Tuesday, January 24, 2017

Who wrote this?

"High social transfers not tied to work incentives emerged as the most likely explanation for the low participation rate. The phase-in of ... minimum wage ... may have also helped to drive down participation rates."

This could be me describing the nationwide consequences of federal policy since 2007.

But the Brooking Institution, which refused to consider nationwide explanations like mine, wrote this!

about Puerto Rico (see p. 29)!

Monday, January 9, 2017

Labor-market growth turns negative, with many coincidences

Below is an index of hours worked per person, which reflects both the amount of employment and the number of hours that employees work up through Dec 2016. It shot up when the Emergency Unemployment Assistance program was finally canceled. Its growth was especially slow when the new health care law began to penalize employers. Over the most recent twelve months, the trend is (infinitesimally) negative.





Sunday, January 8, 2017

Getting rid of ACA subsidies is easy, politically and economically

The conventional wisdom is that creating a subsidy program creates a sense of entitlement that, via political pressures, prevents it from being phased out later. This wisdom applies, perhaps, to a number of federal programs.

But the Affordable Care Act's premium assistance subsidies (technically, they are "tax credits" administered with the personal income tax) are different because, unlike beneficiaries of Social Security, Food Stamps, and so many others, a recipient of a premium assistance subsidy must also pay SOME OF HIS OWN MONEY. Many of them are doing so because of the individual mandate, which could be eliminated with little political cost. With the individual mandate gone, these people would voluntarily forgo their subsidy in order to keep their own money.

A few states have already seen something like this with their Medicaid program -- asking program participants to pay a small part of the overall cost -- and many participants voluntarily exited.

In addition, the rules setting minimum benefits could be eliminated. Some of those previously receiving subsidies would rather get a plan with fewer benefits but also requiring less of their own money (I wrote about them in my book). They too would voluntarily exit the ACA's premium assistance program.

Yet another step would be to cap the subsidy at the DOLLAR AMOUNT that persons with the same income and same state of residence were ACTUALLY RECEIVING during the Obama administration. The amount that the recipient would have to pay out of pocket would be the difference between the premium and that dollar amount. As premiums inevitably rise over time, that amount increases and participants would continue to voluntarily exit the program, never to return.

(A more dramatic version of this would be to cap the subsidy at the dollar amount that the SAME PERSON ACTUALLY RECEIVED during the Obama administration).

Presumably, exit from the subsidy program would not be random -- those whose participation had been more costly to the insurance plan would differentially remain in the program. As they did so, premiums would further rise above what they would have been with the ACA intact, which would further increase what participants have to pay out of pocket, and thereby further encourage voluntary exit.

Approaches like this not only make political sense, they make economic sense. Why should the American taxpayer pay, say, $200/month for a person's insurance coverage when that person himself is unwilling to pay $50/month for it? The answer: the primary beneficiaries of the subsidies are health providers (more paying demand for what they sell) and high-income Democrats (feel good when the official statistics say that coverage rates are high), and it need not be not politically unpopular to take away what is effectively a subsidy to health providers and high-income Democrats yet advertized as something else.

As with many things about the ACA, the conventional wisdom is wrong.

Thursday, December 22, 2016

Popular vote count: directions of causality

I live in Illinois, where it was well-known that Mrs. Clinton's votes would far outnumber Mr. Trump's.

This fall, I did not see any Trump-for-president ads on local TV or in local newspapers. Perhaps the absence of Trump ads was to be expected, because the Trump campaign saw no electoral-vote gain by advertising here.

But I saw MANY Clinton-for-president ads. If Trump ads would not affect electoral votes, then why would Clinton ads?

One could argue, even without the benefit of hindsight, that the Clinton campaign was wasting ad dollars in Illinois. But my view is that Clinton did expect non-Illinois electoral votes from advertising IN Illinois because of the campaign donations that it would induce.

Of course Trump supporters are arguing that Mr. Trump would have won the popular vote, if it were the relevant metric, because he would have campaigned differently.

But my point here is different: that the popular vote is an indicator of campaign style. The Clinton campaign's style was campaign-cash intensive and EVERY state's cash is valuable even in an electoral-college contest. As long as eliciting donations is correlated with eliciting votes, the campaign-cash intensive candidate should be getting a lot of votes in non-swing states.

The Trump-campaign's style was rally intensive. It's more difficult to move, say, an Illinois rally's results to Ohio than it is to take Illinois cash to buy Ohio ads. So it's no surprise that the rally-intensive candidate focused his appearances in the swing states whereas the cash-intensive candidate campaigned more nationally.

Monday, December 12, 2016

New Law Interacts with the ACA

The "21st Century Cures Act" has passed Congress and is presumed to get a signature from President Obama. Among other things, it changes rules for employer healthcare payments and thereby has important interactions with the ACA, especially the degree to which the latter reduces employment and productivity.

But the ACA may not last. So the effects of the 2CCA are largely unknown because they depend on the unknown (if any) replacement of the ACA.

Saturday, November 26, 2016

Cuban education lags

It is probably true that Communist Cuba destroyed its education system less than it destroyed other things.  But if you look on an absolute scale, the average education of the Cuban population has been lagging.


Some of the lag is due to the fact that Communism either killed or drove away comparatively educated people. But if that is masking Castro's success, that's no success!

Update: The Barro-Lee data say that, as of the year 2000, the majority of adults in Cuba had NOT graduated high school.  At the same time, the majority of adults in Puerto Rico HAD graduated high school (Table 5-3 of this book).

Thank you Fidel!

For making Puerto Rico look like paradise.

Journalists today will be making excuses like "Cuba is doing OK compared to developing countries."  They wouldn't dare make those comparisons to parts of the United States, because we ought to expect better.

Thanks to a Communist system, Cuba left the ranks of developED countries.  In contrast, nearby Puerto Rico far outpaced Cuba while the latter was practicing Communism.  In 1950, both were former Spanish colonies and had annual GDP per capita of about $350.  In 2014, Puerto Rican GDP per capita was more than quadruple Cuba’s.  And a number of people escaped Cuba to begin a new life in Puerto Rico, with hardly anyone doing the reverse.


And this chart does not count the fact that, by comparison to Puerto Rico, so much of what a Cuban produces goes to the government rather than the workers.

It is quite irrelevant that there are some African countries doing worse than Cuba.


See also my podcast with Russ Roberts and written observations on Communist Cuba.

Update.  Gross national income takes out some of the "effect" of mainland businesses (arguably Cuba would have enjoyed mainland investment too, if it had taken another path), but is available for fewer years.  The chart below adds those in orange -- bottom line for GNI is 3-4 times rather than 4-5 times.

Saturday, November 5, 2016

The media has been in the bag for Clinton, Obama, and Lincoln too

Even just in my own areas of expertise -- labor markets and health care -- it is easy to see how reporters and editors of "the news" have been promoting Democratic-party policies.  It's not just convenient ignorance about how incentives work.  Many times they know very well but are silent about it for fear of blemishing the narrative, even while proclaiming to their readers that they tell the whole story.

But this is nothing new.  As Harold Holzer found,

Lincoln alternately pampered, battled, and manipulated the three most powerful publishers of the day: Horace Greeley of the New York Tribune, James Gordon Bennett of the New York Herald, and Henry Raymond of the New York Times.

Lincoln authorized the most widespread censorship in the nation’s history, closing down papers that were “disloyal” and even jailing or exiling editors who opposed enlistment or sympathized with secession. The telegraph, the new invention that made instant reporting possible, was moved to the office of Secretary of War Stanton to deny it to unfriendly newsmen.
As long as the government controls significant resources, the consumers of media will want to know what the government is doing, and the government will sell access to that information to "newsmen" in exchange for favorable coverage.

It isn't merely about changing a specific journalist's mind.  It is also about helping those who are already inclined favorable to earn more profits than those inclined otherwise.  Media market entry and exit takes care of the rest.

Friday, November 4, 2016

Slow growth coincident with Obamacare

Below is an index of hours worked per person, which reflects both the amount of employment and the number of hours that employees work up through Oct 2016. It shot up when the Emergency Unemployment Assistance program was finally canceled. Its growth was especially slow when the new health care law began to penalize employers.



These are just coincidences, and more likely have something to do with Russia.


Monday, October 24, 2016

Robert Tollison

Today is a sad day: Robert Tollison passed away at the young age of 74. Here he is on the left:



He published many articles and books ... it is difficult to cite a favorite but I really like Politicians, Legislation, and the Economy.