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Posts Tagged ‘market’
August 21st, 2014 at 2:38 pm
Avik Roy Updates His ObamaCare Alternative

Credit Avik Roy for being open-minded.

A week after unveiling his ambitious – and controversial – reform of ObamaCare, Roy, a well-respected health policy expert, is incorporating some of the best criticisms as amendments to his plan.

Most of the changes are highly technical, and not worth delving into in a short blog post. For readers interested in specifics, here is the link to Roy’s updates page.

What’s refreshing about Roy’s response to his fellow conservatives is his willingness to defend his ideas, but not to the point of brushing aside legitimate improvements.

As to the biggest concern – that preserving ObamaCare’s insurance exchanges makes it possible that Democrat congressional majorities in the future might use them as a springboard to a single-payer system – Roy replies, “No health-reform plan can singlehandedly prevent Democrats from doing whatever they want if they ever again have 2009-size, filibuster-proof majorities. But if that’s the standard for constructive GOP reform plans, well, let’s just call it a day.”

Roy’s point is well taken, but it highlights a central tension among conservatives whenever federal policymaking is considered – Which is more important: Market efficiency or federalism?

Policy wonks like Roy tend to favor efficiency as a way to lower spending and improve citizen-customer experiences. Constitutionalists like myself tend to favor federalism and the policy diversity that it affords. Of course, different regulatory regimes produce market inefficiencies. However, that just may be the price of freedom.

Roy should be applauded for trying to make his ObamaCare alternative as strong as possible. Time will tell whether conservatives will come to favor an efficient, federally-regulated national market, or continue to favor a system that lets states and their citizens decide what works best for them.

June 5th, 2014 at 11:37 am
The Brave New Job Market

“The number of jobs requiring medium levels of skill has shrunk, while the number at both ends of the distribution – those requiring high and low skill levels – has expanded,” says a new research report from the Dallas Federal Reserve.

This employment polarization is changing the standard of living for those in the middle class since, “The number of people performing low-skill, low-pay, manual labor has grown along with the number undertaking high-skill, high-pay, non-routine, principally problem-solving jobs.”

Moving to the wealthier pole requires adapting to non-routine cognitive work since computer automation and off-shoring makes jobs such as “brokers, clerks, tellers, cashiers, telemarketers, title examiners, bookkeepers, insurance underwriters, travel agents and technicians” increasingly irrelevant.

This is sobering news for those aspiring to middle class status. There was a time when a college degree qualified a person’s cognitive abilities, and working according to a companywide routine virtually guaranteed a middle class lifestyle. That time is past. Going forward the likelihood that a person will escape the perils of low-income will depend greatly on her ability to be increasingly entrepreneurial in every facet of her work; whether as a full-time employee or independent contractor.

It’s a reality many formerly comfortable middle class workers would like to avoid. But with computing power and automation spreading quickly everywhere, it looks like the only option available.

Welcome to the brave new job market.

July 31st, 2013 at 8:38 pm
Gallup: Fed Unemployment Formula Distorts Jobs Picture

Beware of financial bureaucrats posing as economists. That’s my main takeaway from some pre-analysis of Friday’s unemployment numbers by Gallup’s lead economist, Dennis Jacobe.

As is sometimes the case when using metrics to understand reality, it looks like the federal government isn’t counting the right economic event if it truly wants to understand the employment market.

According to Jacobe, “The current government job measures leave a lot to be desired in terms of face-validity. For example, [Federal Reserve Chairman Ben] Bernanke noted in his testimony to Congress that the Fed’s unemployment target may need to be adjusted, depending on the labor participation rate. A declining participation rate can artificially lower the unemployment rate as job seekers give up looking for work, while an increasing participation rate can do the reverse.”

The problem is particularly acute when one considers how the feds count part-time jobs.

“Similarly, the establishment survey can be distorted by a surge in part-time jobs – a factor that may need to be considered when one evaluates Friday’s report,” writes Jacobe. “Part-time jobs not only count as new jobs for this survey, but if an American having one part-time job adds an additional part-time job, it counts the same as the creation of a new full-time job.”

This kind of counting completely misrepresents the rise in multiple part-time jobs. By treating two-part time jobs as the equivalent of one full-time job, the metric leaves out the fact that unlike just about every full-time job, almost no part-time job provides health or retirement benefits. Thus, while the hours worked my be roughly the same, the overall compensation is not.

What makes this an especially pernicious way to describe today’s employment market is the well-documented impact ObamaCare is having on the decline of full-time employment. If the federal unemployment survey continues to equate workers with multiple part-time jobs and those with full-time employment, a huge net loss in millions of workers’ standard of living will be lost because the official formula simply doesn’t account for it.

That’s a point worth remembering if Friday’s unemployment numbers come back better than expected.

July 30th, 2013 at 3:57 pm
Howard Dean: ‘Repeal IPAB’

IPAB – aka, the Independent Payment Advisory Board – is one of the chief cost-containing elements of ObamaCare. As designed, a presidentially appointed panel of medical experts will convene to decide how much the government will pay for certain kinds of care, and who gets which treatments.

That means that “The IPAB is essentially a health-care rationing body,” writes Howard Dean in the Wall Street Journal. “By setting doctor reimbursement rates for Medicare and determining which procedures and drugs will be covered and at what price, the IPAB will be able to stop certain treatments its members do not favor by simply setting rates to levels where no doctor or hospital will perform them.”

Dean, who is a licensed medical doctor and spent 11 years as the Democratic Governor of Vermont before running for president in 2004, knows from experience that IPAB is doomed to fail.

“There does have to be control of costs in our health-care system. However, rate setting – the essential mechanism of the IPAB – has a 40-year track record of failure,” says Dean. “What ends up happening in these schemes (which many states including my home state of Vermont have implemented with virtually no long-term effect on costs) is that patients and physicians get aggravated because bureaucrats in either the private or public sector are making medical decisions without knowing the patients. Most important, once again, these kinds of schemes do not control costs. The medical system simply becomes more bureaucratic.”

Dean goes on to call for a bipartisan repeal of IPAB, which is great to read and should be acted on. But the logic of including IPAB with ObamaCare’s structure makes perfect sense. Government-controlled health care is centrally-controlled and -planned health care.

If Dr. Dean wants a more patient-centered health care system he should be calling for repeal of ObamaCare in its entirety and greater deregulation of the health care industry. Empowering a new generation of medical entrepreneurs that can leverage advances in technology into boutique health care outlets would drive down costs, increase business opportunities and improve the quality of individualized care.

Dean is right to shudder at the care-killing cost of bureaucracy. Maybe one day he’ll discover the possibilities of a freer health care market too.

April 16th, 2013 at 1:46 pm
Legalization Bad for Low-Income Native Workers?

Now that the Gang of Eight’s immigration reform bill has been slowed down a bit, it’s worth pausing for a moment to consider what economic trade-offs might occur if millions of illegal immigrants become eligible to enter the job market. Since many of these newly eligible workers are low-skilled, they’ll be competing with low-skilled, low-wage native workers in an economy with 7.6 percent unemployment.

Members of the U.S. Commission on Civil Rights are taking notice, says Byron York:

Last week, three members of the U.S. Commission on Civil Rights wrote to Ohio Democratic Rep. Marcia Fudge, chairman of the Congressional Black Caucus, arguing that legalizing currently illegal immigrants will have far-reaching effects on African-Americans.

“Such grant of legal status will likely disproportionately harm lower-skilled African-Americans by making it more difficult for them to obtain employment and depressing their wages when they do obtain employment,” the commissioners wrote. “The increased employment difficulties will likely have negative consequences that extend far beyond economics.” Among those consequences, according to the commissioners: increased crime, incarceration, family breakdown, and more.

A recent review of the academic literature by Harvard economist George Borjas confirms the negative impact mass legalization will have on low-skilled native wages:

For American workers, immigration is primarily a redistributive policy. Economic theory predicts that immigration will redistribute income by lowering the wages of competing American workers and increasing the wages of complementary American workers as well as profits for business owners and other “users” of immigrant labor. Although the overall net impact on the native-born is small, the loss or gain for particular groups of the population can be substantial.

The best empirical research that tries to examine what has actually happened in the U.S. labor market aligns well with economy theory: An increase in the number of workers leads to lower wages.

If you increase the supply of something, you lower its value. If they want a way to frame opposition in positive terms, expect to see Republican opponents of the Gang of Eight’s reform bill to become the champions of the forgotten working class.

March 28th, 2013 at 12:55 pm
The Liberal Origins of Paul Ryan’s Pro-Market Medicare Reforms

Peter Ferrara, a budget expert at The Heartland Institute, a free market think tank, reminds us where many of Paul Ryan’s ideas on Medicare reform originally came from:

This Medicare reform plan was actually developed by President Clinton’s Medicare Commission, so it had bipartisan support at a time when the Democrat Party had grown ups in influential positions, rather than just adolescent, Marxist, revolutionaries posing in grown up drag.  The legislation providing for these reforms was actually introduced in the Senate by liberal Democrat Sen. Ron Wyden of Oregon.  It has been endorsed by long time liberal academic Alice Rivlin, the Godmother of the CBO, serving as its first director.

Indeed, the plan was developed from an initial proposal in 1995 by two lifelong liberal scholars, Henry Aaron of the Brookings Institution, and former CBO Director Robert Reischauer.  They were the first to propose a premium support system for Medicare in a 1995 article in the journal Health Affairs.  The Reischauer/Aaron concept was later embodied in Medicare Parts C and D in the 2003 Medicare reforms, where they have already worked very effectively.

That’s right – Proposed by liberals, passed by conservatives.

With this in mind, who’s out of the mainstream now?

January 30th, 2013 at 7:37 pm
What Kind of Legal Immigration System Should We Have?

So far, a busy half week on Capitol Hill saw Senator John Kerry (D-MA) become Secretary of State after the U.S. Senate confirmed him 94-3; gun-control politicians getting righteous blowback from the NRA and an advocate for young mothers; and another round of immigration reform heating up.

On this last point, it’s helpful to remember that a big part of what’s missing from the illegal immigration debate is how to fix the problems with the legal immigration system.  For an idea of how byzantine is the process of getting into America the right way, check out these charts prepared the libertarian Reason Foundation and the liberal Immigration Road.  (Each is a pdf.)

The worst lowlight: Waiting up to 28 years to become a citizen.

But before policy wonks and political advocates jump to conclusions and start proposing ways to fix immigration by reducing wait times and streamlining the process, it’s worth having a serious national discussion about what principle should drive our immigration policy.

If it’s about the national interest, in this case defined as what’s best for Americans already here, then it’s far from clear how importing any foreign workers, skilled or unskilled, improves the economic lot of domestic skilled and unskilled workers.  If anything, basic economics suggests that importing more labor reduces the value of the labor already here, which, while a boon for employers, translates into a pay cut for workers.  (For more on this, see Mark Krikorian’s thought-provoking book, “The New Case Against Immigration.”)

On the other hand, if immigration policy is about ensuring that America is the preeminent land of opportunity within the world community, then a small but clear set of filters (e.g. screening out convicted criminals, terrorists, and those fleeing tax problems) need to be put in place to allow the greatest number of opportunity-seeking immigrants to come, live, and hopefully contribute to the nation’s growth.

Personally, I’m conflicted about which route to take.  With Americas suffering from 7.8 percent unemployment – which is really 14.4 percent when underemployed and those too discouraged  to look for work are counted – it’s hard to justify adding to the labor market.  And yet an immigration policy focused on opportunity for those seeking it is an attractive extension of Ronald Reagan’s city on a hill, of which he said “And if there had to be city walls, the walls had doors and the doors were open to anyone with the will and the heart to get here.”

This much I do know: Finding a solution to the illegal immigration problem can’t be done until Americans decide on legal immigration’s foundational principle.

January 29th, 2013 at 2:30 pm
Dodd-Frank Missing Deadlines, Hurting Businesses

A new GAO report says that Dodd-Frank, the 2010 law that enormously expands the federal government’s regulatory role in the financial markets, is being implemented at a snail’s pace:

Overall, GAO identified 236 provisions of the act that require regulators to issue rulemakings across nine key areas. As of December 2012, regulators had issued final rules for about 48 percent of these provisions; however, in some cases the dates by which affected entities had to comply with the rules had yet to be reached. Of the remaining provisions, regulators had proposed rules for about 29 percent, and rulemakings had not occurred for about 23 percent.

At first blush, limited government conservatives might cheer the slow growth in regulation.  But limited government is only good if it’s for the right reasons; for instance, relying on the current legal (fraud) and market (bankruptcy) framework to police financial bad actors.  Here, however, the delays are due to Dodd-Frank’s perpetuation of flawed regulatory methods.

For example, the report lists obstacles such as regulators with overlapping jurisdictions and inconsistent rules, impossible-to-meet statutory deadlines, and lack of consumer confidence in the regulators’ ability to produce fair and reasonable guidelines.  To cope with these realities, bureaucrats are opting to miss deadlines in favor of more collaborative rules.  But while the benefit may be more buy-in from stakeholders inside and outside the government, the costs are huge to the businessman on the street.

The two biggest casualties are the rule of law and regulatory transparency.  The first is undermined because bureaucrats allowed to ignore statutory mandates are bureaucrats allowed to operate outside the law.  Think a private business could just decide to miss a deadline because compliance is too hard?

Moreover, part of the difficulty complying comes from the lack of transparency.  Businesspeople need certainty in regulations to plan for the future, but that can’t be done when deadlines are waived at the discretion of the regulator.  So instead of being able to act on distasteful yet concrete information, businesses are left wondering how to position themselves as the regulatory elites “collaborate.”

In this type of environment, the safest bet is not to take risks like hiring or expanding.  With government like this, is it any wonder the job market is so lousy?

H/T: The Hill’s RegWatch blog

August 20th, 2012 at 7:54 pm
Ryan is the Linchpin to Enacting Conservative Reform

William Kristol sums up the grassroots enthusiasm over the Paul Ryan pick:

Until last week, the Romney campaign was a few hundred operatives working hard in Boston trying to win a presidential election. Now Romney-Ryan is a groundswell of citizens spontaneously writing, volunteering, and proselytizing on behalf of a cause. The first was going to be a grueling uphill climb. The second could be more like running downhill with the wind at your back. Even in the second instance, of course, the candidate still has to jump the hurdles and avoid the obstacles. But it’s a lot easier to prevail when you stand for a cause citizens are eager to join than when you’re engaged in a campaign voters may diffidently support.

And it’s not just politically involved citizens who are energized by Ryan’s elevation to be Mitt Romney’s vice presidential running mate.

As Fred Barnes notes, the 87 House Republicans who won office in 2010 have helped heighten Ryan’s profile by supporting his budget reforms.  At least 70 of these are considered likely to be reelected this year, thus solidifying their importance in the caucus.  By putting their party on record as supporting Ryan’s vision, these House GOPers make Romney’s embrace of Ryan a clear legitimization of conservative, market-based reform.

Ryan is the linchpin.  Without him providing the bridge between the reform-minded conservatives in the House and the Romney campaign, it’s very likely that a Romney Administration would be reluctant to move on a policy package the candidate did not run on.  Now, Romney owns it.

Let the proselytizing continue.

July 20th, 2011 at 3:06 pm
Soda Companies Fight Back Against the Regulatory State

What to do when your industry is singled out by government regulators as a threat to public health?  If you’re in the soft drink industry, use the Freedom of Information Act against state and local governments to get documents that show how regulators use taxpayer dollars to attack legal commercial enterprises.

Earlier this month, the American Beverage Association sued New York City’s Department of Health and Mental Hygiene, which has been at the forefront of education efforts in the fight against obesity. The ABA says the city improperly withheld documents it sought through the Freedom of Information Act.

ABA spokesman Chris Gindlesperger said his group made the same request as the New York Times, but that the newspaper received more information than the ABA.

“Public health departments are going out and aggressively misrepresenting our products in advertising and using taxpayer money to do that,” Gindlesperger said.

Big government advocates are complaining that the FOI requests are “an effort to overwhelm or smother government employees, who already have too much to do.”

Then again, maybe those same government employees could lighten their load a bit by stopping the PR campaign against an industry selling a legal product to satisfied consumers.

November 15th, 2010 at 12:09 pm
Princeton Coal Miner Misses Wal-Mart Canary; Continues Digging

Canaries and markets are sensitive creatures.  Take a canary down a coal mine and the poor bird starts dying as soon as the toxic levels of coal dust start rising.  Wait too long, and coal miners will be following their yellow feathered friend down the River Styx.  The key is to monitor the canary carefully for signals that it’s time to stop digging before it’s too late.

The market is a similar beast, even though the data miners of economic trends at places like Princeton and the Federal Reserve Board choose to think otherwise.

Practitioners of microeconomics presume they have “perfect information” by which they mean knowing all the relevant data before making a decision.  Thusly armed they sally forth to wage war on behalf of whatever economic model (or political interest) they claim provides the greatest good.

Such is the case with Federal Reserve Board Chairman Ben Bernanke, the Princeton economist responsible for authorizing the printing of hundreds of billions of dollars to “quantitatively ease” the lack of money flowing in the marketplace, and spur a “healthy” bit of inflation.  Bernanke is doing this because he assumes he has all the relevant data to support such a move.

A new price survey of a Wal-Mart grocery basket says otherwise.  The retail giant is raising prices, a market signal that inflation is already underway without government interference.  Like any market leader, Wal-Mart’s actions will be quickly emulated by others in their sector, with down market effects reverberating across the economy.

The market is already sensing the need for inflation and is acting accordingly.  A massive injection of “Fed Stimulus” to achieve the same goal will result in accelerating inflation beyond what’s considered healthy, devaluing the dollar and making it harder for middle class families to buy necessities.  That kills an economy.  If Bernanke continues to ignore the ability of the market to adjust itself, it will soon be his career lying lifeless in the shaft.

February 15th, 2010 at 8:19 pm
The Folly of Government Reforming Healthcare Pricing

Every once in a while, there is an article so good, it’s almost an injustice to splice any part of it for fear a reader won’t take the hyperlink and read the whole thing. Thankfully, Freedom Line Blog readers aren’t those types, but just to whet the appetite, here is a sample from an op-ed dissecting why government can never “reform” healthcare pricing.

Healthcare prices are fake, inflexible, and inflated because they are set not by the repeated interactions of buyers and sellers but by opaque acts of collusion between government bureaucrats and special interests. Even if this system were run by a benevolent genius who happened to set prices exactly “right” – whatever that means – these prices would be obsolete the moment they were published.

I don’t know the author, Bill Frezza, but I wish I did. A hat tip to you, Sir.