One of the most shocking talking points floating around right-wing talk radio goes something like this: “Obama keeps saying that if you like your insurance, you can keep it, and that his plan won’t interfere with existing plans. But that’s a lie! Just look at page 16 of the health care bill online. You can read for yourself that it makes it illegal for private insurers to add new clients once the bill goes into effect. From that point on, if you lose your job or otherwise drop your private health insurance, you’ll have to sign up for the so-called ‘public option.’”
Is that true? Not really, but it’s true that the language on page 16 is ominous. (And of course in this post, I’m taking the bill’s language at face value. Obviously I agree that the grand plan is to get as many people dependent on the government for their health care.)
Here’s the actual text of the health care bill [.pdf]. If you turn to page 16, there is indeed some scary language about private plans needing to have been in effect before the first year in which the “reform” kicks in. So if you are already convinced that Barack Obama is devil spawn, you would look at that and say, “Yep, it’s just like the guy on the radio warned me. I can’t believe the mainstream media is silent on this crime!”
However, let’s calm down for a second. The timing issues on page 16 are referring to those private plans that can be grandfathered in. Obviously, you can’t grandfather in someone’s private coverage, if the person signs up for the coverage after the start of the new regulation. (That would be soning or daughtering in the coverage.)
If you go back to page 14 and start reading from the “TITLE I” section, you’ll see what’s really going on. The health bill is coming up with all sorts of new requirements that any private plan must satisfy. If you agree that the government should ensure “universal coverage” (something with which I DON’T agree, of course!), then there needs to be a list of attributes the private coverage must satisfy. Otherwise, someone could set up a plan that charges $10 per month in premiums, and provides access to free aspirin whenever the person has a headache. Then that person could say, “See, I have health insurance! No need for me to sign up with the government plan.” So obviously that wouldn’t qualify as making sure everybody had health insurance.
Now just to allay people’s (justified) fears that these new conditions would render their current health insurance plan illegal, the bill specifically exempts all previous plans from these new conditions; coverage that existed before the bill goes into effect is grandfathered in. And the conditions for which plans qualify for such an exemption are listed on page 16.
So in conclusion, it’s not true that the ominous language on page 16 is saying private health insurers will be legally barred from accepting new clients after the health bill is signed into law. What is true is that many current plans may not qualify under the new regulations, and so private insurers won’t be able to offer the same plan to new customers once this monstrosity kicks in.
In general, the talk radio hosts’ warnings are correct; this bill will definitely hamstring the private provision of health insurance, not even counting the huge advantage the “public” plan will have because it can draw on tax revenues. But strictly speaking, the language on page 16 isn’t showing that anyone born after 2015 will necessarily have to sign up for ObamaCare. (I imagine that aspect will come in through a different mechanism…)
Mario Rizzo has another good post:
While I am not a Keynesian, I would agree that the economics of Keynes (and Keynesian economics!) is more relevant to the present crisis than the graduate macroeconomics taught in most high-level departments today.
I’d also suggest that the business cycle analysis of F.A. Hayek is also more relevant than today’s macro-theory.
That’s definitely true. Let me commit heresy and say that Keynes’ General Theory is (a) comprehensible and (b) packed full of deep insights. Of course, Keynes’ policy recommendations are wrong. Rizzo goes on to say:
By “relevant” I mean, in both cases, that the issues addressed and emphasized are keys to either understanding what is going on or making progress in so understanding. Hayek asks us to consider the role of resource misallocation. Keynes asks us to consider the role of radical uncertainty. Mainstream macro is silent on these issues. In fact, much of it recognizes no connection between financial markets and the real economy.
I am not saying that there is some grand synthesis of Hayek and Keynes that will yield truth. I am saying that these economists raised the fundamental issues. They are relevant.
I actually do think a grand synthesis of Hayek and Keynes is a good approach; I was trying to lay the foundation for such an enterprise in my dissertation [.pdf]. (Now Rizzo was my dissertation chairman, meaning he presumably read it. I hope I did not sour him on the prospects for a grand synthesis.)
Rizzo and O’Driscoll had a very important and (at the time) celebrated book, The Economics of Time and Ignorance. They pushed the idea of “pattern coordination” as a way to retain some type of equilibrium construct, in the face of “radical” uncertainty. The problem was, thinkers like Shackle and Lachmann had come up with very serious objections to the typical notion of intertemporal equilibrium, in which everybody’s expectations about the future are compatible. So rather than just yell, “Ah take your nihilist doubt and go hang out with Krugman!” Rizzo and O’Driscoll tried to salvage things.
I think they were on the right track, and in my dissertation I tried to apply their new equilibrium concept to money. What was amusing is that the single biggest objection I got from Austrians (who had the intrepidity to read my dissertation) was, “Isn’t your theory Keynesian?”
I am getting a little impatient with all of these self-defined “progressives” who won’t admit their mistakes. (Obviously there are analogs of this habit in every movement; the progressives don’t have a monopoly here.) We all got a chuckle over Paul Krugman ridiculing the very IDEA that he could have called for a housing bubble, and today we get to see Matt Yglesias laugh off Alex Tabarrok’s clear busting of him.
Okay so here is the progression:
* On May 30, 2009 Yglesias wrote:
This goes back to a point I was making a while ago about how dangerous it is that the public discourse is so dominated by low-quality freelance philosophy done by people with PhDs in economics. I’m fairly certain that if Mankiw were to walk over to Emerson Hall he could find some folks (possibly T.M. Scanlon who I know sometimes reads this blog) who could explain to him that there’s little grounds for the belief that a commitment to utilitarianism is the main justification for redistributive taxation.
* Then on July 20, 2009 he wrote:
…the point here is that the marginal utility of money income declines as it grows. This is also a strong argument for believing that redistributing money from wealthy or high-income individuals to the poor or to public services will be welfare-enhancing.
Tabarrok pointed out the above contradictions, in a post titled, “Yglesias vs. Yglesias.” Then Yglesias says today:
Contra Alex Tabarrok’s cute post here there’s nothing contradictory between pointing out that Greg Mankiw is wrong to imply that utilitarianism-based arguments are the only (or even the primary) arguments available for redistributive taxation and also to point out that considerations related to the declining marginal utility of money do, in fact, militate in favor of redistributive taxation.
Give me a break, Yglesias. Just say, “Heh, you got me there, Alex. At least I know there was a housing bubble.”
Yes, it’s logically possible that one could have pointed out that Mankiw was wrong, while simultaneously arguing that utilitarian considerations “militate in favor of” redistribution. (By the way, Yglesias, you’re aware that many economists–and philosophers–think it’s impossible to engage in interpersonal comparisons of utility, right?)
But that’s not what you did. Here is a bigger quote from your July 20 post, after you summarize some of Will Wilkinson’s objections to using income inequality as a basis for tax policy:
At the same time, the point here is that the marginal utility of money income declines as it grows. This is also a strong argument for believing that redistributing money from wealthy or high-income individuals to the poor or to public services will be welfare-enhancing. The difference, in welfare terms, between a Sub-Zero refrigerator and an Ikea refrigerator is much smaller than the difference in welfare terms between having health insurance and not having health insurance. So a surtax on high earners that goes to finance expansion of health coverage to the working poor is making people better off. In that case, when we look at statistics indicating skyrocketing income inequality we’re seeing evidence of inefficiency that can be rectified through the policy process.
The crude utilitarianism you mention here is the only justification you give for redistribution, to oppose to Wilkinson’s critique. And you specifically say “the point here is”.
So you’re saying that “the point here” is something that isn’t the main justification, a main justification that you failed to mention in the post when arguing for progressive taxes?
To repeat, it’s theoretically possible that you didn’t contradict yourself, but c’mon, Tabarrok busted you. Just admit it and move on. We all screw up from time to time. It’s hard work pontificating on everything under the sun!
In a previous guest post, Edward Gonzales explained his experiences with government spending on an Iraqi community. In the present essay, Gonzales caters to our requests for more talk of blowing stuff up. –RPM
by Edward Gonzales
While serving in Iraq I came to the conclusion that a thriving economy did more to fight the insurgency than all the weapons in my arsenal. To fully explain this I will describe the conditions in the village in which I served, the type of enemy I encountered, the change in tactics we employed, and the results I witnessed.
When I first arrived in Iraq I had a very simple view of what fighting an insurgency was going to entail. I would organize combat and reconnaissance patrols, find the insurgents, and kill them. The reality I experienced was not so simple. I very rarely saw the bad guys. Most attacks took the form of Improvised Explosive Devices (IEDs), booby traps, snipers, and mortars. The only time the insurgents openly exposed themselves to us was during suicide attacks. It was physically and emotionally draining. Nothing would happen for weeks and then three days of attacks would come with two or three IEDs and booby traps per day and then nothing again. The anticipation of when the next attack might occur was the most draining. When the attacks came from snipers, the insurgents placed themselves in populated areas, so if the patrol returned fire and killed the sniper, the chance of killing one or more innocent villagers was highly likely. After the attacks the insurgents would disappear by blending into the local populace. The insurgents had this ability because the villagers either supported them or they were too afraid to speak out against them. I became convinced within a month that “winning” in the traditional sense against an insurgency was impossible.
Insurgents fell into one of two categories. In the first category were the die-hard extremists committed to jihad. There is no negotiation with this type of insurgent. They must be fought with weapons and brute force. We hear a great deal about this type of insurgent from our politicians and the media. What is not said is that they represent a very small minority of insurgents in Iraq. In my time in Iraq I captured and questioned dozens of insurgents. Only one insurgent fell into this category. The great majority of insurgents I encountered fell into a second category. They were young men who had been recruited by the extremists. They certainly had been ingrained with the usual pro jihad, anti American propaganda that I expected, but upon further questioning the reoccurring theme was no money, no hope for the future, and a promised better quality of life once the Americans were thrown out. I realized that had I gotten to these young men first, I could just have easily recruited them into the Iraqi Army or local police force. These insurgents did not care about American democracy or Al Qaeda ideals. They wanted someone to show them a way towards a better life, a life that included a job and a family they had the ability to support. Al Qaeda in Iraq had convinced these young men that America was the source of all trouble and once the Americans were destroyed Iraq would be a prosperous nation again. The realization I came to was that as long as there was no hope for a better future, I and any Marine who might replace me would be fighting insurgents forever.
A Change in Tactics
My focus therefore became about providing enough security to let the village be relatively safe but not so much that it stifled trade. Myself and the Iraqi officers and soldiers patrolled daily and on every patrol we would stop in to see as many shop owners and village elders as we had time for. I would take ten minutes to have tea with each one and ask if their neighborhood was safe and if business was growing. I repeatedly told them that our only intentions were to keep them and their families safe. The security measures that we did put in place were meant to protect and improve trade, not hinder it. After a few weeks I was on a first name basis with most of them and knew their children. Within six weeks of this type of patrolling the difference within the village was noticeable. The people would greet us and let us know if any outsiders had come to the village. They pointed out the areas and trails they thought might be unsafe and we began to find many more IEDs, booby traps, and weapons caches. The number of attacks began to drop.
I noticed a direct and snowballing correlation between safety and economic conditions. In a dangerous area the people produced just enough for their survival. When security was provided against murder and robbery, people began to produce more for trade. As trade started the area became more safe and production and trade increased again which lead to greater safety. As production and trade increased and more people came into the village my job became easier, not harder. The local businessmen gave us all the information we needed to keep insurgents from launching heavy attacks. There were still dangers and attacks still did happen, but in a village with active trade the locals turned those who did launch attacks into the Iraqi Army or local police force, usually within hours. Many locals risked their lives on numerous occasions to stop an American or Iraqi patrol from walking into an IED or booby trap in the road. On another occasion, two men trying to emplace an IED were chased away by the local men all armed with AK-47 assault rifles. (In the Al Anbar province men were allowed one assault rifle in their homes for protection. As a Marine tasked with providing security I was much safer and my job easier with armed locals, but that is another article altogether.)
As these conditions developed young men who had been “away” began returning to their family homes. Some Americans pointed out the danger that many of these young men had probably been insurgents in the past and they were biding their time in order to attack us again at a later date. I and many of the Iraqi and American officers I worked with disagreed strongly with this assessment. These were young men who had given up fighting and were moving back in with their families and now were making a go at a peaceful life in their hometowns. A discussion that I had with an Iraqi Army officer put the situation into perspective for me. He had fought against the Americans when we first invaded Iraq. When the Iraqi Army was stood up again he decided that the best way for Iraq to be peaceful and prosperous once again was not to fight the Americans but join the Iraqi Army. As time passed he believed that more and more young men who were working with Al Qaeda would realize that the insurgent groups were not the way for a better future in Iraq and would quit those groups and return home.
I knew that the insurgency in the village that I was in was defeated when more and more people moved back into the village to go to work on the family farm or work as a fisherman on the river. There was still an occasional attack, but locals were as committed to stopping the attacks as we were. The insurgents had lost the support of the locals
Sound economics is so vitally important because young men who have jobs and hope for the future do not join insurgent groups and launch attacks against police and army units. The dangerous extremists do still exist, but without the support of the local populace these extremists have no young men to recruit and are much easier to hunt down. A thriving and growing economy does more to combat insurgents than all the weaponry in existence.
Folks, I do not have anything to do with the content of the Google Ads. I certainly don’t sign up for the “Play now, my lord!” ads that seem to feature women with increasingly large busts as the weeks pass.
It’s true, there’s a way I can go into Google Ads and tinker with it, but it’s comparable to my policy with hecklers: Once I start banning posters (or ads), the stuff that remains is prima facie approved.
Plausible deniability is the name of the game. Huh? What’s Area 51?
In case you’re wondering, the only reason I torture myself by going to CNBC.com 5x a day is that I check the price of gold, and I continue to wait for the dollar to crash. But then when I’m there, I can’t help but look at the headlines.
For example, right now I read that Bernanke says there should be no audit of the Fed, lest the venerable institution’s independence is compromised by political factors.
Another headline reads: “Only Fed Fit to Do Systemic Exams.”
If I were running the PR on a big investment bank, I’d take out full-page ads in the Wall Street Journal saying, “Mr. Bernanke, don’t want your mission to be compromised by interference from Congress? Our shareholders know how you feel.”
It wouldn’t do any good, of course, since government officials are the most transparent hypocrites around (with the possible exception of televangelists). But it would be funny.
* A bunch of Ron Paul fans have been griping about this WSJ article on the Fed, and I assumed they were just being touchy. But seriously just read the first three paragraphs. That might as well have titled it, “Give me a B! Give me an E! Give me an N!…”
In case you don’t see the big deal, consider this excerpt:
“Rallying one charge is Ron Paul, an iconoclastic Texas Republican who wants to abolish the central bank entirely. Mr. Paul’s economic ideas sometimes make him the target of ridicule — in the new film “Bruno,” shock comedian Sacha Baron Cohen tries to seduce the startled congressman in a hidden-camera scene while discussing economic theory.
Still, Mr. Paul has persuaded nearly two-thirds of the House to co-sponsor a bill requiring far-reaching congressional audits of the Fed.”
So my question is, what the heck is that “Still” doing? Are these clowns really suggesting that other Congressmen shouldn’t have supported Ron Paul’s bill, since he suffered ridicule at the hands of a comedian? How about this, “President Barack Obama is meeting with fierce criticism, with some commentators–such as Ann Coulter–suggesting he remove his temple from his anus. Still, Obama enjoys strong support from the Congressional Black Caucus.”
* Von Pepe sends me this link of Bernanke explaining that he has no idea where the Fed’s $500,000,000,000 went, after he gave it to some other central bankers. And this is the guy who says he needs more oversight over the financial sector, to prevent systemic risks and such.
* At MasterResource I have another summary of the economics of climate change, and the relation to policy activism. Most of it is recycled (ha ha) but I dwell a bit more on how economic models deal with uncertainty, if you care.
Hayek [sorry!!] Henry Hazlitt reviews Rothbard’s Man, Economy, and State.
* Bob Roddis has a Rothbard speech (in three parts) at his blog.
* We are now officially in Bizarro World. Conservatives are finally on the anti-Fed and anti-Wall-Street bandwagon, while Paul Krugman concludes: “[I]t’s crazy to cut off our future to spite Goldman Sachs’s face.”