Relevant and even prescient commentary on news, politics and the economy.

G-20 to talk about ‘exit strategies’…

Rebecca Wilder

With the developed and developing economies printing money like it’s going out of style, the exit strategy – i.e., taking back the hundred percent increase in the monetary base (at least in the US) – is rumored to be the topic du jour at the G-20 summit later this month.

According to Reuters, the “G20 countries have agreed it is too soon to withdraw measures to end the global economic crisis and will discuss coordinating policy to wind up the trillions of dollars in support at talks in London this week.”

The article focuses on fiscal policy, but only a delinquent discussion of exit strategy leaves out the record monetary easing of late. However, I would most certainly agree that it is too soon.

The global labor market is plummeting.


And global sticky wages are consequently growing at snail-speed rates.

I’ve always been a big believer in the output-gap story. And until that unemployment rate starts to fall, I just don’t see how global inflation is going to be much of a problem.

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Libertarian position…a query

by cactus

As I understand it, the Libertarian position is that for the most part, if an entity (a person, a company, or a corporation) wants to do something with property it owns, it should generally be allowed to do so. I don’t want to be arguing with a strawman, so if I have an incorrect view of the Libertarian position, someone please let me know.

But, assuming this is right, the problem with the Libertarian position is one of externalities. Dump toxic waste in a river that passes along one’s property, and that toxic waste is still there when the river passes through someone property, which means they can’t swim in drink the water. (Well, maybe they can… once.) Enjoy listening to loud music on your property and you may be preventing your neighbor from enjoying some sleep at 2 AM. Put another way… one entity’s right to use its own property as it pleases means other entities don’t.

All of which is to say, assuming I am not, in fact, arguing with a strawman, the Libertarian position is internally inconsistent. For every action, there is an equal and opposite reaction. Or rather, for every action, there is a cost. The Libertarian position essentially says that an entity is entitled to make others pay a cost for what it chooses to do.

I think the Libertarian position can be salvaged very easily, however, because my position is essentially similar to that of the Libertarians. See, like the Libertarians, I believe an entity should be able to do just about anything they want on their own property. I just think that they have no rights to do anything at all on another’s property without that property owner’s permission. All of which is to say… if you want to play loud music at 2 AM, you should be welcome to do it provided you also take on the costs of ensuring that ambient sound does not rise so much as a fraction of a decibel anywhere outside of your property. Now, that may sound costly to you, but someone has to pay it. Why should the someone be third parties who had nothing to do with creating that cost?
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by cactus

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Health Care Hardball II

Robert Waldmann

(who deeply respects our nations senior citizens) has probably written this post already but he forgot.

I had a concern about the proposal to split health care in the Senate into 2 bills one to be passed as budget reconciliation (the 50 votes bill) and one not about the budget (the 60 votes bill). The problem is that regulatory reform (the less controversial and not budgetary part of the bill) alone would be terrible policy. Then I thought that is the very best feature of splitting the bill. I explain after the jump.

The Obama campaign made a terrible health care reform proposal in what might have been brilliant 11 dimensional chess but probably was one dimensional positioning Obama slightly to the right of Edwards. I think this proposal would make an excellent 60 votes bill *to be passed first* because it sounds wonderful and because once it is passed, the health insurance companies will support the second bill even if it includes a public option.

The 60 votes bill would basically be the 8 fold way of regulatory reform — health insurance must pay for treatment of pre-existing conditions, no rescision for non material errors in filling out forms, a limit on out of pocket expenses etc. This includes premia are a function of age and residence only.

The bill can be very brief (most of the pages of the current bills modify the taxe code and are clearly budgetary). It sounds great. The only problem is that the new reformed system would both depend on private health insurance companies and bankrupt the private health insurance companies.

With regulatory reform, it would become optimal for young healthy people to buy insurance only after they got sick. That’s not buying insurance, that’s legalized theft from the insurance companies.

I would add 4 provisions to the 8

9) Handicapped access. Insurance companies can’t screen out applicants by making it physically different for them to apply. One example of a banned practice is having an office on the 2nd floor of a building with no elevator. To prevent this, insurance companies would be required to send a representative to a prospective client if a physician certified (orally on the phone) that the prospective client not be able to go to the companies office.

Sounds good. The part I like best is that a large fraction of such calls from physicians which would be made from emergency rooms.

10) The 8 fold way includes a description of minimal allowed health insurance coverage. I would add a clause saying something along the lines of — nothing in this bill is to be construed as banning sumplementary automobile insurance or firearms injury insurance. It would be legal to sell insurance which will make the policy maker whole following automobile accidents in which the policy holder is responsible for the accident or in which the responsible person is uninsured or unavailable (hit and run). It would be legal to sell insurance covering fire arms injuries whether or not they are the policy holder’s own damn fault.

The point of clause 10 is that covers two reasons young healthy people might want health insurance. 2 things that can give you a huge medical bill during the period that the insurance company representative is coming to the emergency room are covered separately from health insurance. That makes it more attractive to only buy health insurance after you are diagnosed with cancer.

11) premia can only increase proportionally to per capita health care spending.

12) Recission is allowed only if the client has given false information on age and residence. Voter registration will be considered proof of residence. Recision is not allowed if the client is a registered voter and documents that fact when applying for health insurance.

The purpose of 1-11 is to make a bill which sounds great but would drive health insurance companies bankrupt if the senate doesn’t pass another bill with mandates (budgetary as the fines for not getting insurance go to the treasury) subsidies, medicaid expansion oh and now we’re at it a public plan.

The purpose of 12 is to force young people to register to vote. I’d say there are quite a few Republicans who wouldn’t mind a public option so much if the alternative is a provision which forces young people to register to vote.

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Gang of Six, Regular Order & the Johnson Treatment


LBJ and Senator Green of RI c.NYT
by Bruce Webb

Now that Grassley and Enzi have shown where the wind was actually blowing on the ‘bi-partisan’ ‘compromise’ supposedly being worked out by the Senate Finance Committee’s Gang of Six it is time to hit the reset button and in the process clear up some confusion.

Generally the Press has been reporting on the Gang of Six as if it simply represented Regular Order, that when a bill gets referred to Committee it just gets assigned to a sub-group with absolute control and that nothing can proceed until that group agrees. Well that simply is not true at all. Equally some people at dKos have been asking why Senate Finance is split between parties when all other Committees reflect the overall rough balance between the parties. Well Senate Finance is not evenly split, nor all the relevant Sub-Committees.

Senate Finance has 23 members, 13 Democrats and 10 Republicans. Senate Finance Committee Members It is further broken down into Sub-Committees of which the largest is the Sub-Committee on Health. which has 11 Democrats and 8 Republicans, meaning that you have almost total overlap. But three names that are missing are Baucus and Conrad on the Dem side and Grassley on the Rep side. Finance Sub-Committees Meaning that fully half of the Gang of Six are not even on the relevant Sub-Committee. Moreover the Chair of that Sub-Committee was excluded from the negotiations while the Ranking Member was originally included in what could have been called a Gang of Seven, one that had 3 Republicans from the Health Care Sub-Committee: Hatch, Snowe, and Enzi plus one not in Grassley for a total of 4 as against 1 Democrat from the Health Care Sub-Committee in Bingaman and two not in Baucus and Conrad for a total of 3.

The whole thing was a total perversion of Normal Order, which would either have had the full Committee mark up the bill or refer it to the Sub-Committee, instead Baucus simply insisted on doing an end-run in what was just a blatant power-grab. Moreover the first act of the Gang of Seven was to scrap the Kennedy-Dodd HELP Bill, which had drawn Nay votes from two members from the Gang already in the persons of Hatch and Enzi.

The Gang of Six has been treated as if they were a legitimate and normal part of how major legislation is done and that the Senate has no other choice than to just let the process run. This is just not true at all, the Gang has just as much cover and legitimacy as the Committee Chairman allows it to, and his authority is in turn is limited to how much scope Senate Leadership is willing to defer to it. Baucus claimed that the only way to get a deal that could pass the whole Senate was to rewrite the entire bill from the ground up with the help of Republican Senators who fought the Kennedy-Dodd bill to the end. They further have the gall to claim that Ted Kennedy would have wanted it this way. They stooped to putting words in his mouth before his body was even buried.

Time to give up the pretense here. Grassley in his letter and Enzi in his public statements made it clear that they saw their roles as blocking Health Care Reform. If Baucus doesn’t see that then he is being consciously blind. And given the way he simply by-passed the Health Care Sub-Committee to start with it is fair to conclude that he was willfully blind from the beginning. Under the Rules of the Senate a bill that has stalled in Committee can be in effect extracted from that Committee by any Senator invoking Rule 14 (link and explanation below the fold). The only thing that prevents that is some sense of courtesy and deference towards the Committee Chair, a deference that he has clearly abused throughout the process.

It is past time for Harry Reid to give Baucus the Johnson Treatment as depicted above. If he has it in him.

The Legislative Process on the Senate Floor; an Introduction

Committee Referral and Rule 14
The Senate’s standing committees play an essential part in the legislative process, as they select the small percentage of the bills introduced each Congress which, in their judgment, deserve the attention of the Senate as a whole, and as they recommend amendments to these bills based on their expert knowledge and experience. Most bills are routinely referred to the committee with appropriate jurisdiction as soon as they are introduced. However, if a Senator plans to introduce a bill and believes that the committee to which it would be referred will be unsympathetic, Rule XIV, paragraph 4, permits the Senator to bypass the standing committee system altogether and have the bill placed directly on the Calendar of Business, with exactly the same formal status the bill would have if it had been the subject of extensive hearings and exhaustive mark-up meetings in committee.
By the same token, if a committee fails to act on a bill that was referred to it, while this may mean the bill will die for lack of action, the proposal it embodies may not. The Senator sponsoring the bill may introduce a new bill with exactly the same provisions as the first, and have the second bill placed directly on the Calendar. In either event, the committee that has been circumvented may oppose bringing the bill from the Calendar to the floor by unanimous consent or by motion, but now the fate of the bill can be decided by the Senate as a whole, not only by one of its committees. Senators generally view this use of Rule XIV as a last resort, both because it undermines the committee system as a whole and because they do not wish to encourage a practice that can be used against their own committees. In recent practice, the Majority Leader sometimes also uses this method to put a measure directly on the Calendar—often to expedite consideration of a complicated or high-profile bill that has been drafted outside of the committee process.

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Not all of Europe is in free-fall

Rebecca Wilder

Poland: the bull of eastern and central Europe. While most of central and eastern Europe are either defending exchange rate pegs – this limits the ability to stimulate the economy through monetary policy – and/or running large current account deficits (see chart 2 here), Poland grew a remarkable 1.1% in the second quarter of 2009 compared to the same quarter last year. Given that its regional trading partners are falling precipitously, that is a real economic feat.

2009 is a great year NOT to be part of the ERM II, which requires a relatively inflexible exchange rate policy. And since Poland can allow its exchange rate to fluctuate a bit more, strong expansionary monetary policy (lowering its policy rate by almost half) has helped to cushion the blow to regional exports.

In the meantime, Poland’s relative immunity to the globally synchronous crash has kept the fiscal balance in check (relatively speaking).

Even though Poland’s fiscal deficit is expected to rise in 2009 (perhaps outside the share of GDP allowed by the Eurosystem), its more stable growth pattern will clearly “cost less” in terms of government spending and fiscal deficits, making it a strong candidate for euro conversion growing out of the crisis currently scheduled for 2012)

As the IMF article suggests, the re-emergence of regional trade is important for sustainable growth. However, Poland’s relatively flexible currency should keep it competitive.

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"Encouraging Veterans to Commit Suicide"

by reader run

“Encouraging Veterans to Commit Suicide”

Appearing on Fox News “Fox and Friends” in an effort to mislead the elderly, disabled, and veterans; the GOP’s chief spin-meister Michael Steel declares healthcare reform would result in the same bad public policy as shown in a 1997 VA manual encouraging veterans to commit suicide. The manual which encouraged veterans to write “Living Wills” was retired in 2007 for a rewrite and updating. “Your Life, Your Choices.”

Attempting to put additional spin on healthcare reform alleged death panels, which so many of the elderly believe will be a part of healthcare reform; Steele claims the VA and its manual (even though retired) encourages veterans to commit suicide. This is another example of what length the GOP will go to construe the issues and mislead the public with blatant lies, smoke and mirrors, and subterfuge to derail healthcare reform which will benefit Americans at the expense of healthcare insurance corporations, healthcare associations, and a privilege few. Michael Steele’s words:

“If you want an example of bad public policy, let’s look at this situation with our veterans where you have a manual out there, telling our veterans stuff like, ‘Are you really a value to your community?’ and, you know, encouraging them to commit suicide. This is crazy coming from the government, and this is exactly what concerns people, what puts them in fear of what government controlled health care, of health care, will look like.” (Link here).

Veterans for Common Sense (nonprofit veteran advocacy group) Executive Director Paul Sullivan called Michael Steele’s comments a lie:

“Let me be absolutely clear, Steele lied. There is no VA manual encouraging veterans to commit suicide,” said Paul Sullivan, the executive director of VCS, a non-profit based in Washington, DC providing advocacy for veterans, especially veterans with mental health conditions.” “Veterans Demand an Apology from the GOP and Fox News”

Steele’s attempt at demagoguery to sway the public is an insult to the intellect of all veterans who do not need or desire to be burdened with the lies of a few who wish to profit and gain from the direction of public policy. One would have to wonder what Steele’s healthcare insurance policy is like and “who” pays for it.

Hat Tip to Pace and the Veterans for Common Sense.

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