This recent interview of Barack Obama in the New York Times is a must read, it shows how deeply Obama has thought about the issues. I obviously do not agree with much of his policy proposals, but his understanding of many of the issues is impressive, especially in a President.
Monthly Archive for April, 2009
“In fact, when I look back at almost every “environmentally friendly” alternative product I’ve seen being widely touted as a cost-free way to lower our footprint, held back only by the indecent vermin at “industry” who don’t care about the environment, I notice a common theme: the replacement good has really really sucked compared to the old, inefficient version. In some cases, the problem could be overcome by buying a top-of-the-line model that costs, at the very least, several times what the basic models do. In other cases, as with my asthma inhalers, we were just stuck.” — Megan McArdle
So when DeLong, among others, says that government spending is as good as private in restoring employment, he is speaking against the whole thrust of the principle of efficient resource allocation. The essence of our recessionary problem is not the fall in aggregate demand and the lack of business confidence that accompanies it. First, it is the misallocation of resources produced by excessive risk-taking and by excessive expansion of interest-sensitive sectors. (These were generated by excessively low interest rates over the past several years.) Second, it is the uncertainty that is natural to the discovery of more appropriate combinations of resources. Third, it is the endogenous uncertainty created by the fits and starts of stimulus, bailout and unclear monetary policies.
When government adds to investment as a result of fiscal stimulus or directed monetary expansion (like buying mortgage-backed securities, student loans, etc) it does not act as a super-entrepreneur who is trying to determine the efficient and sustainable direction of resources, including the allocation of capital goods. It spends according to economically irrelevant criteria of job creation, propping up over-expanded sectors, and preventing politically painful adjustments.
Such spending is counterproductive in the medium to long term. It is also unsustainable (once the stimulus stops) since it is not consistent with the preferences of consumers-savers-investors.
These considerations tell us that government spending isn’t equally as good as private. To argue otherwise, I suggest, is a mark of basic economic error.
I recommend you read the full article, along with the comments, which include an exchange between Brad DeLong and Mario Rizzo. Full post here.
The cause of my upset is watching the key civil rights issue of this generation — improving big city public school education — get tossed overboard by political gamesmanship. If there is one goal that deserves to be held above day-to-day partisanship and pettiness of ordinary politics it is the effort to end the scandalous poor level of academic achievement and abysmally high drop-out rates for America’s black and Hispanic students….
In a politically calculated dance step the Obama team first indicated that they wanted the Opportunity Scholarship Program to continue for students lucky enough to have won one of the vouchers. The five-year school voucher program is scheduled to expire after the school year ending in June 2010. Secretary Duncan said in early March that it didn’t make sense “to take kids out of a school where they’re happy and safe and satisfied and learning…those kids need to stay in their school.”
And all along the administration indicated that pending evidence that this voucher program or any other produces better test scores for students they were willing to fight for it. The president has said that when it comes to better schools he is open to supporting “what works for kids.” That looked like a level playing field on which to evaluate the program and even possibly expanding the program…
And now Secretary Duncan has applied a sly, political check-mate for the D.C. voucher plan.
With no living, breathing students profiting from the program to give it a face and stand and defend it the Congress has little political pressure to put new money into the program. The political pressure will be coming exclusively from the teacher’s unions who oppose the vouchers, just as they oppose No Child Left Behind and charter schools and every other effort at reforming public schools that continue to fail the nation’s most vulnerable young people, low income blacks and Hispanics.
The National Education Association and other teachers’ unions have put millions into Democrats’ congressional campaigns because they oppose Republican efforts to challenge unions on their resistance to school reform and specifically their refusal to support ideas such as performance-based pay for teachers who raise students’ test scores.
By going along with Secretary Duncan’s plan to hollow out the D.C. voucher program this president, who has spoken so passionately about the importance of education, is playing rank politics with the education of poor children. It is an outrage.
The post should be read in full here.
…even though I disagree with some of what he writes.
Read this post, where Steve Sailer, in a Talking Points Memo discussion of Andrew Gelman’s political book, “Red State, Blue State”, explains why the once Republican California has become a solid Democratic voting state while the once moderate Texas has become a solid Republican voting state. See the full post here.
Agree or disagree, Sailer always brings a unique perspective that is unlike any other author. Which is why I continue to read what he writes and recommend you do the same.
Link via Greg Mankiw:
For the second time in a week, the Obama administration has discarded a major campaign pledge on international economic policy. In its decision last week not to name China a currency manipulator, and now to forswear renegotiation of NAFTA, the administration avoided two potentially costly mistakes.
These are campaign pledges that I hoped Obama wouldn’t keep. Good to see that he isn’t.
“Nominated for New Hampshire’s Teacher of the Year, Hampton Academy teacher Christina Hamilton received a layoff notice — by cell phone — the same week. Kevin Fleming, grievance chairman of the teachers union, tells the Portsmouth Herald, “Even though she is recognized as a candidate for Teacher of the Year, they have to go on seniority.” Hampton has taught eighth-grade social studies.” — Joanne Jacobs
“But is it really so absurd for ordinary Americans to be furious that Uncle Sam now promises to run up $9.3 trillion in debt during the next decade – an unfathomable sum that will inevitably lead to much higher taxes or higher inflation or both? Is it small-minded to oppose corporate welfare for automakers, banks, and insurance companies? Is it lunatic to fear further socialization of medical-care provision? Do these concerns really signal that those of us who hold them are, as Mr. Krugman alleges, “refusing to grow up”? One need not agree with the tea-partiers to concede that these worries are ones that reasonable people can, and do, have.” — Donald J. Boudreaux, economics professor, on the recent Tea Parties
In a remarkable illustration of the power of lobbying in Washington, a study released last week found that a single tax break in 2004 earned companies $220 for every dollar they spent on the issue — a 22,000 percent rate of return on their investment.
The study by researchers at the University of Kansas underscores the central reason that lobbying has become a $3 billion-a-year industry in Washington: It pays. The $787 billion stimulus act and major spending proposals have ratcheted up the lobbying frenzy further this year, even as President Obama and public-interest groups press for sharper restrictions on the practice.
Full article can be found here.
“A week after 200 low-income Washington, D.C. families were offered $7,500 vouchers, Education Secretary Arne Duncan canceled the scholarships. No new children will start at private schools in the fall; those already attending will lose voucher aid in another year, unless Congress reconsiders. As the Washington Post editorializes, this makes it easier for congressional opponents to end the voucher program for good, despite a new study showing reading gains for voucher students.” — Joanne Jacobs
“According to Forbes, Wal-Mart was the most generous corporation in America in 2007 (probably the world too), giving away $301 million in cash gifts to the Children’s Miracle Network, Feeding America, The Salvation Army, the American Red Cross, the United Way of America, National Fish and Wildlife Foundation.” — Quote via Mark Perry, who has much more here
This Ted talk video by Mike Rowe, the host of “Dirty Jobs,” is both educational and entertaining. It gives a side of work that is often ignored in todays society.
A must watch video.
Megan McArdle alerts us to an upcoming crisis:
According to the Pension Benefit Guaranty Corporation, which regulates and insures pensions, the total deficit in private plans covering about 34 million workers was a little over 10 billion as of September 2008. That’s almost certainly multiplied quite a bit since then. But the current underfunding in public plans, which cover about 22 million workers, seems to be something north of a trillion dollars. And they’re not insured.
The funds that are responsible are a different sort of headache; they’ll be slapping heavy levies on local school districts and governments to shore up their capital. That will be a nasty burden on strapped local governments, particularly in places that are already in decline. My mother’s hometown in Western New York now sees its local fiscal picture vary heavily with the financial industry 350 miles away because of teacher pensions. In good years, the market booms, tax revenue soars, and not only does their mandatory pension contribution fall, but the state often offers extra help out of the tax windfall. In bad years, the state aid disappears, their mandatory contribution goes up, and the senior citizens on fixed incomes start assembling pitchforks and torches for the march on city hall.
The full article can be found here.
“The claim that the crisis was due to an insufficient level of regulation is not convincing. For example, commercial banks have been more regulated than most other financial institutions, yet commercial banks performed no better than other classes of financial institutions. At the other extreme, hedge funds have been the least regulated, and on the whole they did better than most others in the financial sector. One major problem with regulations is the regulators themselves. They get caught up in the same bubble mentality as private investors and consumers. For this and other reasons, they fail to use the regulatory authority available to them. This implies that as much as possible, new regulations should more or less operate automatically rather than requiring discretionary decisions by regulators.” — Gary Becker, Nobel Laureate in economics, discussing new regulations for the banking industry
Though long, well worth the time for those interested in the origins of the financial crisis:
Its given by economist Alan Blinder, whose book, Hard Heads, Soft Hearts: Tough-minded Economics For A Just Society, is one of my favorite economic books of all.
“President Obama’s proposal to limit the tax deductibility of charitable contributions would effectively transfer more than $7 billion a year from the nation’s charitable institutions to the federal government. But the high-income taxpayers affected by the rule change are likely to cut their charitable giving by as much as the increase in their tax bills, which would, ironically, leave their remaining income and personal consumption unchanged. In effect, the change would be a tax on the charities, reducing their receipts by a dollar for every dollar of extra revenue the government collects.” — Martin Feldstein, Harvard economist writing in the Washington Post About Obama’s plan to increase taxes on charitable deductions