Applied Rationality focuses on public policy issues and tries to take a liberal perspective that is consistent (comments to the posts will often show otherwise) with neoclassical, rational-choice economics.
Wednesday, March 24, 2010
Senate cry-baby roll call
Sen. Missy McConnell:
Sen. Jeannie ("I'm not feeling so Wellington") DeMint:
Sen. Johnny (I donwanna cooperate) McCain:
Sen. Chuckie (I only cry sometimes) Grassley:
And the lovely Leslie Gore to take us out.
Taking credit where credit is hardly due
For all the unified, angry rhetoric from Republicans lately, there is some evidence of cracks in the GOP wall of opposition.How's that for talking out of both sides of your mouth?
Take, for example, the following e-mail from the office of Sen. Chuck Grassley (R-Iowa), who had mocked the health-care legislation, gave encouragement to the "death panel" accusation, and abandoned bipartisan negotiations.
"The health-care legislation signed into law yesterday includes provisions Grassley co-authored to impose standards for the tax exemption of charitable hospitals for the first time," he said. "The provisions enacted in the new health-care law are the result of Grassley's leadership on tax-exempt organizations' accountability and transparency, including hospitals."
Yes, that's Grassley taking credit for the health-care bill. The same bill that some of his Republican colleagues say they want to repeal. The same bill that 13 Republican attorneys general say is unconstitutional.
Sen. Burr shuts down hearings
Sen. Burr and the Senate Republicans are throwing a tantrum. The Hill reports that
Republicans have blocked Senate committee hearings for a second consecutive day to protest moving healthcare fixes under special budget rules.Maybe when Sen. Burr has cried himself out, the nation can get back to business.
Senate Armed Services Committee Chairman Carl Levin (D-Mich.) asked for consent to hold a hearing Wednesday afternoon but Sen. Richard Burr (R-N.C.) objected. Burr said he was acting on behalf of Republican colleagues.
Update (6:24 p.m.): The business that Sen. Burr obstructed turns out to be damned serious; the stunt also proved to be a huge nuisance to several senior military commanders.
Sen. Carl Levin (D-Mich.), the chairman of the Senate Armed Services Committee, decried the Republicans’ decision to block a hearing in his committee to protest moving healthcare fixes under special budget rules. Levin said that the Republicans disrupted the schedules of senior commanders who have traveled "thousands of miles from their troops" to provide the Senate with "information on pressing national security topics such as North Korea’s nuclear program, Chinese military capability and the threat of cyber-warfare."The officers that Sen. Burr decided to ice included the admiral in charge of the U.S. Pacific Command, the General in charge of the Air Force Strategic Command, and the General in charge of our Korean forces. Clearly, Sen. Burr thinks they have nothing better to do.
"It is astounding to me that Republicans have taken a step of such pointless, blind obstructionism," Levin said in a statement Wednesday. "Our national security should not be held hostage to Republican pique over health care."
Could insurance reform possibly reflect the preferences of voters?
Shame on us. Shame on this body. Shame on each and every one of you who substitutes your will and your desires above those of your fellow countrymen. (Rep. John "Hell no Kitty" Boehner, March 21).What a difference a day makes.
A USA Today/Gallup poll taken the day after the House insurance reform vote indicates that more Americans support the legislation than don't support it.
Nearly half of Americans give a thumbs-up to Congress' passage of a healthcare reform bill last weekend, with 49% calling it "a good thing." Republicans and Democrats have polar opposite reactions, with independents evenly split.
Another USA Today/Gallup poll shows Americans giving President Obama the highest marks for his efforts for insurance reform and the Party of Hell No the lowest marks.
When asked "overall, how would you rate the job that each of the following has done in the efforts to address problems in the healthcare system over the past year, leading up to yesterday's vote in the House," 46 percent of those surveyed gave President Obama excellent or good marks, and 31 percent gave him poor marks. In contrast, only 26 percent of those surveyed gave "Republicans in Congress" excellent or good marks, and 34 percent gave them poor marks.
Perhaps the Democrats have done a better job than the Republicans in discerning the will and desires of their fellow countrymen.
If Americans are indeed coming together in support of the Democrats' insurance reform, will the Party of No now heed them? Don't hold your breath.
So now that insurance reform has passed, what do the Republicans do? File their own frivolous lawsuit.
The White House says it isn't worried that 13 state attorneys general are suing to overturn the massive health care overhaul, and many legal experts agree the effort is futile.Twelve of the attorneys general joing the suit are Republicans, the 13th is a Democrat in a state with a Republican governor.
But the lawsuit, filed in federal court seven minutes after President Barack Obama signed the 10-year, $938 billion health care bill, underscores the divisiveness of the issue and the political rancor that has surrounded it.
The suit is unlikely to succeed.
Robert Sedler, a constitutional law professor at Wayne State University in Detroit, said the effort isn't going anywhere.The suit's success, however, is hardly the point.
"This is pure, pure political posturing and they have to know it," he said.
...Bruce Jacob, a constitutional law professor at Stetson University in Florida ... said the suit seems like a political ploy and is unlikely to succeed.
"The federal government certainly can compel people to pay taxes, can compel people to join the Army," he said.
In the lawsuit, the attorneys general argue that "the Constitution nowhere authorizes the United States to mandate, either directly or under threat of penalty, that all citizens and legal residents have qualifying health care coverage."
If they were serious about this, they would also be suing the federal government for forcing all U.S. workers to contribute to old-age, socialized medicine.
As Rep. Boehner said, "Let's get rid of junk lawsuits," starting with this one.
Monday, March 22, 2010
The day after
Mr. Speaker, this debate is not about the uninsured; it’s about socialized medicine. Today we are turning back the clock. For most of the 20th century, people fled the ghosts of communist dictators, and now you are bringing the ghosts back into this Chamber. With passage of this bill, they will haunt Americans for generations.Republican Representative Dave Camp was more succinct in his scare-mongering, stating
Your multitrillion dollar health care bill continues the Soviets’ failed Soviet socialistic experiment. It gives the Federal Government absolute control over health care in America.
My friends, that is what this debate is really about. Today, Democrats in this House will finally lay the cornerstone of their socialist utopia on the backs of the American people. (Congressional Record, no. 43, p. H1866)
Simply put, the Democrats’ bill will not only ruin our health care system, but the tax increases will ruin our economy and kill jobs. ( CR 43, p. H1863)A "socialist utopia," a "ruined economy?"
Today, Wall Street had its first opportunity to weigh in on the new legislation. It responded by sending the three major stock market indices up, with the DJIA and Nasdaq composite indices climbing to 18-month highs.
Stocks gained Monday, with health care shares leading the way, as Congressional approval of a sweeping reform bill removed the uncertainty that has surrounded its passage for months.Apparently the "socialist utopia" isn't so bad for private businesses or even private health care companies.
The Dow Jones industrial average (INDU) rose 44 points, or 0.4%, ending at a fresh-18-month high. The S&P 500 index (SPX) gained 6 points, or 0.5% and closed just shy of an 18-month high hit last week. The Nasdaq composite (COMP) gained 21 points, or 0.9%, closing at a more than 18-month high.
Republicans show their stuff
It also wasn't the contents of the legislation, which largely follows Republican proposals from the 1990s when they again wanted to "slow down and start all over." The legislation also includes some 200 Republican-proposed amendments.
Certainly, if the contents mattered, Republicans would have supported the follow-on legislation, H.R. 4872 which will eliminate some of the deals cut in the broader health care legislation and reduce the deficit by a further $25 billion over the next decade. Republicans who all voted against the reconciliation bill can fairly be tagged with voting in favor of the "conhusker kickback," "gator aid," and the other provisions that they bloviated against.
Republicans fulminated against the sausage-making aspects of the legislative process. Yet Republicans had earlier insisted that the legislation be written in the Congress and not developed by the White House (as had been the case with the Clinton era proposals). Did it make a difference?
In the end, none of the accommodations mattered. All the Party of No (or in the case of its red-faced minority leader, "hell no") could muster was ugliness with catcalls of n****r, f****t, totaltarian, communist and baby killer.
Wednesday, March 17, 2010
Republicans insist on "up-or-down" votes?
The New York Times reports
Republicans paraded to the House floor on Tuesday to denounce the maneuver as a parliamentary trick. Representative Ted Poe, Republican of Texas, said Democrats were using "a sneaky snake oil gimmick" to pass their bill. "Let’s have an up-or-down vote on this bill and not hide behind some procedural mumbo jumbo," Mr. Poe said.And the Washington Post reports
Republicans sought to block Democrats' path. Rep. Parker Griffith (R-Ala.), who switched political parties in December, plans to introduce a resolution that would compel the Democrats to conduct a regular vote.Huh? Republicans are now clamoring for an "up-or-down vote?"
Representatives Poe and Griffith (and other "outraged" Republicans) would do better to clamor for an "up-or-down" vote in the Senate, where a minority of Republican Senators are effectively preventing that chamber from voting through the "procedural mumbo jumbo" of a threatened filibuster.
While they're at it, Republicans could also clamor for "up-or-down" votes for the 64 Obama administration nominees pending in the Senate.
Friday, March 12, 2010
Dissecting the demise of Lehman
There are many reasons Lehman failed, and the responsibility is shared. Lehman was more the consequence than the cause of a deteriorating economic climate. Lehman’s financial plight, and the consequences to Lehman’s creditors and shareholders, was exacerbated by Lehman executives, whose conduct ranged from serious but non‐culpable errors of business judgment to actionable balance sheet manipulation; by the investment bank business model, which rewarded excessive risk taking and leverage; and by Government agencies, who by their own admission might better have anticipated or mitigated the outcome.The examiner describes how Lehman significantly increased its leverage (specifically, its short-term borrowing to finance long-term assets) starting in 2006. When the subprime mortgage market began to deteriorate, Lehman pursued the worst possible strategy (in hindsight), further increasing its leverage and "doubling down" on its subprime involvement. And then when this strategy didn't work, "Lehman painted a misleading picture of its financial condition."
The examiner reports that it did this through an accounting gimmick called a "Repo 105," in which it moved $50 billion of assets off its books and reported short-term financing agreements based on these as sales rather than as financing. This made Lehman appear to be less leveraged. Indeed, the examiner reports evidence indicates "their sole function as employed by Lehman was balance sheet manipulation." Nevertheless, Lehman's accountants from Ernst & Young signed off.
The examiner also reports that Lehman grossly overstated its liquidity pool.
These misstatements helped Lehman raise more capital to keep its schemes going and to increase investor losses by billions more.
The examiner also finds that unreasonable claims by two other investment bank creditors, JP Morgan - Chase and Citibank, in Lehman's final days hastened the firm's demise.
Government agencies, especially the Security and Exchange Commission (SEC) and the Federal Reserve Bank of New York (FRBNY), also appear to be culpable. Both agencies were aware of Lehman's problems. The examiner reports, "at the time of Bear Stearns’ near collapse in March 2008, it was widely thought at the highest levels of every relevant Government agency that Lehman could be the next investment bank to fail." Despite this, neither agency forced Lehman to disclose those problems, and the FRBNY, under Timothy Geithner, continued to lend to Lehman through the discount window.
The government also failed to clearly communicate its hands off approach, leaving Lehman executives and others to anticipate a bailout that never arrived. The government was also hampered by rules that made the SEC Lehman's primary regulator. When the SEC failed to act, the hands of other agencies were tied.
It looks like Lehman executives, some of its banks, its accountant, and the government were aware of its problems. However, none of them let the investing public in on the secret.
Thursday, March 11, 2010
More earmark reforms
Today, the House Republican conference has upped the Democrats by deciding that its members won't ask for any earmarks at all for this year.
I seldom agree with the "Party of No," but a "no" to earmarks is a good thing.
Some welcome earmark reforms
House Democratic leaders on Wednesday banned budget earmarks to private industry, ending a practice that has steered billions of dollars in no-bid contracts to companies and set off corruption scandals.The Democrats' decision is one of several that addresses the earmark mess that had exploded under the previous Republican leadership. Reforms in the last three years have made the process more transparent (prior to FY 2008, the number and amount of earmarks could not be reliably tracked; earmarks and their sponsors can now be monitored) and also appear to have curbed earmark spending.
The ban is the most forceful step yet in a three-year effort in Congress to curb abuses in the use of earmarks, which allow individual lawmakers to award financing for pet projects to groups and businesses, many of them campaign donors.
But House Republicans, in a quick round of political one-upmanship, tried to outmaneuver Democrats by calling for a ban on earmarks across the board, not just to for-profit companies. Republicans, who expect an intra-party vote on the issue Thursday, called earmarks “a symbol of a broken Washington.”
The Democrats' most recent step probably owes more to ongoing, bubbling scandals (several involving earmarks) than any new-found virtue. The Democrats may have also been trying to stay one step ahead of House Republicans, who are considering a unilateral blanket ban on earmark requests. To the extent that Republicans align more closely with business concerns, the Democrats' move tilts not so subtly in their own favor.
The impact of this particular step may end up being modest. Other Democrats in the House are complaining, and Democrats and Republicans in the Senate have rediscovered bipartisanship in completely dismissing the idea.
Democratic appropriators in the Senate and House are fighting over a ban on earmarks to for-profit companies, throwing a wrench in a House attempt to burnish its ethics record before the midterm elections.The House Democrats' reform is modest in other ways. It still allows for earmarks to non-profits, such as universities (including this one). Representatives can also continue to press for parochial spending through other means, such as defense items that happen to be produced by certain companies or in certain districts.
Sen. Daniel Inouye (D-Hawaii), the chairman of the Senate’s Appropriations Committee, slammed House Appropriations Chairman David Obey’s (D-Wis.) moratorium on earmarks to for-profit companies mere hours after Obey announced it on Wednesday.
At the same time, the Democrats' move could yield bigger dividends if it ignites an inter-party competition over earmark and ethical reforms. Let's hope that such a competition arises.
Wednesday, March 10, 2010
Preying on the vulnerable
Let's start with Somalia, where the New York Times reports
As much as half the food aid sent to Somalia is diverted from needy people to a web of corrupt contractors, radical Islamist militants and local United Nations staff members, according to a new Security Council report.Meanwhile in Pakistan,
Suspected militants armed with grenades attacked the offices of an international aid group helping earthquake survivors in northwestern Pakistan on Wednesday, killing six employees and wounding several others, police and the organization said.And locally,
All the victims of the assault on World Vision, a large Christian humanitarian group, were Pakistanis.
Extremists have killed other people working for foreign aid groups in Pakistan and issued statements saying such organizations were working against Islam, greatly hampering efforts to raise living standards in the desperately poor region. Many groups have scaled down operations in the northwest or pulled out altogether.
A reported Greensboro cleaning company has closed and its owners are believed to have left town after accusations they defrauded job applicants out of hundreds of dollars by promising jobs that never existed, police said.
...The company posted fliers at the Greensboro Urban Ministry and winter emergency shelters in the area over the past two months looking to hire about 150 workers and advertising jobs at $9 an hour.
Police believe hundreds of applicants came, filled out paperwork, gave their personal information for a background check and took a 300-question test about janitorial work.
Once hired, they were required to pay $55 — cash only — for two to four uniforms and a pair of boots.
The uniforms never came; the workers never received starting dates.
Friday, March 5, 2010
Shady economics survey from the John Locke Foundation
The letter of introduction and instruction begins
In an effort to improve high school economics education in the state, we are asking you and other experts from colleges and universities across North Carolina to assess the quality of selected questions from the state's high school civics and economics and U.S. history tests. To test these questions, we added question evaluation options for you to consider.This paragraph taints everything that follows. The first sentence frames the survey as "an effort to improve high school economics education." The wording implies improvements are needed and that the respondent should help by finding things that need improvement.
Additional non-neutral framing appears later in the letter.
Over 100,000 public high school students took the North Carolina end-of-course civics and economics test last year. According to the NC Department of Public Instruction, seven out of ten students passed the test. Unfortunately, pass rates say little about what high school students know and the testing instruments used to assess that knowledge.So again, the letter is framing the survey negatively and, worse, signalling the respondent that the test is unreliable ("Unfortunately, pass rates say little about what high school students know").
The survey form itself asks about six test questions: four drawn from the civics and economics test and two drawn from the U.S. history test. The questions appear to be very selectively chosen.
Each test actually contains 80 questions. From the civics and economics test, there are at least two dozen questions that bear directly on economics. From the U.S. history test, there are another dozen that ask about economic knowledge or reasoning and several more that address political economy issues.
Thus, from the 160 questions on the two tests and from 3-4 dozen questions that address economic issues in some way, the Locke Foundation has selected six.
Anybody who has ever developed a test knows that different questions are better at discriminating students' knowledge than others. This why tests include many questions and why pass criteria are based on answers on the full test or test section, not a subset of answers.
Education researchers further know that there are formal statistical procedures for testing the validity and reliability of questions. Those procedures would also involve evaluating the whole set of questions in a domain.
There are additional problems besides the survey's framing and selectiveness. The formatting of the survey form pushes respondents toward indicating that the questions have problems.
Consider the first item on the survey asks about question 14 from the civics and economics test:
1. A person opened a booth at a flea market to sell paintings this is an example of which factor of production?You can see how the format of the question prompts the respondent to identify a problem. In particular, the check boxes, which are set apart from the test question, prompt particular negative responses.A. Capital
C. Natural Resources
☐ None of the above
☐ Two or more of the above
☐ Defective or misleading question
☐ Comment (optional) _____________
Respondents are also pushed toward these responses from the letter of instruction which told them that they are to "assess the quality" of the questions and that they have "question evaluation options ... to consider." The check boxes are the only entries on the survey form that explicitly allow for assessment.
It's only if the respondent has carefully read a shaded box on the survey sheet that the respondent would see buried in the middle of a paragraph directions that say that he or she can also circle a letter if that appears to represent the answer. The survey is putting a lot of faith in people's willingness to read directions.
I called Terry Stoops, the Director of Education Studies at the John Locke Foundation and the letter author, to relate these concerns. Mr. Stoops was kind enough to take the call and patiently listen. Throughout the call, he expressed confidence in the appropriateness of all of the aspects of the survey instrument.
I'm, in turn, confident that the survey is an exercise in providing a social-science veneer to a pre-ordained conclusion. I strongly recommend that my economics colleagues not participate.
This is not to say that test questions shouldn't be reviewed or that they can't be improved. However, there are much better and less shady ways of going about it.
U.S. employment grows 850,000 since December
Importantly, employment growth is finally outpacing population growth. The percentage of people 16 and over who were employed grew from 58.2 in December and 58.5 in February.
The unemployment rate remained unchanged at 9.7 percent, but even this is relatively good news, as the number of people entering the civilian labor force increased substantially in February. Nearly half a million people have been added to the labor force since December. The number of people who have recently lost jobs is down, while the number of people who are re-entering the labor force is up.
The estimates from the establishment survey were more mixed. The survey indicated that 36,000 jobs were lost on a seasonally-adjusted basis, with these losses coming equally from the private and public sector. The establishment number can differ from the household number because of the different survey coverage (the establishment survey has a harder time tracking small business employment, especially new businesses), multiple job holding (7.1 million people in the household survey held two or more jobs), survey dates, and survey noise.
From the establishment survey, private service industry jobs were up in February. Private goods-producing jobs increased or were flat in most industries; however, a large drop in construction jobs, possibly tied to the winter storms in February, pulled down the overall number. Government jobs were down due to a fall in local education jobs.
Overall, the figures indicate that the job market is turning the corner and that the recovery is solidly, though not spectacularly, underway.