Sunday, January 31, 2010
Wednesday, January 27, 2010
Tuesday, January 26, 2010
The discussion about Obama's spending freeze has been fairly negative. The freeze excludes defense spending and entitlements--the bulk of the budget--and comes into effect even as the economy will still be hurting.
Still, it's worth pointing out that this idea would have been great to have about nine years ago. The graph to the left shows how non-defense discretionary spending--so excluding Homeland Defense, Veterans Affairs, and war spending--grew by 60 percent between 2000 and 2008. Despite Bush's reputation as a ruthless slash-and-burn conservative, (discretionary, non-defense) government spending exploded under his watch. The states, too, went on a binge--Mitch Daniels estimates that state spending rose by 6 percent annually in the past decade.
Both of these trends are unsustainable. It's not clear what exactly state and federal governments are doing that require their spending to rise faster than people's earnings.
So all else considered, I can't say this sort of cap is a bad idea. It would be even nicer still if we treated defense and entitlements as "real" spending too, but one can't have everything.
While this would have been more welcome a couple of years ago, this is welcome now.
Here’s the idea: Starting immediately after enactment, any private-sector employer that hires a worker who had been unemployed for at least 60 days will not have to pay its 6.2 percent Social Security payroll tax on that employee for the duration of 2010. The Social Security trust fund will then be made whole with spending cuts elsewhere in the budget between now and 2015. That’s it. Simple to understand, and easy to explain.
The beauty of this proposal goes beyond its simplicity. Unlike a jobs tax credit of a specific dollar amount, this credit is “front-loaded” in that it provides an incentive for businesses to hire workers earlier in the year — because the tax benefit will be greater. A $60,000 worker hired on Feb. 1 will save a business about $3,400 in taxes, while that same worker hired on May 1 will save it about $2,500.
There's a strain of thought out there that Republicans are being needlessly partisan in refusing to endorse any major Democrat initiative. Setting aside the issue of whether the Senate should operate on a supermajority or not, Hatch's support on this suggests that Republican votes are available for conservative legislation.
Monday, January 25, 2010
My suspicion is that instead of clear walls between things which "work" and don't, things are more complicated and difficult for the government to figure out. There's a great piece in the New York Review of Books which details how comparative effectiveness studies don't have a great history, partly due to biases of the investigators themselves:
With other experts, I performed a "meta-analysis," i.e., a study bringing together data from multiple clinical trials. We concluded that erythropoietin significantly improved the health of cancer patients and we recommended it to them as their default option. But our analysis and guidelines were wrong. The benefits ultimately were shown to be minor and the risks of treatment sometimes severe, including stroke and heart attack.It closes with:
After this failure, I came to realize that I had suffered from a "Pygmalion complex." I had fallen in love with my own work and analytical skills. In behavioral economics, this is called "overconfidence bias," by which we overestimate our ability to analyze information, make accurate estimates, and project outcomes. Experts become intoxicated with their past success and fail to be sufficiently self-critical.
The care of patients is complex, and choices about treatments involve difficult tradeoffs. That the uncertainties can be erased by mandates from experts is a misconceived panacea, a "focusing illusion."Well worth reading. The departures from a perfect world of rational economic agents are real; but they don't have unambiguous lessons for the optimal balance between markets and government.
Wednesday, January 20, 2010
Size matters. Just as Wal-Mart lowers prices by using their size to demand savings, in other countries, governments wield their massive size and market share to bargain down the costs of health care. America doesn't. It's very simple, and very well understood...So on average, we overpay by 60 to 70 percent for pharmaceuticals, largely because we, unlike every other country, don't bargain down the costs. We're in fact subsidizing their discounts, as the pharmaceutical companies can raise our prices to lower theirs. In a nationalized system, that would change. In a system with 50 states all on their own, it wouldn't
Wednesday, January 6, 2010
It's often mentioned that Europeans work less than Americans, so of course they are poorer. This is important, but there is also a tradeoff between domestic work and office work. In Germany, to take one example, people actually work as much as Americans when domestic and office work are taken together. Labor market rigidities, on top of their effects on youth unemployment, act as barriers to female employment and encourage greater housework. It's not obvious that Europe is "better" in this regard.
Swedish-Americans earn more than Swedes; German-Americans more than Germans; and so on and so forth. This is about as clear a test as one can get on the effects of national institutions on individual outcomes, and America destroys the competition.