February 11, 2014

Democrats are the New Republicans

Imagine, if you are under the age of 40, that once, not really so long ago, one of the two major American political parties espoused the following ideals, and the other party did not believe in these ideals strongly at all.
  • Free Enterprise -- That companies should operate in a market under the law without subsidies from government....  Without, for instance, subsidies for oil exploration.  ("According to...the Congressional Budget Office, capital investments like oil field leases and drilling equipment are taxed at an effective rate of 9 percent, significantly lower than the overall rate of 25 percent for businesses in general and lower than virtually any other industry." -- NYT)
  • Market Solution for Health Care -- Health Care should be extended via a market solution: a regulated marketplace of private insurers and providers, a mandate, and subsidies for the poorest families (Nixon).
  • Naive Free Trade -- Extend free trade everywhere possible, regardless of factors like currency manipulation.

So, which party was that?

The Republican Party.

Today, one party pays lip service to these ideals at times, but the other party truly believes in these ideals.

More of the true believers are Democrats.

I'd go further.

Today, it is the Democratic Party that believes in the Horatio Alger story, the upward mobility, the land of opportunity.

These are strong ideals, and the Democrats, having the real belief, should embrace the first two of these ideals, and Horatio Alger, more forcefully, publicly, rhetorically.

Free Trade, on the other hand has a complexity that is crucial:  Free Trade isn't actual unless the currencies freely float (click link to understand why).

...

I was surprised as I began to finish this post and looked up when Elizabeth Warren was a Republican because her party affinity history, wiki nutshell version, is just like my own:

"Warren voted as a Republican for many years saying, "I was a Republican because I thought that those were the people who best supported markets." She states that in 1995 she began to vote Democratic because she no longer believed that to be true, but she says that she has voted for both parties because she believed that neither party should dominate."

People, Elizabeth Warren has evolved some, but not that much.  It's the Republican party that has changed so drastically.

November 15, 2013

Updated: Let People Keep Their Old Swiss Cheese Policies

(Originally published 11/12; Update, 11/15, at bottom)
Just a quick post before other duties.  Some thoughts based on my 2 years of blogging on health care.

President Clinton has opened a helpful topic, which from the short NPR news summary I will paraphrase as: Change the ACA (Affordable Care Act) and let people keep their old policies.

I think this is actually a good idea.  There's little harm in letting people keep Swiss cheese health insurance policies by their own choice.  They can transition to better policies over time, by their own choice.

The premiums on those Swiss cheese policies will still rise due to health care inflation, and yes they will have less-than-complete insurance, but that's by their choice, without financial penalty.

And give these old policies the same premium subsidies according to the ACA income level subsidy formulas!

In fact, giving them the subsidies helps encourage them to eventually upgrade to better insurance.

It won't hurt the new ACA in any pronounced way I can see, at the moment. 

While insurers will need to raise some premiums for their new ACA-compliant policies now on the exchanges, since they provide maternity care and will have somewhat fewer enrollees, this won't likely be a huge increase.  And, lower income enrollees will still get subsidies to make their insurance affordable anyway.

There's little difference on that end, but a lot of difference politically, and in terms of choice.

Choice is always good.

It's a great opportunity for the President to show he's non-partisan while accomplishing some good -- choice helps people in subtle ways.

----

Update 11/15

Insurers are said to be concerned about not having enough young enrollees.   Since insurers will be required to notify those keeping an old-style (Swiss cheese) policy of what that old policy lacks in coverage vs a new comprehensive policy, most younger people choosing to buy insurance at all would make the rational choice to buy the new comprehensive coverage since the cost of premiums is fixed vs their income by subsidy.

Insurers should be allowed to increase premiums mid-year.  Policy holders with subsidies would see no increase.  Insurers net profits are still limited by the payout loss ratio requirement, so they could not use this as a windfall.

If there is legal barrier to insurers raising prices in this way, new provision should simply give them that freedom across the board, across the nation.

Finally, a much smaller group -- higher-income policyholders seeing higher premiums in a few months for their new, comprehensive policies without any subsidy -- these households can typically afford to pay a little more, although that increase could be reasonably limited by law for this single year, perhaps to 5%, as a safety cap, and with required notification to policyholders that should the increase be larger than needed, the law requires the insurer to rebate excess premiums at year's end. They would be simply seeing the "true cost" of coverage, with less subsidy.  Insurers would be fine in each scenario, as the majority of their increased costs will be covered to begin with via subsidies.  The key being that they are allowed to increase premiums mid-year.

October 13, 2013

Why Now Is Crunch Time For The "Tea Party"

I've suddenly realized the behind-the-scenes situation making "tea party" Republicans in Congress so ardent to do-everything-now, why we hear "we can't wait any longer."   It really is crunch time for the Tea Party.

You see, the problem is They've Got No Time Left.

Every economic belief they are based on is becoming like sinking ground.

And it's not about the Affordable Care Act (Obamacare).

One very uncomfortable bit of information slowly seeping into national awareness (and around the world) is that the U.S. stimulus worked much better than the experience of nations going the route of austerity.   As time passes, years now, we are doing better, and big inflation is nowhere in sight, and....  And there is something even worse for the Tea Party...(just keep reading).

But first, look at the real effect of the Stimulus.

Want to know what the U.S. would look like now without the Stimulus of 2009-2011?

To see a nation with many parallels to the U.S. consider Spain: housing boom, housing bust, rising deficits due to falling tax revenues and unemployment supports....but then an interesting difference.

What Spain did next was not a sustained Stimulus like the U.S., with support of central bank Quantitative Easing (QE).  No.

Too soon Spain chose austerity.  And Spain also wilted under the austere (and foolish) European Central Bank which acted as the U.S. Fed did in the early 1930s.  Result?  Spanish unemployment topped out around 27%, recently.....

So, little stimulus, no QE....and plenty of cutting spending results in....  A Spanish Great Depression (II).

But that's not the worst of it for the Tea Party....

The Tea Party has been a message.

They've relied on a story that our "debt is unsustainable" and that we "can't continue like this."

More than anything, this is their story, their message, their crucial one leg to stand on.

And it turns out this proposition is demonstrating itself false, and this new fact is just now becoming visible to careful observers:

As China and other nations have been selling US Treasuries on net for months this year, and interest rates have stayed low, low, low.....

Let me summarize that: massive deficit spending, years of QE, and.....very little inflation, and finally China and the world were selling U.S. debt for months (instead of buying it), and the result is....continuing low interest rates!

The tea party story is just false.

Full stop.

So, perhaps unconsciously, perhaps with some internal party alarm already send through the trenches, the tea party "conservatives" rightly know they have little time until the public begins to become aware of the complete falsehood of their main idea.

Whether it is conscious or unconscious, they feel they need to Act Now, so that they will be able to pretend or believe, later, that the amazingly low interest rates on U.S. Treasuries (our national debt) are due (after the fact) to tea party resolve to improve the budget of the U.S.

That this will be completely false will be beside the point.  (Unless an articulate someone can wake up independent voters to this fact.)

And that such a fast rate of reduction in federal expenditures actually slows economic growth is also beside the point.  Everything is beside the point.

They need to move quick, and then take credit.  It is about public perception, and keeping up appearances.

They need to keep fooling some of the people all of the time.

September 30, 2013

Debt Doomsday: The Wrongest Prediction of Our Time?

Well, it's happened. The oft-trumpeted Day of Doom, when China sells US Treasury Bonds, has arrived.

Actually....
(Reuters) - China and Japan led an exodus from U.S. Treasuries in June after the first signals the U.S. central bank was preparing to wind back its stimulus, with data showing they accounted for almost all of a record $40.8 billion of net foreign selling of Treasuries. 
The sales were part of $66.9 billion of net sales by foreigners of long-term U.S. securities in June, a fifth straight month of outflows and the largest since August 2007, U.S. Treasury Department data showed on Thursday. 
China, the largest foreign creditor, reduced its Treasury holdings to $1.2758 trillion, and Japan trimmed its holdings for a third straight month to $1.0834 trillion. Combined, they accounted for about $40 billion in net Treasury outflows.
As of now, after 5 months of foreign selling of US Treasuries, that 10-yr Treasury yield is....around 2.6% at the moment I'm writing this.

So...where's the panic?  Weren't we supposed to see people jumping from buildings?

Or at least weren't we suppose to see a debt interest catastrophe, with the interest rate climbing and climbing, and the nation's finances in trouble?

Do you realize how low 2.6% is?  It is still far below normal levels.  Normal would be more like 4% to 5%.

Interest rates will go up and down.  They could be up or down this week, or month.  It tells us nothing, unless they rise above normal levels of about 5%.

If 10-yr rates are 3%, that is low.  If they are 3.5%, that is low.  If they are 2.6%, they are very low.

Now, as this endlessly predicted time of doom hasn't amounted to much, we will now hear acknowledgement of the complete falsehood of the popular hypothesis that we are profoundly dependent on China to finance our debt....?

But the non-crisis of debt is no surprise for those that read this blog a couple of years back.

As I wrote in June 2011:
But this [interest rate catastrophe theory] is wrong, illusory, for a pragmatic reason. 
Why? 
Because the worldwide savings glut, which makes US treasury interest rates on our national debt so low, isn't going away, not for decades.
I'd love to see an objective process on the part of those making the interest-rate-disaster prediction, admitting the data is showing their assertion/hypothesis was wrong.

Will that happen?

Perhaps not.  But in the meantime, we live in the world I described.

The world where there are a lot more big savers than big spenders.

September 13, 2013

The Realpolitik Error, Our Modern Bane

James Fallows, whom I've read since I was something like 16 yrs. old it seems (and that is a long time ago), follows an immigrant reader into an interesting mistake  in yet another of too many bits in The Atlantic.  (Does anyone still read David Brooks for interest alone?  Even the best, hardest working columnist-for-life just wears on us when they don't go to the well deeply enough.)

Fallow's reader writes:

He [Putin in his NyTimes Op Ed] is making his case, a case that the world will not understand as Americans understand it. He has protected his interest in Syria under the banner of advancing an international interest. He has established, further, a precedent. That the United States does answer to the council, that it cannot act unilaterally and that our nation can be made to suffer a geopolitical consequence. If you were a country in the Middle East, whose protection would you want right now?

I brought up Khrushchev not incidentally. I currently view our recent impasse as very similar to the Vienna Summit. Americans are quick to hand-wave the foreign apparat, but slow to realize what just happened. We got duped into having a fight we didn't want to have. We wanted limits on Assad's power, and we now have significant limits of our own by way of this precedent.


This is all fine and clever and quite wrong.  Fallows follows by implication this classic realpolitik error, so commonplace in modern times.

The idea that America must be free to act preemptively, without much constraint, and that such actions, like drone strikes, make us safer.

In reality, such actions degrade our security in a clear and definite way.

When we kill people who haven't directly attacked nor are directly attacking us or our contracted allies, everyone senses that we are in the wrong.

Putin, as a Russian controller, manipulator, whatever, is quite beside this point.

By becoming an Evil Empire, we are ensuring not only our eventual fall, but fallout, the very best case of which is losing our freedoms to a security/police state.  The worse and more likely fallout is suffering retribution that kills not a few dozen or a few hundred, but 2 or 3, even 4  magnitudes higher in body count.  Eventually.

In short, the common delusion that we can make ourselves safer by killing punitively or preemptively.

That someone wiser said "He that lives by the sword shall die by the sword" should not only give us pause or make us add in another layer of checks and balances -- it should lead to deeper introspection, or something.  Anything.  Anything but this realpolitik.

In reality, billions of people know when a state is in the wrong, and like water building behind an obstruction, the opposition to the wrong grows.  Everything seems fine to the self-fooling until the sudden and inevitable result.

This will come, unless we recant.

And yes, a religious term is the most appropriate.

Because such a belief in killing as the first or 2nd solution, endlessly supported in our media, our movies, books, language -- it is a mythos, or a religion.  But not a good one.

This does seem a mythos.  So we do have a battle of religions more or less.

Since this battle is in our hearts and minds, we could change in a day, and that change unfurl over a few years, like Gorbachev's Glasnost.  A harmful Wall would fall.

And that could save a lot of American lives.  After all, it is never too late for us to change.

We can renounce unprovoked attacks and killing, we can apologize, we can reform, and we can begin to listen more to the better angels of our nature, and less to the impartially, putatively objective realpolitik of the law-of-the-jungle crowd.

Not sure the law of the jungle isn't best?

Consider: Which nation is safer right now, in the big sense -- the U.S. or China?

Like the U.S., China has an initial level of safety (if it acts neutrally) that arises from its sheer size and weight.  To the extent, extensive, that China has not taken on so many fights of the world, China is by far the safer.

The time to fight a Nazi Germany or an Al Qaeda, as always, as in all of time, is as it begins to attack.

We do always need to wisely prepare, we need to watch and be ready.

We should never preempt.