Wednesday, October 3, 2012

Final Debate Thoughts



I watched the debate alone in an internet vacum, live-blogging some reactions. Though I had severe problems with both candidates' deficit hysteria, I felt Romney was worse in this regard with the absurd China comment. Overall, I thought Obama was more measured and reasonable while Romney's proposals lack seriousness i.e. you cannot seriously plan to lower taxes, create jobs and lower the deficit. Also, he set the stage for health insurance to be a major problem in American life, and then advocated repealing Obamacare without detailing any real alternative (when most states refuse to do anything and are strapped financially, state-based solutions are not a serious proposal).

I go on Facebook afterwards and it appears Obama and the host are being held in contempt -- in Lehrer's case, for reasons I do not comprehend as I felt he did a find job, and was right to let the candidates continue their discussions rather than rush them through another category they had already covered extensively.

 A sample anti-Obama comment: "Early on Pres Obama was sharp and concise, then he got a bit too wonky and too much in the weeds."

I suppose that was why I preferred his approach.

Live-blogging the debate continuing

A few notes:

 - Romney's criticism of Dodd-Frank is, in his words, more nuanced than just repeal the more stringent regulations. He criticizes supporting too-big-to-fail banks through Dodd-Frank. I will look into this more. The phrase "capital requirements" are briefly mentioned than dropped.

- Romney's healthcare discussion ignores the problem of mass, poor, and young uninsured Americans. This is an economic drag on their consumption, in addition to an overall problem.

- Romney and Obama both, paradoxically, praise Massachusett's health plan. This plan has succeeded in raising in the insurance rate (making it worth it in my opinion) and its medical inflation rate has recently slowed even more rapidly than the national rate, likely due income declines. However, they are suffering from a doctor shortage I believe, expected given the dramatic increase in insurance beneficiaries, a national harbinger neither candidate mentions.

- Obama is clearly influenced by the "30% solution" school of thought in health policy (perhaps from David Cutler, an advisor on his campaign): that is, 30% of health care spending is wasted, and we can eliminate it without affecting quality. This result comes from the Dartmouth Atlas studies on regional Medicare variation, and is endorsed at Harvard, Health Affairs, the IOM etc. Some critics, notably Robert Cooper, consider this result fraudulent. This is very interesting, mostly one-sided debate. From what I can gather, Dartmouth Atlas finds that certain regions, mostly in the South, spend far more in Medicare dollars per patient than other regions (typically Northern suburban regions) even when you control for the different risk pools each region faces. Cooper et. al., and his few if any backers, say this is merely a result of comparing low-minority, high-income Medicare spending regions with high-minority, high-risk regions which necessarily have higher spending. Dartmouth says that they control for differential risks in their statistical analysis and that Cooper is ignorant of statistics. I suppose it boils down to whether you believe multiple regression analysis can adequately control for social stratification across the country, by including variables like income in the regression. Cooper points out some strange results from Darmouth such as Mississippi having the highest spending despite its general deficit of medical specialists. Another question about the 30% hypothesis is that it is based on Medicare claims rather than overall expenditure -- possibly not a descriptive sample. Although it did not receive much mention in the debate from Romney or even explicit mention from Obama, the veracity of this 30% hypothesis is crucial. It underlies much of current health policy thought, and is the ideological foundation of the weaker, spending-control aspects of Obamacare. It has led Baicker and Chandra to publish a paper with the famous statement that "regions with higher healthcare spending have lower healthcare quality" to which Cooper has responded, in contrast,  "more is more" in health spending, not less. We will see how it plays out. As a note, Cooper has a track record of success in the field of social prognostication: he predicted the coming physician shortage about a decade ago, recognized only recently by higher authorities.

Live Blogging the Debate: How do you do cut marginal tax raes without raising the deficit?

President Obama asks.

Romney, accusing Obama of chicanery, responds "I won't implement any tax break that adds to the deficit" because he will close deductibles and loopholes to make up the revenue.* Obama parries with "math, common sense, and history" saying you cannot cut taxes, increase spending and not add to the deficit (in a word, yes).

Dr. Lydgate would like to ask, why won't we just 1. cut taxes 2. add spending 3. and, you know, add to the deficit but he doesn't exactly have a seat at the table.

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*Romney's tax plan, in which he lowers taxes, and raises taxes, for a net wash, is an application of the bizarre conception common among economists that people will work more if they earn a slightly higher percent of earnings regardless of their overall wealth level (I think). This, of course, completely ignores the aggregate demand gap that at is the heart of our economic malaise that very much will be negatively impacted by closing loopholes.

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**A few minutes later, Romney goes on a strange speech against deficit spending in which he insists it is a moral issue, invokes the burden on our children (no mention of grand-children yet) and proposes a "Is this worth borrowing from China to pay for?" criteria for every federal government program, including PBS, something that has no basis in reality, but never mind that. Obama, of course, responds with his plan to cut spending and raise taxes to close the deficit.

 Will the entire night pass without anyone asking if cutting the deficit is an unquestionable necessity?


Tuesday, October 2, 2012

Don't look to Romney to Criticize Obama for Pro-Wall St. Politics

This is a very good column in Reuters looking at new book exposing Obama's TARP politices implemented by Geither. Unfortunately, little to no attention is being paid by the media to this story. Oncemore, Romeny, unsurprising for a PE alumni, is in favor of repealing Dodd-Frank rather than any meaning regulations. 

The author concludes with a discussion of BoA's Ken Lewis misleading share-holders on Merrill Lynch's value, and how the government is forcing the company to pay share-holders with its own assets: quite strange. 

Even more strange is the likelihood -- discussed at length in some accounts of that insane time -- that the government in fact forced Lewis to go through with BoA shotgun-wedding after he tried to back out upon realizing the true extent of Merrill's peril. If that was the case, the government is forcing BoA to pay its own assets out to shareholders for actions that it they originally inappropriately forced.  Everything comes full circle, I suppose.  

Sources of Demand Leakage: Student Loan Debt

Why do we have persistently elevated unemployment? I would say it is due to debt overhang mostly, over structural issues or Casey Mulligan's all too serious assertion in The Redistribution Recession that government handouts are to blame. Student loan-debt is just one facet of this, but an increasingly important one.

This Pragmatic Capitalism post demonstrates that the gap between tuition costs for college and disposable income is higher and growing.

What are the macro-economic implication of this rising student loan debt? On the margin, it seems that people in early adulthood are being forced to reduce or forego consumption to handle monthly payments in the hundreds of dollars. Consider the following:


"Those without a monthly student loan payment bought new and used vehicles at about the same frequency. But the likelihood of buying a new vehicle, rather than a used vehicle, was influenced by student loan payments. Fifty-two percent of those in the Wisconsin survey who had never had a student loan were likely to buy a new vehicle, rather than a used vehicle, compared with 32.8% who were paying a student loan."
(see here)
These couple hundreds of dollars a month for young people starting families -- on a case by case basis insignificant, but taken as a whole, a huge total -- likely dramatically reduces their marginal disposable income. 

Consequently, they not only reduce consumption but also save more of their remaining income able: both problems. The first hurts present demand, obviously, while the second is also a problem, as young peoples' inability to accumulate savings will lesson the market for future investments such as homes, as few will have the requistie down payments. 

Boomer generations blase about our student-loan debt problem may be more interested if they know that it will impact the ability of younger families to buy their current homes at acceptable prices when they decide to retire in the not too distant future. 

Sunday, September 30, 2012

McCain-Palin, Obama, and Romney: Considering the Working-Class Vote



I have been somewhat critical of Republicans in the early history of this blog, so it may seem natural that I am an Obama voter.

Actually, however, I voted for McCain in 2008, despite my low estimation of his conservative principles, and my long-hold disgust with his tendency toward geopolitical war-mongering with Russia and other allies.

Why?

My vote, counted in a state with little chance of a Republican victory, was cast out of a desire to express solidarity with Palin and her broader constituency (outlined nicely in an Ape Man at Ethereal Land post, himself a member of working class rural America albeit one with an extensive knowledge of Spinoza). Indeed, I felt nothing but contempt for bigoted lynching of Palin’s personal life and depiction of her as too stupid for office (as a disclosure I have significant family connections with Alaska).


As Palin’s national career has progressed, it has become clear that she is not a great candidate for political leadership, probably because she seems to prefer a normal life to one in pursuit of power. However, I am continually distraught by the classist assumption that if one comes from a rural, non-rich background, or lacks an elite pedigree or talks in a way deviating from classic or upper-class American normalcy (more Minnesotan than Alaskan in Palin’s case), than one is unfit for office. Indeed, Palin, far from the dunce portrayed by the drama major Tina Fey, has a talent for speech delivery matching or exceeding that of Obama.

The reaction of a certain strand of American life to Palin, omnipresent in the media but not the public writ large or even Blue States, who have their fair share of non-educated working class whites, revealed that hate-fueled class discrimination against the white rural working-class is alive and well in 21st century America, so much so that someone identifying with this class will be painted as a troglodyte. A popular Facebook group of the time, populated with clueless high-school and college students without any leadership experience, stated “I [the member] have more foreign policy experience than Sarah Palin.” This clearly begs the unarticulated questions: What does that mean about Obama’s limited international experience – is he to be instructed by the bumbling Biden? What about Clinton’s foreign policy record before the presidency? Is no governor qualified for the presidency? I was most distraught about the episode because it revealed that our elites’ fantasy is to transform American democracy into a mirror of rigid European class hierarchy, in which only the intelligentsia is allowed to be considered for power.

However, in opposite to the disillusioned 2008 Obama supporter, I am probably going to vote for the incumbent this time around, despite the rather dismal economic track record of the past four years.

Why?

Romney has clearly been an elite since birth, and doesn’t even have the sense to mask it with a false persona like George W. Bush did. He made his fortune in the most blue-blood, insider of all American industries, the indefensible private-equity cabal. It seems he has nothing but contempt for the white, working poor who indeed make up much of the 47% he derides. If you get into policy specifics – difficult as he is so vague it is hard to pin him down – it seems that, like Obama, he derives his views from a cadre of elite academic advisors that are, if possible, even more misguided than their liberal counterparts. One only has to read Glen Hubbard’s partner blog – Romney’s key economic advisor -- to see pure deficit hysteria in action: http://balanceofeconomics.com/ I fear for the country if these men take Geither’s seat at the table, and I am no fan of Geither.

In contrast, Obama has an interesting relationship with the white, working poor, as Ape-Man notes, in that it is rare for someone with a Harvard degree to attempt to see more than irrational stupidity as driving conservative values among the white-working class (see What’s the Matter with Kansas for this). His famous “guns and religion” quote, if examined closely in context, was actually an attempt to prompt Bay area elitists to sympathize with the rural, white poor voter whose economic condition has been decimated by the fall of US manufacturing. Indeed, where the San Francisco audience he was speaking to likely saw (and sees) rural white Ohio voters as hopeless rubes swindled by Republicans, Obama correctly identifies the lack of economic help from either party that causes them to choose values as an election decision criteria. Indeed, I think the following paragraphs from his defense of this quote are worth quoting at length:

“But I will never walk away from the larger point that I was trying to make. For the last several decades, people in small towns and cities and rural areas all across this country have seen globalization change the rules of the game on them. When I began my career as an organizer on the South Side of Chicago, I saw what happens when the local steel mill shuts its doors and moves overseas. You don't just lose the jobs in the mill, you start losing jobs and businesses throughout the community. The streets are emptier. The schools suffer.

I saw it during my campaign for the Senate in Illinois when I'd talk to union guys who had worked at the local Maytag plant for twenty, thirty years before being laid off at fifty-five years old when it picked up and moved to Mexico; and they had no idea what they're going to do without the paycheck or the pension that they counted on. One man didn't even know if he'd be able to afford the liver transplant his son needed now that his health care was gone.

I've heard these stories almost every day during this campaign, whether it was in Iowa or Ohio or Pennsylvania. And the people I've met have also told me that every year, in every election, politicians come to their towns, and they tell them what they want to hear, and they make big promises, and then they go back to Washington when the campaign's over, and nothing changes. There's no plan to address the downside of globalization. We don't do anything about the skyrocketing cost of health care or college or those disappearing pensions. Instead of fighting to replace jobs that aren't coming back, Washington ends up fighting over the latest distraction of the week.

And after years and years and years of this, a lot of people in this country have become cynical about what government can do to improve their lives. They are angry and frustrated with their leaders for not listening to them; for not fighting for them; for not always telling them the truth. And yes, they are bitter about that.”

Here, Obama identifies what’s lost in utility-maximization arguments in support of free-trade: a job or employer in a community can produce much greater psychological value than even raising absolute levels of consumption (seen in endless bundles of cheap, purposeless goods and services available at Wal-mart, affordable even for those on unemployment or inadequately employed.) We nearly all may be richer in real terms in America thanks to globalization, but, as Obama emphasizes, communities and personal experience nonetheless can degrade significantly without employment (and mass unemployment since 2008 has only heightened this critique).

So what did Obama do to confront the Great Recession, which has further decimated rural income, job numbers, and migration to the city? Did he change the Washington equation? Not as far as I can see. In 2009, he imported Summers and Geither as his economic team, who promptly increased the bailout of Wall St. covertly, further enriching insiders through the PPIP (http://en.wikipedia.org/wiki/Public-Private_Investment_Program) – after all, we must save the banks to save the economy! They have done little to nothing that I am aware of to counteract globalization, and their central legislation was a mostly useless stimulus package that targeted income through slow, shovel-ready projects to government insiders while giving a pittance of support to indebted working-class families.

Now, you could argue that the Affordable Care Act is Obama’s one contribution to working-class America, with its expansion of Medicaid and provision of premium subsidies to lower income workers. If you take a look at it though, the touted subsidies will still not be very high for what are really fairly low income brackets.

Say for example I am a single adult earning $30,000 in income annually in a medium cost region. My premium will be $6,978 of which the government will cover $4470; the remaining total will still eat up ~8.4% of annual income. To put this in perspective, if my salary was $200,000 this would be an almost $17,000 single coverage premium in terms of equivalent percent of income.

Moreover, the provisions to combat medical inflation among private plans are mild at best, more likely toothless and fanciful in practice as they rely on curbing the 30% of wasted medical care spending perhaps proved by the Dartmouth (but with considerable questions). While 30% may be wasted, I do not see anything in the ACA to transform American healthcare to a well-oiled machine through use of HMO like Accountable Care Organizations alone. I only see medical inflation cooling if continual income falling prompts less health spending.

So in some ways the law only codifies and extends what will likely be an increasing private insurance healthcare burden on lower-wage American workers. The key flaw underlying flaw in the ACA is that it was explicitly crafted to be “budget neutral” over a ten year stretch thanks to an antiquated, gold-standard notions of government solvency. Unfortunately, now that Robert’s decision has opened up the door for states to decide whether to expand Medicaid to poor childless adults, we will likely see a truly unfortunate system in which childless adults in some states who earn under 133% of the federal poverty line will not qualify for any healthcare support while those 133-400% will.

Thus, despite trying to understand poor white America, Obama has done little to help them, aside from “Obamcare” which promises mixed results, although I suppose it is a game-changer in ways both good and bad. However, where Obama has only paid lip-service to deficit reduction, Romeny’s economic team seems fully bought into a reducing deficits, increasing prosperity mindset, so I think he is likely to be more harmful for the economy if elected, even if does not have the legislative support to repeal Obamacare, “reform” Medicare, or other plans. (Interestingly, he also seems lack no temerity in exploiting Obamacare antipathy among the public, strange given his pioneering efforts in Massachusetts. I suppose this calls his character into question.)

In the end, I will likely vote for Obama after snubbing him in the historic 2008 election. I sometimes wonder if he ever gives thoughts to fielding heterodox policy prescriptions in search of a solution to solve our mass unemployment problem, magnified in the youth and minority constitutes who make up much of his constituency. Or perhaps his presidential stature has removed him completely from the problem at hand. It will be interesting to see what happens to his first-term caution if he wins lame-duck status.

Thursday, September 27, 2012

Why would Qatar, a monarchy, hope to drive an autocratic regime change in Syria? And why might the US agree with a Muslim Brotherhood ME?

Unfortunately, reading The New York Times will leave you clueless. Fortunately, Pepe Escobar has an excellent column at  The Asia Times explaining the various actors motivations.

As for the US and its position in the great game, it would be comic how democratic Iraq has served to solidify the Shiite axis with Syria and Iran we now identify as enemy number one if so many lives weren't lost in the process. Until we call for regime change in similarly autocratic Saudia Arabia or Qatar, of course, our attempts to paint support of Syrian rebels as supporting idealist democrats continues to be laughable.