Just a reminder

With Obamacare, here we again find ourselves with a government-made disaster on our hands. There’s much discussion about how ‘we’ fix it or change it, how to make it workable, how the GOP has no solutions…etc.

I hear very little discussion about why we even want these buffoons to touch this stuff.

It’s a good time to remind folks of some wise words from Walter Williams.

If it can help just one…

A common political sales tactic is the ol’, “Even if this government action helps just one person, then it’s worth it” snow job.

It seems we are beyond that snow job now with Obamacare. Apparently, if it only hurts 5% of the population, that’s acceptable.

A step in the right direction?

I’m open for opposing opinions, but at first blush the plan Obama outlined to change Fannie Mae and Freddie Mac seems like a step in the right direction.

Private investors take more of risk. Agree.

Fannie and Freddie lose the implicit guarantee of government. Agree.

While home ownership is good, affordable rental housing is also acceptable. Agree. Renting makes sense for a lot of folks.

Owning does too. You should have to prove you are responsible before owning, though. When people have a tough time getting a loan from a private investor to buy a home, those people should be encouraged to demonstrate responsible behavior.

The only part I had trouble with, so far, was that government would be secondary guarantor. That sounds like an explicit guarantee. Maybe I don’t understand that part.

But, again, a step in the right direction, no?

Could Obamacare be next?

In his speech outlining the plan, Obama quips that this plan will sound confusing for those that call Obama a socialist. For the record, I never thought he was a socialist. I just thought his view on the role of government was on par with public school sophomores. It’s not so much socialism, but the belief that solving problems can be easily accomplished by having government do something about it.

Trade-offs and unintended consequences

Rare bird last seen in Britain 22 years ago reappears – only to be killed by wind turbine in front of a horrified crowd of birdwatchers (via Instapundit).

The multiplier is not prosperity

“I’m doing my part to help the economy!”

I’ve heard many folks make this joke after a big purchase. We snicker. We know they really bought it for the personal benefits they expect to gain. As we’ve been discussing in the comments, they bought it because they valued it more than what they gave up.

The joke implies the multiplier effect — the idea that your purchase stimulates economic activity. You buy a car, which means income for the car maker and workers, they spend that income on suits and shoes, and so on. And, by the time it’s all said and done every dollar of your purchase ‘stimulated’ more than a dollars worth of economic activity, which is measured as GDP.

For some reason, we don’t snicker when economists and politicians make this same claim. We should.

David Henderson, who doesn’t make this claim, does a great job explaining why we should snicker in his aptly titled essay, GDP Fetishism, which I discovered after reading a recent post of his about the ‘multiplier’ of foreign aid.

Also recommended, his latest post about subjective value, which is a topic we’ve touched on here recently in the comments.

Money for nothing

I learned a few things from this EconTalk podcast with guest Casey Mulligan discussing his book, The Redistribution Recession.

One argument from the right against unemployment benefits is that it encourages people to stay unemployed so they can keep receiving it.

A standard retort from the left to that argument is that the unemployment payout is so small that nobody would choose that paltry sum over getting a job.

Mulligan points out that the sum is not trivial. Here’s Mulligan from about 24 minutes into the podcast (bold is mine):

Typically before the recession, unless you are well into the upper half of earnings, when you lost a job you got half of your earnings replaced. So if you used to earn $600 a week, you’d get an unemployment check for $300 a week. And I guess you are referring to kind of that $300 dollar number–it seems $300 isn’t very big. Well, if you earn $600–I earn more than $600 myself–but if you earn $600, then $300 is not all that trivial. Number one.

…number two: There’s all kinds of taxes you don’t have to pay when you are unemployed. Payroll taxes–forget about it. You don’t pay it when you are unemployed. A big chunk of income taxes you are not going to pay when you are unemployed. So when you put all of that together, without even getting to other help you might get from food stamps or Medicaid, put it all together, before the recession about 70%, maybe a little more, of your earnings would be replaced. Not half. And that’s without getting into, like I said, other types of programs.

And when you start with 70% as your baseline–so you are going to get 70% on the old rule, and you are going to put a bunch of new rules* in there–it pushes the 70% up to 85 or 90%. I don’t think we can call that trivial any more.

*The new rules Mulligan mentions earlier in the podcast are expansions made in other programs during in the recession like food stamps, mortgage payment relief and health insurance subsidies.

So, think about these choices:

Choice 1: Get a job making 70% – 100% of what you use to make and give up 40+ hours a week. After paying taxes and paying for more of your food, mortgage and health insurance, you are really making about 50% – 80% of what you use to make.

Choice 2: Don’t get a job (or at least not an official job). Keep making 70%+ of what you use to make.This includes unemployment and other programs. Keep the 40 or more hours of free time during the week, where you might find things to do for others off-the-books for extra cash (which maybe brings you to more than what you use to make).

After learning this, the ‘the unemployment payout is so small that nobody would choose that paltry sum over getting a job’ argument seems much less compelling. I’d say that it would be more of a surprise for someone to give up Choice 2 for Choice 1.

The whole podcast is worth a listen.  There are a couple other points Mulligan makes that I’d like to mention.

One (and some of this may be a mix of Mulligan’s points and my own). Unemployment is more of a choice than a condition that folks find themselves in ‘through no fault of their own.’

He contends that use to be the social norm. If you lost a job, there was more expectation on you to not burden your fellow citizens and to do something productive. So, for example, you were expected to have been responsible and saved for a rainy day when you did have a job. You were expected to make tough choices in your own budget to trim the fat. And, you were expected to find another job and take it and make ends meet, even if it was for less pay that what you used to make. At least you were being productive, responsible and continuing to add to your own work experience and skill set that may lead to bigger and better things.

The ‘social norm’ seems to have shifted to view what you use to earn and the budget choices you made then were things you were entitled to keep and that being out of job is something that you have absolutely no control over.

Two. The cost-benefit analysis of unemployment benefits has shifted. Unemployment benefits use to be viewed as a stop-gap to help folks in transition. It wasn’t really thought of something that would help the economy. Now the benefit-side of the cost-benefit analysis includes stimulative effects to the economy. But, Mulligan does a good job of addressing that belief:

It does put money in a group of people’s hands; it takes it out of another group of people’s hands. And the net reduction in the economy is actually less spending. Because, you know, you have less work going on. So there’s less total income to be spent. And so the people who are going to suffer from that, depending on the industry they work in, they are going to see the drop in demand for what they make. And they may not appreciate my story; but they don’t understand–they need to appreciate: Why aren’t their customers spending? If you drill down to the bottom of that you are going to see that the safety net expansions are a big part of it.

Here Mulligan makes an atomic connection that so few others do. Income and spending derives from wealth creation (i.e. doing productive things), not the other way around. All unemployment benefits do is shift who is spending the wealth that is being created, so since you have fewer people creating wealth, there will be less overall spending.

In fact, this reminds me of a post of mine from 2011, Government is overhead.

Darth Armstrong

Sebastian Shaw as Anakin Skywalker, unmasked i...

Lance after Oprah

With a kid who loves Star Wars, I’ve become too familiar with the story of Aniken Skywalker. I find it striking how similar it is to Lance Armstrong’s story.

Aniken and Lance’s back stories are similar. No father. Humble beginnings. A close relationship with his mother. Caste-changing talent.

Aniken did what he needed to win. Lance, too. When the dark side was their best bet, they went with it and didn’t look back. Aniken murdered a room full of kids and tried to take down his master. Lance shot up and chewed up his friends and spit them out, all the while using his cancer comeback story to pad his hero persona.

I thought those were agonizingly long moments at the end of Return of Jedi as Vader watched the Emperor jolt his son, Luke, (Armstrong has a son named Luke, too). I’m sure Lucas included Vader’s slow deliberation for dramatic effect, but it looked more like Vader was evaluating his options to see which course of action would be better for Vader.

The months from when USADA stripped Armstrong of his titles and banned him from sport for life and Lance v. Oprah reminds me of those moments Vader deliberated.

Lance Armstrong at the team presentation of th...

‘I’m about to cheat, y’all! Anybody got an empty Coke can?’

What’s better for Lance? He lost his rep. He lost his future income (maybe he should lose some of his past income, too). He lost his involvement with LiveStrong. The only thing he has left to look forward to? Competition.

But, wait. He can’t. He’s banned. So, what’s best for Lance? Come clean. Maybe we’ll take pity on him.

Oh…and also, whine that you got a “death penalty” while everyone else got off with slap on the wrist (wait, didn’t they confess when they were given a chance while you tweeted a pic of yourself ‘laying around’ with your fraudulent yellow jerseys?).

Aniken and Lance are easy guys to figure out. They will do what’s best for themselves, always, and they will cross lines to do it. It’s best you not be one of those lines.

When the news of the Oprah interview broke, someone asked me, why is he doing this now? I said, because now is best for Lance. He wants to compete again. It drives him crazy that he can’t. He doesn’t have much else. 

I actually thought I was over playing that, but that was about the only reason Darth Armstrong could muster when asked by Oprah, Why now? I about fell out of my chair. I’m a competitor. I like to win. I want to be able to run the Chicago Marathon when I’m 50. It’s not fair. Waaaaaa…

I don’t think it has sunk in for him yet. YOU DIDN’T WIN. YOU CHEATED. YOU ARE NOT A WINNER. YOU’RE A CHEATER.

As an aside, Oprah played tapes from past interviews where Armstrong defiantly denied doping. I noticed one tell to his lies was saying “absolutely” twice. And I believe he said “absolutely not” twice when Oprah asked if he doped to get his third place finish at the 2009 Tour.

At least Vader’s last selfish act restored freedom to the galaxy (until the next movie comes out in 2015). Armstrong’s cancer survival story has encouraged many cancer victims to fight, which is probably the most heartbreaking for me. What are those people thinking?

Questions I wish Oprah would have asked Lance: Did you discover EPO during your cancer recovery? Was it your discovery of this drug that ignited the EPO generation in cycling?

Lance Armstrong, Johan Bruyneel, 2009

Darth Armstrong, Johan Palpatine, 2009 (Photo credit: Wikipedia)