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Hedge fund manager Cliff Asness writes in a Bloomberg article that true health insurance reform should focus on restoring the true purpose of insurance: "True insurance comprises two things. The first one is a goal: to protect against very large losses. The second one is a method: the proper assessment and pricing of risk."
He argues health care costs are too high partly because "All incentive for the consumer to control costs is abandoned." Why? Most health care costs, "including routine and minor care," are paid for by someone else, and the most common someone else (your employer) has a tax incentive to provide more health care benefits.
In pursuit of social "equality", politicians are moving toward arguing "the same premium must be charged for a well-protected, unscathed house as for one that is already on fire." "The business of insurance is about determining risk and charging accordingly. It’s why insurance companies exist. If we eliminate that, medical insurers are just form-processing companies for the government."
Instead of heavily regulating insurance for everyone due to the few that have extremely high health costs and poor (or no) insurance, Asness claims "direct state subsidy is far more efficient." Not an easy thing for a libertarian like Asness to say.
Daily Read - 2/24/10
Keith Hennessey has a good summary of President Bush's record of passing major bipartisan legislation. Interestingly, it includes items used in recent rhetoric to paint Bush as an extreme partisan and ideologue, and also includes things Obama is expanding or extending, without giving Bush any credit. I'm not a big George Bush fan, but much of the criticism of him is based on fiction and partisanship, and takes little account of the truly difficult times he faced while in office.
The average number of years Americans spend in retirement has roughly doubled since 1970, according to this handy chart in the Economist. "Official retirement ages have failed to keep pace with rising life expectancy, making pensions increasingly unaffordable." The age Americans can qualify for Social Security needs to raised, which means governments and employers need to find ways to keep people working longer and being productive.
Blogger Jay Cost makes an interesting point about those who argue the Senate should not use reconciliation to pass health care because the procedure does not honor the majority rule principle of a Democracy: "the Senate is not a majoritarian institution!" Every state gets 2 Senators, regardless of population.
The FDIC reports: "Lending by the banking industry fell by $587 billion, or 7.5 percent, in 2009, the largest annual decline since the 1940s." (Washington Post) FDIC Chairman Sheila C. Bair says much of the decline is the "result of cutbacks by the nation's largest banks, which have tightened qualification standards for borrowers and increased the proportion of money that they hold in reserve against unexpected losses." I'm sure that speeches vilifying bankers are being loaded into the president's teleprompter as I type this. However, I doubt he will go much further in explaning the lack of lending that saying bankers are evil. As Bair says, banks are still being burned by loans made over the last few years as creditors ability to repay keeps getting worse. Bair says banks are holding extra reserves "against unexpected losses", but banks are also waiting (still) for financial reform measures out of Washington that will almost certainly raise their reserve requirements. If they lent money that the government will later say they should have in reserve, they would be vilified for that too. Washington needs to give up on scoring political points and finish whatever financial reform they decide on -- all they are accomplishing by delaying and demonizing is scaring the private sector from making investments.
The average number of years Americans spend in retirement has roughly doubled since 1970, according to this handy chart in the Economist. "Official retirement ages have failed to keep pace with rising life expectancy, making pensions increasingly unaffordable." The age Americans can qualify for Social Security needs to raised, which means governments and employers need to find ways to keep people working longer and being productive.
Blogger Jay Cost makes an interesting point about those who argue the Senate should not use reconciliation to pass health care because the procedure does not honor the majority rule principle of a Democracy: "the Senate is not a majoritarian institution!" Every state gets 2 Senators, regardless of population.
The FDIC reports: "Lending by the banking industry fell by $587 billion, or 7.5 percent, in 2009, the largest annual decline since the 1940s." (Washington Post) FDIC Chairman Sheila C. Bair says much of the decline is the "result of cutbacks by the nation's largest banks, which have tightened qualification standards for borrowers and increased the proportion of money that they hold in reserve against unexpected losses." I'm sure that speeches vilifying bankers are being loaded into the president's teleprompter as I type this. However, I doubt he will go much further in explaning the lack of lending that saying bankers are evil. As Bair says, banks are still being burned by loans made over the last few years as creditors ability to repay keeps getting worse. Bair says banks are holding extra reserves "against unexpected losses", but banks are also waiting (still) for financial reform measures out of Washington that will almost certainly raise their reserve requirements. If they lent money that the government will later say they should have in reserve, they would be vilified for that too. Washington needs to give up on scoring political points and finish whatever financial reform they decide on -- all they are accomplishing by delaying and demonizing is scaring the private sector from making investments.The National Federation of Independent Business (here) says: "Washington still does not get it. It pays lip service to the fact that small business generates half of private sector GDP and creates over two-thirds of private sector net new jobs, but when it comes time to provide help, small business gets $30 billion IF banks decide to accept the TARP funds to support loans and IF the owners can subsequently get a loan from a bank. But for most firms, this dinky amount is of little help. More so, this new aid misses the main problem since only five percent of small business owners cite “financing” as their top business problem but 31 percent cite “poor sales.”" The NFIB argues that Washington continues to press on with their high-spending, high-regulation agenda, which is the "death knell for private sector vitality." "If the administration wants to count “jobs created and saved” it should also be accountable for “jobs destroyed or prevented.”" (h/t Cato)
Obama the Financial Procrastinator
Banks continue to fail at an alarming rate. The chart below summarizes bank failure data from the FDIC by quarter. Q1 2010 looks like an improvement until you realize the data are only through early February.
More than a year after the collapse of Lehman Brothers, the government has no exit strategy for Fannie and Freddie, former Treasury Secretary Hank Paulson says we've made no progress on improving the regulations for dealing with failed financial institutions, and the number of institutions on the FDIC's "Problem List continues to soar - from 552 in September to 702 in December, noting that "that indicators of asset quality continued to deteriorate during the fourth quarter."
In the meantime, Obama and Democrats in Congress are simultaneously claiming victory over the job-creating power of the stimulus package, while claiming jobs are "top priority" for 2010. So far, this has resulted in a $15 billion job bill proposed by Harry Reid. They're using up countless hours blaming Republicans for the failure of a health care bill that couldn't get enough Democratic support, and has Democrats retiring from public office over the partisanship created. While the FDIC reports bank profits are "still well below historical norms for quarterly profits," and that profit improvement indicates progress for the economy, the President rails against excesses in the financial sector to score political points without taking any meaningful steps toward addressing the real problems.
Financial reform should be top priority, and the longer Obama puts this off, the less likely he will be able to cry "I inherited this mess" when it blows up in his face.
Financial reform should be top priority, and the longer Obama puts this off, the less likely he will be able to cry "I inherited this mess" when it blows up in his face.
Daily Read - 2/23/10
Obama released health-care reform proposal yesterday, the first plan that can realistically be called "Obamacare", in advance of Thursday's meeting with Republicans. Does anyone else think it's odd that Obama isn't taking his proposal to the Democrats first? What if they don't support it? ABC News reports "Congressional Democrats cautiously embraced President Barack Obama's new health care plan as their last hope for enacting a comprehensive overhaul." They feel the need to pass something, even if they don't like it, because "the chance won't come around again anytime soon." "Cautiously embraced" does not sound like a ringing endorsement.
The Washington Post reports that his "proposal's most notable feature, he scales back the Senate bill's main revenue source, a tax on high-cost insurance that he has strongly supported. Instead, he would impose a new tax on the unearned income of the wealthy." Economist Greg Mankiw thinks this is a mistake - higher taxes on expensive health plans would be an incentive to use less health care (and therefore reduce costs), while but the "unearned income" tax reduces the incentives for saving and investment. In Mankiw's words, "the new proposal would do less to bend the curve of rising healthcare costs and more to impede long-run economic growth."
The Post also notes: "White House officials touted as the proposal's signature addition a new nationwide authority to review insurance rate increases," but that the "proposed authority is slightly less than meets the eye." The authority basically amounts to price controls for health care, and Mankiw reminds us of the less-than-impressive history of price controls, citing this article. The Cato Institute also weighs in against "Clintonesque" price controls, and even quotes Obama’s top economic advisor Larry Summers as saying "price and exchange controls inevitably create harmful economic distortions. Both the distortions and the economic damage get worse with time."
While claiming repeatedly that Republicans had no ideas and no plan for health care, the White House web site now says: "Throughout the debate on health insurance reform, Republican concepts and proposals have been included in legislation." It will be interesting to see how Obama uses this in Thursday's televised meeting with Republicans. In Cato's podcast on the price controls, Michael Cannon claims Obama hand-picked the Republican proposals that would get the least support from independents and libertarians and will use them to make Republicans look as "big-government" as possible.
Obama's plan also closes the so-called "doughnut hole" in Medicare's prescription drug coverage, making a Bush-era program that the President and Democrats repeatedly include among their "inherited" problems even more expensive. Also, does Obama include this among his Republican ideas he is including?
The WSJ's editorial "ObamaCare at Ramming Speed" also says the proposal "purports to fix the special-interest favors in the Senate bill not by eliminating them—but by expanding them to everyone." For example, "the White House claims to eliminate the 'Cornhusker Kickback,' the Medicaid bribe that bought Nebraska Senator Ben Nelson's vote, political appearances are deceiving. As with the union payoff, what the White House really does is broaden the same to all states, with all new Medicaid spending through 2017 and 90% after 2020 transferred to the federal balance sheet. Governors will love this ruse, but national taxpayers will pay more."
In summary, the President's new health care plan contains little more than a mash-up of the existing House and Senate plans, plus a feature that makes them worse, and other feature that is politcally popular, but likely to do more harm than good. Or, as the Wall Street Journal puts it: "It manages to take the worst of both the House and Senate bills and combine them into something more destructive"
Keith Hennessey ponders whether the President's proposal is a set-up for his exit strategy from healthcare reform. "The President proposes a “compromise” and blames Republicans for being unreasonable and unconstructive. Legislative failure is the Republicans’ fault, not the President’s." If this is true, it might explain why the President is so set on the event being televised.
In spite of all the opposition, Eugene Robinson of the Washington Post says Democrats should "Find your spines and pass health reform," then spends most of the article blaming Obama and the Republicans for the failure to not pass something already - contradicting the headline, which implicitly blames the Democratic super-majority that failed to pass anything. He argues the last year of negotiating could have been a lot easier if Obama had been more clear about what he wanted (Side note to Robinson: Obama is not the boss of Congress). Then Robinson says Obama's proposal is very similar to the Senate bill, and he is doing Republicans a favor by providing it as a "starting point" for discussions. If Republicans refuse to back this bill, which only passed the Senate due to massive kickbacks to the health care industry, and huge bribes for the last few Senate votes, Robinson says "observers will be able to draw conclusions about who is being constructive and who isn't." On the other hand, Robinson could have argued that it is very unlikely Republicans would support something that Democrats only barely support, but that would not have suited his political purposes.
The Washington Post reports that his "proposal's most notable feature, he scales back the Senate bill's main revenue source, a tax on high-cost insurance that he has strongly supported. Instead, he would impose a new tax on the unearned income of the wealthy." Economist Greg Mankiw thinks this is a mistake - higher taxes on expensive health plans would be an incentive to use less health care (and therefore reduce costs), while but the "unearned income" tax reduces the incentives for saving and investment. In Mankiw's words, "the new proposal would do less to bend the curve of rising healthcare costs and more to impede long-run economic growth."
The Post also notes: "White House officials touted as the proposal's signature addition a new nationwide authority to review insurance rate increases," but that the "proposed authority is slightly less than meets the eye." The authority basically amounts to price controls for health care, and Mankiw reminds us of the less-than-impressive history of price controls, citing this article. The Cato Institute also weighs in against "Clintonesque" price controls, and even quotes Obama’s top economic advisor Larry Summers as saying "price and exchange controls inevitably create harmful economic distortions. Both the distortions and the economic damage get worse with time."
While claiming repeatedly that Republicans had no ideas and no plan for health care, the White House web site now says: "Throughout the debate on health insurance reform, Republican concepts and proposals have been included in legislation." It will be interesting to see how Obama uses this in Thursday's televised meeting with Republicans. In Cato's podcast on the price controls, Michael Cannon claims Obama hand-picked the Republican proposals that would get the least support from independents and libertarians and will use them to make Republicans look as "big-government" as possible.
Obama's plan also closes the so-called "doughnut hole" in Medicare's prescription drug coverage, making a Bush-era program that the President and Democrats repeatedly include among their "inherited" problems even more expensive. Also, does Obama include this among his Republican ideas he is including?
The WSJ's editorial "ObamaCare at Ramming Speed" also says the proposal "purports to fix the special-interest favors in the Senate bill not by eliminating them—but by expanding them to everyone." For example, "the White House claims to eliminate the 'Cornhusker Kickback,' the Medicaid bribe that bought Nebraska Senator Ben Nelson's vote, political appearances are deceiving. As with the union payoff, what the White House really does is broaden the same to all states, with all new Medicaid spending through 2017 and 90% after 2020 transferred to the federal balance sheet. Governors will love this ruse, but national taxpayers will pay more."
In summary, the President's new health care plan contains little more than a mash-up of the existing House and Senate plans, plus a feature that makes them worse, and other feature that is politcally popular, but likely to do more harm than good. Or, as the Wall Street Journal puts it: "It manages to take the worst of both the House and Senate bills and combine them into something more destructive"
Keith Hennessey ponders whether the President's proposal is a set-up for his exit strategy from healthcare reform. "The President proposes a “compromise” and blames Republicans for being unreasonable and unconstructive. Legislative failure is the Republicans’ fault, not the President’s." If this is true, it might explain why the President is so set on the event being televised.
In spite of all the opposition, Eugene Robinson of the Washington Post says Democrats should "Find your spines and pass health reform," then spends most of the article blaming Obama and the Republicans for the failure to not pass something already - contradicting the headline, which implicitly blames the Democratic super-majority that failed to pass anything. He argues the last year of negotiating could have been a lot easier if Obama had been more clear about what he wanted (Side note to Robinson: Obama is not the boss of Congress). Then Robinson says Obama's proposal is very similar to the Senate bill, and he is doing Republicans a favor by providing it as a "starting point" for discussions. If Republicans refuse to back this bill, which only passed the Senate due to massive kickbacks to the health care industry, and huge bribes for the last few Senate votes, Robinson says "observers will be able to draw conclusions about who is being constructive and who isn't." On the other hand, Robinson could have argued that it is very unlikely Republicans would support something that Democrats only barely support, but that would not have suited his political purposes.
Daily Read - 2/22/10
A Swiss court accused a fisherman of torturing a fish because it took 10 minutes to reel it in, and activists are lobbying that animals should have lawyers. (AP story here; h/t Overlawyered.com)
Maryland Gov. Martin O’Malley, the vice chair of the Democratic Governors Association, said at a press conference that Congress should pass a jobs bill that includes “whatever they think is appropriate, as long as they do it quickly...the people of our country need to see us fighting...for jobs." He also argued Democrats should "force Republicans to take uncomfortable votes against measures they've supported in the past. He thinks that would help Democratic candidates on the ballot this year, including him." (Politico) I thought the jobs bill was supposed to be about jobs, not about passing partisan bills quickly for the sake of public appearances and elections? Proposing something just because you think the other party will vote against it is childish and a big part of the reason Americans are getting fed up with their government. Voters don't want to see their politicians fighting any more - they want results.
"For a year, critics of the Democratic health care plans have been applying the label "ObamaCare" to whatever the current draft was," says Marc Ambinder at the Atlantic. The President has now unveiled a comprehensive bill as a prelude to Thursday's meeting with Republicans, and Ambinder summarizes the highlights of Obamacare here.
Ambinder says Obama's "new insurance rate increase mitigation authority" will be hard to oppose politically (and will be used to make Republicans look bad), but that the policy probably won't work - citing this National Review column. I take issue with Obama's grandstanding over "excessive rate increases" by health insurers here.
In the upcoming issue of Vogue, Treasury Secretary Tim Geithner says “You can’t do these jobs worrying about perceptions...You have to focus on improving real things that matter. To consider what is popular will lead you astray and you will have no integrity to do the important things that will make the country stronger.” (Jake Tapper, ABC News)
Five former Treasury secretaries wrote a letter to the WSJ in support of the "Volcker Rule," which would restrict FDIC-backed institutions from trading too much for their own profit, and restrict them from investing in hedge funds and private equity. While this idea is great in theory, I'm still not sure where I stand on this one practically. The letter was in response to a column by Alan Blinder on Feb 15, where he wonders if "the Volcker "idea" can be translated into a workable Volcker rule. It is devilishly difficult to draw bright lines between proprietary trading and trading, hedging, and market-making on behalf of clients." It was the likely impact on FDIC-insured institutions that led to the bailout of AIG, so it makes sense for the government to be more strict about who does, and does not, qualify for FDIC insurance. But, Fannie, Freddie, AIG and Lehman Brothers were not banks -- it wasn't proprietary trading and other investments by banks that caused the crisis, and what the "Volcker Plan" looks to regulate are not a significant part of their businesses.
The Economist weighs in on the challenges facing Obama's deficit commission. Most importantly, the commission has no authority, unlike the commission voted down in the Seante that could "make recommendations which Congress would be forced to vote on (without amendment)." Also, "It is scheduled to report by December 1st this year, shortly after the mid-term congressional elections," which postpones the issue until after the election. The Tea Party movement may be loud and influential now, but the more time passes, the more likely their cries for serious fiscal reform will fade away. If this commission and the next Congress fails to produce something soon, will it be too late? On the positive side, the structure of the commission ensures some amount of bipartisan support for whatever it recommends.
Maryland Gov. Martin O’Malley, the vice chair of the Democratic Governors Association, said at a press conference that Congress should pass a jobs bill that includes “whatever they think is appropriate, as long as they do it quickly...the people of our country need to see us fighting...for jobs." He also argued Democrats should "force Republicans to take uncomfortable votes against measures they've supported in the past. He thinks that would help Democratic candidates on the ballot this year, including him." (Politico) I thought the jobs bill was supposed to be about jobs, not about passing partisan bills quickly for the sake of public appearances and elections? Proposing something just because you think the other party will vote against it is childish and a big part of the reason Americans are getting fed up with their government. Voters don't want to see their politicians fighting any more - they want results.
"For a year, critics of the Democratic health care plans have been applying the label "ObamaCare" to whatever the current draft was," says Marc Ambinder at the Atlantic. The President has now unveiled a comprehensive bill as a prelude to Thursday's meeting with Republicans, and Ambinder summarizes the highlights of Obamacare here.
Ambinder says Obama's "new insurance rate increase mitigation authority" will be hard to oppose politically (and will be used to make Republicans look bad), but that the policy probably won't work - citing this National Review column. I take issue with Obama's grandstanding over "excessive rate increases" by health insurers here.
In the upcoming issue of Vogue, Treasury Secretary Tim Geithner says “You can’t do these jobs worrying about perceptions...You have to focus on improving real things that matter. To consider what is popular will lead you astray and you will have no integrity to do the important things that will make the country stronger.” (Jake Tapper, ABC News)
Five former Treasury secretaries wrote a letter to the WSJ in support of the "Volcker Rule," which would restrict FDIC-backed institutions from trading too much for their own profit, and restrict them from investing in hedge funds and private equity. While this idea is great in theory, I'm still not sure where I stand on this one practically. The letter was in response to a column by Alan Blinder on Feb 15, where he wonders if "the Volcker "idea" can be translated into a workable Volcker rule. It is devilishly difficult to draw bright lines between proprietary trading and trading, hedging, and market-making on behalf of clients." It was the likely impact on FDIC-insured institutions that led to the bailout of AIG, so it makes sense for the government to be more strict about who does, and does not, qualify for FDIC insurance. But, Fannie, Freddie, AIG and Lehman Brothers were not banks -- it wasn't proprietary trading and other investments by banks that caused the crisis, and what the "Volcker Plan" looks to regulate are not a significant part of their businesses.
The Economist weighs in on the challenges facing Obama's deficit commission. Most importantly, the commission has no authority, unlike the commission voted down in the Seante that could "make recommendations which Congress would be forced to vote on (without amendment)." Also, "It is scheduled to report by December 1st this year, shortly after the mid-term congressional elections," which postpones the issue until after the election. The Tea Party movement may be loud and influential now, but the more time passes, the more likely their cries for serious fiscal reform will fade away. If this commission and the next Congress fails to produce something soon, will it be too late? On the positive side, the structure of the commission ensures some amount of bipartisan support for whatever it recommends.
Problems with Obama's Criticisms of Insurance Rates
The New York Times reports that the President "will propose on Monday giving the federal government new power to block excessive rate increases by health insurance companies." The policy is intended "to frame his debate with Republicans over health policy at a televised meeting on Thursday" by "seizing on outrage over recent premium increases of up to 39 percent announced by Anthem Blue Cross of California."
I have at least 4 problems with all of this: one about the uncritical media coverage, one about the political games being played, one about unintended consequences, and the last about the role of government.
1) news story after news story is reporting Anthem's rate hikes as "up to 39 percent". I have yet to find one news story that digs into this number. Out of the 700,000 affected customers, how many will see 39% increases? One? All of them? What's the average increase? Is anyone seeing a rate decrease? With all the coverage this is getting, you think someone would look into this instead of just repeating the number, which has the effect of supporting Obama. This statistic is becoming the new "47 million Americans are uninsured."
2) The article says "the legislation unveiled on Monday will actually be the first comprehensive proposal put forward by the White House." The President keeps criticizing the Republicans for not having good ideas, but he comes out with new proposals, immediately before a televised meeting with them? I hope voters see that "seizing on outrage" = "pandering"; it does not equal good policy based on a long-term strategy. Senate Republican leader, Mitch McConnell said “If they are going to lay out the plan they want to pass four days in advance, what are we discussing on Thursday?”
3) The House and Senate health insurance proposals will require insurers to cover more high-risk patients, and will regulate how much more insurers can charge high-risk patients, compared with low-risk ones. To comply, insurers will have to raise rates overall, and particularly to low-risk patients because the new regulations are an explicit subsidy from the healthy to the sick. Part of these rate hikes are certainly due to the bad economy, but how much is a result of the oncoming Obamacare train? Is Obama criticizing something here that is actually the direct result of what he is proposing? This WSJ editorial thinks so.
4) Who decides what is an "excessive rate increase"? If customers are not getting value for their money, they should be able to choose a different insurance plan. The government should take steps to increase competition so that consumers can make these choices, instead of waiting for a government panel to decide what is appropriate.
I have at least 4 problems with all of this: one about the uncritical media coverage, one about the political games being played, one about unintended consequences, and the last about the role of government.
1) news story after news story is reporting Anthem's rate hikes as "up to 39 percent". I have yet to find one news story that digs into this number. Out of the 700,000 affected customers, how many will see 39% increases? One? All of them? What's the average increase? Is anyone seeing a rate decrease? With all the coverage this is getting, you think someone would look into this instead of just repeating the number, which has the effect of supporting Obama. This statistic is becoming the new "47 million Americans are uninsured."
2) The article says "the legislation unveiled on Monday will actually be the first comprehensive proposal put forward by the White House." The President keeps criticizing the Republicans for not having good ideas, but he comes out with new proposals, immediately before a televised meeting with them? I hope voters see that "seizing on outrage" = "pandering"; it does not equal good policy based on a long-term strategy. Senate Republican leader, Mitch McConnell said “If they are going to lay out the plan they want to pass four days in advance, what are we discussing on Thursday?”
3) The House and Senate health insurance proposals will require insurers to cover more high-risk patients, and will regulate how much more insurers can charge high-risk patients, compared with low-risk ones. To comply, insurers will have to raise rates overall, and particularly to low-risk patients because the new regulations are an explicit subsidy from the healthy to the sick. Part of these rate hikes are certainly due to the bad economy, but how much is a result of the oncoming Obamacare train? Is Obama criticizing something here that is actually the direct result of what he is proposing? This WSJ editorial thinks so.
4) Who decides what is an "excessive rate increase"? If customers are not getting value for their money, they should be able to choose a different insurance plan. The government should take steps to increase competition so that consumers can make these choices, instead of waiting for a government panel to decide what is appropriate.
Weekend Read - 2/20-21/10
"After reaching the top of the podium at the 2006 Turin Olympics, [Hannah] Teter embarked on a charitable mission through her website Hannah's Gold (www.hannahsgold.com) to help an impoverished town in Kenya to acquire basic necessities...After finishing second in a grand prix event in Utah last month, Teter donated her $10,000 winnings to the earthquake victims in Haiti." (Fox News)
Keith Hennessey has six economic ideas that he agrees with Obama on (some with caveats).
"When Yitta Schwartz died last month at 93, she left behind 15 children, more than 200 grandchildren and so many great- and great-great-grandchildren that, by her family’s count, she could claim perhaps 2,000 living descendants." (NY Times)
"In an attempt at transparency, Obama has decided to make public the list of all visitors after a 90-day lag to preserve security." "More than 5.5 million people requested tours of the White House last year." (Washington Post) Do casual tourists really need their names posted to a government website?
Keith Hennessey has six economic ideas that he agrees with Obama on (some with caveats).
"When Yitta Schwartz died last month at 93, she left behind 15 children, more than 200 grandchildren and so many great- and great-great-grandchildren that, by her family’s count, she could claim perhaps 2,000 living descendants." (NY Times)
"In an attempt at transparency, Obama has decided to make public the list of all visitors after a 90-day lag to preserve security." "More than 5.5 million people requested tours of the White House last year." (Washington Post) Do casual tourists really need their names posted to a government website?
Daily Read - 2/19/10
Elton John thinks "Jesus was a compassionate, super-intelligent gay man who understood human problems." In case you're not sure who Jesus was, the NY Daily News can help. According to the story, He was "one of the central figures of Christianity." Who knew?
Philanthropy.com reports that Feeding America, the national network of food banks, raised 51% more money in 2009 than in 2008. Kudos to the generous Americans and American organizations that continue to donate during this rough economy. (http://feedingamerica.org/) "Leaders of the anti-hunger group say the increase is in large part because donors recognize the extreme rise in demand for basic services like food and shelter as the economic crisis has taken its toll."
The Economist says don't blame the political system in the US - blame the President. "America’s political structure was designed to make legislation at the federal level difficult, not easy." Instead of understanding that the system is designed to stall legislation that isn't broadly supported "Mr Obama has done a lousy job of winning over Republicans and independents to the causes he favours." "Rather than regretting how the Republicans in Congress have behaved, Mr Obama should look harder at his own use of his presidential power."
Charles Krauthammer agrees, and gives examples for Obama to follow: Reagan worked with Democratic House speaker Tip O'Neill on Social Security, Reagan worked with Democrat Bill Bradley on tax code reform, and Bill Clinton worked with Newt Gingrich on welfare reform. America is only ungovernable if its leader fails to see that he is not always right.
Paul Volcker, former Fed Chairman and current advisor to President Obama, thinks "Reforming Social Security is “doable,” he said, in part by “jacking up the retirement age” and changing the benefit calculation so that it won’t rise as fast for higher-income Americans as it does under existing law." He prefers reforming Social Security and preserving it as a "bedrock" retirement plan to the proposals in Obama's 2011 budget.
Americans can also do a better job of saving and depending on themselves for retirement. Personal savings rates in the US have been very low, even negative, but are improving recently. (Source: Bureau of Economic Analysis, via NY Times)
Philanthropy.com reports that Feeding America, the national network of food banks, raised 51% more money in 2009 than in 2008. Kudos to the generous Americans and American organizations that continue to donate during this rough economy. (http://feedingamerica.org/) "Leaders of the anti-hunger group say the increase is in large part because donors recognize the extreme rise in demand for basic services like food and shelter as the economic crisis has taken its toll."
The Economist says don't blame the political system in the US - blame the President. "America’s political structure was designed to make legislation at the federal level difficult, not easy." Instead of understanding that the system is designed to stall legislation that isn't broadly supported "Mr Obama has done a lousy job of winning over Republicans and independents to the causes he favours." "Rather than regretting how the Republicans in Congress have behaved, Mr Obama should look harder at his own use of his presidential power."
Charles Krauthammer agrees, and gives examples for Obama to follow: Reagan worked with Democratic House speaker Tip O'Neill on Social Security, Reagan worked with Democrat Bill Bradley on tax code reform, and Bill Clinton worked with Newt Gingrich on welfare reform. America is only ungovernable if its leader fails to see that he is not always right.
Paul Volcker, former Fed Chairman and current advisor to President Obama, thinks "Reforming Social Security is “doable,” he said, in part by “jacking up the retirement age” and changing the benefit calculation so that it won’t rise as fast for higher-income Americans as it does under existing law." He prefers reforming Social Security and preserving it as a "bedrock" retirement plan to the proposals in Obama's 2011 budget.
Americans can also do a better job of saving and depending on themselves for retirement. Personal savings rates in the US have been very low, even negative, but are improving recently. (Source: Bureau of Economic Analysis, via NY Times)
Daily Read - 2/18/10
This one from Mitt Romney: "in case you didn’t hear the late-breaking news, the gold medal in the downhill was taken away from American Lindsey Vonn. It was determined that President Obama is going downhill faster than she is." (h/t National Review)
Anthem Blue Cross recently announced health insurance rate increases of up to 39% for some customers in California. This Wall Street Journal column explains the increases "are the direct result of the Golden State's insurance regulations—the kind that Democrats want to impose on all 50 states." The "cost" of health care reform that the President, Congress, and the CBO measure is only the costs that would be the responsibility of the government. The entire cost to all Americans hasn't been estimated by anyone as far as I know, but it will be much, much larger than the government piece alone.
Cato's daily podcast discusses taxation of multinational corporations. Obama has discussed stricter taxation of US-based companies that produce revenue in foreign countries. The podcast argues this is a bad idea for 2 reasons: 1) US corporate tax rates are already the 2nd-highest in the developed world, and raising them would just cause more businesses to move out of the US, and 2) if a US-based business has to close an office in some other country, a business from another country will move in to take advantage of the local tax advantage. The US can only control our policy, not the policies and actions of other countries.
Bruce Campbell, editor of "The Collected Works of F. A. Hayek," says the economic stimulus stimulated sales of Hayek's "The Road to Serfdom," a dense book from 1944 describing the dangers of social planning and big government. How ironic.
Venture capitalist Bill Frezza's thoughts on "Why Washington Can't Reform Healthcare" -- "The healthcare industry runs on fake prices." "Imagine the world's smartest food expert with access to the best culinary research trying to decide what the right price is for a ham sandwich. Once the price is set, that's it - selling a ham sandwich for more or less is against the law. Oh, and homeless people get free ham sandwiches. Refuse to serve them and you lose your deli license." What happens if the price of pork spikes?
Some good stuff from Yahoo Finance today:
This article has the "Wackiest Tax Deductions for 2010," including someone who produced a diary written all in one color ink, and copyrighted after the relevant year, as documentation to an IRS auditor.
This one says that almost anyone would want to double their income, but there are reasons why many can't or won't that are usually about what you have to give up to earn the extra income. Money can't buy happiness, after all.
Anthem Blue Cross recently announced health insurance rate increases of up to 39% for some customers in California. This Wall Street Journal column explains the increases "are the direct result of the Golden State's insurance regulations—the kind that Democrats want to impose on all 50 states." The "cost" of health care reform that the President, Congress, and the CBO measure is only the costs that would be the responsibility of the government. The entire cost to all Americans hasn't been estimated by anyone as far as I know, but it will be much, much larger than the government piece alone.
Cato's daily podcast discusses taxation of multinational corporations. Obama has discussed stricter taxation of US-based companies that produce revenue in foreign countries. The podcast argues this is a bad idea for 2 reasons: 1) US corporate tax rates are already the 2nd-highest in the developed world, and raising them would just cause more businesses to move out of the US, and 2) if a US-based business has to close an office in some other country, a business from another country will move in to take advantage of the local tax advantage. The US can only control our policy, not the policies and actions of other countries.
Bruce Campbell, editor of "The Collected Works of F. A. Hayek," says the economic stimulus stimulated sales of Hayek's "The Road to Serfdom," a dense book from 1944 describing the dangers of social planning and big government. How ironic.
Venture capitalist Bill Frezza's thoughts on "Why Washington Can't Reform Healthcare" -- "The healthcare industry runs on fake prices." "Imagine the world's smartest food expert with access to the best culinary research trying to decide what the right price is for a ham sandwich. Once the price is set, that's it - selling a ham sandwich for more or less is against the law. Oh, and homeless people get free ham sandwiches. Refuse to serve them and you lose your deli license." What happens if the price of pork spikes?
Some good stuff from Yahoo Finance today:
This article has the "Wackiest Tax Deductions for 2010," including someone who produced a diary written all in one color ink, and copyrighted after the relevant year, as documentation to an IRS auditor.
This one says that almost anyone would want to double their income, but there are reasons why many can't or won't that are usually about what you have to give up to earn the extra income. Money can't buy happiness, after all.
Daily Read - 2/17/2010
In the Atlantic, Megan McArdle wonders why, among all the many government actions, the Obama administration is claiming the stimulus is the one that prevented a depression. Only $287 billion of the $787 billion stimulus has even been spent, according to recovery.gov, and by McArdle's estimation, this can't possibly have added more than about 1% to GDP. Not insignificant, but certainly not more important than all the other government actions put together, which is what they're claiming.
However, Joe Biden was on CBS's "The Early Show" today saying taxpayers have "gotten their money's worth" from the stimulus because 2 million jobs might have been saved. (AP via Yahoo) Doing a little math, that works out to $143,500 per job. That doesn't seem like a good deal to me, but perhaps "one of the least wealthy members of the Senate" thinks that's value for the money. On the other hand, how many jobs have been destroyed because of fear of government regulation and the future taxes that will be needed to pay for growing government?
President Obama is expected to announce that he will create the "National Commission on Fiscal Responsibility and Reform" by executive order today to "to help bring down the federal budget deficit to 3% of gross domestic product by 2015, compared with nearly 10% today, and to propose ways to hold down the surging costs of government programs such as Medicare, Medicaid and Social Security." (WSJ) Unlike the commission proposed by by Sens. Kent Conrad, D-North Dakota, and Judd Gregg R-New Hampshire recently, this commission "will not have the power to force Congress to cast politically unpopular votes. So the commission's report could wind up being another blue ribbon panel report that sits on a shelf somewhere, unless there is public pressure for Congress to act on the proposals." (CNN) The President's logic seems to be that, because voters aren't pressuring Congress enough to spend taxpayer money more wisely, he should create a Commission that has no power, except that derived from voter pressure. This makes no sense. Unless, his logic is: I can take credit for being bipartisan and confronting big problems by ordering a commission to discuss the issue until after the next election! On the positive side, Obama is expected to name Alan K. Simpson, a former Senate Republican leader, and Erskine B. Bowles, a top official in the Clinton White House as chairs of the commission (Washington Post)
Apparently Obama considers nuclear power plants too big to fail. He announced $8B in Federal loan guarantees for the building of a nuclear power plant, although "Reports by Congressional Budget Office and Government Accountability Office have estimated that the risk of default for new nuclear reactors could be as high as 50 percent." (Atlanta Journal-Constitution)
Surprise! "Audit finds Census preparations wasted millions" (USA Today)
However, Joe Biden was on CBS's "The Early Show" today saying taxpayers have "gotten their money's worth" from the stimulus because 2 million jobs might have been saved. (AP via Yahoo) Doing a little math, that works out to $143,500 per job. That doesn't seem like a good deal to me, but perhaps "one of the least wealthy members of the Senate" thinks that's value for the money. On the other hand, how many jobs have been destroyed because of fear of government regulation and the future taxes that will be needed to pay for growing government?
President Obama is expected to announce that he will create the "National Commission on Fiscal Responsibility and Reform" by executive order today to "to help bring down the federal budget deficit to 3% of gross domestic product by 2015, compared with nearly 10% today, and to propose ways to hold down the surging costs of government programs such as Medicare, Medicaid and Social Security." (WSJ) Unlike the commission proposed by by Sens. Kent Conrad, D-North Dakota, and Judd Gregg R-New Hampshire recently, this commission "will not have the power to force Congress to cast politically unpopular votes. So the commission's report could wind up being another blue ribbon panel report that sits on a shelf somewhere, unless there is public pressure for Congress to act on the proposals." (CNN) The President's logic seems to be that, because voters aren't pressuring Congress enough to spend taxpayer money more wisely, he should create a Commission that has no power, except that derived from voter pressure. This makes no sense. Unless, his logic is: I can take credit for being bipartisan and confronting big problems by ordering a commission to discuss the issue until after the next election! On the positive side, Obama is expected to name Alan K. Simpson, a former Senate Republican leader, and Erskine B. Bowles, a top official in the Clinton White House as chairs of the commission (Washington Post)
Apparently Obama considers nuclear power plants too big to fail. He announced $8B in Federal loan guarantees for the building of a nuclear power plant, although "Reports by Congressional Budget Office and Government Accountability Office have estimated that the risk of default for new nuclear reactors could be as high as 50 percent." (Atlanta Journal-Constitution)
Surprise! "Audit finds Census preparations wasted millions" (USA Today)
Daily Read - 2/16/10
NPR has an interesting story on companies that find people with Asperger's Syndrome "as a potential competitive advantage." According to these companies, some data entry and software testing jobs are "a perfect fit," and are looking for more ways to provide opportunities. "According to new data from the Bureau of Labor Statistics, less than 20 percent of the disabled population in the country has work."
"During the 1980s and ’90s only one new medical school was established," according to this NY Times article "Expecting a Surge in US Medical Schools." Nearly two dozen medical schools "have recently opened or might open across the country...seeking to address an imbalance in American medicine that has been growing for a quarter century."
With Evan Bayh announcing he will not run for reelection, Jay Cost thinks "Susan Collins, [Ben] Nelson, and Olympia Snowe are the only true centrists left" in the Senate. Cost adds that, due to the razor-thin 60-vote majority, Bayh was not as centrist as many think because "thanks to the legislative strategy designed by his party's leadership, he was obliged to support them as the critical vote over and over." A sad state of affairs.
Thomas Sowell says to stop calling wealth "obscene." "Poverty is obscene. It is poverty that needs to be reduced--and increasing a country's productivity has done that far more widely than redistributing income by targeting 'the rich.'"
Harvard law professor Elisabeth Warren argued in a WSJ opinion column that the "same Wall Street CEOs who brought the economy to its knees have spent more than a year and hundreds of millions of dollars furiously lobbying Washington." Thomas Hofler wrote a letter in response asking: "To which CEOs is she referring? Perhaps Stan O'Neal, James Cayne, Charles Prince or Richard Fuld? No, none of these folks have lobbied anyone for at least 18 months because, unlike Washington, Wall Street holds its leaders accountable." All of these CEOs are out of a job, and James Cayne, for example, lost over $1 billion of his personal money, which was in Bear Stearns stock. Many of those in DC who encouraged sloppy and reckless mortgage lending are still in Congress -- writing "reform" bills.
President Obama made some remarks on energy today, including that the US will "break ground on the first new nuclear plant in our country in three decades." "This one plant, for example, will cut carbon pollution by 16 million tons each year when compared to a similar coal plant. That's like taking 3.5 million cars off the road." I hope there's more to come! Daniel Indiviglio at the Atlantic has "5 Reasons to Cheer Obama's Nuclear Ambitions."
The AP reports (via Google News) that Federal, state, and local governments are starting to sell real estate to ease their budget deficits. Unfortunately, "Government has a history of selling real estate at an inopportune time, said Dan Fasulo, managing director of Real Capital Analytics." On the other hand, "Pension funds, insurance companies and other institutional investors are eager to scoop up properties that offer the prospect of a steady return on their investment, said Jeff Friedman, principal at Mesa West Capital LLC."
John Stossel reports that lobbying increased 5% last year. Why? “Even when companies are scaling back other operations, many view lobbying as a critical tool in protecting their future interests, particularly when Congress is preparing to take action on issues that could seriously affect their bottom lines,” according to Sheila Krumholz, executive director of the Center for Responsive Politics. When politicians make speeches about getting lobbyists out of Washington, they seem to forget that a lot of lobbying is defensive. Larger government is likely to result in more lobbying, not less, and also a larger degree of government intervention in private business.
Some of this lobbying is done by unions, and Kevin Hassett writes in Bloomberg that "this president has been more in the tank for the labor movement than any U.S. president since World War II." For example, "he included special restrictions on much of the economic-stimulus funds, requiring that large portions of the $787 billion be used only on projects involving unionized workers," and "cut deals with the United Auto Workers ensuring that they be the primary beneficiaries in the bankruptcies of Chrysler and General Motors. More recently, Congress exempted unionized workers from the 40 percent tax on high-end insurance packages in the Senate health-care bill."
“Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power” - Benito Mussolini
"During the 1980s and ’90s only one new medical school was established," according to this NY Times article "Expecting a Surge in US Medical Schools." Nearly two dozen medical schools "have recently opened or might open across the country...seeking to address an imbalance in American medicine that has been growing for a quarter century."
With Evan Bayh announcing he will not run for reelection, Jay Cost thinks "Susan Collins, [Ben] Nelson, and Olympia Snowe are the only true centrists left" in the Senate. Cost adds that, due to the razor-thin 60-vote majority, Bayh was not as centrist as many think because "thanks to the legislative strategy designed by his party's leadership, he was obliged to support them as the critical vote over and over." A sad state of affairs.
Thomas Sowell says to stop calling wealth "obscene." "Poverty is obscene. It is poverty that needs to be reduced--and increasing a country's productivity has done that far more widely than redistributing income by targeting 'the rich.'"
Harvard law professor Elisabeth Warren argued in a WSJ opinion column that the "same Wall Street CEOs who brought the economy to its knees have spent more than a year and hundreds of millions of dollars furiously lobbying Washington." Thomas Hofler wrote a letter in response asking: "To which CEOs is she referring? Perhaps Stan O'Neal, James Cayne, Charles Prince or Richard Fuld? No, none of these folks have lobbied anyone for at least 18 months because, unlike Washington, Wall Street holds its leaders accountable." All of these CEOs are out of a job, and James Cayne, for example, lost over $1 billion of his personal money, which was in Bear Stearns stock. Many of those in DC who encouraged sloppy and reckless mortgage lending are still in Congress -- writing "reform" bills.
President Obama made some remarks on energy today, including that the US will "break ground on the first new nuclear plant in our country in three decades." "This one plant, for example, will cut carbon pollution by 16 million tons each year when compared to a similar coal plant. That's like taking 3.5 million cars off the road." I hope there's more to come! Daniel Indiviglio at the Atlantic has "5 Reasons to Cheer Obama's Nuclear Ambitions."
The AP reports (via Google News) that Federal, state, and local governments are starting to sell real estate to ease their budget deficits. Unfortunately, "Government has a history of selling real estate at an inopportune time, said Dan Fasulo, managing director of Real Capital Analytics." On the other hand, "Pension funds, insurance companies and other institutional investors are eager to scoop up properties that offer the prospect of a steady return on their investment, said Jeff Friedman, principal at Mesa West Capital LLC."
John Stossel reports that lobbying increased 5% last year. Why? “Even when companies are scaling back other operations, many view lobbying as a critical tool in protecting their future interests, particularly when Congress is preparing to take action on issues that could seriously affect their bottom lines,” according to Sheila Krumholz, executive director of the Center for Responsive Politics. When politicians make speeches about getting lobbyists out of Washington, they seem to forget that a lot of lobbying is defensive. Larger government is likely to result in more lobbying, not less, and also a larger degree of government intervention in private business.
Some of this lobbying is done by unions, and Kevin Hassett writes in Bloomberg that "this president has been more in the tank for the labor movement than any U.S. president since World War II." For example, "he included special restrictions on much of the economic-stimulus funds, requiring that large portions of the $787 billion be used only on projects involving unionized workers," and "cut deals with the United Auto Workers ensuring that they be the primary beneficiaries in the bankruptcies of Chrysler and General Motors. More recently, Congress exempted unionized workers from the 40 percent tax on high-end insurance packages in the Senate health-care bill."
“Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power” - Benito Mussolini
Daily Read - 2/12/10
Peter Wehner,a senior fellow at the Ethics and Public Policy Center, talks about three theories about the Democrats failure to pass their agenda in a Wall Street Journal editorial. Theory #1 is that "American people are too stupid to govern," characterised by Slate's Jacob Weisberg who calls Americans "childish, ingorant...dodos." (here) (Side Note: Can you imagine if someone said the education system in the US was failing because kids were "too stupid"?) Theory #2 is that the Republican Party has "adopted an agenda of pure nihilism for naked political gain." (Michael Cohen in Newsweek, here) Theory #3 is that the Senate is "ominously dysfunctional" and "no longer consistent with a functioning government." (Paul Krugman in the NY Times, here) Krugman seems to think that a party with supermajorities and the Presidency should be able to do whatever they want, and Weisberg and Cohen seem to be intent on offending as many people as possible. I prefer Wehner's more simple explanation: "leaders championing unpopular causes find their agenda stalled and eventually defeated." Why? "The Founders set up a system of government that put a premium on slowing things down, on compromise, and on controlling passions. They intentionally made passage of massive legislation time consuming and difficult." In America, a key to "functioning government" is that it does not over-reach. Wehner says "No, America isn't 'Ungovernable'", but America is not meant to be over-governed.
Peggy Noonan, also writing on the WSJ editorial page, on the declining value of Obama not being Bush:
A debate about whether record-setting snow in Washington DC and much of the Northeast US has anything to do with global warming has been brewing. Global-warming believers say deniers are confusing weather with climate, and that short-term trends don't matter. The WSJ's "Best of the Web Today" blog says "for years, global warmists have claimed that the weather proved their claims about the climate." Examples provided here, here, and a collection of clips here. Therefore, deniers should not be attacked for pointing out the flaws in the case for manmade global warming based on discrete weather events.
While the massive amounts of snow in the Northeast don't disprove global warming, Nolan Finley's blog in the Detroit News points out another benefit of the snow: "With lawmakers stuck in their homes, they have not been able to adopt new spending bills for their friends and supporters, contemplate new taxes or order new regulations that intrude on our individual rights."
All Michigan day-care providers are now government employees and union members, and "union dues are being taken out of the child-care subsidies the state sends them." Why? "6,000 day-care providers out of 40,000 voted" in an election conducted by mail. (John Stossel) No word on what conditions would cause a state-wide childcare strike, or any benefits provided by the union, AFSCME, which is likely to use a lot of the money for political contributions and lobbying.
Peggy Noonan, also writing on the WSJ editorial page, on the declining value of Obama not being Bush:
In the 2008 general election, appealing for the first time to all of America and not only to Democrats, they had one great gift on their side, the man who both made Mr. Obama and did in John McCain, and that was George W. Bush...But now it is 2010, and Mr. Bush is gone. Mr. Obama is left with America, and he does not, really, understand it.Daniel Stone of Newsweek argues pork barrel politics is a good thing, if "done right." He cites the common statistic that "about 2 percent of federal spending goes to isolated projects," but ignores the reasons I hate earmarks: 1) although an individual earmark may not have a large dollar value attached, it indicates that the Congressperson receiving the earmark may not have voted for the bill without it. Therefore, the bill might pass based on these favors for local interests and not on the merits of the actual bill for the nation as a whole. How many bills have passed on the basis of earmarks? How much have those bills cost? Until someone can answer these questions, the 2 percent number is meaningless; 2) earmarks do serious damage to the transparency and accountability of government. People always tell me they know exactly what a politician believes because their voting record is online. But, why they voted for those bills is not. What if they made that vote in exchange for a pork project, or in exchange for a vote on another bill?
A debate about whether record-setting snow in Washington DC and much of the Northeast US has anything to do with global warming has been brewing. Global-warming believers say deniers are confusing weather with climate, and that short-term trends don't matter. The WSJ's "Best of the Web Today" blog says "for years, global warmists have claimed that the weather proved their claims about the climate." Examples provided here, here, and a collection of clips here. Therefore, deniers should not be attacked for pointing out the flaws in the case for manmade global warming based on discrete weather events.
While the massive amounts of snow in the Northeast don't disprove global warming, Nolan Finley's blog in the Detroit News points out another benefit of the snow: "With lawmakers stuck in their homes, they have not been able to adopt new spending bills for their friends and supporters, contemplate new taxes or order new regulations that intrude on our individual rights."
All Michigan day-care providers are now government employees and union members, and "union dues are being taken out of the child-care subsidies the state sends them." Why? "6,000 day-care providers out of 40,000 voted" in an election conducted by mail. (John Stossel) No word on what conditions would cause a state-wide childcare strike, or any benefits provided by the union, AFSCME, which is likely to use a lot of the money for political contributions and lobbying.
Daily Read - 2/11/10
In an interview with Bloomberg, President Obama seems to have changed his stance on Wall Street compensation, saying he doesn’t “begrudge” Jamie Dimon's $17 million bonus or Lloyd Blankfein's $9 million. The president said that $17 million is “an extraordinary amount of money” for Main Street, but “there are some baseball players who are making more than that and don’t get to the World Series either, so I’m shocked by that as well...I know both those guys; they are very savvy businessmen. I, like most of the American people, don’t begrudge people success or wealth. That is part of the free- market system." Tell that to all the people with pitchforks, and the people who made death threats against AIG executives last year.
“I know that there are Democrats for sure that we can work with to get things done, but you know what, those aren’t the Democrats running Washington right now,” said Wisconsin Rep. Paul Ryan, the ranking Republican on the House Budget Committee. “The Democrats running Washington right now tell people like me, ‘we’re not going to work with you, we’re doing it our way because we’ve got the votes, and we’re just going to run right over you.’ … You don’t have the common sense, hash-out-the-problem, thinking Democrats running the place right now.” (ABC News) However, Harry Reid may lose his seat, and Pelosi may lose the speakership.
Caroline Baum of Bloomberg says "Small Business has Some News for Big Government" (here) Baum says the left and the right give their reasons for the lack of new jobs, but "Small- business owners list 'poor sales' as the numero uno problem." Tax credits aren't the solution - "Employers aren’t about to pay a new worker $40,000 to earn a $5,000 credit unless that worker generates $35,000 of revenue", according to William Dunkelberg, chief economist of the National Federation of Independent Business. Others said the government is canceling out its own policies if it provides a tax credit with one hand, but raises income taxes with the other (many small business owners are in Obama's "rich" category). And, "Small-business owners aren’t going to expand when they may need the money to pay taxes next year." One small business owner just wants the government to "“Stay out of our way.” However, doing nothing scores no political points, but providing a tax credit and punishing "the rich" gives politicians two things to take credit for, even if the policies have no effect.
Laura Vanderkam has a column in the WSJ today arguing for free-market solutions to product safety: Consumer Reports and Good Housekeeping. Their advantage? "Good Housekeeping puts its own money behind all its endorsements. No government agency can say that."
"Fannie Mae and Freddie Mac said they will ramp up their purchases of some $200 billion in delinquent home loans that the two government-controlled mortgage-finance companies have guaranteed." The two firms "have required $111 billion in capital infusions from the U.S. Treasury to stay afloat. In December, the government said it would stand behind unlimited losses over the next three years, up from the previous limit of a combined $400 billion." (WSJ)
"Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders...Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits." (NY Times, September 30, 1999)
"The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago...The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac...is broken." 'These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.'' (NY Times, September 11, 2003)
“I know that there are Democrats for sure that we can work with to get things done, but you know what, those aren’t the Democrats running Washington right now,” said Wisconsin Rep. Paul Ryan, the ranking Republican on the House Budget Committee. “The Democrats running Washington right now tell people like me, ‘we’re not going to work with you, we’re doing it our way because we’ve got the votes, and we’re just going to run right over you.’ … You don’t have the common sense, hash-out-the-problem, thinking Democrats running the place right now.” (ABC News) However, Harry Reid may lose his seat, and Pelosi may lose the speakership.
Caroline Baum of Bloomberg says "Small Business has Some News for Big Government" (here) Baum says the left and the right give their reasons for the lack of new jobs, but "Small- business owners list 'poor sales' as the numero uno problem." Tax credits aren't the solution - "Employers aren’t about to pay a new worker $40,000 to earn a $5,000 credit unless that worker generates $35,000 of revenue", according to William Dunkelberg, chief economist of the National Federation of Independent Business. Others said the government is canceling out its own policies if it provides a tax credit with one hand, but raises income taxes with the other (many small business owners are in Obama's "rich" category). And, "Small-business owners aren’t going to expand when they may need the money to pay taxes next year." One small business owner just wants the government to "“Stay out of our way.” However, doing nothing scores no political points, but providing a tax credit and punishing "the rich" gives politicians two things to take credit for, even if the policies have no effect.
Laura Vanderkam has a column in the WSJ today arguing for free-market solutions to product safety: Consumer Reports and Good Housekeeping. Their advantage? "Good Housekeeping puts its own money behind all its endorsements. No government agency can say that."
"Fannie Mae and Freddie Mac said they will ramp up their purchases of some $200 billion in delinquent home loans that the two government-controlled mortgage-finance companies have guaranteed." The two firms "have required $111 billion in capital infusions from the U.S. Treasury to stay afloat. In December, the government said it would stand behind unlimited losses over the next three years, up from the previous limit of a combined $400 billion." (WSJ)
"Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders...Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people and felt pressure from stock holders to maintain its phenomenal growth in profits." (NY Times, September 30, 1999)
"The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago...The plan is an acknowledgment by the administration that oversight of Fannie Mae and Freddie Mac...is broken." 'These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.'' (NY Times, September 11, 2003)
Daily Read - 2/10/10
Bill Gates notes "The value to society from inventions is far greater than the financial reward that the inventors themselves receive. This is the opposite of most financial innovations." (TheGatesNotes) A strong case could be made that the cause of our crisis is that just about everyone - from Americans buying homes, to mortgage companies, to Fannie and Freddie, to regulators, to Congress, to Wall Street, to institutional and private investors - believed the value of financial innovations was that they provided a way to increase homeownership. Now we know that spreading the risk of unpaid mortgages across the financial system doesn't reduce the risk, it just infects the entire system.
"The planned overhaul of US financial rules prompted Standard & Poor’s to warn on Tuesday it might downgrade the credit ratings of Citigroup and Bank of America on concerns that the shake-up would make it less likely that the banks would be bailed out by US taxpayers if they ran into trouble again." Good - banks should be judged on their own condition, not the condition of the government. If S&P follows through, it's a strong acknowledgement that they understand my point above. (Financial Times)
In addition to saying "Mr Obama’s budget reveals a road-map to fiscal catastrophe" and "the cuts the president has proposed are comically insufficient," the Economist also says the budget "makes the heroic assumption that a final version of health reform will pass, and save the government some $150 billion over the next decade."
Former secretary of labor Robert Reich says not to worry - it's all a "misunderstanding." If only the "Mad-as-hellers" knew "what the President is trying to achieve and what he’s up against," they wouldn't be so mad. (Salon)
The Economist also has an article on defense spending in President Obama's budget. "America will spend more money on defence than it did during the Korean or Vietnam wars, though as a share of national wealth defence spending is still relatively low in historical terms (see chart)." Defense secretary Robert Gates is trying to cut some costs, including attempting to "kill off plans for an alternate engine for the F-35 Joint Strike Fighter—and if Congress attempts to preserve these two projects, Mr Gates said, he will ask Mr Obama to veto the budget." The article also says "he would also dock $614m in performance fees for the contractor, Lockheed Martin." If Lockheed is missing performance targets, I wonder how much of that is due to the back-and-forth between the President, Congress, and the Pentagon, who can't seem to make up their minds on what engine their "backbone of American air power" should use?
In his news conference yesterday, President Obama said: "I've also called for a bipartisan fiscal commission. Unfortunately this measure, which originally had received the support of a bipartisan majority of the Senate and was cosponsored by Senators Conrad and Gregg, Democrats and Republicans, was blocked there. So I'm going to be creating this commission by executive order." I'm still very skeptical about this commission idea - it seems like a way to provide political cover for politicians that can't make the difficult choices they are supposed to make.
"The planned overhaul of US financial rules prompted Standard & Poor’s to warn on Tuesday it might downgrade the credit ratings of Citigroup and Bank of America on concerns that the shake-up would make it less likely that the banks would be bailed out by US taxpayers if they ran into trouble again." Good - banks should be judged on their own condition, not the condition of the government. If S&P follows through, it's a strong acknowledgement that they understand my point above. (Financial Times)
In addition to saying "Mr Obama’s budget reveals a road-map to fiscal catastrophe" and "the cuts the president has proposed are comically insufficient," the Economist also says the budget "makes the heroic assumption that a final version of health reform will pass, and save the government some $150 billion over the next decade."
Former secretary of labor Robert Reich says not to worry - it's all a "misunderstanding." If only the "Mad-as-hellers" knew "what the President is trying to achieve and what he’s up against," they wouldn't be so mad. (Salon)
The Economist also has an article on defense spending in President Obama's budget. "America will spend more money on defence than it did during the Korean or Vietnam wars, though as a share of national wealth defence spending is still relatively low in historical terms (see chart)." Defense secretary Robert Gates is trying to cut some costs, including attempting to "kill off plans for an alternate engine for the F-35 Joint Strike Fighter—and if Congress attempts to preserve these two projects, Mr Gates said, he will ask Mr Obama to veto the budget." The article also says "he would also dock $614m in performance fees for the contractor, Lockheed Martin." If Lockheed is missing performance targets, I wonder how much of that is due to the back-and-forth between the President, Congress, and the Pentagon, who can't seem to make up their minds on what engine their "backbone of American air power" should use?In his news conference yesterday, President Obama said: "I've also called for a bipartisan fiscal commission. Unfortunately this measure, which originally had received the support of a bipartisan majority of the Senate and was cosponsored by Senators Conrad and Gregg, Democrats and Republicans, was blocked there. So I'm going to be creating this commission by executive order." I'm still very skeptical about this commission idea - it seems like a way to provide political cover for politicians that can't make the difficult choices they are supposed to make.
Daily Read - 2/9/10
The Wall Street Journal says the government has no exit strategy for Fannie Mae and Freddie Mac. "Fannie and Freddie remain troubled wards of the state, with no blueprints for the future and no clear exit strategy for the government...Nearly a year and a half after the outbreak of the global economic crisis, many of the problems that contributed to it haven't yet been tamed. The U.S. has no system in place to tackle a failure of its largest financial institutions." A typical "exit strategy" would be to take the companies public again, but what investor in their right mind would buy shares. After all, the government is "running Fannie and Freddie as an instrument of national economic policy, not as a business," says Daniel Mudd, Fannie's former CEO. (And they have been for years)
The Cato blog has a post about a "National Summit on Health Care Fraud." The GAO has noted in the past that requests for more people and resources to combat fraud in government health insurance programs are typically not met. President Obama's budget requests an 80 percent increase in the budget for anti-fraud measures, but John Dingell (D-MI), among others, are opposing it. James Roosevelt, CEO of private insurer Tufts Health Plan, "pointed out that the chief priority for Medicare/Medicaid is to pay claims as quickly as possible. Public programs lack the capabilities of their private sector counterparts to not only stop improper payments from being made, but also detecting such payments after the fact."
The New York Times has an interesting article on the SEC's challenges in trying to "unmask the next Madoff." "Wall Street vastly outdoes the S.E.C. in terms of people, money and, many in the financial industry argue, talent. The administration has requested a budget of $1.3 billion for the S.E.C. for 2011. Hedge fund stars can make that in a year." The solution, according to Robert S. Khuzami, the S.E.C. head of enforcement? The article says he wants "to infuse the S.E.C. with the ethos of a start-up company, making it faster, more proactive and even a bit entrepreneurial."
An article at The Hill says Democrats blame White House Chief of Staff Rahm Emanuel's politcal mistakes and lack of understanding of the Senate for the collapse of health care reform. "Their plan was to keep all the Democrats together and work like hell to get Snowe and Collins. The Senate doesn't work that way. You need a radius of 10 to 12 from the other side if you're going to have a shot," said an unnamed source.
The Cato blog has a post about a "National Summit on Health Care Fraud." The GAO has noted in the past that requests for more people and resources to combat fraud in government health insurance programs are typically not met. President Obama's budget requests an 80 percent increase in the budget for anti-fraud measures, but John Dingell (D-MI), among others, are opposing it. James Roosevelt, CEO of private insurer Tufts Health Plan, "pointed out that the chief priority for Medicare/Medicaid is to pay claims as quickly as possible. Public programs lack the capabilities of their private sector counterparts to not only stop improper payments from being made, but also detecting such payments after the fact."
The New York Times has an interesting article on the SEC's challenges in trying to "unmask the next Madoff." "Wall Street vastly outdoes the S.E.C. in terms of people, money and, many in the financial industry argue, talent. The administration has requested a budget of $1.3 billion for the S.E.C. for 2011. Hedge fund stars can make that in a year." The solution, according to Robert S. Khuzami, the S.E.C. head of enforcement? The article says he wants "to infuse the S.E.C. with the ethos of a start-up company, making it faster, more proactive and even a bit entrepreneurial."
An article at The Hill says Democrats blame White House Chief of Staff Rahm Emanuel's politcal mistakes and lack of understanding of the Senate for the collapse of health care reform. "Their plan was to keep all the Democrats together and work like hell to get Snowe and Collins. The Senate doesn't work that way. You need a radius of 10 to 12 from the other side if you're going to have a shot," said an unnamed source.
Advice for Republicans?
A commenter on Megan McArdle's article has some advice for Republicans:
"Republicans should do exactly what Democrats do: Promise to pay for everyone's health care and give each person a unicorn. That's how you get elected."Somehow, I don't think that would be good for anyone but the professional Republican politicians. If Republicans do this, I really hope voters would see right through this and vote with their feet (i.e. even more Republicans become Independents).
Daily Read - 2/8/10
NPR has an interview with former Treasury Secretary Hank Paulson, where says things would have been much worse for everyone if the government had not intervened in the financial system. "If the system had collapsed, many, many Main Street companies, not Wall Street companies, but Main Street companies of all size would have had trouble raising the money to fund themselves...we easily could have had unemployment of 25 percent." President Obama likes to talk about Main Street versus Wall Street, but the truth is that they are interdependent. He also keeps saying something needs to be done, but nearly 16 months after the collapse of Lehman Brothers, Congress is still spending most of their time trying to punish bankers instead of reforming the system, after spending 2009 working on health care. While trying to not "let a crisis go to waste", they let a year go to waste, and are working on another one.
An Economist article uses China as an example of the dangers of too much government intervention in credit markets - too much credit when its not needed, and too little when it is:
A column in the Washington Post asks "Why are liberals so condescending?" It argues "American liberals, to a degree far surpassing conservatives, appear committed to the proposition that their views are correct, self-evident, and based on fact and reason, while conservative positions are not just wrong but illegitimate, ideological and unworthy of serious consideration." Surprisingly, 65% of readers seemed to agree when asked "Who is more condesceding (chart at right). In case you're wondering, I answered "both."
George Will's column in the Washington Post yesterday, and Robert Samuelson's column in today's Post summarized some ideas for restoring fiscal sanity in Washington. Samuelson says "We can no longer just tinker. We need to ask whether government spending serves genuine public purposes or merely benefits favored constituencies." Will summarizes ideas proposed by Rep. Paul Ryan (R-Wis) focusing on tax and entitlement reform that go beyond mere tinkering. Although his tax ideas might be considered extreme, something extreme needs to be done. "Since the 1986 tax simplification, the code has been recomplicated more than 14,000 times -- more than once a day." Ryan would also raise the retirement age to reduce government spending - "The system was never intended to do what it is doing -- subsidizing retirements that extend from one-third to one-half of retirees' adult lives." Congress and the President need to realize America's current situation requires identifying ways to pay fewer benefits to less people, not more benefits to more people, regardless of the political consequences.
The President is making gestures, such as saying "he would sit down with Republican and Democratic lawmakers this month to exchange ideas on an issue [health care] that has deeply divided the parties." But, an aide to the President says "We're not starting over. We're coming in with our plan." (WSJ) Too bad - I was hoping for a change.
Are Americans "childish" and "ignorant"? Slate's Jacob Weisberg thinks so, according to his article. Weisberg's article used poll results to make a case that American ignorance was causing paralysis inside the Beltway. I guess he doesn't believe in democracy. However, Derek Thompson at the Atlantic analyzes some flaws in using polling data to make such points, and that there are rational explanations for the way Americans opinions change over time.
An Economist article uses China as an example of the dangers of too much government intervention in credit markets - too much credit when its not needed, and too little when it is:
Big credit decisions in China are not advanced by any one bank, nor any one banker. Credit is infused and withdrawn by central diktat. That process has extraordinary appeal to state planners but is horribly inefficient for individual institutions. In recent weeks, for example, as the screws on lending have tightened, favoured industrial companies have been getting urgent calls from their bankers demanding that they immediately scoop up their credit needs for months to come, or be subject to a freeze of uncertain duration. Firms that manage to load up on credit still suffer because they bear interest costs long before the money is actually needed.In the US, the government pushed hard for more credit just when it was not needed - during a massive housing bubble. As Democrats and others continue to point fingers at bankers as the cause of our financial crisis, the Wall Street Journal's lead editorial reminds us of New York Attorney General Andrew Cuomo's contribution. When he worked for HUD in 1999, he raised the target forloans for low- and moderate-income families that Fannie and Freddie were required to purchase from 42 percent to 50 percent, while encouraging lower underwriting standards. "It's a sign of Washington's continuing failure to examine its own failures." Cuomo would prefer we focus on his fraud lawsuit against Bank of America, filed last week. But, "Mr. Cuomo has arguably done far more harm to taxpayers and investors than the defendants have."
George Will's column in the Washington Post yesterday, and Robert Samuelson's column in today's Post summarized some ideas for restoring fiscal sanity in Washington. Samuelson says "We can no longer just tinker. We need to ask whether government spending serves genuine public purposes or merely benefits favored constituencies." Will summarizes ideas proposed by Rep. Paul Ryan (R-Wis) focusing on tax and entitlement reform that go beyond mere tinkering. Although his tax ideas might be considered extreme, something extreme needs to be done. "Since the 1986 tax simplification, the code has been recomplicated more than 14,000 times -- more than once a day." Ryan would also raise the retirement age to reduce government spending - "The system was never intended to do what it is doing -- subsidizing retirements that extend from one-third to one-half of retirees' adult lives." Congress and the President need to realize America's current situation requires identifying ways to pay fewer benefits to less people, not more benefits to more people, regardless of the political consequences.
The President is making gestures, such as saying "he would sit down with Republican and Democratic lawmakers this month to exchange ideas on an issue [health care] that has deeply divided the parties." But, an aide to the President says "We're not starting over. We're coming in with our plan." (WSJ) Too bad - I was hoping for a change.
Are Americans "childish" and "ignorant"? Slate's Jacob Weisberg thinks so, according to his article. Weisberg's article used poll results to make a case that American ignorance was causing paralysis inside the Beltway. I guess he doesn't believe in democracy. However, Derek Thompson at the Atlantic analyzes some flaws in using polling data to make such points, and that there are rational explanations for the way Americans opinions change over time.
Weekend Read - 2/6 and 2/7/10
Lawyers can't find enough jurors for a product liability trial against cigarette makers. "Lawyers excused a woman who said people have no right to sue over diseases that are listed on the warning label of a package." (WV Record, h/t Overlawyered.com)
Someone on Yahoo Answers who hates snow asks "How do I convince my kids snow is dangerous?" (h/t Free-Range Kids blog)
Baltimore Sun article "Unplowed snow can bury a political career" on the politics of snow removal. Stephanie C. Rawlings-Blake was recently sworn in as Baltimore's mayor. "Taking care of snow is something people can see immediately. If you can't handle that, they'll begin to doubt whether other city functions are being done well,"says Vincent J. Cannato, an associate professor of history at the University of Massachusetts.
A 9-year-old boy was "was nearly suspended after playing with LEGOs during his lunch period because one of the action figures was carrying a toy machine gun." (Pictured, right. Staten Island News)
Yahoo UK has this story about a man who got a £60 fine and three points on his license for blowing his nose in the car - while parked!
I started reading Andrew Ross Sorkin's excellent book, Too Big to Fail. He includes some fun facts about Fed Chairman Ben Bernanke, including that he used to wait tables at the South of the Border tourist stop off I-95. Speaking of economists:
Baltimore Sun article "Unplowed snow can bury a political career" on the politics of snow removal. Stephanie C. Rawlings-Blake was recently sworn in as Baltimore's mayor. "Taking care of snow is something people can see immediately. If you can't handle that, they'll begin to doubt whether other city functions are being done well,"says Vincent J. Cannato, an associate professor of history at the University of Massachusetts.
A 9-year-old boy was "was nearly suspended after playing with LEGOs during his lunch period because one of the action figures was carrying a toy machine gun." (Pictured, right. Staten Island News)Yahoo UK has this story about a man who got a £60 fine and three points on his license for blowing his nose in the car - while parked!
I started reading Andrew Ross Sorkin's excellent book, Too Big to Fail. He includes some fun facts about Fed Chairman Ben Bernanke, including that he used to wait tables at the South of the Border tourist stop off I-95. Speaking of economists:
Iran Provokes Washington
CNN reports that "Two new missile production plants opened in Iran on Saturday." Washington called it a "provocative act," which is what Washington does when provoked.
He "Saw Wind and Made a Windmill"
A great story from Wired.com about William Kamkwamba, a persistent young man from Malawi who built a windmill to "power a small bulb in his bedroom so he could stay up and read past sunset...But one windmill has turned into three, which now generate enough electricity to light several bulbs in his family’s house, power radios and a TV, charge his neighbors’ cellphones and pump water for the village’s fields and household use."
Daily Read - 2/5/10
An interesting article from last November in the Guardian (UK) discusses whether the Playpump (pictured) is an efficent solution for water problems in Africa or just a clever marketing gimmick. Children play on a merry-go-round, which pumps water into the raised tower. Some critics say it is "over-reliant on child labour."In President Obama's address at the National Prayer Breakfast, he "applauded Jewish, Christian, Hindu, and other faiths that are responding to the earthquake in Haiti. He said such compassion should be harnessed for everyday disasters, like hunger and poverty. He also said that liberals have started to embrace the idea that religious groups and other private efforts can play a major role in fighting social problems…There is an "increasing recognition among progressives that government can't solve all of our problems, and that talking about values like responsible fatherhood and healthy marriages are integral to any antipoverty agenda."" I hope he's right, particularly in light of recent comments from Obama's Office of Social Innovation. (Philanthropy.com)
Philip K Howard, of Common Good, has an editorial in the WSJ. He thinks when Obama said "Let's try common sense" in the State of the Union, he really meant more laws. "Government is out of control, schools are out of control, health-care costs are out of control, lawsuits are out of control—because law has supplanted the responsibility of people needed to keep them in control."
Charles Krauthammer in today's Washington Post says "don't the Democrats see that clinging to this agenda will march them over a cliff? Don't they understand Massachusetts?" He argues the Democrats are sticking to their agenda because many of them believe "(1) The people are stupid and (2) Republicans are bad. Result? The dim, led by the malicious, vote incorrectly." Obama says he has not explained health care clearly enough, even after 29 speeches. (I thought he had "a gift"?) Krauthammer also says liberals believe in the "moral hollowness of conservatism," while liberals "act in the public interest."
Of course, you can find commenatators on the left who say Republicans think Democrats are stupid and are only motivaed by politics. Thus, the rise of the tea party movement and others who are sick of both sides.
Somehow I missed this one earlier this week: "Education Secretary Arne Duncan said Sunday that 2005's Hurricane Katrina was "the best thing that happened to the education system in New Orleans," since it forced the failing school system to start over from scratch." He later apologized. (Politico)
Obama's budget has some optimistic projections for economic growth going forward. Perhaps he should plan for the worst, based on the chart below, an analysis of past budget projections, from downsizinggovernment.org (here) However, Paul Krugman says not to worry - deficit fearmongering is only politics. Perhaps, as Obama says, the worst is behind us. Robert Reich argues for "The Necessity of Obamanomics" on the editorial page of the WSJ, given the "big picture" (he doesn't mean the big picture below). On the other hand, the Economist thinks "Mr Obama’s budget reveals a road-map to fiscal catastrophe" and "the cuts the president has proposed are comically insufficient." Moody's Investors Service, which provides credit ratings, said "Unless further measures are taken to reduce the budget deficit further or the economy rebounds more vigorously than expected, the federal financial picture as presented in the projections for the next decade will at some point put pressure on the Aaa government bond rating." (quoted here)
Obama Aide says Government Not Good at Finding New Ways to Treat Social Problems
In a recent speech, Sonal Shah, head of the White House's Office of Social Innovation and Civic Participation, said "It's hard to take risks when you have 535 board members," and "that resistance to cultural changes and legal constraints made it hard for government to be agile and try new approaches to finding and financing the most effective and innovative nonprofit groups." So, she "urged foundations to take greater risks...to figure out what ideas were worth government investing in," according to a column at Philanthropy.com.
In review, Obama created a new "Office of Social Innovation." The first lesson that the head of this new office learns is that government is a terrible way to achieve social innovation - they are not good at identifying good ideas, and not good at generating new ideas.
Instead of creating a new office that apparently has no function but to provide a few more government jobs, why didn't Obama just give some speeches about Americans donating more to their favorite charities, or volunteering? Does the government really need to be more involved in channeling tax money into charities of their choice?
In review, Obama created a new "Office of Social Innovation." The first lesson that the head of this new office learns is that government is a terrible way to achieve social innovation - they are not good at identifying good ideas, and not good at generating new ideas.
Instead of creating a new office that apparently has no function but to provide a few more government jobs, why didn't Obama just give some speeches about Americans donating more to their favorite charities, or volunteering? Does the government really need to be more involved in channeling tax money into charities of their choice?
Daily Read - 2/4/10
"The American Republic will endure until the day Congress discovers that it can bribe the public with the public's money." Alexis de Tocqueville (quoted in a column by Bill Flax at Real Clear Markets)
"For the first time, government programs next year will account for more than half of all U.S. health-care spending, federal actuaries predict, as the weak economy sends more people into Medicaid and slows growth of private insurance...By 2020, according to the new projections, about one in five dollars spent in the U.S. will go to health care, a proportion far beyond any other industrialized nation." (WSJ)
George Will with a startling statistic showing how improvements in treating infectious disease has drastically altered demographics, leading to higher health care costs. "In 1900, more than 33 percent of all deaths were of children under 5; today they are less than 2 percent. In 1900, deaths of persons 65 and older were only 18 percent of all deaths; today they are 75 percent." (Washington Post)
"Structural steel for the 1,776-foot tower that will be known as 1 World Trade Center has risen 200 feet above street level, a tangible sign of ground zero progress, redevelopment officials said Wednesday...The 104-story skyscraper is scheduled to be completed in 2013." (Washington Post)
"For the first time, government programs next year will account for more than half of all U.S. health-care spending, federal actuaries predict, as the weak economy sends more people into Medicaid and slows growth of private insurance...By 2020, according to the new projections, about one in five dollars spent in the U.S. will go to health care, a proportion far beyond any other industrialized nation." (WSJ)
George Will with a startling statistic showing how improvements in treating infectious disease has drastically altered demographics, leading to higher health care costs. "In 1900, more than 33 percent of all deaths were of children under 5; today they are less than 2 percent. In 1900, deaths of persons 65 and older were only 18 percent of all deaths; today they are 75 percent." (Washington Post)
Jay Cost on how Obama's pleas for bipartisanship could in fact be partisan. "This partisan view of bipartisanship doesn't suggest a meeting at the halfway point."
Politico's Glen Thrush has an interesting exchange between Sen. Blanche Lincoln (D-Ark.) and Obama from yesterday's Q and A between Senate Democrats and the President. Lincoln asked Obama to push back at the left wing of the party, and said "no one in your administration" understands how to make payroll - a jab at the lack of experienced businesspeople in Obama's administration. (Politico)
Politico's Glen Thrush has an interesting exchange between Sen. Blanche Lincoln (D-Ark.) and Obama from yesterday's Q and A between Senate Democrats and the President. Lincoln asked Obama to push back at the left wing of the party, and said "no one in your administration" understands how to make payroll - a jab at the lack of experienced businesspeople in Obama's administration. (Politico)
"Scott Brown (R) will be sworn into office Thursday, a week earlier than expected, after he asked officials in his home state of Massachusetts on Wednesday to certify his election "without delay."" This eases concerns his swearing-in would be delayed for partisan reasons. (Washington Post)
"Structural steel for the 1,776-foot tower that will be known as 1 World Trade Center has risen 200 feet above street level, a tangible sign of ground zero progress, redevelopment officials said Wednesday...The 104-story skyscraper is scheduled to be completed in 2013." (Washington Post)
Daily Read 2/3/10
The ever-helpful Keith Hennessey on how the stated goal of the President's Fiscal Commission in his budget "is using clever language to make it sound like a balanced budget goal." One of the perils of having a very intelligent President is they have a greater capacity for "clever language." Hennessey also calculates what Obama considers an "acceptable level" of debt. Using Obama's numbers, he concludes "the President is defining 71-72% of GDP as an acceptable level of debt...Debt-to-GDP last exceeded 70% in 1950 as we were paying off the debt from World War II." Is this an "acceptable level"?
This week's Economist has a series of articles on financial reform. One article "Garrottes and sticks", the author highlights that Washington is under intense political pressure to do something, but is not sure what. "The administration is “trying to legislate by shouting,” Steve Bartlett of the Financial Services Roundtable, an industry group, told NPR radio, pointing out that when Mr Obama unveiled the Volcker rule he devoted more words to trashing banks than to outlining the plan. But bashing banks is good politics: a majority of Americans say Wall Street should not have been bailed out."
In Buttonwood's column "Not what they meant", he reviews the unintended (negative) consequences of past financial "reforms," and says "capital, like water, tends to flow around obstacles. Try to dam its movement at one point, and slowly but remorselessly it will find its way around." His prediction for the unintended consequence in this round of "reform"? That more and more capital will flow to the unregulated parts of the market, hedge funds will become bigger and even more influential -- "something the authorities may regret when the next crisis comes along."
The next Economist article "Off target" repeats the likely benefit to unregulated (or less-regulated) financial firms. "If banks are forbidden to indulge in proprietary trading, their employees may decide to decamp to the hedge-fund industry. Indeed, bank traders have been typical founders of hedge-fund start-ups. But once that initial spate of spin-offs has occurred, where will budding hedge-fund managers be able to prove their mettle? The best training ground will be at the existing hedge-fund groups."
Washington needs to tread carefully as it panders for votes by punishing banks, or the cure may end up worse than the disease.
Robert Samuelson in Newsweek (via RCP) says "a crude consensus has formed over what caused the financial crisis", but is "vastly simplified." "Unless we get the story of the crisis right, we may be disappointed by the sequel." In a classic boom-bust cycle, America became enamored with the idea of ever-rising house prices, and, thinking the housing market was not risky, "people took actions that made it more risky. The pleasures of prosperity backfired. They bred carelessness and complacency. If regulation was lax, the main reason was that regulators -- like the lenders, investors and borrowers they regulated -- shared the conventional wisdom." As Obama pounds the pulpit saying "never again!", Samuelson cautions "it's neither possible -- nor desirable -- to regulate away all risk." Although some changes need to be made in our banking system, "a single-minded focus on the blunders of Wall Street may also distract us from other possible sources of future crises, including excessive government debt and borrowing."
John Stossel on how "Big, complicated government gives [politicians] opportunities to do favors for their friends." (RCP) Even if this particular story is not true, the overall point that larger government is inherently less transparent, and creates larger incentives to lobby for favors still stands.
Gateway Pundit has coverage of Las Vegas Mayor Oscar Goodman's threat to "give him the boot back to Washington," if Obama comes to visit. Although he's probably over-reacting to Obama's recent comments that people should not blow their college savings in Vegas, Goodman is in the unfortunate position of being mayor of a city that is very dependent on an industry that is on Obama's "naughty" list. And, although Obama says his repeated negative comments about Vegas are about saving money, this WSJ article from July 2009 pointed out that government conferences were being moved out of Vegas, even if they were cheaper, to avoid political backlash. I'm not particularly pro-gambling, but much of Vega's economy comes from holding conferences, not from casual gamblers.
![[1unions]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tYjNb0ErtbhPrxi35-FgvRsC4uqUEEpjml_AIRdChzk1nIfS4S9Rpe0h7vcHJd1l9tDJ9sQlveSwcbJU8_KlBIQcMd7uLnmXSO0wZaEj2rvqGcGWcHqbbIfVdVMGnWTnAr6qzYKI1h-fMoueaH0C4W7K8=s0-d)
"It's now official: In 2009 the number of unionized workers who work for the government surpassed those in the private economy for the first time." "Government unions offer what is close to lifetime job security and benefits, subject only to gross dereliction of duty. Once a city or state's workers are organized by a union, the jobs almost never go away...which explains why the AFL-CIO and SEIU have become advocates for higher taxes and government expansion in cities, states and Washington." (WSJ)
This week's Economist has a series of articles on financial reform. One article "Garrottes and sticks", the author highlights that Washington is under intense political pressure to do something, but is not sure what. "The administration is “trying to legislate by shouting,” Steve Bartlett of the Financial Services Roundtable, an industry group, told NPR radio, pointing out that when Mr Obama unveiled the Volcker rule he devoted more words to trashing banks than to outlining the plan. But bashing banks is good politics: a majority of Americans say Wall Street should not have been bailed out."
In Buttonwood's column "Not what they meant", he reviews the unintended (negative) consequences of past financial "reforms," and says "capital, like water, tends to flow around obstacles. Try to dam its movement at one point, and slowly but remorselessly it will find its way around." His prediction for the unintended consequence in this round of "reform"? That more and more capital will flow to the unregulated parts of the market, hedge funds will become bigger and even more influential -- "something the authorities may regret when the next crisis comes along."
The next Economist article "Off target" repeats the likely benefit to unregulated (or less-regulated) financial firms. "If banks are forbidden to indulge in proprietary trading, their employees may decide to decamp to the hedge-fund industry. Indeed, bank traders have been typical founders of hedge-fund start-ups. But once that initial spate of spin-offs has occurred, where will budding hedge-fund managers be able to prove their mettle? The best training ground will be at the existing hedge-fund groups."
Washington needs to tread carefully as it panders for votes by punishing banks, or the cure may end up worse than the disease.
Robert Samuelson in Newsweek (via RCP) says "a crude consensus has formed over what caused the financial crisis", but is "vastly simplified." "Unless we get the story of the crisis right, we may be disappointed by the sequel." In a classic boom-bust cycle, America became enamored with the idea of ever-rising house prices, and, thinking the housing market was not risky, "people took actions that made it more risky. The pleasures of prosperity backfired. They bred carelessness and complacency. If regulation was lax, the main reason was that regulators -- like the lenders, investors and borrowers they regulated -- shared the conventional wisdom." As Obama pounds the pulpit saying "never again!", Samuelson cautions "it's neither possible -- nor desirable -- to regulate away all risk." Although some changes need to be made in our banking system, "a single-minded focus on the blunders of Wall Street may also distract us from other possible sources of future crises, including excessive government debt and borrowing."
John Stossel on how "Big, complicated government gives [politicians] opportunities to do favors for their friends." (RCP) Even if this particular story is not true, the overall point that larger government is inherently less transparent, and creates larger incentives to lobby for favors still stands.
Gateway Pundit has coverage of Las Vegas Mayor Oscar Goodman's threat to "give him the boot back to Washington," if Obama comes to visit. Although he's probably over-reacting to Obama's recent comments that people should not blow their college savings in Vegas, Goodman is in the unfortunate position of being mayor of a city that is very dependent on an industry that is on Obama's "naughty" list. And, although Obama says his repeated negative comments about Vegas are about saving money, this WSJ article from July 2009 pointed out that government conferences were being moved out of Vegas, even if they were cheaper, to avoid political backlash. I'm not particularly pro-gambling, but much of Vega's economy comes from holding conferences, not from casual gamblers.
![[1unions]](http://sg.wsj.net/public/resources/images/ED-AK923_1union_NS_20100202181620.gif)
"It's now official: In 2009 the number of unionized workers who work for the government surpassed those in the private economy for the first time." "Government unions offer what is close to lifetime job security and benefits, subject only to gross dereliction of duty. Once a city or state's workers are organized by a union, the jobs almost never go away...which explains why the AFL-CIO and SEIU have become advocates for higher taxes and government expansion in cities, states and Washington." (WSJ)
Daily Read 2/2/10
The Economist's leader on bank regulation said "For investors the most dangerous words in the English language are “this time it’s different.” For governments and financial policemen they are “never again.”" Regulators, like Sisyphus, are doomed to fight the last battle, to watch the boulder roll back down the hill the next time there is a crisis. The Economist questions "Can he live up to this promise? Or is it destined to become a YouTube classic, played endlessly in half a decade or so, after another banking implosion?"
Physician, heal thyself! The status of most private companies in the middle of the credit crisis has been resolved, but: "Fifteen months after Fannie and Freddie were effectively nationalized, neither the Obama administration nor Congressional leaders see a quick solution to one of the thorniest problems in American finance: how to fix the twin mortgage giants without choking the flow of credit to homeowners and dealing a blow to a still-fragile housing market." (NY Times)
Thomas Sowell on a possible contributor to higher unemployment rates among young workers in this recession: minimum wage. "The very fact that the government has to impose those wage rates means that workers were unwilling to risk not having a job by refusing to work for less than the wage rate that has been mandated. Now that choice has been taken out of their hands, with the hidden cost in this case being higher unemployment rates." (Real Clear Politics) Maybe Obama should consider a temporary reduction in the minimum wage to spur employment?
The uncertainty theme continues in the clean energy industry. "Wind turbine manufacturers "need more certainty" to add shifts and factories in the United States, said Elizabeth Salerno, director of data and analysis for the wind industry trade group." The $787 billion stimulus bill that needed to be passed in a hurry to create jobs in shovel-ready projects is not creating as many jobs as expected, but don't worry: "Obama's advisors said the biggest clean-energy benefits of the stimulus are still to come." (LA Times)
Installing solar panels can save money in the long run, but homeowners have trouble with the up-front installation cost. Berkeley, California has a program by "which it lends homeowners the money to put panels on their houses. The owners repay the loans over a period of years through an extra charge on their local property-tax bills." (The Economist)
Since Obama promised to freeze some government spending starting next year, his budget this year is "one of the greatest spend-while-you-can documents in American history," according to this WSJ editorial. In addition to lots of new spending, "the White House proposes to convert long-standing "discretionary" spending that requires annual appropriations into permanent entitlement programs," making it harder to cut back spending later. "If Mr. Obama's priorities become law, federal outlays will have grown an astonishing 29% since 2008." They make an attempt to pay for some of this, and the WSJ helpfully highlights selected tax increases found in Obama's budget:
![[1budget]](https://lh3.googleusercontent.com/blogger_img_proxy/AEn0k_tlRgdR5DAJ9eZZibnq2e-YSlPXeq3zYkh3GH1WUT_ajhP6ZFWlSV0bm7yDQudPW6n6czOTlPq_guaW1CnJtzMpIpuAfX112GvQOvzVf269xZTxvg6ypwv7dqw4V1JQSzNxv663JTZs1a5dhCAPMHIDCbQ=s0-d)
Mark Steyn's editorial in yesterday's Washington Times talks about political consequences for Democrats:
Physician, heal thyself! The status of most private companies in the middle of the credit crisis has been resolved, but: "Fifteen months after Fannie and Freddie were effectively nationalized, neither the Obama administration nor Congressional leaders see a quick solution to one of the thorniest problems in American finance: how to fix the twin mortgage giants without choking the flow of credit to homeowners and dealing a blow to a still-fragile housing market." (NY Times)
Thomas Sowell on a possible contributor to higher unemployment rates among young workers in this recession: minimum wage. "The very fact that the government has to impose those wage rates means that workers were unwilling to risk not having a job by refusing to work for less than the wage rate that has been mandated. Now that choice has been taken out of their hands, with the hidden cost in this case being higher unemployment rates." (Real Clear Politics) Maybe Obama should consider a temporary reduction in the minimum wage to spur employment?
The uncertainty theme continues in the clean energy industry. "Wind turbine manufacturers "need more certainty" to add shifts and factories in the United States, said Elizabeth Salerno, director of data and analysis for the wind industry trade group." The $787 billion stimulus bill that needed to be passed in a hurry to create jobs in shovel-ready projects is not creating as many jobs as expected, but don't worry: "Obama's advisors said the biggest clean-energy benefits of the stimulus are still to come." (LA Times)
Installing solar panels can save money in the long run, but homeowners have trouble with the up-front installation cost. Berkeley, California has a program by "which it lends homeowners the money to put panels on their houses. The owners repay the loans over a period of years through an extra charge on their local property-tax bills." (The Economist)
Since Obama promised to freeze some government spending starting next year, his budget this year is "one of the greatest spend-while-you-can documents in American history," according to this WSJ editorial. In addition to lots of new spending, "the White House proposes to convert long-standing "discretionary" spending that requires annual appropriations into permanent entitlement programs," making it harder to cut back spending later. "If Mr. Obama's priorities become law, federal outlays will have grown an astonishing 29% since 2008." They make an attempt to pay for some of this, and the WSJ helpfully highlights selected tax increases found in Obama's budget:
Mark Steyn's editorial in yesterday's Washington Times talks about political consequences for Democrats:
"We don't quit. I don't quit," he said. But throughout the chamber, Democrats were quitting. "I quit," says Rep. Marion Berry of Arkansas, declining to run in November. "I quit," says Sen. Byron Dorgan of North Dakota, doing likewise. "I quit," says Beau Biden of Delaware, son of Vice President Joseph R. Biden Jr., choosing not to run for his father's seat.The Hill reports today that Durbin and Schumer are preparing to take over if Harry Reid loses his seat: "The second- and third-ranking Senate Democratic leaders are doling out huge sums of cash, laying the groundwork for a leadership race should Senate Majority Leader Harry Reid lose reelection."
Meg Whitman on Welfare in California
Former eBay CEO Meg Whitman is running for governor of California. She has a column in the Orange County Register lamenting the state of the welfare system there. "In 1996, California had 21 percent of the nation’s welfare cases. Today, 32 percent of all welfare cases in the United States are in California, even though we only represent 12 percent of the total U.S. population. Consider this troubling comparison; California is nearly twice as big as New York state, but we have five times as many welfare cases."
Why?
Why?
Only 22 percent of welfare recipients in California who are required to meet federal work minimums are working. According to the Public Policy Institute of California, our state is one of only nine that does not unconditionally enforce the federal government’s five-year lifetime limit on cash welfare assistance. These flaws in our welfare system, coupled with a monthly cash check that is almost 70 percent higher than the national average, work against the goal of helping more welfare recipients leave welfare for a life of greater independence and dignity.
Douthat on Keeping "Culture Wars" Local
Columnist Ross Douthat chimes in on abstinence-only versus contraceptive-oriented sex education in today's New York Times. He argues "we should understand it more as a battle over community values than as an argument about public policy," and "What is taught in the classroom is vastly less important than the matrix of family, culture and economics: the values parents impart and the example that they set, the friends teenagers make and the activities they join, and the cross-cutting effects of wealth, health and self-esteem." "The abstinence-based courses that social conservatives champion produce unimpressive results — but so do the contraceptive-oriented programs that liberals tend to favor."
I hate to wonder how much effort and money is being put into debating these things at the Federal level, for little effect.
I hate to wonder how much effort and money is being put into debating these things at the Federal level, for little effect.
Daily Read 2/1/10
A WSJ article on effects of the recession's "triple whammy" to non-profits: "Donations are down. Government funding is down. Need is up." Consider giving more to your favorite charities this year. When you give directly to a non-profit, you decide what's worthy, and charities are more accountable for wasting money than the government is. You can stop donating, you can't stop paying taxes. However, if you think the government is a good way to provide services to the needy, keep reading...
President Obama is submitting his $38 trillion budget to Congress today. The deficit will "approach a record $1.6 trillion this year," and "recede to $1.3 trillion in 2011 but remain persistently high for years to come under Obama's policies." (Washington Post, emphasis mine)
Megan McArdle of the Atlantic (here) on why Obama is having trouble with his "they broke it, I'm going to fix it" message: "what he has done, and what he wants to do."
In Obama's remarks on his budget, he says "the previous administration and previous Congresses created an expensive new drug program, passed massive tax cuts for the wealthy, and funded two wars." Obama is campaigning for additional, expensive medical programs; He is not likely to reverse the tax cuts during a recession; He was not in Congress when the Iraq war started, so has been able to get a free pass, but calls the war in Afghanistan a "necessity." So, how is the existing budget everyone else's fault? And, how are the "persistently high" future budgets everyone else's fault?
Obama says some proposed spending cuts are "more painful, because the goals of the underlying programs are worthy," and he is "willing to reduce waste in programs I care about." This is the problem when people see government as a source of benefits, and as a way to steer the economy. Everything the government does is "worthy" to someone, and the conversation becomes about small cuts in "waste" instead of whether the government should be involved at all.
This article, "The greatest risk is living swaddled in bubble wrap", from The National says that, in the UK, it seems "the principal role of government is to remove all hazards from daily existence." (h/t Overlawyered.com) If that's truly government's role, we're doomed to ever larger tax bills!
The Washington Post has an article today on how the crusade for a Consumer Financial Protection Agency lost steam, "echoing the enduring national debate over whether government intervention is more a solution or a problem." Opposition to CFPA is increasingly bipartisan.
The GOP blog has this excerpt from Obama's meeting with Republicans in Baltimore where he admits some people might not be able to keep their current insurance under health reform, then blames it on things that "got snuck in" to the bill. Again, those provisions were "worthy" to someone, or they wouldn't be there.
President Obama is submitting his $38 trillion budget to Congress today. The deficit will "approach a record $1.6 trillion this year," and "recede to $1.3 trillion in 2011 but remain persistently high for years to come under Obama's policies." (Washington Post, emphasis mine)
Megan McArdle of the Atlantic (here) on why Obama is having trouble with his "they broke it, I'm going to fix it" message: "what he has done, and what he wants to do."
In Obama's remarks on his budget, he says "the previous administration and previous Congresses created an expensive new drug program, passed massive tax cuts for the wealthy, and funded two wars." Obama is campaigning for additional, expensive medical programs; He is not likely to reverse the tax cuts during a recession; He was not in Congress when the Iraq war started, so has been able to get a free pass, but calls the war in Afghanistan a "necessity." So, how is the existing budget everyone else's fault? And, how are the "persistently high" future budgets everyone else's fault?
Obama says some proposed spending cuts are "more painful, because the goals of the underlying programs are worthy," and he is "willing to reduce waste in programs I care about." This is the problem when people see government as a source of benefits, and as a way to steer the economy. Everything the government does is "worthy" to someone, and the conversation becomes about small cuts in "waste" instead of whether the government should be involved at all.
This article, "The greatest risk is living swaddled in bubble wrap", from The National says that, in the UK, it seems "the principal role of government is to remove all hazards from daily existence." (h/t Overlawyered.com) If that's truly government's role, we're doomed to ever larger tax bills!
The Washington Post has an article today on how the crusade for a Consumer Financial Protection Agency lost steam, "echoing the enduring national debate over whether government intervention is more a solution or a problem." Opposition to CFPA is increasingly bipartisan.
The GOP blog has this excerpt from Obama's meeting with Republicans in Baltimore where he admits some people might not be able to keep their current insurance under health reform, then blames it on things that "got snuck in" to the bill. Again, those provisions were "worthy" to someone, or they wouldn't be there.
