Why, Oh Why, Can’t We, Etc.

I think that it’s clear from the plantive column from David Leonhardt in the New York Times on the things that might be bought with the $60 billion in revenue that the “Bush tax cuts” for the uppermost income bracket represents that he’s never heard of deadweight loss. Deadweight loss insures that, with the exception of deficit reduction, reducing the corporate income tax, or an across the board reduction in income taxes (question: is it good public policy to increase the percentage of Americans who pay no income taxes?) none of his ensuing calculations on spending alternatives come out quite right. You’d think that an economics reporter for the New York Times might know about such things but apparently not.

Additionally, isn’t there a difference between “could” and “would”? Additional money could be used for the various good things he catalogs but experience suggests that it would be used where it would do the most political good for incumbents.

Don’t get me wrong. I don’t think that the “Bush tax cuts” should be extended for anybody. However, I do think that, insofar as it would be imprudent to increase taxes (failing to extend a tax cut is a de facto tax increase) with the economy in the fragile condition in which we find it, we would be much better off replacing those tax cuts with reductions in business income taxes or for a payroll tax holiday. At least those things have some choice of creating additional jobs.

I have another question for the economists or would-be economists out there. Would the relative inelasticity of labor in medical research mean that tripling the funding for medical research could actually result in less research being done in the long run? Doesn’t a short term increase in funding under those conditions just mean that you’ll pay more for the research that’s already being done?

16 comments

Attention Must Be Paid

Pay attention to Joel Klein, the outgoing chancellor of the New York City Department of Education’s, advice:

First, it is wrong to assert that students’ poverty and family circumstances severely limit their educational potential. It’s now proven that a child who does poorly with one teacher could have done very well with another. Take Harlem Success Academy, a charter school with all minority, mostly high-poverty students admitted by lottery. It performs as well as our gifted and talented schools that admit kids based solely on demanding tests. We also have many new small high schools that replaced large failing ones, and are now getting outsized results for poor children.

Second, traditional proposals for improving education—more money, better curriculum, smaller classes, etc.—aren’t going to get the job done. Public education is a service-delivery challenge, and it must be operated as such. Albert Shanker, the legendary teachers union head, was right when he said that education has to be, first and foremost, about accountability for “student outcomes.” This means there must be “consequences if children or adults don’t perform.”

The Harlem Success Academy requires parental involvement. Far too rare today. Wonder why the Chinese, Korean, and Indian students in our schools do so well? Family involvement.

However, there is one thing I’m curious about. The New York City Department of Education employs 135,000 people. I wonder how many of them are teachers in the classroom, the real “education barricades”? A key problem in public education is far too high a spear to tip ratio.

33 comments

From the Department of Bad Advice

Writing in the Washington Post Michael Lerner gives Democrats some egregriously bad advice:

But there is a real way to save the Obama presidency: by challenging him in the 2012 presidential primaries with a candidate who would unequivocally commit to a well-defined progressive agenda and contrast it with the Obama administration’s policies. Such a candidacy would be pooh-poohed by the media, but if it gathered enough popular support – as is likely given the level of alienation among many who were the backbone of Obama’s 2008 success – this campaign would pressure Obama toward much more progressive positions and make him a more viable 2012 candidate. Far from weakening his chances for reelection, this kind of progressive primary challenge could save Obama if he moves in the desired direction. And if he holds firm to his current track, he’s a goner anyway.

Every president of recent memory who has faced a serious primary challenge from within his own party has been a one-term president: George H. W. Bush, Carter, Ford, Johnson all faced such challenges. The effect of each challenge (from the right on the part of Republicans, the left on the part of Democrats) was not to force the candidates to move in the direction of the challenge but to cut off the incumbent’s support from that wing of his party and depress turnout.

My advice would be the opposite: dance with the one what brung you and accept that, if Democrats are to hold the White House, it will require support from centrists and independents. I strongly suspect that many in the cast of characters that Rabbi Lerner gives as prospects:

Public officials who would make excellent candidates should they run on this platform include Sens. Russ Feingold, Bernie Sanders, Barbara Mikulski or Al Franken; Reps. Joe Sestak, Maxine Waters, Raul Grijalva, Alan Grayson, Barbara Lee, Dennis Kucinich, Lois Capps, Jim Moran and Lynn Woolsey. Others include Jim McGovern, Marcy Kaptur, Jim McDermott or John Conyers. We should also consider popular figures outside of government. How about Robert F. Kennedy Jr.? Why not Rachel Maddow, Bill Moyers, Susan Sarandon or the Rev. James Forbes?

Far from attracting centrists, moderates, and independents to President Obama a serious primary challenge from Maxine Waters would in all likelihood drive them away from Democrats, generally.

3 comments

Foreign Policy Blogging at OTB

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

“Or Just On the Other Side?”

Do the actions of the cabal behind Wikileaks suggest that they’re anti-war? Or are they just on the other side?

0 comments

Not [Insert Name Here]

Martin Frost’s advice to President Obama in 2012 is that he court senior and blue collar voters:

Dealing with seniors is not that complicated. Obama must flatly reject any suggestions by the various deficit reduction panels to privatize Social Security and Medicare. At the same time, he needs to embrace some reforms that help put the programs on better financial footing — like gradually raising the retirement age over an extended period and reworking cost-of-living formulas.

Let Rep. Paul Ryan (R-Wis.) run with the privatization concept. That dog won’t hunt any better in 2012 than it did in 2006.

Solving blue-collar-job woes is not as easy. First, Obama must embrace the success of his efforts to save General Motors and Chrysler. Second, he must recommend putting real money into green jobs programs — for example, electric car-battery technology and increased reliance on natural gas.

He should also consider a second stimulus package focusing only on infrastructure jobs — highways, mass transit, bridges and ports. This should be paid for by increasing the gasoline tax, so it doesn’t add to the deficit. Let the Republicans vote against creating real jobs without increasing the deficit.

If by “blue collar” Mr. Frost means unionized voters, President Obama already seems to be doing the opposite of which Mr. Frost advises. Contra Mr. Frost most union workers these days aren’t in the construction trades or even in manufacturing. They’re government workers and by supporting a pay freeze for federal workers he will almost certainly at least at the margins reduce his strength among that bloc of voters.

If he actually means construction and manufacturing workers, Republicans won’t need to vote against an infrastructure bill. It won’t get out of committee in the new Republican-dominated House. But, heck, they could vote for it and it wouldn’t help the president much. The way infrastructure projects are handled these days the next president will be in office before such a plan, however large, could have an appreciable effect on unemployment among construction and manufacturing workers. Unemployed construction and manufacturing workers aren’t particularly likely to support President Obama this time around. It also seems to me that “Obama’s gas tax” would provide a tempting target for an opponent.

If in 2012 the unemployment rate (U3) is at or near 10% and if the president faces a primary challenge, barring some cataclysm (e.g. nuclear war in the Middle East) he won’t be re-elected regardless of how he runs. However, barring those circumstances I think that President Obama is quite likely to be elected to a second term. If the Republicans run Sarah Palin or Mike Huckabee, I’ll all but certainly vote for him again. I don’t think he’s been an awful president but I do think he’s been a mediocre one, especially when compared with the advance billing. Historically, the candidate who is better able to present a bright picture of America and its future has been elected. I strongly suspect that, recent performance notwithstanding, President Obama will be better at that than his opponent.

10 comments

Would a Carbon Tax Actually Reduce Carbon Production?

Ever since I lived in Germany more than thirty years ago I’ve been in favor of a carbon tax of one form or another. Originally, my reasons were largely geopolitical. More recently environmental concerns have been added to those geopolitical ones.

In the last few weeks I’ve begun to wonder whether a carbon tax would actually reduce carbon production in the United States to any appreciable degree. The central reason is differential production of carbon among earners of differing income levels.

A place to start thinking about this is with this study (PDF). It’s not a study, really, more a collection of anecdotes but they’re interesting and suggestive anecdotes. The findings of the study are that

  1. The overhead costs of living in the United States put reducing carbon production below a fixed level that’s above most of the rest of the world beyond the control of individual behavior. This actually may be more of a premise than a finding. But it means that even if you live in a cardboard box and don’t work your carbon footprint will be higher than the average Indian’s.
  2. For most Americans there’s not a huge amount separating this overhead level and their actual carbon footprint.
  3. This begins to change at about the top income decile and carbon footprint and the carbon footprints of the top .1% of income earners is orders of magnitude higher than that of those at lower income levels.

The short version of this is that people in the upper income decile have a carbon footprint something like an order of magnitude higher than the average, Bill Gates has a carbon footprint 10,000 times the average, and the carbon footprints of those in the upper income decile including Bill Gates are included in the average. Clearly, if they were excluded from the average the average for the lowest nine deciles would fall. How far it would fall is, as my mathematics textbooks used to say, an exercise left for the interested student.

The anecdotal results are supported by a somewhat more systematic study done in British Columbia. In the study the authors pitch the idea of individual offsets as a means of reducing income inequality. Frankly, I’m leery. I think you can grind only so many axes at a time and, if the objective is to reduce carbon emissions, shouldn’t we be doing that rather than implementing a policy that will reduce carbon emissions only at the margins but is bound to require a large civil bureaucracy and will be subject to political finagling since it picks winners and losers?

Going back to the cardboard box and Buddhist monks living in the woods doing nothing but pray and eat bark. I think that individual carbon production can be divided into three categories: overhead (the level of the guy living in the cardboard box), mandatory (the level of people with homes and going to jobs), and discretionary (everything else). Offhand I’d guess that a lot of carbon production for most people is the result of commuting to work. Over time a carbon tax high enough might have the effect of causing people to move closer to their work but I strongly suspect that for many that isn’t really an option.

A guy who commutes from the West Side of Chicago to Schaumburg every day doesn’t do it for the fun of it. There aren’t enough jobs on the West Side of Chicago and there isn’t enough low cost housing in Schaumburg. If you have a high enough carbon tax, something’s got to give. Either there need to be more jobs on the West Side of Chicago, there’s got to be more low cost housing in Schaumburg, or working stops making economic sense.

I don’t know what it’s like where you live but here at the far north end of Chicago and in the adjoining suburbs we’ve been eliminating the last few remaining pockets of low cost housing like mad over the period of the last ten years. The motels and SROs that used to exist are gone. What’s left is a lot more expensive.

There are any number of barriers to businesses relocating into the city of Chicago, city regulations and the pain of dealing with city government not the least of them. However, I suspect that a lot of managers want to live closer to where they live, too, and they don’t particularly want to live on the West Side of Chicago.

Thinking along those lines I’m beginning to think that a carbon tax might be more likely to make work less worthwhile than it is to reduce carbon emissions for one, simple reason: for those producing the highest amount of emissions no imagineable tax is high enough to cause them to change their behavior enough to reduce their emissions and those whose behavior will be affected by the tax don’t have enough discretionary emissions to make a big difference.

All of this reaffirms the direction I’ve been heading on this for some time: to the extent that reducing the amount of carbon in the atmosphere is a problem, geoengineering is probably going to be the only game in town.

81 comments

More on the Next Shoe

It looks like the U. S. bank mentioned in the last post as the target of Julian Assange’s next leak is very likely to be Bank of America. Apparently, Mr. Assange gave an interview last year in which he claimed to have in his possession the hard drive of a BoA executive:

“At the moment, for example, we are sitting on 5GB from Bank of America, one of the executive’s hard drives,” he said. “Now how do we present that? It’s a difficult problem. We could just dump it all into one giant Zip file, but we know for a fact that has limited impact. To have impact, it needs to be easy for people to dive in and search it and get something out of it.”

Hat tip: Calculated Risk

1 comment

The Next Shoe

In an interview at Forbes Julian Assange, the force behind Wikileaks, the web site that released a quarter million U. S. diplomatic communications including some classified as secret or “secret noforn” gives tantalizing hints of a leak of private sector communications to be released some time around the first of the year:

These megaleaks, as you call them that, we haven’t seen any of those from the private sector.

No, not at the same scale for the military.

Will we?

Yes. We have one related to a bank coming up, that’s a megaleak. It’s not as big a scale as the Iraq material, but it’s either tens or hundreds of thousands of documents depending on how you define it.

Is it a U.S. bank?

Yes, it’s a U.S. bank.

One that still exists?

Yes, a big U.S. bank.

The biggest U.S. bank?

No comment.

When will it happen?

Early next year. I won’t say more.

I would hope that it’s Goldman Sachs but I suspect that it’s Bank of America.

Considering the shaky state of the U. S. (and world) banking system, depending on the content of the leak it could bring the whole shebang down like a house of cards. Have a happy new year!

5 comments

Shrinking Medicare

When I read Ezra Klein’s post on the difficult and hazards of controlling Medicare costs, two thoughts occurred to me. The first was that Ezra appears to be unaware that Medicare actually has more than one component, see here. Consider the pie chart above.

The entirety of Ezra’s critique appears to be based on Medicare Part B:

The problem is that Medicare can’t control costs too much better than private insurers or, as you see from the article above, doctors will simply abandon Medicare. In a world where there’s only Medicare and Medicare decides to control costs, doctors can either take the pay cut or stop being doctors. And as we see from other countries, lots of people want to be doctors, even if being a doctor doesn’t make you particularly wealthy. But in a world where Medicare is just one of many payers and Medicare decides to control costs, doctors can simply stop taking Medicare patients and a lot of legislators will lose their jobs.

His post is accompanied by what seems to me to be an extremely misleading bar chart graphic which doesn’t look to me to prove what he thinks it does.

Medicare has other components. Medicare Part D is the prescription drug benefit. Medicare Part C (Medicare Advantage) supports managed care programs for the elderly. And Medicare Part A, at $186 billion in 2010 the largest of the components, pays for hospital care. Does any hospital refuse to take Medicare? My understanding is that almost two-thirds of hospital revenues come from Medicare and Medicaid combined, the bulk coming from Medicare.

Is it really not possible to control costs in Medicare Part A without compromising access? That seems incredible. I’m not the only one to notice this. Robert at Angry Bear observes:

Klein seems oddly indifferent to the detailed text of the Affordable Care Act. I never would have guessed that I would ever type that. Medicare is four programs which are differently squeezable. Plan C (take advantage of Medicare) can be squeezed to death with relatively low costs to anyone but insurance companiies. Plan B can’t be squeezed easily. Doctors can and do refuse deal with the CMS. Plan A can be squeezed as I argued here and here.”

The second thought that occurred to me was something I’ve asserted here from time to time: that Medicare is a price support on healthcare. This seems so self-evident to me as to scarcely require proof. How would one go about proving that Medicare, particularly Medicare Part A, was in fact a price support? How would one go about disproving it?

It seems to me that it would be impossibly difficult to disprove without producing an alternative credible explanation for how price discovery is done in healthcare. What say ye? Youth wants to know.

10 comments

Foreign Policy Blogging at OTB

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

“Covering the Coverage of the Diplomatic Leaks”

The major news outlets that received document drops of leaked diplomatic communiques from Wikileaks are covering the story in different and interesting ways. Unfortunately for English Speakers, the coverage in the New York Times and The Guardian is worse than that in the foreign language press. The NYT’s coverage in particular is securely rooted in a gatekeeper and dead tree mode.

Spiegel’s coverage is visually the most appealing; Le Monde seems to be the most factual; to my eye El Pais is the most informative.

0 comments