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

In Case You Haven’t Seen It Yet …

… I offer you this exchange for your Thanksgiving amusement (warning: not suitable for children):

[Neil Bush’s] ex-wife’s attorney sounded skeptical. “Mr. [Neil] Bush, you have to admit it’s a pretty remarkable thing for a man just to go to a hotel room door and open it and have a woman standing there and have sex with her,” said Brown.

“It was very unusual,” the errant husband replied.


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Medicare Drug Benefit

The Washington Post has an impressively informative piece on the new Medicare drug benefit–they numbers are detailed and useful. In fact, I hereby nominate the authors, Edward Walsh and Bill Brubaker, for the Bush Budget Beat through at least the 2004 elections. Had work like this been common throughout 1999 and 2000, the election could well have turned out differently. It was known, but not covered, at the time that Bush’s budget proposals didn’t add up. But I digress. Based on the numbers in the Walsh and Brubaker piece, I came up with a chart comparing total drug costs (on the X-axis) to total out of pocket costs (Y-axis). Note that where the line is flatter the portion covered by the government is higher; where the line is steeper, the portion covered is lower.

First, a few comments. The chart below shows the benefit starting in 2006; the interim plan consists of, well, coupons basically. Second, click on the graph below to open up a larger graph with more details and explanation. I may have more to say about this soon, but at first sight, it seems like a decent plan for the somewhat sick (drug costs between $800 and $2500) and the extremely sick (drug costs well over $5000), but for the elderly who fall in between those extremes, the plan will only cover 36% of drug costs (for an enrollee with $3000 in drug costs) to 21% (for an enrollee with $5100 in drug costs).

Also, the plan in the chart is for the 27.5 million seniors making more than 150% of the poverty line. The 6 million seniors below the poverty line who previously had drug coverage under Medicaid will continue to have coverage ($1 generic and $3 branded). The 4.5 million seniors not eligible for Medicaid but earning less than 135% of the poverty line will receive generous coverage ($2 for generics and $5 for branded). The 2 million seniors earning between 135% and 150% of the poverty line will have a $50 deductible and pay 15% of their drug costs thereafter. Again, all of this is for 2006 and after. In the meantime, the plan is to give billions in subsidies to insurance companies in exchange for discount cards (the aforementioned “coupons”).


UPDATE: I plan to comment on this a bit more (it’s boring but important), but in the meantime, Mark Kleiman has a good preliminary list here.

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Why are Bond Yields Still so Low?

One of the fundamental conclusions of basic macroeconomics is that when the economy booms, interest rates should rise. That’s because when the economy is doing well, people and businesses borrow more money to finance their spending and investment. When the demand for borrowed money rises, we know that the cost of borrowing money will rise – i.e. interest rates will go up. And lately we’ve had a raft of data showing that the economy is recovering very nicely, thank you. GDP growth was revised up to 8.2% in the July-September quarter. Employment grew in September and October. Home construction is at record levels.

If the economy is improving so strongly, then why in the world have long-term interest rates fallen over the past two months?

The Economist’s Buttonwood column has this to say about it:

The simple explanation for this… is that investors sense a chill beneath the warm glow of the numbers. One cold wind blowing across this particular recovery is that Americans are up to their necks in debt. With short-term interest rates at a 45-year low, households are spending some 13% of their disposable income on servicing their debts—a higher number even than in the sharp recession of the early 1980s, when the Federal funds rate topped 13%. How much longer can they carry on spending at this rate, let alone increase it? If they don’t, then someone else will have to spend on their behalf.

The government, perhaps? The Bush administration has turned a budget surplus of 2.4% of GDP into a deficit that official numbers say will amount to 4.3% of GDP next year. Not much room, in other words, to raise spending. Nor do American companies have oodles of money to play with. For all the talk of restructuring, they continue to increase their borrowing, though at least a slowdown in the rate at which they borrow and better profitability mean that their dreadful financial ratios are starting to look better than they were. Whether they will continue to do so is another matter.

This echoes the concerns that I raised in this earlier post. But The Economist goes on to add that there’s a more fundamental problem that the US economy will be facing over the next several years: the economic leadership of George Bush. As Buttonwood puts it, “George Bush is a man who wants to get re-elected and seems prepared to sacrifice the long-term economic good—assuming (a big assumption) he knows how it is best served—to get back into the Oval Office.”

Good point.


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Reflections on Medicare and the Democratic Party

Take a look at this bit of fascinating analysis of the Medicare fight by the Washington Post:

For Democrats, A Wake-Up Call

Democrats have owned the Medicare issue for nearly 40 years. But this week, the Republicans climbed into the driver’s seat and mashed the gas pedal. In closed-door sessions that excluded nearly all Democrats, through rule-bending roll calls, dishing out goodies to friends and twisting arms of the recalcitrant, the Republicans passed $400 billion worth of changes. Democrats spent the day picking carpet fibers out of their hairdos and sorting out their reactions.

Should they be outraged or envious in the face of GOP audacity and discipline? Disheartened or energized by President Bush’s latest victory? This inability to choose a voice, to stick to one path, was a worrisome sign for many Democrats — especially after such a disorienting year for the party.

Longtime party strategist Harold Ickes was at a loss to see any upside to a Republican victory in an area Democrats have always owned. He said he was flabbergasted that key Democratic senators, led by John Breaux (La.) and Max Baucus (Mont.), went along with it… “We just don’t have the discipline on our side that’s needed.”

Robert Borosage of the Campaign for America’s Future blamed Senate Minority Leader Thomas A. Daschle (D-S.D.) for the collapse. In the House, he said, Minority Leader Nancy Pelosi (D-Calif.) held the line so effectively that Republicans had to hold open their middle-of-the-night vote for nearly three hours on Saturday — the longest flouting of the 15-minute rule in House history — just to eke out a win. After which the Democratic filibuster in the Senate swiftly collapsed.

“There’s clearly an absence of forceful leadership at the top of the Senate,” Borosage said. “In the Senate we saw the difference between the other side’s discipline and our lack of it, and I think Democrats are disappointed in the extreme.”

The piece suggests that people in Washington are getting used to the idea of Republican dominance for the foreseeable future. I have to say, after this week, I’m starting to see why. This story reminds me of the Tory party in Great Britain – a party that, as the years have gone by since Tony Blair first defeated it, has gone from moderate losses to huge losses, from disorganization to utter disarray, and from being the party of the loyal opposition to being virtually irrelevant. Could the same fate be store for the Democratic party?


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Corporate Responsibility

Nice move by Boeing:

Michael Sears, executive vice president and chief financial officer of Boeing Co., had the required pedigree and background to become the next chairman and chief executive of the Chicago-based company.

But on Monday, Sears, 56, a resident of Lake Forest, was fired from his $1.2 million-per-year job. His wife said he was unavailable for comment.


Sears’ undoing came in the wake of a scandal over an Air Force lease/purchase contract for 100 refueling tankers based on the Boeing 767 airliner.

The company said Sears, a member of Boeing’s three-member Office of the Chairman and the second-ranking officer of Boeing, was fired for violating company policies by communicating with Darleen Druyun, then an Air Force purchasing official, about future employment, when she hadn’t disqualified herself in matters involving Boeing.

The firing came shortly after Boeing said it learned of Sears’ discussions with Druyun. Druyun also was fired.


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Era of Big Government, Continued

While the energy bill is down, Pork remains at an all time high. Via Calpundit, see the “Grand Old Porkers: Special Favor ‘Earmarks’ contained in Annual Labor-HHS-Education Appropriation Bills” report by the minority staff of the House Appropriations Committee. (Needless to say, Pork is up since Republicans took over. Way Up.)


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Nice Job

Except for you, Tom Ethanol Daschle:

Washington — The White House and Republican leaders Monday abandoned a vigorous effort to try to revive a sweeping energy bill this year after a liability waiver for the makers of a gasoline additive stalled the measure last week.


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Why does Kurtz Have a Job?

Here’s Kurtz on Gephardt’s criticism of Dean’s willingness as governor to cut spending, including spending on social services, to balance Vermont’s budget:

Does Gephardt really want to argue that balancing the budget (which states, by the way, are constitutionally required to do) is bad?

In case it’s unclear, the parenthetic is Kurtz speaking. However, the parenthetic is false.(*) Many, in fact the majority of, state constitutions prohibit deficit spending (even those states use tricks to circumvent their constitution), but there is no constitutional requirement that all states balance their budgets. Admittedly, Kurtz claims to be a media critic, but when he wanders into politics, which is most of the time, he should make a small effort to know what he’s talking about. On the other hand, his job security appears to be unrelated to the quality of his work, so why bother?


(*) The U.S. Constitution, Article I, Section 10 says

No state shall enter into any treaty, alliance, or confederation; grant letters of marque and reprisal; coin money; emit bills of credit; make anything but gold and silver coin a tender in payment of debts; pass any bill of attainder, ex post facto law, or law impairing the obligation of contracts, or grant any title of nobility.

The prohibition on “bills of credit” may make it appear that Kurtz is right (notwithstanding the factual counter-evidence: States do run deficits), but this is really a prohibition on states issuing currency. Tom DeLay helpfully defines the term for us: “bills of credit: A paper medium of exchange, intended to circulate between individuals and between government and individuals, whether or not the quality of legal tender is imparted to such paper.”

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The Era of Big Government, Continued

Yes, it was on hiatus for a bit in the 1990s, but it’s back with a vengance. First, the energy bill. Now the Republicans are using the same pork belly tactics on all of their bills (DeLay to recalcitrant Republican Congressperson: “how many millions of taxpayer money would it take to get your vote?”):

As Congress rushes to conclude its 2003 session, Republican leaders are trying to garner votes for controversial legislation by loading the bills with billions of dollars in added costs that analysts said would expand the budget deficit for years to come. The year-end binge has alarmed analysts in Washington and on Wall Street, coming as it does after three years of presidential and congressional initiatives that have both substantially boosted government spending and shrunk its tax base.

“The U.S. budget is out of control,” the Wall Street investment firm Goldman Sachs & Co. warned Friday in its weekly newsletter to clients.

As the post story recounts, massive amounts of pork are flowing into bills covering Energy, Medicare, Veterans Affairs, Forest-thinning projects, funding for Iraq, and I’m sure everywhere else.

I’ll have to second Warren Rudman’s take, which is tantamount to my earlier take, “It’s your children’s money. Quick! Take it!”:

“The only thing I can tell you is evidently the word ‘tomorrow’ no longer exists in the vocabulary of otherwise responsible members of Congress,” said Warren Rudman, a former New Hampshire Republican senator and long-standing budget hawk. “They are acting as if there is no tomorrow.”


“It is puzzling, unless you take the most cynical political view of ‘I’ve got to do what I’ve got to do, and whatever bad that’s going to happen is not going to happen on my watch,’ ” he said, trying to explain lawmakers’ motivations. “If that is what’s happening, we are facing the Titanic of fiscal crises in eight to 10 years.”

There’s a lot more in the full story — all disgusting. Democrats aren’t blameless in this (witness Daschle’s selling out for ethanol subsidies), but as the party in control of the House, Senate, and White House, this spending is certified 94% Republican (96% if you count Zell Miller as a Republican).


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