I’ve just published a foreign policy-related post at Outside the Beltway:

Musing About the Near Future of U. S. Security Policy

I think that killing Osama Bin Laden, what the operation revealed about Pakistan, the dreary state of the U. S. economy, and a host of other forces won’t cause us to reduce our vast security spending much but are pretty likely to turn our attention in other directions. What directions? There are still a lot of China hawks in the Pentagon (and they’re really the only candidate for a near-peer competitor). Mexico’s problems are becoming increasingly concerning. Do the drug traffickers there really have tanks? Africa, maybe.

Everything but what we should be doing which IMO is standing down a bit.

A sample snippet from my most recent telephone conversation trying to wrest one of my mother’s investment accounts away from the financial institution managing it:

Customer Service Supervisor: “The IRS requires us to take this information.”

Me: “Are you a lawyer?”

Customer Service Supervisor: “No.”

Me: “Are you an accountant?”

Customer Service Supervisor: “No.”

Me: “Former employee of the IRS?”

Customer Service Supervisor: “No.”

Me: “Read a directive from the IRS requiring you to collect it?”

Customer Service Supervisor: “No.”

Me: “So, you don’t know what the IRS requires. That is not what the IRS requires. It’s what your organization requires. I’ve already supplied that information to your organization three times. Let’s move this along or my next step will be going to the court.”

That conversation lasted about an hour and followed five rounds of correspondence (each round produced requests for new, additional information) and more than 20 hours of my time chewed up on what should have been something trivial.

This is really just a passing thought but when I look around at the broader trends in our lives today I can’t help but wonder over how the enormous increase in informatoin will affect government. Consider this recent statement by head Eurozone Finance Minister Jean-Claude Juncker:

On March 29, when speculation swirled that Portugal needed a bailout, Prime Minister Jose Socrates denied — again — that that would happen despite clearly unsustainable market pressures.

“I’m sick of saying we won’t” be requesting help, he told journalists.

Just eight days later, in a chastened appearance on national television, Socrates did just that.

For Jean-Claude Juncker, the prime minister of Luxembourg, the threat of immediate market turbulence means the usual norms of transparency don’t apply.

“When it becomes serious, you have to lie,” Juncker, who as the chairman of the regular meetings of eurozone finance ministers is one of the currency union’s key spokesmen, said in recent remarks.

The emphasis is mine. Politicians lying is nothing new. What is new is that institutions are not as capable of controlling information as they once were, the truth will out, and as we have learned repeatedly over the last couple of decades the cover-up is worse than the crime.

This loss of control in information isn’t restricted to the loss of the gatekeeper function on the part of major media outlets, undermined by blogs and social media. It extends to information mischief-makers like WikiLeaks and Anonymous but none of those are the most subversive of the forces that are driving information out into the open.

Consider projects like the Consumer Metrics Institute’s indices of economic activity and the Billion Prices Project’s tracking of prices. Real-time metrics that conflict with the official statements on economic activity and inflation over time will inevitably undermine the ability of governments to control the message about these things and manage public opinion.

We do not yet have good real time measurements of employment and unemployment. We may well have—the information is out there and will inevitably be harnessed. When we do the survey- and model-based measurements will become decreasingly credible.

Nostalgic for the halcyon days of th 1930s, Marshall Auerback proposes the equivalent of a WPA to employ those who’ve lost their jobs during the Great Recession:

In my view, a universal Job Guarantee program would be the best way forward and truest to the spirit of the WPA. The jobs would pay basic wages and benefits with a goal to provide a living wage. The program would take all comers — anyone ready and willing to work, regardless of education, training, or experience. We could adapt the jobs to the workers. As the late Hyman Minsky put it, we could “take the workers as they are”, work them up to their ability, and then enhance their skills through on- the-job-training. Additionally, the guaranteed public service job would be a counter- cyclical influence, automatically increasing government employment and spending as jobs were lost in the private sector, and decreasing government jobs and spending as the private sector expanded. Such a program would remain a permanent feature of our economy, acting as a buffer stock to put a floor under unemployment, while maintaining price stability whereby government offers a fixed wage which does not “outbid” the private sector, but simply creates a stabilizing floor and thereby prevents deflation.

My concerns about such a plan aren’t, as Yves Smith predicts in her introduction, that it would constitute “undue government intervention in the economy”. My concerns are that it would be outrageously expensive, it wouldn’t create as much growth as they think it would, and it would be impossible to contain.

My back-of-the-envelope calculation suggests that the cost per job would be about $28,000 a year. Adding another 25% for administrative costs (to quote one my favorite pictures, The Castle, “they’re dreaming”) would bring it to $35,000 per year per job. As a carve-out from existing programs that would be an adequate plan. As an add-on undoubtedly financed by borrowing, not so much.

Using a round number for those who’ve lost their jobs since 2006 plus those who could be expected to re-enter the labor force under such a plan of 10 million people that comes to a tidy $350 billion a year added to the deficit potentially in perpetuity. BTW take a look at Mish Shedlock’s estimates of the actual number of unemployed. The number of people who might show up for the guaranteed jobs could be much, much higher.

I’m not even going to attempt to determine the finance costs of such a plan. It would run into many multiples of the headline sum. That’s $350 billion on top of the more than a trillion that we’re borrowing per year already, a steep increase.

I think we should be very concerned about borrowing at that level. If the claim is made that the borrowing will be made up by the additional taxes collected we’re back to the cat and rat farm. It can’t work.

Is the world capable of sustaining an additional incremental level of borrowing of that size? That’s a question. I don’t know the answer. I can’t help but believe that at some point the sheer size of borrowing becomes a problem. You can’t borrow $1 trillion from a $1 billion bank.

There are so many reasons that such a plan is unlikely to produce the kind of economic growth we’d like to see it’s hard to know where to start. Deadweight loss comes to mind. Additionally, the plan assumes that those who take the jobs are willing to be trained and capable of being trained for the jobs that will exist at the point when the training is complete. That assumes a degree of prescience on the part of the program’s administrators that beggars credulity. That’s has typically been a key problem with job training programs. Too frequently they train people for jobs that don’t exist.

Further, the plan assumes that the story of the loss of jobs during the Great Recession is the Keynesian or neo-Keynesian one of insufficient aggregate demand. It ain’t necessarily so. BTW, while I’m on the subject try this thought experiment. Assume an economy that consists of just two industries: one with sticky prices that is subsidized so that it cannot decline and another without sticky prices that is not subsidized. What happens over the course of the business cycle?:

But the biggest problem with the plan is that it cannot be contained. Minimum wage may not sound like much but when you add healthcare, vacation, etc. (“the usual benefits”) and you’re earning $1 a day making bricks in Bangalore it sounds magnificent. It’s enough to live on and send money home to the family. Under the stated conditions (take all comers) the plan would attract tens of millions of people. And its costs would rise commensurately.

The Watcher’s Council has announced its winners for last week. First place in the Council category was Joshuapundit’s Pakistan, A Bridge too Far.

First place in the non-Council category was BlackFive’s with Squandering Our Victory. Former Navy SEAL Froggy takes a rather contrarian view of the reports of the death of Osama Bin Laden.

You can see the full results here.

Here are the results for the previous week. First place in the Council category was Bookworm Room’s What happens when government (state or federal) is pathologically hostile to business. If conditions in California are really as bad as this, Californians should be very concerned.

First place in the non-Council category was Barry Rubin’s with How the West Is Being Turned into a Version of the Middle East.

You can see the full results here.

Steven Taylor has published a string of posts on healthcare and healthcare reform over at OTB (here, here, and here) that, frankly, has me rather baffled. In comments Dr. Taylor writes:

Part of the question is whether good public health, to use Dave’s phrase, is a public good or simply an individualized commodity like an TV.

to which I responded that healthcare doesn’t fit the definition of a public good.

“Public good” is a term of art in economics. A “good” is something that can be bought or sold. A “public good” is a good that is non-rivalrous (meaning you and I can consume it at the same time; one of us consuming it doesn’t preclude the other from consuming it, too) and non-excludable (meaning that I have no way of preventing your consuming it). An example of a public good would be nuclear deterrence.

To my mind my response was completely non-controversial, no more controversial than correcting somebody when he or she refers to a Phillips screwdriver as a “thingummy” or, perhaps more accurately, calls a star screwdriver a Phillips screwdriver. I would think it’s just ignorance and, after the distinction has been made clear, the speaker would know. They’re different things; they’re intended for different things. The purpose of language is sharing ideas. In order to do that you’ve got to agree on meanings. Without such agreement there is no communcation.

However, the subject has spawned quite a bit of discussion.

So, let’s consider healthcare, private goods, and rights.

Although there are segments of our healthcare system that are public goods, e.g. sanitary sewers—clearly non-rivalrous, arguably non-excludable, and certainly only delivering its beneficial public health effects when their use is compulsory—in general healthcare is a private good. When you consume a dose of erythromycin I cannot consume that dose; if there is only one dose available some allocation mechanism must determine which of us gets it. That is by definition a private good.

However, the healthcare private good has beneficial side effects (the economics term of art for these is “positive externalities”) that cause everybody to benefit. When the poor are sick their diseases may spread to the rich. Ultimately, that is why public health departments came to be.

Can a private good be a right? I suppose it depends on what you mean by a “right”. If you assert healthcare as a right, do you mean a right like freedom of the press? That has never been construed as a mandate for the federal government to buy printing presses for everybody. Or do you mean something different?

If by a right you mean something that must be provided and paid for by somebody regardless of your ability to pay, we already have that, at least in the case of emergency care. Hospital emergency rooms are required by law to accept people in urgent need of care regardless of their ability to pay.

I don’t believe, however, that’s what people mean when they say “a right to healthcare”. What is meant? That’s not a rhetorical question; I genuinely want to know. If healthcare is a right (according to your definition), on what basis could you deny healthcare to someone? Note that if you can never deny healthcare to anyone under any circumstances at the limit case there either can be no such thing as property rights or there can be no rights of self-determination for healthcare providers.

Because healthcare, generally, is rivalrous and excludable some sort of allocation mechanism is necessary. The mechanism can be the market, it can be healthcare providers, or it can be some third party, e.g. the government.

I think that allocating healthcare resources via market reforms is likely to have adverse public health consequnces. If the allocation is to be done by physicians we must adopt some sort of capitation system coupled with a single payer strategy and total healthcare spending must be capped. If the allocation is to be done by a third party, we’ve also got to cap healthcare spending.

However, when healthcare spending is rising at 5% a year, the non-healthcare economy is rising at 2-3% per year, and the majority of healthcare is paid for via tax dollars it’s rather obvious that the situation is unsustainable.

Whiile we’re on the subject of good news the early results from the Social Security Trustees’ report is telling us that Social Security is in the red (benefits paid are exceeding revenues taken in). Bruce Krasting has a good summary of the preliminary results, if you’re interested.

From a fiscal standpoint this is very bad news, indeed. Social Security paying out more than it takes in means that the revenues from FICA aren’t offsetting other expenditures any more. That means that our borrowing will continue to proceed at a faster pace than we were accustomed to even if we were to return other spending areas to their pre-recession levels. You can’t go home again.

Some are hailing the Bureau of Labor Statistics’s latest labor situation report of 244,000 jobs added during the month with unemployment rising to 9.0% as a sign that the economy has improved, the recovery “has legs”, etc. Frankly, I don’t see it. When you subtract the number of jobs added by McDonalds alone (62,000) and take into consideration the sheer size of the birth-death adjustment (some 175,000 jobs), I find that report pretty phlegmatic. It’s especially so what you take into account that a) we’re nearly two years into a recovery; b) according to the NBER the mean trough-to-peak period is 59 months in the post-war period; and c) the median is no more than 58 months. That means that we’re probably at least half-way into the recovery.

It’s all downhill from here, baby.

Do I hear Glenn Reynolds calling for a poll tax?