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Tuesday, August 25, 2009

Clunker Program Confusion

From Gary Becker:
"To be sure, some cars would be purchased under the program that would not have occurred during the next 18 months, if at all. But if the goal of the program is to help stimulate the economy by subsidizing consumer spending, why limit it to individuals who own old cars? Why not give vouchers to all consumers that they can spend for a limited time period on many durable goods, such as computers, printers, TV sets, washing machines, and refrigerators? If that seems like too obvious a straight handout, the government could require consumers to turn in old computers or other durable goods in exchange for new ones. Of course, as with the cash-for car clunkers subsidy, many consumers under this more general clunker program would simply alter when they purchased the new durables to take advantage of the subsidy. The net result would again be subsidies that produced little net increase in spending."

First off, kudos to Dr. Becker for completely doing a 180 within the span of a paragraph. I don't buy the argument that this is just simply shifting consumption up a couple months. Regardless, even if this does just shift SOME consumption up a few months or a couple years - it's still stimulus NOW isn't it? We all know crowding out is a factor in the long-run regardless of how/why that crowding out occurs (though I would disagree on how much of a factor it is with Gary Becker given the slack in capacity utilization/demand). I do agree though, that if the government truly supported the program, the program should have been broadened. And I agree that the administration of the program has been a train wreck.

Monday, August 17, 2009

My Health Care Idea: and

This week, Obama signaled that he might be open to doing away with the 'public' health plan option. I applaud that. While Obama said that the public plan was/is but "one small piece" of the puzzle, while that may be true as far as the overall idea for reform goes, that is not true as far as cost. The plans in the House etc. that include a public option are costly by CBO estimates in large part due to a new public health option and the bureaucracy around it.

Of all the plans out there, I like parts of the bi-partisan Wyden-Bennett plan.
One of the big benefits of such a plan is that it encourages private competition, creates federal oversight, but would also create State-run collectives - all insurance would be purchased in a State pool, as opposed to at the individual consumer level.

I like all but the last component. While the cost to the Federal government may be low, the cost to States, and the varying ways that States could administer the pools, makes this problematic. We don't want States competing with each other on health pools.

I think there is a way we can keep the 'pool' idea but still allow individuals to make their own choices (at maximum competition - across State lines and providers etc). One way would be to, instead of creating a State-run pool, create a Federal run set of pools - but that would undoubtedly cost a lot

A better option would be to take the government involvement and oversight ideas of Wyden-Bennett and merge it with Sen. Baucas's plan for a Non-profit Co-op. So, instead of pooling individuals by geography, people would be pooled nationally by the co-ops. Customers wouldn't chose their health plan - the co-ops would negotiate rates in the private market. But customers would instead choose what co-op they would be part of. The 'Wyden' part of this comes in so far as the Feds (or States) would then regulate a set of websites that provide information about all the various co-ops nationally (on price and history of service etc). It's the best of both worlds - competition amongst insurance groups due to the Co-op, and competition amongst co-ops due to the pool - all while eliminating potentially harmful competition amongst State governments.

So how should this be structured?

One way would be for the government to run the co-op site, but that could be costly. A better way would be for, in addition to the Feds providing 'seed' money for co-op formation, it would provide 'seed' money to companies like, which already have infrastructure and knowledge in place to run sites that can show customers the best deals (quality and price). Only, instead of planes and hotels, they would be 'selling' information about the best co-op plans available. The government would of course need to provide oversight to not just the co-ops but also these health information databases - but the cost would be much smaller than the government actually 'running' these programs.

Saturday, August 15, 2009

Bubbles beget Bubbles: The great Wine Bubble

A financial system out of control begets a housing bubble. But little attention is paid to the fact that a housing bubble by itself cannot cause economic hardship/ruin. It must, by definition 'infect' an entire economy (national and/or global). It does this by creating bubbles in other industries. A housing bubble makes people richer (artificially), and this richness leads to other spending of fancy which leads to other the great wine bubble of the 2000s. There is certainly a correlation here.

Cite: "Wine Spectator" magazine, Sept 30, 2009 issue

Thursday, August 13, 2009

Evidence we need to expand 'clunkers' program to other goods and services

Cash for clunkers has been wildly succesful as stimulating demand for new autos, but overall retail sales fell in July, despite many people expecting it to rise. This is more evidence that we need to take the Cash for Clunkers model and formulate it across different industries. This would not necessarily spend more money than has already been committed - but would rather serve to speed the spending up and put it in a place that has a proven record of stimulative success.

Friday, August 7, 2009

Defending Cash for Clunkers

"While on the surface the program may be seen as an economic stimulus initiative at work, no one should be fooled into believing that this is a carefully designed, long-term strategic answer to the worst economic contraction to occur in the United States since the Great Depression. And most notably, the supposedly strong response to the program actually betrays its supercilious essence. For one thing, four of the the five most popular cars being purchased under "cash for clunkers" are foreign brands, meaning the impact on the domestic auto industry is minor at best."

First, no one ever said it was a 'long-term strategic answer' to anything. Economic stimulus, by its very nature, is a short-term issue. And cash for clunkers is but one part of this 'answer.'

Second, the most popular vehicle being purchased is a Ford. Additionally, helping Honda and Toyota helps their suppliers, who are often some of the same suppliers of GM, Ford, etc.... Further, there are myriad Honda and Toyota plants in the US - and they hire Americans. Finally, the 'stimulus' of this program is not just the initial purchase of the vehicles, but the subsequent spending that occurs.

Wednesday, August 5, 2009

Posner on Stupid Fat People

So, according to Dr. Posner, the key to the health crisis is to educate stupid fat people. If only they knew or could comprehend with their little pea-brains, he seemingly surmises, would they then stop eating their Ho-Ho's and Big Mac's.

Posner can be, and is in this case, absurd.

I'm pretty sure that even the most idiotic of idiots are aware that like, omg, I could like get fat and stuff if I super size my meal along with a box of Little Debbies.

Education is not the issue - there's plenty of education. Will power, self control - these things are important but that's not just about education - that requires a complete change in psyche and behavior. Plus, food is an addiction, and no amount of education can totally reverse that.

I'm at least glad he's talking about health care costs - I agree that is the crux of the health debate. I actually agree with most of his last paragraph about needing to discriminate sales taxes based on food purchases varying in calories / fat. We need to incentivize people to be thin, and punish those that eat out of had. That won't necessarily change fat people's psyches right away, but numerous studies show that higher prices, even on addictive behaviors, reduce the consumption of those behaviors.

Tuesday, August 4, 2009

Answer: Cash for Clunkers is Best Stimulus Ever

Screw the environment (tongue - in - cheek)!

This is not about the environment - that is just a guise created by some politicians to tac on another stimulus plan. And boy is it one....$1 billion spent by consumers in a week! More money committed! We shouldn't stop there. We need to make any as-yet uncommitted ARRA funds do the work that this clunkers program is doing. Start getting this money out the door now, not a year from now. We need to extend the clunkers program to things other than autos: home appliances (like fridges and ACs), computers, etc. This program has shown it be the single best stimulus ever - by urging consumer spending at rapid-fire pace and volume. It just makes sense to expand it not just to other consumer goods, but potential investment goods/inputs as well.