A sort of Saudi Arabia within the United States

Eli,

A study "Oil: The Next Revolution," by Leonardo Maugeri of the Harvard Kennedy School, Belfer Center for Science and International Affairs was published this month.

The first paragraph of the Executive Summary:

"Contrary to what most people believe, oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption. This could lead to a glut of overproduction and a steep dip in oil prices."

Further on in the report, talking about estimates of the Bakken Field in North Dakota (the state with the lowest unemployment rate in the nation):

A sort of Saudi Arabia within the United States. While the free market delivers reliable, cheap energy to American consumers and industry, the US Government continues to invest in high cost, unreliable sources of energy like solar, biomass and wind.

Bill

Why Americans Hate Obamacare (And Will Hate Romneycare Even More)

Bill,

At dinner Friday night in a beautiful little town on the Massachusetts seacoast, I shared the table with a self described arch conservative, and did my best to enjoy my meal while listening to him rage against the evils of the ACA. Knowing that he has a small business in the state and 2 children their early 20s, I politely inquired whether he takes advantage of the components of the Massachusetts health care law (aka Romneycare) that work to his advantage. He answered, "I  know its hypocritical, but yes of course I do."

Like a thunderbolt it hit me. American hate the ACA because the vast majority of them (>80%) already have pretty good health care, and they see the law, correctly, as a benefit for those who don't. For the adequately insured, (and I include Medicare recipients in that category), the ACA offers no particular advantage. When most Americans ask "What's in Obamacare for me?" the answer for most of them is "Nothing, except your tax dollars will have to pay for it."

Roosevelt understood the critical intersection between self interest and societal interest when he insisted that Social Security benefits would be extended to all citizens whether they needed them or not. Otherwise, he correctly foresaw that Americans would come to see Social Security as a welfare plan and resent it as a giveaway to the undeserving (i.e not them).

But as Obamacare passes into history, either via Supreme Court rejection or repeal by a  Republican Congress in 2013, policy makers would do well to remember the flip side of a  politics based primarily on perceived self interest. For if we don't like someone else benefiting from the government's largess, we will scream like an enraged 2 year old when the goverment takes away something from us that we already have. Republicans understood this completely when they portrayed the ACA as "taking away away your Medicare" a program they would like to dismantle. So be careful President Romney. Go ahead and try to  "reform" Medicare outside of the framework of comprehensive tax reform and deficit reduction. I double dog dare ya.

Eli

Eli,

I haven't read the article referred to. But I've mentioned this in the past. One of the big unspoken costs the deficit imposes is a lower growth rate. It's not just that we pass on a debt burden to our children and grand children. It's also the economy grows at a slower rate making it even more difficult for them to pay off that debt.

If the young knew about this inter-generational wealth transfer that was taking place, and how we were placing major impediments in their path, I doubt they'd be happy. 

Bill.

Study: Long-term deficits are linked to 24 percent lower growth

What's the real harm of a massive government deficit? Carmen Reinhart, Vincent Reinhart, and Kenneth Rogoff find that high public debt is associated with a significantly lower level of GDP in the long run.

In a new paper for the National Bureau of Economic Research, the researchers examined the historical incidence of high government debt levels in advanced economies since 1800, examining 26 different "debt overhang episodes" when public debt levels were above 90 percent for at least five years.

The debt episodes included everything from Netherlands' Napoleonic War debts and the Japan banking crisis of the 1990s to Greece's current fiscal crisis. On average, the researchers found that growth during these periods of high debt were 1.2 percent lower on average, consistent with Reinhart and Rogoff's findings in 2010. What they also found, however, was these episodes of high debt and lower growth were quite lengthy, averaging 23 years. And the accompanying long-term drag on GDP was substantial. "By the end of the median episode, the level of output is nearly a quarter below that predicted by the trend in lower-debt periods," they explain.

Such findings strengthen the case for tackling the long-term deficit in the United States, where the debt-to-growth ratio shot past 101 percent in February. But the authors also warn that their paper shouldn't be interpreted as a manifesto "for rapid public debt deleveraging in an environment of extremely weak growth and high unemployment."

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Original Page: http://feeds.washingtonpost.com/click.phdo?i=ea0214a855d72c5165bbe295157befe4

Brooks this morning

Eli,
I'm not a big fan of Brooks, but I liked the article this morning. However, why he believes Romney is puzzling. Brooks can be a tad gullible, in my opinion.

I think too many want to double down on our current health care arrangements. Too many think it can be fixed. I want the structure fundamentally changed. Same for education and pensions.

Obama wants to double down. Romney says he wants change at the core. Unlike Brooks, I don't believe him.

Bill

From Your Lips to God's Ear, David

Bill,

David Brooks (the country's greatest columnist IMO) writes in todays New York Times

"Mitt Romney .....would structurally reform the health care system, moving toward a more market-based system. He would simplify the tax code. He would reverse 30 years of education policy, decentralizing power and increasing parental choice. The intention is the same, to create a model that will spark an efficiency explosion, laying the groundwork for an economic revival. "

If only it turns out to be so. If only he doesn't do most elected officials do, open the gates to the government trough to the folkss who get him elected. Does anyone think Sheldon Adelson put up 10 million bucks out of the goodness of his heart?

Eli

With friends like this...

Eli, 

With friends like this, Obama doesn't need enemies.  

Bill

The Washington Post: Obama's debt falsehood

Obama's debt falsehood
http://wapo.st/KFH4xq

Cuomo is a Genius: Restricts Gas Drilling to Areas Where there is Gas

Eli,

I have little respect for Andrew Cuomo, but this is pure genius. His plan is to allow gas drilling with hydraulic fracturing in the Marcellus Shale areas close to Pennsylvania and restrict it from areas that are close to the water supplies of New York City and Syracuse.

Now where do gas companies want to use hydraulic fracturing? You get one guess: In the Marcellus Shale areas close to Pennsylvania. Cuomo is allowing oil and gas companies to drill for gas in areas where they think they will be successful.

Genius.

Bill

Insurance is a terrible way to pay for medical care

Eli,

Why do we use insurance to pay for normal medical care? It's such a bad deal for consumers. The answer is, of course, the historical anomaly of companies using health care as a benefit to avoid wage controls during WWII and the subsequent determination that these insurance premiums should be tax deductible. Subsidies mixed with inertia create terrible results.

I bring this up since my company is switching medical insurance carriers. I have a choice of two policies. One costs $1,000 per month, the other $1,300 per month. My firm contributes a like amount. In total, we are paying an insurance company somewhere between $24,000 and $31,200 per year for medical care. Both are littered with benefits I have no need of and do their best to shield me from knowing or paying for most normal medical services. On the surface, it seems like a good thing, but it's not. For consumers, or at least this consumer, it's an awful waste.

In a normal year, my medical consumption is about $10,000 per year. That's full freight. No discounts, no negotiated rates. List price. So why am I and my company paying $25,000 per year? Well, of course, to avoid large expenses. And that happens, in my family about every five years. I had an appendectomy. Three kids. Some unusual issues for us last year. Every five years or so something big and expensive happens.

But insurance is still a bad deal. Let's say every year I put $25,000 into an account. For fun, let's call it a health saving account. Half would come from me, half from my employer. Out of that fund I would pay for my health care. After five years I would have $75,000 in the account. $25,000 per year x five years, less $10,000 per year for normal medical expenses. Now my emergency arises, and the $75,000 is available to pay for that emergency. Plus, since the normal medical care is something where I see the price, I'm much more likely to shop around. The $10,000 per year of medical care could go down. The typical argument is people can't shop around for doctors. That's hogwash. Normal medical care is something that can absolutely be shopped for. Conversely, it could go up. Maybe I'd like at $10,000 and determine my family's health is worth much more than that.

Alternatively, I could contribute less to my HSA and buy a catastrophic insurance policy. Buy insurance only for those large unexpected items that would be financially unbearable. Similar to flood or fire insurance we have on our houses.

Over the past five years, even give my recent unusually high medical expenses, medical insurance has been a sink hole for me. Just an awful waste of money.

It is inexplicable to me the denial of many, on the right and the left, of more market oriented solutions to financing health care. They are right in front of our face. My idea is nothing new. But we continue to go round and round on trying to determine how to make the health insurance market a better way to pay for health care. The answer may be health insurance is a terrible way to pay for health care.

Bill

We Get the Government We Deserve

Bill

In your recent posts I detect a note of dismay if not despair about the direction of the campaign thus far, and I share it. In the last 2 years we have experienced the spectacle of 4 reasonable efforts at fashioning a bipartisan solution to our fiscal crisis (Gang of 6, Simpson Bowles, Grand bargain, Gang of  6 again) and each  has tipped across the stage of national consciousness like a kabuki dancer acting out an ancient ritual- with lots of pleasing aesthetics but everyone already knows how the story ends. Each effort has failed not only because of a failure of leadership (although the principles have hardly distinguished themselves), but because the constituencies they represent don't want to accept a solution that changes their current economic level of comfort (low taxes for conservatives, generous outlays for liberals and conservatives). Both sides think cutting is fine as long as it comes out of the other guy's hide. Both sides are criminally delusional about just how much sacrifice and from how many actors that sacrifice will be required in order to fix the problem. Republicans fulminate that all we need to do is cut off the poor, and Democrats whine that all we need to do is tax the super rich and there will plenty of money for all. As you have pointed out, both sides are full of baloney. Partisans on both sides cling to the psychotic delusion that supreme victory in our 50-50 nation is just around the corner. We live in a country where President Kennedy's famous injunction is stood on its head.The only politicians who tell the truth anymore are those no longer in office and apparently no longer interested in seeking it. Better take my temperature, that's Jeb Bush I'm praising.

So my answer to Grandma is look to yourself honey. Look at all the country has provided for your generation at a cost 16 trillion bucks. Look at what you are prepared to give up, what problems you are prepared to solve before before you ask someone else to solve them for you. And ask the candidates to do the same.

Your cranky fellow blogger

Eli



  

Obama the Republican?

Eli,

About 20-21 minutes into the broadcast of ABC's, "This Week", Van Jones, the Obama surrogate says, "Now his to-do list is literally the Republican Party's to-do list. He's saying let's give tax cuts to small businesses, they won't do that. He's saying let's give homeowners the tools to cut red tape and get re-financing on their homes, on their own expense. The Republicans won't do that. They won't pass their own agenda because it's Barak Obama."

This is their campaign? Obama is a better Republican than the Republicans?

When the surrogates are pressed on Solyndra, they'll respond it was a George Bush program. When pressed on foreign affairs they say'll they've been tougher on terror than Bush. They say they are fiscally responsible while the Republican's ran up the deficit. Obama's "to-do list is literally the Republican Party's to-do list."

Really? Vote for Obama because he's a better George Bush than George Bush?

Bill.

"What About My Grandchildren?"

Eli, 

 About halfway through the article a woman remarks about the auto bail-out, good for the auto workers she says, "but where does that leave my grandchildren?"

For all Obama's talk of a level playing field and everyone playing by the rules, there sure seems to be a lot of preferences and favors to select groups.  I don't think Romney is much better.  Somewhat, not much.  

I think these special favors hurt growth so hurt our kids.  I think these special favors raise prices so hurt the poor. I think these special favors are paid for with borrowed money, so hurt our grand kids. It's not just autos, it's banks, and farmers, and unions and clean energy and on and on. Lots of protected interests on both sides of the aisle. 

Obama can lose because people know we are leaving our grandchildren a terrible legacy. Romney may not win because he isn't offering a viable alternative. 

The Obama pitch is, vote for me, I'm smart and I'll fix everything.  Romney's pitch, sadly, is the same. I'll vote for the guy who says government is the organization breaking things, not fixing them. 

Bill.

Dems to Obama: Voters don't believe economy talk
http://campaign2012.washingtonexaminer.com/article/dems-obama-voters-dont-believe-economy-talk/593901

The Nature of Affliction and the Role of Fortune

Bill,

One of my colleagues, a gifted academic physician in her late 40s. has just been diagnosed with a chronic autoimmune disease. In a great deal of pain, she is doing her job as best she can, relying on the rest of us to help out for as long as we can, hoping that this cursed affliction that is assaulting her body and spirit will somehow abate, but knowing full well that the natural history of her disease is more likely filled with debilitation and suffering, as her own T cells march relentlessly into her joints and elsewhere, exploding their cytokines like cluster bombs, destroying every healthy tissue n their path.

This is her second chronic autoimmune disease. The first, which commenced in her 20s, ending her promising career as a surgeon and required that she retrain in a less demanding field of medicine. In the meantime she has been fully engaged caring for mother who will die of a brain tumor within the next year.

The older I get, the more I'm struck by how much success in life, and satisfaction it hopefully brings, depends upon forces beyond our control.  The difficulties in my own life, most of which have been of my own making, seem modest compared to the good fortune visited upon me by forces that feel  beyond my control.  I was lucky to be born a Jew in America, lucky to have the enduring affection and unyielding loyalty of a mate I do not deserve, lucky to have produced two glittering children, one of whom at least has forgiven me my inadequacies as a father, lucky have all of the material comforts and economic security a reasonable person could want, lucky to have been in the right place and time to help write a landmark paper at a very young age that improved medical practice,  lucky to have stumbled into sharing this space with you. I've never been seriously ill or disabled, never lost a job, never buried a spouse, never felt the weight of discrimination, never worried about how the bills would get paid or what the future would hold.

And though I have mostly worked hard and overcome an obstacle here and there, I remain extremely skeptical that I somehow deserve my good fortune. Such a notion seems fatuous (to borrow your phrase) at the very least and sinister at the very worst. For one cannot argue that the more fortunate among us somehow deserve their good fortune without also embracing its counterpart,  that the unlucky and afflicted somehow somehow deserve their misery along with the indolent, the bigoted,, the inept and the criminal.

Eli

We can't just drill our way out of the problem

Eli,

According to Obama and the Dems, "We can't just drill our way out of the the problem."

Tell that to North Dakota and the Energy Information Administration www.eia.gov

 

Bill

 

The Consequences of Our Debt

Eli, 

The US will be able to borrow cheaply until it can't. That day may come without warning. We can ignore that risk believing now is not the time to grapple with this issue, but it is a risk.  

There's another issue.  Savings equals investment. When you save a dollar, it goes into the bank, or into the market. Investment equals growth. Investment drives productivity. Productivity drives wage growth. These aren't Chicago School versus Keynesian concepts. This is 2+2=4 kind of stuff. 

We borrow to subsidize the wealthy and middle class with things like Medicare, Social Security, farm subsidies and the Ex-Im Bank. Our children are left with the debt. It's lucky for us old well-off people the young aren't aware of the massive inter-generational Ponzi scheme we are playing with them. If they knew they would riot. 

Bill

News from The Hill: CBO projects US debt will be double GDP by 2037

CBO projects US debt will be double GDP by 2037
By Erik Wasson

U.S. debt will be nearly twice the size of the U.S. economy by 2037, the non-partisan Congressional Budget Office warned Tuesday.

The new CBO report warns that increased entitlement spending driven by the retirement of the baby boomers and insufficient revenue is making the long-term outlook for the national debt increasingly dire.

Under CBO's most likely scenario, in which lawmakers extend current tax rates and fail to curb entitlement spending, debt held by the public would reach 109 percent of the economy by 2026, and it would be almost 200 percent of GDP by 2037. 

Link: http://thehill.com/blogs/on-the-money/budget/230901-cbo-warns-of-grim-long-term-debt-outlook

What Do the Democrats Want?

Eli,

Help me understand what the Democrats want.

They hate George Bush for many reasons, but at least economically he followed the precise policy prescription they offer: Lots of spending, lots of tax cuts. Yet these are the policies that "got us in the mess we are in," "resulted in the worst economy since the Great Depression," and "drove the car into the ditch."

And they love Obama. But at least recently (see recent comments by Krugman, Jay Carney) they say Obama has been the austerity President, following the precise policies that will lead us into another recession.

Bush did what they wanted and they hate him. Obama has done what they hate and they love him. Seriously, what do the Democrats want?

Bill.

Obama to Wisconsin Unions: Drop Dead

Eli,

Do you find it strange the Democrats haven't gone to the mattresses over the Walker recall in Wisconsin? Walker has killed the only growing union in the US, public sector unions. Eliminating collective bargaining on key items and forcing unions to collect their own dues instead of government collection, kills the union.

Unions are the key fundraising source for Democrats and provide much of the sweat equity in campaigns.

Why aren't the Democrats moving heaven and earth to win in Wisconsin?

Losing in Wisconsin has large and lasting repercussions for the Dems.

Bill

Obama's Hollow Argument

Eli,

I don't understand how Obama thinks he is going to win this election by pointing out how poorly the economy is doing. It seems that every time the President, or one of the President's supporters opens his or her mouth the first words are, "The economy is not doing as well as it should." The second thing they have been saying, recently, is well summarized by David Axelrod on yesterday's "Face the Nation."

"No one is arguing if Mitt Romney is qualified to be President. What we are arguing is whether he is qualified to call himself a "job creator," that's not what he did in his business, uh, that's not the purpose of his business, uh, and it's certainly not what he did in Massachusetts where they had one of the worst economic records, uh, in the country, so, when you hold yourself out as an economic oracle and you say to people, "Trust me. I know how to move the country forward," and your record says something else, of course you're going to challenged for that."

Tell me. If in sentence one you are saying the economy should be better, and in sentence two you are criticizing someone for saying "Trust me, I know how to move the country forward," aren't you saying Obama shouldn't be trusted to move the country forward? It seems like such an odd argument.

Bill

Is He Toast?

Bill

Your amazement regarding the Presidents ongoing buoyancy in the polls is well placed, especially in light of May's dispiriting jobs numbers. But my guess is that the encouraging poll numbers represent an illusion for Democrats (including myself) and the president. I googled the Reagan Carter numbers for comparison and they tell a very clear story. Until a week before the election, Carter led most surveys, yet he was never going to win (unless he could portray Reagan as a dangerous lunatic, and that was never going to happen). The number that really mattered was Carter's historically dismal approval rating; 31% on election day and not much better for months beforehand. At 48%, Obama is not quite out of the game  but he is in a great deal of trouble.

While I, along with many economists, do not fault the President for the tepid recovery from the Great Recession of 2008, he and the Dems will have to play the hand they're dealt. And the Europeans incapacity for avoiding disaster can only damage his chances further (not to mention my retirement portfolio).

So we are going to have a nasty election in which the Repubs are going to to what they do best, which is to belittle and dirty up the other guy. On the other side, a sharp elbowed Chicago poll is going to do everything he can to disqualify the challenger, because that may be his only hope of holding onto the White House.

Eli

This Little Piggy Went To Market

Bill,

I don't really know what to make of the Faceboook faceplant, other than that a lot of people who thought they might get rich quick and didn't are now unreasonably pissed about it. The lawsuits make me laugh, as you like to say. But I don't understand how the opening price of a stock's IPO is the product of market forces. Isn't it the product of the best guess of the underwriters as to what the stock can fetch? Once the bell wrings the market takes over yes, and the guess turns out to be a good one or a bad one no?

Eli