Friday, February 27, 2015

The War on Poverty

According to Milton Friedman

The war on poverty of which so much has been made since then has been a very good thing indeed for many thousands of civil servants who have been able to make excellent careers and many thousands of academic people who have been able to do study after study on poverty.

From Friedman on Galbraith

Monday, February 23, 2015

Opeds about Redistribution and Obamacare

I published three opeds in the Wall Street Journal, but do not reproduce them here in real time to be consistent with WSJ's copyright. Here are some shortcuts to ungated versions:

Monday, January 12, 2015

Robocall cost-benefit analysis

I just answered a Robocall from Covered Illinois touting Obamacare policies.  Will the time I spent answering the call be counted in any cost-benefit analysis?

Thursday, January 8, 2015

Republicans help to socialize medicine

Wow!  A widespread failure to consider the economics of health reform has led Republicans to push legislation to (unwittingly, may we suppose?) promote socialized medicine, and Democrats to oppose it!

The new Republican-sponsored bill ("Save American Workers Act") is about changing the "definition of full-time work" from 30+ hours to 40+ hours. But we are not really talking about definitions because the federal government does not publish the English dictionary.

What we are talking about the threshold for getting free stuff: government-financed health care in this case. Because of the original ACA, it is much more difficult for full-time workers to get subsidized coverage without experiencing an employment penalty than it is for part-time workers or non-workers. So the new bill is vastly increasing the number of people who would be deemed part time (for the purposes of getting free stuff), or could be deemed part time with a trivial change in their work schedule.

As a result, the bill will take millions of people off employer coverage and put them on Obamacare, all at taxpayer expense.  The bill will put the U.S. dramatically closer to "single payer" than it would be with Obamacare as originally written.

The great political question is: which party will consider the economics first? Maybe Democrats? The White House statement makes me think that they understand the economics pretty well, and the Wall Street Journal editorial suggests that the Republicans may be lagging.  Maybe the President will sign the bill, laughing all of the way to the history books?

Even if they are not concerned about the economic effects, do Republicans really want to bet that the President is not bluffing about veto?  Ie, bet that he is NOT willing to take another big step toward single payer with a Republican-sponsored bill that increases the deficit?  And bet that the President is NOT willing to make his Department of Health and Human Services even more powerful than it already is?  And bet that the President is NOT willing to make a move that makes several 2016 Presidential contenders look like fools?

(Original here)

P.S. The Congressional Budget Office estimates than "only" one million people would change coverage coverage as a result of the bill. With all due respect for their admirable efforts, the CBO is wrong on this.  They are using a variant of the Gruber microsimulation model (all of the sudden, even the Wall Street Journal is relying on the nonsense output from the model), which fails to include any market analysis and improperly uses elasticities from an era where the (non-elderly) alternatives to employer coverage primarily were Medicaid or being uninsured. All of this is explained in my book about the economic consequences of the health reform.

Friday, December 12, 2014

Program participants sometimes OVERestimate disincentives; good new book

I commonly hear it claimed that health insurance assistance does not discourage work because the rules are too complicated for people to understand that work does not pay. This claim is full of errors of logic and fact (see here and scroll to Q8). But let's look at one: why should we assume that people underestimate work disincentives rather than overestimate them?

Here's one story in which one man, Dave Campbell, decided to reduce his work hours in order to reduce his income in order to qualify for Medicaid, when it now appears that he probably would have qualified without reducing income.

... when Dave returned to work a few months after the accident, he pared his hours down to meet the $2,100 [monthly] level: why work more when it would all go to Medi-Cal [California's Medicaid program]...

Dave had been getting advice from a social worker and Medi-Cal expert, as well as his very smart Harvard/MIT professor/social-policy expert sister. Nevertheless, it appears that he/they overestimated the program's disincentives (as the disincentives applied to him).

I have not yet read Professor Campbell's new book that contains the full story. I expect that it is very good, because I did read her earlier book and found it to be excellent!

Tuesday, December 9, 2014

Prof. Gruber "No one has ever questioned the quality" of GMSIM

That's a quote from today's hearing (about the 46 minute mark), referring to the Gruber MicroSImulation Model.  It's reminiscent of this quote:

Both claims are contradicted here, especially Chapter 7.

The testimony also said that he was happy to "answer questions about the model and how it works" but I received no reply to the inquiry I sent Professor Gruber by email June 10, almost 3 months before my book would be published containing criticisms of GMSIM.

Wednesday, November 26, 2014

Real PCE per person

Real PCE per person was less in October than in August.  Year-over-year, it has grown 1.4 percent.

Real GDP per capita has grown 1.7 percent year-over-year.

Sunday, November 23, 2014

Reasons to continue the Elmendorf era

Very briefly,
  1. We are fortunate to have their shoulders to stand on.  I find vast amounts of Elmendorf-era CBO research results to be interesting and rock-solid reliable.  The plain fact is that my books and my University of Chicago lectures highlight such CBO material.  I would be handicapped without it.
  2. Elmendorf-era CBO updates as research progresses, without being gullible.  Is there any other DC institution in that category?
Later when I have more time I will elaborate and document these points, and explain why the detractors are confusing the forest with the trees.

Tuesday, November 18, 2014

Professor Krugman continues to misinform readers about Romneycare

Get the economics of Obamacare and Romneycare from Side Effects: The Economic Consequences of the Health Reform.  Especially Chapter 10, entitled "Romneycare times Eleven":

Overall, the ACA erodes nationwide average work incentives about eleven times more than Romneycare did in the state of Massachusetts . Table 10.1 is a good summary of why the differences are so dramatic: the amounts involved and the fraction of the potential workforce presented with a new income or employment tax as a consequence of health reform.
The primary difference between Romneycare and ACA employer penalties is the nominal amount: $ 295 versus $ 2,000 (plus health cost inflation), respectively. Also significant are the facts that the ACA penalty is not business-tax-deductible and that Massachusetts employers are especially likely to offer health insurance even without a penalty.
The subsidized coverage in Massachusetts has barriers to participation that are absent from the ACA and thereby make Romneycare’s implicit [full-time employment tax] less significant. Romneycare came after other permanent forms of assistance for Massachusetts workers leaving [jobs with health coverage], whereas, before the ACA, the federal government had no significant and permanent program for assisting nonelderly nonpoor adults with health insurance while they are not working. Accounting for the prevalence of various taxes, I find that the ACA’s implicit income tax (not shown in Table 10.1) is about eleven times greater than Romneycare’s.

I give the CBO a lot of credit on this. Unlike Professor Krugman, the CBO never fell into the trap of saying that Romneycare= Obamacare, therefore Obamacare has no noticeable effect on the labor market (CBO 2012).

Updated. I answer commenter Veritas with the excerpt below from Chapter 10 of Side Effects.

[The] federal government helped pay for much of Romneycare, whereas the ACA does not turn to any higher power for funding. ...Romneycare encouraged employers in the state to help employees use pre-tax dollars to pay for health insurance, which means that the U.S. Treasury would be passively assisting employees in the form of reduced personal income and payroll tax receipts from Massachusetts. The state also had federal money that was attached to a Medicaid waiver from the federal Department of Health and Human Services (Powell 2012). Thus one should not assume that Romneycare would be elevating Massachusetts labor income tax rates to [the] levels [needed when federal governments expand coverage],

I believe that Professor Gruber videos refer to the Medicaid waiver but, as my excerpt notes, Romneycare had even more federal funding than that.

Saturday, November 15, 2014

CSPAN covers economic impact

At the 4:58 mark, Dr. Aaron acknowledges that "there is a tradeoff." That was a big surprise to me, because Dr. Aaron was the lead signatory on the economists' letter to Congress saying that there is no tradeoff: the ACA both helps people and grows the economy.