Sunday, March 28, 2010

On healthcare, again ...again

Well since I rely heavily on The Economist as my primary news source, it should come as no surprise to find that I'm essentially echoing their views, albeit in a much less eloquent way. For those of you that aren't avid readers of the news magazine, its important to note that even given these critiques The Economist supported the passage of this bill based on the humanitarian imperative of insuring more people. I can't link to the article for non-subscribers, but here are a few excellent excerpts from their business commentator who puts it far better than I did (feel free to ignore my previous post as this pretty much sums it up):

"Obamacare has taken the most idiosyncratic feature of American health care - the fact that the onus for providing health insurance falls first and foremost on companies rather than on individuals- and set it in concrete."

"Left-wingers point out that employer-provided health care fails to control costs ... conservatives argue that costs would come down if individuals rather than companies were responsible for their own insurance. But Mr. Obama insisted from the first that Americans who liked their existing cover would be able to keep it"

"General Motors complains that providing health care adds $1500-2000 to the cost of every car it produces in America" (!!!)

"... employees feel no compunction about undergoing expensive treatments, since the company pays. The fact that employer-provided insurance is untaxed blunts employers' incentives to control cost"

and finally

"overhauls of something as complicated as America's health-care system only come once in a generation."

Let's hope they're wrong.

Saturday, March 27, 2010

On health care, again

In a word: ambivalence.

So health care passed and depending on who you talk to its either turned this country into an egalitarian paradise or a fiscal nightmare. Both claims are equally ludicrous.

I'm not happy with the legislation that passed because, as I saw it, there were/are two goals to health care reform. We wanted to stop spiraling costs from destroying both private pocketbooks and public entitlement programs, and we also wanted to finally join the rest of the civilized world by insuring most citizens. Well, we've successfully accomplished the latter goal, but even the most ardent supporters of this reform bill have to admit utter defeat on the first.

My lack of happiness stems from our lack of doing what I saw as the more important goal: changing the incentives in this perverse system in order to cut costs. As I saw it, bringing down health care costs would allow more people to afford it and thus bring more people into the system. Bringing more people, however, into a clearly broken system just puts a heavier strain on policies that have been failing for quite some time and will continue to do so.

My lack of outright unhappiness comes from the fact that I don't see broadening the social safety net as an inherently bad thing. I'm glad more people are insured, and it seems that this bill did it in a relatively responsible way. I still think the fiscal aspect is highly overstated: almost everyone compares this bill to the Massachusetts plan which isn't necessarily failing but has far exceeded even the wildest of initial cost estimates. As such, it has turned to the federal government for help, but the federal government won't have that luxury.

The cost estimates from the CBO rely heavily on the ability of congress to approve taxes and recommendations in the future, such as the 'Cadillac Tax' that is supposed to become effective in 2018. This can, and most certainly will be undone with the stroke of a pen once 2017 rolls around and thus the budget estimate becomes meaningless. Likewise, supposed cost cutting measures come from a panel that will set guidelines regarding the efficacy of certain treatments that are contingent on congress signing into law. We all know how well that will work, it's hardly been 6 months since the recommendations for mammograms caused outright vitriol across the country.

Nevertheless, I'm glad to live in a country where more people will be insured and I don't think the effect on growth will be that horrendous. Make no mistake about it though, these taxes will have a net detrimental effect. Caterpillar predicts 100 million in added costs, AT&T: 1 Billion. Yes we'll insure people with that money, but it will absolutely come at the expense of jobs and productivity. I'm okay with that, but it's essential to keep in mind.

The real issue now is how to get at cost. Unfortunately, and I hope I'm wrong on this, passage of this bill makes further reform even less likely if only for the fact that people are sick of hearing about health care. We do, however, need tort reform. We absolutely do need to take away the tax breaks for employer provided insurance. This ridiculous system serves only to obfuscate health care costs and prevents individuals from being able to accurately weigh the costs and benefits of certain health plans and procedures. We would all be much better off if our paychecks were a bit larger and we could use that money to shop around for our own insurance plans like they do in every other non-single-payer country in the developed world. Increasing transparency and bridging the information gap at this microeconomic level is crucial to fixing our macroeconomic problem.

Politically, I laugh in the face of angry Republicans on this one. They claimed the system was broken and provided abslutely no concrete fixes. How hard would it have been to say at the health care summit, here: this is our plan. But they didn't. Instead they talked about tort reform, and even then it was far to late. They had the chance to get these good ideas into the Senate Finance Comittee's initial bill, but they belly ached and left the processs completely. The sad thing is that tort reform would have been great to add to this bill, as would have been the end of employer tax breaks. I think the bill would have been far better with some of these Republican ideas, none of which were at odds with this existing legislation.

Instead they kept them as mere ideas rather than concrete proposals and stood steadfast in their opposition to the current bill which really isn't all that bad and they know it. Just ask Mitt Romney the conservative poster child who passed an 85% similar bill a few years ago in Massachusetts. Whining about the individual mandate is absolutely shameful; this was THEIR idea in the mid 90's. You absolutely can't stop the exclusion of pre-existing conditions without the individual mandate because everyone would wait until they get sick to go sign up for insurance. Likewise, you can't break this bill into smaller chunks and tackle them one at a time as was preposterously suggested: it's clear that these policies rely on one another to be effective.

That's not to say I'm happy with the Democrats, after all, why on earth isn't tort reform in here? Just because it was a Republican idea? Clearly bowing to the unions are why the employer tax break stays put, and why the Cadillac Tax won't be implemented for 8 years, if ever. My inclination is to take the government intervention out of the system rather than add more regulation, but I know not everyone would agree. This is why I advocate less government intervention in the realm of giving tax breaks to businesses that supply health insurance. I just truthfully can't fathom the argument for this system especially in the face of an individual mandate where everyone would be forced to get health care. It's a 'less-government' idea, and why democrats can't support a single decrease in government size is mind-boggling.

In any event, we're left with a new entitlement that is mostly paid for and will help a lot of people in this country, most of whom are from lower income brackets, get access to health care. It also leaves us with a politically toxic and polarized environment which will make further reform on health and other issues more difficult. It adds more stress to an already broken system of health delivery, and it does little to curb costs and nothing increase tranparency at the microeconomic level so that individuals can make more rational decisions. The tax increases aren't crippling to growth, but considering the other inevitable tax increases that will be required to come close to balancing the bloated federal budget, they might quickly approach crippling.

With that rant, I'll leave you with some of the better articles that I've read on the issue. Most of these are critical or ambivalent, and I'm purposefully doing that because the benefits of having more people insured are clear. Reading some critiques can help us decide whether the costs (which are far less clear) are worth the benefits.

From Cafe Hayek

From The Economist
From the American Enterprise Institute

Another from AEI

And as a special treat, here is a fantastic bonus article on entitlements

Saturday, March 13, 2010

On Capitalism: a love story

Another movie review? I'm running short on things to say as of late and can't help myself on this one.

I'm not going to judge this film on its cinematography, because Moore clearly knows how to make a documentary. Rather, I'm going to briefly tirade against the dishonest, illogical drivel that makes up the films content. I'll limit myself to two case studies for the sake of brevity but I could probably annotate the entire film with counter arguments and objections to populist cheap shots (should we somehow feel convinced that Priests and actors know what the hell they are talking about with respect to the economy?).

The first is that we should somehow feel bad that airplane pilots don't make as much money as Michael Moore thinks that they should. Sure I'd love to pay them more, but does anyone think that the majority of Americans are willing to pay extra money on the cost of the airfare to pad pilot's salary? Their job requires education and great responsibility, but how else are we supposed to reward them if not by letting customers decide how much they are willing to pay for their services? Their income is decided not buy some bureaucrat or industry executive, but by the American public voting not with their hopes and wishes but by putting money where their mouth is.

Maybe low income levels will discourage young pilots-to-be from getting their pilots lisence, this dimished supply will inturn lead to a higher demand for well trained pilots who can thus demand a higher wage(!). Artificially setting their wage, however, will encourage an excess supply of people wanting to become pilots and having to compete for a limited number of jobs. We would thus have a large number of pilots, many of whom are unemployed while the rest make a great wage but are ready to be fired on a whim because there is always someone else waiting in the wings to take their tenuous job. I say that having a supply of pilots that meets demand even if their wage isn't as 'fair' as some might like is a far better option.

Moore also goes to an electronics manufacturing co-op to espouse how great it is when companies are run and owned by their members. Somehow through all of this we're supposed to forget the fact that he is in Michigan, and that the capitalist system that he denegrades throughout the film clearly allows, nay enables, this to happen. I say yes to more worker owned co-ops who pay their workers a decent wage, and I bet a majority of the population does too.

Of course, we say this, but are we willing to pay extra money for it? This co-op that he visits seems to be doing a good job, and more power to them. If they were able to produce quality goods at a low price, there would probably be a lot more of them. Even if they weren't able to bring costs down as low as large corporations, if the majority of this country really valued their manufacturing and ownership process higher, there would be more of them because they're not limited by the government or by evil corporations.

Their success is limited by how many people are willing to vote with their money and buy products produced from worker owned co-ops. I belong to a food co-op, and I pay a premium for it. But really, the fact that its across the street from my house is a prime motivator and I'm not willing to pay a 10% surcharge on a car, computer, etc. just to know that it was made from a factory that was owned by its employees. And even if I was willing to do so, I could under our terrible capitalist system...

As best as I can remember, I liked Bowling from Columbine and Farenheit 9/11. I was of course a young, idealistic, liberal college student at the time but can recall that many arguments that Moore made resonated with me to the point of being ready to grab my pitchfork and descend upon the District. The faint recollection of these other films and my agreements with them made my stomach churn as I listened to one illogical argument after another in this movie.

Oh how I hope that his earlier films really aren't this awful upon reviewing. It will make me so jaded about the entire liberal college aged crowd to which I once belonged as well as personally ashamed that I couldn't recognize poorly crafted arguments. For now, I'll simply say that this film is a two hour lesson in half baked economic populism with no understanding of economic reality and no solutions/suggestions for the areas where problems clearly do exist. Instead, we're left with a tried and true delusional argument (I hate to even use the word) about how great life was in the 50's, how ruinous it has since become, and how terrible it is when factories close down because someone else can produce a product better and cheaper.

If democratic socialism is the goal, how is it possible to not once visit or talk about Scandinavia? There is a cogent argument to be made against U.S. style capitalism. I'm not sure I agree with it but I at least acknowledge that if your value systems differ, the Scandinavian model can be an appealing alternative that trades a certain amount of technological innovation for a larger social safety net. This film, however, isn't the place to learn about it or anything else for that matter.

*posted on my blog, fingerprints.and.snowflakes*

On The Hurt Locker

Well at the risk of being too untimely, and having not written an entry in quite some time, I'm going to frantically write down a few thoughts about this years Best Picture: The Hurt Locker.

I'm ever so thankful that Up in the Air didn't win, because really at that point they might as well have given the award to Nick and Norah's Infinite Playlist. And, I'm also glad that Avatar didn't win either as its plot line was rivaled only by GI Joe (which was clearly robbed of several acting awards).

I'm happy that The Hurt Locker won. It is a deserving picture, and is one of a very select number of movies that really had me emotionally involved. This isn't to say that I felt for the characters, but rather that the tensest moments of the film were gut wrenching for me. I give a great amount of praise to any movie that can evoke a visceral reaction in its viewer, even if every now and then I shook the feeling off and felt rather ashamed at the grip that it had on me. Because after all, I can't help but feel duped when a film can successfully play my heartstrings like a harp from time to time; this to me is the very definition of trite even when done well.

Of course, I'd be amiss not to mention the content of the film which has caused quite a bit of fury in the press, namely that the movie is (apparently) completely unrealistic. As someone who never went to war, I'm not going to comment on the accuracy but I did read a few interesting analyses. All of the events depicted in this film have happened to some degree, but they have happened to different units. In that sense, the film makers weren't being completely untruthful but it does require a bit of information gathering on the audiences behalf to gain anything factual rather than emotional from the film.

Whether its okay to be untruthful in the name of art is an open debate. I personally don't think the film really built up these characters strongly, and it could have easily been shot with a different unit involved in each situation. This would presumably be much more realistic, while changing little in the way of content. But I suppose for narrative purposes, portraying all events as happening to one unfortunate unit in 50 days creates a better story; it is however at least worth acknowledging the expense of realism.

The reason that there is so much uproar is because the film is shot in a very documentarian style. In that sense, it implicitly casts itself as reality and dupes the majority of its viewing audience into the delusion that they understand the reality of life as a soldier in Iraq. Most soldiers agree that they accurately and artfully crafted the tense feeling and tenuous relationships of the military to the Iraqi civilian population. This is why it won an Oscar and why in my mind it is an artistic success that contributes greatly to the public discourse on the successes and limitations of this war and war in general.

I do however tend to agree with the 'wolf in sheeps clothing' argument about the obligations of artists. No one gave a second thought to the factual basis for Avatar, but this film clearly gives the feeling that what the viewer is watching is a direct depiction of reality and in that sense I think artists absolutely do have an obligation to adhere loosely (how loose is to loose?) to facts. I suspect that many would disagree with me here, and the good served by this film may very well overshadow its inaccuracies but its a discussion worth having.

We can all see that film makers obviously benefit by creating a feeling of realism whether through a few words at the beginning (The following events were based on a true story...) or the minimalist approach to cinematography taken by The Hurt Locker. I merely propose that there is a line, which I don't intend to properly articulate, whereby the cost of doing so (in terms of a grossly misinformed populace) exceeds the benefit (public awareness of life in Iraq in this films case).

With regards to the book 'A Million Little Pieces', I proudly fall in the camp that states that no matter how much good this book did in encouraging people to seek help from drug addiction, the author's means of doing so by presenting fiction as fact in the name of making a better story were untruthful, shameful, and should be vilified. I don't propose that The Hurt Locker goes that far (unless it starts showing up in Documentary sections), but it is treading a fine line.

If you have any other examples (I'm sure there are tons that are eluding me at the moment) where art embelishes reality for better or for worse, I'd love to hear about them and discuss the issue further.

*posted on my blog, fingerprints.and.snowflakes*

Sunday, February 28, 2010

On libertarians and the right to bear arms

I had a rather heated online discussion the other day at the blog Cafe Hayek. Entries on this particular blog vary from poignant economic insight, to sheer partisan drivel. But if you can excuse some of the quizzical rants, you can actually find some good libertarian/conservative arguments. My discussion the other day started because the author linked to an article ranting about the right to bear arms and this raised a few issues with me, most of which remain unresolved.

1) If you believe that the constitution grants you the right to bear arms, and that this right should not be impinged in any way, my argument is essentially that you logically must believe that every single citizen has the right to build a nuclear warhead in their back yard, drive an abram's tank on the D.C. beltway, walk around NYC with a pocket full of anthrax, take assault rifles into public schools, etc. Any law preventing either of these scenarios would surely violate the "right to bear arms" tenet that you so strongly believe in. I'm taking extreme examples here, but any strict constitutional or libertarian argument would have to agree with this and any reasonable thinking human being realizes that this would be sheer lunacy and our country would be in ruins in no time.

So, if we throw away the purely libertarian argument, we essentially have to draw a line in the sand that says what arms we truly have the right to bear. I don't claim to know the answer to that, but I'm pretty sure that intra-continental ballistic missiles should be banned, and bb-guns should not. In between is an enormous gulf which I don't wish to get into, but this is where serious arguments can happen.

Should we ban any item that has the potential to kill more then 10 people in 60 seconds? How about anything that can be concealed? Explosives? Projectiles? The ways that you slice up 'arms' could be infinite but I trust that some ways of slicing can strike a reasonable balance between individual liberty and societal welfare. That's a scary thought to libertarians, and if you take a stance on either end of this spectrum I'll grant that your argument is logically consistent. If you however give an inch by agreeing that c-4 explosives shouldn't be allowed on airplanes, you leave yourself open to virtually any attack on the 'right to bear arms' because you clearly don't stand behind that right with all your weight.

2) I have even less patience for the logic behind the constitutional argument than I do for the libertarian viewpoint which I attempted to deconstruct above. Quite frankly, the constitution is wrong. It has been wrong in the past (3/5ths law anyone?), and will be wrong in the future. That's why we have amendments, and I feel strongly that the current incarnation of the US constitution is far better with amendments than it was in its initial framing. As a document, it has surely held up fantastically well over the years, but the day we treat it as scripture is the day when this country is left standing still in an otherwise moving world. How I loathe religious like deference to the constitution....

3) Of course, not all arguments about the right to bear arms defer to the constitutional or libertarian reasoning highlighted above. A well armed populace really might be the best deterrent to crime. While I don't necessarily agree, we could have a lot of heated discussions looking at facts, figures, and natural experiments to see how safe loose gun laws really make us. Depending on what those studies say, I'd have a very open mind. This is a discussion worth having, but best left to another day.

4) Trying to look at the libertarian argument in this one case was kind of illuminating and made me realize that I'm not at all sure of the difference between libertarianism and anarchy (aside from the fact that one sounds so much more academic and intelligent). I fail to see how a single law would pass were it to be judged against the criteria that if it restricts an individuals freedom it is not worth having.

Libertarians avoid potentially calamitous claims about murder or theft by saying that you can do whatever you want as long as it doesn't infringe on the rights of others, but I'd love to hear cogent deconstructions of drunk driving, smoking, speeding, etc. All of these cases can potentially be areas where you harm someone else, so do we allow them? Do we allow some, but not others? Where do we draw the line?

What about wearing a seatbelt or a helmet? By not wearing a seatbelt you're sure to need more medical care when you get into an accident and the costs of this will rarely be recovered from the individual. Make no mistake about it, we all pay more whether its through taxes or insurance premiums to subsidize foolish choices such as riding a motorcycle without a helmet or eating McDonald's 5 days a week. Isn't this an infringement on my rights which in turn could lead to laws to limit this behavior?

5) I've been told that: "A true libertarian asks one question, and one question only about a political policy: does it increase individual liberty? If yes, then a libertarian is for it. No, against."

Presumably restricting the freedom of individuals to restrict their own freedom if they so choose is the one exception...

6) All this criticism and I consider myself a libertarian. Just not a crazy one.

*posted on my blog, fingerprints.and.snowflakes*

Friday, February 12, 2010

On free trade

After listening to this weeks EconTalk, which is essentially a lecture on the merits of free trade that I recommend to anyone who still has doubts, I felt compelled to write a response to Russ Roberts on where I see his analysis falling short.

I'm not going to summarize his argument, but rest assured he makes a compelling, albeit tried and tested case, for why trade helps everyone in the long run and that 'self sufficiency is the road to poverty'. In simple thought experiments, as well as practical real world examples, the benefits of trade are virtually indisputable; my qualm comes when we try to extrapolate these findings to a global scale.

The global marketplace is filled with individuals and groups that not only speak different languages, but also have drastically different cultural norms as well as varying degrees of governmental regulation and support. Recognizing that governments are imperfect (as they are made up of imperfect individuals), we have to account for the fact that conflicts will inevitably arise. In a truly interconnected idealized global economy with high degrees of specialization, countries of the world would be mutually dependent on one another to potentially damaging degrees. This dependence wouldn't necessarily be even as some goods are quite frankly more important to immediate survival than others. Markets provide a way to equate goods by differential valuation, but this doesn't change the fact that humans have several absolute necessities such as food, water and shelter which will always take economic priority over iPods and mattresses.

Let me expand on this thought: Japan has emerged over the past decade as the global leader in automobile sales. It makes economic sense to say: if Japan can produce better automobiles for cheaper, Detroit should close down and there would be no need to produce cars in America. We could instead focus on something that we do well, say harvesting corn. However, if for some unforeseen reason Japan stopped exporting cars to the US, a large sector on which our economy depends would come to a stand still causing massive disruption. And without existing factories, no matter how inefficient they may be, the US would have a several year lag time until they would be able to start producing cars on their own. In this respect, I can see an argument for why we would keep subsidizing a failing industry that is crucial to our economy.

The US could tolerate a lag time in automobile production, but in the case of more essential goods like raw building materials (concrete, steel, plastics, etc.), medicine, and food, any trade disruptions would have absolutely devastating consequences for the country who is on the losing end. To overcome this possibility, countries specializing in relatively low priority goods would have to find other ways to make up for their clear lack of economic power that arises from the inherent inequity of goods. How they do so could involve physical defense in the form of weapons, or pacts with other countries neither of which are ideal options for economically disadvantaged countries that with to retain a certain amount of political autonomy.

To put it bluntly: small, poor countries hardly get a fantastic deal out of this situation. They may benefit greatly from free trade in lieu of disruptions, but when conflicts arise the well diversified rich countries can weather the storm leaving nations that are unable to produce their own food to fall into ruin.

In an interconnected world, economic sanctions could be far more devastating than any bomb. This is not an issue amongst a tribe of traders, or even between states and nations where well designed social and political institutions can easily handle conflicts. Yet, as the circle of free trade grows, so to does the potential for conflict and disruption. Why we can't all just get along is more an issue for philosophers and political scientists but it has real ramifications for the economics of globalization when we realize that there is not a serious institution that can be deferred to in order to solve conflicts on a global scale. When distances expand and trading partners become a number rather than a face, there is a much greater potential for fraud and misrepresentation. Designing efficient conduits for information exchange can help alleviate some of these problems, but cultural barriers may still lead to misunderstandings and outright acts of aggression between trading partners.

In reality, I'm still a staunch supporter of open borders and tariff free goods and I see trade friendly policies as being crucial to economic development and technological advancement across the world. However, serious information/transparency problems as well as cultural/linguistic divides invariably emerge between economic actors as interactions are scaled to the global arena.

Though the costs might not outweigh the obvious benefits, at very least we need to recognize that trade occurs in an imperfect political environment. Therefore there are costs which could outweigh the benefits in certain situations, whether real or hypothetical, and lead to protectionist policies being reasonable options. I don't claim to be able to predict those situations, but as a scientist I recognize that all theories must be falsifiable and we all benefit from further investigation and tests to our theories.

*posted on my blog: fingerprints.and.snowflakes

Friday, February 5, 2010

On why I don't hate the tea party movement

And by don't hate, i mean kind of like. Kind of.

My political views over the past several years can be summed up by saying that I loathe the Republican party ever so slightly more than the Democratic party. My free-market ideology heavily favors economic libertarianism and is therefore more closely aligned to textbook 'small-government' conservatism but unfortunately I find Republican stances on social issues such as abortion, immigration, privacy, gun control, defense spending, executive power, and gay rights as falling somewhere between misguided to utterly abhorrent. My passionate disagreements on these latter issues has regrettably forced me to swallow my economic misgivings and side with the Democrats in most elections.

But perhaps change is afoot. The tea party movement firmly values fiscal conservatism and smaller government in general (read: libertarianism) and as this party grows in size several possible outcomes could happen:

1) Most likely, it will fizzle out and die leaving little to no lasting impact; no one wins and all the outrage is for naught. I'm left hating Democratic economic practices and Republican social/international practices alike.

2) By emphasizing what was once the core ideology of the Republican party above all else, I hold out hope that perhaps Republicans will be persuaded to suspend their unrelenting assault on social issues which has so scorned me over the years. Pro-life, anti-immigration, and pro-war are just a handful of issues that are ideologically unrelated to the issue of small governance and fiscal conservatism but these issues dominate party rhetoric and policy on virtually all fronts.

However, and this is an enormous however, I maintain a lasting skepticism that the tea-party is really only about fiscal conservatism and libertarian economic policies as opposed to the traditional god-fearing, gay-hating, gun-touting, war-hawk evangelical conservatism that I so despise. They've made the populist argument of less government, but time will tell if they stick to such a limited scope.

3) Almost a non-existent but ever-so-delightful chance is that the Republican party could split from the pressure resulting in a clear distinction between Republican moderates and hard-line conservatives. I cherish the thought and would further love to see the Democratic party split into two parties as well. Ideally, this would leave a ruling coalition of moderates at the center with each party having their fringe activists that lose and gain in popularity creating slight shifts in how the ruling center buffers popular opinion and thus governs.

4) Rather than split the Republican party, there is a chance that Republicans could instead be pulled further to the right. Democrats could thus move rightward which would shift the entire spectrum to the right or they could react by moving leftward creating a rapidly polarized government. On the surface, this would be awful but perhaps if it were to occur the outcome could look somewhat like number 3 whereby a vacuum in the center brings moderates together as a reaction against policy crippling polarization that has slowly been occurring.

Of all those options, most sound pretty okay to me except for the dreadful thought of the fiscal conservatism movement morphing into a growing evangelical conservatism movement. As long as that doesn't happen, some intelligent shifts in economic policy and decreasing emphasis on social issues would be a breath of fresh air potentially benefiting both parties.

The Democrats are succeeding in getting people incensed at the growing size of government, and perhaps this can be placated in exchange for a Republican easing on the social front. Any movement that brings this about, no matter how convoluted the means, garners my undying support.

*posted on my blog: fingerprints.and.snowflakes*