Thursday, August 30, 2007

Thomas Sowell, what a caricature

Caricature -- noun -- a picture, description, etc., ludicrously exaggerating the peculiarities or defects of persons or things. (

I had a couple of reasons for initiating this blog and naming it what I did. Beyond the obvious motivations of narcissism and self-aggrandizement was and is a genuine belief in people's underlying rationality. As an economist, it's the first assumption that I reach for in an economic or social analysis. Despite a good deal of contradictory evidence from psychology and behavioral economics, rationality still seems the best place to start.

Rationality does not mean that people are always right. However, it does mean that they try to work out problems logically and do their best to achieve their goals subject to the constraints that they face or perceive. Differences in goals, values, constraints, perceptions, and information can all lead to different outcomes. Logic itself takes effort; there's usually only so long that someone can work on a problem before having to take an action or make a decision. It's not surprising that reasonable people come to different conclusions. By writing about and discussing different issues, there is the hope that one's logic or information base might be improved. Similarly, there's often a lot to be gained from reading and carefully considering analyses that are different from your own.

As I wrote, differences in outcomes and opinions can come from differences in underlying values, but they can also come from lots of other things. It seems worthwhile to explore all of these possibilities when evaluating someone's opinion. Put another way, we don't gain much by starting with the assumption that anyone who disagrees with us is a moral or intellectual defective.

Sadly, this does seem to be the starting point of Thomas Sowell (a one-time economist no less) and many conservative columnists. Rather than engage in any logical debate or any hard reasoning, Sowell takes the easy route of ascribing fundamental character flaws to people with different opinions. In this week's column, the compounded tragedy of the Utah mine collapse, opposition to the death penalty, and the absence of a market in the U.S. for human organs are all pinned on "squeamishness," a character flaw that blinds people "who flatter themselves as being more advanced thinkers than the rest of us" from considering trade-offs for the greater good.

In last week's column, the perfidious "left" has as its fundamental goal, failure and poverty. Sowell trots (or more appropriately Trotsky-s) out the old argument that liberals purposefully expand the number of poor and dependent people to expand its voter base. Of course, Sowell is too busy fuming and quoting Marx to consider that the "blue states" in recent elections have tended to be richer than the "red states." In the column before that, he argued that the Minnesota bridge collapse served as a convenient prop for scheming politicians "itching to raise tax do what they are always trying to do." There's no possibility that someone could logically propose taxes as a way for society to begin to pay more for bills it's neglected; the proposals can only be an excuse to expand the role of government. (For a contrast of how the financing infrastructure might be rationally discussed see Gary Becker's and Richard Posner's blog).

In each case, Sowell caricatures the left as weak or immorally scheming. Maybe when he tires of setting up strawmen, he'll write something that is worth reading. Until then, he could at least have the decency to call himself something other than an economist.

Tuesday, August 28, 2007

47 million uninsured

The Census Bureau reported today that the number of Americans without health insurance reached a record high in 2006 of 47 million, or nearly one out of every six Americans. Blacks are twice as likely as whites to be without insurance, while Hispanics are more than three times as likely. North Carolinians are slightly more likely to be without insurance than residents of other states. Both the number and the percent of people without insurance have grown since 2000.

President Bush's recent observation that "people have access to health care in America...After all, you just go to an emergency room” is as unhelpful as it is callous. His new rules to restrict states from expanding insurance for children through through the State Children's Health Insurance Program (SCHIP) will only make the problem worse.

What about the following three-part proposal based loosely on the Massachusets plan?

First, offer all Americans the opportunity to participate in either Medicaid, SCHIP, or a new publicly-administered, high-deductible, catastrophic health insurance plan. None of these plans would offer Cadillac care, but they would provide basic, no-frills services.

Second, set the premiums for these plans on a sliding scale based on income. That is, set the premiums to be certain fraction of people's incomes, just as we do with the Food Stamp Program (food stamp families are expected to contribute roughly 30 percent of their incomes to their own food purchases; a smaller percentage would be appropriate for medical insurance). People with no income or very low incomes would be enrolled for free--this is essentially how Medicaid works now. People at or near the poverty line would contribute something, and people with moderate or high incomes would pay the full actuarial cost of participation. Some families who currently participate in Medicaid and SCHIP would have to begin paying something for medical insurance (and have the option to switching to the catastrophic plan) while some near-poor and moderate-income families would begin receiving subsidized health insurance. Families with greater means would get access to services at cost. Payments could be made through the tax system, much as FICA taxes and self-employment taxes (Social Security and Medicare) are handled now. These payments would receive the same tax treatment that private payments now receive.

Finally, mandate that everyone either obtain insurance--either through their employer, from a private provider, or from the government--or demonstrate sufficient resources to cover their own health care. This last provision is needed to keep people from free-riding on emergency room care. It is also needed to broaden the insurance pool and to keep people from waiting until they are sick to purchase one of the government plans. Again, the tax system could be used to enforce this mandate. The government would require payments into one of its health plans unless people could document some other type of coverage or a level of assets.

The proposal has the potential to insure every citizen who needs insurance. The societal costs would be enormous; one way or the other public and private funds would have to pay for 47 million people who aren't covered now. However, the drain on the public treasury would be modest. The government would only take responsibility for providing no-frills plans, and it would only cover a small portion of the payments beyond what it is already covering. The majority of Americans who have private insurance could keep those plans under the same conditions as today.

Paving the way for new development

The Guilford County commissioners faced a tough choice last week when they had to consider rezoning property and approving a special-use permit for a proposed asphalt plant. In deciding to let the plant go forward, the commissioners made a hard, but correct choice.

There's no getting around the negatives associated with a facility like this. Asphalt plants will never qualify as glamorous development. However, a successful development strategy depends on encouraging a variety of businesses. Moreover, such plants are necessary in an area with growing transportation needs.

The plant will be sited in about as good a location as the county could hope for--in an area that already contains other "heavy" industries and that is near a major highway. There may be less overall pollution than other possible sitings because the asphalt can be tranported over shorter distances. Finally, the proprieters made several accomodations in their site plan to gain planning board approval.

This won't be much solace to the neighbors, who reasonably mobilized against the plant (wouldn't you?). However, the decision was in the best interests of the county.

Sunday, August 26, 2007

The Social Security clock continues to tick

We haven’t heard much lately from Washington about reforming the Social Security system; however, the problems for the system continue to mount. In their last report in April, the Social Security Board of Trustees projected that we will begin drawing down the Social Security trust fund 10 years from now (in 2017) and that we will exhaust the trust fund 24 years later (in 2041). During the last year, the projected unfunded obligation to pay future retirees over the system’s 75-year planning horizon increased by another $100 billion.

A little background is in order. In 1983, a bipartisan compromise saved the Social Security system. The system had exhausted its trust fund and was paying out more in benefits than it was receiving in revenue. President Reagan, a Republican Senate, and a Democratic House made several fundamental changes to the system. Some of those changes reduced potential obligations of the Social Security System; most importantly, the legislation gradually increased the age at which people qualified for full retirement benefits from 65 to 67. It also delayed cost-of-living increases for six months. Other changes increased funds going into the system; these included raising the FICA tax rate and expanding its coverage to higher earnings levels. As a result of these changes, Social Security once again began taking in more money than it paid out, investing the surplus in U.S. treasury bonds, which would be redeemed after baby-boomers began to retire. In historic terms, the legislation was a stunning success; a program that was insolvent a quarter-century ago was stabilized and will continue operating for many years to come.

There’s a catch, however, and that has to do with the composition trust fund, which consists entirely of U.S. treasury bonds, that is, debt that we as a country owe to ourselves. Thus, the trust fund is a bunch of IOUs. Depending on your view on these things, this isn’t necessarily a bad thing. Some of the bonds have gone to pay for things like schools, children’s health care, infrastructure, and research that should make the country more prosperous in the long-run and increase its ability to pay. The bottom line, however, is that recovering money from the trust fund does depend on the ability of the U.S. to make good on these debts, while taking care of its other obligations.

Starting in about 2017, a portion of payments to retirees will start to come from these extra payments. To get some idea of the extra pressure on our budget, consider that the federal deficit this year is somewhere in the neighborhood of $160 billion—better than the last couple of years but still unacceptably high for the late stages of an economic expansion. But this figure includes the net contributions to the Social Security trust funds, which are taking in about $190 billion more than they are paying out this year. In the absence of these contributions, the deficit would be more than twice as high as it is right now. Over the next ten years, these extra contributions will fall to zero. To put it one way, there will be an extra $190 billion of pressure on the budget in a decade, and even greater demands after that.

The clock continues to tick.

Friday, August 24, 2007

Say it ain't so, a leaner Krispy Kreme

In a delicious bit of irony, Krispy Kreme today announced a new realignment of its operations to become "leaner" while some of its remaining executives take on "expanded roles." I bow to few in my worship and pursuit of (mmmm) doughnuts. Nevertheless, in these health conscious times, a company whose principle product consists of gluten fried in oil and then glazed with a sugary proprietary substance (mmmm, drool) should word its press releases more carefully.

Treehuggers step up, or rather let up on that gas pedal

A rebuttal column in today's News & Record cataloged evidence supporting global warming. The column set off the usual back and forth about whether the U.S. should or shouldn't do something about global warming. Absent from the column and subsequent commentary was any mention of what people--and in particular, those concerned with global warming--might actually do.

The U.S. Department of Energy offers several tips to improve gas mileage. Two of these stand out: driving sensibly by avoiding rapid starts and excessive braking and obeying the speed limit. The DOE estimates that sensible driving reduces gas consumption by 5-33 percent and that obeying the speed limit reduces consumption by 7-23 percent.

Treehuggers should put up or shut up. Anybody who thinks that global warming is a serious problem should gladly accept the small increase in travel time for the substantial reductions in gas consumption and environmental degradation. Treehuggers' reductions won't be enough to eliminate the anticipated effects of global warming. Nevertheless, they would make a substantial dent in the problem and can be accomplished without expensive or intrusive government programs--all treehuggers need to do is obey the law. This also provides a minimal, ready test of people's commitment to the global warming issue. Treehuggers should not hector others or advocate expensive government actions until they're willing to put their cruise controls where their mouths are. Are treehuggers ready to take this first simple step?

P.S. The U.S. Energy Information Agency estimates that transportation accounts for two-thirds of the petroleum consumed in this country, or slightly more than all of the petroleum that we import. If everyone obeyed the existing traffic laws, oil imports would go down substantially. Stated another way, every extra mile over the speed limit and every jack-rabbit start effectively puts dollars in the hands of Hugo Chavez, Vladimir Putin, and the House of Saud. Before issuing any criticisms of their own, conservatives should carefully consider how their own behavior enriches tyrants and Islamic extremists.

Thursday, August 23, 2007

No room for dissent

One of the great strengths of the U.S. is its willingness to tolerate free expression, and especially criticism and dissent. We all benefit from the free flow and careful examination of ideas. It's a shame, however, that the Bush administration does not see things this way. Time and time again, the administration has suppressed dissenting viewpoints. Recently, some of its explicit policies for suppressing dissent were revealed by the ACLU, when it published a copy of the Presidential Advance Manual.

Among other things, the manual makes clear that attendance at Presidential appearances is to be restricted as much as possible to supporters through the selective distribution of tickets. It also directs advance team members to "check for signs or protesters" when admitting attendees and has sections devoted to "preventing demonstrators." Should the odd demonstrator make his or her way into an event, the White House recommends that roaming "rally squads" of either "college/young republican organizations, local athletic teams, and fraternities/sororities" surround, hide, and drown-out the demonstrators. The parallels between the "rally squads" and brown shirts or goon squads are chilling.

The White House sees an obvious gain in the ability to get its message and visuals across without having to respond to others. Undoubtedly, the directive must also be seen as a response to demonstrators who would themselves suppress speech by disrupting public events and shouting the President down. However, the White House has gone far beyond this to suppress even respectful speech.

The policy is wrong on Constitutional grounds; it is in direct contradiction of the first amendment rights to free expression and peaceable assembly. It's also ultimately self-defeating. Arguments are strengthened through criticism. The manual reinforces the notion that this White House exists in and works to maintain a bubble. Beyond this, it reduces the value of the President's own public events by turning them into pure propanda (part of the never-ending political campaign). Rational people catch on to the game and interpret the messages from these events accordingly.