Category: Economics

And We Wonder Why . . .

By , December 4, 2012 3:09 pm

To simply call this video by the California Teachers Union offensive is to do offense to the word offensive:

Warning: You should be standing up when the video hits the 2:55 mark; otherwise, you may injure your jaw when it hits the floor.

Some Truth Telling

By , November 30, 2012 8:39 am

Kevin Williamson is a conservative columnist that I trust. I base my trust on the fact that when he swings his scythe through the political weeds, he is indiscriminate. Both bad Republican and bad Democrat ideas fall by the wayside–or would if he actually had any power. In National Review today, he cuts into the fiscal cliff debate, revealing it for what it is–a charade.

Chew on this quote from his article for a moment:

The fundamental unseriousness of the fiscal-cliff debate can be appreciated by examining [Senator Bob] Corker’s (R-Tenn.) plan . . ., which probably is very close to the best that deficit hawks could hope for in terms of a bipartisan compromise — which is to say, precious little. At best, the Corker plan would reduce the growth of U.S. federal debt by about $4.5 trillion over the next decade, but it would not eliminate the deficit or reduce the debt, and it would allow for trillions of dollars to be added to the wrong side of the national ledger. (emphasis supplied)

To repeat, just in case you didn’t grasp Williamson’s point: Corker’s plan would only reduce the growth in Federal spending over 10 years. It does not actually reduce the debt, which will continue to grow and grow and grow and so on. In other words, under Corker’s plan–and he’s a Republican, mind you; a so-called deficit hawk–10 years from now our national debt would be much larger than it is today–“trillions of [new] dollars” on the “wrong side of the national ledger,” Williamson writes–just not as large as it would be without Corker’s plan.

Some wise people argue for more spending in times like these to keep the economy moving along. When they do, they generally talk about raising taxes and spending the new revenue on our infrastructure. I’m conflicted on this subject. I see the need and I’d like to contribute, but the apparent unseriousness of the people who would actually be collecting and spending the dollars brings to mind a drunk teenager asking his parents for the keys to the family car.

And so the game continues. Somewhere, Nero is stringing his violin.

Another Defense of Niall Ferguson

By , August 21, 2012 1:05 pm

Harvard history professor Niall Ferguson took a shot at President Obama the other day in Newsweek, and in short order Ferguson was taking incoming fire from his own critics, including Paul Krugman, The Atlantic, and Politico, among others. I’m not an expert in either fiscal or foreign policy, so I’ll not comment there. I will say that if Krugman and The Atlantic missed the mark as badly as Politico’s Dylan Byers did, Ferguson’s wounds should heal quickly.

David Frum has come to Ferguson’s defense on the foreign policy front. This is my defense on the English grammar front.

Here is the relevant part of what Byers wrote at Politico:

So, in order to get himself out of that predicament, Ferguson decides to edit the CBO report to satisfy his own conclusions:

If you are wondering how on earth the CBO was able to conclude that the net effect of the ACA as a whole was to reduce the projected 10-year deficit, the answer has to do with a rather heroic assumption about the way the ACA may reduce the cost of Medicare. Here’s the CBO again:

“CBO’s cost estimate for the legislation noted that it will put into effect a number of policies that might be difficult to sustain over a long period of time. The combination of those policies, prior law regarding payment rates for physicians’ services in Medicare, and other information has led CBO to project that the growth rate of Medicare spending (per beneficiary, adjusted for overall inflation) will drop from about 4 percent per year, which it has averaged for the past two decades, to about 2 percent per year on average for the next two decades. It is unclear whether such a reduction can be achieved …”

Indeed, it is, which is why I wrote what I wrote.

But Ferguson cut the CBO excerpt off mid-sentence and changed the meaning entirely. Here is how that last sentence in the excerpt actually reads:

It is unclear whether such a reduction can be achieved through greater efficiencies in the delivery of healthcare or will instead reduce access to care or the quality of care (relative to the situation under prior law.)

So contrary to what Ferguson leads readers to believe, the CBO report does not state that the reduction is “unclear.” What is “unclear” is whether the reduction will come through greater efficiencies in healthcare delivery or reduced access to care.

So, one more time: The Oxford-trained, Harvard-employed, Newsweek contibutor Niall Ferguson just edited the CBO report to change its meaning.

With all due lack of respect: What are you thinking?

Better question: What was Mr. Byers thinking? I responded to him with the following:

Dylan,

With all due respect, Ferguson’s so-called “selective” edit did not change the meaning of the CBO’s sentence. You did, however.

You wrote, “So contrary to what Ferguson leads the reader to believe, the CBO report does not state that the reduction is ‘unclear.’ What is ‘unclear’ is whether the reduction will come through greater efficiencies in healthcare delivery or reduced access to care.”

Both sentences in that statement are incorrect: 1.) Ferguson’s edited version of the CBO report said “It is unclear whether such a reduction can be achieved” not that the reduction is “unclear.” 2.) Even in its unedited form, the CBO report did not say that it was unclear whether the reduction would come from greater efficiencies OR reduced access to healthcare. No, the CBO said that it was unclear whether the reduction would be ACHIEVED through greater efficiencies. If those efficiencies did not materialize, access to healthcare would be reduced.

Look at it this way: The structure of the CBO sentence in question is not parallel. The verb “achieved” applies only to the first clause and NOT to the second. To see what I mean, let’s remove the first clause:

“It is unclear whether such a reduction can be achieved . . . will instead reduce access to care or the quality of care (relative to the situation under prior law).” Pretty silly sentence if you ask me.

The second clause only makes sense if you excise the verb “can be achieved” as follows: “It is unclear whether such a reduction . . . will instead reduce access to care or the quality of care (relative to the situation under prior law).” In other words, the reduced access to healthcare will be the result of the reduction in Medicare spending rather than the reduction in Medicare spending being the result of reduced access to healthcare.

Thus Ferguson’s edit was not selective at all. According to the CBO, IT IS unclear whether such a reduction can be achieved. The words “through greater efficiencies in the delivery of healthcare” only speak to how that reduction might come.

Me thinks you owe Mr. Ferguson an apology–or at least a correction.

I’ll let you know how Mr. Bryers responds.

UPDATE: Mr. Bryers responded via e-mail, writing:

Hi Gregory,

You’re wrong.

The full sentence: “It is unclear whether such a reduction can be achieved through greater efficiencies in the delivery of healthcare or will instead reduce access to care or the quality of care (relative to the situation under prior law.)”

Break it down: It’s unclear whether A can be achieved through B or will instead reduce C.

As in, “It is unclear whether weight-loss can be achieved through exercise alone or will instead reduce food-intake.” It would be ridiculous to make that mean, “It is unclear whether weight-loss can be achieved.”

Thanks,
D.

I responded in kind, well, the short kind: “Sorry, but you’re still wrong.”

To which he responded:

Gregory,

You agree that there is a reduction?

D.

And dutifully, I replied:

Dylan,

I agree that the CBO projects that the growth rate of Medicare spending will drop (or reduce) from 4% to 2% per year.

Do you agree with the following? And if not, why not?

The second clause only makes sense if you excise the verb “can be achieved” as follows: “It is unclear whether such a reduction . . . will instead reduce access to care or the quality of care (relative to the situation under prior law).” In other words, the reduced access to healthcare will be the result of the reduction in Medicare spending, rather than the reduction in Medicare spending being the result of reduced access to healthcare.

Reduced Medicare spending is, after all, the subject of the verb “reduce” in the CBO sentence I quote above.

Thanks,
Greg

And that’s how things stand at 4:16 PM Mountain Time.

UPDATE (Wed. 8.22 10:22 AM):

Yesterday, Dylan asked:

You agree that there is a reduction?

I responded:

I agree that the CBO projects that the growth rate of Medicare spending will drop (or reduce) from 4% to 2% per year.

Do you agree with the following? And if not, why not?

The second clause only makes sense if you excise the verb “can be achieved” as follows: “It is unclear whether such a reduction . . . will instead reduce access to care or the quality of care (relative to the situation under prior law).” In other words, the reduced access to healthcare will be the result of the reduction in Medicare spending, rather than the reduction in Medicare spending being the result of reduced access to healthcare.

Reduced Medicare spending is, after all, the subject of the verb “reduce” in the CBO sentence I quote above.

A bit later, I read a new post by Byers, one that compared a 2009 CBO statement with the 2011 statement at issue. I quickly wrote Byers:

I just read your “ducks, nitpicks” post in which you virtually concede my argument: The CBO is (was?) unclear whether the reduction can be achieved–yes, the CBO said it more clearly in its 2009 letter, but the bolded quote in the 2011 testimony says essentially the same thing, as I’ve pointed out in my previous e-mail. Seems to me that the bone you want to pick is with the CBO because, I repeat, Ferguson’s quote was fair, ellipsis and all. The CBO–in both quotes–was unsure whether the reduction would be achieved through efficiencies. The possible reduction in care or access to care would be **because** of the reduction in spending.

Spin it as you will, that’s that the CBO says in both bolded quotes in your “ducks, nitpicks” post.

He responded:

Ferguson is suggesting the CBO says there might NOT be a reduction.

And followed up with:

In other words, if you are correct, why did the 2009 CBO say “if so” and “whether”

To which I responded:

Dylan,

You accused Mr. Ferguson of editing the CBO report in “a ridiculous, misleading, ethically questionable way that completely misses the mark” of “chang[ing] the meaning entirely.” And yet, here we are in a two-day e-mail exchange, debating the meaning of the very sentence in question. Ironic, no? I’ll repeat my understanding of the sentence in question one more time.

The short story: In both CBO statements, the first clause is about the HOW of the reduction. The second clause is about the possible EFFECT of any reduction. The CBO statements do not present a case of either/or.

Let’s look at CBO 2011 again–grammatically:

It is unclear whether such a reduction [the object of this sentence] can be achieved through greater efficiencies in the delivery of healthcare.

OR

It is unclear whether such a reduction [the subject or actor in this sentence] will instead reduce access to care or the quality of care (relative to the situation under prior law.)

As I read those two sentences, I see two different concerns on the CBO’s mind: 1.) a question of whether greater efficiencies will lead to a reduction of Medicare spending, and 2.) a concern about the effect of a reduction in Medicare spending–however that reduction comes about. The first is a question of HOW. The second is a concern about EFFECT.

That reading is buttressed by the CBO’s 2009 letter

“It is unclear whether such a reduction in the growth rate could be achieved, and if so [that is, IF it is achieved], whether

1.) it [the reduction–the object of this clause] would be accomplished through greater efficiencies in the delivery of health care

OR [however it’s achieved]

2.) [the reduction–the subject of this clause] would reduce access to care or diminish the quality of care.”

To repeat: In both CBO statements, the first clause is about the HOW of the reduction. The second clause is about the possible EFFECT of any reduction. The are separate issues or concerns.

As you said yourself in your “Nitpicks” post, had Ferguson quoted the 2009 letter, he would have been on firm ground. My analysis says that he was also well within the bounds of a fair reading of the 2011 statement to claim that the CBO was unclear that a “reduction in the growth rate could be achieved.”

Again, if you’ve got a bone to pick, go pick it with the CBO person who wrote those statements. They could have been written more clearly. So yes, I can see where you’re coming from, but it’s a stretch–and frankly unfair–to claim that your reading is the only correct reading and therefore Ferguson “misses the mark,” is “unethical,” and that he “changed the meaning entirely” of the CBO’s statement.

I don’t know Ferguson. Though I lean right, this is not a partisan issue for me. I simply feel that your post was unfair and responded accordingly.

Respectfully,

Greg Taggart

(All emphasis and most of the formatting in the last e-mail above is mine, something I point out to the general reader, but that I did not say in my original e-mail to Byers since he was familiar with the actual statements.)

Update:
Ferguson defends himself.

President Obama Is Right

By , August 14, 2012 9:54 am

I agree with what President Obama says in this video, particularly at around the 4:00 – 4:30 mark. Until we–Republicans and Democrats–stop fear mongering, we will not solve our nation’s financial problems.

The question is, does President Obama and his side of the aisle really believe what he says in that video? The evidence from the last few weeks says no. To be fair, does the Republican party?

Senator Simpson’s Budget Buddy on Paul Ryan and His Budget Plan

By , August 13, 2012 10:24 am

Hot Air has the story. It ain’t good for Mr. Obama

Fair Criticism or Hit Piece?

By , August 2, 2012 1:19 pm

In Wednesday’s New York Times, Jared Diamond, author of Guns, Germs, and Steel, takes Governor Romney to task for misrepresenting the thesis of his book in the Governor’s speech in Israel. He goes so far as to “doubt whether Mr. Romney read” his book. In my view, Diamond’s NYT op-ed is an uncharitable hit piece masquerading as indignant criticism. That’s not to say that Romney was completely accurate in his discussion of Diamond’s book. It is to say that Romney got the thesis–as stated by Diamond in the NYT–essentially right; that his mention of iron ore, though a bit off base, captured the essence of what Diamond said about iron in his book; and that judging by Romney’s discussion of Diamond’s book in his own book, No Apology, Romney has read Guns, Germs, and Steel.

Before we begin, let’s remember the context of Romney’s speech. He was speaking at a fund-raiser in Israel. He spoke about a variety of issues for around 20 minutes. I’ve not been able to find a copy of the speech–if one exists–but judging by something he said, I’d guess the speech was an off-the-cuff recitation of his stump speech, tailored to his audience (more below). What it was not was a book review of Diamond’s book. What it was not was a point-by-point discussion of Diamond’s thesis. And that’s important.

Here’s the relevant part of Romney’s speech, as quoted by Diamond:

[Diamond] basically says the physical characteristics of the land account for the differences in the success of the people that live there. There is iron ore on the land and so forth. (emphasis mine)

Note, the words “and so forth.” That’s the little throwaway that tells me Romney was speaking off the cuff and without notes. Note also that he summarizes Diamond’s book in about 30 words–hardly a full discussion.

According to Garance Franke-Ruta at the Atlantic, Romney goes on to say,

And you look at Israel and you say you have a hard time suggesting that all of the natural resources on the land could account for all the accomplishment of the people here. And likewise other nations that are next door to each other have very similar, in some cases, geographic elements.

That’s it. As far as I can tell, that’s all that Romney said that relates to Diamond’s book other than the next paragraph where Romney mentions David Landes’s Wealth and Poverty of Nations, which I’m not going to discuss here because my interest is in Diamond’s criticism.

Now, here’s how Diamond characterizes his own book:

My focus was mostly on biological features, like plant and animal species, and among physical characteristics, the ones I mentioned were continents’ sizes and shapes and relative isolation. I said nothing about iron ore, which is so widespread that its distribution has had little effect on the different successes of different peoples. (emphasis mine)

In fact, he did say something about iron ore, on page 246, where he writes,

[Ancient peoples] gradually learned . . . to work available pure soft metals such as copper and gold, then to extract metals from ores, and finally to work hard metals such as bronze and iron. (emphasis mine)

and on page 259, where he continues,

One reason why technology tends to catalyze itself is that advances depend upon previous mastery of simpler problems. For example, Stone Age farmers did not proceed directly to extracting and working iron, which requires high-temperature furnaces. Instead, iron ore metallurgy grew out of thousands of years of human experience with natural outcrops of pure metals soft enough to be hammered into shape without heat (copper and gold). It also grew out of thousands of years of development of simple furnaces to make pottery, and then to extract copper ores and work copper alloys (bronzes) that do not require as high temperatures as does iron. In both the Fertile Crescent and China, iron objects became common only after about 2,000 years of experience of bronze metallurgy. New World societies had just begun making bronze artifacts and had not yet started making iron ones at the time when the arrival of Europeans truncated the New World’s independent trajectory. (emphasis mine)

Diamond goes on to say that what Romney said was not new because he apparently got it wrong in his book No Apology as well. Here’s the relevant passage from that book, again according to Garance Franke-Ruta of The Atlantic:

In his best-selling book Guns, Germs, and Steel, Jared Diamond notes that long ago, the availability of minerals like iron ore meant that some nations could fashion weapons and conquer their neighbors while others without those minerals could not. The complex geography of germs and disease could cripple the economy of one nation while opening new possibilities for another. A nation’s rivers, mountains, and deserts dramtically shaped the transportation network essential for trade and economic development. For scholars like Diamond and many others, the relative differences between nations and people are largely the result of these kinds of inherent natural features. To a degree, there is truth in that perspective, but it simply doesn’t fully account for the great differences between nations and civilizations.

Diamond is right that in both in his speech and in his book, Romney does imply that iron ore was unevenly distributed around the world, when in fact what was not widespread was the ability to turn iron ore into steel. A different disparity, but a disparity nonetheless, and apparently an important one, given that Diamond points out in his book that the Europeans “truncated the New World’s independent trajectory.” Why? Because “New World societies had . . . not yet started making iron [artifacts]” when the Europeans arrived. Isn’t that essentially the point Romney was making in No Apology, that some had iron weapons when others did not? The only difference is Diamond attributed the relative circumstances to metallurgy; Romney mistakenly attributed them to the uneven distribution of iron ore.

Furthermore, Romney–especially in his book–briefly covers the same ground Diamond does in his NYT summary of his book’s focus. As someone who has read neither Romney’s speech nor Diamond’s book in their entirety, I ask anybody to explain to me how Romney’s brief discussion of Diamond’s book is so far off base as to warrant an op-ed response in the New York Times. Then tell me if you think Romney has read Diamond’s book.

UPDATE: Given that Diamond forgot that he did discuss iron ore in his book, isn’t it only fair to give Romney some slack for forgetting that the it was metallurgy that was not widely distributed across the earth rather than iron ore?

Scalia Hits The Nail — And Hard

By , June 28, 2012 9:50 am

From Scalia’s dissent (at page 190 of the opinion), joined by Kennedy, Alito, and Thomas, in the Affordable Care Act case:

The Court today decides to save a statute Congress did
not write. It rules that what the statute declares to be a
requirement with a penalty is instead an option subject
to a tax. And it changes the intentionally coercive sanction
of a total cut-off of Medicaid funds to a supposedly
noncoercive cut-off of only the incremental funds that the
Act makes available.

The Court regards its strained statutory interpretation
as judicial modesty. It is not. It amounts instead to a vast
judicial overreaching. It creates a debilitated, inoperable
version of health-care regulation that Congress did not
enact and the public does not expect. It makes enactment
of sensible health-care regulation more difficult, since
Congress cannot start afresh but must take as its point of
departure a jumble of now senseless provisions, provisions
that certain interests favored under the Court’s new design
will struggle to retain. And it leaves the public and
the States to expend vast sums of money on requirements
that may or may not survive the necessary congressional
revision.

The Court’s disposition, invented and atextual as it is,
does not even have the merit of avoiding constitutional
difficulties. It creates them. . . .

Hurrah for the limits the Court imposed on the Commerce Clause. Boo because the Court struggled so hard to find a tax. Double boo on a Congress that didn’t have the guts to call it a tax in the first place.

I Beat Tyler Cowen to the Punch

By , June 17, 2012 10:51 pm

Tyler, today, in The New York Times:

The reason that we aren’t getting more expansionary macro policy is fundamental: a lack of trust. It’s not an easy problem to fix, but the place to start is by recognizing it.

Me, over a year ago, on this blog:

. . . there is one thing missing from both their statement [of ten former chairpersons of the Council of Economic Advisors] and the Bowles/Simpson report they refer to: What can Congress and the President do to regain the trust they’ll need to pull this trick out of a hat?

Elinor Ostrom, RIP

By , June 12, 2012 12:01 pm

I was only vaguely aware that Elinor Ostrom won the Nobel Prize in Economic Sciences in 2009. From this post on the Volokh Conspiracy, I can see she is someone I should know more about.

Politics and Policy: Does it Matter Who’s Driving?

By , March 13, 2012 3:09 pm

The following paragraph in a post on TheMacroTrader.com caught my eye today:

This is a good time for a disclaimer-Some people might call me right of the right wing when it comes to personal views and voting. When it comes to trading, politics absolutely need[s] to be put aside. I take a pragmatic view of things and never confuse politics with policy.

Which, in turn, reminded me of one of my posts that had the following poll result:

Which brings me back to the claims in the first post I referred to: “When it comes to trading, politics absolutely needs to be put aside.” I get TheMacroTrader’s point: when creating policy, we need to operate from facts. But remove all politics from the equation? I’m not so sure about that proposition. Remove all politics, and any sane person would vote for Romney, based on the poll result I posted above. But the fact is that all kinds of considerations enter into virtually all of our decisions. In the case of Romney, many won’t vote for him because of his stand on abortion, but they’d be happy to have him managing their financial affairs. Likewise, facts can only tell us so much about oil: that we’ve probably passed peak oil; that many reasons other than Obama account for the recent rise in the price of gas; etc. But then there’s this in that TheMacroTrader.com post:

T Boone Pickens is not lying when he says that every President since Nixon has declared that we will be energy independent and then has proceeded to do nothing.

Is this time different? Will one of the candidates–including our current President–step up and do something? And so we’re back to politics.

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