Another day, and the slow realization that they’ve been prostituting themselves for frauds slowly sinks in a little deeper at Reason.
Hey, I’m not the Dreamer! I’m the Dreamee!Post + Comments (40)
by John Cole| 40 Comments
This post is in: Glibertarianism, Clap Louder!
Another day, and the slow realization that they’ve been prostituting themselves for frauds slowly sinks in a little deeper at Reason.
Hey, I’m not the Dreamer! I’m the Dreamee!Post + Comments (40)
This post is in: David Brooks Giving A Seminar At The Aspen Institute, Glibertarianism
I shouldn’t get sucked in — I mean, I’ve got a ton of work to get done before the next semester brings its apocalypse with it. Dealing with Megan McArdle is just a poor investment of scarce time and attention…and yet….Oh the temptation!
Perhaps there is a middle way.
I’ll try. I just won’t let myself go all John Foster Dulles on McArdle’s recent attempt to show that she knows more about journalism than an actual journalist, and more about constitutional law than a constitutional law professor. Suffice it to say that hilarity ensues.*
Here I’m just going to look at a single little paragraph that contains one of McArdle’s standard party tricks. She asks:
…surely we can agree that it’s an open moral and political question as to whether it’s acceptable to respond to moral hazard problems with coercive comprehensive regimes? Maybe before you answer that, you’ll want to contemplate the gnarly moral hazard problems attached to many social insurance schemes.
__
Look at the skeleton of her “reasoning” (sic — ed.):
(a) There are moral hazards associated with social insurance
(b) Some of those moral hazards are “gnarly” — i.e. too complex to confront. (I think that’s what she means.)
(c) Coercive comprehensive regimes are the tool used to respond to such moral hazards.
(d) That’s a bad thing.
__
There are a couple of problems here.
__
First, yes, there are indeed moral hazard issues associated with social insurance schemes.** (Moral hazard, by the way, as defined by one of McArdle’s favorite people, Paul Krugman, is “…any situation in which one person makes the decision about how much risk to take, while someone else bears the cost if things go badly.”)
__
Unfortunately, the paper to whose abstract she links is not primarily concerned with what most people think of as the core moral hazard associated with providing pensions to old folk. It does address an important phenomenon. Published in 2005 by three University of Minnesota economists, Michelle Boldrin, Mariacristina De Nardi and Larry E. Jones, it argues that a bit more than half of the drop in fertility observed in Europe and America from the 1920s forward can be attributed to the emergence of old-age pension systems.
__
A couple of things here: first of all, this change in fertility is not exactly an unintended outcome. Because large families are associated with poverty (especially in recent studies of developing nations), fertility reduction can be seen not as a tangled trap for pension systems but as a sought-after policy result.
Still, there are consequences to reductions in family size. Dependency ratios change — how many active workers are available to support each retiree. So pension schemes could be said to suffer a burden of moral hazard, if in fact you treat fertility decisions as an unanticipated externality that unfairly shifts the costs of aging onto society, (as opposed to understanding them as a goal, or at least a useful secondary outcome of the policy). But in the real world, the fact that competing social (and economic) goods come into play is not exactly a shock. We do or as a society can choose to care about poverty, population, and old – age security all at once. That responses to such various concerns interact is not particularly surprising, and if there are externalities involved it is hardly “gnarly,” as in intractable. There is, after all, a difference between complicated and impossible.
__
But the real point is that this sonorous utterance of a scary sounding term — ooooh, “moral hazard” — and this very authoritative seeming invocation of the economics literature have little or nothing to do with what McArdle’s is talking about here, the “coercive” individual mandate in health care reform. Here’s how an economist friend of mine explains the matter:
There are two sorts of asymmetric information problems that undermine social insurance – moral hazard (if you can’t tell whether being poor is the result of bad luck or of lack of effort then insuring against it will reduce the effort people put into avoiding it) and adverse selection (if you can’t distinguish those who have higher and lower risk of falling into poverty then the greater attraction of voluntary insurance to those at highest risk drives costs up and undermines efficient design of insurance schemes). I bring this up because compulsion is usually thought of as a response necessitated by the latter problem not the former.
__
In the context of health care reform, this translates into having to find a way to keep people from gaming the system — waiting until they are sick, or at least until they’ve hit a high-risk stage of their lives, before forking over their ducats. The response, and it’s not gnarly, nor complicated, nor a mystery to most folks who lack the extra sophistication of the Business and Economics Editor of the Atlantic, is to make people pay for insurance before they “need” it.
__
So again, why thunder on about moral hazard or invoke a paper on fertility and pensions as a prop to a complaint about a government mandate? Most likely, IMHO, is that McArdle is just trying to overawe her audience into ignoring the flaws in her argument. I believe the technical term for this is “baffle them with bullshit.” (Heaven forfend! Could such a thing be?–ed.) (Yes — TL)
__
The moral of this story: McArdle employs her grand platform to one end, and one only: to comfort the comfortable. In her long running campaign to return to the status quo ante for health care in the US, she’s willing to sacrifice economic advantage, fiscal prudence, and any other inconvenient facts that get in her way. Her success is predicated on presenting the appearance of authority while spamming out so much economics-sounding stuff that it is weary work to catch up to all the errors more subtle than her inability to catch order-of-magnitude mistakes in her arithmetic. That’s how she rolls…and it’s why, tedious as it is, she needs to be called out on such stuff as often as possible.
*I have to say I feel for James Fallows, whose post sparked McArdle into verbiage. You know how Click and Clack have this running gag about how Scott Simon (or whoever) spits their soup when they hear the Tappet Brothers say “this is NPR.” That’s how I’d feel in Fallow’s shoes were I to hear McArdle refer to me as “my colleague.”
**For example, old age pensions — social security — shifts some of the risk of old age from the individual to society as a whole. In that case, some people may choose to work and save less than they otherwise would have, because they would know that they no longer need to pay for their entire retirement.
If/when people make that choice, the total output of an economy/society would go down—and that would increase the relative cost of the social insurance scheme, a cost which would be born by others than those who alter their behavior in this way. (Of course, enabling folks not to work till they drop is not necessarily an undesirable example of moral hazard at work. It could, just maybe, form a desired goal, a policy-outcome explicitly sought with benefits both moral/social and economic that devolve not just on individuals, but on any society that gets to see its older members as anything other than failing members of the labor force.)
Either way, of course, this is not all that “gnarly” a concept, pace McArdle.
There are well-known policy responses to this particular concern. For example, you address the incentives to slack-off created by social welfare programs by making sure that the benefits they provide are floors, not ceilings: keep the benefits low enough so that they serve as insurance, and not a total income replacement — which is exactly what Social Security does. As of the November 2010 monthly report, the average benefit for retired workers was $1,079. I don’t care where you live in this greatest country evah of ours, $13K a year is not going to lard your table with T-bones and caviar.
Contrast that with what we’ve come to know and love through our experience of recent events — for example — in which the banksters shifted the risk of highly leveraged bets on real estate from themselves to the taxpayer. Crucially, risks that ultimately fell to the taxpayers under a “too big to fail” notion were concealed in various ways, so that we (unknowing) ended up bearing the weight of the collapse of 2008 et seq. Now that’s how you do moral hazard.
Images: John Singer Sargent, The Daughters of Edward Darley Boit, 1882, with a shout out to my hometown Museum of Fine Arts, in which I look at this several times a year.
Vincent van Gogh, Ward in the Hospital in Arles, 1889.
On The Nature of Truth: A Quick Bit of McArdle GiggingPost + Comments (86)
This post is in: Glibertarianism, Assholes, Blatant Liars and the Lies They Tell, Bring on the Brawndo!, Teabagger Stupidity, Technically True but Collectively Nonsense
You gotta just love the new (same as the old) Republican majority in the House. The very first thing they do is kinda/sorta introduce new rules:
After calling for bills to go through a regular committee process, the bill that would repeal the health care law will not go through a single committee. Despite promising a more open amendment process for bills, amendments for the health care repeal will be all but shut down. After calling for a strict committee attendance list to be posted online, Republicans backpedaled and ditched that from the rules. They promised constitutional citations for every bill but have yet to add that language to early bills.
Some rules are more equal than others, though:
The new Republican majority in the House is learning already that governing is harder than campaigning.
They vow to repeal President Obama’s health reform. But they say they want to reduce the deficit, too, so one of their rules requires that any new legislation be paid for fully.
Here’s the problem: The health care reform includes new taxes and a tough cut in Medicare spending. It actually reduces the deficit, according to the Congressional Budget Office. So if you kill health reform, the rules require that you find offsetting spending cuts or tax increases to plug that gap.
So Republicans have decided to exempt health reform from the rule. That deficit they talked so much about during the campaign? Never mind.
We haven’t seen this kind of hypocrisy in Washington since … a few weeks ago, when Republicans insisted on extending tax cuts to the wealthy and didn’t pay for that either.
And about those massive costs associated with the repeal of health care reform? I know it is all fashionable for the Republicans to call the CBO a bunch of liars (and for the glibertarians to come riding, once again, to their defense), but the CBO is not backing down:
The estimate for H.R. 2 will differ in one significant way from the estimate for the enacted health care legislation. The original estimate covered the period from 2010 through 2019, the period used for Congressional budget enforcement procedures when the legislation was being considered; new estimates will span the period from 2012 to 2021.
Today’s letter describes—in broad terms and on a preliminary basis—CBO’s assessment of the effects that repealing PPACA and the relevant provisions of the Reconciliation Act would have on federal budget deficits, the federal government’s budgetary commitment to health care, the number of people with health insurance, and health insurance premiums in the private market. (Repealing the provisions of that legislation would also have a variety of other effects on the health care and health insurance systems that this letter, like previous CBO cost estimates, does not address.)
Impact on the Federal Budget in the First Decade
As a result of changes in direct spending and revenues, CBO expects that enacting H.R. 2 would probably increase federal budget deficits over the 2012–2019 period by a total of roughly $145 billion (on the basis of the original estimate), plus or minus the effects of technical and economic changes that CBO and JCT will include in the forthcoming estimate. Adding two more years (through 2021) brings the projected increase in deficits to something in the vicinity of $230 billion, plus or minus the effects of technical and economic changes.
I’m sure all the Republicans need to do to dispute this new report is borrow a calculator from the Atlantic’s Business and Economics Editor.
The Very Weird Concept of Fiscal Conservatism Under Wingnut RulePost + Comments (154)
by John Cole| 41 Comments
This post is in: Glibertarianism, Clap Louder!, hoocoodanode, Teabagger Stupidity
That $100 billion in cuts Republicans promised? What they really meant was more like $50 billion.
No one could have predicted that two years of shilling for tea party lunatics financed by the usual suspects to put the same old crooks that broke your heart the last time back in power could have ended this way.
They’re So Cute When They’re Young and NaivePost + Comments (41)
by Dennis G.| 51 Comments
This post is in: Glibertarianism, Open Threads, Republican Venality, Assholes, Good News For Conservatives
Our Glibertarian overlords have big plans for the 112th Congress. Despite wedging on about loving the Constitution, transparency, Government by the people, populism, deficits, etc., etc., etc.–the Leaders of the incoming Republican Confederate Party House majority have shown their fidelity to the oligarchs by crafting rules designed to blow holes into any effort to balance the budget while still transferring yet more wealth from the poor and middle class to the richest in the land.
A recent editorial in the NYTs explained the madness of the new rules:
The new Republican rules will gut pay-as-you-go because they require offsets only for entitlement increases, not for tax cuts. In effect, the new rules will codify the Republican fantasy that tax cuts do not deepen the deficit.
It gets worse. The new rules mandate that entitlement-spending increases be offset by spending cuts only — and actually bar the House from raising taxes to pay for such spending.
And just before Christmas the Center on Budget and Policy Priorities identified an even larger problem with the new rules. It seems that these rules would make Glibertarian fanboy, Paul Ryan, a super secret and all powerful Austerity Czar.
As Think Progress noted these new powers would let Austerity Czar Ryan “unilaterally set spending levels that are binding on the House, and any attempt to lessen the impact of these cuts can be ruled out of order”. Under the terms of this extraConstitutional power grab, Czar Ryan could force cuts to popular programs like Social Security without anybody else in Congress having a chance to read, debate or change the Austerity Czar’s cuts.
As the long Holiday week winds down more and more folks are noticing this fundamental attack on the way our democracy should work. More and more folks, like Steve Benen, are sounding the alarm. And the Democrats in Congress are letting the incoming lapdogs of the elites know that their attempt at this power grab will meet some resistance. As Chris Van Hollen’s office told The Hill:
“Allowing incoming Chairman Ryan to have unilateral power to set spending limits — instead of subjecting those limits to a vote on the floor of the House — flies in the face of promises by House Republicans to have the most transparent and honest Congress in history,” said Doug Thornell, spokesman for incoming House Budget Committee ranking member Chris Van Hollen (D-Md.), in an e-mailed statement.
“Unfortunately, the House GOP is reverting back to the same arrogant governing style they implemented when they last held the majority and turned a surplus into a huge deficit,” he added.
This is a developing story to watch and how this power grab is framed and reported will give one a good idea of easy things will be for Czar Ryan and his oligarch pay masters in the 112th Congress.
2011 should be an interesting year.
Have fun welcoming it in.
Cheers
dengre
.
Footnote:
In a stylistic homage to Tom Levenson I include the image of Ivan the Terrible showing off his riches from the The Muscovy Trading Company to an English Ambassador of Queen Elizabeth I. The kind of elite controlled financial system that old Ivan the Terrible had in Russia is the system that Czar Ryan and the Republican Confederate Party House majority are striving to replicate with these new rules.
The 1875 painting, Ivan IV of Russia Shows His Treasury to Jerome Horsey, is by Alexander Litovchenko and hangs in Russian Museum of St. Petersburg (which is an excellent museum to visit if you’re ever in old Leningrad).
by John Cole| 96 Comments
This post is in: Free Markets Solve Everything, Glibertarianism
When in doubt, blame the unions. Personally, I’m holding out until we hear how ACORN and the New Black Panther Party are involved.
I do have to admit that I love this paragraph:
Assuming this is true it’s likely to provide much more ammunition to the arguments of those on the right who have started speaking out against the very idea of a public employees being allowed to unionize. Personally, I don’t think it would be appropriate to ban people from voluntarily associating just because they’re public employees. However, situations like this do raise the legitimate question of whether public employees in certain positions should be legally permitted to engage in some of the tactics that unions in the private sector engage during work disputes. When you’re a position where your job is one that is essential to the operation of the city — like a policeman, fireman, or sanitation worker — I think it’s highly questionable to concede that you should the right to go on strike. Essentially what happens in that situation is that the Union has a huge negotiating advantage over the city because leaders would not want to deal with the backlash that would result from the fact that garbage hasn’t been picked up in a week.
“I have no idea if this is true, but nonetheless it proves public employee unions are bad!” That’s fucking pro.
This post is in: Glibertarianism, Technically True but Collectively Nonsense
It’s too early for DougJ to start drinking, even though he is Irish and on vacation, so I will note that McMegan has thrown up a “correction” of sorts:
Yup, Brad DeLong is right: I probably made a math error eight years ago, and didn’t see it when it was initially pointed out to me by commenter Doug J. How large the error is depends on whether you take nominal or real GDP, compare it to nominal or real spending on the Iraq war, and so forth, but I’d say at a minimum I was off by a factor of at least three, though not “an order of magnitude”, since it seems clear to me that nominal-to-nominal, not real-to-real, is the correct comparison.
I can’t explain the math error, since it was, as I believe I mentioned, eight years ago. I can probably explain why I didn’t see it, which is that I was laid flat with gastritis and working on about 3 hours sleep and 300 calories a day of rice and mashed potatoes. As anyone who has had gastritis can attest, this does leave you a little fuzzy. Or perhaps I was just being stupid.
I struggle daily to live up to Brad’s well-known standards of accuracy, fairness, and integrity; I’m sorry that I clearly failed in this instance.
This is so quintessentially McMegan and representative of the way our elites function that it is actually a thing of beauty. Researchers in the future will want to examine this when looking back on the decline of the empire. Point by point:
1. “I probably made a math error…” – Actually, you quite clearly made a math error.
2. “and didn’t see it when it was initially pointed out to me by commenter Doug J”– Or the other half dozen times in the thread he attempted to explain it and re-explain it.
3. “How large the error is depends on whether you…”– Back to making excuses already.
4. “I can’t explain the math error, since it was, as I believe I mentioned, eight years ago.”– Actually, what drove DougJ to drink was that you couldn’t see the math error as recently as a few hours ago, despite repeatedly having it pointed out to you in excruciating detail.
5. “I can probably explain why I didn’t see it, which is that I was laid flat with gastritis…”– Gastritis broke MAH CALCULATOR!
6. “and working on about 3 hours sleep and 300 calories a day of rice and mashed potatoes.”– Really, you all should feel terrible for picking on me when I feel like this. Jerks! Pity party pity party!
7. “Or perhaps I was just being stupid.”– Perhaps.
8. “I struggle daily to live up to Brad’s well-known standards of accuracy, fairness, and integrity..”– And let’s finish this “correction” with a snide insult directed at the people who had the temerity to point out I was wrong.
And there you have it- McMegan, in all her glory. The only thing missing is the customary “I’m sorry if you were offended by that” that is so popular these days.
Why couldn’t she just write- “Pretty clearly I was wrong about what the cost of the Gulf War was going to be and made some calculation errors based on my inaccurate projections. I don’t know what I was thinking back then, but right now I’m feeling a little under the weather and not thinking clearly. Thanks to those of you who pointed this out and were right.”
That’s what I would have written. Although, in fairness, I have had a lot of practice being wrong.