Here’s a list of articles that I have been reading today (organized by topic):
- From Greg Mankiw’s blog, a picture is worth a thousand words:
- The Man Who Predicted the Depression, by Mark Spitznagel
“Ludwig von Mises explained how government-induced credit expansions led to imbalances in the economy.”
Health Care Reform
- Obamacare and Civil Society, by Jeffrey Miron
- What the Pelosi Health Care Bill Really Says, by Betsy McGaughey
“Here are some important passages in the 2,000 page legislation.
- Obamacare’s nasty surprise, by Martin Feldstein
“Obamacare could have the unintended consequence of raising health insurance premiums and causing a decline in the number of people with insurance.”
- The Rose Garden Path, by Peggy Noonan
“The White House has gotten bad at listening, and now it’s paying the price.”
- The myth of ’08, demolished, by Charles Krauthammer
“Sure, Election Day 2009 will scare moderate Democrats and make passage of Obamacare more difficult. Sure, it makes it easier for resurgent Republicans to raise money and recruit candidates for 2010. But the most important effect of Tuesday’s elections is historical. It demolishes the great realignment myth of 2008.”
Here’s a list of articles that I have been reading today, accompanied in some cases with some of my own commentary (organized by topic):
- In the Battle for Stimulus Jobs, Shoe Store Owner Tells War Story, by Louise Radnofsky
Here’s a practical, step-by-step guide to “creating or saving” 9 jobs for only $889! Thanks to Greg Mankiw for the pointer! Professor Mankiw has previously written on “Create or Save“, where he notes, among other things, that while this “statistic” is politically clever, it is based upon counterfactual reasoning and not measurable in any meaningful sense.
The White House uses this created or saved “metric” regularly; e.g., last Friday, the White House claimed that the $787 billion economic stimulus plan approved early this year “…has generated or saved more than 1 million jobs” and that “…it is on track to create or save 3.5 million jobs by the end of next year.” (Source: “White House: 1 million jobs created or saved”).
Finance and the Financial Crisis
- Is Market Efficiency the Culprit?, by Eugene Fama
“Justin Fox (“The Myth of the Rational Market“) and many other financial writers claim that much of the blame for the financial meltdown is attributable to a misguided faith in market efficiency that encouraged market participants to accept security prices as the best estimate of value rather than conduct their own investigation. Is this a fair assessment? If so, how should policymakers respond?”
Health Care Reform
- Yes, the House Health Bill Costs More than $1.2 Trillion, by Donald Marron
- Disincentives from Reform: House Edition, by Greg Mankiw
Professor Mankiw points out an important unintended consequence associated with the House of Representatives’ version of health reform unveiled last Thursday by Speaker Nancy Pelosi. Specifically, the House bill imposes very high implicit marginal tax rates on labor income. For example, a family of four earning $54,000 would pay only about 1/3 of the actual cost for health insurance. However, if that same family earns additional income of $12,000, then the health insurance subsidy falls by $3,800, which translates into an implicit marginal tax rate of 3,800/12,000 = 32 percent. This is an implicit tax that must be “paid” on top off of all the other explicit (income and payroll) taxes which normally apply to $66,000 of personal income.
- Obama and the Liberal Paradigm, by John Stele Gordon
“The sheep are quite capable of looking out for themselves. Someone tell the Democrats.”
Yesterday, I blogged concerning The economics of the Car Allowance Rebate System (CARS) and the First-Time-Home-Buyer Tax Credit (FTHBTC). I brought up the topic of economic stimulus but didn’t follow through on it. In what follows, I will try to make some assessment of stimulus possibilities based upon data reported in the article entitled “Cash for Clunkers Results Finally In: Taxpayers Paid $24,000 per Vehicle Sold, Reports Edmunds.com”.
If you read the Edmunds.com article referenced above a bit more closely, you’ll notice the following table which compares (annualized) Actual/Forecast sales with and without Cash for Clunkers:
|Month||Actual (or Forecast)||If no Cash for Clunkers||Difference|
The numbers in this table indicate annualized auto sales rates (actual or forecast) on a monthly basis during 2009 (the monthly unit sales is calculated by dividing the annualized data by 12, so this implies that in May 2009, 9.85 million/12 = 820,833 new cars were sold in the United States).
This table clearly indicates that the primary effect of CARS was to change the timing of vehicle sales, and that it had a very limited effect on total volume; specifically, during the months in which CARS was in full swing (i.e., July and August, 2009), more sales were generated than would have been the case had the program not been implemented. The program stimulated temporarily higher sales rates last summer primarily by motivating people who would have bought cars anyway to simply act sooner. The overall effect of CARS during 2009 is to increase new car sales in the United States by a total of 1.65%, which translates into an additional 170,000 unit sales (obviously, it will be interesting to see how long it takes for new car sales to revert back to the seasonally adjusted trend line). After the program expired, the auto industry had marginally worse sales than they normally would have expected simply because some of the sales that “should” have occurred in September through December occurred instead during July-August. Based upon this analysis, I stand by my earlier assertion; i.e., that as far as stimulus measures go, CARS most certainly had a very low (probably close to 0) multiplier effect upon the overall economy.