Marginal Revolution

Is the Senate bill fiscally responsible?

Matt Yglesias writes:

The bill contains provisions that have front-loaded positive impacts on the deficit and also have provisions that have back-loaded positive impacts on the deficit. The bill, rather intelligently, seems to balance this out well leading to net deficit reductions in the short-, medium-, and long-terms. The bill by no means solves the considerable long-term fiscal challenges to the United States, but it does improve the situation. If people want to say that on balance they think the bill is a bad idea, that’s fine, but to do so is to oppose what’s far-and-away the most politically realistic way to enact non-trivial long- and medium-term deficit reduction in the 111th Congress.

I should coin a new MR term: the retreat into the relative.  As I understand it, the apparently fiscally responsible portions of the bill come from a) eventual cuts in Medicare spending, and b) rising taxes on some health insurance plans and they come later of course.  Few Congressional representatives are willing to do these things today, so should we predict they will be done in the future?  (The same problem plagues Waxman-Markey, by the way, so these back and forth rhetorical debates are becoming quite common.)  In my view, policies structured in this manner are simply another way of doing deficit spending.

To quote Matt, he writes of: "the most politically realistic way...to enact...deficit reduction."  That sounds powerful.  and in fact I agree with his claim as it is worded.  But if all the politically realistic options make our fiscal position worse rather than better (Congress likes to spend money more than it likes to inflict pain on voters)...well, this bill still makes the deficit problem worse.  Even it is the best of the realistic worsening options.  We should be wary of the retreat into the relative because all the options may be bad.  Nor should the phrase "building a framework" be translated into anything but "we are unwilling to do this now or anytime soon and thus we are engaging in more de facto deficit spending."

The fact that Republicans can (correctly) be blamed for making the bill worse does not constitute an argument that the current bill will make things, in fiscal terms, better. 

Citing inconsistencies of bill opponents ("but he didn't scream loud enough about [fill in the blank] way back when") does not help on this score either.

Another argument I have seen in MR comments is: if we can't solve this health care costs problem it won't matter, therefore we can spend more without making the problem in net terms worse.  That's a fallacy and you would never apply such reasoning while driving over the speed limit ("I'll accelerate right now, after all at some point I've got to slow down anyway.")  Think of it as a kind of Zen-like, reverse Sorites ploy: "It is adding stones which takes a pile away."  Or "Let us add stones.  The pile must disappear in any case."

Here is a numerical style guide (SG) for identifying future arguments in these veins, because they will recur when you have an activist government which wants to be very popular, combined with an under-educated, short-term oriented citizenry:

SG1. The retreat into the relative: "All the other options are even worse."

SG2. Blame the Republicans: "They made the bill bad, not us."

SG3. The critic is evil or inconsistent: "Your views are inconsistent, or you are morally questionable, so I can dismiss your worries."

From now on in the MR comments section you can just cite the appropriate number and spare yourself carpal tunnel syndrome. 

Addendum: Megan McArdle adds relevant comments and also here.

Badges? We don't need no stinkin badges.

In pursuit of an Eagle Scout badge, Kevin Anderson, 17, has toiled for more than 200 hours hours over several weeks to clear a walking path in an east Allentown park.

Little did the do-gooder know that his altruistic act would put him in the cross hairs of the city's largest municipal union.

Nick Balzano, president of the local Service Employees International Union, told Allentown City Council Tuesday that the union is considering filing a grievance against the city for allowing Anderson to clear a 1,000-foot walking and biking path at Kimmets Lock Park.

"We'll be looking into the Cub Scout or Boy Scout who did the trails," Balzano told the council.

Story here. Hat tip to Modeled Behavior.

Innumeracy can get you killed

"Statistically, it is very dangerous, but I have lived here a long time and I don't feel like I'm in any danger."

That is Justin Fenton, the Baltimore Sun's crime correspondent.

The quote comes from a longer article by a British reporter who switched places with his Baltimore counterpart because he wanted to see whether The Wire was accurate.  It is. 

Give them your tired, your poor, your huddled masses

Three countries that relied on low-skilled immigrant workers during good times — Japan, Spain, and the Czech Republic — have recently introduced voluntary return programs programs, popularly known as "pay-to-go" programs, in an effort to reduce the number of unemployed immigrants.

The programs established in 2008-2009 generally provide unemployed legal migrants with stipends that cover the cost of a one-way plane ticket "home." Some programs also offer migrants a lump-sum payment.

More here.

Ayn Rand

With two new biographies being covered in all the major newspapers, The Daily Show, and elsewhere, Ayn Rand is in the news.  Yet all of the reviews that I have seen have focused on her personal life rather than her ideas.  Nearly five years ago Tyler and I both wrote on Rand's ideas on the occasion of the 100th anniversary of her birth.  It seems like a good time to reprise.  Here is my post with links.

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Here, on the 100th anniversary of her birth, are some thoughts on Ayn Rand.  See also Tyler's post and Bryan Caplan's excellent series (links.)

It used to be commonly said that “Until Robinson Crusoe is joined by Friday there is no need for ethics on a desert island.” Rand replied that it was on a desert island that ethics was most needed because on a desert island you cannot free ride on the virtues of others; if you are to survive you must yourself exercise the virtues of rationality, independence, and productiveness. As her reply indicates, Rand was an exponent of virtue ethics, the Greek/Aristotelian idea that ethics is about how one should live. Indeed, although she does not get much credit, Rand is the most prominent and lucid, contemporary exponent of virtue ethics.

I think Rand’s version of virtue ethics is compelling because it is explicitly modern – where the recent literature still sometimes seems to focus on the virtues required of a Greek olive grower, Rand’s virtue ethics is post industrial-revolution, a virtue ethics for the capitalist world.

If ethics is about the virtuous man then politics is about the social requirements for the virtuous man to exist (the modern literature lags behind Rand in connecting ethics and politics). One can understand Rand’s novels as an extended disquisition on virtue ethics and the political and social requirements necessary to practice such an ethics. In particular, she argued that rights, a legal concept creating a protected sphere for independent action, were a necessary condition to live a life of virtue.

One need not buy Rand’s deductive argument that laissez-faire capitalism is the sine-qua-non of ethical action to appreciate her insights connecting the good man and good woman with the good society. Relatedly, I do think that Rand was absolutely right to say that capitalism requires a moral defense.  Moreover, the only plausible defense must involve the virtue of selfishness. It is all too obvious that capitalism promotes and rewards self-interest and, Mandeville nothwithstanding, no defense which simply excuses this fact will succeed.

Rand’s language hasn’t done much to advance her case and indeed it has obscured areas where her insights are now widely accepted. Today, for example, you can find many books attacking the evil of altruism. Surprised? Of course, the books don’t use those terms, instead they call it the problem of codependency (or some other such). Relatedly, it’s no accident that Hillary Clinton was once an avid Randian (recall her political career started with Barry Goldwater) because Rand is an important feminist. Rand’s portrayal of strong, independent, intelligent women is coming to be recognized as a landmark in fiction but in addition Rand’s attacks on self-sacrifice have special meaning in a culture that has long used the “caring ethic” to bind women to the service of others.

Of weaknesses there are many, most of which flow from the combination of Rand as philosopher, novelist and powerful personality. John Galt, for example, is but one instantiation of the Randian/Aristotelian virtue ethic, an instantiation which was created for a particular aesthetic purpose by a particular person. Too often both Rand and her detractors have taken the instantiation for the class thereby limiting the vision.

I have a bad feeling about this

Here is the latest on Tysons redevelopment:

Remaking Tysons Corner into the second city of Washington will take a lot more than a new Metro line and a downtown of tightly clustered buildings designed for walking. It will take almost $15 billion in new roads and public transportation.

Even in this age of sticker shock, that's a lot of money for a local project.  You'll recall my earlier prediction that Tysons will get the road widenings but not enough of the other changes needed to make it a walkable downtown; the road widenings will on net make things worse. Call me an apologist for suburbia if you wish, but I sooner view myself as an apologist for public choice theory.  Some parts of the redesign will be more popular than others and we will get a very unbalanced mix of reforms.  This is indeed what I predict:

The numbers also have prompted some proponents of dense development in Tysons to argue that if the county pushes too many costly road improvements and makes room for more cars, the vision could unravel. 

To simply insist that it "should be different," or to charge that I do not spend enough time criticizing interstate highway subsidies, is to miss the public choice point.  Now that the stimulus is up and running, you can see road widenings all over NoVa and they will be finished.  Who will put up the money for the rest of Tysons reform?

For funding, Fairfax officials say, they will look to the Obama administration, which is committed to subsidizing growth projects in urban areas. They hold out little hope from the Virginia Department of Transportation, which this year slashed the county allocation for secondary roads to zero. Given the millions of dollars Northern Virginia has gotten for big projects such as the HOT lanes and new Woodrow Wilson Bridge, "More state funding is pretty much politically doomed," said Kathy Ichter, the county's chief of transportation planning.

Stay tuned...

PETA, or environmentalism?

The bodies of thousands of rabbits culled every year from the parks in Stockholm’s Kungsholmen neighbourhood are being used to fuel a heating plant in central Sweden.

The story is here and I thank Jonathan Falk for the pointer.

Gone, gone, gone

At BofA and AIG close to a majority of the top executives whose salaries were to be cut have already left.  Nuff said.

"There's no question people have left because of uncertainty of our ability to pay," said an executive at one of the affected firms. "It's a highly competitive market out there."

At Bank of America, for instance, only 14 of the 25 highly paid executives remained by the time Feinberg announced his decision. Under his plan, compensation for the most highly paid employees at the bank would be a maximum of $9.9 million. The bank had sought permission to pay as much as $21 million, according to Treasury Department documents.

At American International Group, only 13 people of the top 25 were still on hand for Feinberg's decision.

A big hat tip to Ryan Lee for the link.

Going Galt

The Obama administration orders huge pay cuts:

Under the plan, which will be announced in the next few days by the Treasury Department, the seven companies that received the most assistance will have to cut the cash payouts to their 25 best-paid executives by an average of about 90 percent from last year. For many of the executives, the cash they would have received will be replaced by stock that they will be restricted from selling immediately.

And for the 25 best-paid executives, the total compensation, which includes bonuses, will drop, on average, by about 50 percent.

The companies are Citigroup, Bank of America, the American International Group, General Motors, Chrysler and the financing arms of the two automakers.

There is no way this will work as advertised.  If the administration actually follows through, most of these executives will quit and get higher paying jobs elsewhere.  Executives not directly affected by the pay cuts will also quit when they see their prospects for future salary gains have been cut.  Chaos will be created at these firms as top people leave in droves.  Will the administration then order people back to work?    

Addendum: Larry Ribstein has an excellent post on this issue and see Max Fisher for an interesting explanation of the timing and a good roundup.

*Too Big To Fail*

That's the new book by Andrew Ross Sorkin and the subtitle is The Inside Story of how Wall Street and Washington fought to Save the Financial System -- and Themselves.  Last night I read through to p.132.  So far it seems to be the single best narrative of the crash and its aftermath.  I haven't seen anything theoretical or on root causes, etc.  I chuckled at reading this sentence, which starts with Dick Fuld of Lehman Brothers picking up the phone:

"I know this call may be a little unusual," [Treasury Secretary] Paulson began.  "You and I have been trying to kill each other for years."

I'll let you know if my judgment changes, but so far this falls into the "recommended" category, noting again that it is narrative not theory.

Addendum: Here is Yves Smith on the book, very good post.  See also Felix Salmon.