Wednesday, January 23, 2008

Earmark Corruption? Par For The Course

Mark Tapscott:
With the exception of a tiny band of GOP senators led by Tom Coburn, R-OK, and Jim DeMint, R-SC, and House Minority Leader John Boehner, Republican Study Committee chairman Jeb Hensarling and the small caucus of anti-earmark conservatives, the congressional GOP is every bit as addicted to pork-barrel politics as the Democrats, if not even more so.

That's why since before Christmas, the White House has dawdled on what ought to be a no-brainer decision and has thus been hearing from a steady procession of congressional GOPers pleading with Bush not to sign the Executive Order, like drug addicts begging the judge not to force them into rehab.

From that perspective, Blunt's actions, the deafening silence of Senate Minority Leader Mitch McConnell on the Executive Order, and the determined effort of National Republican Congressional Committee chairman Tom Cole of Oklahoma to get a seat on the House Appropriations Committee instead of supporting efforts to put anti-earmarker Rep. Jeff Flake, R-AZ on the panel are all par for the course.

The problem is the congressional wing of the GOP is all but the second caucus of the Government Party in Washington. Bush wimping out on what could be a milestone in the fight to restore limited government and a tremendous boost for Republican prospects in the 2008 campaign simply reflects the general lack of political courage in the GOP at the national level on spending and entitlements. These people love Big Government and won't take serious actions to reduce its size and scope of power.
The idea here is that because of the way earmarks are accomplished by Congress, the President is probably not constitutionally bound to spend the money on the earmarked projects. Apparently the President was thinking about signing an executive order that would tell the executive branch agencies not to spend the earmarked money in that way. It seems to me that would be a good thing, but alas, it appears now that the President will continue to join with the corruption of Congress. Reforming the corrupt practices of our government continues to be unlikely, and I should perhaps seek to refuge of the rationally ignorant.

Tuesday, January 15, 2008

Cold Weather Kills

Tyler Cowen:
Spells of extreme cold kill over 27,000 Americans each year, or about 700 people each very cold day. Heat waves may receive more publicity, but it turns out that cold periods — days with an average temperature below 30 degrees —have more significant and longer-lasting effects on human mortality. More people die in cold periods than in homicides.

Extreme cold brings cardiovascular stress as human bodies struggle to adjust to the temperature; many of the deaths in these periods come through heart attacks. Heat waves tend to kill people who were already weakened and would have died soon anyway; cold periods bring additional people to the verge of death.

When retired people move to a warmer state, their life expectancy rises dramatically. In fact, 8 to 15 percent of the increase in American life expectancy over the last 30 years comes from people moving to warmer climates, according to research done by two economics professors, Olivier Deschenes at the University of California, Santa Barbara, and Enrico Moretti, at the University of California, Berkeley.
I wonder the economists researching global warming have considered this in their analyses yet?

Fraudulent Borrowing

Tyler Cowen:
There has been plenty of talk about “predatory lending,” but “predatory borrowing” may have been the bigger problem. As much as 70 percent of recent early payment defaults had fraudulent misrepresentations on their original loan applications, according to one recent study. The research was done by BasePoint Analytics, which helps banks and lenders identify fraudulent transactions; the study looked at more than three million loans from 1997 to 2006, with a majority from 2005 to 2006. Applications with misrepresentations were also five times as likely to go into default.

Many of the frauds were simple rather than ingenious. In some cases, borrowers who were asked to state their incomes just lied, sometimes reporting five times actual income; other borrowers falsified income documents by using computers. Too often, mortgage originators and middlemen looked the other way rather than slowing down the process or insisting on adequate documentation of income and assets. As long as housing prices kept rising, it didn’t seem to matter.

In other words, many of the people now losing their homes committed fraud. And when a mortgage goes into default in its first year, the chance is high that there was fraud in the initial application, especially because unemployment in general has been low during the last two years.
This is interesting. If the President and Congress are going to look for policy responses to mortgage defaults, then shouldn't this be a big part of the policy discussion? In cases of borrower fraud, it seems to me that the mortgage contracts themselves probably suggest what government's role in the default should be, which is to enforce the contract's provision with respect to default. There wouldn't seem to me very solid normative grounds to have government "bail out" the borrower who had committed fraud in securing the mortgage.

Friday, January 11, 2008

The Selfishness Of Others

Walter Williams:
"Selfish" is a bit more useful term, and it's the human motivation that gets wonderful things done. For example, I think it's wonderful that Alaskan king crab fishermen take the time and effort, often risking their lives in the cold Bering Sea, to catch king crabs that I enjoy. Do you think they make that sacrifice because they care about me? I'm betting they don't give a hoot about me. They make it possible for me to enjoy king crab legs because they want more money for themselves. How much king crab would I, and millions of others, enjoy if it all depended on human love and kindness?

Thursday, January 10, 2008

Politics & Intergenerational Justice

Robert Samuelson has some very important observations about the young and the old in this presidential campgaign:
The big lie of campaign 2008 -- so far -- is that the presidential candidates, Democratic and Republican, will take care of our children. Listening to these politicians, you might think they will. Doing well by children has now passed Motherhood and Apple Pie as an idol that all candidates must worship.

"We will do whatever it takes to make America a better country, to give our kids a better future," says Mike Huckabee, winner of the Republican Iowa caucuses.

"We will deliver for our children, our grandchildren and our great-grandchildren," claims Sen. Barack Obama, the Democratic winner.

"We're going to reclaim the future for our children," says Democratic Sen. Hillary Clinton.

Actually, these are throwaway lines, completely disconnected from reality.

Our children face a future of rising taxes, squeezed -- and perhaps falling -- public services, and aging -- perhaps deteriorating -- public infrastructure (roads, sewers, transit systems). Today's young workers and children are about to be engulfed by a massive income transfer from young to old that will perversely make it harder for them to afford their own children.

No major candidate of either party proposes to do much about this, even though the facts are well-known.

I view this forced income transfer from young workers to retired workers as intergenerational injustice, and I've posted on this thought before, here and here for example.

Samuelson concludes his commentary with this:
A moral cloud hangs over our candidates. Just how much today's federal policies, favoring the old over the young and the past over the future, should be altered ought to be a central issue of the campaign. But knowing the unpopular political implications, our candidates have lapsed into calculated quiet.

They pay lip service to children but ignore the actual programs that will shape their future. The hypocrisy is especially striking in Obama. He courts the young, promises "straight talk," and offers himself as the agent of "change." But his conspicuous omissions constitute "crooked talk" and silently endorse the status quo.

The insidious nature of this problem is that because the spending increases for the elderly occur gradually, the pressures on taxes and other government programs will also intensify gradually. A crucial moment to clarify the stakes and compel politicians to make choices probably won't occur until it's too late.

The longer we delay -- and we've done so now for several decades, because the strains created by an aging society have been obvious that long -- the more likely that eventual "solutions" will be unfair to both young and old. To acknowledge that and to come to grips with it would constitute genuine "change."
Social security and the allied government programs seems to have always been discussed by our political leaders in terms of a big lie. It seems unlikely this will change any time soon. Both President Clinton and President Bush made efforts to reform social security in needed directions, and in both cases politics stopped the efforts.

Is it ironic that Senator Obama draws young voters in large numbers when it seems he too has little interest in reforming intergenerationally unjust programs? Or, perhaps the young voters are unconcerned about what government has promised as their very large tax burdens? Or, perhaps young voters are rationally ignorant, as we tend to assume all voters are in public choice analysis? Or perhaps young voters are merely irrational?

Friday, January 04, 2008

Santa Claus Politics

Tom Sowell, as always, gets to the heart of the matter, in this case explaining the nature of politics as being somehow like Santa Claus. Here is the way he concludes his commentary to begin the new year:

After the departure of Senator Phil Gramm and House Majority Leader Dick Armey, Congress has been an economics-free zone. There is not one economist among the 535 members of Congress.

But, in an election year, that is not a political handicap. Santa Claus has won far more elections than any economist.

What does he mean about Santa Claus winning elections?
Senator Hillary Clinton's Christmas commercial, showing various government programs as presents under a Christmas tree, was a classic example of calculated confusion in politics.

Anyone who believes that the government can give the country presents has fallen for the oldest political illusion of all -- the illusion of something for nothing.

Santa Claus may turn out to be the real front-runner in the primaries, judging by the way candidates are vying with one another to give away government goodies to the voters.

Santa Claus is bipartisan. The Bush administration is unveiling its plan to rescue people who gambled and lost in the housing markets when the bubble burst.

We now have a bipartisan tradition of the government stepping in to rescue people who engaged in risky behavior -- whether by locating in the known paths of hurricanes in Florida or in areas repeatedly hit by wildfires over the years in California or by doing things that increase the probability of catching AIDS.

Why not also rescue people who gambled away their life's savings in Las Vegas? That would at least be consistent.

Apparently the only people who are supposed to be responsible are the taxpayers -- and they are increasingly made responsible for other people's irresponsibility.

Military conscription is long gone. But taxpayers are still being conscripted to play Santa Claus.
Go ahead. Read the entire piece and consider just how well Sowell helps us understand politics, politicians, and government

Health Insurance: The Young & The Old

Betsy McCaughey discusses proposals to have government mandate that everyone buy health insurance. This is a policy idea that seems to have a pretty prominent position in the political agendas of several presidential candidates. There is an interesting implication of such a public policy:
The first myth is that it's fair to make everyone pay the same price for health insurance. It is not: For young people who rarely use health services, this is a rip-off. If people in their 20s paid attention to politics and voted, politicians wouldn't dare try this.

According to the latest Census data, 56% of the uninsured are adults aged 18-34. True enough, forcing them to be a part of a same-price-for-everyone insurance pool will likely bring down premiums. These young people generally need minimal health care ($1,500 a year, on average, according to a Commonwealth Fund study).

In most states, (but not New York and Vermont), young adults who buy health insurance are charged premiums that reflect their low medical needs. A 25-year-old man can buy a $1,000 deductible policy for a quarter to a third of what a 55-year-old man has to pay. (In Manchester, N.H., a 25-year-old man pays $156 per month, while a 55-year-old pays $542 for the same policy, according to

Both the Clinton proposal and the bipartisan congressional proposal prohibit insurers from giving such price breaks to the young. Their mandates would force the young to subsidize the heath tab for the middle-aged generation. This subsidy would come on top of the payroll tax younger people already pay to support today's Medicare recipients. This is contrary to a fundamental American principle. This nation has always believed in making life better for its children, not exploiting them.
I used to think, when I was young and naive, that there was just such a "fundamental American principle." But, then, sometime in my recent past, I decided to try to understand the social security program. After cutting through all the political rhetoric about social security it is quite clear it is a program which uses government's power to tax to take income from young workers in order to give it to old retired workers. Of course, social security is a program that has been around for some time now. So, I no longer think America holds to such a fundamental principle, and it seems to me the proposed health insurance mandates continue what is now a pretty long tradition of government taking from those who are younger in order to give to those who are older (and often these transfers are also from those who are relatively poor to those who are relatively wealthy).

Wednesday, January 02, 2008

Alien Concepts, Reluctant Minds

Peter Boettke's comments on a New York Times article:
The problem is that various statements in the piece are so misinformed theoretically, empirically, and policy application wise that it is hard to know where to start to set the matter straight. But the article is extremely useful as a means to remind us as economic educators that our work is cut out for us and that it does take varied reiterations to force alien concepts upon reluctant minds.
I agree there are far too many problems in the piece to know where to begin a critical analysis. The piece does make an interesting read, especially if, as a member of the club of dismal scientists, you like to be discouraged. Here is how the piece ends:
“Untethered market forces lead to bad things,” said Mr. Bernstein of the Economic Policy Institute. “You simply can’t run an economy as complicated as ours on ideology alone.”
I would like to borrow just a bit from Mr. Bernstein's comment here to say: "You simply can't run an economy." The "economy" emerges. It simply is not possible to have sufficient knowledge come to reside in the minds of government bureaucrats to "run an economy" in order to achieve the great good things politicians and bureaucrats have in mind for us.

Less Creative, More Useful

Greg Mankiw:
I wonder how different the economics profession would be if economists were expected to do a year of service outside of academia or, at the very least, if university hiring committees rewarded a year of real-world experience as the equivalent of, say, a couple of academic publications. My conjecture is that the profession would be less creative but more useful.
I'm not sure if I would personally like to be required to do a year of service outside of academia. But it would certainly be a good thing if economics and the professional work of economists as researchers and teachers were more useful.