Thursday, August 26, 2010

Smaller Government I Can Believe In

There's another good article in the NY Times about efforts to downsize the number of generals and admirals in the military.  This leads me to a few thoughts.

First the government needs to do this throughout the bureaucracy.  Top heavy bureaucracy has been a problem for years and trimming needs to be done not just in the armed forces but in the federal, state, and likely (though this I'm less sure of) municipal levels.  We have too many high ranking people relative to lower level people.  This is not a natural distribution for an organization.

Second, we need to do this in a way that keeps career opportunities open.  There are problems with up or out systems that are present in some areas of the federal bureaucracy.  You don't want to get rid of someone with good skills just because there's no place, and you don't want to promote someone with specialized skills just because to keep them you need to move them up.  There should be ways to compensate people for needed skills without necessarily having a bureaucracy full of senior staff.

Last, we need better ways to reward people without having to promote them.  Paying people's salary isn't really that big a part of government expenses.  I have no problems with good pay, people doing hard work should get rewarded.  The problems are the high benefits down the line as well as not creating good career paths and new leadership lower down in the ranks which is made more difficult by top heavy organizations.  The focus should be on rank inflation, not on people's salary.

Can the State Create Effective Housing Policy When There is No Rational State Interest in Housing?

Economix pointed me to a good report on Fannie Mae and Freddie Mac.  I think the data is fairly clear.  Fannie and Freddie weren't causal, they didn't help matters, and the idea that the government should be encouraging home ownership is basically hare-brained.

More specifically, both organizations performed very poorly in their core business, not just when they got creative and went into exotica.  They lost money on pretty much everything.  As for the argument that Fannie and Freddy were behind the housing bubble, their market share declined from 80% in 2001 to a low of 46% in 2006.  While I'm sure someone that knows more than me about mortgages will probably be able to make a convoluted argument as to why this doesn't prove anything, I think it's pretty strong evidence that there were other problems that were more important.

There's lots of good stuff in the report and it's easy reading.  Lots of charts and bullet points.  I'd encourage you to take a look.  And let me know if you think government guarantees of mortgage is still a good idea after reading it.

Personally, I see no state interest in encouraging home ownership in the first place.  I understand that it's popular, but I can't get from any of the arguments to a convincing argument that there's a state role there.  I think this is important.  A very simple model of determining what the state should, and should not be, involved in is simply asking how does this intervention increase the prosperity of the state as a whole?  If you can't answer that, the state shouldn't be involved.  The reason simply being that if this question can't be answered there is no consistent guiding policy for the intervention between administrations and policy that lacks direction will simply waste resources.  The more a state's policies conform with an idea of what a state's interests are the more likely there will be coherent policy, leading to a more prosperous state and indirectly to more prosperous citizens.  Ignore this, and simply say a policy is for the good of the citizens, and resources are simply wasted.  This is an area it's unlikely that the state can effectively create consistent policy for.  Leave the market to do that.

Wednesday, August 25, 2010

A Positive Interfaith Message On a Subject That Has So Far Inspired Little but Acrimony

I'm sick of the topic of the mosque too.  Still, there's been so much negativity surrounding the issue that I was glad to see a positive message on the topic that makes no mention of the negativity.  I thought I'd share with those that haven't come across it independently.

Message from the New York State Council of Churches:

The New York State Council of Churches, which represents Protestant denominations with more than 6,000 congregations in New York State, released a statement today supporting the planned Community Center at 51 Park Place in Manhattan. The Council also voiced support of Imam Feisal Abdul Rauf, whom they characterize as “a religious leader allied with the best of both our traditions,” who has “repeatedly denounced Islamist terrorism and has admonished members of his congregation to be, both good Americans and good Muslims.”

The Council pointed to the planned Park51 Community Center as an opportunity for America to demonstrate to the world that it stands up for its principles of religious freedom.

Pointing out that those “seeking to build The Community Center at Park51 in lower Manhattan lost family members in the September 11th tragedy also,” the Council praised the project as “a tribute to the American way of life,” in that “those whose faith is often blamed for the sins of extremists that happen to claim the same religious label, wish to turn this place into one that is life-giving for the community. Bringing life to an area still physically and economically depressed by the events of nine years ago will show extremists that the spirit they sought to eradicate still thrives and that new vitality will grow here.”
[Hat Tip: Capitol Confidential]

Monday, August 23, 2010

More Data on How the Market Effects the Provision of Health Care

It should be no surprise to my readers that I continue to believe that the way the health care market is institutionalized in the US has real negative impacts on our health care.  The most recent piece of information is from the Prescriptions blog reporting on a study that found that:

Conclusion: The consistent finding of higher use rates by physician owners across time clearly suggests that financial incentives linked to ownership of either specialty hospitals or ambulatory surgery centers influence physicians’ practice patterns.

This is why we need care guidelines that dissociate the recommendations for procedures from the financial incentives of those that provide those procedures.  I'm not saying that physicians are intentionally recommending unnecessary surgeries, I believe the effect is more indirect.  Instead, I'm suggesting that the way the system, and the incentives, are set up will influence the beliefs of practicing physicians leading them to prescribe treatment differently than they would in another system.  This can't be fixed without systemic change.

Friday, August 20, 2010

Math and Locavorism

I always enjoy complaining about silly fads.  While I love a good farmer's market as much as anyone else the whole locavore food movement always struck me as quite batty.  Whenever I did look into actual numbers, it just ended up looking battier.  Today's NY Times had some particularly striking numbers on the phenomenon.

"The result has been all kinds of absurdities. For instance, it is sinful in New York City to buy a tomato grown in a California field because of the energy spent to truck it across the country; it is virtuous to buy one grown in a lavishly heated greenhouse in, say, the Hudson Valley."
"The real energy hog, it turns out, is not industrial agriculture at all, but you and me. Home preparation and storage account for 32 percent of all energy use in our food system, the largest component by far."
"Indeed, households make up for 22 percent of all the energy expenditures in the United States."

"Agriculture, on the other hand, accounts for just 2 percent of our nation’s energy usage..."
That's just a sampling.  Take some time to read the whole article, at least if you have any exposure to this phenomenon.  I'm fully supportive of someone who desires, and is willing to pay for a particular type of consumption, I feel entirely different when they put a moral dimension on it that is based on pseudo-science rather than actual evidence.  Enjoy what you like, but if you make specific claims about it, be able to back up what you say, not repeat nonsense about food miles.  Now, if what you really like is more variety and heirloom tomatoes I'm right behind you, just don't pretend it's saving oil.

Thursday, August 19, 2010

Are We Really Prepared to Prove the Extremists Right? Prove Them Wrong, Double That Aid to Pakistan.

There's another article on Pakistan and US security worries today.

While the administration has kept its public emphasis on the relief effort, senior officials are busy assessing the longer-term strategic impact. One official said the disaster would affect virtually every aspect of the relationship between the United States and Pakistan, and could have ripple effects on the war in Afghanistan and the broader American battle against Al Qaeda.
With Pakistan’s economy suffering a grievous blow, the administration could be forced to redirect parts of its $7.5 billion economic aid package for Pakistan to urgent needs like rebuilding bridges, rather than more ambitious goals like upgrading the rickety electricity grid.

Some security officials sound rather tone deaf:

“It certainly has security implications,” said another official who, like others interviewed for this article, spoke on the condition of anonymity because he was not authorized to discuss internal policy deliberations. “An army that is consumed by flood relief is not conducting counterinsurgency operations.” 

 Despite realizing the difficulties of the situation we remain sufficiently out of touch that we're bragging about low numbers:

On Thursday, the United Nations will convene a special meeting devoted to the floods, hoping to galvanize what has been a lackluster global response. Secretary of State Hillary Rodham Clinton is expected to announce that American public aid has surpassed $100 million, an official said.

 How many drone strikes does that buy?

There are some bright spots:

In recent days, the United States has sent 15 helicopters, rescuing nearly 6,000 people. On Wednesday, military cargo planes delivered 60,000 pounds of food and other relief supplies, bringing total deliveries to 717,000 pounds. The speed and scale of the effort, officials in both countries said, have helped bolster the checkered American image in Pakistan. 

But Pakistani officials can still be relied on to state the obvious:

“Americans have not yet registered the enormity of the crisis,” Pakistan’s ambassador to the United States, Husain Haqqani, said in a telephone interview from Islamabad, the capital. 

This problem has about the most obvious solution imaginable, double the aid spending, at least.  Doing this will save a multiple of that in security expenses down the road.  These people need help, without it they'll be desperate and turn where they can, in some cases undoubtedly to militant groups.  Much of the Islamic world has long been condemning us for being so willing to spend money on killing and comparatively so little on saving.  Are we really prepared to prove them right?

Wednesday, August 18, 2010

Faith and Politics and Obama

I don't want to get derailed on the many other issues brought up in this NY Times article.  The very last line struck a chord with me though and I believe it deserves reflection.

“I must say,” Mr. Caldwell said, “never in the history of modern-day presidential politics has a president confessed his faith in the Lord, and folks basically call him a liar.”

Since when do Americans deny any man's personal profession of faith?  We need to reflect on what it means to deny to another the ability to define for themselves what it is they believe.  How can it be valid for us to to deny what another expresses their faith to be and to then claim they believe something else, despite what they themselves claim?

Evidence in Favor of "Death Panels" Continues to Build

A NY Times article reports that a randomized clinical study of 151 patients with fast growing lung cancer found that palliative care led patients to opt for less aggressive treatment options, found that they reported fewer problems, and lived about 3 months longer.

A lot of political opinion makers should pat themselves on the back for making many patients more miserable and costing society a lot more in aggressive treatments by pushing the Death Panel meme and putting another nail in the coffin of America adopting evidence based medicine.  Way to go guys.

Tuesday, August 17, 2010

If We Ever Wanted to Do Something to Stop the Spread of Extremism Now is the Time to Act

I was just reading another article about the continued shortfalls in aid to Pakistan.  If basic human decency isn't enough to motivate us the opportunity to give aid in order to reduce the influence and counter the message of extremists should be enough.

What baffles me is that we can spend trillions on killing people and attempting to force them to conform to our expectations but when a situation arrives that gives us an opportunity to prove our good faith we can't muster the will to intervene on a grand scale.

[Edit: The Lede has a list of organizations accepting donations]
[Update: A more complete article is now available.  I really think we are making a major mistake in the US by not intervening much more heavily.  We could make up the entire aid shortfall on our own.  It would be well worth it.  Far more valuable than an equivalent amount of military spending at the very least.]

U.S. Role as Mortgage Backer Confirmed; I'm Not Surprised but I am Disappointed

The NY Times reports today that Geithner said that the government would continue to guarantee mortgage loans.  This was at the opening of a conference on housing.  I'm not at all surprised by this but I'm at a loss to point to any legitimate state interest in promoting home ownership.  The few areas of intervention necessary in this market could probably be achieved by some updated regulations.  Home ownership being such a big deal to so many it's probably inevitable that the state will do something but personally I don't see any firm evidence of market failures that are fixed by government guarantees or by promoting ownership through other policies.  Not that market failures don't exist in the mortgage market that require regulation but none of these are fixed by making mortgages easier to get.

[Update: An updated article has been posted to the NY Times that includes the rest of the conference.  This worries me:

Broader guarantees create greater risks for taxpayers, but also lower interest rates, bringing ownership within reach for more families.
Shaun Donovan, the housing secretary and a host of the conference with Mr. Geithner, said that the administration remained committed to “broad access to homeownership, including options for those families who have historically been shut out of these markets.”

I think it's very hard to not conclude after the recent crisis that we already pushed homeownership farther than was realistic.  Trying to expand it past where it is now is the opposite of the direction I'd like to see us going.  Some of the others topics seem sensible, such as trying to reduce government exposure to systemic risk factors but as long as increasing homeownership rates is an explicit policy goal there's a problem.  Sooner or later we need to say we've done what we can and pat ourselves on the back for a job well done.  Having a goal of always increasing ownership rates and opening new markets is not a sensible policy goal.]

Important Details Not Being Reported: Is Feisal Abdul Rauf a Sufi?

While I haven't been following the Manhattan Mosque story very closely I was rather surprised to stumble across an extremely important detail that I hadn't heard yet.  According to an op-ed in the NY Times today, "Feisal Abdul Rauf of the Codoba Initiative is one of America's leading thinkers of Sufism."  Now, I couldn't confirm this in 10 minutes on Google, Sufism is a more generic term applied to mystical Islam so it isn't easy to identify without going into some detail with an individual's writings, but if this is true this is a very important detail that the news media has largely left out.  I had been led to believe from previous news reports that Imam Rauf was a moderate but fully mainstream, not a Sufi.  His being a Sufi makes the entire controversy even more absurd, Sufism is pretty much as far away from Islamic fundamentalism as you can get. 

This just goes to show how thoroughly ignorant most Americans, even educated ones, are about Islam.  This is a rather critical detail in understanding the issue and the form of Islam being practiced.  That it has hardly been mentioned at all, and that virtually all the reporting seems to be written as if the Cordoba Initiative was a mainstream Sunni organization, tells us a lot about the negligence on the part of the media.

Monday, August 16, 2010

Denmark's Unemployment Benefits

There's a very interesting article in the NY Times on Danish unemployment benefits. Generally, I like the Danish "flexisecurity" model, which provides a strong safety net while still allowing a great deal of freedom to employers to hire and fire. There is a bit of an issue with the problem of make work jobs but that isn't so bad compared to other alternatives. Looking at the numbers, Danish unemployment* looks good and labor force participation seems high, though I couldn't get a good series of numbers on it all in one place.

The Economix blog extends on the original article with some additional information on the length of unemployment. The issue stated here seems to be a very common one for many government policies. Benefits are paid in an all or nothing matter, if you're eligible you do what you're supposed to do and you get a fixed rate of benefits. This results in what anyone would expect, those easily employable get jobs quickly, the rest pretty much stay in the program till benefits expire since they're not willing to settle for a worse job (of course, it's a little different if there's a severe recession since many of those fully employable will not be able to find work, the data in the Economix post isn't for the current sharp recession though). This is quite a common problem, programs are set up so you either qualify, or you don't.

Fixing this incentive problem actually seems pretty easy in the modern digital age. Why not simply have benefits reduce gradually rather than having sharp cut-offs? It would be possible to have checks decrease 1% a month, or depending on what those with greater knowledge of the relevant policies think is preferable a more complex formula could be used, perhaps with a grace period but with sharper benefit drops every four or six months. This would provide strong incentives to find work since benefits are decreasing the longer one remains on benefits but would still provide a strong cushion to the negative effects of unemployment. I'm always surprised that government hasn't caught up with simple solutions like this, it wouldn't have been possible 30 years ago but by now surely all of this is managed electronically, these are simply changes a computer could easily handle.

While I'm on the topic, I'd like this kind of logic to be applied to just about every government program. Rather than all or nothing eligibility requirements make a smooth sliding benefit scale so benefits are gradually, rather than sharply, reduced. Same on the tax side, make it smoothly progressive rather than choppy with large jumps between brackets. It's a simple, logical fix that reduces many of the incentives causing problems with current systems.

Picture Credit: Trading Economics

Can't Say I'm Surprised: Interest Rates Fall Even Further

The NY Times has a decent overview of fears related to recent bad economic data. Now I don't think too much should be read into this, it's a short spike in bad data and who knows what next month will bring. This may prove to be just a blip.

That said, I think from the outset of the crisis things were handled badly, especially in the US. Somehow the "responsible" thing to do came to be framed as undershooting estimates because it was seen as more "responsible" to do too little in case things turned out not to be as bad as feared. If we did too much than we'd be left with huge debt either way, if we did too little than if things turned out well we'd have less debt. Didn't make sense to me from day one.

Of course, even given these screwy incentives things may not have turned out so bad; our stimulus program probably could have been fairly effective if targeted correctly, even if it was somewhat too small. The Republicans deserve a huge black eye for the poor targeting of stimulus, while the Democrats weren't exactly paragons of responsiblity it was the Republicans demanding that as much of the stimulus as possible consist of tax cuts, which everyone at the time was saying would be the least effective form of expenditure. They successfully framed the debate in a way that secured this objective even while largely voting against the plan, insuring they would get their way while not even reaping what they sowed through being blamed for failure of the stimulus plan. Brilliant campaigning, though for what it's worth I'm sure history books will judge them harshly.

Internationally, the outlook also didn't look great for the long term. Europe had many automatic stabilizers in place which fulfilled the same function that much of the US stimulus did (significant portions of the stimulus took the form of unemployment benefits and other policies that required no special authorization in Europe). However, they still had large problems with their banks, which weren't exactly handled with grace, and didn't have a particularly encouraging method of dealing with sovereign debt problems and other issues involving coordination within the EU. Export led growth on the part of some EU countries also had a bit of beggar thy neighbor feel, in a global crisis the main issue is getting the world out of a slump, trying to simply maintain your growth during the slump is an ultimately futile delaying tactic. An autarkic policy only makes sense if the rest of the world can pull itself out otherwise you get a temporary surge and sink back with the rest as the downturn continues.

This issue afflicted Chinese policy to some degree as well. Being a low cost competitor meant that what demand existed would shift in favor of China, combined with a very large and well targeted stimulus the Chinese have continued to do quite well through most of the downturn. There are however many recent reports showing at least some strain on the Chinese economy. From what I gather the Chinese policy failed in what it really needed to do to continue growing in a worldwide slump, shift more of its production to meet internal needs and increase consumer demand, both for domestic and foreign products. There is of course only so much government policy can do to achieve this but given the depth of the slump the Chinese government would have been wise to focus less on export led growth.

Of course, while there is plenty of blame to go around for mistakes made, this leaves the question of what to do now. This is much harder, the opportunity for effective policy is past so we're left with bad options. I personally favor a long run investment plan in infrastructure, including such goods as more mass transit, a smart grid, and a standardized electronic health infrastructure paired with long term revenue and expenditure reforms, namely a health care cost reform bill to put back in and add new cost reforms left out in the ACA, pollution taxes, defense cuts, and tax reform to streamline and rationalize the tax code. Just for kicks, lets throw in getting rid of mandated free parking. This isn't immediate stimulus, I think the time for that has passed, but instead long term reforms aimed at restoring confidence in the long term prospects for the economy (I don't buy the argument that long term confidence is a synonym for low taxes, real people need more well thought out plans that provide tangible ways forward).

Back to the NY Times article, I think the biggest flaw isn't so much in how we responded to the downturn, there was a lot of uncertainty so mistakes were inevitable, it's how we responded to the relatively good times of the decade before, though even then growth was historically slow hinting at unaddressed problems. This quote from the article is something I entirely agree with:

The I.M.F. has often prescribed austerity for countries in trouble, but last week two senior officials of the fund sought to slow the push for spending reductions in major economies. They challenged the perception that national budgets are in trouble because of the bailouts and fiscal stimulus programs that were enacted to combat the financial crisis.

“Today’s debt problems,” wrote Olivier J. Blanchard, the chief economist, and Carlo Cottarelli, the fund’s head of fiscal affairs, in an essay published in The Financial Times, “result not from how fiscal policy was managed during the crisis, but from how it was mismanaged before the crisis.”

Countries, they said, should have built up savings when times were good. The two officials argued for restraint in imposing austerity programs now, advocating the adoption of fiscal reforms that will have their largest impact in later years.

Something else I disagree with a bit:

Economics is a notoriously uncertain discipline. It is possible that a surprisingly strong employment report, or some other unanticipated event, could begin to disperse the fog of economic pessimism that has engulfed investors and sent interest rates to record lows.

Economics isn't nearly as uncertain as it's made out to be. I think it's more accurately described as being quite certain on a number of politically inconvenient ideas and very uncertain about a number of politically convenient ones. In many cases, it's also usually a small number of hold outs from schools of thought marginal to the discipline as whole that are dissenting in favor of a politically convenient set of concepts while the majority of the discipline is saying hogwash to those notions.

Yet More Evidence Tough Policies Don't Work

Stumbled across this article on Portugal's decriminalization program. According to the article, rates of heroin addiction as well as HIV infection have plummeted since possession was decriminalized. This matches well with what I've been hearing in other places, as we accumulate evidence we increasingly find that outright regulation almost always works poorly. It's more effective to focus on focusing on the actual problems caused by "bad" behaviors rather than focusing directly on these behaviors. Drug treatment and counseling works, heavy punishment doesn't. This can be extended to many different fields, not just narcotics enforcement.

One of these days I'll have to do more direct research on this particular subject, I'm curious what the UN reports are saying.

Sunday, August 15, 2010

A Massive Economic Distortion Caused By the Government: Free Parking

I may occasionally give the impression to my readers that I tend to favor pro-government policies.  In general it would be more accurate to say that I believe that government plays an essential role when it comes to social change, it both cushions the cost of change to the losers and provides the institutional framework necessary for change to happen at all.  Without government intervention, I believe the most likely case is generally stagnation. 

By contrast, I am extremely hostile to government intervention that favors the status quo.  I believe there are very significant institutional, economic, and cultural forces that favor inertia, we're doing the same thing today that we did yesterday and will continue doing it tomorrow without the intervention of some kind of outside force.  This is why government intervention is entirely unnecessary to preserve existing arrangements.  Other social forces are far more effective at preserving ways of doing things that are of value than government is, making government intervention unnecessary and a complete waste in these situations.  Of course, when existing arrangements begin to decay there is often pressure for the government to intervene to preserve them, which is a complete waste of resources since government is a very weak force in comparison to social, cultural, and economic inertia.

Of course, for rather obvious reasons the news is almost entirely about change and almost never about the status quo.  This results in a strong bias in favor of writing about newsworthy events that I favor intervention compared to ones where I think government functions solely as a wasteful parasite.  Which is why I'm rather happy to have an article to write about where I do think government is very clearly the problem.

I've written about the evils of free parking before, Tyler Cowen has a great article in today's NY Times that provides some hard numbers on the subject.  I can't say more than that I am in very powerful agreement with this.  More generally, I feel that one of the big challenges facing our country in regards to both oil shortages and pollution is how to direct the costs of adjustment more towards those that have the opportunity to make changes than those that will be forced to simply eat the costs of adjustment as a dead-weight welfare loss.  In the case of automobiles this is pretty easily conceived of as a mostly urban-rural divide, with the suburbs falling in between.

I encourage you to read the full article, to wet your appetite below are some of the key passages:

After discussing how zoning rules and mandates require developers to also build a certain number of parking spaces attached to a development Cowen claims:

Under a more sensible policy, a parking space that is currently free could cost at least $100 a month — and maybe much more — in many American cities and suburbs. At the bottom end of that estimate, if a commuter drives to work 20 days a month, current parking policy offers a subsidy of $5 a day — which is more than the gas and wear-and-tear costs of many round-trip commutes. In essence, the parking subsidy outweighs many of the other costs of driving, including the gasoline tax

These mandates also conceal the value of the land being built to park vehicles on.  This creates very significant distortions in land use and represents very significant losses to society by not allowing the market to function in these cases:

Many parking spaces are extremely valuable, even if that’s not reflected in current market prices. In fact, Professor Shoup estimates that many American parking spaces have a higher economic value than the cars sitting in them. For instance, after including construction and land costs, he measures the value of a Los Angeles parking space at over $31,000 — much more than the worth of many cars, especially when considering their rapid depreciation. If we don’t give away cars, why give away parking spaces?
Yet 99 percent of all automobile trips in the United States end in a free parking space, rather than a parking space with a market price. In his book, Professor Shoup estimated that the value of the free-parking subsidy to cars was at least $127 billion in 2002, and possibly much more.

I encourage you to read the full article, this is big government I don't believe in, that's $127 billion that could be put to much better use.  This is just one of many areas where I greatly desire to shrink government, too often our government is big and intrusive in areas where it has no function and imposes great costs on society, this is probably far more common than the areas that it needs to step into.  However, political debates being what they are, almost all the dialogue is over areas where I feel government needs to have a bigger role than it does have, there is too little discussion of the areas where the state clearly needs to shrink.

Friday, August 13, 2010

Obama Authorizes Dumping of Additional $600 Million Into Money Hole

Given the complete and total failure of increasing border control spending from $1 billion to $3.5 billion to make the flow of Mexican immigrants to the US dependent on anything but economic factors, Obama opts to build upon success and dump an additional $600 million into America's Giant Money Hole further confirming America's obsession with supporting failure at any cost rather than changing course.

If you can't tell, I'm completely fed up with policies that continue based solely on emotional factors without any particular grounding in actual reality.  We need to stop this madness.

The One Reform America Needs

I feel particularly snarky today.  America needs just one reform to return to insure its greatness for all time and that is to regard something not working as an argument to end it in favor of a different tactic instead of an argument to do more of the same.

This is a bipartisan policy flaw.  On any number of policies such as immigration, the drug war, health reform, taxes, crime, home ownership, clean energy subsidies, some components of the stimulus plan, financial deregulation, and even oil production it seems that the abject failure of the popular policy to reach the objectives that led to it initially being adopted becomes not an argument to abandon the failed policy but instead an argument that we need to embrace more of it.

I don't have a strong explanation for this tendency.  Best I have is that proponents of a failed policy see the negative data coming in and early on seek to associate failed policies with the American way making the continuation of the policy an end rather than a means to whatever the original end was.

I'm open to other suggestions but I'm sincerely afraid that this dynamic has become the dominant one in American policy making.

Some Explorations of Why the Health Care Market Doesn't Work

There's been a recent series on the Economix blog in the NY Times on some failings of the market in regards to health care.  I disagree with one of the central premises here, I don't think that a moral dimension needs to be introduced to explain the market or its failing.  Though in this recent post it seems to be partially explaining why it works at all as a private market, this seems more plausible to me.  In any case, I think market failure is inevitable due to how the market is set up.  Economix lists a few of these reasons in rather more detail than I'd be able to:

First, physicians may not agree on the medical condition causing the symptoms the patient presents.

Second, even if physicians agree in their diagnoses, they often do not agree on the efficacy of alternative responses — for example, surgery or medical management for lower-back pain.

Third, information on both the diagnosis of and the likely consequences of treatment are asymmetrically allocated between the sell-side (providers) and the buy-side (patients) of the health care market. The very reason that patients seek advice and treatment from physicians in the first place is that they expect physicians to have vastly superior knowledge about the proper diagnosis and efficacy of treatment. That makes the market for medical care deviate significantly from the benchmark of perfect competition, in which buyers and sellers would be equally well informed.

Economix goes on to explain these premises in more detail and how the situation has changed, or hasn't over the years.  It's a post well worth reading.

Thursday, August 12, 2010

One Compelling Example of Health Care Reform

Good NY Times article on some of the problems with China's hospitals.  I've done some academic reading on the subject as well, one thing I found remarkable is how quickly China developed some problems with its health care system that are very like some problems facing the US but that aren't faced by countries that have universal health care.  There are a lot of very obvious reasons why China isn't a good choice for comparison, even in a single sector, but the independent development of problems such as over-treatment and over-investment of capital intensive medical goods adds to my belief that there are systemic issues that prevent any non-universal health care system from operating efficiently.  Of course, I don't believe outcomes nearly as bad as China's are possible under any institutional reform imaginable in the US but the case does present a warning.  I'll quote the most relevant passages below, I'd encourage you to read the full article.

Doctors and nurses say the strains in the relations between them and patients’ relatives are often the result of unrealistic expectations by poor families who, having traveled far and exhausted their savings on care, expect medical miracles.
But the violence also reflects much wider discontent with China’s public health care system. Although the government, under Communist leadership, once offered rudimentary health care at nominal prices, it pulled back in the 1990s, leaving hospitals largely to fend for themselves in the new market economy.
By 2000, the World Health Organization ranked China’s health system as one of the world’s most inequitable, 188th among 191 nations. Nearly two of every five sick people went untreated. Only one in 10 had health insurance.
The article also relates some fairly dramatic results once the state realized just how bad outcomes were and decided to intervene again.  There's still a very long way to go for China before their system is comparable in quality to ours but its worth questioning if some of the mechanisms that led to problems in China would be present here if we tried to privatize even more of the system.

Good Op-Ed on Fannie and Freddy

This is one of the subjects I tend to be in full agreement with the Cato Institute on.   William Poole is arguing for the eventual closure of Fannie and Freddie because the mortgage market can stand on its own without help and that Fannie and Freddie were structure in a way that is fundamentally inefficient.

What I do take a little issue with is this:

In principle, it ought to be possible for government financial agencies to be self-supporting. But decades of observation have convinced me that there is no practical way to prevent the government from inserting hidden subsidies and special interest mandates into the agencies’ operations. If there are to be more federal housing subsidies — and I hope there are not — they should be legislated transparently.
There's a couple of things that can be drawn out here.  First, it does seem quite plausible that the government doesn't do a great job handling financial agencies and it shouldn't be involved.  I'd also add that neither does the private sector.*

More generally however, I question whether the problem is the nature of the activity and how badly lacking the legislation was rather than some general rule about government failure in these institutions.  First, housing is not investment, it doesn't produce anything.  While land can appreciate it's really distinct from capital or labor and does not actually produce anything, it's only value comes from scarcity.  The government should get out of the business of subsidizing any form of land ownership, it's basically a zero sum game so nothing at all is gained through promoting ownership over renting, prices get driven up to no one's advantage.

Second, these are tradable assets and part of the problem lies there.  A financial agency instituted for different purposes may fare better.  I specifically have in mind a financial agency dedicated to student loan service.  Why farm this business out at all?  Of course, heavy oversight would be needed to prevent the abuses at Fannie and Freddie but a financial agency dedicated solely to managing loans at strictly regulated rates, with no mission to innovate, seems plausible enough to me.  Of course, I'd guess the Cato scholar may have something slightly different in mind with financial agency than I do, I certainly agree wholeheartedly we don't need something like Fannie and Freddie in any business.

* Historically authority has not always been divided solely between the state and the private sector, it isn't even strictly divided that way today.  I don't know how to reinstitute the financial sector into an institution governed by a regime distinctly different from either existing public or private norms however.  Examples of other institutional divisions of authority would be the medieval church, medieval dynasties, city leagues, Chinese lineage structures, and several others that I could go into if I thought about it more.  More modern examples would be the EU, UN, standard setting bodies such as W3C, or multinational aid groups.  I can't emphasize enough how important thinking about institutionalization in a more nuanced fashion than the simple dichotomy of private/public is however.  Without these conceptions you are left with a static conception of the world that can't explain social change, given the massive changes our world has been going through due to the collapse of the Soviet Union, rapid technological change, environmental and resource pressures, etc. it is necessary to be aware of the existance of conceptions of the world that do allow for broad based social change.

Wednesday, August 11, 2010

This is Said All the Time. If It's True Where's the Data?

"Equally troubling has been the effect on national character. Until recently, Americans  were known and admired everywhere for their hopeful determination to assume responsibility for the quality of their own lives; to rely on their own work and initiative; and to improve opportunities for their children to prosper in the future. But over time, Americans have been lured into viewing government – more than themselves, their families, their communities, their faith – as their main source of support; they have been drawn toward depending on the public sector for growing shares of their material and personal well-being. The trend drains individual initiative and personal responsibility. It creates an aversion to risk, sapping the entrepreneurial spirit necessary for growth, innovation, and prosperity. In turn, it subtly and gradually suffocates the creative potential for prosperity."

This is from the Ryan Roadmap.  Hayek* made the same assertion decades ago.  You should be able to prove whether or not this has happened with some survey data and economic statistics.  How many new business start ups (couldn't find anything going past 2000)?  How many American's trust the governmentHow many see themselves in control of their success (see page 15, also section 6 and 7 in general are related, as is section 2 though somewhat less so)?

Is there any evidence whatsoever that there is a correlation between government programs and any of these alleged social changes?  Is there any evidence these social changes have actually happened?

* Of course, when Hayek made a similar assertion in The Road to Serfdom empirical data did not exist to test this.  We now can test whether dependence on government drains individual initiative and personal responsibility and separately if people have come to view government as their main source of support.  Fifteen minutes of searching on Google led me to several pieces of evidence that contradict Ryan's claim.  Of course, this isn't a proper research project and in section 2 of the Pew report one question did support Ryan's contention, however a properly made study could test his contentions with a fair degree of certainty and even this slim amount of evidence should cast the central claims in doubt.  A proper study has probably already been done but my interest in the subject isn't high enough to comb the empirical literature for a study on this.

Perhaps a more important point though is that politics isn't faith, any political contention ultimately is testable, though it may be some time before data exists to test it.  This isn't religious faith where the questions being asked are ultimately unanswerable, at some point every claim made in politics will be tested and either supported or refuted.  Eventually, what was once an untestable statement of political belief becomes a testable research project, at this point belief must give way to evidence, this is essentially what modernity is.  There remain many areas where end results are unknowable, as well as different possible conceptions of society where one conception is not clearly superior to another, and these areas are the proper realm of politics.  Statements of belief that are testable with existing evidence should however be subjected to empirical evidence, and either fade away or continue based upon the results of this testing.

[Edit: Most Importantly: What is the labor force participation rate?


The Ryan Plan and the Boomers

I'm sure this isn't the first time this has been brought up.  But I was just pondering today how the Ryan plan grandfathers the existing Medicare system for a good sized chunk of the boomer generation (anyone currently 55 or over with the Ryan plan) with the voucher program only kicking in after that.  Doing this completely misses the point of reform, the difficulty we're facing is the demographic shift which is causing our social programs to be under strain.  Without that demographic shift we wouldn't be in much trouble and in no need of drastic solutions.  If your cost control plan is not dealing explicitly with the problems caused by a shifting dependency ratio, skewed heavily towards the elderly, than you're completely missing the entire reason that reform is necessary.

Being one of those in the demographic that will be in the working part of the dependency ratio through the entire transition, my position is that any cost control has to effect the demographic bulge which is the root cause of our difficulties (well, medical cost inflation is the real root cause but the Ryan plan really just handwaves that with a bunch of free market rhetoric with little compelling theory to back it up), not just those coming into the system after the bulge is passed.  There's absolutely no problem paying for my generation's health care, once it's us qualifying for Medicare the dependency ratio should be just fine, barring unforeseen disasters.

I was looking around for a good population pyramid to illustrate this point.  This one will have to do.

[Edit: I slight caveat to the contention that my generation will be just fine despite demographic changes.  We know that the retirement age and eligibility for benefits will have to rise for my generation due to increased life expectancy.  That will be enough to fix it for us.]

[2nd Edit:  Going beyond the Medicare section of the Ryan plan does reveal two good ideas.  One is a non-government group that will seek to produce standards on health services.  The plan compares this to the FASB, I think there are some serious differences between the health industry and the accounting system that will lead to vastly different outcomes (mostly that I think there is an essential difference between standard setting between institutional actors all with an interest in forming a single standardized system and standard setting for the sake of the consumer by institutional actors all with widely varying interests and capacities) but I'd say it's worth a try.  The second is standard setting and the formation of state based exchanges.  Tort reform is also in there but it's not a big deal.  These efforts don't tackle what I believe are the essential problems of health care, the balkanized current institutional structure (which I don't believe is likely to change without outside interventions), the emotional aspect that interferes with decision making on the individual level (end of life counseling and hospice being the big items here), and the fundamental disparity in information between patient (or often, family of the patient) and the array of institutional actors involved in health care, including doctors.]

Tuesday, August 10, 2010

Adam Smith and the Smart Grid

Jumping off of my last post on Portugal I'd like to explore the subject of institutional barriers to investment and progress.  This is a subject that deserves a much more detailed treatment than I can give it on this blog, still I can give enough space to give an outline of the subject without making this post a prime example soporific writing.

To start this off, the relevant paragraphs from the NY Times article on Portugal's energy transformation.

"But a decade ago in Portugal, as in many places in the United States today, power companies owned not only power generating plants, but also transmission lines. Those companies have little incentive to welcome new sources of renewable energy, which compete with their investment in fossil fuels. So in 2000, Portugal’s first step was to separate making electricity from transporting it, through a mandatory purchase by the government of all transmission lines for electricity and gas at what were deemed fair market prices..."

"Such a drastic reorganization might be extremely difficult in the United States, where power companies have strong political sway and states decide whether to promote renewable energy. Colorado recently legislated that 30 percent of its energy must come from renewable sources by 2020, but neighboring Utah has only weak voluntary goals. Coal states, like Kentucky and West Virginia, have relatively few policies to encourage alternative energies..."

"Last year, President Obama offered billions of dollars in grants to modernize the grid in the United States, but it is not clear that such a piecemeal effort will be adequate for renewable power. Widely diverse permitting procedures in different states and the fact that many private companies control local fragments of the grid make it hard to move power over long distances, for example, from windy Iowa to users in Atlanta. The American Society of Civil Engineers gave the United States’ grid a 'D+,' commenting that it is 'in urgent need of modernization.' "

So, the first thing that is apparent from this is that the fragmented ownership of transmission lines is one of the biggest barriers towards a modernized grid and a significant bottleneck in making renewable energy viable.  This is an institutional barrier and one that is unlikely to go away through private negotiation (though I guess it would be possible for a large well financed company, or on an even more fantastical level a giant non-profit, to try to buy up the entire grid, I find this highly unlikely however).  The alternative is state intervention to do as Portugal did and take control of the grid away from smaller groups so that modernization can proceed. 

Personally, I don't view this problem as one of state vs. private; there wouldn't have been a problem if the institutionalized system of power transmission had been set up differently with a private central authority.  This wasn't how history happened in the U.S. however.  State intervention becomes necessary only because the way institutions developed make it impossible to modernize within the current system and provide no clear pathway to a new institutional framework.  In other words, the market system largely acts by maximizing efficiency given an existing institutional framework; it has little ability to change the institutional structure that it is functioning within.  So, to break this path dependency state intervention becomes necessary to create a new set of institutions to manage the grid, once this is done the system can either be re-privatized ) under the new institutional framework or remain within state power (or, if we want to get innovative, spun off under a type of non-government organization devoted to the grid's maintenance.

So what does this have to do with Adam Smith?  Mostly that much of the anti-government rhetoric claims a vague relationship to his thinking.  The problem with this is that it's an anachronistic reading of Smith.  Smith claimed (to paraphrase loosely) that barriers to trade, largely created by government, interfered with the development of markets that would efficiently allocate resources.  This worked pretty well for England but from a comparative contemporary perspective this contention needs a few caveats.  England was unusually highly centralized at the time Smith was writing, private enterprise had little ability to erect strong barriers to trade and innovation in England so Smith's opposition to government interferences was plausible enough and a correct analysis of the problems within the institutional structure that was England.  Of course, even then, a careful reading of Smith reveals that his attitude towards the state was much more complicated than those claiming to be his modern adherents.  Throughout the work Smith favors rationalization of necessary state institutions, such as poor houses, rationalization that would only be possible through a central authority.  He also writes favorably about the navigation acts, which displays the nuance Smith meant to convey but that isn't terribly relevant to the immediate topic.

So, why the confusion?  At the time centralization was largely seen as how concentrated power was at the top, England was less centralized because power was shared between institutions at the highest levels while in France and other countries more power was concentrated in the singular person of the monarch.  This is far different from the modern conception of centralization that understands it in terms of how power is distributed at different levels.  This becomes very clear when comparing France and England in the 18th century.  In France, private individuals (though there is some necessary confusion of definitions here, duties that were later centralized within the state were privatized in this period making the distinction between private economic and political power even more complicated than it is today) retained rights over many institutions necessary for the easy transportation of goods, they had rights to rivers that could block commerce, corporate groups could resist taxation, and other local bodies could restrict the flow of goods and labor in and out of the areas that possessed contractual rights over.

England was far different.  It had destroyed many of these traditional rights and restrictions long before the 18th century.  The state had much more sway over how goods moved within the country and could promote the formation of a truly national market, something that the King of France had great difficulty in doing, no matter how hard he tried.

Back to US policy, I'm becoming afraid that we're beginning to look more like France than England.  The state has ceded so many powers to private institutions that it is losing the ability to impose a truly common market across the country in critical areas such as energy transmission.  Indivdiual firms and local political institutions are winning the battle to fracture the national market and to instead create limited markets subject to private control.  As long as the rhetoric continues to embrace the simple distinction of private ownership = free market rather than the more complicated relationship between different levels of authority and the continued strength of the institution of the national free market (international markets aren't truly free yet) there exists a very real threat to the practice of free market capitalism within our country.  Restricted markets simply aren't free markets, even if restricted markets are controlled by powerful private individuals or incorporated entitites instead of political institutions.

What Portugal's Clean Energy Drive Tells U.S.

I really enjoyed today's NY Times article on the success of Portugal's clean energy drive.  Ever sceptical of journalists I may have to see if I can get harder data on it in the future but for now a few things jump out at me. 

First, it seems that citizens ARE willing to pay higher energy prices to fund clean energy.  While public opinion may differ between here and Portugal, from Portugal's experience it doesn't seem true we should simply accept the notion that we have to hide the end costs from consumers through clever legislative mechanisms; presented correctly consumers, in Portugal at least, will accept a 15% rise in energy costs to pay for the transition.

Second, there is more hope than the doomsayers claim.  Portugal's transition has been quite rapid, from 17% of electricity from renewable sources 5 years ago to 45% today.  Of course, Portugal is in a position that makes the transition unusually appealing, it has little in the way of domestic supply of fossil fuels so it has to import leading to a high vulnerability to price swings.  For them, domestic investment in renewable energy poses relatively little cost to existing domestic firms and there was likely less policy inertia since they would have been unlikely to have the vast system of subsidies and entrenched interests that we do.  Still, this transition is technically possible, it's a question of interests not physical barriers.

The third part I'll take up in a separate post since it touches a subject I think is very important and underdiscussed, how private rights can be as much, or more, an impediment to the operating of the market as government intervention.

[Edit: A brief follow up post is up on the Green blog.]

Monday, August 9, 2010

Book Review: The Conservative Mind

The Conservative Mind
by Russel Kirk

Haven't done one of these in a while, they were taking too much time.  This will just be some brief comments.

First, this is a conservatism that makes sense.  I still don't agree with it as a whole, though I certainly agree with many parts of it, but this doesn't leave me scratching my head wondering what the hell these people are talking about, which has become my normal reaction to anyone identifiable as part of movement conservatism (this should be sharply distinguished from people who simply identify themselves as conservative or on the right).

Something that especially pleased me is that Kirk made some distinctions about the relation of the individual to political philosophies which I had begun to think Conservatives no longer made in the US (considering he's been dead for some time they may not today).  Specifically, he recognizes that ideologies such as socialism are extremely individualistic, they rely on a concept of an "atomized individual."  His version of conservatism is by contrast explicitly corporatist, emphasizing family and community connections along with the broader concepts of tradition and culture.  This was very refreshing to hear.  These are basic concepts necessary for discussing most any aspect of broader social theory or identity, the constant contrasting of the individual vs. socialism that I hear constantly grates on  me since it shows a complete lack of understanding of either concept.

Readers who have been following for awhile will remember this was a major issue I took with Hayek when he conflated the corporatism of Nazism with the collectivism of communism.  These are completely distinct concepts, while Kirk never discusses the German far right he does show an understanding of the distinctions between Communism and socialism and other means of social identity.  I was glad to see there are some well known conservative writers that get these distinctions, it's not Glenn Beck all the way down.

After reading it I was left pondering the major mistakes of both the left and right.  One of these for the left, is that too often they are prone to seeking change without fully considering the costs and benefits of a new system vs. the old one, too often they only look at the ills of the old and the potential benefits of the new.

On the right, it would be good to reflect more often on if they are actually defending treasured old institutions or simply resisting new ones that may either be able to exist alongside existing institutions or may be seeking to fill a gap caused by the collapse of old institutions that are beyond hope of restoration.

[Edit: Figured I should mention a little more about the book itself.  Kirk provides a good overview of conservative thinking in the US and Britain, starting with Burke.  It makes no apologies for presenting this intellectual history through a thoroughly conservative frame (it calls the American revolution a conservative revolution for instance, many scholars would dispute this) but knowing this going into it adds to the appeal of the book for someone wanting to understand conservative thought.  I certainly wouldn't recommend it to someone that doesn't already have at least some knowledge of intellectual and social history however, the view is that of a single interpretation of this history (and not necessarily the strongest interpretation) and would give someone unfamiliar with the material a very slanted view of intellectual development in the relevant periods, the interpretation given wouldn't be considered by most scholars to be the most accurate description of intellectual development over this span of time.

What it does communicate very effectively however is an intellectually defensible interpretation of political thought.  There is a highly developed worldview running throughout the work presenting a poweful vision of both the past and of how this can be used to interpret the present.  Kirk's literary style is somewhat unusual, he quotes heavily from the author's he is writing about while restating many of their ideas in his own voice.  At times it can be confusing, as I reader I sometimes wondered if Kirk was trying to communicate how the author being studied should be interpreted against that author's contemporaries or Kirk's contemporaries, but despite this occaisional confusion the reader is left with an overall impression of what Kirk believes the conservative worldview and political program should look like.  It's a valuable book to read for anyone wanting to understand the conservative point of view, though comparing this to what I'm hearing from conservatives contemporary to me I am left wondering if Kirk's vision is still influential or if it has been jettisoned in favor of other worldviews.  In any case, it is still a valuable read for anyone interested in intellectual history and conservatism, though with the caveat that it's not valuable as a starting text, other sources should be pursued first so that a prospective reader has a firm grounding in general political thought before tackling this text (this text is written to be approachable by the general reader, the intent of the work is a political program however so the reader needs enough background to realize it is this rather than an unbiased overview of political thought).]

Saturday, August 7, 2010

Some Examples of How Worrying About the Deficit Now Will Be Raising it Later

The NY Times has a great article today on some examples of sharp cuts by municipalities that have cut services to the bone.  Most of these will have some long term economic consequences.  I'd also add that this shows the foolishness of thinking of taxes solely in the form of what the government collects.  Cut my bus service and you just raised my taxes by a car.  Cut my streetlights and you raise my taxes by a shotgun.  Add up all my exemptions and other complexities of the tax code and you just raised my taxes by an accountant.

We really do need to bail out the states.  All that government waste just isn't materializing.

Not Going to Comment Further Immigration Doesn't Need Constitutional Reform

People need to know about this.  I'm not going to comment further but things are going too far if Senators are talking about constitutional amendments as part of the immigration debate.  At least the leadership is trying to create distance from these claims.

"But Mr. Graham, speaking on Fox News last week, said it was “a mistake” to allow American-born children of illegal immigrants to become citizens automatically, a practice known as birthright citizenship. He said that along with a plan to grant legal status to millions of illegal immigrants, he would also amend the 14th Amendment as a way of discouraging future unauthorized immigration."

"But giving citizenship to everyone born in the United States has been the practice since the 1860s, and was upheld by the Supreme Court on the few occasions when it was tested there, immigration lawyers said."

"In fact, under immigration law American citizen children must wait until they are 21 years old to apply for legal residency for their parents. Also, most of the illegal immigrants who have children who are American citizens have not recently arrived."  

[Small edit: Apparently blogger didn't like my giant link so it was broken in places.  Should be fixed.]

Friday, August 6, 2010

Fantasy Immigration Policy

This is how I'd go about trying to fix the immigration policy.  By fix, I mean fulfilling as many expressed policy goals as fully as possible.  This is written with no consideration for existing law, while I'm unsure I believe that the tax provision at least would likely face difficulties with existing legislation, other portions likely would as well.  This is the advantage to being a blogger and not a legislator.  I'd list those interests as the following:

Provide America with a workforce it needs given demographic changes
Maintain our international obligations and reputation (asylum mostly)
Minimize regulatory burden and business uncertainty
Promote labor mobility
Reduce impact on the budget
Provide long term revenue
Assimilate new immigrants
Reduce smuggling
Protect against security threats (terrorism etc.)
Prevent crime (as in street level, thefts, assaults, etc.)
Distinguish between security threats and benign traffic
Create opportunities for the American workforce

Part 1: End the Quota System
The quota system places an undue administrative burden on the state as well as making it difficult to distinguish between legitimate security threats and benign immigration.  Furthermore it is simply philosophically unsound to apply quotas to people when rationing is not enforced by physical constraints.  The most basic reason being that it is essentially arbitrary which engenders contempt for the law, even using the point system, because there will be equally well qualified individuals who are permitted in and who are not with no promises to those who were not permitted in.  Expanding on this idea would take too much space so I'll propose an intellectual exercise, imagine if government decided to control pollution not through regulation on vehicles or by imposing gas taxes but by restricting access to public roads by setting up quotas on the number of driver's licenses available each year, would you continue to feel the law was just if your neighbor gets one and you didn't?  The fact that this arbitrariness is applied solely to non-citizens does little to make it more philosophically defensible.

Part 2:  Require Registration
All immigrants would be required to register with the federal government, including immigrants currently illegally within our borders on payment of a small fine (the advantages of this system require registration, providing strong disincentives, while perhaps just, would prevent many of the positive developments of registration).  There would be a requirement of productive activity to remain in the country, this could be a job, marriage, school, voluntary work, and perhaps some other areas.  This would have to be renewed on a yearly basis showing that requirements were met for at least half the previous year, if the requirement isn't met at the time of renewal there would be an additional requirement to fulfill the productive activity requirement within 3 months and submit proof to ICE (Immigration and Customs Enforcement).

Part 3: Tax
All registered immigrants would be subject to an additional 3% tax on income while they remained under that status.  This tax would cease once an immigrant becomes a permanent resident.  A large portion of these funds would be earmarked for programs designed for new immigrants that will be described below.  This tax serves several purposes.  First, it funds specialized programs for new immigrants, existing citizens should not be responsible for services they will not use directly.  Second, it is a Pigovian tax and creates disincentives for businesses to hire immigrant workers when entirely equivalent workers are available in the US labor pool (indirectly through lowering effective wages, this is charged to the worker, not the business).  Third, it is flexible and can be responsive to changes in labor demand, though to maintain the legitimacy of treating these workers differently any increases should also lead to correspondingly greater budgets for services of interest to immigrants.  Fourth, it would create an incentive for a worker to either eventually return home or to make a priority of fulfilling the requirements to become permanent resident.

Part 4: Updated Permanent Residence Laws
Permanent residence requirements would be extended to include English language requirements (or alternately American Sign Language, other waivers may be necessary in some cases), a minimum of 1 year of residency as a registered immigrant, no criminal history (with a possible waiver for misdemeanor or less after the passage of several years), and passing a basic test on US history and culture to help promote integration within the broader community.  The effort required to achieve this minimum requirements will provide a disincentive for immigrants who simply wish to avoid a small tax from going through the effort while providing a strong incentive for an immigrant desiring longer term residence to work on skills needed for integration in the community.

Part 5: New Immigration Programs
Using money from the new tax programs would be developed to aid immigrants.  These would involve English language classes or subsidies for all registered immigrants and permanent residents, bi-lingual education for immigrant's families, a relocation program funding a move back to the country of origin for immigrants which so desire (this would be capped), and a job matching program for immigrants that would like to come over as temporary workers that would help them to have employment prior to arrival (ideally with offices in countries having high levels of immigration to the US).  Funds would also go towards enhanced law enforcement activities against groups which seek to exploit immigrants, such as prostitution and drug smuggling rings.  The victims would be provided with counseling and given the option of repatriation or going through the standard immigration process (the exploiters would obviously be punished to the full extent of the law).

Part 6: Access to Services
Registered immigrants would receive access to most basic services, exceptions would be made for unemployment insurance and other transfers until permanent residence status is attained.  This serves two purposes.  First, it provides an incentive to register to receive basic services such as a drivers licenses.  Second it provides incentives to work towards permanent residence to attain full access to services.  The restrictions should, along with the increased revenue provisions, assuage fears that immigration will be a net drain on the Treasury.

Part 7: Enforcement
Shifting to these mechanisms would do a great deal to make enforcement easier, even without additional considerations.  There would be little incentive for a law abiding immigrant to enter illegally, too many advantages would now be available to a legal immigrant.  To help insure this would be the case, immigrants who fail to register should be subject to severe penalties, including the potential for a permanent ban on them achieving legal status.  Immigrants entering illegally would be much more likely to be engaged in illegal activity allowing security forces to focus on those that pose the biggest threats.  Immigrant communities would also become much more likely to assist law enforcement since they would no longer have to fear legal action.  There would furthermore be an additional funding stream if additional resources prove necessary.  Businesses would also benefit from decreased regulatory costs since there would be less incentives for immigrants to commit fraud, removing a source of some uncertainty and of workforce turnover.

That's pretty much it.  I'll add a subsequent post if I think of anything more I'd like to add.  If by some miracle a politician reads this and proposes it I believe this could solve most of our problems.  It would make border enforcement a doable, rather than impossible task.  It would end what reality there is to the contention that immigrants are a net drain on revenue.  Incentives would be provided to assimilation, countering those critiques.  Otherwise law abiding immigrants that are currently illegal would no longer have to fear the law and could become full members of their communities. Strong incentives would be provided to foreign students that have already completed their education here to stay, most of the bureaucracy would have been reduced to a straightforward registration process that would be well funded through a dedicated revenue stream.  Business would have a more secure workforce with less turnover as well as less regulatory burden since verification is shifted to the individual not the workplace.  It would be easier for immigrants in unstable circumstances to leave, reducing the possibility that workers would stay here despite unemployment.  I could probably add some more positives if I wished.  I also have trouble seeing much downside, though there may be something of a net increase in immigration this would be partially offset by an easier outflow.

Krugman on Reading CBO Reports

This is a great post on basic analytical reading (this one specific to a CBO report) for the casual reader.  Ignore the ideological axe he's grinding here, this shows the basic methodology you should be following when reading anything to show the proper scepticism.  I'm sure many people know this already but methodology barely gets mentioned in the news so I'm a little bit overjoyed just to see it mentioned somewhere.

Thursday, August 5, 2010

Border Control Data Dump

This provides the background data for a post I plan to write tomorrow.  That post will be my fantasy policy making post on what immigration platform I'd have if I had a massive stroke that caused sufficient brain damage to make me want to run for Congress and suffer through all that nonsense.  It's what I think we'd have to do to have a working border policy, not anything that I see coming up for debate any time soon.

Some very limited discussion.  First, as you can see there is likely some deterrent effect.  It's also mostly swamped by the economic effects.  I'd add that based on some historical points I've heard made that a massive increase in draconian enforcement would likely lead to a sharp drop in border crossings.  I'd also say based on historical data this drop would be temporary since those crossing can adapt faster than government can respond to adaptations.  The cost figures I have are for border patrol only, there is also substantial expenditure on inland enforcement, such as workplace raids.  From these reports it seems that interior enforcement is much more expensive than point enforcement at the border.  There is no hard data given on this so you can choose whether or not to believe this.  I do think it's unavoidable to conclude that an enforcement first approach is futile, the additional resources are having an impact but it isn't that large and is likely to suffer from diminishing marginal returns.

Feel free to dig into the data yourself.

People Crossing Borders: An Analysis of U.S. Border Protection Policies

Border Security: The Role of the U.S. Border Patrol

Remember, these are reports for Congress.  Whatever it is they're saying they do know this stuff, or at least have a staffer who does.
[In case it wasn't clear, all data from the above two linked reports]

Wednesday, August 4, 2010

Frum's Continuing to Make Sense

Just read a very good post by David Frum. I really wish this guy represented the mainstream GOP. I think his criticism goes along well with what I've been saying about the far right, they didn't pay attention to developments in political thinking springing from the collapse of the Soviet Union and other developments in political theory and economics over the past 30 years. They're devoted to doctrinaire understandings of the political and economic theories that brought them to power in the 1980s. These theories were a big step forward from the Democrats of the 1970s but they still seem to believe that the left is what it was instead of seeing how much it has changed. There are very few Progressives that retain a belief in anything approaching socialism, continuing to yell about it simply makes it look like the right has stopped paying attention.

Back to Frum, my favorite bit was this:
The most centrally planned sector of the American economy is energy. The federal and state governments command utilities to buy certain percentages of their electricity from wind and solar, regardless of price. The federal government commands that ethanol be mixed into gasoline, again regardless of price. Governments subsidize favored “green technologies” with grants and tax credits. Meanwhile a non-green technology, the incandescent light bulb, has been banned outright.

“Socialists” did not make this mess. Every one of these distortions was championed by President George W. Bush and remains the declared policy of congressional Republicans. Republicans have chosen energy command and control because the market-maximizing alternative is an energy tax – and taxes are ideologically taboo.

Look at most of the policies being pushed by Progressives, most of the big ones are explicit recognition that central planning is a failure and that market mechanisms have to be used. Our understanding of what works and what doesn't has changed radically. Every time someone on the right shouts socialism they reveal that they're paying no attention to what people on the left actually profess and believe.

As a side note, this will probably be my last post focusing on the right. I think I get somewhat too emotional about the subject to write about it in an even-handed manner and will avoid explicit references from here on. There may be one last post on media bias but that will definitely be it (thinking about what to include in that post and proving my point without writing a paper is what led me to the conclusion I'm too emotional on the subject). For a final clarification, my critique has always been of the far right, not the Republican Party proper. I'd classify myself as actually being most comfortably characterized as a member of the Progressive wing of the Republican Party, if that wing still existed. An updated version of that which existed at the beginning of the 20th century to account for what we've learned since then* of course, but the basics of Teddy Roosevelt's philosophy sits well with me. The reason I get so worked up about the subject is that I feel so betrayed by the dissolution of what I feel to be the most sensible combination of philosophies that American politics has enjoyed and I blame this dissolution on the far right.

[Hat Tip: Ross Douthat for the Frum link]

*I feel the big advantage that Progressives have is that most of us have the humility to know how much our understanding of the world has changed over the course of time and to know our beliefs about what works must change with experience and knowledge, there is no such thing as a principle that is fixed despite the evidence, except for toleration and mitigation of harm.

I Feel a Lot of Sympathy for This Guy

Anthony Weiner explains his outburst in the House of Representatives today in a NY Times Op-Ed. I don't know enough about this specific piece of legislation or the procedural rules involved but I am in full sympathy with his frustrations. I do fully agree that we'd be better off if people broke decorum now and then to say what they really think. This should go for more than just members of Congress though, we've been too silent for too long about those that would abuse the procedures and institutions that have made our country so great. Once the Republicans are back in power I urge them to remember this message too.

My favorite quote was this:

Meanwhile, conservative television and talk radio programs are full of false anger, intended to scare Americans. I think some genuine frustration at this misleading tactic is overdue.

Too few people are willing to come forward and be blunt about this, despite the fact that we all see it, whatever our political persuasions are (though depending on that some are more likely to dismiss its corrosive effects than others). We need truly accountable news media. Their even-handed whatever the merits standard procedures have proved themselves open to abuse. They need to start casting doubt where it's due, though I'd like it if they avoided playing up people too much for saying something likely to be accurate; it's the attitude towards falsehood and abuse of institutions that has to change, the mirror image of this, rewarding someone simply for following the rules would be a very bad road to go down.

Tuesday, August 3, 2010

He ought not to be altogether ignorant of the law of nations

The title quote from James Madison pretty much sums up my thoughts on the importance of looking abroad for good ideas, even in law. It's not like our Constitution was created in a vacuum nor should it be interpreted as if it were. The NY Times has a good editorial today on the influence of nativism on attitudes towards the court and those trying to stand against this backward step. This quote from Senator Kyl is particularly revealing:

I’m troubled by it,” not because foreign law would create a United States precedent, but “because it suggests that you could turn to foreign law to get good ideas.

Not quite sure how this is meant to be interpreted, and there's the caveat I have no context for it but it certainly sounds like he is troubled by the notion that good ideas could come from beyond our shores. I find the idea that anyone would find that notion troubling, troubling.

Update: Since I don't really like the use of quotes out of context I went and looked at the original video. The following is from the captions, it doesn't match up exactly with what was said in the video but it's close enough to assuage my conscience. Check out the video yourself if you'd like.

00:19:30 OKAY.

It goes on for quite some time from this but this seems more than sufficient. I don't think the context changes a lot in this case, it still seems a strange thing to say.

Monday, August 2, 2010

Health Care Reform on Trial

Sounds like at least one challenge to health care reform will go through. A federal judge refused to block Virginia's challenge to the new law.

I have two reactions to this. First, I agree with the judge. This does need to go to court so people's concerns and grievances can be aired. There's no avoiding that and the administration wouldn't be doing itself any favors if it made a serious effort to block these challenges (I don't know a lot about its efforts to do so, with 21 lawsuits pending and my relatively scant knowledge of the law I don't see the initial challenges to these suits as being evidence the administration didn't see the inevitability of the court challenge and was simply going through basic procedural motions with these blocks).

My second reaction is that if by some means Virginia wins (from what I know I think this is highly unlikely) we're screwed. I think the best evidence is that universal coverage is a necessary but insufficient component of cost control. Without it, there is no way to line up the relevant interests so that their best strategy isn't to simply attempt to pass on costs to someone else rather than dealing with cost inflation directly.

This view seems to be fairly well supported by everything I was reading by health care policy specialists and economists as well as most more general economists. It's well supported by historical and comparative data as well as most modeling.

The counter argument seemed very weak, largely reliant on analogy as well as some theoretical modeling, most of it by general economists, not ones that specialized in health care. I always tend to trust whoever has the best arguments supported by multiple prospective theories and sources of evidence, that leads me to a pro-reform position. The anti-reform position relied too much on a narrow range of perspectives for me to feel it had any real weight.

We'll see what happens but if it is successfully challenged I expect another 40 years of costs diverging from the rest of the world. We can't afford this. Even if critics are right and this is in some way un-American (I don't know any definition of what makes us American that would make sense here but I hear it expressed rather frequently) the preponderance of evidence seems so strong that we're just going to have to swallow this one if we want to remain solvent. As much as we might wish it were otherwise, the nature of the system demands that universal coverage precede cost control, not vice-versa. This does of course mean that we still need a follow up bill for cost control, and we need this urgently since this reform plan got gutted during compromises to pass it.