To a person who is not a professional economist, it can seem difficult to understand why economists can have such disparate views on economic policy issues. Part of the explanation for these apparent differences in professional opinion is that some economists are willing to sweep aside the implications of economic theory when theory leads to policy conclusions that the economist dislikes. A recent newspaper article (War on the Poor) illustrates this behavior by some economists.
Alan S. Blinder is a distinguished economist at Princeton University who specializes in macroeconomics. He has produced a substantial body of influential research in his academic career. He also served as a member of the Board of Governors of the Federal Reserve System. He recently published an article discussing what he called a “war” on the poor being waged by the government. This is provocative stuff and he lists a number of policy issues which he believes are illustrative of this so-called war. Here is a revealing quote from this article. Read more…
New York City just elected a new mayor who has expressed skepticism about the Stop-and-Frisk policy of the New York City Police Department. There has been some press reporting of this situation and I thought it might be instructive to gather some data just to see what the data might reveal about the Stop-and Frisk policy.
One of the truly amazing innovations brought by the internet to economists with empirical interests is how easy it is to gather data. After a one minute Google search, I found the FBI web site (www.fbi.gov) providing data on U.S. crime rates. Their data collection program, Uniform Crime Reports, contains data on crime rates by city among other things and so I downloaded murder rate statistics for New York City.
One last piece of data was needed for our analysis and that is the date when Stop-and-Frisk was started. Another great innovation, Wikipedia, provides the answer. An article there states that the program started under Mayor David Dinkins during the 1990-1993 time period. With this last piece of data, we can now see what the data might reveal about the effectiveness of the Stop-and-Frisk program. Read more…
President Obama now finds himself in the kind of mess that central planning creates. The web site fiasco is just the beginning of the problems that result when politicians try to micromanage a complex healthcare sector. The President is now playing “whack-a-mole” as he attempts to fix the problems caused by the Affordable Care Act but each “fix” creates another problem. For example, health insurance prices may need to be adjusted upward if people are permitted to keep their existing insurance policies resulting in riskier individuals buying insurance in the exchanges. As argued in a recent paper, true reform of the healthcare system requires changing laws at the federal, state, and possibly local levels to permit markets to function as they do elsewhere in the economy.
John Cochrane is an economist at the University of Chicago who has written an article (see After the Affordable Care Act) discussing how difficult, but desirable, it would be to reform our healthcare system. Here is a summary of his main point (see page 2) regarding the absence of well-functioning healthcare markets.
Such markets do not emerge, not because of deep-seated market failures, but because our current web of health care regulation forbid them from doing so. But deregulation is not easy. The impediments to well-functioning health care and insurance markets go deep in to federal, state and local law, regulation, and practice. And the pieces are linked: Greater competition, innovation and entry by suppliers, greater control by consumers, and insurance innovations that cure the current mess each need the others in order to function.
Clearly he argues that government policy prevents the formation of markets. As an example, I pointed out in an earlier post that Medicare prevents advertising of prices which is a feature of any competitive market system. So one must conclude that true reform is difficult to carry out, no matter how desirable, because so many government policies need to be changed.
This paper is a highly-recommended read and is nontechnical in nature so it is appropriate to non-economists wanting an economist’s views on this subject.
Accountability requires that something bad must happen to an employee who is incompetent. That unpleasant event is usually being fired for nonperformance. As far as I know, Kathleen Sebelius did not get demoted, she did not take a pay cut, and she did not get fired. If Sebelius wasn’t fired, that must mean she is doing her job well and that job must not include creating a usable web site for Obamacare. Imagine that this fiasco happened to Amazon or Google. People would have been fired on day one. As far as I know, nobody experienced any damage to their careers as a result of this web site mess. Thus one can only conclude that there is no accountability at all but, to the politicians making the mess, it sure seems like a good talking point to pretend that they are accountable.
This seems to be the standard operating procedure for the Obama Administration. They talk but they don’t act. Maybe somebody should tell the President that we expect him to act. Want to know why government is so incompetent? Lack of accountability is part of the answer.
Some time ago, I read a claim that it was quite easy to evade the Obamacare fines. I stumbled upon a news article (read it here) that confirms this claim. To avoid the fines, just make sure that you don’t get a refund from the IRS.
It appears that Obamacare instructs the IRS to deduct fines from any refunds owed to taxpayers. If there is no refund, then what? Well it appears that the IRS will just carry over the bill until the next tax return is filed, collecting the fine at that time. But if there is never a refund, the only recourse is for the IRS to ask the Department of Justice to sue taxpayers for the fines. Think about this. How entertaining would it be to see high-priced U.S. attorneys trooping into what amounts to a small claims court trying to get taxpayers to pay a $95 fine? This would be hilarious to see. I think I’d pay money to see this show!
Obviously this enforcement scheme has no teeth. Why would politicians do this? The only answer that I can imagine is that, after deceiving taxpayers by promising that the IRS would not be involved with Obamacare and because of the lack of public support for this so-called health care reform, Democratic politicians probably tried to avoid making taxpayers any more hostile to the law than they already were. The result may be that the whole Obamacare system collapses when people ignore the fines and only buy insurance when they are sick. Ironically, if this happens, there may be more people without insurance than there were before Obamacare was passed.
Obamacare really is the gift that keeps on giving. If there was ever a program illustrating the profound incompetence of politicians, this is it. I hope that this lesson is not lost on the public and never forgotten.
The Affordable Care Act (AFA) is a stunning example of just how destructive a government can be when it chooses to play central planner of markets. Here is a partial list of the wreckage caused by Obamacare.
1. Layoffs of workers in the medical device industry due to the tax on medical devices in the AFA.
2. Hours reductions have been imposed on part-time workers so that employers can avoid the requirement to provide health insurance.
3. Staggering price increases in the price of health insurance.
4. Millions of individuals losing their health insurance policies cancelled as a result of the AFA.
5. Individuals are often being forced to buy coverage that makes no sense. Do people in their fifty’s really need maternity coverage?
It is hard to think of any other legislation that has wreaked havoc on this scale. Unfortunately, the worst damage is yet to come. Obamacare may destroy the private health insurance market altogether. Read more…
Niall Ferguson is an historian at Harvard University. I just finished reading his book, entitled The Great Degeneration. I highly recommend this book but I should warn readers that it is not a happy read. The book attempts, in a scholarly way, to document the events that can lead to the decline of a society. Reading this book leads to the inescapable conclusion that the U.S. is in decline since many of the causes of decline listed by Niall Ferguson can easily be seen in the U.S. I can’t mention all of the issues discussed in this book but there is one that I want to highlight here and that is the decline in the rule of law.
Economists are aware that one crucial role of government is the enforcement of a legal system. There can be no wealth creation in a capitalistic society if property rights are not enforced and, for this and other reasons, we need a government to implement and enforce the laws on the books. Ferguson mentions that we are now seeing laws that are sloppily written and enormously complex so that the implications of such laws are unknown to the very politicians who pass them. The Affordable Care Act is a law whose details were not known at the time of passage and a recent court case underscores this problem of sloppy construction. Read more…