Mankiw on the Ex-Im Bank.

Eli,

Greg Mankiw, professor and chairman of the economics department at Harvard University wrote this on the Ex-Im Bank:

The Export-Import Bank
I just got back from Utah, where I was one of the speakers at a conference that has been dubbed "Club Mitt." One of the other speakers--this one a politician rather than a nerdy academic like me--spoke about the need to reauthorize the Export-Import Bank.  (I won't mention the person's name, since the event is off the record.)  What struck me is how weak the arguments were. 

Three arguments for the Ex-Im Bank were given:

1. It creates jobs.  Of course it does!  If the government were to put the names of all businesses into a hat, pull out a few randomly, and give those a per unit subsidy, those businesses would expand and hire more workers. That would not make it a good policy, because the wrong jobs would be created.

2. It returns money to the Treasury.  Really?  If the bank were truly a profitable venture, we could privatize it.  I bet if the government tried to sell off the Ex-Im Bank, it wouldn't get much, if anything at all.  If the Bank's activity were actually profitable, we wouldn't need a government-run bank to do it.

3. Other countries give similar subsidies to their firms. So what? If other nations engage in corporate welfare, that is no reason for the United States to follow suit in the name of a level playing field.  We don't need to import other nation's bad policies.

Maybe there are better arguments for the Export-Import Bank.  But if this is the best advocates of the Bank can do, it shouldn't be reauthorized.

 Bill.

Grandiloquent fustian!

Eli,

I'm reading Volume I of Adam Badeau's "Military History of U. S. Grant." Here is a description of General McClernand, a political appointment by Lincoln, charged with operating an Army Corp, under Grant,

All this while, Grant was greatly annoyed by McClernand's insubordinate behavior. That officer claimed to have been placed in command directly by the President, and therefore to be independent of his superior. He constantly appealed from Grant in matters of military etiquette and law; his language was as intolerable as his actions were injudicious; his official papers teemed with self-laudation and grandiloquent fustian, assuming credit to which he was not entitled, raising objections to the orders of his commanding officer, making suggestions contrary to all the principles of military science, and fostering jealousies among different portions of the army and with the naval officers.

Grandiloquent fustian is not a term I hear everyday, but I sure would like to.

Bill

DeflateGate Disproved, but authors can't be trusted.

Eli,

Earlier this year Christopher Monckton, Willie W. H. Soon, David R. Legates  and William M. Briggs wrote a report titled, "Why models run hot: results from an irreducibly simple climate model." Rather than addressing the report's main argument, which is that models for global warming are really bad predictors, so the models assumptions need to be questioned, critics attacked the authors, specifically Willie Soon. Soon couldn't be trusted because he was in the pocket of big oil (so it was claimed), therefore the report could be dismissed without even addressing the central fact that climate models run too hot so their assumptions are necessarily wrong.

Let's see if the same thing happens with Deflating ‘Deflategate’which claims

Our study, written with our colleague Joseph Sullivan, examines the evidence and methodology of the Wells report and concludes that it is deeply flawed. (We have no financial stake in the outcome of Deflategate.)

The Wells report’s main finding is that the Patriots balls declined in pressure more than the Colts balls did in the first half of their game, and that the decline is highly statistically significant. For the sake of argument, let’s grant this finding for now. Even still, it alone does not prove misconduct. There are, after all, two possibilities. The first is that the Patriots balls declined too much. The second — overlooked by the Wells report — is that the Colts balls declined too little.

But here's the problem. The authors of Deflating Deflategate are the director or economic studies and a resident scholar of the American Enterprise Institute. Since AEI is "is a community of scholars and supporters committed to expanding liberty, increasing individual opportunity and strengthening free enterprise," surely their opinions and studies can be ignored, dismissed, derided and discarded as paid advertising of the Koch Brothers and Wall Street.

Too bad for Tom Brady and the Patriots that the wrong people had the right opinion.

Bill

Why Are The 2016 Obamacare Rate Increases So Large?

Eli,

Bob Laszewski, in my opinion, has been the most balanced, knowledgeable commentator on Obamacare.

In his most recent note, published in Forbes,

I have also made the argument that after two years the Obamacare enrollment is coming up way short of what it needs for us to be assured that we have a sustainable risk pool—enough healthy people signed up to pay the costs for the sick.

Instead of moderate rate increases for one more year, the big rate increases have begun. They are particularly large among the health insurers with the most enrollment—the carriers with the most data.

Of course, there are alternative views, based on slicing the data differently, like this:

Lowest-Cost Exchange Premiums Remain Competitive in 2016; Consumers may be able to keep increases small by selecting a low-cost silver option

Specifically, premiums for silver plans will increase 5.8 percent on average across the states analyzed, ranging from a 12.0 percent average increase in Oregon to a 5.3 percent decrease in Michigan. More than two-thirds (68 percent) of 2015 exchange enrollees picked silver plans.

“While recent public attention has focused on a subset of plans that filed for premium increases of 10 percent or more, these data reveal that most plans are proposing more modest increases,” said Caroline Pearson, senior vice president at Avalere. “Notably, final premiums could be even lower than those proposed.” 

The latter report notes, "Accessing these low cost plans may require enrollees to change carriers in some regions," which makes the claim of moderate (my term, "moderate," but is 5.8%  moderate in a zero % inflation economy?) rate increases suspect. It's like saying iPhone prices are falling as long as you buy the iPhone 3 with 8GB of memory.

Bill

Skip Showers for Beef?

Eli,

This can't be real. Is it real? It can't be.

http://www.skipshowersforbeef.com

SkipShowersForBeef.com is a nonprofit organization established during the historic California drought of 2015, aiming to support the beef industry with innovative eco-friendly practices. We aim to advocate water conservation, educate the public on drought awareness, and develop and disperse creative resources that promote environmentally responsible beef consumption. Is it real? You bet it is! Pledge today!

 I feel like at any moment Jimmy Kimmel will own up to this.

Bill

Friends Don't Let Friends Raise Taxes

Eli,

Indiana ran a full page ad in the Wall Street Journal inviting Aetna, GE and Travelers to move to Indiana to avoid Connecticut's proposed tax increase. (Funny, Bush said "No new taxes," and lost his next election. Malloy promised no new taxes, lied, and was re-elected on the promise of no new taxes, and lied again!)

The stories I've seen are putting the ad in the context of a pissing contest between Governor's Malloy and Pence. First Malloy criticized Pence over Indiana's Religious Freedom Restoration Act, now Pence is hitting back. 

I think those stories are missing the point. 

Businesses like to threaten governments they will move if they don't get tax breaks, and often those threats are idle. Moving is expensive. It disrupts the lives of the employees. It can cause management of the business to falter. But they will move. Exxon (the old Standard Oil of New Jersey) moved to Texas, as did Pepsi and many others. And it's not just the old companies that move. Surprisingly, I read recently there are more tech start-ups in Austin Texas than there are in Silicon Valley. "Study: Silicon Valley Is No Longer America’s Startup Capital." 

Texas likes to contrast its lack of an income tax versus rising rates in California and elsehwere. Fortunately I don't worry about taxes increasing again in CT since I was promised twice they wouldn't be raised. After all, Fool me once, shame on you. Fool me twice shame on me. Oops, maybe I will worry about it.

But people and businesses don't move just because of taxes. It costs a lot less to live in some places. Part of that is a function of government policies. California has decided to make building structures difficult so rents are too damn high. Houston has had more housing starts in the past few years than ALL of California. Houston does not burden builders with the same restrictions California does and the result is greater growth in Houston. 

You could argue Houston is destroying its environment with its choices. I would disagree, and obviously there are many in this world who also disagree or believe the potential trade-off is worth it. The population of Texas grew 20% from 2000 to 2010. The US grew 10%, as did California. For the first time since it was a state, California's congressional delegation did not grow in the 2010 re-allocation. That should be a worrying sign to California (and the national Democrats). 

California is still growing, but the growth is slowing and as costs continue to rise for workers, consumers and businesses, I would guess growth continues to slow. Moves across country don't happen overnight, but over decades. Governor Malloy can worry about RFRA and criticize Indiana but if he continues to ignore the impact of his policies on the consumers, workers and businesses of Connecticut, he will preside over a continued weak economy and declining population. 

I have no interest in moving to Texas. I lived in Austin and wasn't impressed. But there are plenty of places I would move to and none of them are on the Eastern seaboard. 

Bill 

 

No Sympathy for Wall Street From Me.

Eli,

Here's the headline of a Politico story from April 15th.

Hillary Clinton’s Wall Street backers: We get it. Populist rhetoric, many say, is good politics — but doesn’t portend an assault on the rich.

The story pretty much matches the headline.

Here's the headline from Political today:

Wall Street fears leftward swerve by Hillary Clinton. As Sanders gains traction, Clinton’s backers expect her to take a tougher stance on banks.

Serves them right.

Bill