Libraries Revisited

I was reading this post by Matthew Yglesias, where he makes the case that libraries are something of an anachronism, which reminded me of a post in defense of the modern library by PeP's very own founding blogger- Piedpiper. Pied's defense of libraries was written not quite five years ago. I would be interested to see if he believes if his defense of libraries has weathered this brief test of time. Pied laid out three arguments in favor of the library in modern times:

Well Pied's first argument in favor of the library is confusing so I will cite the whole bit (notice something here? Yes my readers, a hyperlink, that is like a citation that is even better than a citation. You click on it and it takes you to the source):
"First, the Web is great at providing information. But that information is neither here nor there without the ability to cite your source (!), prove its authenticity, or delve deeper into the subject. The problem with the Web is that since there is so much information, we can't delineate (in many circumstances) fact from fiction."
I think there seem to be two related thoughts here: 1a. appears to be the difficulty of citations (which in the middle aughts actually was a greater concern as citing conventions for online sources where less common than they are today and certainly less accepted). 1b seems to be a concern with the ability to discern whether the source is an authority or not. Apparently Pied gained much more faith in a source if it was on the printed page than pixels on a screen. I guess I don't understand how this is really an issue and I don't think I would have thought it was at the time either. I would say his first concern, that of citations has cured itself. His second concern, that of authenticity was misplaced.

Pied's second argument in favor of libraries centered around the concern with the cost of connectivity. The argument goes that the web is a poor substitute for a library because you need connectivity and a computer a router and so on in order to use the web. Pied argued that one of the areas where a library demonstrated its relevance was by providing the poor with access to the web. I think this still holds up, though, I would guess that at this point the barriers to web access as far as cost goes has substantially diminished in the last five years thus attenuating the libararies usefulness in this function.

Pied's third argument is I believe the most potent, which is that the Library functions as a community center. I guess, here too I wonder how valid this is? A library may be a place where people can have meetings but typically there are in fact things called community centers for that. Libraries typically are characterized by stern old ladies shushing you which really inhibits that whole interaction bit that is the predicate to functioning as a community center. Then again, I don't read books, I burn books, so maybe I am not a good arbiter of this discussion. Pied, what says you?

I think the basic function of a library, sharing books, is still a good one, even as e-readers proliferate but not as necessary as it once was. To me that augurs for the scaling back of public libraries but not outright elimination of them.

Conservative Stupidity on Mandates

The individual mandate is an idea that was popularized by conservatives during the Clinton administration when the Clinton administration initial reform proposal included extensive employer mandates (which I think was and is bad policy). I don't really mind the mandate per se. I suppose it is somewhat odd that the federal government can require you to purchase a private product, this does seem like a new step (what about an iPod, broccoli, treadmill, how about a specific service- colonics anyone?). That said, it is only an incremental step from subsidizing homeowners or employees of certain firms and so on through the tax code. I suppose this explains my indifference.

In the end, there needs to be some pooling mechanism to prevent adverse selection. I do not view adverse selection as THE central health care problem but it certainly is a problem and could become a bigger problem. Thus, I think the mandate or some substitute is necessary. Maybe you could be required to post a bond in the absence of a mandate. In Germany if you opt out of health insurance you cannot immediately purchase health insurance in the event of a medical crisis, but rather must wait for a predetermined enrollment period (Paul Starr of the American Prospect made a proposal along these lines where the re-enrollment for an opt-out would be restricted to the January of a leap year, that seems pretty significant). To the extent that a subsidy is available for healthcare, such as a refundable credit, its availibility could be conditioned on the purchase of qualifying healthcare. Another alternative would be a federal re-insurance program along the lines of what John Kerry proposed during his 2004 presidential campaign (this type of policy is one that some republicans have embraced, though, they have focused on replicating this policy at the state level). Conservatives are advocating for private insurance and to keep government out of health care. A risk pooling mechanism is a predicate to a functioning insurance market. If the republicans should refrain from gloating unless they propose an alternative risk pooling mechanism.

hat tip: Avik Roy of the Agenda

Christmas and Other Predictions Revisited and Other Consumerist Musings

Back in the glory days of 2007 I predicted that a Blu Ray or an HD-DVD player would be an awful present as the format war had not yet been resolved (so your chance of getting the right format was only 50/50) but I also predicted the winning format would be obsolete soon thereafter as people would increasingly download their content. Frankly, I think I was right on that. Increasingly people are forgoing DVDs or Bluray or any physical media at all and are opting to stream their media (whether for pay or not, legally or not is a different matter). And netflix has been leading the charge.

In that same blogpost I rescinded a previous prediction that SmartCars would be a failure. I think I was too hasty to withdraw. SmartCars had an initial spark of enthusiasm but have since struggled for relevance as everyone has concluded that they suck.

The other thing that has been vexing me is the differing sizes of the tablets out there. The iPad is the standard at 10 inches basically resembling a netbook in size. The Samsung Galaxy Tab is 7 inches and the Dell Streak is only 5 inches. The Dell Streak to me could actually be more of a really large smart phone. The Droid X is 4.3 inches and I wouldn't characterize it as unwieldy. It's funny, the trend was to have the sleekest smallest form factor possible. But since the iPhone the trend has been to get as much screen space as your pocket will fit. But I digress. To me, the iPad is neither fish nor fowl. It is too large to be truly portable or much more so than a netbook. It doesn't really replace my normal computing needs as I do fiddle a lot with spreadsheets and like to run things at the same time. The one thing about the Galaxy tab is that it is a little more portable (maybe it can fit into your coat pocket but not your pant pockets). It could probably replace your GPS without obstructing your view like an iPad, though your smartphone could do the same. I don't quite get the tablet thing though I know a lot of people that have and love their iPads (I can't say the same for the Samsung Galaxy tab or any other android tab). I don't know where I come out on this. I have heard the tablets described as platforms for new applications that aren't really available today but that these newer form factors will facilitate (book-textbook size with touchscreen). I can imagine them in a health care or educational context of being very useful. In college you could see a math textbook slowly evolving into an interactive module that will interrupt you mid formula as you are going down the wrong path in a problem.

Bipartisan Health Care

With the individual mandate possibly in doubt (depending on Anthony Kennedy's mood at the moment) some are speculating that PPACA will need to be heavily modified. Unfortunately, I don't think that the health care bill will be significantly changed anytime soon. I think Republicans would rather have a bad and unpopular policy to campaign against in 2012 than actually do something to fix it. This is foolish because while I do think PPACA is bad policy it is not beyond repair. Additionally, irrrespective of whether or not it is improved upon, I don't think it will be unpopular for long (people love spending other people's money). Anyhow, in the event that Republicans decided that they would actually like to make some good policy, Donald Taylor has proposed something that they might find somewhat congenial. The meat of his policy would be:

1. for medicare to offer catastrophic coverage to every individual and family (Taylor says caps of $10k and $15k respectively, I wonder if he is referring to deductibles)

2. to offer premium support (who qualifies is undefined) for insurance to cover the gap

3. Employer tax exclusion would be eliminated to fund the above.

The first sticking point I see is I doubt republicans would be keen on having medicare for everyone even if it were a catastrophic program. I could live with this. The second sticking point that I envision is the relatively high deductible before medicare kicks in. I don't actually have a problem with it, this would limit the government's exposure in the outyears significantly, however, it sort of shocks the eyes when you see it. There is something of a lock-in effect that makes even a deductible as low as $2500 shocking to people. People have been conditioned to think of first dollar coverage as being free as it is provided by their employer (even though it as at the expense of wages).

Mr. Taylor suggests premium support for "gap insurance". I am of two minds on this. If you go back to the Rand study it appears that people actually manage to be competent health care consumers, with the exception of lower income folks (specifically those with chronic conditions). They are more likely to forgo care if they don't have first dollar coverage (even if their income is supplemented to offset the difference). In the Rand experiment, my understanding is that people were randomly assigned to different health plans but they were provided with side payments to equalize their economic circumstances. So for instance, let's say I had a gold plated plan that normally cost $10k with no copay and no coninsurance and no deductible and was assigned to a plan that cost $2.5k and had a $5k deductible. In the Rand study I would have been provided the cash to cover the deductible and possibly more. The central finding was that people spent considerably less the more coinsurance was involved while having a negligible impact on health outcomes. As I said, the real caveat was for poor folks with chronic conditions such as hypertension. This would indicate that providing first dollar coverage to the very poor would ultimately benefit health outcomes and should be considered preferable to a simple cash benefit. My question is would first dollar coverage also be preferable to something along a health savings account or MediSave (a la Signapore) where unlike cash your only option is to spend the money on health care? If the answer is yes, then so be it. If the answer is no then I think the some sort of either tax incentivized savings regimen (like an HSA) or more preferably a MediSave account (forced savings accounts used in Signapore) would be more preferable as a straight cash transaction involves less overhead and forces the consumer to to be price conscious and evaluate the tradeoffs involved in a given treatment.

Los Angeles Vikings

It would be sort of funny if the Vikes followed the Lakers out to LA.

Tyler Cowen on Income Inequality

In a nutshell his view could be distilled into the following: doesn't matter except for those bastard bankers. I basically agree with this take. It's a good and quick read, enjoy.

Xtra's Pronouncement on the Tax Deal

I think it is crap and stupid. The payroll tax cut is good. I don't know which side it would be better to cut (here is Matt Yglesias in favor of cutting the employee side and Bryan Caplan and Greg Mankiw in favor of cutting the employer side). I don't view boosting aggregate demand as the most important thing in the world but rather cutting the cost of labor so as to reduce unemployment. I think instead of the crap stimulus bill that we got with $100 billion for highways and the stupid Make Work Pay tax credit we should have focused all the tax cuts on the employer portion of the payroll tax cut and sought higher value infrastucture investments but that day has passed. The Obama administration botched that stimulus and they seem intent on botching the tax deal. Some suggest that Obama adminstration had no leverage. I disagree, the default, i.e. current law, would have resulted in the expiration of the Bush tax cuts which the right desperately wanted to presever. If I had been President Obama, at a minimum, I would have sought a downpayment on deficit/debt reduction in the outyears (maybe an increase in the gas tax or a federal booze tax, whatever) in exchange for any extension of the tax cuts. I think the alternative view is that the Obama administration wanted to get as much stimulus as possible and this was the deal that got them that. That may be the case but it is still weak sauce in my view.

What Should Health Insurance Be

Ezra Klein provides a good definition (though I actually doubt that he agrees with this definition):
"... that helps protect you from a health-care crisis is,.."

I think if Health Care Reform mandated such a product, essentially catastrophic coverage, then there would be much less apprehension and uproar about the mandate. Here is my lament from almost a year ago about then proposed high minimum benefits and the problem a mandate creates:

"Thought 1: I have probably said this previously but I think the biggest peril in health reform lies in the convergence of two areas- the minimum benefit and an individual mandate. If the minimum benefit is generous (i.e. covers all the first dollar stuff like physician visits and eyeglasses) than it will be fairly expensive. This will be problematic as even with subsidies (currently proposed for folks with an income up to 3X-4X the poverty level) a lot of the middle class that do not get their insurance from an employer will find themselves still unable to afford healthcare (maybe less so than before) and will now face the prospect of a penalty for not having complied with the mandate. Sounds fantastic.

"Thought 2 (closely related to thought 1 for those keeping score): The emphasis on coverage thus far has been on the first dollar variety (e.g. low deductible, low copayment, low coinsurance). This emphasis is misplaced. Going to the doctor for your annual physical, semi-annual dental checkup, and some antibiotics are the typical interactions for most people with the medical system. This can be done and should be done out of pocket. These are predictable events not suited for insurance and add to the overall cost growth of health insurance in creating administrative waste. What is important though is that you are covered when something unfortunate does happen, such as getting hit by a bus, a sudden stroke, etc. This is what insurance is typically for, low frequency events with high payouts. It is this type of event, a catastrophic event that causes medical bankruptcies for the uninsured. It would thus seem logical that a mandate would involve such a plan-catastrophic coverage-as opposed to something that makes sure you can get a pair of designer glasses and prescription sun glasses without having to reach into your wallet."

The mandate was necessary to make these high minimum benefit plans remotely affordable. I have never been confident that the mandate would actually make the plans affordable (the high minimum benefits make that goal unattainable), but it was the only hope. The legal current legal challenges pose a direct threat to the foundation of health care reform.

Part of the current dilemma could have been mitigated if congress had approached health insurance in a more traditional sense (catastrophic coverage). Mandating a product that costs a family a couple hundred dollars a month without a subsidy is an easier pill to swallow than one that costs north of a thousand a month to purchase without a subsidy. There would still be some opportunistic state AGs willing to file suits but their suits would find fewer sympathizers (on and off the bench). Instead, health care reform has written such coverage out of law. There is in fact something called catastrophic coverage envisioned in the new health care law but it has so many minimum benefits that it would be more accurately characterized as a PPO with a higher deductible.

Bowles-Simpson Commission

I think the commission has actually been fruitful as they have facilitated a national conversation on the deficit and I think have framed a very important issue: tax expenditures. The one area where I think the commission failed was on the revenue side. Their focus on getting rid of tax expenditures and lowering rates was quite good but I would have liked to see some other revenue options thrown into the mix like a securities transaction tax and a carbon tax.

QE2, the Euro, and Currency Devaluation

A couple of good paragraphs from Arnold Kling:
"Yesterday in my high school econ class, I found myself trying to explain why having a separate currency that could depreciate would enable the PIIGS to live happily ever after. I made the textbook argument, but I found myself not so convinced. OK, so maybe you can tell a story where one country that has a recession and a large fiscal deficit would be better off with devaluation. But there are so many countries in that position right now, and they cannot all devalue.
Speaking of "cannot all devalue," doesn't the impact of the PIIGS crisis completely nullify QE2? If the dollar appreciates 10 percent and the foreign sector is 10 percent of the economy, then that represents 1 percent disinflation, which probably more than wipes out any inflationary impact of the Fed's new bond buying program."

Fannie, Freddie, the FHA

The big question is whether we need them. Fannie and Freddie have cost the taxpayer an absurd amount. Yes, I know, they were innocent victims of all other banks malfeasance (that's why they required the biggest bailout? "hmm" he says with a furrowed brow). What is the reason for Fannie, Freddie, and the FHA? Ostensibly they make home ownership more affordable by providing lower mortgage rates. However, if you have a lower mortgage rate then by extension you can afford a larger mortgage thus pushing up home prices in the aggregate and wiping out any savings.

So what is the point of the big three Government Mortgage Giants (I am throwing FHA in here because they are originating most of the loans in the market and my guess is they will be costing the taxpayer an obscene amount shortly). Affordability they don't provide. I think the answer is to provide liquidity in the mortgage market and facilitate a cheap 30 year fixed rate mortgage. I have a 30 year fixed rate mortgage and certainly would prefer one all things being equal. However, all things are not equal. In order to provide me with a 30 year fixed rate mortgage the taxpayer and banks ends up taking the interest rate risk as opposed to the homeowner. If in fact a 30 year fixed rate mortgage is so desirable it stands to reason that banks would offer a 30 year mortgage without a guarentee from the feds. Such a mortgage, one without a guarentee would probably be priced significantly higher then current mortgages, but again, if people are so averse to interest rate risk then they should be willing to pay a higher rate. Alternatively, more people would be inclined to do 5 year ARMS like they do in Canada and continually roll over the debt until the principal is paid down. This would expose the homeowner to interest rate risk that they currently do not face but would also likely encourage homeowners to paydown their principal more rapidly. Some homeowners would find that they couldn't roll over their debt and would lose their homes. The flipside though is that "some homeowners" are less likely to extract massive bailouts from the government than Goldman Sachs and Citigroup when they are unable to roll over their debt. My two cents.

I love WikiLeaks Cablegate

Thanks to WikiLeaks, foreign affairs are no longer the private business of the ruling class, but open for all to see.

Bush Tax Cuts

If I were the Democrats I would say that I had no problem extending the Bush tax cuts for high earners provided they were paid for. This would put the onus on Republicans to find spending to cut or other taxes to raise to maintain current rates. My two cents. If I were a Republican I would respond that an appropriate pay-for would a phase out of the state and local tax deduction.

Carbon Tax, not a VAT

I agree with Matt Yglesias that if there is gonna be a consumption tax it should be a carbon tax not a VAT. I think part of the reason that some are still enamored with a VAT is that it can raise a ton of money, probably more than a carbon tax. That said, a carbon tax should generate substantial revenues and also would more efficiently curb carbon emissions while not sacrificing any ground on efficiency to the VAT.

Ezra Klein's Guide to Philanthropy

Basically, he thinks of himself as a charity case. Personally, I like to do a mix of scientific research less popular diseases (that sounds weird but some diseases can be devastating but somehow aren't as marketable), international development, social services, cultural outlets, and conservation. But to each his own.

More on The Trust Fund

This was a comment that was left on Matthew Yglesias' blog that does a much better job of articulating the problematic nature of the trust fund:
"My point is the value of the trust fund is the value of future congresses to honor the current promises to pay future retirees and the value of future congresses and presidents to transfer money to social security when it is needed.Holders of public debt would probably not flinch or be concerned at all if the trust fund was never paid back. It has no implications for the u.s's ability to borrow from third parties."

Yglesias Pens Uncharacteristically Daft Post

Matthew Yglesias is apparently hot and bothered about the characterization of the SS Trust Fund as lacking assets. His take on the Social Security Trust Fund is incredible. Here is the key part:
"The Social Security trust fund is a very real fund that really contains assets—bonds—that represent lending from Social Security to the rest of the government (ROTG). "

"The only issue with the Social Security Trust Fund is that if you assume ROTG will repay its debts, that means ROTG will need to obtain that many through tax hikes or spending cuts. Conversely, if ROTG avoids tax hikes or spending cuts, that will require additional hikes or cuts from Social Security."

So, to paraphrase, the only issue with the SS Trust Fund is if you assume that the Trust Fund is real then you will be sorely suprised when your taxes go up/non-SS spending is cut/SS benefits are cut to compensate for the fact that the Trust Fund is not real. Great, thanks for clearing that one up. I think this is a post he wishes he could have back.

Millionaire Tax Bracket

The rich are different. Among other things they are very good at sheltering income. Ezra Klein's suggestion of making a millionaire's tax bracket seems foolish as over time it won't get that much income as: 1. there are not a ton of millionaire's though with time there will be more; 2. Most millionaire's get their money in the form of capital gains which are taxed at a lower rate. If you want the super rich to pay a greater share of taxes then capital gains should be taxed as ordinary income.

Wyden-Brown Proposal

I basically agree with Reihan Salam's take on the Wyden-Brown's proposal. I think it would be great to enable states to experiment on health reform by giving them a waiver and letting them implement their own reform but the waiver process is essentially worthless if there is a requirement that the insurance that is offered is as comprehensive as envisioned in the health care bill. Reihan's objection is one I share more broadly with the entire health reform effort which is in order for a state to qualify for a waiver the state must ensure that the insurance is as comprehensive as the health care bill offers. I think that is the central failing in the health care bill which is that in maintains a system of comprehensive health care coverage when we should in fact be shifting away to a system of catastrophic coverage. What if for instance, a state said that it wanted to take the the funds and implement universal catastrophic coverage for everybody and health savings accounts for medicaid eligible population and spend any savings on things that would constitute wellness or public health improvements. This could be as varied as increasing budgets for healthier school lunches, better and more extensive public transportation, promoting walkable communities, expanding community clinics or just return the savings to the people in the form of lower taxes.

Reporters Should Not Be Allowed to Report Unless They Know the Difference Between the General Fund and the Unified Budget

This article makes the basic observation that raising the retirement age hurts the poor. This is a fair observation. Raising the retirement age is probably the most regressive means of putting SS into balance. It is probably also one of the most efficient (keeps people in the workforce longer + lower taxes). Anyhow, I don't think the Bowles-Simpson Commission's proposal of raising the retirerment age a whole 2 years over the next 65 years is all that draconian, but whatever. What really gets my goat about the article is this part:
"On its current path, Social Security is projected to run out of money by 2037, largely because of aging baby boomers reaching retirement. The longer action is delayed, the harder it will get to shore up the program."

Stephen Ohlemacher is probably blissfully unaware of his error. But he has mislead the public and this is typical of how the media treats discussions about social security, budget deficits, and our nation's finances more genearlly. In their ignorance the media has abbetted what would amount to accounting fraud in the private sector. Many will think I am crazy and will say, "but wait a minute, the author is right, there is the trust fund, we have prefunded Social Security to cover the gap between Revenues and Outlays that starts in 2018. That will take us till 2037." Here is the problem with that, every year, the federal government spends more than it takes in (except for a few years during the Clinton Administration).

Presently and since 1984 during the last go around of Social Security Reform, Social Security revenues have exceeded Social Security expenditures. What happens is that the government uses the surplus revenues to plug the gaps in its budget and then issues the Social Security Administration special issue bonds that bear interest (read: IOUs) for the money it borrows. This is where the general fund and the unified fund distinction comes into play. The General Fund does not look at Social Security outlays (but typically does count some of its revenues- to my mind the decoupling of revenues and expenditures in a pension fund is cooking the books). But to the extent it uses the surplus revenues it counts those as revenues. For example, just using some made up numbers, let's say in the current year for the US government to prefund social security it needs to collect $200 billion more than it spends in social security benefits. Now imagine that there is a general fund deficit of $200 billion. The government takes those $200 billion dollars and plugs it into the general fund. Instead of issuing debt to cover the general fund the government now has to issue debt to cover future expenditures to future social security recipients. Let's say that the size of the economy is $10 trillion dollars. Thus, in this scenario, the government by shfiting excess social security revenues away from prefunding the trust fund and into the general fund has not actually changed the fiscal picture. But what our moronic press corp would do is say that the government has balanced the budget deficit as there is no general fund deficit. However, there is a deficit, it has been shfited off the books, that is the unified deficit, and it is in my view the important number. In this scenario since the Social Security trust fund has been shortchanged by $200 billion (in a $10 trillion hypothetical economy) the unified budget defict would be 2% of GDP. The government is doing this even today**.

As I mentioned in the previous paragraph, when the government takes those excess social security revenues, it issues debt not assets to social security. Some say that Social Security trust fund possesses actual T-Bills. It doesn't though. Well, first, you can verify whether this is the case (click on this link), and it is not. Second, it wouldn't actually make a difference. A T-Bill is a form of debt that the government issues. You get a T-Bill in exchange for giving the government money. That T-Bill is backed by the taxpayer and at some point if you want to redeem it the government will have to raise revenues to pay you. So if the SSA were to in fact posess T-Bills it would be the functional equivalent of having an IOU as one part of the government would be issuing debt to another part of the government. The end result would be the same. The taxpayer would be asked to cover the debt.

Going back to the title of this post and how it relates to the earlier quote, my objection is the characterization of Social Security as being solvent until 2037 is essentially false. An accurate statement would be: 1. Social Security is solvent so long as social security revenues are equal to or greater than Social Security expenditures; 2. Social Security will continue to be solvent after social security revenues are less than social security expenditures if the taxpayer is willing to fund the difference. The second clause may or may not be true. So here would be my proposed revision:

"On its current path, Social Security is projected to run out of money by 2018, largely because of aging baby boomers reaching retirement and generations of fiscal mismanagement and creative accounting. We are past the point of no return, future benefits will be cut at the margins next decade and wholesale in the decades thereafter."

The health of social security is contingent on the ability to redeem the bonds in the Trust Fund. The ability to redeem the bonds in the trust fund is tied to the health of government's finances more generally. If publicly held debt were low, issuing new debt to fund social security wouldn't be an issue. However, the Government's finances are piss poor and deteroriating and we are just beginning to work our way through the baby boom. The media in pretending that there is some imaginary pot of gold out there that is gonna cover the next two decades of Social Security expenditures. They have been unwitting accessories in cooking the government's books.

* I am not entirely sure if this is accurate for 2009-10 as the social security revenues are depressed as a function of the recession.

Military Brain Drain

Matthew Yglesias has a great post on one of the overlooked consequences of military spending. While the military does foster a lot of innovation and development through its spending it also raises the price of engineers and sucks away a lot of talent from more productive endeavors than killing feriners.

PeP Phraseology Smackdown

The New Oxford American Dictionary has crowned Refudiate as the word of the year. This is a really stupid one. Refudiate does not capture a new concept (see unfriend) or is not a novel twist or combination of words (see chillax).

More on the Bowles-Simpson Plan

Glenn Hubbard has a good rundown on the commission's chairs' report.

Tax Hikes Republicans Should Put Forward

If Republicans are serious about deficit reduction they will have to get serious not only about spending cuts but also raising revenues, and that means raising taxes. Now, some see the Republicans stated desire to maintain current income tax rates as being in competition with deficit reduction, this is not necessarily true. One can raise taxes without raising rates by broadening the taxable base (which has been significantly narrowed by a myriad of deductions, exclusions, and credits). Additionally one can tax different activities other work to raise revenues. If I were the Republicans I would propose that for every dollar of revenue raised the revenues be split evenly between deficit reduction and rate reduction. To raise revenues Republicans should propose the following:
Base Broadening Tax Modifications
1. Cap the Employer Exlusion today and set it at the average plan on the FEHB and index the cap to inflation (extend the tax treatment to those who buy their own healthcare, this will offset some of the revenues but will also be a good thing for small businesses and entrepeneurs.)
2. Cap the Mortgage Interest Deduction (currently you can deduct interest on a mortgage up to $1 million dollars, even for a home equity loan or a second home. Cap the deduction at $500,000 of interest and make home equity loans or second homes no longer applicable for the deduction). Don't index the cap.
3. Get rid of the State and Local Tax Deduction
4. Simplify all of the different tax advantaged savings programs- create one pre-tax savings vehicle and one after tax savings vehicle that everyone is eligible for- My suggestion would be a universal 401-k and a Roth IRA

Ancillary Revenues (New or Higher Existing Taxes)
1. Sin Taxes- the alcohol tax alone can raise significant revenues. On the flip side you would have fewer murders, rapes, and drunken driving deaths and injuries. Win/win.
2. Tobin Tax- Setting a modest financial transaction tax could raise a significant amount of revenue (up to $100 billion annually) while at the margins reducing market volatility
3. Gas Tax- Convert the gas tax from a fixed amount per gallon to an ad valorem basis. As the price of gas goes up so to will revenues (unless consumption of gas all of a suddent decreases much faster than the price of gas increases)
4. Carbon Tax- This is not happening but again, I think this is an area where Republicans could reorient the party in a sensible direction that is both economically efficient, distrubitionally neutral, and environmentally conscious. The tax could be very modest to begin with, though, consistently increasing over the years and plow the revenues to offset payroll taxes.
5. Bank Tax- Tax bank size. I don't know how much revenue this would raise, in an ideal world revenues would be close to nil as banks would be smaller and pose less of a systemic risk.
6. User Fees: Many agencies are funded in part or whole through user fees. These practices should be expanded.

In Case You Were Wondering...

what your municipal government's regulations regarding urban chicken coops was here is a handy link: http://home.centurytel.net/thecitychicken/chickenlaws.html

Can You Cut the Federal Workforce and Contractors?

Stan Collender says that if we cut the federal workforce and contractors that support them then some work is gonna have to be left undone. Mr. Collender has made this point a couple of times before. I think Stan Collender typically has very interesting and informative things to say about public policy but this is daft. I work in the government and on my floor alone you could send 25% of the people home (contractor and fed alike) without any loss in productivity. I am in my 20s and every where I turn I bump into somebody who is a GS-14 or GS-15 who has no real responsibility and is constantly figuring out ways to make themselves scarce. You don't lose anything by canning someone that isn't doing anything. And as it is virtually impossible to fire someone in the federal government (in my five years in the government the only thing someone that is not SES has been fired for is watching Porn). In theory contractors are supposed to serve as a workaround for managers but it usually doesn't work out that way. If you are an ineffective manager and you decide to augment your staff through contract because your employees are shirking what often happens is the contractors start to act like the feds. And because you have not disciplined your employees, because you are averse to confrontation or whatever the case may be, you don't ride your contractors. As such, you find lots of scenarios where we are spending $200k for someone to GS-7 Admin Assistant or Program Assistant type work just so we have the option of canning them but fail to exercise this option (a dear one) when appropriate. This is why you need to fire both feds and contractors. If you want to achieve greater productivity in the federal workforce there are two things that I believe are necessary:
1. More accountability, less job security (sometimes people should be fired, it is shameful how much deadweight taxpayers are asked to bear)
2. Higher Salaries at the Senior Management Level. I believe government is a good place to start salary wise but as you move up the career ladder it tops out too quickly. As a GS-15 or SES you can have a tremendous amount of responsibility yet your salary (starting $125k) isn't really competitive. Once you get to that level the traditional benefits of public sector work (a less hectic schedule/or more family friendly schedule) disappear but are not mitigated by a competitive salary. The only saving grace is that you don't have to do the sales work and proposals that you would have to do with a consulting firm. But you will end up on the hill, at trade associations, getting screamed at by stakeholders, etc.

Revenues As A Percentage of GDP

Historically revenues as a percentage of GDP have averaged around 18%. Obama's deficit commission is proposing to elevate the federal government's take to 21%. Liberals are howling that this is to low. That is a pretty significant tax hike, I don't see how you can dismiss such a proposal as unserious as it pertains to the revenue side. If anything it's ambitious.

Washington D.C.

I grew up in D.C., one of those rare natives you hear about. I actually think we as a folk, the natives that is, are a nice group of people. The problem with D.C. is that States expunge the greedy, selfish, narcissistic, and power crazed and they all come and settle here. To get a good feeling of this dynamic and the resulting culture you must read the comments on this article. Mind you, Sidwell Friends is probably the premier private school in D.C. and costs as much as a private college does.

hat tip: Marginal Revolution

Don't Repeal Obamacare, Reform It

Republicans are not going to succeed in repealing Obamacare without control of the Senate and Obama still there to veto any such repeal. As such, I don't think they should bother. While I belive Obamacare is an abomination in its present form it can and should be improved and there are ways of doing so that provide opportunities for bipartisan cooperation.

1. Funding: Both parties are giving lipservice to the deficit. However, Republicans have stated that they do not want to raise marginal rates. On its face this appears hypocritical but it needn't be. One way to raise a significant amount of revenue would be to cap the employer exemption on healthcare and align the cap with the cost of a High Deductible Health Plan (HDHP) plan. This would have a significant and immediate impact on cost control thus reducing spending in the out years while raising more than letting the only the upper tax bracket of the Bush Tax Cuts (as the White House has proposed) expire would. This would also accelerate the transition away from an employer provided system.

2. Minimum Benefits: The current health care bill's principal failure is that it defines the minimum benefit in at a very high level. As such, most routine predictable care is paid by an insurer. Adding a party to a transaction is inefficient but also promotes overconsumption as prices are not immediately evident to the consumer. By capping the employer exemption more people would opt for HDHPs where routine non-catastrophic care comes out of pocket but Obamacare has effectively outlawed such plans by defining a high minimum benefit level. Reducing the minimum benefit level to a naked HDHP will also make the individual mandate more effective as the penalty (while staying the same) would be more significant in relationship to the much lower premiums of HDHP plan. This would ameliorate the potential adverse selection spiral that Obamacare presently appears destined for.

3. Exchanges: Accelerate implementation of the exchanges, allow individuals to buy into them as opposed to employers. Let individuals buy across state lines tomorrow. These three steps together would get employers out of the health care game. If employers are no longer providing health care this should make employees at the bottom end of the wage scale significantly cheaper and help with the unemployment picture.

These three elements would preserve the basic architecture of Obamacare, maintain the coverage expansions all while reducing the present and future cost of implementation.

It Costs Two Cents to Make a Penny

Which to me indicates that it is no longer a useful medium of exchange. Be done with the penny.

Scary Quotes

"3. Social Security won't much change, keeping in mind that the number of elderly voters is growing larger every day. Given all their elderly white voters, the Republicans are already "the party of Medicare." The Democrats have become "the party of Medicaid." That locks three major programs into place, more or less. I don't hear serious talk of major cuts in defense spending."~Tyler Cowen, Marginal Revolution

Cross Country Train

"Why don't more of us take the train, and why doesn't Washington invest in the rails across the country to give more of the country, and not just the northeast corridor, the pleasure of the Acela, with speeds up to 150 mph between Boston and Washington?" -Peter King, SI

This is a really stupid question. Why would you want travel across the country on speeds of up to 150 mph on a train when you can do so on speeds up to 500 mph in a plane? Trains are a very enjoyable and efficient means of travel for trips under 250 miles (and probably 500 miles for the forseeable future depending on the price of gas).

Trompe L'Oeil Speedbump

TTAC calls this the 'creepiest application of the “trompe-l’œil speedbump”'. I have to agree. I wonder if this is really more effective than a physical speed bump or will it just cause a couple of older folks to have a cardiac arrest when they are under the false impression that they just ran over some girl chasing after a pink ball in a parking garage?

Unfortunate Names: DC School Edition

One of the rumored short listers to replace Michelle Rhee (assuming that Mayor-Elect Gray cans her) is a fellow by the name of Robert Bobb, or to be less formal, Bob Bobb. While Bobb-Squared's parents must have had contempt for their child, they did create an impressive fellow. Here's his wiki.

PeP Phraseology

The word chillax is a hybrid of chill and relax. Some would say this type of word is superflous but I would argue its adoption in the urban lexicon is what makes the English language rich. Thus my shock and horror when I looked up the proper definition on dictionary.com to find it did not have an entry.

Rosy Scenario's Secret Identity

I have discovered Rosy Scenario's secret identity. Her true name is Brad DeLong. Go read the whole post. Brad's logic is that right now it is obscenely cheap to borrow money and thus the potential long term budgetary costs are negligible (especially when you consider the potentially high social costs of structural long term unemployment). Brad looks at the borrowing as a one time cost and seems to assume no difficulties rolling over the debt. That is more what worries me.

That said, I largely agree that we should have taken advantage of the low borrowing rates and cheap labor available during a recession and that the first stimulus could have and should have been crafted better (50% of it was wasted on poorly constructed tax cuts). I would like to see such borrowing paired with future tax increases and spending cuts as early as 2 years out.

If the Bush administration had done any work whatsoever on planning for high speed rail, upgrading our grid, or implementing more mass transit (hell, just fixing what ought to have been fixed such as bridges) we would be in a much better situation right now. A lot of those unemployed construction workers could have been employed in a beneficial manner (at a discount). The taxpayer would reap the benefit of an upgraded infrastructure (with extremely low financing costs, likely lower if paired with a credible deficit reduction plan).

Al, We Hardly Knew Ya

If the smoking gun is to be believed, Al Gore likes handjobs from strangers. I don't see that as a problem. That said, I wonder what Sen. Gore's voting record was on these types of activities? I think if Al Gore had introduced legislation once upon a time called the Massage Parlor Freedom Act or the Happy Ending Act that that might have softened some of the rough edges of his public image. Personally, I am always much more comfortable with a Democrat whose views of limiting government intervention extend beyond abortion and sexual orientation.

BP and Unemployment

I do like the following idea from Robert Reich: "The President should order BP to establish a $5 billion clean-up fund, and immediately put America’s army of unemployed young people to work saving the Gulf coast. Call it the new Civilian Conservation Corps."

PeP Endorsement

I am endorsing Blogger cum Senate candidate Mickey Kaus (D-CA) to be California's next Senator. Given my previously established influence over the interwebs, I firmly believe that this endorsement will have an earth shattering impact (Kaus thinks that he will get about 3% of the vote, my endorsement should probably swing another 1%).

My rationale for endorsing Mickey Kaus is principally self-serving (somebody needs to set the precedent of a blogger becoming a big time politician so that it's not perceived as crazy when I jump straight to the white house without holding major office) but there are also more substantive reasons. One, I think it is important for someone who will not be immediately perceived as a bigot (thus, not a republican) to advance a sensible enforcement first-legalization later immigration policy. Aside from being better policy I think this would have a salutary impact on the immigration debate. Two, Kaus while liberal, would promote heterodoxy in general. Once other politicians saw how reporters had a lip lock on his ass for going against the grain on major issues other politicians and candidates will have an incentive at the margin to act out of envy and see personal gain in telling their leadership to go to hell. Again, I think this too would have a beneficial impact on policy debates and ultimately on policy outcomes. So with that said, I endorse Mickey Kaus for Senator.

Sensible Celebrity Quote

Normally I cringe when actors and such offer their politcal opinions as they're policy advice tends be daft. That said, this, from James Cameron, is very sensible:
'"The government really needs to have its own independent ability to go down there and image the site, survey the site and do its own investigation," he said.
"Because if you're not monitoring it independently, you're asking the perpetrator to give you the video of the crime scene," Cameron added.'

My Influence is Boundless

My call for a BP boycott is mushrooming. I am one of the most important people on the internet. See this article, it may not mention me by name, but it is really all about me. I get results.

Great Sentences

I loved this sentence from Politico (the quotes are from President Bill Clinton stumping for Blache Lincoln):
“'If you want to be used that way, have at it,’ he said to about 200 Democrats at Philander Smith College, speaking without notes for 20 minutes."

BP Sucks

Just a public service announcement. Go anywhere else but BP. Boycott BP.

How To Lose an Election: Vincent Gray Edition

Lesson 1: Do not oppose a popular program that your opponent supports, highlight said opposition, then only to knuckle under once you discover that it is popular within the same day.

Example: Vincent Gray earlier tried to strip funding from the streetcars in the d.c. budget and tried to use it as an issue to bash Mayor Adrian Fenty over the head with. Now this is stupid for many reasons. The streetcars are a good idea. They will enahnce connectivity in the core and are already spurring development. Wait, you ask, "how can nonexistent streetcars spur development?" Well, the streetcars are not running, however, a lot of construction has already occurred. The streets where the first phase of the streecar implementation is supposed to occur have already been dug up to set up the utilities, tracks have been laid for the majority of the routes, and actual streetcars have been purchased and delivered. This sends a signal to investors and potential homeowners. Potential homeowners might be willing to forgo amenities presently for rising property values later. Restaurants are willing to open up now to take advantage of cheap rents. Businesses relocate in anticipation of new foot traffic. So a large part of the work has been done and good amount of the money spent and to some degree the benefit has already started accruing. Unless you think that it is a foolish project it would make no sense to terminate it at this point. Anyhow, apparently Vincent Gray came to this same conclusion after half the city called his office in an uproar (in his defense, the majority of the council voted with him to strip out the funding, it was 11-2 vote- but they were not running for mayor).

"The Battle"

I agree with Bryan Caplan's take on Arthur Brooks new book; I wish I agreed with the premise but I think it is absurd. Brooks is arguing that 2/3rds of Americans are solid free enterprise folks but the other Social Democratic 1/3rd has managed to capture all influence and power and steer the country towards sclerosis (read: Obamacare). I don't think the median voter has all that coherent a political ideology. I think at the federal level politics seems to large, distant and abstract to really have any influence. That Americans are at heart more libertarian is probably true in relationship to the average European but Americans like a lot of interventionism too.

Massachusets: Our Health Care Future

It is rare in the policy realm where we can refer to a natural experiment. Massachussets is one such example and what this portends for the nation's future fiscal health is bleak. I think this quote from Megan McArdle sums up the issues with both the Massuchussets universal plan and Obamacare: "It's hard to simultaneously expand demand, while lowering the incentives for supply (i.e. Medicare reimbursements), without having some pretty dramatic mismatches between the two."

Two Sides of the Same Coin: Excessive Spending/Insufficient Revenue

The Center of American Progress has an interesting little bulletin documenting that Greece was not extraordinary in its spending but rather in its lack of revenues which were far below the average for Eurozone members. The bulletin then goes on to state that this notion of excessive spending being the cause of the Greece's demise is a myth. Their argument relies on two basic observations- Greece was close the median amongst Eurozone memers in terms of spending in relationship to GDP and Greece was at the bottom amongst Eurozone members in terms of revenues. I actually get their argument. They are making a technical argument that if Greece had a more efficient tax system they would have collected a similar ratio of revenues to GDP then in theory their fiscal deficit would be nowhere near what it is now.

In reality this argument is stupid. It would be like me saying: "The problem is not that my lifestyle outpaces my means, but rather I am not paid enough". Both statements in that sentence are saying the same thing but from different directions. Greece didn't have an efficient tax system like the median member of the Eurozone, which would lead to the obvious conclusion that it could not afford the median member of the Eurozone's spending habits. That it did spend thusly indicates that in fact, Greece's spending was excessive. There is no such thing as a spending problem that isn't a revenue problem or vice versa. In the end it is question of making tradeoffs which nobody can postpone indefinitely. That is the lesson I hope, but doubt, our lawmakers will take from Greece.

Public Sector Wages

Though it pains me to say this as a civil servant I think it is absurd that public sector wages have not been reduced or at the least frozen. If private sector wages, which when taxed are fund to public sector wages, stagnate or fall it would seem to me that public sector wages should similarly be reduced or cut. While I recognize stimulus was necessary (though I thought it was wet pile of dog shit), as the economy rebounds we will need to start acting aggressively on budget deficits. Cutting salaries is obviously a small step but it should be among the tools available.

The Next Global Depression

This from Tyler Cowen: "6. Basically the ECB is monetizing bad government debt claims." I think the net result of all this will be that Northern European governments and banks will be able to paper over Southern European's debts for a time but the cumulative result is that moral hazard has become more pronounced and global in nature. Increasingly it seems that the counter measures to this recession will be the proximate cause for a global depression.

Great Column from Ken Rogoff

Ken Rogoff has been beating the drum for a while that the financial crisis is a precursor to a Sovereign Debt crisis and he appears to be right. Here is a very informative column in the FT.

Ezra Klein Has a Stupid Post on Frannie

This post from Ezra Klein seems particularly daft. Ezra Klein is going to great pains to distinguish Frannie from the rest of the financial world due to the fact that Frannie deals with housing and how thus Frannie should be dealt with in a separate housing bill not the FinReg. However, the impetus for the FinReg bill is in large part to prevent another "Great Recession". A proximate cause for the current recession was a bubble induced by the financing of housing of which Frannie where major players (though contributors, contrary to absurd claims on the right, not the cause of the current mess). The only valid point Klein makes is that Republicans are proposing a stupid policy which this day and age is the same as saying the sky is blue.

Humor from Andy Stern

"It is the greatest middle-class, job-creating mechanism that we have ever had in America that doesn't cost tax payers a dime."

This comes from an interview with Ezra Klein. Naturally, Mr. Klein let the comment stand. His salary should really be considered a contribution from the Washington Post to the DNC and the unions.

Voucher Fail?

Liberals appear to be happily stomping on what they presume to be the tomb of the voucher movement. This celebration is predicated on the failure of vouchers to be the silver bullet for Milwaukee's educational needs. The Milwaukee voucher pilot demonstrated modest gains at a cost per pupil less than than public schools average expenditure for student. It just seems odd to label something as an outright failure when it yields a slightly better product at a lower cost. Most folks would call that an improvement, not a panacea or silver bullet, but an improvement.

WTF!?!?!

McNabb is a Redskin?

Will the GOP Remain the Old White Crusty Dude Party in Perpetuity

Not necessarily says Gene Healy:

"Yet, here’s an interesting fact: Recent Census Bureau figures predict that the working-age population will be 55 percent minority by midcentury. It may be hard to imagine the Tea Party movement becoming a Rainbow Coalition. But it’s even harder to believe that minority voters will enjoy paying for the (mostly white) baby boomers’ retirement and health care while they’re working to support their own families."

That's an interesting thought but I think the GOP will need to be crushed harder before it decides it needs to market itself towards a more diverse array of voters. Given that this midterm election is going to be a positive one for the GOP it is unlikely that such a change will occur anytime soon.

Gary Becker gets to the biggest aspect of our cost growth in my view- insulation from out of pocket spending-

"Here in the United States," Mr. Becker says, "we spend about 17% of our GDP on health care, but out-of-pocket expenses make up only about 12% of total health-care spending. In Switzerland, where they spend only 11% of GDP on health care, their out-of-pocket expenses equal about 31% of total spending. The difference between 12% and 31% is huge. Once people begin spending substantial sums from their own pockets, they become willing to shop around. Ordinary market incentives begin to operate. A good bill would have encouraged that."

Health Care Passes

Republicans lost, I would argue so did our nation's finances. Things Republicans should focus on in the next congress on improving health care and making it affordable long term:
1. Change the definition of the minimum benefit to HDHP
2. As part of tax reform cap the employer exclusion
3. Enable the purchase of insurance across state lines

Student Loan Reform and Health Care bundled Together

I find this ironic because the methods of financing both higher education and health care are in a general sense quite similar (3rd party payment) and both have exhibited higher than average cost growth without delivering superior outcomes. And the legislation being proposed for both appear to do little to arrest the current trend but at best will reset the baseline a little lower.

Note: The student loan reform proposes to make the government a direct lender to students. This will reduce the interest rates of the loans as they will have to cover for the rate of default but not profit. However, if the interest rates are lower then students can borrow more thus enabling Universities to charge higher tuition thus necessitating greater indebtedness yet from their students. Rinse and repeat so the cycle goes. The only thing that has changed is there isn't a middle man getting a take and for the purposes of reducing public corruption alone that is all to the good (though, during the Clinton years banks had to bid in order to provide lending services which made it a much more transparent and efficient operation). On a positive note the bill does propose plowing some of those savings (a meager amount as most of the savings are used to offset the health care bill) into Pell Grants.

Worst Bio for A Senator

Risk Modeler for AIG? CEO of Lehman Brothers? How about Chief Economist for Bear Stearns? Yes, the former Chief Economist of Bear Stearns, David Malpass, major housing bubble Pollyanna is gearing up for a Senate run. In New York, this background may be overcome but in every other state in the union I would think his background would be an insurmountable obstacle.

Orrin Hatch Has a Very Misleading Op-Ed

Orrin Hatch argues that using reconciliation for health care would be a travesty for democracy. I think the end result of passing health care would be disastrous but not for procedural reasons. The op-ed is misleading as he conveys that broader health care reform would be enacted using reconciliation. This is false. Reconciliation would be used to change a bill that has already been voted on by the Senate and got a supermajority. Reconciliation would only affect those measures that directly impact the budget, such as subsidy levels and revenue provisions. Reconciliation is used to this effect regularly. Republicans used it regrettably with the Medicare Plan D. Again, I am no fan of the health care reform bill but this op-ed is plainly disingenious.

Postal Service

It looks like they are going to cut their Saturday deliveries. I know it is a popular past time to complain about the US Postal Service but I have always been impressed with their service. That said, the only time I am reliant on the post office is for netflix. I am guessing at this point the Post Office's relevance is similarly diminished for most people. Couldn't we shut it down?

Was the Senate's Makeup Solely a Political Bargain

Thus claims Ezra Klein:
"Finally, Will accuses liberals who are not sufficiently respectful of the Senate's undemocratic nature of believing the Founders either "dolts or knaves." This is nonsense. The Founders were trying to entice large states and small states alike into an uncertain union. They solved it as best they could. And as part of their solution, they decided that the Senate should be appointed, not elected."

This is certainly true to some extent, however, verily overstated. The disparate composition of Senate and House are largely a reflection of a balancing act our founders sought to strike between preventing the ascension of a tyrant and mob rule.

Question About Toyota

Any chance the reason the gummint is slamming Toyota has more to do with Government ownership of GM as opposed to safety issues?

More Insurance Equals Better Insurance

This is the underlying premise of health care reform, that we need to further insulate consumers from costs of their health care. I come from the opposite premise; we need to insure against catastrophe and for the most of the population leave it to them to cover predictable expenses. In every other avenue of life, we do not buy a financial product whose sole purpose is to add parties to a predictable transaction. Why should health care be different?

Who Needs the Public Option

I think Obamacare is an Obamanation but it amuses me that progressives find the absence of a public option to be so disheartening. The legislation will force insurers to issue a policy to all that want one, forbids any price differentiation based on risk, guarantees renewal, defines minimum benefit levels, and now effectively establishes price caps. Insurance companies will effectively be public utilities. The only distinguishing factor between insurance companies and the public option would be the statutory authority to use medicare reimbursement rates.

CBO Scuttebutt

One of the things that will be interesting to see with the President's new health care proposal (this is supposed to be a compromise between the Senate and House bills) is how the CBO treats it. At first blush it appears that the revenue and subsidy changes are modest and should only inflate the bill's 10 year budget number slightly. However, in the president's proposal the government would obtain the authority to reject rate hikes by insurers. This coupled with all of the other changes in the bill would in effect reduce insurers to public utilities. It is conceivable that the CBO would decide that premiums paid should thus be recorded on budget thus massively inflating the budget number.

The Bachelor Reunion Show Liveblogging

It's my dirty little secret, I watch the Bachelor. My fondness for the show has an inverse relationship with the douchebagginess of the season's bachelor. This season features air line pilot Jake Pavelka, arguably the biggest douche to ever walk the earth. So I am loving this season.

Anyhow, here's my prediction for the Season finale: Jake picks Vienna. Upon her selection, a sex tape of Vienna makes it onto the internets. Jake reveals in the season wrap up show that Vienna gave him the herp but that he hopes that they will make it through it.

Bitch Set Me Up Volume 87

Marion Barry has been accused of self-dealing for the umpteenth time. How shocking!

Salinger and Sex

I've come across two really interesting essays on the sexual character of Salinger's published and published-but-rigorously-out-of-print writings. This post on the LRB blog offers a theory of the real meaning of "bananafish". This article in Slate extrapolates from a little known hot and sexy essay that Salinger wanted to write about sex and perhaps did until he died. Fascinating.

SOTU Thoughts

President Obama will give the SOTU in five minutes. It will be very interesting to see what remarks he has on health care reform. I can see him going one of three ways: 1. Trying to sell reform and implore the House to finish up the job; 2. Also suggest a path to a scaled down health care bill; 3. Not mentioning it. My guess is he will go with option 1. There is some discussion bubbling up that the House would be willing to vote on the Senate bill if the Senate took up amendments to the Senate version in Reconciliation. The other big expectations are that Obama will publicly push Congress to repeal "Don't Ask, Don't Tell". Obama is also expected to announce a spending freeze in discretionary spending. That is small beer. The other issue to watch out for is financial reform.

The Apple iPad

It will f$%k you up for life. Just Kidding. I don't really get it. It seems like a netbook with a little more content. It looks really pretty and some people think it will be the neatest thing since sliced bread. My track record is horrible on these things.

note: I don't think my predictions were totally off base about the smart car. They haven't taken the world by storm but they are common enough to be considered mainstream (to the extent that driving a clown car can be considered mainstream).

More Proof that NoVa is better than MoCo

Courtesy of Urban Turf.

PeP Link Farm

Saab is officially undead.

Union membership dropped 10% last year. Which makes it all the more galling that the House won't vote on the senate health care bill so as to appease unions (why appease them when they are disappearing).

Bruce Bartlett discusses Obama's plan for a discretionary budget freeze- partying like it's 1937 again.

Ezra Klein wonders why Obama is proposing the discretionary budget freeze in a vacuum as opposed to using it as a negotiating ploy. I wonder myself, seems like an unforced error.

Garret Jones has a provocative twitter- If you want to decrease spending increase earmarks.

Chuck Schumer and Orrin Hatch have an op-ed in the NY Times proposing a temporary cut in the employer portion of the payroll tax to stimulate employment. This is something we should have done with the first stimulus.

Ezra Klein has a sort of stupid take on the Hatch proposal, but not completely wrong. He sees the virtue of the proposal as harnessing the rich's irrational desire to avoid taxes. I think most would simply note that its chief virtue is reducing the cost of hiring someone. I suppose though they are two sides of the same coin.

Raghuram Rajan proposes eliminating deposit insurance. It's certainly a provocative proposal.

My Modest, Scaled Down Bipartisan Healthcare Plan

Step 1- Revenues and moving away from the employer-based system-

I propose a full phase out of the employer exclusion for those with incomes above $125 k for an individual/ $250 k for a household. This would only yield a modest amount of revenue assuming a static model. There aren't all that many households that would fall into bracket, however, those that do tend to be upper middle management. I think once hr directors across the country see their tax liability go up anywhere from $2-5k that they may rethink the virtues of having their company "provide" their healthcare. This would not cause every company to cash out their fringe benefits and only pay cash wages but it would significantly shift things in this direction.

Now, obviously, getting rid of the employer exclusion would transform compensation norms away from non-taxable benefits to taxable wages much more quickly, but this is probably not politically possible. One could argue that touching the employer exclusion is basically impossible as evidenced by the fact that an incredibly weak excise tax (this was basically a roundabout way of gradually eroding the employer exclusion-really gradually, like decades) sent labor into a tizzy and is arguably the proximate cause for the failure of current health reform bill (that and the fact that house democrats are apparently stupid and timid). I think what distinguishes this proposal is that labor's ox is not getting gored by and large. Most union members do make good salaries but not on this order. Rather, it is a soak the rich proposal which usually is politically palatable. The strength of the proposal is not that the rich will be successfully soaked but in attempting to avoid being soaked explicitly will drastically change the way companies pay their employees. Far fetched, I don't think so.

Step 2- Dump people into the individual market and let them buy insurance across state lines

I know, the individual insurance market is horrible, yadda yadda yadda. One of the basic problems with the individual market is that many states suffer from minimum benefit creep. If you live in New York or some other states where there are very generous mandated benefits chances are your choice is between buying a policy that is exorbitantly expensive and going uninsured. Given that you need food and shelter, the choice most people make is to go uninsured. In choosing between protecting folks from catastrophe on one side and providing insurance that has a no-copay for acupuncture treatments on the other side, I think the providing protection against catastrophic bit is more important.

Why propose buying across state lines as opposed to a national exchange? National exchanges, while a great idea in theory, are likely to be a cess pool for rent seeking. The notion of a basic catastrophic plan being offered unmolested by gentle nudges from the hill (in response to contributions from the AMA) is simply inconceivable. One could counter that without national exchanges, buying across state lines will promulgate a regulatory race to the bottom. Yes, this is a feature of my plan, not a bug (within reason, addressed later in the blog). In the end, my underlying assumption is that we insure ourselves in a perverse manner, and are incentivized to do so by tax incentives. I don't think it is necessary to add third and fourth parties to a simple transaction covering a predictable expense. Thus, my optimal insurance plan would be a pure high deductible plan where you pay cash directly to the provider until you hit the deductible where the insurer would take over (as the deductible would be around $2,500 for an individual the likelihood that you would hit it in a given year is very low). By going the federalism route such a insurance product is more likely to survive.

Step 3. Mandate a couple of insurance reforms- no rescission, guaranteed issue

The danger of buying across state lines and the attendant race to the bottom is the prospect of incentivizing rescission. Ban it, problem solved. This would make premiums more expensive, however...

Step 4. A Federal Catastrophic Reinsurance Plan

People with pre-existing conditions are basically uninsurable. I liked John Kerry's proposal during the 2004 campaign for catastrophic reinsurance. The basic contours of his plan was that after a certain threshold (I think it was $75k) the government would pay half the cost. I wouldn't touch community rating however as it does away with the one thing insurers do well, price risk(never mind that whole AIG thing, nothing to see here). If there was a federal catastrophic reinsurance plan insurers wouldn't have the incentive, or nearly as much of one to screen for pre-existing conditions, but they would have an incentive to price according to certain unhealthy behaviors- like smoking.

Step 5. Use revenues from step 1 to provide a refundable tax credit to those under 200% of the poverty line in amount sufficient to cover the premium and 75% of the deductible. Phase out the deductible contribution and premium coverage by 350% above the poverty level.

Step 6. An individual mandate. Again, if people want to blow their nonrefundable tax credit on crack that is fine with me, but they should have to pay a penalty. A HDHP by itself in VA (my lovely home state) is about $1500 per annum. A penalty of $500 would probably incent most to go ahead an buy the insurance.

Sidebar- Federalize medicaid and get rid of the State and Local tax deduction.

This plan would be considerably less expensive than the currently proposed one, would do more to reform the system, and in the long run would have greater likelihood of containing costs. It would probably be disruptive though.

Volt Coming To D.C.

D.C. will be joining Michigan and California as the first markets where the Chevy Volt will be sold.

Beating a Dead Horse

"In its present form without any changes I don't think it's possible to pass the Senate bill in the House," Pelosi said, adding, "I don't see the votes for it at this time."

This is amazing to me.

Learning to Love Glass-Steagall All Over Again

President Obama appears to be pushing for financial reform and it looks like he has shifted directions in a positive direction (away from the influence of Geithner and Summers and towards Paul Volcker). The principle objective of the reform seems to be to walk back from the Too Big to Fail doctrine and to fashion a new Glass-Steagall.

Health Care Reform is Dead

Labor is throwing a fuss about the excise tax and has now declared opposition to the Senate bill.

I think this effectively kills the reform effort. Even with Brown's election the house could vote on the Senate bill that has passed exactly as it was written and pass it into law (the ping-pong route). This would obviate the need for an additional senate cloture vote that would be necessary if the bill went to conference, which became increasingly important as of yesterday when the Democrats lost their 60th vote. However, now that labor is opposing the senate bill this makes ping pong route unlikely.

The Senate could try to craft new legislation but it no longer has the 60 votes unless it is able to turn a republican or two. Obviously this raises Olympia Snowe's importance. The important question is will Olympia Snowe be willing to ditch the excise tax and embrace a revenue measure that is likely to pass in the house (such as a surcharge on top-earners). I view this as unlikely.

I still think some bill will be passed that is called health care reform but it will be substantially less ambitious.

Playoff Blogging

I think Neil Rackers is gong to be looking for a new job.

Pricing Transparency in Health Care

Matt Yglesias, normally super intelligent blogger, has made a breathtakingly stupid argument against the potential efficacy of pricing transparency in health care:

"I went to the Maine version of this idea and decided to pretend that I was living at my dad’s summer house in North Brooklin, ME and was considering my hospital options. It turns out that the closest place to get a knee MRI costs $1,550 and is a 40 minute drive to Ellsworth. There are two slightly cheaper options in Bangor—$1,159 or $1,160—but that’s more like a 75-80 minute drive. So the competition in this market is not very fierce. Bangor is the second-largest city in the state; it’s not convenient to get there from Brooklin, and even there you only have two options. Possibly not the best test case for these ideas."

An additional hour of driving would save the hypothetical patient $350. How many jobs pay you $350 per hour? Unless you work for Goldman Sachs, work for KPMG fudging Goldman Sachs books, or are a lawyer helping Goldman Sachs fudge their financial statements, very few. The problem is twofold: 1) Most people lack the information to comparison shop (health care reform should remedy this), and 2) people largely lack the incentive to use that information to economize (health care reform will not remedy this, rather it will exacerbate this trend). Presently people do not have the incentive to economize as they are not directly paying for the procedure. Rather, the insurer is paying for the procedure and then passing on the additional cost in the form of higher premiums. If people were exposed to the additional cost then they would have an incentive to economize it would drive prices down and also premiums.

How to Chase Off Foreign Investment and Destroy the Welfare of Your Nation

Hugo Chavez is threatening to instantly deport all automakers with production capacity in Venezuela if they do not immediately share their proprietary technology with local businesses. Things like this do not make for a inviting investment climate for potential new entrants and for existing companies may nullify threats of deportation as companies may decide to up and leave of their own volition. The only impetus for such idiocy in my mind would be a concerted effort on Chavez part to meet and overtake Zimbabwe's Mugabe as worst world leader.

Christmas Links

This is crazy, check it out. A high rise fell over intact in Shanghai.

A really interesting blog post about the future of cell phones, cell companies, and Google.

Johnathon Chait says Republicans screwed up by trying to defeat health care reform instead of influence health care reform. I agree!

Matt Yglesias agrees with Chait and makes the obvious but interesting observation that by not participating in the reform process "they gave all their leverage away to Joe Lieberman and Ben Nelson, so we wound up with some weird freebies for Nebraska." This should have been obvious to any casual observer but somehow was still lost on Mitch McConnell.

Ezra Klein channels Tom Harkin who thinks the Nelson deal (getting full federal reimbursement for Medicaid expansion) might lead to full federalization of Medicaid.

Auction Broadcast Spectrum

Presently broadcast television is allocated a certain/significant amount of spectrum, spectrum that could be used for other applications such as broadband. What is galling about this arrangement is that the government is conferring a scarce and hence extremely valuable resource for free. Mark Cuban suggests reclaiming the spectrum and auctioning it off. I wholeheartedly agree. In general, outside of reserving spectrum for first responders and for national security reasons I don't understand why the default presumption isn't to auction spectrum.

update: Whoops! I was hasty. Cuban also makes a good counter argument, along the lines of national security/emergency response, for why you wouldn't want to sell off spectrum. Anyhow, it's in interesting post, read it (all the way through I should say).

Google Chrome Now Available for Macs

Beta version here. Jiggity.

Tyler Cowen has a good post on the problems with mandates, namely, mandate creep:

"Breaking a three-day stalemate, the Senate approved an amendment to its health care legislation that would require insurance companies to offer free mammograms and other preventive services to women.

The vote was 61 to 39, with three Republicans joining 56 Democrats and the two independents in favor."

Tyler leaves unexplored what this means for the proposed IMAC/IMAB (the medicare board that is supposed to propose cuts which congress can vote up or down). Ezra Klein and other progressive bloggers consistently tout the IMAC as a central mechanism for cost control. That said, congress voted to include this benefit just as study was released indicating that the US's mammogram protocol is probably too extensive, and thus too expensive for the benefit conferred. Or in other words, that it doesn't pass muster with respect to comparative effectiveness. This was a controversial finding, and I don't have the capacity to know whether it is dispositive. But, it does highlight a tradeoff, the type of tradeoff that the IMAC board will be proposing, ostensibly in order to "bend the curve". To me this says, unfortunately, that the IMAC proposal has little potential of "bending the curve" as Congress will always be loathe to cut benefits (especially seniors' benefits).