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Archive for the 'Politics' Category

Short Post on Cap and Trade

Published on June 26, 2009 in News and Politics. 1 Comment

Mr. Obama on Thursday called it “a vote of historic proportions … that will open the door to a clean energy economy” and green jobs. “It will create millions of new jobs,” Ms. Pelosi insisted.

From: WSJ Link

This makes absolutely no sense to me. It refers to a recent House vote that clears a hurdle for passing a cap and trade bill. I’ll give Obama the claim that it will lead to green jobs. Of course, when you effectively tax carbon through a cap and trade system, it will cause a shift to renewable “green” energy sources. This will likely lead to the creation of green jobs.

Pelosi’s claim that enacting cap and trade will create millions of jobs makes 0 (zero) sense. First, just think about that claim–millions of jobs. We’ve been losing hundreds of thousands of jobs per month. Charging companies for emissions is going to create millions of jobs?

Yes, thousands of jobs will be shifted to other, possibly new, industries, as Obama’s comment indicates. Millions of jobs are not going to appear because of a RELATIVE change in price.

Example: Ketchup becomes more expensive than mustard. The condiment industry employs 100 people. The relative increase in cost of ketchup is not going to cause the total jobs to go to 120 (for instance). Instead, as demand for mustard goes up to lower costs, production will increase for mustard and fall for ketchup. A relative price increase will not effect overall consumption in a way that will dramatically change the total level of employment. Some ketchup folks will move to the mustard industry.

This example is simple, but the logic holds, in my opinion, for analyzing a cap and trade scheme. Especially, against such a ridiculous claim like creating millions of jobs. Shifting jobs is far appropriate.

Alternative example would be an absolute change in price, something that effects overall productivity. If condiments become cheaper, people will change their buying habits to buy more overall. This will increase the employment level because overall production increased. This example could include where mustard benefits more than ketchup and the mustard industry DOES uniquely create a bunch of new jobs.

This post was supposed to be short, but just realize Nancy Pelosi said something ridiculous.

I’m Not Convinced

Published on June 24, 2009 in News and Politics. 0 Comments

I watched an interview with President Obama by Diane Sawyer. I am not convinced by President Obama’s arguments. Who are these people that suggest we do nothing? These supposed people are the focus of Obama’s arguments. His argument goes along the lines of ‘the people who say we do nothing have the burden of proof.’ If these people do not exist, then there is no actual opposition to Obama’s argument, as framed by him. That is a pretty easy argument to win.

Furthermore, it problematically paints opponents of the Administration’s plan as people who want to do nothing. This seems to be the actual strategy of Obama’s health care strawman. This is not reality. There are Republicans who are proposing reforms that focus on fixing our current system through market reforms, adjusting the tax code, and nationalizing the insurance market.

[Sens. Tom Coburn of Oklahoma and Richard Burr of North Carolina, and Reps. Paul Ryan of Wisconsin and Devin Nunes of California] proposal — called the Patients’ Choice Act — is to leave in place the tax deduction companies receive for providing employees with health insurance and to create a “Medi-Choice” tax rebate that will give individuals $2,200 and families $5,700 to spend on health insurance.

The rebate will make health insurance more affordable, especially for young people. It also will make health insurance portable, which will free people from being locked into jobs they hate because they are afraid of losing their health insurance.

One issue that bothers me that people don’t seem to be talking about is the impact of adding healthcare to the government’s budget. The current recession has made one thing abundantly clear, state budgets are not rock solid. This is not new news though. Yes, California is suffering incredibly bad right now and using federal money to finance its operation, but Minnesota has had several budget crises. What happens during a recession? States cut back. Right now, states are cutting healthcare benefits to children. The only way to avoid this is to make healthcare a dedicated part of the budget and let the federal government run deficits, if necessary, to finance it.

Again, I implore people to ask themselves this question: If competition and price-cutting is the answer, why don’t we foster an environment for healthcare that creates a more competitive industry?

The private market may not be able to handle this public-option because the market is so riddled with regulation. There are a lot of reforms that we have not tried yet. Before we commit the government to financing our healthcare system (a truly dangerous proposition), let’s try these things first.

Catching Up on a Few Articles

Published on June 16, 2009 in Minnesota, News and Politics. 1 Comment

1. “A Governor and His Veto Pen”

If you live in Minnesota and you missed the politically intense budget battle and use of archaic MN constitutional techniques:

Upon receiving the last spending bill, he announced that he would exercise the power of “unallotment,” which has been on the books since 1939 and which has been used four times. Under it, the governor is allowed to “unallot” (take away) any state spending for which there is no money to pay. Panicked, the DFL passed tax legislation to cover its blowout spending bills, 10 minutes before the session’s end. Too late. The governor said he’d veto the bill and would not be calling back the legislature to do any more mischief.

2. Pawlenty not Running for Reeelection

Possible presidential run?

3. Alternatives to the Democrat’s Health Care Reform

Four Republicans in Congress — Sens. Tom Coburn (Oklahoma) and Richard Burr (North Carolina) and Reps. Paul Ryan (Wisconsin) and Devin Nunes (California) — will today introduce a bill that moves away from federal centralization. Aptly called the Patients’ Choice Act, it provides a path to universal coverage by redirecting current subsidies for health insurance to individuals. It also provides a new safety net that guarantees access to insurance for those with pre-existing conditions.

These are all great articles (especially 1 and 3). Definitely worth the read if you have some time to sit down and spend it with the Wall Street Journal. One final note, everyone should probably subscribe to the paper because it really is the best news source out there. (Note: I am not paid by News Corp)

Wow = :(

Published on June 9, 2009 in Politics. 3 Comments

NY Times delivers this bombshell:

The story of today’s deficits starts in January 2001, as President Bill Clinton was leaving office. The Congressional Budget Office estimated then that the government would run an average annual surplus of more than $800 billion a year from 2009 to 2012. Today, the government is expected to run a $1.2 trillion annual deficit in those years.

What went wrong?

Business Cycle, Bush, more Bush, Bush that Obama extended, and Obama.

Their share of the damage (in the same order): 37, 33, 20, 10 (percent)

Politics aside, I think that this is pretty clear evidence that government has grown too big. The national debt is a symptom of that. A surplus disappearing over several years is another symptom of that. As soon as some money frees up, it disappears. People do the same thing, in anticipation of a paycheck, you might go out to eat or buy a few new movies. Except if you start going in the red, you stop your poor spending habits. Once money is allotted for a federal program, it is hard as hell to remove from the budget.

I don’t think our leaders need to quibble about debt as a percentage of GDP, size of the budget, earmarks, etc. They need to seriously consider what services government should provide and what role it should play in people’s lives. I think by bickering about numbers we are missing a fundamental question. Answering that question (provided the answer is what I expect it to be) will do a lot toward solving the other problems.

Telling Quote from the OMB

Published on June 9, 2009 in Politics. 0 Comments

From ABC News’ White House Correspondent Jake Tapper’s questioning:

ORSZAG: It includes a lot. I mean, again, if — look, if health care costs grow at the same rate over the next four decades as they did over the past four decades, Medicare and Medicaid go from 5 percent of the economy today to 20 percent of the economy by 2050. That is the core driver of our entitlement problem.

If we succeed in bending that curve, we will have done more to improve the long-term health — fiscal health — of the nation than any other single thing we could do. Which is not to say other things aren’t important, but what I’m saying is, over the next two months we have an opportunity, our best shot, at addressing that problem, and that’s what we want to do. (emphasis added)

I am pretty concerned about what health care reform means for the country. I have a lot of thoughts on it and want to post more in-depth, but I thought this quote from a WH press conference would be a good start.

This quote has nothing to do with ’socializing’ health care in the United States. It does have a lot to do with the Obama Administration’s recent foray into health care industry meetings. The OMB has cited studies out of Dartmouth reporting that regional health care costs differ dramatically with no tangible results. The belief of the Administration is that if costs can be lowered to the cost of the low-cost region, the cost of care will drop without diminishing the quality of care.

That is the basis for the bolded portion of the quote. I think it is interesting that in a quote about health care, the meaning of health has to be clarified to fiscal health. In particular, he is talking about fiscal health to the year 2050. Will Obama’s policy help actual health care over the next four decades? That does not seem to be a concern of this policy.

It seems to me that it takes several key assumptions to accept the conclusion that regional cost differences can be eliminated and the quality of not care will be change. It is pretty common that health care procedures are the most expensive during their initial use, as companies attempt to recoup R&D costs. If some of the regional discrepancy comes from introducing new procedures, do we want to eliminate those costs?

Philosophically, this issue stands as extremely interesting to me. In a competitive industry there are strong incentives for efficiency. To maximize profits a firm needs to minimize costs. Government, on the other hand, is no model citizen for efficiency. If cost savings are really the way out of the entitlement mess that we have created for ourselves, shouldn’t we maximize the incentives for a competitive industry to flourish?

For instance:
Hospital A in Region 1 is providing services at cost X.
Hospital B in Region 2 is providing services at cost Y.
X

Therefore A has an incentive to move to Region 2 and sell it's services at a lower cost, thus making a higher profit than Hospital B. It seems if this discrepancy can be resolved the greenback would have induced these savings long ago, unless entrenched government policies are preventing those changes. Chiding from the Obama Administration does not seem like the solution. I'm guessing that government intervention and tax incentives are not aligned to create a low-cost market for health care. Just a guess. Maybe we should try that first?

Some Thoughts on SCOTUS Nominee

Published on June 4, 2009 in News and Politics. 1 Comment

…from a much greater legal mind than my own:

Jurisprudentially, moreover, the sorry Didden episode reveals an important lesson about constitutional law. It is always possible to top one bad decision (Kelo) with another (Didden). This does not augur well for a Sotomayor appointment to the Supreme Court. The president should have done better, and the Senate, Democrats and Republicans alike, should subject this dubious nomination to the intense scrutiny that it deserves.

Nominating a justice to the Supreme Court is a great honor for a president. They get to appoint a man or woman for life to the top legal institution in the United States. In some instances, they can change the balance of power on the Court. Judicial philosophy matters. It affects and guides rulings. Even if the balance on the Court does not change, the personalities on the Court certainly will.

A SC nomination does not do much for members of Congress from the President’s party. Yes, Chuck Schumer can repeat the President’s praise of Sotomayor and so can everyone else. But that is not a very productive confirmation hearing.

The nomination does give the opposing party the opportunity to use the hearings as a platform to explain their judicial philosophy vis-a-vis the nominee they oppose. Politically it may not be salient to vote against a nominee. By that I mean several things. First of all, the President has the power, under the advice and consent of the Senate, to appoint justices. The Constitution grants him (or her) that power. In my opinion, the nominee should face scrutiny for their opinions, but that does not mean a nominee should simply be opposed because your party does not have control of the White House. Second, every vote counts. Votes in Congress are not independent of one another, members of Congress have limited political capital, as does the President.

So what can the GOP do? Ask questions with purpose. Be creative. Don’t play softball with a Princeton and Yale Law School grad. Frame questions so that you can use your answers to show the superiority of the judicial philosophy you believe should be on the Court. Sotomayor is certainly running through what questions may be asked. She will be prepared. I’m not saying you need to ambush her, but as a conservative you believe a certain type of justice should be on the Court. Show the public why Sotomayor does not fit that bill.

Speak to moderate America when asking questions about judicial philosophy. I think that they will readily listen. Just because Sotomayor will be confirmed does not mean it has to be a win for Obama. Remember, he might get another nominee in the next 3 years.

What Do Nancy Pelosi, Jay-Z, and 50 Cent Have in Common?

Published on March 13, 2009 in Politics. 1 Comment

Their love of Gulfstream G5’s:

What is the plane of choice for a Speaker of the House? Well Nancy Pelosi prefers to fly in Gulfstream’s G-5, made famous by Jay Z and 50-Cent rap videos.

“It is my understanding there are no G-5s available for the House during the Memorial Day recess. This is totally unacceptable . . . The speaker will want to know where the planes are,” a Pelosi aide wrote in one of the e-mails to the military.

Proxies for Confidence

Published on February 19, 2009 in Economics and Politics. 2 Comments

In the social sciences, you cannot always observe the variable whose effect you wish to measure. For instance, there is no single exact measure of car safety. So, one might use percentage of cars with seat belts or number of airbags. In this case, these variables become a proxy for safety. In other words, they stand in the analysis in place of the unobservable variable.

Using proxies can be dangerous. Sometimes variables will unintentionally serve as proxies for other variables. For example, consider a time-series where number of accidents and the average speed limit is observed each year. Over time, the number of accidents goes down as the speed limit goes up. Does this mean I should drive 80 mph around my neighborhood to avoid an accident? That does not seem to make sense. It seems more likely that safety features and the quality of cars have increased over time, allowing the speed limit to increase while overall the number of accidents falls. Speed limits over time served as a proxy for safety, with undesirable consequences.

Currently, as we are all well aware, the United States is dealing with an economic recession and a financial crisis. Partly, I argue, the government is at fault for this crisis. For the past 6 months, the government has been responding and attempting to remedy the recession and the crisis. Starting with the Bush Administration and continuing with Obama, the willingness of the government to spend money has been pushed upon us as a proxy for confidence. In my opinion, this proxy will also lead to undesirable consequences.

Intuition lends some insight into this ’solution’. If a gambler has lost everything and goes to the bank to borrow a little bit more, to win it all back, would you lend money to him? Rarely, do we, as a society, view borrowing as a solution to debt. Except, of course, in the case of the U.S. government. Historically, we have griped about this debt, but dealt with it and prospered. The size of the government in absolute terms has grown tremendously since the founding of this great nation.

Now, we have what appears to be a specific problem with banking and housing. Perhaps things are not so simple because the government has yet to aggressively address these issues. It appears more willing to spend money on its agenda and bailout corporations. If we had a plan buried in the trillions of dollars we are spending, we expect to see the willingness to spend money be positively related to confidence and recovery, even though, as in the safety-speed example, the plan was the real cause, not the proxy. We don’t have a plan buried in the proxy though. Not that I’ve seen. Not that the Treasury Secretary has proposed. Not that the markets have responded to (positively).

We have an empty proxy for confidence. When that shroud disappears, we will be disappointed with what we see. Trillions of dollars in TARP and a stimulus bill. Money that we can’t get back, but we can only pray serves its role.

Ohhhhh Illinois…

Published on February 16, 2009 in Illinois, News and Politics. 0 Comments

Roland Burris….Roland Burris….Roland Burris…

*Shakes Head*

Blago’s gone, but he lives on politically through his appointment of Roland Burris to the U.S. Senate. Mr. Burris, famous for his ego, apparently lied or avoided answering a very direct question about his connections to Blago. Republicans are now calling for his resignation. I’m not sure he is qualified to be a U.S. Senator anyway, but this changes things.

Comprehensive Fox News Report

Obama Administration Sheds 500,000 Jobs

Published on February 16, 2009 in Economics, Politics and Uncategorized. 0 Comments

When we found out the U.S. economy lost about the same number of jobs in January, Obama chided Republican congressmen for not passing stimulus legislation faster. Now, with little fanfare the Obama administration has downgraded their estimate of the stimulus bill’s ability to generate jobs. In fact, it moved form 4 million jobs down to 3.5 million jobs. Of course, the people in January who lost their job are real, not fictional estimates about a ill-planned and rushed bill. They have families, needs and concerns. Futhermore, many Americans have worries about what the future holds.

Republicans chided Obama and House Democrats for not thinking about the opportunity cost of this bill. In other words, if we spend $1, what opportunities do we give up in the future. Put one more way, by spending $1 on ‘the arts’, we give up $1 toward aiding the credit markets or $1 for preventing a home from foreclosing, or from giving up $1 by cutting the taxes of businesses or individuals.

The federal deficit could balloon up to as much as 14% of GDP that is huge. Many economists and politicians (as well as myself) agreed that budget deficits and the national debt should not be a huge concern, especially considering the amazing reputation of government-issued debt from the Treasury (how we finance the debt). If we have a suitable means to finance the debt and the money we are spending seems to be necessary, then we should do it without a concern for debts and deficits. That equation changes when the yearly deficit is predicted to be 14% of GDP. That means the government is spending more than it is taking to the point of being 14% of our entire economy. The world’s largest mind you. That is a dangerous precedent and we have to think about coming back from that.

In 2004 and after, politicians and military advisers warned not to go on a military junket with out an exit plan. Do we have an exit plan for the stimulus bill and the crisis? It does not appear so. The new Treasury Secretary gave us a new proposal that was nearly as vague as Henry Paulson’s. That makes me believe we have just authorized Congress and the President to throw the kitchen sink at the list of solutions to fix the economy. If the Treasury Secretary, hand-picked to deal with this crisis, doesn’t have a specific solution, why are we authorizing Congress to pass a hodge podge bill with different pet projects and Keynesian rhetoric?

We should really think about this crisis…and given a $1 trillion dollars (less than spending a million dollars everyday since Christ’s birth), we should be able to fix this. Throw a $1 trillion against the wall, maybe it’ll stick, but it won’t solve the crisis. Target a $1 trillion solution at the root(s) of the problem and I suspect we’ll get something done.

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