Wednesday, May 28, 2008

The American Health Care System

Here is a brilliant description of it courtesy of Jim's Blog:

"The American health care system is socialism without a central plan, and capitalism without markets or prices."

Tuesday, May 27, 2008

Hillary as VP?

That's Krugman's suggestion. This suggestion puzzles me for a number of reasons. Krugman posits that Hillary's inclusion in the ticket will help Obama recapture jilted Hillary supporters and lower/lower-middle income white voters who Hillary has typically won over. On the former, I don't really think there are that many jilted Hillary supporters. I am guessing her conduct at this point has taken care of that. The few remaining people whose noses are bent out of shape over Hillary's failure to secure the nomination are those who had been promised a gig in a Clinton Administration (which makes me wonder if Krugman had been offered some position, say CEA chair, as he has been in the tank hardcore for Hillary on his blog and op-ed pages).

The real question is whether or not Hillary will be able to bring her blue collar white supporters. I doubt it. I think many of those who are supporting Hillary are not so much supporting Hillary but opposing a Black male. I think for many of those voters a Barack-Hillary ticket would be a diversity freak show. For Obama to appeal to these voters he will need a white male, plain and simple. Ideally this potential VIP would also bring other credentials than his whiteness (this rules out John Edwards), such as foreign policy experience or experience in general.

But the other reason Hillary would be an awful choice is that she more anything the Republicans can do themselves, will engergize the conservative base.

Monday, May 26, 2008


My sense is that we were in a recession before any economists or government agencies were talking about recessions and now that they are talking about us being in a recession we are probably emerging from the recession.

Thursday, May 15, 2008

Wednesday, May 14, 2008

PeP Links and Random Thoughts

Bob Barr is running for president on the Libertarian Party ticket. However, Bob Barr is no libertarian. He is a small government conservative. So while he is a critic of the expansion of executive power and the war in Iraq there are areas he is where he significantly departs from libertarian priorities: he is a hardcore drug warrior, anti-immigration, and a social conservative. Actually, Barr represents basically what the conservative coalition candidates have been about until Bush: an unrealistic fiscal plan (heavy on tax cuts/heavy on spending cuts) as a sop to Grover Norquist and business conservatives, skepticism/hostility of government (and military intervention abroad) to entice libertarians, and an emphasis of hostility towards gays and a firm pro-life position to appeal to social conservatives. In a tight election, I think Barr's presence would be a significant problem for McCain, much more so than Nader was for Gore. He cannot be dismissed out of hand as fringe character (he was a significant player in the Republican party till not too long ago). Nevertheless, I think Obama (or in the off chance that Clinton snatches the nomination away) will trounce McCain, thus Barr's impact is likely to be irrelevant.

Go read Cato-Unbound's lead essay. The topic is the resource curse. The author, Leif Wenar, proposes approaching the resource curse as a property rights issue. His premise is that a given country's resource is the property not of the government but of the people. What he is getting at is that every country should have some sort of trust fund like in Alaska where people are reaping the dividends of extracted resources. I think that's a great idea, but his proposal for bringing a resource trust about are troubling on many dimensions and impractical. He presents the scenario of Sudan selling $3billion of oil to China and plowing the money into its civil war/ethnic cleansing. The US would create a trust for the Sudanese people and impose tariffs on Chinese imports till there was $3 billion in the fund. It's one of those ideas that strikes you as novel, sort of an aha moment, and then of a sudden you realize its massive flaws. For instance, how do you get the money to the Sudanese people? What if you actually get money into the hands of actual Sudanese as opposed to the government only to find that they use the money to arm themselves? Should Europe impose tariffs on US imports to fund a trust for Iraqis? What if the Sudanese use the monies received to invest in infrastructure or education? etc. Anyhow, it's an interesting if clumsy attempt to grapple with a very serious problem.

Anne Applebaum makes the case for intervening in Burma. I guess if we are invading Iraq for among other reasons to promote democracy, why not invade a country for strictly humanitarian reasons. This is the dangerous logic that Iraq has spawned. I don't know quite what one does. Do you fly over Burmese airspace and carpet bomb them with food, clothing and medicine? I do think these types of tragedies are situations where the US should be grabbing onto to try to improve our international reputation.

Over at Gristmill they have a good rundown on McCain's cap and trade plan. The takeaway is that it is nowhere near as serious as Obama's plan but does pass the laugh test. A low bar admittedly, but I have low expectations for McCain. For me a cap and trade is clearly inferior to a carbon tax, and a cap and trade that does not auction permits is piss poor. Though, sometimes piss poor is an improvement (which is possibly the case).

Monday, May 12, 2008

Local Governments Facing Pension Problems

WaPo has an article on the underfunding of state and local government pensions. Anyhow, read the article, this is just another data point in the larger argument as to why defined benefit pensions are such a bad idea.

Walking Away From the Mortgage

There has been some hysteria paired with some sober speculation (courtesy of esteemed minds like Marty Feldstein and Hal Varians) that what is driving home foreclosures, or what will drive the majority of home foreclosures is negative equity. I think this is both obviously correct and patently false. Where Feldstein and the like I think are wrong is they anticipate massive foreclosures brought on by negative equity for home owners who can afford their mortgage.

Background: Mortgages are Nonrecourse Loans
What makes a mortgage distinct from other loans is that it is non-recourse. What does this mean? Well, say I have a $500,000 mortgage and I default within six months of the loan's origination, the bank forecloses on my home and is only able to sell the home for $300,000. The bank can't come after me for the difference. They are stuck with the loss.

Two Scenarios:
Scenario One- the Foolish Speculator

A lot of folks got into mortgages that they couldn't reasonably afford but were banking on being able to take on a line of equity credit based on their home's appreciation. Thus, they're plan to pay for the mortgage was to take out more debt. This actually worked during the housing boom. However, when the bubble burst, homes ceased to appreciate, and thus there was no equity to tap. These folks went into to foreclosure and are going into foreclosure.

Scenario Two- the Solvent Homeowner who walks away

In Scenario two, the homeowner, while he can afford his mortgage, walks away from it because the bursting of the housing bubble has caused his mortgage to exceed the value of his house. I find this scenario unlikely for a number of reasons. The biggest reason, is if a homeowner simply walks away from his house which then goes into foreclosure, his credit will be wrecked. Your credit is vitally important. Landlords will look at your credit as a basis of whether or not to accept you as a tenant (an important consideration now that you don't hava a house). Banks look at your credit if you try to get a business loan from them. And the same applies to credit cards.

If the homeowner can afford the mortgage, he can ride out the housing downturn and wait till prices go up again, all the while, keeping his credit intact. There may be some regions where the downturn in real estate prices is more likely to be a permanent phenomenon (e.g. the rust belt) but for most areas prices are likely to rebound after awhile. Thus, it should come as no surprise that this second scenario, contra the emerging conventional wisdom, does not appear to be occuring.

Saturday, May 10, 2008

Congratulation Piper!!!

I big congratulations to our very own PiedPiper who just graduated from law school today!!!!!

Wednesday, May 07, 2008

Classic Quote

“Everything reminds Milton Friedman of the money supply. Everything reminds me of sex, but I try to keep it out of my papers.” Robert Solow.

Monday, May 05, 2008

Enough With Hillary's “Gas Tax Holiday” Bullshit

I have had enough with Hillary Clinton’s bullshit rhetoric about some asinine “gas tax holiday” for the summer. Anyone who has the most basic understanding of how supply and demand functions realizes what complete crap this idea is.

Here is a quick run down:
  1. During the summer gasoline demand is the highest and gasoline production at the refinery level is at its peak.

  2. The current high gas prices work to lower demand by detering consumption, dropping the price of gas by 18 cents per gallon (the current Federal tax level) will lower prices thus encouraging people to buy more and raise demand.

  3. Since production is already at capacity the increase in demand will not raise the quantity of gasoline available to consumers and will instead raise prices completely cancelling out any savings to consumers.

  4. So now instead of using that 18 cents a gallon to build and maintain things such as roads we will just be sending that 18 cents to oil companies.

Summation – Hillary’s plan is complete bullshit political pandering.

On Sunday Hillary Clinton was asked if her plan was endorsed by any economist. She dodged the question but then responded "I'm not going to put my lot in with economists... this mind-set where somehow elite opinion is always on the side of doing things that really disadvantage the vast majority of Americans."

What’s next? Maybe Hillary Clinton wants to start regulating the auto industry and requiring that all new cars receive 300 miles per gallon powered by Care Bear Stares?

But how would this work? Well that’s easy; the collected Care Bears stand together and radiate light from their respective tummy symbols (see above photo). These combine to form a ray of love and good cheer which could be harnessed to power all of our cars of course.

Who cares that those elitist engineers say that it won’t work. Care Bear power is more than capable of handling all of our energy needs, it is just one big elitist conspiracy that is keeping the technology down.