How to Frame a Winning Campaign Theme

You can campaign for something and you can campaign against something. This falls into the latter camp and I think has it dead on:
“It’s the collusion of big government and big business and big finance to the detriment of all the rest — to the little guys.”
Guess who said it.

Republicans, Taxes, and the Poor

Today's NYT editorial brings to mind this quotation by sociologist Zygmunt Bauman: "One cannot desire poverty for others without feeling morally contemptible; but one can desire lower taxes." Or to raise taxes on the poor.

Federal Holidays

Tyler Cowen has a post speculating on what will be the next federal holiday and who will be the namesake. This is a subject near and dear to my heart (I love vacation*, yay!). What says you my dear non-existent readers?

2012 Prediction

The election is just over a year away but I feel confident in predicting that Mitt Romney will both win the republican nomination and become our next president. The economy sucks and it is likely to muddle through at best (or tank if Europe disintegrates further as it is threatening to do). Unemployment is unlikely to rebound in the near term (I wouldn't be surprised if we are staring down 10% unemployment again by November '12). What odds would you like to give me that the stock market is above 10k? Home prices will likely be flat, maybe still declining in some places and foreclosures will continue to be stacking up. I think this means that the generic Republican (and Mitt Romney is assuredly the nearest thing) will beat President Obama handily*.

*Inconvenient fact- Romney is mormon and that gives a lot of otherwise fair-minded people the heebeejeebees and this is to say nothing of those who are not fair-minded.

Texas Jobs

Now that Rick Perry has thrown his hat into the ring his record is being rightfully dissected. One thing that has struck me is the commentary surrounding how low paying Texas jobs are. The median wage in Texas in $15.14 (28th in the nation) which would in fact be quite low in someplace like N.Y. and D.C. where the cost of living is quite expensive. In D.C. $15 an hour is what you make slogging away for some obscure non-profit and enables you to get a room in a run down group home (probably not a well maintained one at that) in a transitional neighborhood. However, in anti-zoning zealous Texas land is plentiful and land use restrictions are minimal thus you end up with cities like Houston where a single family home can be had for $130,000. I have never been to Houston so I can't speak to its vices or virtues but I would consider affordable housing a virtue. And since housing and the overall cost of living is lower in Texas the median wage gets you much further than it does somewhere like NY or LA. There are many credible lines of attack against Rick Perry--clearly he has said some things that are batshit crazy (his claim that if Bernanke and the Fed starting printing more money that that would be nearly treasonous*)-- but the low wage meme is not one.

*The treason comment and his earlier secession comment unfortunately probably reveal less about Rick Perry but rather reflect an able politician who has a good feeling for his base.

Interesting Article on Germany

David Leonhardt has a superficial but interesting piece on the Germany's relative economic success over the last couple of years. There is one sentence that I take issue with and think is a bit misleading:
"That role starts with serious regulation. American regulators stood idle as the housing bubble inflated. German banks often required a down payment of 40 percent."
First I would question the wisdom of requiring such a large down payment almost as much as enabling such low down payments as we see in the US. I don't know that society is necessarily bettered by actively discouraging home ownership. I believe governments position should be neutral but look to ensure that banks are not taking imprudent risks. At some point everyone would like to stop working and you will need shelter, not having to pay rent seems like one way to ensure an adequate retirement. In the absence of home ownership my guess is there is probably a need for higher state pensions. But that aside, it does appear that German and European regulators were very much asleep at the switch. While they did not allow German banks to lower their credit standards for German homebuyers (quite the opposite as documented above), German regulators apparently had little problem with DeutscheBank and other German banks accumulating as many bad risks on their balance sheet at considerable leverage.

What interested me also was any lack of reference to the German Kurzarbeit scheme which seems to have blunted layoffs. If you look at mass layoffs I think there are two ways to approach them (that is preventing them). The first would be to see the primary goal as propping up consumption so firms might hold off on cutting their workforce. Alternatively you can attempt to make the cost of labor cheaper. I think Kurzarbeit is very social democratic gloss on the latter. In the US the most direct and obvious way to have cut the costs of employment would have been to cut the employer portion of Social Security.

A Different Generic Republican

Tim Pawlenty just issued his major economic policy address and what is clear is that he is a moron. I guess this bit of knowledge is something oddsmakers are intimately aware of and why they believe Romney will get the nomination. After reading the text of Pawlenty's address, I agree.

2012 Prognostication

Unemployement is stuck around 9% and gas is hovering around 4$ a gallon. While I believe Obama is likely to get re-elected, so long as the economy sucks this is no sure thing and if the economy were to backslide (hello Spanish or Italian default and the resulting havoc on every Americans 401k) I could imagine just about anybody beating Obama. Ergo, if I were a Republican candidate considering running I would go ahead and do so. There is no clear favorite in the primary and whoever emerges has a good chance at victory without lifting a finger. On to my predictions: I think the Republican nominee will be Tim Pawlenty and if unemployment hits 9.5% or above by October 2012 he will be President.

Health Care Link

http://walledvillage.blogspot.com/2011/05/how-to-blow-40000-without-going-on.html

Another Good Quote

John Cogan this time:
"But regardless of how much they have contributed, the hard reality is that the federal government has already spent it. No matter how deserving they are, it is younger generations of workers who have to come up with the money."

The Conundrum

Arnold Kling wrote this post a little while ago and I wholeheartedly agree with him:
"I don't think of the long-term budget fight as being between Democrats and Republicans or between rich and poor. I look at it as a fight between people with funded retirements and unfunded retirements."

More Thoughts on SS

When policy types discuss bringing SS into balance they are really talking about 2047 and beyond when the "trust fund" is exhausted and revenues no longer match benefits. If we did nothing, then in 30 years and benefits simply matched revenues that would effectively be a cut in benefits to about 75% of their scheduled value. That said, in 30 years we should be wealthier and in the intervening decades we at least have the ability to plan accordingly. The elephant in the room is the Trust Fund. Starting this decade we will have to redeem the IOUs (or special issue bonds) in the trust fund to pay out benefits. What will this entail? Raising taxes. So really the issue with social security in my view is not the long term balance but meeting obligations over the next three decades.

Severing the Link on SS

One of the easier means of bringing social security into balance is means testing it. Such a policy would likely bring social security into balance and would do so while protecting the most vulnerable. This solution is generally favored by right of center policy types whereas left of center policy types dislike means testing as it would undermine the universal nature of Social Security and render it more like welfare. The ironic thing though is that left of center policy types also favor means testing but conducted through a different mechanisim, lifting the payroll cap. Lifting the payroll cap itself does very little to balance social security as revenues and benefits are tied. So if you pay more taxes into the system you will also get higher benefits. Some modest savings would be generated as the benefit formula is somewhat progressive (though the distributional effect of social security is probably slightly regressive when you take into account the correlation between wealth and health). However, thus the only way to actually balance social security by lifting the cap is to the sever the link between revenues and benefits. At that point you have made social security much more redistributive and undermined its universality. Sort of sounds like welfare. And in the end, there isn't anything wrong with welfare, a just and decent society provides a safety net. But let us not fool ourselves, Social Security reform is not a discussion about preserving it as a universal entitlement, it is whether means testing will be affected by higher taxes or lower benefits. Given that you can only raise so much in revenues, and we will need to raise significant amounts for medicare, it seems the sensible solution is to means test through lowering benefits for the well off.

Somebody Should be Writing a Textbook

Really, I think this would be a marked improvement.

Examining My Priors: Health Care Edition

I look at health care and I see the rand study, which appears to be backed up by this recent study, and see health care cost inflation as primarily a function of the 3rd party payment system and a lack of cost sharing. So to me, the ideal health reform would feature creating a universal risk pool and mandate people to buy a naked high deductible health plan with premium and deductible assistance for the poor. I take it as a given that if people have an incentive to economize that they will comparison shop and this will force providers throughout the system to innovate in how they deliver care. However, I think the greatest weakness in this view is that it treats health care as a normal good and presupposes people will be unabashed in getting the best value for their dollar. But people don't always approach health care as a function of healing. A lot of health care involves signaling how much you care. So it's possible in my market driven health care utopia what in fact would happen is that health care would be a proxy for loved ones to demonstrate their love and care for others by spending exorbitant amounts.

Judicial Elections and the Progressive Cause

Isn't sort of ironic that progressives are looking towards a judicial election to further their goals in Wisconsin?

Off the Grid

I love Dwell. It's one of my favorite publications and my particular fancy is when they feature some old rich dudes off the grid cabin. But the nice type, with Ikea furniture and solar panels, not like the Unabomber type. I would aspire to this lifestyle but the lack of sewer hookup really seems like an impediment.

The Ryan Plan and A Counterfactual

Mickey Kaus flirts with contrarianism but comes out on the side of common sense when he states the following about Ryan's budget plan: "I have to reluctantly conclude that it’s … a near-suicidal act that will lead Republicans off the cliff". I think the Ryan plan is a conversation starter but in many ways is unserious. I don't have issues with voucherizing medicare or block granting medicaid (though, most do) but do find it spurious that the defense budget is untouched, there are no additional revenues nor any serious discussion of tax reform (cutting rates with some hand waving about loopholes does not count as serious). So if I were the democrats I would be licking my lips for when Ryan's budget comes to a vote. This will provide a lot of campaign fodder. But what is interesting to me is a counterfactual in which instead of banking on the unpopularity of healthcare reform republicans provided bipartisan cover in exchange for making the bill a better bill. There are a lot of things Republicans could have put into play: Capping and then phasing out the Employer exclusion, making an HDHP the minimum benefit, tort reform, buying across state lines, etc. Clearly if Mitch McConnell used his leverage towards such an end the gains the republicans saw in the House and the Senate would have been diminished, though still substantial. However, this is probably a naive sentiment, having tackled health care in a constructive manner there might be sufficient residual goodwill to reform entitlements and the attendant debt burden.

While Talking About Hypocrisy

I think the republicans would be on firmer ground if they didn't campaign last cycle as the party of Medicare which they are now proposing to cut substantially.

PPACA and the Ryan Roadmap

Paul Ryan is set to unveil his plan to reform Medicaid and Medicare. I think his proposals have a snowflakes chance in hell of passage but they might get the debate headed in a positive direction. Ryan's plan basically comprises of two elements: Block granting medicaid and providing those currently under 55 with vouchers to purchase health insurance once they are eligible for Medicare. One of the criticisms that has annoyed me regarding the voucherization of Medicare has been the discussion that by setting the growth of Voucher at CPI+1 that the vouchers over time will cover less care as it will not keep pace with medical inflation. My complaint is not that this isn't necessarily a valid criticism but rather a hypocritical one. Many of the same critics have champion IPAB which is the major driver of cost savings for Medicare in PPACA. The reason they champion IPAB and the reason it would save money if the proponents of IPAB are correct, is that IPAB will be successful in reducing access to care. If that is a virtue of IPAB it cannot be a weakness of vouchers.