David Brooks is Shrill!

Bobo goes bananas!

Resilient societies have a level-headed understanding of the risks inherent in this kind of warfare.

But, of course, this is not how the country has reacted over the past week. There have been outraged calls for Secretary Janet Napolitano of the Department of Homeland Security to resign, as if changing the leader of the bureaucracy would fix the flaws inherent in the bureaucracy. There have been demands for systemic reform — for more protocols, more layers and more review systems.

Much of the criticism has been contemptuous and hysterical. Various experts have gathered bits of Umar Farouk Abdulmutallab’s biography. Since they can string the facts together to accurately predict the past, they thunder, the intelligence services should have been able to connect the dots to predict the future.

Dick Cheney argues that the error was caused by some ideological choice. Arlen Specter screams for more technology — full-body examining devices. “We thought that had been remedied,” said Senator Kit Bond, as if omniscience could be accomplished with legislation.

Many people seem to be in the middle of a religious crisis of faith. All the gods they believe in — technology, technocracy, centralized government control — have failed them in this instance.

Well, David, may we suggest it's time for a different god? Hastur is accepting supplicants over in conference room 3.

James Kwak: A Partisan Post: You Have Been Warned!

A Partisan Post, You Have Been Warned « The Baseline ScenarioLast night I read a post by Brad DeLong that made me so mad I had trouble falling asleep. (Not at DeLong, mind you.) There’s really nothing unusual in there — hysteria about the deficit, people who voted for the Bush tax cuts and the unfunded Medicare prescription drug benefit but suddenly think the national debt is killing us, political pandering — but maybe it was the proverbial straw.

First, let me say that I largely agree with DeLong here:

I am–in normal times–a deficit hawk. I think the right target for the deficit in normal times is zero, with the added provision that when there are foreseeable future increases in spending shares of GDP we should run a surplus to pay for those foreseeable increases in an actuarially-sound manner. I think this because I know that there will come abnormal times when spending increases are appropriate. And I think that the combination of (a) actuarially-sound provision for future increases in spending shares and (b) nominal balance for the operating budget in normal times will create the headroom for (c) deficit spending in emergencies when it is advisable while (d) maintaining a non-explosive path for the debt as a whole.”

Now, let me tell you what I am sick of:

1. People who insist that the recent change in our fiscal spending is the product of high spending, without looking at the numbers, because their political priors are so strong they assume that high deficits under a Democratic president must be due to runaway spending. And it’s not just Robert Samuelson.

2. People who forecast the end of the world without pointing out why the world is ending. Here’s Niall Ferguson, in an article entitled “An Empire at Risk:” “The deficit for the fiscal year 2009 came in at more than $1.4 trillion—about 11.2 percent of GDP, according to the Congressional Budget Office (CBO). That’s a bigger deficit than any seen in the past 60 years—only slightly larger in relative terms than the deficit in 1942.” But does he mention that the reason for the 2009 deficit is lower tax revenues due to the financial crisis and recession? No. Here’s Ferguson on the 10-year projection: “Meanwhile, in dollar terms, the total debt held by the public (excluding government agencies, but including foreigners) rises from $5.8 trillion in 2008 to $14.3 trillion in 2019—from 41 percent of GDP to 68 percent.” Does he mention that, as early as January 2008, that number was projected to fall to 22%, and the majority of the change is due to lower tax revenues? No.

3. People who posture about our fiscal crisis who voted for the Bush tax cuts — shouldn’t shame require them to keep silent?

4. People who say, like Judd Gregg, “after the possibility of a terrorist getting a weapon of mass destruction and using it against us somewhere here in the United States, the single biggest threat that we face as a nation is the fact that we’re on a course toward fiscal insolvency,” as if this is a new problem, when it’s been around since 2004 (see Figure 1) — when, I might add, Judd Gregg was a member of the majority. (Tell me, was Niall Ferguson forecasting the end of the American empire in 2004, when everything he says now about long-term entitlement spending was already true? That’s a real question.)

5. People who say that we can’t pass health care reform because it costs too much, ignoring the fact that the CBO projects the bills to be roughly deficit neutral, ignoring the fact that the Senate bill has received bipartisan health-economist support for its cost-cutting measures, and ignoring the fact that our long-term fiscal problem is, and always has been, about health care costs (see Figure 2).

6. People who say the Obama administration is weak on the deficit (Ferguson refers to Obama’s “indecision on the deficit”, and he is gentle by Republican standards), when by tackling health care costs head-on — and in the process angering their political base — they are doing the absolute most important thing necessary to solve the long-term debt problem.

7. People who cite “financial ruin” purely, absolutely, incontrovertibly as a political tactic to try to kill health care reform (courtesy of DeLong and Brian Beutler)...

8. Joe Lieberman.

Dean Baker, Yog-Sothoth Professor of Political Economy at Miskatonic University, on the Washington Post and the Stimulus

Beat the Press Archive | The American Prospect: Given the quality of the economics reporting, parents would be well-advised to prohibit their children from reading the Washington Post so that they don't get confused on basic arithmetic concepts. The Post doesn't want more stimulus and is willing to say anything to push its case.

The lead editorial tells readers that: "government has managed to blunt the recession, but at a cost -- a higher national debt burden, which future Americans must pay off by working harder and saving more than they otherwise would have." Actually, future Americans will own the debt that will be paid off. This is not a generational issue, it can be a distributional one.

There is a point that some of the debt is held by foreigners. This will be a burden on the country, but the issue here is the trade deficit, not the budget deficit. If we had no government debt, but foreigners bought up $4 trillion of private capital in the United States, it would pose the same burden on future generations as if foreigners bought up $4 trillion of government debt. Remarkably, the Post is not concerned about the trade deficit and the burden it poses on future generations and actually does not want the cause of the deficit -- the over-valued dollar-- to be fixed.

The Post also gives the bizarre argument that:we should wait on further stimulus because "the government still hasn't run through half of the $787 billion in tax cuts and spending increases enacted this year." Of course, for those of us who passed our third grade arithmetic class this argument is just plain silly.

The stimulus is already being disbursed at its maximum rate and therefore having its full impact on the economy. The additional spending will provide no further boost.

To see this point, imagine my rich uncle promises to give me $2,400 over two years in installments of $100 a month. I may originally be slow to change my consumption, but after 3 or 4 months I will likely have fully adjusted my spending in accordance with this monthly gift of $100. Once I have reached the 8th month, I will almost certainly be at my maximum spending rate, even though two thirds of the gift is yet to come.

This is where we stand right now. We have spent close to 40 percent of the stimulus with more than 60 percent yet to come, however the rate of spending will not be increasing from this point forward. Therefore, it will provide no further net boost to the economy. People who write editorials for major newspapers should understand this fact.

It is worth noting that the Congressional Budget Office (CBO) projections showing a 10.2 percent unemployment rate for 2010 and a 9.1 percent rate for 2011 include the impact of the stimulus. Perhaps the Post's editors know something that CBO doesn't, in which case they should share this information with their readers.

Miskatonic University Bulletin: Fall 2009

The leaves are turning here in Arkham, Massachusetts, as we welcome to his padded cell our new Dread Cthulhu Professor Health Policy, Thomas Levenson. Watch his mad ululations beneath the uncaring stars:

It’s not that McArdle can’t read... it’s that she can’t (won’t) think: part four (and last, thank FSM). « The Inverse Square Blog: OK, by now it’s clear that this is overkill.  One post by Megan McArdle does not need this kind of rant; it’s like using a howitzer to plink a tin can off a fence.  [For grotesque demonstration of my logorrhea problem, check out parts one, two, and three of this series]

But in some sense, all I’m doing is channelling my inner John Foster Dulles:  McArdle, and her ilk are not going away.  Sadly, no amount of day-by-day debunking seems able to evoke the kind of respect for their claimed craft that would produce even a smidgeon more care and honor in their ongoing attempt to write into reality their unexamined assumptions.  So, after Dulles, consider this a kind of blogospheric massive retaliation, an attempt to shock and awe the recalcitrant into the virtues of intellectual honesty.

Which brings us to one more thing that McArdle did not do in her attempt to recruit what she claims as the gold-standard of authority, the academic literature, to bolster her assertion that any attempt to control drug expenditures in the US medical system is tantamount to a pact to kill nice old people...

Ph'nglui mglw'nafh Levenson R'lyeh wgah'nagl fhtagn!!

David Frum is Shrill!

Former Bush speech-writer David Frum is, dare we say it, Shrill and Unbalanced!

All this hysterical and provocative talk invites, incites, and prepares a prefabricated justification for violence.

And indeed some conservative broadcasters are lovingly anticipating just such an outcome.

...

Newt Gingrich tweeted: "The person who drafted the outrageous homeland security memo smearing veterans and conservatives should be fired."

I don't think the former speaker could tweet such a thing today in good conscience. The person who drafted that homeland security memo has gained very good reason to be worried. The guns are coming out. The risks are real.

It's not enough for conservatives to repudiate violence, as some are belatedly beginning to do. We have to tone down the militant and accusatory rhetoric.

David, welcome!

Joe Klein is losing it

Time was we'd expect Joe Klein to reliably mutter something about being liberal before launching into a broadside against everyone to the left of Atilla the Hun. This time is past:

...The most liberal members of the Democratic caucus — Senator Russ Feingold in the Senate, Representative Dennis Kucinich in the House, to name two — are honorable public servants who make their arguments based on facts. They don't retail outright lies. Hyperbole and distortion certainly exist on the left, but they are a minor chord in the Democratic Party.

It is a very different story among Republicans. To be sure, there are honorable conservatives, trying to do the right thing. There is a legitimate, if wildly improbable, fear that Obama's plan will start a process that will end with a health-care system entirely controlled by the government. There are conservatives — Senator Lamar Alexander, Representative Mike Pence, among many others — who make their arguments based on facts. But they have been overwhelmed by nihilists and hypocrites more interested in destroying the opposition and gaining power than in the public weal. ... There is no Republican health-care alternative in 2009. The same people who rail against a government takeover of health care tried to enforce a government takeover of Terri Schiavo's end-of-life decisions. And when Palin floated the "death panel" canard, the number of prominent Republicans who rose up to call her out could be counted on one hand.

A striking example of the prevailing cravenness was Senator Johnny Isakson of Georgia, who has authored end-of-life counseling provisions and told the Washington Post that comparing such counseling to euthanasia was nuts — but then quickly retreated when he realized that he had sided with the reality-based community against his Rush Limbaugh-led party. ... Why are these men so reluctant to be rational in public?

Nonpartisan Tax Professor Dan Shaviro Is Now Shrill!

Welcome, Dan! Phnglui mglwnafh Cthulhu Rlyeh wgahnagl Ftagn!! The deep-fried shoggoth tentacles are on the right. And the 65 million B.C. vintage of the chardonnay is from Hastur the Unspeakable's private cellars...

Start Making Sense: Healthcare reform: The current debate's lack of coherent content has been quite startling, and indeed dismaying insofar as one naively hoped for better. I generally support what the Obama Administration is trying to do (though sometimes what that is, isn't entirely clear). In 1993, I was unsympathetic to the Clinton plan, but since then my view of how well the U.S. healthcare market functions has darkened. More on that in a moment. Unfortunately, I don't think the Administration has conveyed any clear sense of what it is trying to do, or why. Concerning the other side in the debate, perhaps the less said, the better. I really can't say anything temperate at this point. What is the set of problems to which the Administration's healthcare reform proposals might, with luck, be an at least partial solution? Brad DeLong once put the point quite crisply (in his moderate rather than shrill persona). To liberal economists, the big problem is adverse selection. To conservative economists, the big problem is moral hazard. And I myself would say they're both right, plus there also are externalities. On adverse selection: Anyone who is facing uncertain healthcare expenses ought to want insurance, smoothing out the actual cost towards the expected cost. Our healthcare market does not work well to solve this problem, and that's a big reason for the millions of uninsured. The tax subsidy for employer-provided insurance contributes to this, by making risk pooling much harder for the people left over after these generally healthier groups have been cherry-picked out of the pool (so to speak). Adverse selection, making fairly priced insurance unavailable, is inherently a big problem in healthcare if the government doesn't somehow mandate pooling, given that people often will know more about their expected future health than insurance company doctors will be able to learn. But the system created by tax benefits certainly has made things worse. Myopic or irrational failure to insure (until it is too late) when one should have also is a problem. Likewise, the prospect of free care in the ER if one has a crisis may create an individually rational reason for under-insurance, but involving a fiscal externality. When you count as well the adverse effect on risk-pooling of people's staying out of the insurance market (contributing to adverse selection), there's a good case for mandating health insurance coverage, just as Social Security effectively mandates retirement savings. >There is an argument on the other side - why give me (or make me buy) something that costs $X if I value it at less than $X - but while that's often a good argument I personally would reject it on balance here. Note, however, that this argument applies equally to making me buy something for $X and giving it to me for free (since in that case we could simply have given me the $X instead). And the question of whether I pay the $X or get it for free is simply an input to the overall issue of post-tax and transfer wealth distribution in the society (which is not to diminish its importance, but just to put it in the proper larger context). >And finally, mixed in with adverse selection (though conceptually distinct) is that we may favor redistribution from those facing low expected healthcare costs to those facing high expected costs, in particular to the extent that brute luck rather than choice underlies the difference. Thus, mandatory insurance for which everyone was charged the same amount might be defended as combining a solution to adverse selection with a deliberative redistributive policy. By the way, lest this sound a bit lefty, it is distributionally equivalent to what the George H.W. Bush Administration would have proposed it if Bush I had won the 1992 election, via risk-adjusted subsidies for the purchase of private health insurance. >OK, on to moral hazard. One key reason the U.S. healthcare system is so wildly expensive relative to the benefits provided (where the comparison is other economically advanced countries, where people get comparably good healthcare for much less) is that we have half of a free market system, in effect - which can be worse than no market system at all. Consumer demand drives the market, but it is largely the demand of subsidized consumers who are not actually paying at the margin for what they get. Suppose that in the market for groceries or cars we had consumer demand in the driver's seat (as we do), except that people didn't actually have to pay for what they purchased (or maybe they just had a small co-pay). Whole Foods and GM might like this, but it wouldn't be good socially. Yet in healthcare, that's effectively what we have, much of the time, for people on Medicare, Medicaid, or employer-provided health insurance that overpays at the margin (relative to the optimal insurance level) due to the distorting effect of the tax subsidy. Perhaps the food or cars analogy overstates the problem in a couple of respects. Good food and cars are fun in themselves, getting healthcare isn't and hence I'd generally only do it out of the belief that my health will benefit. Plus, doctors to a large extent tell healthcare consumers what to do. But the latter is actually a big part of the problem - they don't bear the marginal costs either, and have some reasons of both ideology and self-interest (earn more fees or practice overly defensive medicine) for recommending treatments that aren't actually worth their cost to the patient. So we have a terrible healthcare system that surely could be vastly improved. I take the Administration to be addressing the adverse selection problem by extending health insurance to the uninsured population. Also, it may want to address under-treatment of this population (which exists alongside over-treatment of others), which I think of as a distributional issue, because being sick and treatable, but unable to afford the treatment, should raise one's estimate of the marginal utility that a transfer via free provision of the needed service would provide. The Administration would also perhaps like to address the moral hazard problem, which is a key input to the horrendous problems of long-term fiscal unsustainability that the U.S. currently faces. Many observers are skeptical, I would guess rightly, of the progress that the current proposal would make on this front. Unfortunately, addressing it really requires bipartisanship, since cutting benefits is politically unpopular. And the Republicans couldn't make any clearer their unwillingness to cooperate in any sort of good faith effort to address waste and put healthcare outlays on a sustainable path. One of the many offensive and odious aspects of the Republicans' hateful lying about death panels and the like is that they are actually the ones who want to provide less treatment. For those among them who are sane and believe in civil society, this mainly reflects concern about moral hazard and/or a libertarian distributional view. The rest, apparently a large majority of their number, do not bear discussing.