Yet another natural economics experiment

Menzie Chinn at Econobrowser recently had fun demolishing the argument that Pro-Koch business policies are good for state economies:

If a higher ALEC-Laffer ranking resulted in faster growth, then the points should line up along an upward sloping 45 degree line. This is not what I see…

In the full sample, the ordered probit regression with 50 ranks yields a coefficient of -0.001, z-statistic of 0.01. Since the ranking is likely to include many cases where the gap in growth is very small, I place the growth ranking and ALEC index rankings into 10 bins, and re-estimate the ordered probit.

The full sample coefficient on ALEC2013 is -0.028, z-statistic of -0.56, so that the p-value is 0.58. Examining the same data, excluding oil producers yields a coefficient of -0.046, z-statistic of 0.85. The p-value for rejecting the null hypothesis of zero coefficient is 0.40.

While the proportion of correct predictions is quite low (the pseudo-R2 is 0.003), the coefficient on ALEC2013 is always negative regardless of specification. The interpretation of the impact of a higher ALEC-Laffer ranking on growth rank is ambiguous in general (and has to be calculated out numerically). However, for the top decile (using the “binned” data), it indicates a higher ALEC-Laffer ranking reduces the probability of being in the top decile. For the bottom decile, a higher score implies increases the probability moving into the lower decile.

Shorter Menzie Chinn — ALEC and Laffer are so full of shit that even when they design a metric to make their prefered policies look good, the metric fails. 

These idiots are the top tier of “conservative economists” whose primary job is to throw mud in the air to dirty the conversation.  Their policy preferences have been to say no to any health insurance expansion for the past century.  An argument is that it will be bad for the state economies as higher taxes will eventually be needed to pay for the state share of Medicaid expansion.

Brad Delong on the regional economics of Obamacare:

I am wondering: how soon before we begin to see the signal emerging from the noise as states that implement the ACA start pulling ahead, economically, of the others? Enrico Moretti tells me that in the long run each additional state “export” job comes with five other jobs. And from the perspective of a state, a federal government-financed healthcare job is a regional “export”. ACA subsidy plus Medicaid expansion do look to approach 1% of GDP in implementing states. And Chodorow Reich et al. definitely find that federal Medicaid dollars matter a lot in the short (Keynesian) run, and that also means they matter even more in the long (resource shift) run…

Besides having flashbacks to my REMI modeling days, this makes sense. 

The biggest winners off the top of my head should be full expansion states that have few high income individuals being hit by the Obamacare surtaxes and relatively robust current medical sectors to keep the new spending in-state.  Kentucky, at first thought, should be the biggest net winner with Arkansas trailing behind. West Virginia is slightly below these two states as its medical spend bleeds out to Pittsburgh, Baltimore and Virginia for high end care.  The next tier should be the full expansion states that aggressively pushed the Exchanges but have significant tax flows financing both local and national expansion.  New York, California, New Jersey would be the prototypical states.  New York will benefit a bit from New Jersey expansion as more patients will cross the river, and California will keep almost all marginal new care in-state. 

And then there are the massive resistance states which did not expand Medicaid and have low Exchange enrollment and low net new tax outflows.   Alaska is a prime example.  It had low enrollment against its projection.  Medicaid was refused.  Very little new care will be delivered and some of that new care will be delivered out of state.  The biggest losers though are the full refusal states that are seeing significant tax outflows like Texas.  Again enrollment is low so new economic activity via incoming federal subsidies is low, but more cash is leaving the state to pay for expansion in other states.

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28 replies
  1. 1
    MomSense says:

    It is shocking to me how many people believe in supply side economics no matter what the data say.

  2. 2
    Biff Longbotham says:

    When I think of healthcare tax dollars dribbling out of Texas vs. Department of Defense dollars gushing in, my major sad for the Lone Star state comes to a screeching halt.

  3. 3
    Chris says:

    Considering that we’ve been sticking our fingers in our ears and humming loudly WRT superior health care in Europe for 60 years, i’mnot hholding my breath.

  4. 4
    Luthe says:

    @Chris: It’s much easier to disparage those damn Yurpeens for their health care because they are all the way over there across the ocean. When the state next door starts attracting more jobs and raking in more money because they embraced the demon Obamacare, well, governors and legislatures have to notice.

  5. 5
    Fuzzy says:

    No mention of state financed trips to the emergency room by the uninsured. I thought that was the GOP version of healthcare so it would seem that a significant reduction in those trips/reimbursements costs should have some effect on the bottom line. Or am I confused again?

  6. 6
    justawriter says:

    Protestations from the regular suspects about how ALEC and Laffer are flawed and not “real” conservatives anyway in 3…2…

    Because conservatism can never fail, it can only be failed.

  7. 7
    aimai says:

    Another thing that I wonder about is the mobility issues for people denied the medicaid expansion. The right wing assumption, I think, is that it would be great if poor people up and voted with their feet and moved to blue states so they could get healthcare, but I don’t think that population is very mobile. They don’t have the resources to move and resettle and are often highly dependent on networks of family for jobs and other assistance.

    But if the indigent/medicaid population is stable in place the drain in resources that those states experience trying to plug (some) gaps in care become more and more death spirally. As we are seeing with the closing of hospitals that can’t get federal funding anymore. What effect does that have on people who have healthcare through the exchange (with subsidies) and on businesses who might be consideirng moving states?

    The evidence seems to be that people who can retire or downsize or start their own businesses are doing so thanks to the ACA. Theoretically they are free to move but in practice I think people can be very protective of their medical situation preferring the insurance/doctors/hospitals they know to those they don’t. So the blue state population wills tay in blue states. Businesses will prefer to stay in states which took the medicaid expansion because their workforce will be healthier and less combative w/r/t wages.

    I guess what I’m saying is that the knock on effect from the medicaid expansion is going to widen over time. Indigent and working poor will be stuck in Red States but the newly healthy/business starting/working poor and middle class will stay in the Blue states and contribute economically.

  8. 8
    MomSense says:

    @aimai:

    I actually think that in the red states they are counting on low information voters to assume that ObamaCare is as bad as they have heard and that it didn’t do anything to help them so they don’t vote or don’t vote for dems. Or they are hoping that low information voters will assume that ObamaCare is as bad as they have heard and be grateful to their Gov or legislature for protecting them from it.

  9. 9
    MikeJ says:

    DeLong said:

    I am wondering: how soon before we begin to see the signal emerging from the noise as states that implement the ACA start pulling ahead, economically, of the others?

    Most of the places that refused medicaid expansion are in the old confederacy, and are pretty far behind the civilized parts of the country already.

  10. 10
    Ruckus says:

    @aimai:
    And the conservatives get what they want, a regression to a time when only the wealthy landowners had anything and everyone else is a surf, a brown collar worker if you will. Not saying the conservative voter isn’t getting what they voted for but life sucks as a bottom feeder. And the wealthy landowners are better only in comparison.
    Still trying to figure out the attraction of conservatism.

  11. 11
    JGabriel says:

    Speaking of ALEC, Missouri’s State Senate Republicans overrode a gubernatorial veto of a tax cut yesterday; the State House also has to override the veto for the tax cut to go through – that’s expected to happen today, or sometime this week at the latest..

    The tax cut is based on a Kansas tax cut that has led to ratings agencies downgrading KS’s credit rating to Aa2, with notched ratings (whatever that means) to Aa3.

    As a New Yorker, I am sick of states that don’t tax enough to support their government and pensions, then expect the feds – who they hate and whine about at every opportunity – to bail them out with money from states like mine that tax enough to support themselves and give to the feds more than they get back.

    I think we need a constitutional amendment that demands a minimum taxation rate at the state level, with all federal aid to that state being reduced by the percentage of the percentage that states fall below that rate. For instance, if the rate is set at 10%, then any state that collects only 8% would have all it’s federal aid reduced by 20%.

    I know that’s not going to happen, but I am absolutely fed up with these moocher red states that slag the federal government on a daily basis then come begging for handouts funded by responsible blue states.

  12. 12
    azlib says:

    The Medicaid expansion denial only makes sense when it is seen in racial terms. Modern conservatives hate those brown folks getting any kind of aid from government. The hospital lobby must be completely befuddled by this development, since hospitals are major losers without the Medicaid expansion.

  13. 13
    JGabriel says:

    azlib:

    The hospital lobby must be completely befuddled by this development, since hospitals are major losers without the Medicaid expansion.

    As should be the insurance lobby, which ends up paying for un-reimbursed hospital care with higher medical fees.

    Hmm, maybe insurance companies and hospitals should stop giving money to the GOP and stop funding conservative hobby horses like ALEC.

  14. 14
    Linda Featheringill says:

    @Biff Longbotham:

    “When I think of healthcare tax dollars dribbling out of Texas vs. Department of Defense dollars gushing in, my major sad for the Lone Star state comes to a screeching halt.”

    We need D of D installations in Texas so that when the locals revolt, we’ll already have troops in place.

    And no, I’m not kidding.

  15. 15
    RSR says:

    Which states are missing out on low hanging fruit by refusing or mucking around with Medicaid expansion? I’m wondering where PA fits? Is this something else we can hang around the neck of Corbett? That what ever the Medicaid shell game he’s playing is damaging our economic potential? As noted, some WV care migrates to Pittsburgh. I would think the same of some south Jersey care and Philly.

  16. 16
    Yatsuno says:

    @Fuzzy: The next conservative call is to repeal EMTALA now. But I think the only thing stopping them is it’s a sacred Reagan law, and all sacred Reagan laws are canon.

  17. 17
    JGabriel says:

    @RSR:

    Is this something else we can hang around the neck of Corbett? That what ever the Medicaid shell game he’s playing is damaging our economic potential?

    Yes and yes.

  18. 18
    Belafon says:

    @Luthe: Because Kansas legislators and the governor believed in the Laffer curve, they are on track to lose a half a billion in revenue, which is a lot for the state. So, the Missouri governor said “that’s bad” and vetoed a similar tax cut bill. The legislator is set to override his veto; the senate has already done voted for it, and the House will if one Democrat votes with Republicans (and it sounds like more than one is one board).

    So, no, they don’t necessarily look at their neighbors as if it’s a bad thing.

  19. 19
    jayackroyd says:

    @RichardMayhew

    Kentucky, at first thought, should be the biggest net winner with Arkansas trailing behind.

    Great point! And word of mouth will build.

  20. 20

    @Belafon:
    Like with abstinence only sex education, results don’t matter. The morally right position is to stick it to those minority-coddling liberals. Doing the opposite of what liberals want will make everything Right, no matter what the evidence says. Throw in a few merely greedy or corrupt assholes, and you have conservative economic policy.

    For this same reason, I don’t see red states accepting expanded Medicaid soon without a fight. If it’s legally possible, I could see some that got lucky with a Democratic governor withdrawing. Angry zealots don’t care how much destruction that would cause.

  21. 21
    Biff Longbotham says:

    @Linda Featheringill: That very reason is why they put Fort Sheridan just north of Chicago in the late 1800s–to keep those pesky foreign born anarchists in their place. The Haymarket Riot put the fear into the Man and they wanted a federal garrison of troops near at hand to teach those Eyetalians and Polaks some manners and to get them back to work.

  22. 22
    C.V. Danes says:

    If you are waiting for a conservative wake-up moment where they will all of a sudden start looking at the data instead of ideology, then you will be waiting for a long, long time. These people made a conscious choice to follow the faith, data be damned. They will never come back from that. The only thing they are interested in are pretty pictures that reinforce their beliefs. The accuracy of the data behind the the pretty pictures is irrelevant, because a priest/preacher would never lie to his flock, right?

  23. 23
    Matt McIrvin says:

    @C.V. Danes: Committed wingnuts will never come back, but generally apolitical, low-information people who have mostly just heard things from wingnuts might be persuadable.

    Fox News obsessives, remember, aren’t low-information voters; they inform themselves quite a lot, it’s just bad information.

  24. 24
    Gene108 says:

    @Luthe:

    What governors and legislatures notice does not matter as much as what voters notice.

    And given the right wing news bubble many voters live in, they may not notice.

  25. 25
    Chris says:

    @MikeJ:

    Yeah, exactly. Which is kind of why I said what I did at # 3. I would venture a guess that most of the states that accepted Medicaid expansion were already favorable to the ACA, whereas those that didn’t are heavily populated with “get your government off my Medicare” types who already have plenty of experience doublethinking themselves into believing anything but their lying eyes.

    Even if you can make them acknowledge that states that accepted the ACA are doing better, I can just see them grousing that it just shows Obama rigged the game so all those blue states woth all their blahs would be the ones to win out.

  26. 26
    burnspbesq says:

    I barely remember anything from the statistics class I had to pass in order to get a degree in economics, but I remember enough to understand that the only hypothesis that these data support is “Average American, the Kochs are not your friends.”

  27. 27
    Epicurus says:

    GOP response, delivered by President Merkin Muffley: “But look here doctor, wouldn’t this nucleus of survivors be so grief-stricken and anguished that they’d, well, envy the dead and not want to go on living?” Also, too, has Laffer not already been proven to be a complete fraud? Outside of Bullshit Mountain, of course.

  28. 28
    ralphb says:

    @Linda Featheringill:

    “We need D of D installations in Texas so that when the locals revolt, we’ll already have troops in place.

    And no, I’m not kidding. ”

    I don’t think you’re kidding. Interesting enough, Texas was number 3, among all states, in ACA signups at 734K people. Only New York and Florida had more people sign up. Seems the citizens may be smarter than their state government.

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