Paul Krugman has taken some rather interesting stances on the fiscal situation here in the U.S. First up is a piece entitled Fiscal Train Wreck from March 2003,

With war looming, it’s time to be prepared. So last week I switched to a fixed-rate mortgage. It means higher monthly payments, but I’m terrified about what will happen to interest rates once financial markets wake up to the implications of skyrocketing budget deficits.

[…]

Last week the Congressional Budget Office marked down its estimates yet again. Just two years ago, you may remember, the C.B.O. was projecting a 10-year surplus of $5.6 trillion. Now it projects a 10-year deficit of $1.8 trillion.

And that’s way too optimistic. The Congressional Budget Office operates under ground rules that force it to wear rose-colored lenses. If you take into account ? as the C.B.O. cannot ? the effects of likely changes in the alternative minimum tax, include realistic estimates of future spending and allow for the cost of war and reconstruction, it’s clear that the 10-year deficit will be at least $3 trillion.

[…]

That may sound alarmist: right now the deficit, while huge in absolute terms, is only 2 ? make that 3, O.K., maybe 4 ? percent of G.D.P. But that misses the point. “Think of the federal government as a gigantic insurance company (with a sideline business in national defense and homeland security), which does its accounting on a cash basis, only counting premiums and payouts as they go in and out the door. An insurance company with cash accounting . . . is an accident waiting to happen.” So says the Treasury under secretary Peter Fisher; his point is that because of the future liabilities of Social Security and Medicare, the true budget picture is much worse than the conventional deficit numbers suggest.

What does he say today (well at least in August 2009)? Well, lets take a look,

I respect Jim Hamilton a lot, so I take his criticism seriously — and he raises questions that others raise too about my relatively sanguine assessment of the debt situation. Yet I think that he and others are quite wrong, on several counts.

[…]

But let’s take a slightly later start date: in 1950, federal debt in the hands of the public was 80 percent of GDP, which is in the ballpark of what we’re looking at for 2019. By 1960 it was down to 46 percent — and I haven’t heard that anyone considered America a debt-crippled nation when JFK took office.

So how was that possible? Was it through drastic cuts in defense spending? On the contrary: we’re talking about the height of the Cold War (with a hot war in Korea along the way), and federal spending actually rose as a share of GDP. So yes, it wasn’t entitlement programs, but it wasn’t exactly discretionary either.

How, then, did America pay down its debt? Actually, it didn’t: federal debt rose from $219 billion in 1950 to $237 billion in 1960. But the economy grew, so the ratio of debt to GDP fell, and everything worked out fiscally.

[…]

Jim gets scary numbers about the debt burden by assuming that we’ll have to pay off the debt in 10 years. But why would we have to do that? Again, the lesson of the 1950s — or, if you like, the lesson of Belgium and Italy, which brought their debt-GDP ratios down from early 90s levels — is that you need to stabilize debt, not pay it off; economic growth will do the rest. In fact, I’d argue, all you really need to do is stabilize debt in real terms.

Note that in 2003 Krugman was just fine looking at the 10 year budget predictions. Now, why that’s silly we just need to alter our perspective. And the new post mentions nothing about Social Security and Medicare whose fiscal/actuarial position has not changed appreciably since 2003.

Now some might argue, and indeed in the comments to other posts people have argued, that during the fat years you trim the deficits or best of all run surpluses and in the lean years run the deficits. Sure, that is a some what simplified version of Keynesian fiscal stimulus. My response is lets make a list of the two situations,

View from 2003:

1. The economy was in recovery.
2. The fiscal outlook was a $1.8 trillion deficit.
3. Social Security and Medicare were in serious actuarial imbalance (tens of trillions of dollars).

View from 2009:

1. The economy is in recession.
2. The fiscal outlook is $9 trillion deficit.
3. Social Security and Medicare were in serious actuarial imbalance (tens of trillions of dollars).

The view in 2003 terrified Krugman, so much so that he took personal action regarding his own finances. Switch to 2009 and, meh guys like Prof. Hamilton are just being alarmists. The view from 2009 is pretty much worse than it was in 2003, and it seems to me that yes, if one was worried about the fiscal outlook in 2003, then in 2009 it is even more worrisome. I agree with James Hamilton,

If the government tries to double taxes on people like me, it’s in real political trouble. If it doesn’t try to double taxes on people like me, it’s in real solvency trouble.

It looks like we may have a problem here.

Thanks to Scrivner.net for the links, and their article is also well worth reading. And yes, I know that this stuff is rather old, but…well Krugman is basically saying the samethings today he did in August, “No worries, we’ll grow our way out of it.”

Well looks like the entire town of New London, Conn. is going to get screwed by Pfizer.

“Look what they did,” Mr. Cristofaro said on Thursday. “They stole our home for economic development. It was all for Pfizer, and now they get up and walk away.”

That sentiment has been echoing around New London since Monday, when Pfizer, the giant drug company, announced it would leave the city just eight years after its arrival led to a debate about urban redevelopment that rumbled through the United States Supreme Court, and reset the boundaries for governments to seize private land for commercial use.

Pfizer said it would pull 1,400 jobs out of New London within two years and move most of them a few miles away to a campus it owns in Groton, Conn., as a cost-cutting measure. It would leave behind the city’s biggest office complex and an adjacent swath of barren land that was cleared of dozens of homes to make room for a hotel, stores and condominiums that were never built.

[...]

After Pfizer completed its $67 billion acquisition of Wyeth, another drug giant, in October, Ms. Power said, “We had a lot of real estate that we had to make strategic decisions about.” She said Pfizer would try to sell or lease its buildings in New London and would “continue to pay our taxes to the city as scheduled.”

The complex is currently assessed at $220 million, said Robert M. Pero, a city councilman who is scheduled to become mayor next month. The company pays tax on 20 percent of that value and the state pays an additional 40 percent, Mr. Pero said. That arrangement is scheduled to end in 2011, around the time Pfizer, which is currently the city’s biggest taxpayer, expects to complete its withdrawal.

“Basically, our economy lost a thousand jobs, but we still have a building,” Mr. Pero said. Then again, he added, “I don’t know who’s going to be looking for a building like that in this economy.”

Basically you suck Mr. Pero. Good job wrecking your town’s economy. Not only has your economy lost thousands of jobs you’ve gone out and wrecked considerale amounts of private property…for nothing. On top of this you’ve spent millions of dollars that could have been spent elsehwere.

Mr. Pero said that he was offended that Pfizer did not notify city officials about the decision before Monday or give them a chance to argue against it or even fully understand it.

Oh the irony. Hmmm how did Ms. Kelo feel?

The Urban Institute’s Eugene Stuerle is not very happy with the health care expansion legislation that is likely to be passed into law. Stuerle argues that the legislation violates the standards of equal justice.

Of course, families in this income bracket pay far more than $14,700 for health care. They get hit by uninsured expenses or covered expenses they have to share-perhaps an average of $5,100 with the $14,700 policy just noted. They also pay fairly large amounts of tax to cover others, such as retirees. In fact, Americans spend about 24 percent of monetary income (wages and interest and the like) on health care. Using a more familiar metric, the total comes to 16 percent of the gross domestic product (GDP), though GDP includes many items that aren’t typically reported as income (such as the rent you save by owning a home).

Congressional health reformers believe that most households shouldn’t pay that much. They propose something closer to tithing. That way, no more than a tenth or an eighth of household income would go to purchase health insurance. This has a nice political ring to it, but here’s the reality: the 24 percent burden is rising and can’t drop without lower cost growth. Congress can only change who pays or temporarily borrow more from China and other creditors.

The problem gets serious when these arithmetical contradictions get woven into legislation. And we’re already on a slippery slope there.
Take the Senate Finance Committee efforts at health reform that have garnered so much attention. Under one version, households with $54,000 of income would get a subsidy of almost $10,000 toward the $14,700 health insurance policy that Congress has decided that they can’t afford. The first catch 22 is that since these subsidies are so expensive, Congress plans to exclude from getting the subsidy those households that get health insurance in lieu of higher cash wages from their employer.

This is unfair. It violates the fundamental principle of equal justice. People in similar circumstances should be treated similarly under the law.

The notion of justice here that Stuerle is referring to is often called horizontal equity and holds that people in similar circumstances should be treated similarly. In this case they are not.

There is also the distorting effect that related penalty on not providing health insurance for workers. There is a $400 cap on the penalty in one case. Could this lead to employers who are in that situation dumping their workers health care and taking the penalty? And, if you have less than 50 employees you are exempt from the penalty, and this provides a subisidy to small businesses.

Then there is the tax subsidy for employer provided benefits.

Here’s yet another complication. Congress is holding fast to today’s regressive tax subsidy for employer-provided health insurance, which can be worth $2,000 to $6,000 per family. This benefit, an exclusion from tax of compensation received as health insurance, would be valuable enough to some employers—especially those with highly paid employees who aren’t eligible for the new individual subsidies—to keep them from dropping insurance coverage. It is also probably one reason why the Congressional Budget Office estimated that a Senate Finance Committee version of health reform would cause a drop of only about 3 million in employer-provided coverage over the next 10 years. John Shields and Randy Haught of the Lewin Group, in a study for the Peter G. Peterson Foundation, estimated that when fully implemented, this same Senate Finance bill would cause one set of employers to drop insurance coverage for 19 million people but another set to add coverage for 12 million.

Considering the new and old subsidies together gets complicated. Still, many low- and middle-income earners paying through an employer by accepting lower cash wages would lose out big time. They would get thousands of dollars less in subsidy than families making an equivalent amount of total compensation in cash and then getting insurance from the type of insurance exchange that the reform bills would establish.

All in all, the current legislation is going to have many bizzare incentives and it could very well result in less desirable outcomes. For example, what if small employers who grow over time simply never offer health insurance like large employers today? If the penalty is not sufficiently large then these firms will essentially be getting a subsidy as will the workers. A wealth transfer from those who do work for employers who provide health care benefits to those who do not.

And the current legislation completely fails to address the issue of cost. So when President Obama stated,

Soaring health care costs are unsustainable for families, they are unsustainable for businesses, and they are unsustainable for governments, both at the federal, state and local levels.

It wasn’t serious enough to actually warrant addressing. And if one were to look at history we see that government has a rather bad record when it comes to health care and costs. As my co-blogger Dave Schuler has noted, for the past several years Congress has failed to reduce Medicare reimbursement rates. Also, the U.S. takes up the health care issue, legislatively, about once every decade or two. So the idea that the issue of costs will be addressed later is not very reassuring considering it might be 15 years later. At which time we can probably expect health care to be consuming at least 20 – 25% or GDP and who knows how much of our federal budget. And given the inability of politicians to reduce spending it will likely add to our already large debt and growing deficits. Or to put it differently, the trillion dollar deficits? Get used to them. You thought Bush was a spendthrift, you ain’t seen nothing yet.

This is why I don’t consider the legislation passed by the House of Representatives and what the Senate is working on to be health care reform. It will expand and entrench our current system. A system that people have already agreed is broken. Will it be easier to reform the cost side of the issue when you take the current system and expand and further entrench it? Such thinking is simply delusional. Refroming any system will create losers as well as winners. My guess is that the winners will be more motivated, a smaller group, and have better funded lobbyists.

So I agree with Eugene Stuerle when we rights,

Done the right way, I believe that Congress could get more equal justice, higher levels of basic insurance coverage for Americans, and lower costs all in the same package.

I agree from a theoretical perspective this is possible, but from a politically feasible standpoint I’m more inclined to think it is impossible.

Reason’s Nick Gillespie has a bit of fun with the UPS-FedEx fight to make a larger argument about unions.

What’s particularly amusing about this is that, rather than seeking to get the favorable regulatory treatment that FedEx enjoys, UPS is fighting to put FedEx under the same onerous rules.

I’m reminded of the old joke about the Russian who gets a wish from a genie and complains that his neighbor has two cows while he only has one.  The genie asks, “So, would you like a second cow?  Or a third?”   “No,” says the peasant.  “I want you to kill one of my neighbor’s cows.”

via Glenn Reynolds

The recently passed health care “reform” noted by James below is going to have another impact some have noted, but many have not given much thought too. It will, in effect, make labor more expensive. When something becomes more expensive for firms then tend to use less of it. They will substitute away from it if possible, or failing that hire fewer workers, and in some cases simply shut down. Other firms might relocate to other countries. The bottom line effect is to make employing labor more costly. Not exactly a brilliant move when the unemployment rate has just hit 10.2%.

This will also have a further adverse impact on the fiscal situation. To the extent that the labor market takes longer to recover because of this legislation tax revenues will be lower, and thus the deficit higher and the public debt will grow faster. This kind of effect is probably not included in the CBO’s $1.1 trillion dollar cost of health care “reform”.

It looks like the Obama Administration’s brilliant political jujutsu move of using “jobs saved or created” is making its way around some of the economics blogs again. First up is Brad DeLong’s attack on Allan Meltzer. Meltzer wrote the following,

There is no greater recognition of the failure of the stimulus program to create jobs than the efforts to mislead the public into believing the program had saved thousands, or millions, of jobs. One can search economic textbooks forever without finding a concept called “jobs saved.” It doesn’t exist for good reason: how can anyone know that his or her job has been saved? The Administration can make up any number it pleases. The number has no meaning…

Brad points to this partial quote by Milton Friedman,

Suppose the [Federal Reserve] System… had accompanied the measure by purchase of government securities [for cash]… as called for by the “classic” remedy for an internal drain…. [L]et $1 billion be the amount…. What would have been the consequence?… Reserve purchases of $1 billion… would have meant an increase of $1,330 million in high-powered money… would have permitted a multiple expansion of deposits…. Even if… the deposit ratios would have fallen as much as they did–and for the deposit-currency ratio, the fall in so short a time was the largest on record–the result would have been to cut in half the decline in the stock of money…. Only a moderate improvement in the deposit-currency ratio–a decline from 8.95 to 7.10 instead of 6.47–would… have enabled the stock of money to be stable…

You might be wondering, “What the….?” Well, what Friedman is saying is that if the Fed had taken expansionary policy with regards to the money supply it would have stopped the Great Depression, or at least it wouldn’t have been Great, and probably not even a depression. In other words, isn’t Friedman doing the samething that Meltzer is saying is impossible?

Well it depends. The above quote it from The Great Contraction and I haven’t read it and so I don’t know the context in which Friedman couched his argument or what is missing in the ellipses in the quote Prof. DeLong has quoted. But, if Friedman is making an analysis given a specific model, then his argument might be valid…in the context of that model. In fact, Prof. DeLong writes,

You can critique models. You can critique parameters. You can critique parameters. You can critique how the calculations are done, but you cannot deny their existence, for the kind of counterfactualcalculations [sic] that Milton Friedman does are, of course, the steady diet of what economists and other policy analysts do every day.

This leads me to believe that, indeed that Friedman is making his statements within the context of a specific model.

Paul Krugman decides to pile on by making the following comments,

But it’s not just Meltzer — Greg Mankiw has done the same thing.

They should be ashamed of themselves.

The Obama administration’s “jobs created or saved” is just a way of saying “other things equal” in non-economese. Of course it makes sense to ask how many more people are working than would have been the case without a given policy — and every administration makes assertions along those lines. During the 2001 recession and its aftermath, how many times did the Bush administration claim that the recession would have been worse without its tax cuts? And while many of us quarreled with that claim, I don’t think I ever argued that other-things-equal arguments are nonsense on their face.
The willingness of conservative economists to fall in line behind such cheap shots says something sad about them, not about the Obama administration.

Mankiw responds,

Here is what I wrote on the topic last February:

The 4 million job number is a counterfactual policy simulation of what the stimulus will do based on a particular model of the economy. As such, I have no objection to someone citing it in a policy discussion. In fact, macroeconomists use models to generate figures like this all the time. I have even done it myself.

But as an answer to the question “how can the American people gauge whether or not your programs are working?… What metric should they use?”, citing the 4 million job figure is a non sequitur, or more likely a diversion. A metric has to be measurable, and the actual number of jobs “created or saved” by the policy will never be measurable from any data source.

That is, I do not object to claims such as,

A: “Based on our models of the economy, we believe there would be X million fewer jobs today without the stimulus.”
But it is absurd to suggest that you can say,

B: “We have measured how many jobs the stimulus has saved or created, and the number is X.”

Economists are capable of making statements such as A, but it is beyond our ken to make statements such as B. Statement B is,of course, much stronger than statement A, as it purports to be based on data rather than on models. Unfortunately, we are hearing statements like B much too often from administration officials. A good example is here, where can you “learn” that 110,185.36 jobs have been created or saved in California alone.

Yes that is right, because of Obama’s brilliant policy there is a 0.36 person employed now that otherwise wouldn’t be employed. Of course, the use of the phrase “jobs saved or created” is baloney. If the President or his spokespeople had said, “Well, according to our analysis we think it is likely that 4 million jobs will be saved or created with this stimulus package…” they’d be home free. But that isn’t what they say. This is what they say,

Question: The American people have seen hundreds of billions of dollars spent already, and still the economy continues to free-fall. Beyond avoiding the national catastrophe that you’ve warned about, once all the legs of your stool are in place, how can the American people gauge whether or not your programs are working? Can they — should they be looking at the metric of the stock market, home foreclosures, unemployment? What metric should they use? When? And how will they know if it’s working, or whether or not we need to go to a plan B?

Answer: I think my initial measure of success is creating or saving 4 million jobs. That’s bottom line No. 1, because if people are working, then they’ve got enough confidence to make purchases, to make investments. Businesses start seeing that consumers are out there with a little more confidence, and they start making investments, which means they start hiring workers. So step No. 1, job creation.–emphasis added

Whoops.

Back when talks about bailing out General Motors started one potential issue was that GM would “encouraged” to make decisions based on political considerations vs. a sound business plan. Looks like there is evidence for such concerns with this story of how Montana’s Congressional Representative and two Senators are pushing to get a contract reinstated with a Montana palladium mine.

Montana Rep. Denny Rehberg was no fan of the $58 billion federal rescue of General Motors Co., saying he worried taxpayer money would be wasted and the restructuring process would be vulnerable to “political pressure.” Now the lawmaker says it’s his “patriotic duty” to wade into GM’s affairs.

Along with Montana’s two Democratic senators, the Republican congressman is battling to get GM to reinstate a contract with a Montana palladium mine nullified in bankruptcy court. “The simple fact is, when GM took federal dollars, they lost some of their autonomy,” Mr. Rehberg says.

Translation: I might lose votes next election so whether reinstating this contract makes sound business sense or not, I’m going to use my influence to get in reinstated and screw the tax payers.

Federal support for companies such as GM, Chrysler Group LLC and Bank of America Corp. has come with baggage: Companies in hock to Washington now have the equivalent of 535 new board members — 100 U.S. senators and 435 House members.

Yes, and those 535 new board members don’t answer to shareholders, they answer to their constituents. Obviously these new board members are going to be making very good business decisions. Just look at the U.S. budget….uhhhmmm…look at Social Security….hmmm…Medicare, wait no don’t look! In fact, these aren’t the droids you are looking for either. Move along now.

Some more juicy bits from the article,

In May, even before the government’s ownership became official, lawmakers erupted when GM disclosed it planned to produce a new subcompact car at its factories in China. Under congressional pressure, GM dropped those plans and promised instead to retool an existing U.S. facility in Michigan, Wisconsin or Tennessee for the new model.

Lawmakers from those states demanded and received high-level meetings in Washington to quiz GM on the criteria for site selection and to tout their states. GM in the end picked a site in Michigan.

That same month, GM dealer Pete Lopez in Spencer, W.Va., received notice that GM was giving him just over a year to shut down his Chevy, Pontiac and Buick dealership, which he’d acquired two years earlier. GM’s move to shutter more than 1,300 dealerships — about one-quarter of its network — was central to its restructuring because it cleared out underperforming showrooms and brought the network more in line with its shrunken sales.

With an assist from his mayor, Mr. Lopez took his complaint straight to one of his state’s senators, Jay Rockefeller, the Democratic chairman of the powerful Commerce Committee.

Sen. Rockefeller sent a letter to GM headquarters on Mr. Lopez’s behalf, according to a staff aide. He arranged for Mr. Lopez to come testify before a Senate panel in early June, alongside GM Chief Executive Frederick “Fritz” Henderson. The senator introduced the two men, giving Mr. Lopez a chance to make a personal pitch.

[…]

In addition to the dealership issue, lawmakers have jumped into a union fight that pits GM and Chrysler against two trucking companies that haul new cars around the country. The auto makers want to give some of the work to cheaper nonunion contractors. But that raised the ire of lawmakers who support the International Brotherhood of Teamsters.

Rep. Dale Kildee, a Democrat from Michigan, sent letters on Sept. 30 to the chief executives of both GM and Chrysler, demanding they explain their positions and advising them to stick with their unionized carriers. At least four other lawmakers sent similar letters.

[…]

GM for years was supplied by the Montana-based Stillwater Mining Co., which bills itself as the country’s only supplier of the precious metal. In early July, Frank McAllister, the mine’s chief executive, received news that GM, as part of its bankruptcy proceedings, planned to sever its ties with Stillwater in favor of cheaper suppliers in Russia or South Africa.

“I thought, for heaven’s sake, this doesn’t make any sense,” says Mr. McAllister. “Taxpayer dollars are keeping GM alive, just so it can turn away from U.S. workers?”

[…]

“I was elected to represent the interests of Montana, not General Motors, which is something that GM should have considered before letting the federal government assume control of their company,” Rep. Rehberg said recently.

Government Motors the new welfare program of the Obama Administration.

Yesterday afternoon, in a bit of faux transparency like you’ve never seen before, the administration released the names of everyone who has toured the White House from Obama’s inauguration through the end of July.  This, after various Freedom of Information Act requests to determine whether, say, William Ayers and Jeremiah Wright have stopped by.

A lot of people visit the White House, up to 100,000 each month, with many of those folks coming to tour the buildings. Given this large amount of data, the records we are publishing today include a few “false positives” – names that make you think of a well-known person, but are actually someone else. In September, requests were submitted for the names of some famous or controversial figures (for example Michael Jordan, William Ayers, Michael Moore, Jeremiah Wright, Robert Kelly (”R. Kelly”), and Malik Shabazz). The well-known individuals with those names never actually came to the White House. Nevertheless, we were asked for those names and so we have included records for those individuals who were here and share the same names.

Oddly, Kevin Drum and I had the same reaction (although he had it first, since I didn’t get the news until this morning):

This data dump includes everyone who’s been on a public tour of the White House?  Everyone who’s been invited to some kind of White House ceremony?  Seriously?

Yes, seriously.  Max Doebler, for example, is the White House ceremonies coordinator, and sure enough, there are 29 visitor records linked to luncheons and receptions where he’s listed as the official host.  Bill Ayers is one of the many people who were there for public tours.  (Plus a second mystery Bill Ayers who was there for some other reason.)

This is kind of ridiculous, isn’t it?  I suppose it’s easy enough to filter out the dross once you figure out the right codes, but it almost seems like the White House is deliberately trying to inundate everyone in useless mountains of data by including this stuff.  In particular, when the end of the year rolls around and we get the full dump, do we really need the names of all 500,000 people who have been on a tour of the residence?

No. No we don’t. “Transparency” would near-real-time releasing of the names of people who met with the president and other high level White House officials.  It’s long been understood in the legal arena that sending a warehouse full of files in response to discovery requests for a single document is dirty pool.  I fail to see how this is any different.

The New York Times has an interesting multiple choice question regarding how to spend money to help stimulate the economy,

If you wanted to help the economy and you had $14 billion to bestow on any group of people, which group would you choose:

a) Teenagers and young adults, who have an 18 percent unemployment rate.

b) All the middle-age long-term jobless who, for various reasons, are not eligible for unemployment benefits.

c) The taxpayers of the future (by using the $14 billion to pay down the deficit).

d) The group that has survived the Great Recession probably better than any other, with stronger income growth, fewer job cuts and little loss of health insurance.

The New York Times notes that the Obama Administration has decided to go with option d. And this spending will follow a 5.8% cost of living increase from this past year. Now granted, Social Security recipients are scheduled to get no cost of living increase next year, because they received such a large one this year, but still is this the best way to spend $14 billion? Give it to people who are not productive and have already gotten a nice raise? Especially when we have options a and b out there?

I have to agree with Rosanne Altshuler, this is nothing more than “pure pandering to the elderly”. Change you can believe in.

President Obama has declared that the swine flu, which is much less prevalent and deadly than the ordinary influenza virus, is an “epidemic” and a “national emergency.”  Silly as it sounds, it was the right call.

President Obama has declared H1N1 swine flu a national emergency, clearing the way for his health chief to give hospitals wider leeway in how they handle a possible surge of new patients, administration officials said Saturday. The president granted Health and Human Services Secretary Kathleen Sebelius the power to lift some federal regulations for medical providers, including allowing hospitals to set up off-site facilities to increase the number of available beds and protect patients who are not infected.

Obama said in the declaration that the “rapid increase in illness . . . may overburden health-care resources.” White House officials played down the dramatic language, saying the president’s action did not stem from a new assessment of the dangers the flu poses to the public. Instead, officials said the action provides greater flexibility for hospitals that may face a surge of new patients as the virus sweeps through their communities. The declaration allows Sebelius to waive certain requirements under Medicaire and Medicaid, privacy rules and other regulations.

“The H1N1 is moving rapidly, as expected,” White House spokesman Reid Cherlin said Saturday. “By the time regions or health-care systems recognize they are becoming overburdened, they need to implement disaster plans quickly.” The Centers for Disease Control and Prevention reported on Friday that the flu was spreading widely in at least 46 states and had already caused the hospitalization of at least 20,000 Americans. More than 1,000 deaths have been attributed to the virus and more than 2,400 additional deaths were probably associated with it, officials said.

NYT adds:

The department first declared a public health emergency in April; Ms. Sebelius renewed it on Tuesday. But the separate presidential declaration was required to waive federal laws put in place to protect patients’ privacy and to ensure that they are not discriminated against based on their source of payment for care, including Medicare, Medicaid and the states’ Children’s Health Insurance Program.

As a practical matter, officials said, the waiver could allow a hospital to set up a make-shift satellite facility for swine flu patients in a local armory or other suitably spacious location, or at another hospital, to segregate such cases for treatment. Under federal law, if the patients are sent off site without a waiver, the hospital could be refused reimbursement for care as a sanction.

Some are terming this “fear-mongering” and hysteria. And it’s true that this is neither “epidemic” nor an “emergency” in any ordinary senses of those words.  But these are the magic words the president has to invoke in order to bypass the bureaucratic rules preventing faster dissemination of the vaccine.   This is something I would like to see changed because the headlines will in fact create some hysterical reactions.  But it’s the system Obama has to work within for now.

Others are questioning why, if this is such a big deal, the Obama girls haven’t been vaccinated. But the Obama girls aren’t in the high risk categories that would permit them to get the vaccine right now.   My 9-month-old is in that category but our pediatrician doesn’t yet have a supply. 

In Fairfax County, Va., officials had planned to have swine flu clinics at 10 different locations on Saturday. But the county did not receive the number of doses it requested, and was forced to offer the vaccinations only at the government building. People began lining up with camping gear the night before to get vaccinations. Merni Fitzgerald, Fairfax’s public affairs director, said officials were aiming to administer 12,000 doses of the vaccine to those most at risk for serious complications from the H1N1 virus, mainly pregnant women and children 6 to 36 months. But that did not stop some other high-risk patients. “I lied and told the doctors I was pregnant,” said Theresa Caffey of Centreville, who has multiple sclerosis and nurses her 11-week-old son, Joshua. “I’m religious. I don’t lie. But it’s not about me. It’s for my son. It’s safer for him if I have the antibodies.”

People would be going crazy if the Obama girls were jumping the line ahead of the very small children and pregnant women who have been deemed the most critical to inoculate early.

Photo credit: Paul Sancya/AP.

I periodically hear this during presidential campaigns and when various elected officials are trying to push a green policy, often in response to global warming.

Because of [insert environmental problem here] we need to pursue a policies that will promote [insert one or more alternative fuel/energy sources here]. And not only will it address [the environmental problem noted above], but it will also reduce our demand for foreign oil, which often goes to the terrorists, but it will also promote job growth.

I’ve always found this argument to be extremely annoying. Why? Because anyone who has sat through intermediate micro economics should know that it is just simply bunk.

Intermediate micro is where you are introduced to the concept of relative prices. Typically, it is in a “two good world”. This simplification allows the instructor to draw graphs of indifference curves and budget constraints. And the point of tangency between the budget constraint and (highest possible) indifference curve is the point where people consume various amounts of the two goods. This point of tangency is where the ratio of the prices is equal the ratio of marginal utility for each of the two goods. Change the prices and you’ll move to a new point of tangency and a new allocation of goods.

What the above argument is saying (implicitly) is that we’ll change the price ratio by subsidizing whatever green energy/fuel source they prefer, be it switch grass, tar sands, or solar power. However, we can also change the price ratio in another way: taxing the offending energy/fuel source. In most cases it is going to be a petroleum product like gasoline or maybe coal or even both. If we subsidize, for example switch grass based energy production we are in effect lowering the price of energy derived from switch grass relative to all other sources of energy.

Now, why do I say the above claim about jobs is baloney? Because we can get the same change in relative prices by taxing the offending sources of energy, but this option is never discussed. Why? Because nobody thinks raising the tax on gasoline by $5/gallon is a good way to stimulate the economy. Thus, the jobs claim is just not true. Or to put it differently, sure, you’ll get more jobs in producing energy from switch grass, tar sands and the like. But you’ll also lose jobs in the market for the offending energy source. The citing of the gross number of jobs created in the alternative energy source markets is not sufficient. The true measure is the number of net jobs created or lost. But politicians never tell you that.

Further, you’ll get an immediate price response by taxing the offending energy source so it will work even better at reducing the negative environmental impact. In short the most obvious and direct solution is never, ever discussed. This is the main reason why I scoff at people who are hysterical about global warming. If it is really the dire threat they say it is, then a tax on gasoline and other petroleum products should be the way to go. Instead of trying to jury rig up some stupid carbon credit trading scheme which in actual practice has turned out to be nothing more than corporate welfare they should be arguing for a tax on the offending energy source. But they don’t.

Note: This isn’t to say that global warming is not a problem or that we should ignore it.

Mickey Kaus noted the other day that the UAW, which owns large stakes in both GM and Chrysler without paying a cent thanks to their support for the election of President Obama, is cutting their own companies a break and sticking it to Ford.

I knew they’d find a way to punish Ford: The new UAW contract with Ford apparently does not give America’s surviving non-bankrupt automaker parity with GM and Chrysler, reports Bloomberg: “The plan doesn’t include cuts to retiree benefits, such as vision coverage, that were granted to GM and Chrysler.” Rather, the pain seems even more concentrated on future hires (if there are any) than with the GM/Chrysler deals. … TTAC wonders whether the UAW had an extra incentive to resist giving concessions that might make Ford more successful now that the union owns a large chunk of its main domestic competitors. [emphases original]

Megan McArdle cries Foul!

It seem to me that this is a clear and insurmountable conflict of interest.  Should the UAW be compelled to relinquish its stake in the automakers, or stop representing Ford workers?  I’d say they should.  Not that this has a snowball’s chance in hell of actually happening.

It is, to say the least, problematic for a labor union to own competing firms.  But to the degree that the conflict of interest hurts Ford’s UAW employees, they could presumably divest and start a new union.

The real issue is the antecedent to this situation:  The federal government picking winners and losers between firms.  The federal taxpayer bailed out two of the Big 3 and now has powerful incentive to assure the success of those two companies at the expense of the third.  Not only is Ford much less likely to get government contracts now but they’re much more likely to come under higher regulatory scrutiny.  That they also have a more hostile union — one that no longer ultimately needs them to stay in business — is mere icing on the cake.

Peter Suderman and Berin Szoka provide sane, libertarian arguments against the Nanny State regulating the volume of television commercials.  While they both find the longstanding practice where the ads are several decibels higher than the surrounding programming annoying, they nonetheless argue that it’s not a matter where government should intervene.

Says Suderman,

It’s easy enough to turn your TV off (or even live without one, as Szoka does). And if that’s too arduous, there are various technological solutions from companies like Dolby and SRS that help keep TV volumes on a more even keel.

[...]

But the larger problem is the assumption this grows out of — that government’s job is to regulate every minor annoyance out the lives of its citizens. That’s bad for government, because it gives it unnecessary power and distracts it from legitimate government activity. It’s also worse for citizens, who develop an implicit sense that, when problems arise, the way to fix them is to beg Congress, pass a law, wait for new irritations to arise, then wash, rinse, repeat. And  in the end, I think that’s far more grating and obnoxious than a little volume manipulation from advertisers on the idiot box.

Szoka notes that proposed legislation is technically unsound and subject to selective enforcement.  And there’s the issue of freedom:

[T]he bill does embody a recurrent presumption that it’s ok to regulate advertising in ways we wouldn’t accept for the “show” itself (i.e., non-advertising content). Of course, the show could be “commercial” (which, in First Amendment terms, means it would generally get only “intermediate” scrutiny) while the advertisement could be “non-commercial”—such as a political ad. But even if most ads are commercial, so what? If the government is going to protect us from “noisy or strident” commercials, why not all “noisy or strident” programming? Even the most annoying TV ad is probably less annoying than, say, the James Carvilles of the world debating the Glenn Becks of the world. (Of course, users really bothered by noise, but unwilling to give up TV, would probably much rather have a dynamic market for TVs with volume moderating features than rules that dull the din of commercials alone.)

Kevin Drum doesn’t care. He just wants the noise to stop.

[B]laring TV commercials have been an obvious and fixable problem for several decades and no “basic harmony of interests” has yet manifested itself.¹ This suggests to me that it never will unless the industry is pressured into doing it.

[...]

¹A shortcoming, by the way, that’s made worse by the artistic decisions of certain shows.  The worst for me is 24, which I have to crank up in order to hear the hoarse stage whisper that Kiefer Sutherland affects in his Jack Bauer role.  The ads are loud even at the best of times, but they’re really loud when you’ve already turned up the volume just to hear the show itself.

²This is an issue, like the Do Not Call registry, that transcends politics.  I don’t really care whether volume regulations are liberal or conservative or trample the Bill of Rights or whatever.  I just want the noise to stop.  If it takes jackboots to stop it, then so be it.

While I’m naturally in the Suderman-Szoka camp on the issue of Nanny Statism, Drum has persuaded me on this one with the strength of his footnotes.

The fact of the matter is that the federal government has regulated the manner in which television has been broadcast since before we were broadcasting television. (The Radio Commission, the forebear of the FCC, predates television.)  They regulate the spectrum on which broadcasters operate, require a certain amount of “public interest” programming as a condition of licensing, require a certain amount of “truth in advertising,” restrict the use of coarse language and images in over-the-air broadcasts, and otherwise oversee many aspects of what’s shown on television.   Why shouldn’t they set parameters on something that genuinely annoys most of us?

This isn’t a free speech issue. It doesn’t impinge on speech in any way. It merely requires that broadcasters refrain from blaring the ads.

Government already regulates the content of commercial speech, which has long been less protected than political speech.  Indeed, those of us over a certain age can recall the days when those advertising ladies’ undergarments had to use mannequins to demonstrate their wares.  Or that it took the AIDS epidemic to get the FCC to allow advertising for condoms — or, hell, the use of the word “condom.”

Yes, I suppose consumers could invest in sophisticated technology to solve this annoyance.  But why should we have to do that?

James Capretta does a back of the envelope calculation on the Baucus health care reform bill and concludes that it would be like having a 70% marginal tax rate on the low income.

According to CBO, family coverage in 2016 is likely to cost about $14,400 under the so-called “silver option” in the health-care reform plan sponsored by Senate Finance Committee Chairman Max Baucus. In the Baucus plan, a family of four at the poverty line (about $24,000 in 2016) would have pay to about $1,400 toward coverage, with the federal government paying the other $13,000 on their behalf. In addition, the government would also provide $3,500 to reduce the family’s deductible and co-payment costs for health services. Thus, the new entitlement provided by the Baucus bill would be worth a whopping $16,500 for a family at the poverty line.

As incomes rise, however, the Baucus bill cuts the value of the entitlement. A family with an income at twice the poverty line, or $48,000 in 2016, would get $9,072 in federal assistance for coverage — still a substantial sum. But it’s $7,400 less than the family would get if they earned half as much. The Baucus plan thus imposes an implicit marginal tax rate of about 30 percent ($7,400/$24,000) on wages earned by families in this income range.

And that would come on top of the high implicit taxes already built into current law. Low-wage families with children also get the Earned Income Tax Credit (EITC). The EITC boosts incomes for those with the very lowest wages, but it is also phased-out as incomes rise. Past a certain threshold (about $21,400 in 2016), the EITC is reduced by $0.21 for every additional $1 earned. Throw in the individual income tax rate (15 percent) and payroll taxes (7.65 percent), and the effective, implicit tax rate for workers between 100 and 200 percent of the federal poverty line would quickly approach 70 percent — not even counting food stamps and housing vouchers.

That is a substantial marginal tax rate, and would serve as a disincentive towards working towards getting higher paying jobs. I also agree it would be a good idea if the CBO were to do a much more thorough analysis of this bill to verify these calculations.

Update: Via Greg Mankiw I see that the CBO has released some analysis on incomes, premiums, and so forth under the Baucus bill, and for the upper incomes there are marginal tax increases, not sure about low income earners. Also, if you are single you will get hit pretty hard even when your income goes from $26,500 to $32,400, the implicit marginal tax rate on that income due to the change in premiums is 24%. Then add on for payroll taxes, income taxes and so forth.

There is also this CBO policy brief that discusses the issue,

New subsidies might be created to cover the costs of private health insurance, and they could be gradually reduced over a specified income range in a variety of ways—with different implications for marginal tax rates and work incentives. Those subsidies could be gradually reduced at a uniform rate, causing implicit marginal tax rates to rise by the same amount for all recipients in the phase-out range. For example, a proposal might provide families whose income was at the federal poverty level (roughly $23,000 for a family of four in 2013, the year in which many proposals would take effect) with fully subsidized health insurance valued at $15,000. That subsidy might be gradually reduced as income increased, and families whose income was above 400 percent of the poverty level ($92,000) might be ineligible for any subsidy. In that case, marginal tax rates would go up by about 22 percentage points for all families whose income was between 100 percent and 400 percent of the poverty level.

A 22% marginal tax rate on households with income between 100% to 400% of the poverty level could reduce incentives for those households to decision on how much to work. If taking on a new job means less leisure time as well as a higher marginal tax rate a person might decide not to take the job even if the pay is higher.

And as Greg Mankiw points out, if people respond to these implicit changes in the marginal tax rates by working less, then it is possible that in the future GDP is lower and that payroll taxes are also lower. Thus exacerbating our already serious problems with Social Security and Medicare.

Tyler Cowen passes along a paper [PDF] which finds that “every death of a helmetless motorcyclist prevents or delays as many as 0.33 deaths among individuals on organ transplant waiting lists.” The study is titled “Donorcycles:  Do Motorcycle Helmet Laws Reduce Organ Donations?”

On balance, I oppose helmet and seatbelt laws on the grounds that the negative externalities imposed by the reckless behavior in question doesn’t outweigh the loss of individual liberty, given how rare serious crashes are.   The organ donation issue obviously moves the needle further in that direction. For those unconcerned about liberty, of course, saving 0.33 lives at the cost of 1.00 lives is a bad tradeoff.

Regardless, however, the “Donorcycles” concept would be a good one for one of those PSAs that networks are required to air in exchange for use of the public airwaves.  A satirical ad wherein those who chose to ride without a helmet are thanked for their generosity in helping meet the demands for organs might well be an effective tool for persuading people to change their behavior.