Dismantling the left's rhetoric

Keith Hennessey does a fine job.

A little economic realism?

David Brooks seems to make some sense.

Paul Krugman is predictably horrified, as are Steve Benen and someone at Balloon Juice.

Dean Baker goes into detail with a response that seems particularly well argued.

Link blag

Ezra Klein defends the individual mandate.

He also says to stop worrying about inflation; Krugman agrees.

DIA's New York correspondent looks at criticisms of the torture trials and finds them wanting.

Pictures of libraries.

Ironic oil ad from the sixties.

Danish advocacy group encourages you to "hit the bitch" as part of their campaign to end domestic violence.

Statuary rape.

AT&T rep has a soul.

Comical dog exercise.

Link blag

David Frum wonders if conservatives can govern.

Dish reader draws a lesson from Fort Hood. Another differs. American Muslim reaction here.

Library Grape: Catholic diocese channels Christ's love, threatens to stop feeding the poor if gays marry.

TMV: Can we please just tax the churches already?

Politico: The Republican National Committee's health insurance plan offers coverage for "a fundamental assault on innocent human life".

TPM has a Lou Dobbs slideshow retrospective. Krugman writes: "Until now it really has seemed as if there was nothing, nothing at all, that someone on the right could say and do that would make them unacceptable in polite company. Now it at least seems that there is a line somewhere."

Fallows: more than a hundred TSA agents have gone undercover...cleverly disguised as TSA agents! (he follows up)

Police arrest twenty-five dangerous deviants in Chicago.

Headline to appreciate: "Irish priest kidnapped in Philippines released by MILF"

Unlike every other document on the Web, this page is in final form and completely finished. *grin*

Math is beautiful.

This guy can juggle. So can this one.

Soldiers and their dogs.

The story so far

World industrial production in the Great Depression and now:



Writes Krugman:

Basically, we started out with a year that matched the Great Depression, but have since pulled back a bit from the edge of the abyss.

Link blag

DIA: The fierce urgency of whatever

NYT: It's a fork, it's a spoon, it's a...weapon?

ABC: Tennessee woman arrested for poking someone over Facebook

WSJ: Reagan's secretary of state says the drug war is not working

Cato: Paul Krugman continues to be wrong

And the award of "best headline for something I skipped reading" goes to:
"Will Stimulating Nominal Aggregate Demand Solve our Problems?"

Medicare's impingement on freedom

Paul Krugman writes:

the modern G.O.P. considers itself the party of Ronald Reagan — and Reagan was a fierce opponent of Medicare’s creation, warning that it would destroy American freedom. (Honest.)

Greg Mankiw responds:

Pretty silly of old Ronald, wasn't it? Well, also today, over at the Wall Street Journal, three past presidents of the American Medical Association write:

the right of patients to privately contract with physicians to ensure they have the medical care they want, without penalty—regardless of what the government pays—must be recognized and protected. Today, if a doctor wants to bill a patient for additional payment over the Medicare reimbursement, he has to withdraw from Medicare entirely for two years. A patient who agrees with this arrangement can't receive any Medicare money for that service, either.

So, if you include the right to sign mutually advantageous contracts and engage in the gains from trade as part of "freedom," then President Reagan was not so far off the mark.

The problem, it seems, is that Medicare sometimes tries to push the price of medical services below their equilibrium levels (a phenomenon that will likely get more severe with the Medicare cuts being envisioned in the pending healthcare reform bills). Such price controls naturally lead to private attempts to circumvent them, which in turn lead to regulations to prevent that behavior. These new regulations cannot help but impinge on economic freedoms.

Manzi on Krugman's climate change alarmism

What he said.

An open letter to Paul Krugman

From Washington University economist David Levin.

Economic purgatory

Paul Krugman pictures a jobless recovery.

Quote of the day

"The argument against the public option is sheer nonsense, we know that, it's nothing except the insurance lobby." —Paul Krugman

[This post brought to you by a previously undisclosed member of the "nonsensical insurance lobby".]

A trillion here, a trillion there...

(meme) Obama administration's overly-rosy projections now less rosy.

Seems Greg Mankiw won the bet Paul Krugman wouldn't take.

Quote of the day

Responding to Paul Krugman, Peter Suderman writes at the Dish:

What did progressives expect?

That Obama could simply roll into Washington and ignore the myriad forces arrayed against a liberal agenda? That conservatives, Republicans, moderate Democrats, and interested industry groups would simply go away or shut up? That Obama, through force of will and liberal coolness, could use his awesome rhetorical ju-jujitsu skills to flip the opposition and defeat nutty right-wingers and conservative politicians forever?

Unless you're a character in an Aaron Sorkin show, that's just not how national politics work.

Touché

Question of trust

Krugman observes:

You could rely on a health maintenance organization to make the hard choices and do the cost management, and to some extent we do. But HMOs have been highly limited in their ability to achieve cost-effectiveness because people don’t trust them — they’re profit-making institutions, and your treatment is their cost. [Emphasis in the original.]

This gets Mankiw thinking:

Perhaps a lot of the disagreement over healthcare reform, and maybe other policy issues as well, stems from the fundamental question of what kind of institutions a person trusts. Some people are naturally skeptical of profit-seeking firms; others are naturally skeptical of government. (There is, of course, the issue that an HMO can be run as a nonprofit organization. The one I use through Harvard is an example. But let's put that issue aside for another day.)

I tend to distrust power unchecked by competition. This makes me particularly suspect of federal policies that take a strong role in directing private decisions. I am much more willing to have state and local governments exercise power in a variety of ways than for the federal government to undertake similar actions. I can more easily move to another state or town than to another nation. (I am not good with languages.)

Most private organizations have some competitors, and this fact makes me more comfortable interacting with them. If Harvard is a bad employer, I can move to Princeton or Yale, and this knowledge keeps Harvard in line. To be sure, we need a government-run court system to enforce contracts, prevent fraud, and preserve honest competition. But it is fundamentally competition among private organizations that I trust.

This philosophical inclination most likely influences my views of the healthcare debate. The more power a centralized government authority asserts, the more worried I am that the power will be misused either purposefully or, more likely, because of some well-intentioned but mistaken social theory. I prefer reforms that set up rules of the game but end up with power over key decisions as decentralized as possible.

What puzzles me is that Paul seems so ready to trust solutions that give a large role to the federal government. (In the past, for instance, he has advocated a single payer for healthcare.) I understand that trust of centralized authority is common among liberals. But here is the part of puzzles me: Over the past eight years, Paul has tried to convince his readers that Republicans are stupid and venal. History suggests that Republicans will run the government about half the time. Does he really want to turn control of healthcare half the time to a group of policymakers that he considers stupid and venal?

These thoughts, I appreciate, are broad generalizations. They don't immediately lead to a specific set of reform proposals. But I wanted to give Paul credit for a key insight: A central question in this and perhaps other debates is, Whom do you trust?

Naturally, I'm totally on Mankiw's side here.  And it seems to me that a large part of the distrust of private health-care in particular (as compared to non-health-care sectors) originates from a lack of choice.  Health insurance and management organizations may not be selling a commodity like bread, as Krugman argues, but they are selling something you could potentially have healthy market-based competition on.  The problem is right now we don't have good competition.

The market has been distorted by employers offering single or a limited selection of plans--a relic of World War II price controls that prohibited wage competition, leading employers to compete by offering more lavish benefits instead.  (This is a fine example of the unintended consequences of government regulation.)  To make matters worse, not only is there a limited selection, but those plans are tied to employment and not portable once you leave a job.  The status quo is perverse.

The lack of healthy competition causes problems.  If the insurance company you have refuses to cover a procedure that most health care consumers would expect to be covered (a situation that isn't specific to healthcare and can occur in other areas like insurance and finance) you don't have an effective recourse.  You probably can't switch to a provider that covers the procedure, because a) your employer may not offer that plan, and b) you might be denied based on the pre-existing condition.  You also couldn't start a backlash against the company that causes other customers to switch, the threat of which serves to keep companies honest (e.g., retention-attitudes like "the customer is always right").  Thus, health insurance and management organizations have a perverse incentive: denying coverage, particularly of more obscure and expensive procedures, offers them a much higher upside than the potential downside, because maintaining a good reputation with customers is less important to them than a healthy level of competition would dictate.

So how do we fix the market's competition?  Set up health insurance exchanges where anyone can choose any plan and not be denied on the basis of pre-existing conditions.  Require every employer that offers health benefits to contribute the same portion to these premiums if chosen.

For example, suppose that an employer offers to cover 70% of a $10,000/yr. BlueCross plan.  That's $7,000.  The employee should be able to take this very $7,000 and apply it toward any of the plans in the health insurance exchange.  Suppose there are several plans on offer there:

MoreBasicThanBlue -- $7,000/yr., with higher deductibles and such.
GoldPlated --- $15,000/yr., better coverage
MoreTrusted -- $10,000/yr., very similar to BlueCross but higher customer satisfaction

Presently, this employee would pay $3,000/yr. for their portion of the employer's BlueCross offer.  They might opt for the more basic plan, and pocket the difference as savings.  Or they might want want to shell out that extra $8,000/yr. for the Gold.   Or, maybe they heard from a friend or read at Consumer Reports that "MoreTrusted" offers better care then BlueCross (e.g. better customer service, fewer spuriously denied claims, etc).  They could select the most trusted provider.

This concludes my illustration of a functional, for-profit market-based system.  A government-run plan and greater bureaucracy does not seem helpful to me--and if you have a healthy distrust of government intervention and price controls, you should be concerned about direct public involvement making things worse.

Meanwhile, Tyler Cowen looks at examples of free market health care, which Krugman thinks there are no successful examples of.

More on the latest Mankiw-Krugman spat

Though he's partial to Krugman, Nate Silver gives Mankiw a fairer hearing and also discusses Wyden-Bennett as an alternative to the public plan.

I've linked to their bipartisan Healthy Americans Act in the past, when lefties were upset it was being considered.

If you're a centrist who has no particular love for insurance companies but also doesn't want a public plan, this is your bill.  You can also read about it on Wyden's site.

"The Arbiter of Ignorance"

Greg Mankiw counters Paul Krugman:

In his latest post, Paul writes, "the standard competitive market model just doesn’t work for health care: adverse selection and moral hazard are so central to the enterprise that nobody, nobody expects free-market principles to be enough."

In my view, these comments are just off point. The Obama administration says it wants a public insurance plan that will compete on a level playing field with private plans (that is, without taxpayer subsidies). Is there any cogent economic analysis that suggests that such a policy addresses problems of adverse selection and moral hazard? None that I know. If it has to stand on its own financially, the public plan has no special advantage in addressing these issues.

"off point", hmm. For my part, I accused Krugman of beating a strawman.

Krugman bashes a strawman and takes a short-term view on healthcare

Earlier I linked to George Will and Greg Mankiw on the public healthcare plan. Of course, Krugman disagrees:

Health care is not a bowl of cherries. Or a carton of milk, or a loaf of bread.

Both George Will and Greg Mankiw basically argue that we don’t need a government role because we can trust the market to work — hey, we do it for groceries, right?

Um, economists have known for 45 years — ever since Kenneth Arrow’s seminal paper — that the standard competitive market model just doesn’t work for health care: adverse selection and moral hazard are so central to the enterprise that nobody, nobody expects free-market principles to be enough. To act all wide-eyed and innocent about these problems at this late date is either remarkably ignorant or simply disingenuous.

Krugman may wish to argue against this strawman, but neither George nor Greg are "basically arguing" that we "don't need a government role" regulating the health industry. Rather, they think that too much of a role--such as a national monopsony--will be harmful to quality of care and R&D. Offering a public plan puts us on the most politically expedient path to this.

Of course, I agree with George and Greg: modern medicine has been developed at its faster rate compared to other nations partly because of America's for-profit healthcare system. Just look at some high-end equipment numbers compared to Canada's:

Does anyone believe these numbers would be as lopsided if the U.S. had a nonprofit, national system like Canada?

This ties in with my earlier post about taking a long view on wealth, rather than shooting for more equal distribution in the here-and-now--as lefties like Krugman are wont to do.

I have no doubt that if tomorrow we nationalized the US healthcare industry and provided universal coverage for all, access would become more equitable and many people would have improved access to helpful treatments. For the immediate present, this would be a boon.

But 10, 20, maybe 40 years down the line, their children would be worse off. Again, see my wealth growth over time draft for the math behind this thinking.

Additionally, the rest of the world would also be worse off--because presently, countries with socialized medicine like Canada and Britain basically wait for U.S.-developed treatments to become cheap enough before making them available to their population. If the U.S. develops new treatments at a reduced rate, the model stagnates.

Prophetic quote of the day

Oy vey:

"The basic point is that the recession of 2001 wasn't a typical postwar slump, brought on when an inflation-fighting Fed raises interest rates and easily ended by a snapback in housing and consumer spending when the Fed brings rates back down again. This was a prewar-style recession, a morning after brought on by irrational exuberance. To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble."

—Lefty economist and future Nobel Laureate Paul Krugman, August 2002.

(ht Megan)

Heckuva job, stimulators

Here is the graph that was used to sell the stimulus in February, updated with later unemployment numbers:



Obviously this new data means we need more government spending, as our enlightened technocrats from the left will surely tell us.

It's like the Iraq war, man. When something isn't working as planned and in fact producing an outcome worse than your original projected baseline, clearly the patient needs more medicine. Let's hear it for a stimulus surge!

Dig us deeper, man...

As Paul Krugman preemptively wrote:

I see the following scenario: a weak stimulus plan, perhaps even weaker than what we’re talking about now [this happened], is crafted to win those extra GOP votes. The plan limits the rise in unemployment, but things are still pretty bad, with the rate peaking at something like 9 percent and coming down only slowly. And then Mitch McConnell says “See, government spending doesn’t work.”

Let’s hope I’ve got this wrong.

According to Obama's economists, he did get something wrong--the plan didn't limit unemployment relative to their baseline. It is not the case, as Krugman feared, that the stimulus was too small--but rather, even with a more moderate stimulus, things are worse than the predicted non-stimulus baseline!

The real problem here is that projected baselines of economic performance are always uncertain. And no matter how bad employment numbers get, lefties like Krugman will argue things would be worse without their spending programs. That's the magic of "jobs created or saved".

"Reagan Did It"

In yesterday's Times, Paul Krugman argued that Reagan was responsible for the recent housing crisis.

A response at Commentary Magazine:

First, he attributes the results of the Garn-St. Germain Depository Institutions Act of 1982, and thus the S&L crisis of the late 1980’s, entirely to Ronald Reagan, as though Reagan was ruling by decree. It was Democrat Fernand St. Germain, Congressman from Rhode Island, who dropped into the bill in the middle of the night the provision that raised the government guarantee on bank deposits from $40,000 to $100,000 and assorted other goodies for the powerful S&L lobby. It passed both houses with veto-proof majorities.

Second he lies with statistics, especially the “savings rate,” which measures only family income versus outgo. Mortgage payments, for instance, which add to net worth, are not counted, nor are capital gains, unless realized. In the great boom of the 1982-2007 period, families saved more by increased housing and investment gains than by old-fashioned savings.

Third, he writes, “traditionally, the U.S. government ran significant budget deficits only in times of war or economic emergency. Federal debt as a percentage of G.D.P. fell steadily from the end of World War II until 1980. Translation: Reagan began running up the debt to unsustainable heights.

What he doesn’t say is that while the debt remained fairly steady in dollar terms in the late 40s, and in 50s and 60s (it increased by roughly a third in the 1960s though), it declined as a percentage of GDP thanks to strong economic growth. But in the 1970’s, with Congress firmly in the hands of Democrats and with weak Republican presidents Nixon (after Watergate broke) and Ford, the debt tripled in dollar terms. It declined slightly as a percentage of GDP only because of the roaring inflation of that decade.