Category Archives: Economics

Static Scoring Of Health-Care Costs

Yuval Levin notes that CBO is admitting that their projections are intrinsically wrong:

What we have here, in other words, is a frank admission by CBO that their methodology ignores the effects of policy changes on the behavior of both providers and consumers—effects which must, of course, be essential to the consequences of any health-care reform.

This methodological “gap” strongly favors the left in the health-care debate, because it assumes that the economics of health care are just a matter of manipulating levels of spending, and so that crude price controls will not affect access and quality and that market competition will not reduce costs. There is, of course, ample evidence of the former effect (especially in Medicaid, which in most states pays doctors at even lower rates than Medicare, at least for now), and there is some evidence of the latter too (though market forces haven’t had much of a chance to be tried, except in the Medicare prescription-drug benefit; other experiments (like Medicare advantage) all take place in the shadow of the existing fee-for-service Medicare system and so can’t really change the behavior of providers—they therefore have neither traditional Medicare’s ability to boss doctors around nor a market system’s ability to keep costs down, so they end costing no less than traditional Medicare, and sometimes even a little more.)

It’s the same kind of scam that they pull when they statically score the effect of a change in tax rates. It’s lunacy to assume that it will have no effect on behavior, and yet they do, and so delude themselves that they can predict with any confidence the resulting revenue.

Rethinking Space Transportation Regulation

Wayne Crews, one of my colleagues at the Competitive Enterprise Institute, has some thoughts at Forbes about how best to regulate the new private spaceflight industry.

[Update a while later]

Speaking of my CEI colleagues, Iain Murray has a new book out, titled Stealing You Blind: How Government Fat Cats Are Getting Rich Off of You. Sounds like the basic theme of the last three years. If not eighty.

“I Didn’t Create A Single Job”

At last, a presidential candidate who understand economics and the limits of government power:

“Don’t get me wrong,” Johnson said in a statement. “We are proud of this distinction. We had a 11.6 percent job growth that occurred during our two terms in office. But the headlines that accompanied that report – referring to governors, including me, as ‘job creators’ – were just wrong.”

“The fact is, I can unequivocally say that I did not create a single job while I was governor,” Johnson added. Instead, “we kept government in check, the budget balanced, and the path to growth clear of unnecessary regulatory obstacles.”

And the current gang in DC is doing exactly the opposite, so there’s no reason that continuing bad economic news should be “unexpected.”

[Update a couple minutes later]

The one stimulus that the government refuses to try:

It’s almost as if Washington envisions the economy not as a complex network of billions of voluntary, mutually beneficial relationships, but as a lawn mower which could be forced to run smoothly if only they’d yank hard enough on the starter cord.

Amid government’s rush to “do something,” we forget that, on a percentage basis, the nation’s most productive years, those in which the U.S. overtook Great Britain to become the world’s leading economic power, occurred prior to the creation of the Federal Reserve in 1913. What many lawmakers and regulators are not considering here is the strong possibility that the stimulus and intervention have had a deleterious effect.

No, that couldn’t possibly be.

Unexpectedly!

A compilation of headlines. What’s amazing to me is that none of them were in any way unexpected to me, because I’ve recognized the high level of economic nincompoopery at the highest levels of government for years. It’s a shame our intellectual betters (just ask them) in the media can’t figure it out.

[Update a while later]

Gee, I guess I’m smarter than the head of the Fed, too:

Fed Chairman Ben Bernanke told reporters Wednesday that the central bank had been caught off guard by recent signs of deterioration in the economy. And he said the troubles could continue into next year.

“We don’t have a precise read on why this slower pace of growth is persisting,” Bernanke said. He said the weak housing market and problems in the banking system might be “more persistent than we thought.”

You don’t say.

[Update a few minutes later]

Hard to argue with this:

As an economist, if I were working for a foreign government and were to design a package of policies to destroy a country’s economy, I would design a plan very similar to what we’ve undertaken in the U.S. over the past 18 months.

If we pursue another economic stimulus of similar size to the previous one, we may as well condemn the economy to another 10-20 years of recession.

Not only will it not work, but it will significantly add to an already grave debt problem. Stimulus is what keeps entrepreneurs from creating new jobs and products. It makes them nervous, because we have to raise taxes in the future to pay for stimulus spending, and this makes for a very uncertain business environment.

You could make a similar statement about space policy. As the preface to the book I’ve been working on for a while begins: “Imagine that extraterrestrial aliens had secretly contacted the White House and U.S. Congress after the Apollo landings, and told them under dire threat that humans were to never again venture beyond low earth orbit, but that the public was not to know this, and to make sure that their successors were aware as well. If it were the case, how would space policy have been much different for the past four decades?”

[Update a few minutes later]

More thoughts from VDH:

Two thoughts: One, the latest Democratic idea of borrowing even more money is de facto proof that all the bailouts, borrowing, vast increases in unemployment and food-stamp monies, Obamacare, etc., have done nothing but terrify employers, who are holding off buying and hiring. And, second, when one adds in the National Labor Relations Board roguery, the presidential quips about the wealthy, the Chrysler creditor mess, the nonstop spread-the-wealth, already-made-enough-money demonization of those who make over $200,000, etc., we are witnessing a sort of psychological stasis in which millions of employers are shrugging and collectively sighing, “I think I’ll pass until this crazy outfit is out of here.”

It can’t happen soon enough.