencies from banks who are seeking to exploit a technicality that would result in agencies having to pay banks millions of dollars that could otherwise be used to shore up equipment and ensure safe operations, even though they have not missed a single payment to the bank"). The bill imposes an excise tax equal to 100% of any "ineligible amount" collected by "any person other than a SILO/LILO lessee" as a party to a SILO/LILO transaction. Ineligible amounts are proceeds from terminations, rescissions, or remedial actions in excess of those under defeasance arrangements. The bill also would deny deductions for attorney fees and other costs attributable to seeking to recover ineligible amounts.

It's messy, but it does end up with the right results, it seems. I note, though, that there are no additional co-sponsors at this time. Doesn't look like Congress is hopping on the bandwagon.

Given that Kajagoogoo is reforming this year, that is the only possible conclusion from this so far best reaction to the news out of Alaska.

The right is having a lot of fun commenting about the economic forecast by the Obama team being too optimistic.




I guess they are right, Obama along with everyone else has massively underestimated the damage Team Bush did to our economy.

by Bruce Webb

I haven't gone through the text or the numbers, make of this what you will. But at least we can start with some actual numbers attached.
McClatchy: Kennedy-Dodd unveil cheaper health care bill

Bill Text: SHORTTITLE.—This Act may be cited as the ‘‘Affordable Health Choices Act"

CBO Score


Excerpts and updates may be added under the fold as discussion goes on.

Note 1: Read these tables with care! Page 1 compares currently non-elderly insured to projected non-elderly insured. This is how you end up with 97% of Americans with insurance in 2019 even as that drops to only 90% for non-elderly American citizens. 21 34 million uninsured still seems too high to me but as footnote 'd' indicates this includes people eligible for but not enrolled in Medicaid.
"

rdan

Money Central presents a dilemma for shareholders in goods and services:

The old notion that profitable companies with good growth prospects should have rising share prices -- and that failures like GM should be gone, or at least trading in the pennies -- is history.

Today, a hedge fund investing billions using a quantitative formula can stall a stock; a couple of hedge funds aligned can turn a profitable company into a Dow laggard. Toss in a few short sellers and you have the great Wall Street collapse of September 2008.

It wasn't always this way. Before the machines and the shorts took over Wall Street, stocks were evaluated by an underlying company's prospects. Buy-and-hold investing ruled the day. Investors such as Warren Buffett and Bill Miller were the models.

Those fellows are a far cry from this generation's masters of the universe. Traders are in charge now. They rule the market. They dominate volume. That stock you bought because you thought the company was in good shape? It's a pawn in the hands of a computer model or some supertrader like Steven Cohen at SAC Capital Partners or Bridgewater Associates' Ray Dalio.

To move a security, they don't need to own it. They can have a short position. They can put an order to sell 1 million shares in a dark pool, those anonymous marketplaces that operate outside the walls of the exchanges. They can own options or futures contracts. Buy enough GM puts and watch the price begin to fall under the pressure.

Obvious, but plays havoc with the investing side of the tax cut and savings equation meme.

rdan

Seeking Alpha notes a Supreme Court ruling on federal pre-emption of state regulation of banks. Google on Angry Bear OCC for posts on the issue.

In a surprising 5-4 vote, the Supreme Court ruled that national banks are still subject to the laws of the states they operate in. What made the ruling unusual is that Justice Scalia wrote the opinion and the other four conservative judges were in dissent (Roberts, Thomas, Alito and the normal swing vote Kennedy).

The ruling overturned an appeals court ruling that said that state attorneys general cannot investigate banks if they operate in more than one state.

The case in question involved the enforcement of fair lending laws in N.Y. State, specifically allegations that some banks were charging minorities higher interest rates. Instead, even though these are state laws, the appeals court had said that only the Office of the Comptroller of the Currency (OCC) had the power to investigate. In practice, this means that the laws were null and void, since the OCC has a lousy track record on such issues.

Enforcing state laws is simply not a priority for a division of the Treasury Department. While clearly there can be a problem if multiple agencies have jurisdiction in regulation, allowing things to slip through the cracks, there can also be problems when there is only one regulator and that regulator is in the pocket of the regulated. It is harder to capture all 50 state attorneys general and the OCC, than it is just the OCC alone. Make no mistake, the head of the OCC, John Dugan, a holdover from the last administration, is very much a creature of the big banks he is supposed to be overseeing. The OCC ranks just behind the OTS in being an ineffectual regulator during the bubble.

While the state attorneys general will not be able to issue subpoenas on their own authority (they need approval from a state judge), it does mean that they do not have to sit on their hands if they think the banks are breaking the law. It also will mean a more fair application of the law.

Update: Remember that John Dugan is the regulator who insisted it was the job of banks to validate their own risk models.

After my previous posts on Georgia, it seems only fair to note the bank closings in Illinois today.

There have been 13 bank closings posted (as of right now, about 6:50pm) in the state of Illinois since last March. That alone is significant—but, even more interesting, six of them occurred today. This exceeds the previous record for a state, Georgia's five last week.

Three (in Elizabeth, Oregon, and Danville) are in the NW part of the state. The other three are located near Chicago (Worth, in Cook County), Urbana (Clinton), and Springfield (Winchester).

Only two of those cities (Worth and Danville) are in the Top 200 cities by size in the state, so it's difficult not to suspect that their location had a lot to do with the closing of at least four of the banks.

Again, the same as the Georgia question, why Illinois? And, most especially, given the past two weeks, why are there multiple state closings now?

John Quiggin makes the broad case (link fixed).

If you are then stuck with trying to present a Grand Unified Field Theory, you will inevitably lose (or, at best, reduce) the importance of all the agglomerations that follow from the presumption that the Rational Actor is the mean performer—ignoring that no one, including the economists themselves, believes that to be true in their own lives, let alone the lives of others.

Micromotives and Macro Behavior indeed. But no molecular biologist (or even biologists) would try to build on the Phlogiston Theory.

by Divorced one like Bush

So, American's put an intellectual in the president's seat. It's been called pragmatism. We cheer the return of science and thus critical thinking to our politics. Yet, here we are at the cusp of the next great societal character development issue since we figured out after the depression there was class war in the US and we get this:
"If you establish a public option at the forefront that goes head-to-head and competes with the private health insurance market ... the public option will have significant price advantages," she said.
Yes, Maine's finest: Olympia Snowe as she argues against making the public option available at the get go.

But, this concept is not new. It dates back to 2006 when the Council for Affordable Health Insurance presented a 17 page report suggesting the same thing. And!, now we have the Heritage foundation dittoing the same report. (More on that coming at AB by the other bloggers here.)

But, never fear, Sam's got you covered. He explains the appropriateness of Olympia's thinking.

By Spencer

The June employment report sent a clear message to expect more of the same. It showed essentially no signs of improvement as payroll employment fell -467,000 and the unemployment rate rose to 9.5%

The average work week -- considered a leading indicator of employment growth -- dropped to 33.0 hours and the index of aggregate hours worked fell 0.8%. In the fourth quarter of last year hours worked fell at a -7.4% annual rate. In the first quarter they fell at an -8.9% rate and in the second quarter the index fell at a -7.9% rate.


Both hours worked and employment indicate that this is the worse recession since WW II and show few signs that the recession is ending.

Moreover, growth in average hourly earnings continue to slow sharply.


Consequently, average weekly earnings growth slipped to 0.36%, the smallest gain on record.

However, because of tax cuts and other government transfer payments total nominal income growth is rebounding strongly and providing essentially the only reason to expect economic growth.

But so far most of the tax cuts have gone into the rebound in the personal savings rate. This can be viewed several ways. One, there is normally a lag between income increases and spending growth. But this probably accounts for only a very small share of the savings growth as higher savings are dominated by individuals need to rebuild their balance sheets. Two, the tax cuts are financing the savings increase and preventing a much more severe drop in consumer spending. I personally favor this view and see it is part of the story that as in Japan's lost decade this fiscal stimulous prevents the economy from sinking into a depression but does not stimulate much growth. I have believed for a long time that the US has slipped into an environment much like Japan's lost decade and just continue to see developments reinforcing that belief.

rdan

Finfacts

From 1995 to 2008, the annual US trade deficit with China grew from $34 to $266 billion, accounting for virtually all of the increase in the US non-oil deficit from $44 to $282 billon.

Imported oil petroleum contributes significantly to the US trade deficits. From 1995 to 2008, the petroleum deficit increased from $34 to $386 billion. This huge deficit is caused primarily by the failure to impose higher mileage standards on automobiles, implement other fossil-fuel saving technologies, and to develop US domestic oil and gas resources.

Together, imports of oil and from China account for 90 percent of the US trade deficit, and that deficit has averaged more than 5 percent of GDP over the last five years.

In theory, increased imports of manufacturers from China and petroleum should shift US employment from import-competing industries to export activities. Since export industries create about 10 percent more value added per employee and undertake more R&D than import-competing industries, this would raise US productivity and GDP growth. Those are the expected gains from expanding trade based on comparative advantage.

Instead, large trade deficits shift U.S. employment from trade-competing industries into nontrade-competing industries. Trade-competing industries create at least 50 percent more value added per employee, and spend more than three times as much R&D per dollar of value added, than nontrade-competing industries. By shifting labor and capital into nontrade-competing industries, chronic trade deficits have reduced U.S. economic growth by at least one percentage point a year, or about 25 percent of potential GDP growth.*

Lost growth is cumulative. Had trade deficits been significantly smaller over the last two decades, U.S. GDP would likely be $3 trillion or 20 percent greater than it is today.

Peter Morici gets to the point in this paper in Finfacts on the first half of what we need to face. I hear little from naysayers of 'protectionism' on this point of manipulating trade advantages.

Fixing credit markets and energy policy are largely domestic challenges, whereas recalibrating trade with China requires cooperation from Beijing. However, such cooperation requires fundamental changes in Chinese industrial policies and a departure from maintaining an undervalued yuan to spur industrial development.
...

The United States has engaged in high level talks with China since negotiations for its entry into the World Trade Organization. Most recently, the Strategic Economic Dialogue was launched in 2007.

Throughout this process the United States has encouraged China to more substantially raise the value of the yuan, which would require Beijing to purchase fewer dollars and other currencies to sustain its value. Instead, China has increased its foreign exchange market intervention as the gap between the official value of the yuan and its fundamental value has widened. This has exacerbated the damage to the U.S. economy and China's other trading partners.

The United States has three broad policy options to leverage change.
First, the United States could bring a complaint in the World Trade Organization. China's currency policy policies create a WTO illegal subsidy on exports, and subvert the benefits its trading partners expected when they acceded to China's entry into the world trade body.

Were the United States to bring such a suit, other WTO members would likely join the petition. If they prevailed, either China would have to stop intervening in currency markets, or face tariffs--approved by the WTO and imposed by WTO members participating in the complaint--to redress the trade imbalance. Those tariffs would be strictly temporary and removed when China complied with the WTO decision, ended currency market intervention, and let the yuan rise in value.

Second, the United States, consistent with its WTO obligations may impose tariffs on imported goods that receive government subsidies, if those goods harm U.S. industries when they enter U.S. markets. Until 2006, the United States did not apply the subsidy and countervailing duty law to commerce with China, but in a case regarding imports of Chinese paper, the Bush Administration changed that policy. However, in addressing the domestic industry's petition, the Bush Administration denied application of the subsidy and countervailing duty law to China's undervalued currency.

Bills sponsored by Senators Jim Bunning (R-KY) and Debbie Stabenow (D-MI) in the Senate and by Representatives Tim Ryan (D-OH) and Tim Murphy (R-PA) would make more likely the subsidy implicit in an undervalued currency were included in the computation countervailing duties in both dumping and subsidy cases, when a "fundamental and actionable misalignment" is present. Such circumstances would be determined by a standard consistent with International Monetary Fund guidelines.
Third, Americans need to accommodate to the fact that China is much less a market economy, either by design or by policy, than North American and Western European economies.

Its financial system may not be able to sustain an unmanaged floating exchange rate; however, China can manage the value of the yuan at 4 as easily as it does 6.8. In fact, it would be a lot easier to manage a value closer to balance of payments equilibrium.

should read Sensible Centrist J. Bradford DeLong on the difference in forecasting between the current Administration and the CEA under N. Gregory Mankiw.

Romer/Bernstein/Kreuger et al., 2008-9 edition:

As I understand matters, last December the median private-sector forecast had the unemployment rate topping out at 9% in the second half of 2009. The incoming Obama administration simply adopted that forecast. At the time I thought that was a mistake: (I thought that was a mistake: I thought they should have made a bifurcated forecast with a "good case" 80th-percentile scenario and a "bad case" 20th-percentile scenario; they should then have stressed that in the bad case we would need a large stimulus indeed to prevent high unemployment, and that in the good case we could restrain inflation via monetary policy.)

Mankiw et al., 2003 edition:

it would make it extremely difficult for things to happen like what happened to the Mankiw CEA over the winter of 2003-2004, when high politics appears to have reached down into the forecast, changed the table for payroll employment (and only payroll employment: the rest of the forecast is not out of line with contemporary professional forecasts), and produced an estimate for December 2004 (a) inconsistent with the rest of the forecast, and (b) high by 2.3 million in its estimate of payroll employment--all because Karl Rove and company thought it important to avoid headlines like "Bush administration forecasts 2004 payroll employment to be less than when Bush took office." (link from original)

The positive-spin version is that Mankiw plays politics better than the Obama Team.

UPDATE: Kauffman Foundation invitee Mark Thoma adds to the fun.

1. Candian Bacon (certainly Michael Moore's best work of fiction), starring John Candy
   
2. So I Married an Axe Murderer / Mike Meyers
   
3. Airplane! / Leslie Nielsen
   
4. Chain Reaction / Keanu
   
5. Bright Lights, Big City / Michael J. Fox (who has no Elvis in him, but does good work)

I think they're trying to convince everyone to be outside.

More Canadian Content here, via my Loyal Reader.

UPDATE: The NYT honours the day. Highlight from Malcolm Gladwell:

In history class, in seventh grade (or as we like to say in Canada, grade seven) we learned the story of the American Revolution...Turns out you were all a bunch of ungrateful tax cheats. And you weren’t very nice to the Loyalists. What I miss most about Canada is getting the truth about the United States.

He's got a point there, except about the Loyalists. And that the "tax cheats" were really fighting the East India Company (think Wal-Mart with a British accent).

Also, we had Stevie Wonder last night and you didn't. The bad news is it was the night before a National Holiday in a relatively large city and a free concert. So most of couldn't get within five blocks of it.

by Bruce Webb

Sanders makes the case I have been thinking of making (bolding mine):
Bernie Sanders Demands Democrats Commit To Stopping Health Care Filibuster

One of the Senate's most vocal progressives is demanding that the Democratic Party commit to voting against filibustering health care legislation now that, with the impending arrival of Al Franken, the party has 60 caucusing members.

Sen. Bernie Sanders (I-Vt.), called on the White House and Democratic leadership in Congress to ensure that party members agree unanimously to support cloture on legislation that would revamp the nation's health care system. Democratic senators on the fence, he added, could still oppose the bill. But at the very least they should be required to let the legislation come to an up-or-down vote.

"I think that with Al Franken coming on board, you have effectively 60 Democrats in the caucus, 58 and two Independents," Sanders said in an interview with the Huffington Post. "I think the strategy should be to say, it doesn't take 60 votes to pass a piece of legislation. It takes 60 votes to stop a filibuster. I think the strategy should be that every Democrat, no matter whether or not they ultimately end up voting for the final bill, is to say we are going to vote together to stop a Republican filibuster. And if somebody who votes for that ends up saying, 'I'm not gonna vote for this bill, it's too radical, blah, blah, blah, that's fine.'"

"I think the idea of going to conservative Republicans, who are essentially representing the insurance companies and the drug companies, and watering down this bill substantially, rather than demanding we get 60 votes to stop the filibuster, I think that is a very wrong political strategy," Sanders added.

There is nothing in the Constitution that suggests that ordinary legislation or amendments thereto should require a 60 vote super-majority to move to a vote. But the filibuster exists and the majority cannot deny the minority some opportunity to demand debate (not that the filibuster ever is actually used to honestly debate anything). Still enough is enough. The Senate has never had the Whipping system of say the British Parliament, indeed its tradition allows leading members to buck Leadership and the White House on final legislation. However extending that principle to the point that unless everyone capitulates to every demand of the most center-right member of the caucus every time is to make a mockery of the Constitution itself. Exactly when did we decide to turn total power over to Ben Nelson?

Time to play hardball. Nelson doesn't have to be a good soldier every time, he can vote against every bill that violates his conscience or ideology or that goes against the interest of his state. But there have to be sanctions for going AWOL time after time and even more severe sanctions for giving Aid and Assistance to the Enemy. Currently Ben Nelson sits on four powerhouse committees: Agriculture, Appropriations, Armed Services, and Rules. First offense? Lose Rules. Second offense? Off of Appropriations. What's his recourse? Becoming the permanent Mr. No as the junior member of the Republican caucus?

Look we are not looking for a blood oath here, just an agreement to let legislation go to an up or down vote. Time to get things which have majority support among the American people and the US Senate done.

Instapundit offered a chart on the growth of actual and projected Federal government budget deficits a couple months ago:



Treasury lists the numbers of the on-going rise in debt as well. The new ceiling for spending is 12.1 trillion USD, but we are close to that now at an estimated 11.3 trillion USD.

09/30/2008 10,024,724,896,912.49
09/30/2007 9,007,653,372,262.48
09/30/2006 8,506,973,899,215.23
09/30/2005 7,932,709,661,723.50
09/30/2004 7,379,052,696,330.32
09/30/2003 6,783,231,062,743.62
09/30/2002 6,228,235,965,597.16
09/30/2001 5,807,463,412,200.06
09/30/2000 5,674,178,209,886.86

CBO provides various snapshots as well.

My take on posts and comments on other blogs have included these observations:

1. There are plenty of partisan viewpoints about responsibility for this deficit and debt situation. This usually starts out with comments about who is responsible for the spending (with a hat tip to the Bush eight years of war and military spending funded by the mechanism of tax cuts), or blaming the Dem congress of the last two years as controllers of spending, or Obama for extending the Bush policies under TARP and military spending, but then adding "stimulus" and health care costs on top of everything else.

2. Technical arguments about some forms of 'crowding out' of private investment or not with the caveats of how money is spent domestically on public works, and which companies are favored in which administration (Cheny vs. Immelt?)

3. Policy memes centered around domestic savings and consumption, fiscal responsibilty, stimulus spending and 'multipliers', and how tax cuts will pay for current spending habits or allowing the sunset of the Bush tax cuts. Little discussion of raising taxes so far.

4. Consideration of the current 'US trade deficit with the world' as an underlying driver of our problems appears to be a somewhat marginal consideration in the current public debate except as part of 'we are financed by foreigners' or protectionism is bad,

5. With little discussion of how we are to prepare ourselves for a future role in the world that involves less dominance, less consumption, better exports to imports ratios from a US perspective, and what kind of jobs are thus created.

What could be re-worded or has been left out in broad strokes...obviously much detail and scope of particular interest? Five posts overall, with posts from Bears and guests to add proof and detail?