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

A/l/a/n/ C/a/r/u/b/a/ Milt Shook Explains It All

Ken Houghton notes the obvious corollary to Bruce Webb’s post on the 1st: if you don’t “read the bill,” the obstructionists will lie about it. UPDATE: And now corrects his misreading (see Bruce’s update below, following on Mitt Shook’s comment).

Milt Shook demonstrates in detail that, even if you do, people such as Alan Caruba of ChronWatch will lie about it anyway. That this post is even necessary is saddening. And that he has to point out fundamentals such as

[Annual Limitation] is on how much a patient will have to pay, not a limit on the health care the patient receives. Watch how many times these tools bring up the “rationing” canard. It’s almost as often as they mention ACORN. (I kid you not. Just wait.)

or my favorite: that maintaining a market depends on people being able to make informed choices:

[Alan Caruba at ChronWatch] Page 72: All private healthcare plans must conform to government rules to participate in a Healthcare Exchange.

[CarubaShook] This is a phenomenally stupid complaint from a right wing ideological perspective, and it lays bare the moral bankruptcy in their arguments against universal health care. These are the same people who are always touting competition and choice as the most important aspects of capitalism. The point of the insurance exchange is to give people an obvious and transparent choice of health insurance options. A private insurance company can participate and offer their wares alongside the public option, if they so choose. If they don’t want to participate, they’re free to conduct business as usual, and they won’t have to conform to any government rules. Well, except for the ones they must already conform with….They’ve always had to conform to government rules to participate in Medicare, and I don’t see any of them dropping out of business for that. [italics mine; snark omitted]

Go Read the Whole Thing. And think about all the good things Alan Caruba could have been doing if he hadn’t had to waste time dealing with deliberate misreading and outright lies.

(Update by BW: the second link actually goes to a web-site called Please Cut the Crap run by a blogger named Milt Shook. Milt in comments points out that it is he deconstructing Caruba and not the other way around. The lines in italics are Milt, the plain text is from Caruba. ChronWatch=Caruba, ‘Caruba’=Shook for the full Caruba:

Tags: , , Comments Off on A/l/a/n/ C/a/r/u/b/a/ Milt Shook Explains It All | |

Can the U.S. Government do anything right ?

Robert Waldmann

I hate to type that headline given the health care reform debate, but I am alarmed by Karen DeYoung’s article in the Washington Post about new efforts to get Afghans to stop producing opium — all new this time with carrots.

The problem is that the price of wheat is too low.

The average Helmand farmer cultivates less than an acre of land, with about half an acre planted in poppy yielding a gross income of about $2,000. After paying 45 percent of that in production costs, and 10 percent in local taxes, he nets about $900, more than twice what he would earn from wheat at current, albeit rising, prices.

OK if there is one thing the US government can do it is drive up the price of wheat to subsidize wheat farmers. So what’s happening ? Check after the jump.

First, the program is funded at $300 million out of the total Afghan effort of
$65 billion. Odd proportion there.

Still that’s a lot of money given that Afghan farmers don’t make much growing opium

More than 365,000 Afghan farm households earned about $730 million from poppy last year

Hmmm and they grow opium because they would make half as much growing wheat so buying wheat forward at twice the world price would mean paying 730 million for about 365 million in wheat costing oh about 365 million so what the hell is the problem ? Now obviously this will also involve buying wheat from people who currently grow wheat (smaller crop than opium by value so even if no targeting is possible this will less than double the cost so it is still chicken feed compared to the cost of the war). I guess the people smuggling opium out of Afghanistan will maybe smuggle wheat on the way back, but, you know, at twice the world price a kilo of wheat is still not worth much.

My proposal is to buy wheat forward at a high enough price that farmers will be busy growing it and not have time for opium.

The problem is that that would be welfare and not for US farmers. So we must have no “subsidies” and instead sell fertilizer for one tenth of its market price (good think poppies just hate fertilizer) plus low interest loans which do no good at all to opium farmers (except that they do). The program is complicated (sounds like it was designed by Ira Magaziner) the key point is that it is based on vouchers. Huh?

“The way [the assistance] is offered is important,” said the senior U.S. military official, one of several who spoke on the condition of anonymity because they were not authorized to discuss the program on the record. “We are not providing subsidies . . . we are not just handing out cash.” Farmers will have a “stake” in the program, he said, buying vouchers for seeds and fertilizers for about 10 percent of their value. Cash will be distributed only as credit or for work performed, the official added.


The timeline is daunting. A planned “civilian surge” of hundreds of U.S. aid officials and agriculture experts has been slow to arrive. A micro-finance loan program is in the planning stages, and although $300 million in aid has been set aside for “rapid response” initiatives, including voucher programs for seeds and fertilizer, distribution has been sluggish. Mohammad Gulab Mangal, the governor of Helmand, whom U.S. officials have praised for encouraging local communities to turn away from poppy, held the first of eight scheduled outreach meetings only last week.

US policy is damaged by the strangely different rules for military operations and for aid. Killing people is urgent and collateral damage is acceptable, but giving money to people uh oohhhh we have to worry about creating dependency (which is, you know, the whole point of the operation).

in conclusion

Wages in Helmand for lancing, $15 a day, are the highest in the country.

“What we’re looking for is a way to compete with that,” the senior military official said of the opium economy. “This is not easy. . . . There is no silver bullet.”

The US government can’t afford to compete with people who pay $15 a day?!?

I’d say a less pathetically low amount of silver is the silver bullet.

Tags: , , Comments Off on Can the U.S. Government do anything right ? | |

Simple Answers to Simple Questions, CRA edition

Dear Barry:

The need for posts such as this one recurs because the large majority of economists are idiots. (Multiple exceptions noted—but not enough to change the truth of the initial statement.)

As the regulatory reform report notes (quoted by PK at the last link above):

In fact, enforcement of CRA was weakened during the boom and the worst abuses were made by firms not covered by CRA.

But the truth should never be allowed to get in the way of Economic Theory.

Tags: , , , , , , , , Comments Off on Simple Answers to Simple Questions, CRA edition | |

It Looks Like a Great House. Why Does the Basement Always Flood?

Come on, guys, somebody take it to the Next Step.

Matt Y comes closer than anyone else to getting to the truth of the problem with Macroeconomics. Following Justin FoxSteven Levitt’s summary, Matt asks the next question:

So why should it be that “in the current regime, if [macro models] are not meticulously constructed from ‘micro foundations,’ they aren’t allowed to be considered”?

There’s a hint in the title of this post.

Edited to fix attribution.

Tags: , , , Comments Off on It Looks Like a Great House. Why Does the Basement Always Flood? | |

I Remember When Mankiw was still a Neo-Keynesian

Cassander, writing at Steve Keen’s Debtwatch,* puts the hammer to those arguing that the death of the patient had nothing to do with the doctor:

What a load of bollocks.

The “principles of economics” that [N. Gregory] Mankiw champions, and the “More economic research (and teaching)” that [Doug] McTaggart et al are calling for, are the major reason why economists in general were oblivious to this crisis until well after it had broken out.

If they meant “Principles of Hyman Minsky’s Financial Instability Hypothesis”, or “More Post Keynesian and Evolutionary economic research”, there might be some validity to their claims. But what they really mean is “principles of neoclassical economics” and “More neoclassical economic research (and teaching)”—precisely the stuff that led to this crisis in the first place. [emphases in original]

Go Read the Whole Thing: a worthy spew of bile from one of the blogs that I’ve been reading a lot recently, in part so I don’t feel guilty not having written the same thing.

*Cassander is, I believe, Keen’s nom-de-blog for non-personal posts. But I could be wrong.

Tags: , , , , Comments Off on I Remember When Mankiw was still a Neo-Keynesian | |

I Do Not Think "Tool" Means What You Think It Does

Dear Brad,

Do you want to reconsider the title of this post in the context of this article?

An examination of Mr. Geithner’s five years as president of the New York Fed, an era of unbridled and ultimately disastrous risk-taking by the financial industry, shows that he forged unusually close relationships with executives of Wall Street’s giant financial institutions.

His actions, as a regulator and later a bailout king, often aligned with the industry’s interests and desires, according to interviews with financiers, regulators and analysts and a review of Federal Reserve records.

To take a phrase more prominent in our middle-school days, he would qualify as an “unindicted co-conspirator.”

Tags: , , , , Comments Off on I Do Not Think "Tool" Means What You Think It Does | |

1,121 Words on Bruce’s Post, with footnote

I’m going to have to do a little clean-up work here (i.e., run the data in Excel instead of Stata), so I’ll ask forgiveness for the double-labels and all that.Graphic redone; data as per FRED. I think the story is clear. The long version is Bruce’s post below.

What is now the top line is total government debt. The bottom line in Publicly-Held Government Debt. The lines become bold as ofThere is now a dividing line at FY 1984, which began the year after the Greenspan Commission put a regressive tax on low- and mid-level wage earners which was supposed to prefund their (our) retirement needs.

The difference between the two lines is the money that has been contributed to the Social Security Trust Fund in order to “save” it.*

*The Greenspan Commission was clear on this, requiring that, as of 1993, the President’s Budget Proposal note both the real (i.e., ex-SocSec overpayment) deficit as well as the nominal one, precisely because they did not want the system to be gamed.

Tags: , , , Comments Off on 1,121 Words on Bruce’s Post, with footnote | |

Miami Vice

Reality (h/t Dr. Black):

In certain ZIP codes in places like Homestead and Florida City, around 25 percent of the homes are in one stage of foreclosure or another. Countless others were built by developers and sit vacant in ghostly subdivisions, with not a buyer in sight.

In the days after Andrew, then-Dade County Emergency Management Director Kate Hale famously said on national TV: ”Where the hell is the cavalry on this one?”

The same could be asked now, in this new disaster. People in south Miami-Dade — just like people in foreclosure-strewn cities across the nation — are wondering: How did we get here?

Fantasy (via The Sports Law Blog):

The stadium did undergo some renovations in 1999 to make it more baseball-friendly, but the Marlins have been drawing low attendance figures. The Marlins averaged 16,688 fans last year, their third straight season averaging under 17,000 per home contest.

As Marc Edelman notes at the link above:

Last year, the Marlins team payroll was just $22 million…by far the lowest in the league. Rather than investing in their own team, Marlins President David Samson often used the threat of keeping a low payroll as part of his strategy in demanding public subsidies.

Miami-Dsde officials, as those from Montreal know well, must be really stupid if they think Jeffrey Loria is going to invest in making the team competitive just because they just wrote him a Very Large Check. Then again, maybe they figure one more vacant property won’t make a difference.

Tags: , , , , Comments Off on Miami Vice | |

Dear Brad and Mark (et al.)

This is why we don’t believe the bailout will work the way you think it will (i.e., to increase lending):

Recently, securities rated AAA have changed hands for roughly 30 cents on the dollar, and most of the buyers have been hedge funds acting opportunistically on a bet that prices will rise over time. However, sources said Citi and BofA have trumped those bids.

Instead of using the bailout monies to lend, or even make their balance sheets more creditworthy, the firms have been doubling-down on the assumption that they will be fellated by Timmeh and Larry. (At least Bill Gross and PIMCO (h/t Robert) did it when there was still a chance of sane monetary policy.)

I take back part of what I said earlier: this isn’t comparable to hitting on 17 because you’re drunk; it’s hitting on 19 because you’re desperate and insane. As Barry R. closes:

If anything, this argues against bailouts and in favor of nationalization, firing management, wiping out S/Hs, zeroing out debt, haircutting bond holders, etc.

Some economists may need to spend less time reviewing brilliant analysis from Barry Eichengreen (link is to PDF) and more reviewing Friedman and Savage (link is to PDF) in the context of principal-agent problems.

Tags: , , , , , Comments Off on Dear Brad and Mark (et al.) | |