Contrarian Economics – Page 5 – The Moral Healthcare Blog

Wallison: Still Wrong About Genesis of Housing Crisis | The Big Picture

Wallison: Still Wrong About Genesis of Housing Crisis | The Big Picture:

If you’ve been closely following the housing finance reform debate, you may have come across a pair of shrill blog posts penned by Peter Wallison, a senior fellow at the American Enterprise Institute and a Republican appointee to the Financial Crisis Inquiry Commission. He responded to my February 2011 article, “Faulty Conclusions Based on Shoddy Foundations,” which criticized the research underlying Wallison’s dissent from the majority of the members of that commission, and his contention that U.S. affordable housing policies caused the global financial crisis.

In these blog posts on The American Spectator’s blog on May 24 and on AEI’s blog on May 26, Wallison criticizes ”Faulty Conclusions” as “fallacious,” “fraudulent,” and “deceptive”; claims that it contains a “fake” chart; and describes the article as a “political screed.”

As I describe below, these accusations are baseless and distract from the fact that Wallison does not actually address the main arguments of “Faulty Conclusions.” Wallison does not contradict the claim that his FCIC dissent depends critically on the categorization of millions of home mortgage loans as “high risk” that are not actually high risk. Wallison also fails to answer other serious issues with his arguments that were pointed out in “Faulty Conclusions.”

I was watching Bill Maher the other night and John Fund was again blaming Freddie and Fannie (and low income people via the Community Reinvestment Act – the bastards!) for the great recession, and I was disappointed that Thom Hartmann didn’t protest more vigorously. I found this article via Brad Delong’s economics blog.

Basically, from the viewpoint of a non-economist, the guy flogging these claims was a minority of one, even with other Republicans on the Financial Crisis Commission, and one would think responsible conservatives would recognize the lack of credibility, yet this is the favorite meme among Fund and others who want to minimize the role of deregulation and crony capitalism for this mess.

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Daily Kos: An indecent proposal

Daily Kos: An indecent proposal:

That cut-up Grover Norquist suggest wealthy Americans like Warren Buffet contribute to the Federal government on an optional basis, and Hunter at DailyKos offers to accept the offer…

My proposal is that we make taxes for wealthy Americans and corporations entirely optional. That’s it. If a corporation wants to pay zero percent in taxes, they should be allowed to, and if they want to pay the full tax rate, that is also allowed. The same for wealthy Americans.

The only caveat is that non-contributing corporations and individuals will be barred from taking advantage of any government services. It is the perfect free-market-based opt-out: If you do not want to support the American infrastructure and population to the same extent that your fellow citizens do, you can simply decline to, and live your life as the libertarian god you have always longed to be. You will be free! You will be allowed to go Galt, or not go Galt, to whatever degree you wish; as a special bonus, we shall prevent you from becoming that most dreaded of figures, the parasite, since if you are not contributing to the benefit of society it only stands to reason you should not gain profit from it either.

For starters, companies that do not pay the going tax rate will be barred from shipping their products on American roads. They will be prevented from connecting to the American electric grid, or from using municipal water or sewer systems. Instead, they will have to provide these services on-site. The good news: They can feel free to pollute as much as they like, as long as no pollution crosses the boundaries of their property (above, below or horizontally) into the rest of America. That would be considered an act of war.

Wealthy Americans that opted out of paying the going tax rate would also, of course, be prohibited from using American roads. This would not be a problem for them, as they generally can afford airplanes or helicopters, which would be similarly fine so long as they did not use American airspace (sorry, but the FAA costs money too, you know). But they could certainly fly around the property, which might be a pleasant experience.

Then we must consider the issue of security. Fire and police protection would be right out, so there would be no particular incentive for poorer Americans not to loot their properties (wealthy Americans tend to have nicer things than the rest of us). The American elite might consider the approach taken by wealthy Mexican families, which is to install a high perimeter fence around the property with a heavily armed private guard service. This would be expensive and unsightly, but it would be up to each individual to decide, for themselves, what the appropriate free-market level of protection for their own property might be. My one tip would be to spend a good deal of time on that decision.

It goes without saying that non-contributing Americans, corporate or otherwise, would not have access to the courts. This should be fine with them, since we know that meddlesome lawsuits are the biggest non-tax-related threat to America today. There is the minor issue of no recourse, if armed mercenaries do manage to overpower your guards and make off with your antique commodes or whatever it is you rich people hoard these days: Again, though, think of the tax savings.

This is a nice echo of Elizabeth Warren’s comments on the arrogance of the John Galt wannabees.

UPDATE: I posted this to the comments section:

Don’t forget the socialism of WWII

Let me add another item to your great piece, Hunter, and to Elizabeth Warren’s recent speech: Did the fathers of any of these captains of industry go to college on the GI Bill?
See here:

Within the following 7 years, approximately 8 million veterans received educational benefits. Of that number, approximately 2,300,000 attended colleges and universities, 3,500,000 received school training, and 3,400,000 received on-the-job training. By 1951, this act had cost the government a total cost of approximately $14 billion.
The effects of increased enrollment to higher education were significant. Higher educational opportunities opened enrollment to a varied socioeconomic group than in the years past. Engineers and technicians needed for the technological economy were prepared from the ranks of returning veterans. Also, education served as a social safety valve that eased the traumas and tensions of adjustment from wartime to peace. For the American colleges and universities, the effects were transforming. In almost all institutions, classes were overcrowded. Institutions required more classrooms, laboratories, greater numbers of faculties, and more resources. House facilities became inadequate and new building programs were established. New vocational courses were also added. This new student population called for differential courses in advanced training in education, commerce, agriculture, mining, fisheries, and other vocational fields that were previously taught informally. Teaching staffs enlarged and summer and extension courses thrived. Further, the student population was no longer limited to those between 18-23. The veterans were eager to learn and had a greater sense of maturity, in comparison to the usual student stereotype. Finally, the idea that higher education was the privilege of a well-born elite was finally shattered.

And of course, it was continued after WW II: Continuation of the Bill

The original G.I. Bill of 1944 expired in 1956, but the concept of veteran compensation continued, with all subsequent legislation still referred to as G.I. bills. In 1952 Congress passed the Veterans’ Adjustment Act to compensate veterans of the Korean War (1950-1953). There were some minor differences between the World War II and Korean G.I. Bills, but the outcome was broadly similar. More than two million Korean War veterans used the G.I. Bill to go to college, and 1.5 million financed new homes. The G.I. Bill underwent a significant change in 1966, when Congress passed the Veterans Readjustment Benefits Act (VRBA) as part of President Lyndon B. Johnson’s Great Society slate of social programs. The VRBA removed the requirement of serving in combat to receive government benefits, and instead made G.I. Bill benefits available to anyone who served in the military, whether in wartime or peacetime. Since 1966 the G.I. Bill has undergone a series of modifications and adjustments, but the fundamental benefits subsidizing education and home ownership remain the same. The Montgomery G.I. Bill (MGIB), enacted by Congress in 1985, provides educational stipends to former members of the military who contribute a small portion of their pay during their time in the service. The Post 9/11 Veterans Assistance Act of 2008 (effective date August, 2009) substantially increased the amount of tuition and housing assistance, allows veterans to transfer benefits to their spouses and children, and provides tuition benefits for National Guard and Reserve members.

The Social Contract – NYTimes.com

The Social Contract – NYTimes.com:

According to new estimates by the nonpartisan Tax Policy Center, one-fourth of those with incomes of more than $1 million a year pay income and payroll tax of 12.6 percent of their income or less, putting their tax burden below that of many in the middle class.

Now, I know how the right will respond to these facts: with misleading statistics and dubious moral claims.

Go read the whole thing!

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A glimpse at the high pay for children’s hospital CEOs – Sacramento Living – Sacramento Food and Wine, Home, Health | Sacramento Bee

A glimpse at the high pay for children’s hospital CEOs – Sacramento Living – Sacramento Food and Wine, Home, Health | Sacramento Bee:

“Hospital CEOS, including those at children’s hospitals, are among the most lavishly compensated executives in the nonprofit field,” said Daniel Borochoff, president of the American Institute of Philanthropy, a charity watchdog group based in Chicago. “If hospital CEO compensation were more in line with other large nonprofits then there could be more funding for community benefits such as free or discounted health care or important medical research.”

In 2009, an advocacy group for nonprofit hospitals and other health care groups warned its members that the pay packages were coming under increasing scrutiny. “Boards would be wise to streamline their executive compensation programs to make them less tempting targets,” a report prepared for the Alliance for Advancing Nonprofit Health Care stated.

The report pointed to cars, bonuses, generous retirement payouts and country club memberships as likely to attract criticism. “Many nonprofit organizations have been pressing their luck by imitating patterns in the for-profit sector,” it noted.

That year, CEO compensation at the 25 largest independent children’s hospitals ranged from a high of nearly $6 million to a low of $686,125, records show.

In all, CEOs collected more than $38 million, including deferred income and supplemental retirement awards, for an average of $1.5 million each.

If you are interested in looking up data for your own hospital or for any non-profit, go to Guidestar at http://www2.guidestar.org/Home.aspx and search for the organization. When you have found it, go to the Form 990 section (you will have to register – it’s free). Then you will have to look for either page 7, which is where the data may be, or go to an appendix/attachment at the end. Happy hunting.
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What Is a ‘Just’ Physician’s Income? – NYTimes.com

What Is a ‘Just’ Physician’s Income? – NYTimes.com: “The payment of physician income has been the subject of a lively debate for centuries. In fact, one finds it addressed at length in the famous Code of Hammurabi, chiseled into stone tablets some 4,000 years ago by edict of the Babylonian King Hammurabi along, by the way, with a malpractice system that makes today’s look like a pussycat.

Adam Smith, who generally is regarded as the father of modern economics, mused at length on the compensation of physicians in his celebrated book “An Inquiry Into the Nature and Causes of the Wealth of Nations” (1776).

Chapter 10 of Book 1, titled “Wages and Profit in the different Employments of Labour and Stock,” is a gracefully written treatment of what we now call labor-market theory. It is well worth a read.

“Honour makes a great part of the reward of all honourable professions,” Smith wrote. “In point of pecuniary gain, all things considered, they are generally under-recompensed, as I shall endeavour to show by and by. … Disgrace has the contrary effect. The most detestable of all employments, that of public executioner, is, in proportion to the quantity of work done, better paid than any common trade whatever.” (Italics added.)

Today we teach students that seemingly mysterious differences in the pecuniary income of different occupations can be explained in part by what we call “compensating variations in the psychic income” associated with different occupations.

Remarkably, in his treatise on compensation, Smith then departed sharply from the traditional demand-and-supply framework he popularized and we economists usually employ to explore employment and wages. Instead, for physicians and lawyers he appeared to lean on the medieval doctrine of “just price.” Thus he wrote:

We trust our health to the physician: our fortune and sometimes our life and reputation to the lawyer and attorney. Such confidence could not safely be reposed in people of a very mean or low condition. Their reward must be such, therefore, as may give them that rank in the society which so important a trust requires. The long time and the great expense which must be laid out in their education, when combined with this circumstance, necessarily enhance still further the price of their labour.

Although I’m a card-carrying economist who normally is quite comfortable with our supply-demand framework for virtually anything, I do find Adam Smith’s perspective persuasive.

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Bruce Bartlett: Are Taxes in the U.S. High or Low? – NYTimes.com

Bruce Bartlett: Are Taxes in the U.S. High or Low? – NYTimes.com:

“The truth of the matter is that federal taxes in the United States are very low. There is no reason to believe that reducing them further will do anything to raise growth or reduce unemployment.

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GOP and Obama’s jobs plan: Do Republicans oppose the president’s economic policies for ideological reasons or political ones? – By Jacob Weisberg – Slate Magazine

GOP and Obama’s jobs plan: Do Republicans oppose the president’s economic policies for ideological reasons or political ones? – By Jacob Weisberg – Slate Magazine:

“You can group the conservatives who reject the economic consensus into three rough categories: fundamentalists, cynics, and sheep. The fundamentalists are ideological and come in several varieties. The more primitive prefer Hoover to Keynes, or in some cases God to Hoover. Rick Perry, the Texas governor and presidential candidate, believes that the purpose of the economic crisis is to bring us back to “Biblical principles.” Asked on the campaign trail how he would create jobs if he were in office, Perry responded: “You won’t have stimulus programs under a Perry presidency. You won’t spend all the money.” This is a pretty good summation of the Tea Party’s know-nothing view that all government spending makes all things worse, always.

“That’s not to say that everyone who rejects Obama’s stimulus spending is a default-welcoming ignoramus. Libertarians or libertarian-leaners don’t necessarily think stimulus won’t grow the economy; they just worry that it will grow the government at the same time and that it won’t ever shrink back. But they don’t mind stimulus tax cuts, which reduce the resources available to government. Rep. Paul Ryan, for instance, the government-slashing chairman of the House budget committee, has argued that stimulus spending is an evanescent sugar high that produces no lasting economic benefit.

“The cynics, by contrast, don’t offer any economic analysis at all. They simply reject whatever President Obama proposes. In the now immortal words of Senate Minority Leader Mitch McConnell: “The single most important thing we want to achieve is for President Obama to be a one-term president.” McConnell, like Boehner and House Majority Leader Eric Cantor, happily voted for the stimulus bill George W. Bush proposed in 2008, which cost $152 billion. Back then, they felt some responsibility for the economy. Now it’s Obama’s problem. Mitt Romney knows enough about finance to understand that shrinking spending would raise unemployment. But he also knows that running against Obama with a 9 percent unemployment rate is a better bet than running against Obama with an 8 percent unemployment rate. “

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Trying to understand income inequality, the most profound change in American society in your lifetime. – By Timothy Noah – Slate Magazine

Trying to understand income inequality, the most profound change in American society in your lifetime. – By Timothy Noah – Slate Magazine: Timothy Noah’s 10-part series on inequality, published in Slate last September, has won the 2011 Hillman Prize for magazine journalism, an honor awarded annually by the Sidney Hillman Foundation for reporting that “fosters social and economic justice.” It was clear from the moment of publication that “The Great Divergence” struck a chord, treating a profound and complicated issue in an engaging and understandable way, and we’re delighted that the Hillman Foundation has recognized Noah’s work. You can read the series below, or print a PDF.

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