The Unbroken Window » wintercow20

The Forked Tongue

wintercow20 — Wed, 08 Feb 2012 09:16:39 +0000

I have always been bother by monetary policy for the simple fact that it seems that effective monetary policy in a fiat system with a central bank monopoly on the production of base money relies almost exclusively on managing expectations. That sounds innocuous until you realize that really it is a fancy way of saying that good monetary policy is that which tricks people best. We’ll delve into the details of what that means perhaps later on.

But this is not unusual. For all of the fits that anti-capitalists get themselves into about advertising and how corporations play mind games with people to get them to buy their products or do other awful things, that same action is either ignored when done by government or outright celebrated. Here are two additional examples:

Paul Starr, in talking about the Clinton insurance exchanges: “Consumers would acquire that insurance through purchasing cooperatives, soon renamed “regional health alliances” at the instigation of political advisers who thought that the term “cooperative” sounded too leftist.
Paul Starr, in talking about the Clinton health plan: “As a little reflection will show, the capped premium had much the same incidence as a payroll tax graduated according to firm size and average wages, but the capped premium had the singular advantage of being called a premium rather than a tax.

It’s one thing for advertising firms to use subtle language to make you want to eat the hamburgers of their clients, and quite another when the force of coercion stands behind it. But for some, that is a distinction without a difference. I beg to differ.

You Say Potatow I Say Potahto

wintercow20 — Tue, 07 Feb 2012 12:05:13 +0000

Some of us find this horrifying:

“What’s most exciting about the new standards is the ‘nationalness’ of this work—we are all in it together, talking the same language and working toward the same goal, …

That in response to the unveiling of new centrally planned math standards for our inmates K12 students.

Starving Yourself to Starve the Beast

wintercow20 — Tue, 07 Feb 2012 09:04:17 +0000

When I was a kid I vaguely remember hearing Republican support for a “starve the beast” strategy to shrink government so much that it can be drowned in a bathtub. Someone forgot to tell the Republicans that monsters lurked in the drain. Think about Medicare. Its costs were growing faster, much faster, than projected until the turds hit the fan in the 1980s (at about the time we bailed out Social Security). In an effort to stop the bleeding, price controls were imposed – really the rates that the government reimbursed hospitals for was reduced. Now, you might think that being starved of funds would put pressure on Medicare to shrink or become more effiicient or for doctors to lower costs.

But it did precisely the opposite. What ended up happening, as we all would expect knowing what we know today, was a great cost shift. Indeed, the 80s seems to be a time when the rate of increase in US health spending moved out of line with other countries’ experiences. In this case, hospitals began charging more to patients with private insurance, which in turn put more pressure on private insurers to raise premiums but also to pursue unpopular cost-cutting strategies in response. Of course, think of how the voting population responds to this. “Look at the exorbitantly large increases in private insurance premiums!” Look at how evil insurers are! And of course, this greases the wheels even further for a discussion of both single-payer health care and perhaps even single-provider health care.

Now, there are forces that push us away from both single-payer and single-provider in health care, but it is clear to me that starving the beast (even if unintentional) has resulted in precisely the opposite of what its proponents would suggest. Maybe the better option would be to allow the beast to continue eating until the tax payments required to keep it alive would have spurred the population to wield a pitchfork. Is there a better test case for this theory out there?

Balanced View for Sure

wintercow20 — Mon, 06 Feb 2012 09:53:20 +0000

In a self-described balanced political treatment of the history of health care policy, Paul Starr delivers us this:

What finally broke the grip of the hospitals (and later the doctors) on the methods of Medicare payment was the acute fiscal crisis that developed after Reagan cut taxes and increased military spending in 1981 and the economy then plunged into the worst recession in decades.

The dual recessions of the early 80s are largely thought to be the result of the necessary tightening of monetary policy at the time which was the unfortunate policy prescription (necessary) from the Keynesian unicorn period of the 1970s (high inflation and high unemployment). Indeed, the early 80s recession is known as the Volcker Recession after the chairman of the Fed who sharply and quickly increased the federal funds rate to stave off the inflation.

Interestingly, the narrative above is a little out of touch with modern stimulus advocates, no? Wouldn’t both cutting taxes and raising spending (whether on bombs or bridges or battery powered cars or basement digging for that matter) be precisely what the Keynesian doctor ordered? But is the author going to argue that doing this, only when Reagan was president, plunged us into recession? Seems like the opposite of the austerity fairy to me.

To give the author a little leeway, he did just remind readers on the page prior that Reagan himself was responsible for instituting both an expansion of Medicaid and in imposition of Medicare price controls. Remind your friends of that when you are at a dinner party.

Be Careful What You Wish For

wintercow20 — Sat, 04 Feb 2012 09:12:48 +0000

It is likely that the decline of private sector unions has led to additional pressure on the federal government to provide a more state-centered medical system. Why? One defining feature of the old-style union firms was their top-notch health care benefits. Therefore, unions would be natural opponents to government intrusions in the health care sector. Even if expansions of insurance to the non-poor population was all that was being discussed by policymakers, unions (and others with good insurance policies) would naturally view any government moves as a possible threat to their existing plans. You ought not be surprised at who politicians are talking to when they say over and over again, “If you like your current plan, you can keep it …”

The Economic Costs of Global Warming Policy

wintercow20 — Fri, 03 Feb 2012 09:27:56 +0000

When one encounters the statement above, it is typically in reference to what it might cost in terms of lost output from now going forward should policy be enacted to reduce CO2 emissions. That is in some sense a very easy analysis to do. What is far more difficult to do is estimate what the current costs of global warming policy are. How much intellectual energy is being directed into studying global warming? How much lobbying and rent-seeking is done to secure particular policy outcomes related to global warming? How much are energy costs higher today because of the prospects of future global warming policy? How much economic activity is being diverted to unproductive green elephant energy products? How much education about more important environmental problems (coastal eutrophication for example) is being tossed aside because of a focus on policy? And how much optimism, ambition and hope is being instilled in our children when they are regularly told that humans are nothing better than a malignant cancer and that we’ve already doomed countless species to extinction and even threaten our own existence because of our evil capitalistic ways? Do I really want my 6 year old learning how to write letters to their elected official? Or do I want my 6 year old to get some gumption and learn how to take some risks and be inventive and entrepreneurial? I understand those are not mutually exclusive of course.

So, if I were a real economist, I’d spend a few weeks doing these estimates. Kudos to anyone who wishes to take a crack.