Sunday, July 22, 2012

The Boring Election, Blogging Haitus, and John Kasich

Okay, I feel like I need to ask: Am I the only one tremendously bored by this election so far? Yes, yes, I know the stakes are high because Republicans are practically insane at this point, but its all just a bit, well, boring to me right now. I'm tired of hearing about how Mitt Romney's business experience will help him run the country better. I'm tired of hearing about how Obama hates America and that he wants to punish success. It's boring

In any case, I feel I should announce to people that I will be taking some time off from the blog for awhile. There are a few reasons for this, but the most important two are a) the news has been boring lately and I don't have much to blog extensively about and b) I'm really busy. 

In any case, I'm not sure when blogging will pick back up, but I'll be sure to keep a watchful eye on the news for anything that annoys me enough that I need to write about it. With that, I leave you now with an article definitely worth reading. John Kasich is costing Ohio a lot of money by being intransigent.

That is all.


Friday, July 20, 2012

Cutting Taxes on Businesses Probably Won't Make Them Hire More

Something I frequently hear Republicans frequently say is that businesses are taxed far too heavily, and that reducing their tax burdens will induce hiring in our current slump. There are a lot of reasons why I'm sort of skeptical of this claim, so I'll run down the list one by one. 

First, imagine that you're a business owner. Imagine that you're employing, say, 20 people right now. You run a car wash, or something. Now imagine that, because of the economy, business is a bit slower than usual, so you only use about 60% of your workforce's capacity. Now imagine that the government comes and says, "Oh, hey, all businesses only have to pay half as much in corporate taxes this year, hope this makes you guys want to hire!" Now stop. If you're only using 60% of your workforce because of insufficient demand for your services, how would paying less in taxes make you want to hire more workers? The only way you'd hire more workers is if you were already using your workers at full capacity, which most firms are not doing right now. This is a huge reason why I'm skeptical that cutting business taxes is an appropriate form of stimulus right now. U.S. companies aren't desperate for cash--they're sitting on over a trillion dollars right now.

Now, don't get me wrong, I'm not trying to say that cutting taxes on businesses won't ever work to induce hiring. I just don't think it would work right now, because so many businesses have so much excess workforce capacity, since there's a lack of demand for goods and services. If you don't believe me based on my little thought experiment, (I don't blame you if you don't, because who the hell am I to say what's what?) the Congressional Budget Office has a paper out about strategies for economic growth, and this is what they had to say about tax cuts for businesses:
"Increasing the after-tax income of businesses typically does not create much incentive for them to hire more workers in order to produce more, because production depends principally on their ability to sell their products."
I couldn't have said it better myself. 

A much better strategy (if you feel the need to stick with tax cuts), I think, is to cut them for individuals. Individuals don't need to fully utilize their workforce capacity for those tax cuts to work, they just consume more with the extra cash they have on hand. Tax cuts aren't really my favorite form of stimulus, but if you must use them to get us out of this slump, cut them on people, not businesses. Personally, I'd like to see the government provide aid to the states so they can hire back the teachers, cops, and firefighters that they've had to lay off. That'd be a quick and easy way to put money to good use, I think. Or the Fed could do something. You know, because Bernanke totally said that a) the current economic conditions were bad and, b) that the Fed was ready and able to do something to help stimulate the economy further.

Then it didn't.

Sunday, July 15, 2012

Yet Another Reason Wall Street Journal Op-Eds Suck

Via Paul Krugman I learn that Allan Meltzer, Professor of Economics at Carnegie Mellon, wrote an op-ed in the Wall Street Journal the other day. You already can tell where this is going, can't you? All I had to say was "Wall Street Journal op-ed" and you knew that this was going to be scathing.

Most of the op-ed is spent saying that monetary policy is ineffective, so the Fed should stop trying to print more money. He also says that the Fed's policy is going to be wildly inflationary at some point in the future (wooooo, scaaaaary!). He bases this off of the idea that the risk premium (basically the minimum returns people are willing to accept on a riskier asset) on inflation-indexed Treasury bonds is increasing. I don't think that's true:


But anyways, if you want to read about why his inflation predictions are likely wrong, read Krugman's post. I want to deal with the other part of his post, in which he says that America's problems right now are fiscal and budgetary.

He says, predictably (this is the Wall Street Journal, after all) that the only way for our economy to recover is for us to balance the budget and reform entitlement programs. Sigh. Sometimes I get the feeling that I'm trying to talk to an army of mindless robots that only know about three catchphrases. "The problem is demand," I say. The response to that is usually one of these phrases:

  • "Regulatory uncertainty is making businesses not want to hire people! We have to get rid of all of these regulations so they start hiring again!!"
  • "High taxes are making businesses not want to hire people! We must cut taxes so they start hiring again!!"
  • "The budget deficit is making businesses not want to hire people! We must balance the budget so they start hiring again!!"
Sure enough, here's a line from Meltzer's piece:
"Business investment is held back by uncertainty."
No. Just...no. Remember these charts?



Business investment is being held back by poor sales, Professor Meltzer. There isn't much more I can say besides that. You can't seriously expect us to believe that cutting spending right now or in the near future would be stimulative to the economy. Don't believe me? Well, you can ask the IMF what they think of fiscal contraction without monetary policy offsetting it, since you seem to think that the Fed shouldn't do anything else.

Okay, yes, as I've said before, we do need entitlement reform at some point in the future, but we've got bigger issues right now. Moreover, solving those issues isn't going to help the economy get out of this slump. The economy needs stimulus, be it fiscal or monetary, to get hiring going again at a faster pace. It continues to amaze me that people still refuse to believe that our problem is not enough demand. 

Keep up the good work, WSJ Op-ed section. You keep me in business over here.

Friday, July 13, 2012

A Circus of Incompetence

In reading Ezra Klein's post today about why the current Congress is probably the worst one in recent history, I was struck by one particular thing. House Republicans have voted to repeal the Affordable Care Act 33 times now. I realize this was one of their promises in 2010 and all, but seriously? I can understand a symbolic vote or two to show that they were serious, but over thirty times? That's just overkill. Not only that, but most Americans want Congress to just move on to other issues.

Case in point:


That isn't really the main reason I think they should stop this repeal nonsense, though. The main thing that gets me is that for all of their talk of repealing and replacing, they've not once put forth a bill that would do both things. So far, all I've seen is a whole lot of repealing. "But Andre," you say, "they need to repeal it first to replace it!" I don't buy it. If they were actually serious about replacing it with something that Americans wanted, they would craft a bill that would both repeal the ACA and implement their new law. At the very least, they'd tell us what their alternative entails. They haven't even hinted at what their replacement would be. Any proposals I've seen involve bad ideas or irrelevant ones that wouldn't work

What's more, these pointless repeal votes take up time that could have been spent on something more productive, like, say, the economy? Remember that old chestnut? I haven't seen a whole lot of compelling ideas there. Eliminate all of those terrible regulations and that health care law, because they create uncertainty, right? You know what else creates uncertainty? Continuously trying to repeal a massive health care law and failing. Oh, and nearly breaching the debt ceiling to prove a point. That makes people pretty uncertain, doesn't it?

Oh, and another thing! If whenever a recession comes around your only idea is to permanently cut taxes, cut spending, and eliminate regulations, what happens when you run out of taxes to cut, spending to cut, and regulations to get rid of? Are you going to hold a ritual to the gods of aggregate demand and hope they're feeling generous during that particular business cycle?

Riddle me that, why don't you?



Thursday, July 12, 2012

Senseless Centrists

Well, I'm back from my travels. I'm sure you all missed me, so I won't even bother to ask if you did. In any case, I was catching up on my blog-reading today, and I came across a very old quote by Paul Krugman that a friend of mine had put up on his blog from a few days back. My friend mentions that it sums up his political views better than a thousand-page tome could, and I find myself in agreement with him on this. But before I go any further, I guess I should let you read the quote, right? Well, here it is:
"To be both a liberal and a good economist you must have a certain sense of the tragic--that is, you must understand that not all goals can be attained, that life is a matter of painful tradeoffs. You must want to help the poor, but understand that welfare can encourage dependency. You must want to protect those who lose their jobs, but admit that generous unemployment benefits can raise the long-term rate of unemployment. You must be willing to tax the affluent to help those in need, but accept that too high a rate of taxation can discourage investment and innovation. To the free-market conservative, these are all arguments for government to do nothing, to accept whatever level of poverty and insecurity the market happens to produce. A serious liberal does not reply to such conservatives by denying that there are any trade-offs at all; he insists, rather, that some trade-offs are worth making, that helping the poor and protecting the unlucky may have costs but will ultimately make for a better society."
This is  something I often grapple with when I try to form opinions about public policy. There really isn't much more that I can say about the quote that Krugman himself didn't include in it. That's probably why I like it so much. In any case, I suppose the main point I want to get across in this post is that I honestly do believe that there are trade-offs to everything in public policy. This often leads me to take somewhat moderate stances on issues.

However, all of this is not to say that I want to be one of those alleged "sensible centrists." I don't really derive much in the way of satisfaction by throwing up my hands and declaring that both sides are equally wrong and they just need to grow up--that kind of talk doesn't get us anywhere, because that isn't the case right now. I am not Tom Friedman. I am not David Brooks. Just to give you an idea of why I don't really like the so-called "centrist dodge," let me drop some knowledge on you.

In one of his recent columns, Friedman says that we need a President who offers us a "three-step rehab plan" that includes the following:

  1. Short-term stimulus to bolster the recovery
  2. A long-term deficit reduction plan that combines tax reform with spending cuts
  3. A detailed plan to bend the health care cost curve downward
I've seen this before somewhere...Oh, that's right! Obama has proposed or enacted all of these things! The issue is that Republicans have stonewalled or tried to repeal all of them. But you won't catch a sensible centrist saying anything like that, because it would be bitter and partisan. 

Okay, look, it would be really, really nice if Republicans were reasonable like they were thirty years ago, but they're clearly not. Ronald Reagan would practically be a socialist by the standards of today's GOP. They've made it clear time and time again that they have no interest in compromising

The big issue I have with centrists like Friedman is that they try to lay the blame equally at the feet of both parties, when in fact that isn't the case. By dreaming up a centrist candidate and laying the blame for dysfunctional government at the feet of both parties, it obfuscates the fact that nearly all of their ideal centrist policies have essentially been enacted or proposed by one Barack H. Obama already. But no, it seems that we're doomed hear them cry a pox on both houses (of Congress), because to point out what actually is happening would be too partisan. 

Well, I've got news for you. It has been partisan and will continue to be partisan. People as widely read as David Brooks and Tom Friedman do the country a great disservice if they just sit by on the sidelines and bemoan the state of our politics.

Your move, centrists.


Thursday, July 5, 2012

Semantics

I meant to write about this days ago when the ruling came out, but I kind of got sidetracked with everything else going on in my life. Anyways, I guess Republicans are making a big deal out of the fact that, in its ruling on the individual mandate, the Supreme Court said that the enforcement mechanism was a tax. So now Republicans are all up in arms about how this is a tax instead of a penalty, as if this is some great revelation they've just now had.


Okay. Let me take this real slow-like. According to the Kaiser Family Foundation, this is what the mandate basically does: 
“Those without coverage pay a tax penalty of the greater of $695 per year up to a maximum of three times that amount ($2,085) per family or 2.5% of household income…Exemptions will be granted for financial hardship, religious objections, American Indians, those without coverage for less than three months, undocumented immigrants, incarcerated individuals, those for whom the lowest cost plan option exceeds 8% of an individual’s income, and those with incomes below the tax filing threshold.”
Now if we change the word "penalty" to "tax," what changes in the terms above? Precisely nothing. The fact that it is a tax is completely irrelevant. If someone doesn't like the mandate already, the fact that it is a tax instead of a penalty won't change anything. Someone who likes the mandate isn't going to be outraged that they would be paying a tax instead of a penalty if they don't purchase insurance.


This seems like a pretty poor line of attack for the GOP to take right now, if you ask me. Penalty and tax carry pretty similar implications and meanings to people, so far as I can tell. What's more, the actual terms of the mandate have not changed one iota! You could call it Peter's Pence if you wanted to, and the terms would still be the same. 


Completely, totally, irrelevant.

Tuesday, July 3, 2012

I'm Leavin' on a Jet Plane...

I just wanted to inform the readers of this blog that you'll be facing limited blog posting in the next week or so, as I will be off in Chicago attending a wedding, among other things. Try not to miss me too much. Normal blogging will resume sometime after the 9th of July, but I may be able to squeeze in a few short posts during my time away. Until then, however, try to peel yourself away from this blog for a few days. I know it's hard, but a little variety could do you all some good. 

With that, I leave you this delightful picture.




Stay beautiful, dear readers.

Sunday, July 1, 2012

John Roberts: Saving America from Socialism Since 2012

I just read a great post by Matt Yglesias in which he argues that John Roberts voted to uphold the Affordable Care Act's individual mandate because he wanted to prevent America from adopting socialized health care in the future. This is something I've often said to people when I talk to them about the ACA. In spite of all of the GOP's misinformation and rhetoric on Obamacare, the law really cannot be considered "socialist" in the traditional sense of the word. 


Think of it like this: traditionally, liberals favored a single-payer system of universal health care in which everyone basically had Medicare. When Obama came into office, he embraced the individual mandate because he wanted to be bipartisan, since he had seen conservatives supporting the idea in the past. Hell, Mitt Romney even thought it was a good idea as a national model for health care reform. And thus, the Affordable Care Act was born. 


With Republicans so vehemently opposed to a health care law that uses many of their ideas, what was next? If the law had been struck down by the Supreme Court, health care reform would not have just gone away as a major issue. Health care costs aren't just going to come down on their own in the U.S. So, inevitably, the issue would be brought up again in the future. However, the next time Democrats tried to pass health care reform, they would not seek a bipartisan consensus. With the individual mandate ruled unconstitutional, they would campaign on the idea of "Medicare for all."  At that point, there would be no other way to ensure universal coverage with a balanced risk pool other than to socialize health care. 


Thus, Roberts did the Republicans a great service by upholding the law. Had the law been struck down, health care in America probably would end up being socialized. Ultimately, the American people would get tired of half-measures for achieving health care reform. Without the option of a mandate for universal coverage, there's only one option left--single-payer. Not that I'm saying that's a bad thing, necessarily. Plenty of countries (Spain, France, UK, Sweden, Norway, Finland, Australia, Canada, New Zealand) have socialized medicine and they have better health outcomes than we do for less money. But I digress. 


Basically, the point I'm trying to make here is this: Republicans are attacking the ACA as a "socialist" law. Had the law been struck down, what would eventually replace it would actually be socialized medicine. Be careful what you wish for, I guess.




P.S. I now have a Twitter account for this blog that I'll update with each new post, starting with this one. You can follow me on Twitter here. Get the word out!


P.P.S. I suppose that it would be possible for the policy debate to swing the other way on health care. That is to say that health care could presumably take on a decidedly more conservative/libertarian point of view, with less government intervention. There are a number of ways I could interpret this, I suppose. Some, like Senator Coburn of Oklahoma, say we should go down the road that Switzerland went down, but that likewise involves an individual mandate as well as government regulation of insurance plans to some degree. Other interpretations simply say that people will all pay actuarially fair prices for their insurance--that is, the sick will pay higher premiums and the healthy pay lower ones. It is possible that the debate could go this way, but I feel like Americans would not support a system in which sicker people were charged more than healthier people, in spite of what may or may not be logical or economically efficient. This is a debate worth having, I think, but I'm not sure how popular something like actuarially fair pricing of insurance plans would be with the American people.