“Pelosi screwed up royally. She is the Democratic Tom DeLay. Newt Gingrich was an ideologue, but Tom DeLay was simply a partisan, most keenly interested in maximizing his party’s political power. Pelosi cut a deal in which, as far as I can tell, every single Republican in a safe seat had to vote yes so that the Democrats could maximize their no votes. Given that the Republican caucus is pretty much in open revolt, this was beyond moronic. She then spent a week openly and repeatedly blaming the Republicans and the Bush administration for the current crisis. The way she set things up, it was “Heads I win, tails you lose”: vote for the deal and I’ll paint you as heartless reactionaries bailing out your fat cat friends. If you’re going to do that, you’d better make sure you have some goddamn margin for error in your own party. She didn’t. Then she got up and delivered yet another speech blaming the Republicans for the bailout deal she was about to pass.” –Megan McArdle, blogging at the Atlantic
Monthly Archive for September, 2008
There were undoubtedly many mis-characterizations of the opponents view in Friday nights debate from both sides. But there is one that especially stood out in my mind because it was not only unfair to McCain but it showed how disconnected or dishonest or both Obama was about his own economic advisor’s.
During Friday nights debate Obama said:
Just one last point I want to make, since Senator McCain talked about providing a $5,000 health credit. Now, what he doesn’t tell you is that he intends to, for the first time in history, tax health benefits.
So you may end up getting a $5,000 tax credit. Here’s the only problem: Your employer now has to pay taxes on the health care that you’re getting from your employer. And if you end up losing your health care from your employer, you’ve got to go out on the open market and try to buy it.
It is not a good deal for the American people. But it’s an example of this notion that the market can always solve everything and that the less regulation we have, the better off we’re going to be.
What Obama fails to tell you is that it is McCain that shares the view of economists in general, not Obama. Don’t believe me? Even Obama’s chief economic advisor endorsed the McCain plan – that is, before he was Obama’s economic advisor and this was specifically McCain’s plan.
Jason Furman, Obama’s Economic Policy Director writes regarding health policy:
The most promising way to move forward in all three dimensions – coverage, cost, and long-run fiscal situation – is to replace the employer exclusion with a tax credit, a step that has been proposed many times before (e.g., Butler 1991 and Pauly and Hoff 2002). Firms would still be allowed to deduct the cost of their contributions to employee premiums, just as they can deduct wages and other expenses today for the purpose of calculating taxable income. But workers would now have to include employer contributions to health insurance in their earnings for the purpose of calculating taxes (precisely which taxes is discussed below). In exchange for, workers who purchased qualifying insurance would get a refundable tax credit. Qualifying insurance would be along the lines proposed by the President in his standard deduction for health insurance, including limits on out-of-pocket payments, coverage of a general range of medical care, and guaranteed renewability by the provider (Treasury 2008).(emphasis added)
This is not unique to Furman either, as Brad DeLong, professor of economics at UC Berkeley and Bill Clinton’s economic advisor, in his post titled, An Unrealistic, Impractical, Utopian Plan for Dealing with the Health Care Opportunity specifically mentions the goal of, “No deduction for employer-paid health expenses.” See here.
This is why Harvard economist Greg Mankiw stated, “My guess is that most health economists would endorse the Furman-McCain plan.” See here.
This also makes sense: how much more expensive do you think auto insurance would be if it was covered by employers – and, in addition, covered everything including wear and tear on tires, and gas? That is, in a nutshell, the argument against corporate funded health insurance. It’s dishonest, ignorant, or both, of Obama to claim otherwise.
Update: The WSJ has more.
Update: Ross Douthat has more.
Update: Greg Mankiw and Jeff Jacoby have more.
Here is my thought process on who I am voting for and why. I use numerical values to show what is important to me and by how much. It should also be noted that these are my views today, tomorrow they may change.
Economic Instincts: Obama strikes me as an overall open minded person on economics. He seems much more willing to trust his economic advisors and is open to different economic points of view.
This shows, for example, in his pick of economic advisor’s. Austan Goolsbee is a top notch economist in the University of Chicago mold. The same can be said of many others on Obama’s economic team – in other words, you can tell that Obama put alot of thought in who should be his advisor’s, and listens to them carefully. +10 Points
Economic Ideology: Because Obama is a democrat, you can expect pressure on him to pursue many misguided policies. Whether we are talking about free trade, unions, or more government healthcare, his party will pressure him hard to deliver. - 8 Points
In any other political environment, this alone could cancel out his positive economic instincts above but because we are likely headed into a recession and the debt from the financial bailout is likely to significantly add to an already out of control budget deficit, Obama will be severely limited in the liberal policies he wants to accomplish, especially in the healthcare area. So this further constrains his economic ideologies push and limits any far reaching program Obama may want to adopt. +5 Points
Minority Issues: I think electing a black president will send a strong signal to minorities that racism really isn’t what it used to be. In other words, one of the side effects of electing Obama to the presidency will be in furthering the conservative argument, namely, that racism plays a low roll in minority poverty, see here, here, here and here. In addition, I think Obama is more able to get the message out that the US is the land of opportunity and that so long as you remain committed and focused, you too can escape poverty, see here. +12 Points
Message To Republicans: Whether we are talking about corruption, fiscal irresponsibility, or just arrogance, it is clear that the Republicans in office did not live up to the ideals they claim to hold dear. Removing them from office sends a strong message that the citizenry will not tolerate this and will – hopefully – bring the Republican party back to its original roots. +5 Points
Joe Biden: Many things rub me the wrong way regarding Joe Biden and the thought that he may one day become president really bothers me. - 5 Points
Hillary Clinton: Many things rub me the wrong way regarding Hillary Clinton and the thought that she may one day have become president really bothered me. Obama removed that threat, and I feel some obligation to thank him for that. In addition, the election of him to the presidency almost guarantees that she will never become president. + 5 Points
Education: John McCain seems much more likely to do something positive regarding education. He has publicly admitted to supporting vouchers, and his education philosophy is centered around what is most likely to have a real impact on education: competition and choice.
This is no small matter either, as education is the ticket out of poverty and the area where policy can have the most dramatic effect on minorities living in bad neighborhoods. +12 Points
Judges: Given that the oldest judges on the Supreme Court are liberal, with the oldest being 88, the chances that the next president of the United States will pick a judge are almost certain. McCain is much more likely to pick a justice that does not believe in pushing her/his moral views down the throats of voters. A judge that believes that moral issues should be settled by the democratic process, as opposed to judicial fiat by unelected justices. Given the critical make up of the court, just one liberal justice replaced by even a moderately conservative justice can dramatically change the future opinions for years to come – long after Obama or McCain have left the presidency. +12 Points
However, given McCain’s maverick streak, his reluctance to support Alito, and more importantly, his support of the McCain-Feingold Campaign Reform Act that, IMHO, reduces the civil liberties of the citizens (see here, here and here), leads me to believe that McCain will pick a justice who is either moderate, or at the least dubious on civil liberty issues. At the very least, he will want a justice that supports his campaign reform act, which would likely be a candidate that ranks overall civil liberties low. - 6 Points
Divided Government: There is something to the argument that a divided government is a better government. Electing Obama will give too much power to one political party. We learned this when Republicans were in power and will, I am sure, learn it again when Democrats have the same power. +5 Points
Sarah Palin: I really like McCain’s pick for VP. As I argued here, based on her income, background, and life experiences, IMHO, I believe Sarah Palin to be the closest candidate to “everyday people” than any other presidential candidate in my lifetime. If she were to become VP, and maybe one day President, I believe she has a real chance of reforming the Republican party and bringing it closer to its roots of middle class and everyday working people, bringing a further divide from the elitism of the Democratic party. +5 Points
Economic Instincts: McCain seems an overall populist on economics and when you mix that in with his stubbornness and maverick image, you get a dangerous mix. Whether we are talking about Pharmaceutical drugs, regulations, or tax cuts, McCain strikes me as someone that when he makes up his mind on something, he will pursue it, no matter what his economic advisor’s tell him. - 10 Points
Economic Ideology: Though because McCain is a Republican and his Republican party is generally the more pro-growth party, you can expect this to be a check on his tendencies. Though, as the Bush presidency showed with the Medicare benefit for prescription drugs, I wouldn’t put too much weight on this check. + 3 Points
Free Trade: Though I don’t think Obama’s advisor’s will let him be much of a threat to free trade, I do think that on this important issue, McCain has the slight advantage. +1 Point
Health Care Reform: As Obama’s economic advisor’s have admitted before becoming Obama’s economic advisors (see more here, here and here), McCain’s proposal to break the link between employer and health insurance is a good one. More on why here. + 3 Points
Issues that are a wash between the two candidates:
Immigration: I don’t think there is a big difference between the candidates on immigration. McCain’s political party may push him towards anti-immigration but McCain, as was shown in the primary race, is not too malleable on this issue. In addition, though I see Obama as overall in favor of immigration, his ties to black America may also push him to favor some anti-immigration policies (remember, poor blacks are the biggest losers of all when it comes to more immigration). Though I don’t see this as very likely, it atleast cancels the risk that McCain will move towards anti-immigration as well.
Foreign Policy: On the one hand, McCain seems much more likely to do what it takes to make Democracy succeed in Iraq but seems like much more of a hawk than I’d like. On the other hand, Obama seems knowledgeable enough on foreign policy and, contrary to what many may think, strikes me as someone who will be pragmatic on foreign policy issues and Iraq in general (he already has distanced himself from the loony left).
As you can see by the numbers, the election remains close.
I will update this post periodically when I find other interesting articles. Enjoy!
Update: Megan McArdle explains the limitations of regulation.
Update: For up-to-the-minute commentary on the mess, I’d recommend Megan McArdle at The Atlantic, Arnold Kling of EconLib (who used to work for Fannie Mae), Berkeley Professor Brad DeLong, Tyler Cowen of Marginal Revolution, and Felix Simon’s Finance Blog.
Update: Winterspeak’s blog is essential in understanding the back and forth of the above blogs, see here.
Update: Economists as a whole speak. Read their open letter to congress.
Update: Bruce Bartlett makes the case on why bailing out the financial sector is very different than bailing out the auto industry, and, more importantly, why its important the bail out goes through. See here.
Update: Robert Shimer, professor of economics at the University of Chicago, explains why we are in the mess we are in, see here.
Megan McArdle explains:
One of the central insights of economics is that exit matters. Markets don’t do better, over the long run, because people in the private sector are smarter or well meaning. They do better because they can be fired. What’s more, they frequently are: firms that don’t satisfy their customers go away. Look at the businesses that people in America complain most about: cell phones, utilities, cable companies, health care. What they have in common is that the end consumers do not have meaningful right of exit–those companies have at least a temporary monopoly on their customers. Private sector firms can fail spectacularly, as many financial firms just did. But the important thing is that they fail. Schools that do to education what Bear Stearns did to mortgage bonds maybe get a stern talking to from the mayor, and in extraordinary circumstances, the principal may be fired. (Though this takes year). But the school itself keeps going no matter how bad a job it is doing.
Middle-class parents instinctively know this, because they move to places where the right of exit keeps school quality high. Scarsdale knows that if it doesn’t keep the schools successful, middle class parents will leave, taking their lavish tax dollars with them. Riverdale, too, knows that it needs to keep parents happy and test scores high. The New York City public school system, on the other hand, mostly has to get butts in seats, because that’s how they get their money. It’s not that the teachers don’t want to teach kids; it’s that they don’t have to. And as anyone who’s ever tried to write a novel in their spare time knows, anything onerous that you don’t have to do generally runs afoul of other priorities.
The full article can be found here.
“Obama’s plan to fix the schools: more money. More money for teachers, more teachers, more after school programs. Absent are any specifics about what the new teachers will do that is any different from what the current teachers are doing that isn’t working. John McCain doesn’t either, but at least he’s planning to shake up the educational architecture that gets worse every year.” — Megan McArdle
Sandra Tsing-Loh, a “rabid public school Democrat” is mad that Obama does not sacrifice his children for the sake of Democrat ideals, she writes:
I do not know why Barack and Michelle Obama cannot send their children to a nice public school in Hyde Park. You understand that I am a bit unstable this election season (I voted for Hillary) and I do my research by erratically Googling from home. And all I know about Hyde Park — and, readers, I’d love to be corrected if I’m wrong — is that even though real estate prices seem high, the brave little public schools in its ZIP code seem to be flailing. Their scores on www.greatschools.net are largely 2’s and 4’s (on a scale of 1 to 10, 10 being the best). When you read the tea leaves as manically as I do, those low numbers suggest that few children of educated, middle-class children are attending the local schools. Rather, they’ve withdrawn, with nary a ripple, into their whispery private enclaves.
Let us not even touch the term “community organizer,” so buffeted about, by both sides, like a balloon at a rock concert. Let us just say that if Mr. and Mrs. Obama — a dynamic, Harvard-educated couple — had chosen public over private school, they could have lifted up not just their one local public school, but a family of schools. First, given the social pressure (or the social persuasion of wanting to belong to the cool club), more educated, affluent families would tip back into the public school fold. And second, the presence of educated type-A parents with too much time on their hands ensures that schools are held, daily, to high standards.
But the significance of educated families opting in to their local public schools goes deeper than that. Research done by Richard Kahlenberg, a senior fellow at the Century Foundation, indicates that poor children benefit hugely by mixing, daily, with middle-class children (particularly those from families who value education). Conversely, as long as the deleterious effects of poverty, like rampant absenteeism and serious health issues, do not overwhelm the school culture, middle-class children suffer no ill effects. Furthermore, studies have shown that new immigrant children learn English faster and master the complex linguistic skills they need to succeed on standardized tests when they are in classrooms with native English speakers. Sadly, because of the widespread flight of higher-minded families, ethnic segregation (not to mention class segregation) in public schools today is so extreme that only one in five immigrant children will have even one native English-speaking friend.
So it is with huge grief-filled disappointment that I discovered that the Obamas send their children to the University of Chicago Laboratory School (by 5th grade, tuition equals $20,286 a year). The school’s Web site quotes all that ridiculous John Dewey nonsense about developing character while, of course, isolating your children from the poor. A pox on them and, while we’re at it, a pox on John Dewey! I’m sick to death of those inspirational Dewey quotes littering the Web sites of $20,000-plus-a-year private schools, all those gentle duo-tone-photographed murmurings about “building critical thinking and fostering democratic citizenship” in their cherished students, living large on their $20,000-a-year island.
She goes on to criticize Biden and McCain for doing the same thing but in discussing Palin, she writes:
As a Democrat I am horrified that Sarah Palin is the one who snagged the deeply profound — and absolutely ignored by professional smart people — emotional real estate of “P.T.A. mother.” I too am, in fact, not just “my kids’ mom” but their Title I Los Angeles public school P.T.A. secretary. This unheard female howl is, for better or worse, what Ms. Palin has set out to tap into; it is real, and I am sick that we’ve let the Republicans charge this ground.
Sarah Palin’s children went to what looks like a humble little public school: Iditarod Elementary on Wasilla Fishhook Road. The school’s score on www.greatschools.net is a 4. That’s a lot of street cred, for a gun-totin’, snow-mobilin’ creationist-lovin’ lady.
Oh, I’m such a depressed, Democrat P.T.A. mother.
Personally, knowing that Obama refuses to sacrifice his kids future for the sake of public schools makes me respect him more. Like the argument that minorities should move into bad neighborhoods for the sake of the neighbhorhood, I find this argument lacking. My first priority should always be to my kids and family.
But as a Democrat, especially one that refuses to give the poor families in Hyde park the same opportunity, how could Obama himself justify such actions? Under those premises, it certainly seems hypocritical and anti-poor, don’t you think? Megan McArdle has more.
“I’d like to stress again that I remain worried about the rule of law in all these events. First, the referee is on the playing field. Second, while Dodd and others are on board, basically we have the executive branch of our government — the Treasury — operating without formal checks and balances. (Does that sound familiar? Would this administration do that?) That’s why it is all being done through the Fed. Fortunately the Fed is also a competent technocracy (as is the current Treasury) but the broader implications here are very worrying, both for governance and for the future of the Fed itself.” –Tyler Cowen
“So the schools have a gigantic, powerful bargaining bloc. Who doesn’t have a bargaining bloc? The kids. Of course, the customers of corporations don’t bargain with unions either–but they have the right of exit, which is what prevents the unions (or their corporate bosses) from turning them upside down and shaking them until the last nickel falls out of their pockets. Unsurprisingly, the schools in this country that function worst are the ones where the kids have no realistic ability to exit. So for whom are those schools run? The teacher’s unions, the principal’s unions, the janitor’s unions, the friends and relations of people with seats on the school board. The children have the least powerful voice. Which is why, as far as I can tell, every single thing that is proposed by any of these groups “for the children” has the
primary side effect of employing more teachers/janitors/principals, paying same more, or making their jobs more pleasant.” — Megan McArdle, discussing the overwhelming power unions have in education and the hope that Democrats might be tempted to fight against it
Feldstein and Taylor, professors of economics at, respectively, Harvard and Stanford, and economic advisers to John McCain write in the WSJ:
Tax revenues will increase robustly over the next few years with Mr. McCain’s overall tax strategy as the economy grows — even with conservative economic growth assumptions. And by maintaining strong control over the growth of government spending, Mr. McCain will bring the budget into balance. His long record of fighting against excessive government spending, his plans to veto earmarks and reverse the spending binge of the past few years, and his strong commitment to balancing the budget can make this goal a reality.
Mr. McCain’s tax policy stands in strong contrast to Mr. Obama’s ever-changing tax proposals. Although it is difficult to know just what Mr. Obama would do if he were elected, it is clear that he wants to raise taxes on personal incomes, on dividends, on capital gains, on payroll income and on businesses — all of which will hurt the U.S. economy. He regards the tax system as a way to redistribute income, and disregards the resulting adverse incentive effects that reduce employment and economic growth.
Mr. Obama’s claim to being a big tax cutter defies credibility. His assertion that he would cut taxes on 95% of families reflects his one-time $1,000 rebate payouts, and a variety of new government spending handed out through the tax system.
Mr. McCain, on the other hand, has been clear that he wants to preserve the favorable incentive effects of the existing low tax rates — and to reduce taxes in other ways that will strengthen the economy, create jobs and help current taxpayers, including those without health insurance.
The full article can be found here.
If you have not watched it, you should – it really shows how comfortable Obama is with economics and foreign policy and has really put thought into his views. I respect him alot more after watching the video – and you will too.
“Democratic vice presidential nominee Sen. Joe Biden released 10 years of tax returns Friday…The Bidens’ joint gross income hovered between $215,000 and $320,000 a year during this period…The amount they gave to charity during this period never exceeded one-half of 1% of their annual income. The Bidens never gave more than $995 to charity in any of the tax years, and usually gave much less.” — Source
“People should be more worried than they are by the fragmentation of states. Consider that shortly after World War II, there were around 60 states. Today, there are almost 200. A lot of this increase is due to decolonization, but in recent years, the main cause has been, essentially, ethnic separatism. Because ethnic groups are mixed together, ethnic separatism is a recipe for civil war, ethnic cleansing, and worse. And because most ethnic groups are tiny, the resulting nation states can be too small to govern themselves – Kosovo is an example, again. They either become failed states, magnets for terrorists and drug smugglers, or wards of powerful states or what is mischievously called the “international community.” The more states there are, the harder it will be for them to cooperate — a worry for those concerned with world-scale problems such as climate change and international terrorism. And because international law rests on the cooperative efforts of states themselves, fragmentation may further weaken international law, to the detriment of all.” –Eric Posner, blogging at The Volokh Conspiracy
“It occurred to me, with some surprise, that the Obama supporter with whom I was debating actually thought that it was important to determine which of the two candidates was a finer human being. It’s refreshing to be reminded that educated and intelligent people actually think Obama is a better grade of person than the usual politician. I never did. I have a very low opinion of politicians as people. People who run for office are, well, the kind of people who crave power and fame more than almost anything else. These are not my favorite kinds of people. Now, I do think there are some extra-specially awful politicians (no, I name no names). But I don’t think McCain is one of them. I disapprove of the man as a politician, but I’m not going to not vote for him merely because I think he cheats. My interlocutor argued that this shows that McCain thinks the rules apply to everyone but him. I would say that such a belief seems to be a prerequisite for running for office. Check, say, Al Gore’s position on a) vouchers and b) sending his own children to private school. I have other reasons not to vote for McCain, namely that I do not think I would like the policies he would put into place”. — Megan McArdle, an Obama supporter who is a realist when it comes to politics
Don Boudreaux has more.
Greg Mankiw reports on the Top Recipients of Fannie Mae and Freddie Mac Campaign Contributions, 1989-2008:
1. Dodd, Christopher J, D-CT
2. Kerry, John, D-MA
3. Obama, Barack, D-IL
4. Clinton, Hillary, D-NY
N.B.: Senator Dodd is Chairman of the U.S. Senate Committee on Banking, Housing, and Urban Affairs.
So said Obama when he was deep in it reports the New Republic:
He told Kellman that he feared community organizing would never allow him “to make major changes in poverty or discrimination.” To do that, he said, “you either had to be an elected official or be influential with elected officials.” In other words, Obama believed that his chosen profession was getting him nowhere, or at least not far enough. Personally, he might end up like his father; politically, he would fail to improve the lot of those he was trying to help.
And so, Obama told Kellman, he had decided to leave community organizing and go to law school. Kellman, who was already thinking of leaving organizing himself, found no reason to argue with him. “Organizing,” Kellman tells me, as we sit in a Chicago restaurant down the street from the Catholic church where he now works as a lay minister, “is always a lost cause.” Obama, circa late 1987, might or might not have put it quite that strongly. But he had clearly developed serious doubts about the career he was pursuing.
Though I would add that the political process is also a lost cause in helping the poor, but that lesson, if Obama wins the presidency, will be one he will learn later.