F Financial Sector Induced Systemic Instability of Economy

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Financial Sector Induced Systemic Instability of Economy

While I believe in usefulness of capital markets, it is clear that they are double edge sword and that banks "in a long run" tend to behave like sociopathic individuals. Mr. Capone may have something to say about danger of banks :-).That means that  growth of financial sector represents a direct threat to the stability of the society. Positive feedback loops creates one financial crisis after another with the increasing magnitude leading up to a collapse of financial system like happened in 1927 and 2008.

News Casino Capitalism Recommended Links  Stability is destabilizing: The idea of Minsky moment Corruption of Regulators Quiet coup
Neoliberalism as a New Form of Corporatism Principal-agent problem Numbers racket Criminal negligence in financial regulation Corruption of FED Invisible Hand Hypothesis
The “Too Big To Fail” Problem In Goldman Sachs we trust Citi - The bank that couldn’t shoot straight JPMorgan AIG collapse Lehman
Free Markets Newspeak as Opium for regulators Derivatives Lobby Corrupts Congress Lobbying and the Financial Crisis Control Fraud
(crisis of corporate governance)
Stock Market with buybacks as a Ponzi scheme Derivatives
Small government smoke screen Financial Bonuses as Money Laundering Corporatist Corruption: Systemic Fraud under Clinton-Bush-Obama Regime Corporatism   Financial obesity
Webliography of heterodox economists HFT Aleynikov vs. Goldman Sachs Casino Capitalism Dictionary Financial Humor Etc
  "Minsky's financial instability hypothesis depends critically on what amounts to a sociological insight. People change their minds about taking risks. They don't make a one-time rational judgment about debt use and stock market exposure and stick to it. Instead, they change their minds over time. And history is quite clear about how they change their minds. The longer the good times endure, the more people begin to see wisdom in risky strategies."

The Cost of Capitalism: Understanding Market Mayhem and Stabilizing our Economic Future, by Robert Barbera

The flaw with Capitalism is that it creates its own positive feedback loop, snowballing to the point where the accumulation of wealth and power hurts people — eventually even those at the top of the food chain. ”

Uncle Billy Cunctator
In comment to Economic Donkeys

 
  Banks are a clear case of market failure and their employees at the senior level have basically become the biggest bank robbers of all time. As for basing pay on current revenues and not profits over extended periods of time, then that is a clear case of market failure !  
  The banksters have been able to sell the “talent” myth to justify their outsized pay because they are the only ones able to deliver the type of GDP growth the U.S. economy needs in the short term, even if that kills the U.S. economy in the long term. You’ll be gone, I’ll be gone.  
  Unfortunately, many countries go broke pursuing war, if not financially, then morally (are the two different? – this post suggests otherwise).

I occurs to me that the U.S. is also in that flock; interventions justified by grand cause built on fallacy, the alpha and omega of failure. Is the financial apparatchik (or Nomenklatura, a term I like which, as many from the Soviet era, succinctly describes aspects of our situation today) fated also to the trash heap, despite the best efforts of the Man of the hour, Ben Bernanke?

 

Introduction

While I believe in usefulness of capital markets, it is clear that they are double edge sword and that banks "in a long run" tend to behave like sociopathic individuals. Mr. Capone may have something to say about danger of banks :-).That means that growth of financial sector represents a direct threat to the stability of the society (Keynesianism and the Great Recession )

Without adult supervision, as it were, a financial sector that was already inherently unstable went wild. When the subprime assets were found to be toxic since they were based on mortgages on which borrowers had defaulted, highly indebted or leveraged banks that had bought these now valueless securities had little equity to repay their creditors or depositors who now came after them. This quickly led to their bankruptcy, as in the case of Lehman Brothers, or to their being bailed out by government, as was the case with most of the biggest banks. The finance sector froze up, resulting in a recession—a big one—in the real economy.

Neoliberal revolution, or, as Simon Johnson called it after "quite coup" (Atlantic), brought political power to the financial oligarchy deposed after the New Deal. Deregulation naturally followed, with especially big role played by corrupt Clinton administration.  Positive feedback loops creates one financial crisis after another with the increasing magnitude. "Saving and loans" crisis followed by dot-com crisis of  2000, which in turn followed by the collapse of financial system in 2008, which looks somewhat similar to what happened in 1927.  No prominent financial honcho, who was instrumental in creating "subprime crisis" was jailed.  Most remained filthy rich.

Unless the society puts severe limits on their actions like was done during New Deal,  financial firms successfully subvert the regulation mechanisms and take the society hostage.  But periodic purges with relocation of the most active promoters of "freedom for banks" (aka free market fundamentalism) under the smoke screen of "free market" promotion does not solve the problem of positive feedback loops that banks create by mere existence. That's difficult to do while neoliberal ideology and related neoclassical economy dominates the society thinking (via brainwashing), with universities playing especially negative role -- most of economics departments are captured by neoliberals who censor any heretics. So year after year brainwashing students enter the society without understanding real dangers that neoliberalism brought for them.  Including lack of meaningful employment opportunities.

Of course, most of high level officers of leading finance institutions which caused the crisis of 2008-2009 as a psychological type are as close to  gangsters as one can get. But there is something in their actions that does not depend on individual traits (although many of them definitely can be classified as psychopaths), and is more related to their social position.  This situation is somewhat similar to Bolsheviks coup d'état of 1917 which resulted in capturing Russia by this ideological sect.  And in this sense quite coupe of 1980 is also irreversible in the same sense as Bolsheviks revolution was irreversible:  the "occupation" of the country by a fanatical sect lasts until the population rejects the ideology with its (now apparent) utopian claims.

Bolshevism which lasted 75 years, spend in such zombie state the last two decades (if we assume 1991 as the year of death of Bolshevism, its ideology was dead much earlier -- the grave flaws in it were visible from late 60th, if not after the WWII).  But only  when their ideology was destroyed both by inability to raise the standard of living of the population and by the growing neoliberal ideology as an alternative (and a new, more powerful then Marxism high-demand cult) Bolsheviks started to lose the grip on their power in the country. As a result Bolsheviks lost the power only in 1991, or more correctly switched camps and privatized the country. If not inaptness of their last General Secretary, they probably could last more. In any case after the ideology collapsed, the USSR disintegrated (or more correctly turn by national elites, each of which wanted their peace of the pie).

The sad truth is that the mere growth of financial sector creates additional positive feedback loops and increases structural instability within both the financial sector itself and the society at large. Dynamic systems with strong positive feedback loops not compensated by negative feedback loops are unstable. As a result banks and other financial institution periodically generate a deep, devastating crisis. This is the meaning of famous Hyman Minsky phrase "stability is destabilizing".

In other words, financial apparatchiks (or Financial Nomenklatura, a term from the Soviet era, which succinctly describes aspects of our situation today) drive the country off the cliff because they do not have any countervailing forces, by the strength of their political influence and unsaturable greed. Although the following analogy in weaker then analogy with dynamic systems with positive feedback loops, outsized financial sector can be viewed in  biological terms as cancer.

Cancer, known medically as a malignant neoplasm, is a broad group of diseases involving unregulated cell growth. In cancer, cells divide and grow uncontrollably, forming malignant tumors, and invading nearby parts of the body. The cancer may also spread to more distant parts of the body through the lymphatic system or bloodstream. Not all tumors are cancerous; benign tumors do not invade neighboring tissues and do not spread throughout the body. There are over 200 different known cancers that affect humans.[1]

Like certain types of cancer they depend of weakening "tumor suppressor genes"  (via "Quiet coup" mechanism of acquiring dominant political power) which allow then to engage in uncontrolled growth, destroying healthy cells (and first of all local manufacturing).   

The other suspicion is the unchecked financialization always goes too far and the last N percent of financial activity absorbs much more resources (especially intellectual resources) and creates more potential instability than its additional efficiency-benefits (often zero or negative) can justify. It is hard to imagine that a Hedge Fund Operator of the Year does anything that is even remotely socially useful to justify his enormous (and lightly taxed) compensation. It is pure wealth redistribution up based on political domination of financial oligarchy.  Significant vulnerabilities  within the shadow banking system and derivatives are plain vanilla socially destructive. Yet they persist due to inevitable political power grab by financial oligarchy  (Quiet coup).

Again, I would like to stress that this problem of the oversized financial sector which produces one devastating crisis after another   is closely related to the problem of a positive feedback loops. And the society in which banks are given free hand inevitably degrades into "socialism for banks"  or "casino capitalism" -- a type of neoliberalism with huge inequality and huge criminality of top banking officers.  

Whether we can do without private banks is unclear, but there is sound evidence that unlike growth of manufacturing, private financial sector growth is dangerous for the society health and perverts society goals.  Like cult groups the financial world does a terrific job of "shunning" the principled individuals and suppressing dissent (by capturing and cultivating neoliberal stooges in all major university departments and press),  so self-destructing tendencies after they arise can't be stopped within the framework of neoliberalism. In a way financial firm is like sociopath inevitable produces its  trail of victims (and sociopaths might be useful in battles exactly due to the qualities such as ability to remain cool in dangerous situation, that make them dangerous in the normal course of events).

This tendency of society with unregulated or lightly regulated financial sector toward self-destruction was first formulated as "Minsky instability hypothesis" -- and outstanding intellectual achievement of American economic Hyman Minsky (September 23, 1919 – October 24, 1996). Who BTW was pretty much underappreciated (if not suppressed) during his lifetime because his views were different from  orthodox (and false) neoclassic economic theory which dominates US universities, Like flat Earth theory was enforce by Catholic church before, it is fiercely enforced by an army of well paid neoliberal economics, those Jesuits of modern era. Who prosecute heretics who question flat Earth theory even more efficiently then their medieval counterparts; the only difference is that they do not burn the literally, only figuratively ;-)

Minsky financial instability hypothesis

Former Washington University in St. Louis economics professor Hyman P. Minsky had predicted the Great Recession decades before it happened.  Hyman Minsky was a real student of the Great Depression, while Bernanke who widely is viewed as a scholar who studied the Great Depression, in reality was a charlatan, who just tried to explain the Great Depression from the positions of neo-classical economy. That's a big difference.

Minsky instability hypothesis ("stability is destabilizing" under capitalism) that emerged from his analysis of the Great Depression was based on intellectual heritage of three great thinkers in economics (my presentation is partially based on an outstanding lecture by Steve Keen Lecture 6 on Minsky, Financial Instability, the Great Depression & the Global Financial Crisis). We can talk about three source of influence, there authors writing of which touched the same subject from similar positions and were the base of Hyman Minsky great advance in understanding of mechanics of development of financial crisis under capitalism and the critical role of financial system in it (neoclassical economics ignores the existence of financial system in its analysis): 

  1. Karl Marx influence
  2. Irving Fisher influence
  3. Joseph Schumpeter influence

Karl Marx influence

Minsky didn't follow the conventional version of Marxism  . And it was dangerous for him to do so due to McCarthysm. Even mentioning of Marx might lead to strakism fromthe academy those years.  McCarthy and his followers in academy did not understand the difference between Marx great analysis of capitalism and his utopian vision of the future. Impliedly this witch hunt helped to establish hegemony of neoclassical economy in economic departments in the USA.

While Minsky did not cited Marx in his writings and did use Marx's Labor Theory of Value his thinking was definitely influenced by Marx’s critique of  finance. We now know that he read and admired the Capital. And that not accidental due to the fact that his parents were Mensheviks -- a suppressed after Bolshevik revolution more moderate wing of Russian Social Democratic Party that rejected the idea of launching the socialist revolution in Russia --  in their opinion Russia needed first to became a capitalist country and get rid of remnants of feudalism. They escaped from Soviet Russia when Mensheviks started to be prosecuted by Bolsheviks.

And probably the main influence on Minsky was not Marx's discussion  of finance in Volume I of Capital with a "commodity" model of money, but critical remarks scattered in   Volumes II & III (which were not edited by Marx by compiled posthumously by Engels), where he was really critical of big banks as well as Marx's earlier works (Grundrisse, Theories of Surplus Value) where Marx was scathing about finance:

"A high rate of interest can also indicate, as it did in 1857, that the country is undermined by the roving cavaliers of credit who can afford to pay a high interest because they pay it out of other people's pocket* (whereby, however, they help to determine the rate of interest  for all) and meanwhile they live in grand style on anticipated profits. 

Irving Fisher influence

The second source on which Minsky based his insights was Irving Fisher. Irving Fisher’s reputation destroyed by wrong predictions on stock market prices. In aftermath, developed theory to explain the crash and published it in his book  "The Debt Deflation Theory of Great Depressions". His main points are:

According to Fisher two key disequilibrium forces that push economic into the next economic crisis are debt and subsequent deflation

Joseph Schumpeter influence

Joseph Schumpeter was Joseph Schumpeter has more positive view of capitalism than the other two. He authored the theory of creative destruction as a path by which capitalism achieves higher and higher productivity. He capitalism as necessarily unstable, but for him this was a positive feature -- instability of capitalism the source of its creativity. His view of capitalism was highly dynamic and somewhat resembles the view of Marx (who also thought that capitalism destroys all previous order and create a new one):

Unlike Marx, who thought that the periodic crisis of overproduction  is the source of instability (as well as  gradual absolute impoverishment of workers), Minsky assumed that the key source of that instability of capitalist system is connected with the cycles of business borrowing and fractional bank lending, when "good times" lead to excessive borrowing leading to high leverage and overproduction and thus to eventual debt crisis (The Alternative To Neoliberalism ):

Minsky on capitalism:

The idea of Minsky moment is related to the fact that the fractional reserve banking periodically causes credit collapse when the leveraged credit expansion goes into reverse. And mainstream economists do not want to talk about the fact that increasing confidence breeds increased leverage. So financial stability breeds instability and subsequent financial crisis. All actions to guarantee a market rise, ultimately guarantee it's destruction because greed will always take advantage of a "sure thing" and push it beyond reasonable boundaries.  In other words, marker players are no rational and assume that it would be foolish not to maximize leverage in a market which is going up. So the fractional reserve banking mechanisms ultimately and ironically lead to over lending and guarantee the subsequent crisis and the market's destruction. Stability breed instability.

That means that fractional reserve banking based economic system with private players (aka capitalism) is inherently unstable. And first of all because  fractional reserve banking is debt based. In order to have growth it must create debt. Eventually the pyramid of debt crushes and crisis hit. When the credit expansion fuels asset price bubbles, the dangers for the financial sector and the real economy are substantial because this way the credit boom bubble is inflated which eventually burst. The damage done to the economy by the bursting of credit boom bubbles is significant and long lasting.

Blissex said...

«When credit growth fuels asset price bubbles, the dangers for the financial sector and the real economy are much more substantial.»

So M Minsky 50 years ago and M Pettis 15 years ago (in his "The volatility machine") had it right? Who could have imagined! :-)

«In the past decades, central banks typically have taken a hands-off approach to asset price bubbles and credit booms.»

If only! They have been feeding credit-based asset price bubbles by at the same time weakening regulations to push up allowed capital-leverage ratios, and boosting the quantity of credit as high as possible, but specifically most for leveraged speculation on assets, by allowing vast-overvaluations on those assets.

Central banks have worked hard in most Anglo-American countries to redistribute income and wealth from "inflationary" worker incomes to "non-inflationary" rentier incomes via hyper-subsidizing with endless cheap credit the excesses of financial speculation in driving up asset prices.

Not very hands-off at all.

Steve Keen is probably the most well know researcher who tried to creates model of capitalist economy based on Minsky work (  http://www.debtdeflation.com/blogs/manifesto/ )

John Kay in his January 5 2010 FT column very aptly explained the systemic instability of financial sector hypothesis: 

The credit crunch of 2007-08 was the third phase of a larger and longer financial crisis. The first phase was the emerging market defaults of the 1990s. The second was the new economy boom and bust at the turn of the century. The third was the collapse of markets for structured debt products, which had grown so rapidly in the five years up to 2007.

The manifestation of the problem in each phase was different – first emerging markets, then stock markets, then debt. But the mechanics were essentially the same. Financial institutions identified a genuine economic change – the assimilation of some poor countries into the global economy, the opportunities offered to business by new information technology, and the development of opportunities to manage risk and maturity mismatch more effectively through markets. Competition to sell products led to wild exaggeration of the pace and scope of these trends. The resulting herd enthusiasm led to mispricing – particularly in asset markets, which yielded large, and largely illusory, profits, of which a substantial fraction was paid to employees.

Eventually, at the end of each phase, reality impinged. The activities that once seemed so profitable – funding the financial systems of emerging economies, promoting start-up internet businesses, trading in structured debt products – turned out, in fact, to have been a source of losses. Lenders had to make write-offs, most of the new economy stocks proved valueless and many structured products became unmarketable. Governments, and particularly the US government, reacted on each occasion by pumping money into the financial system in the hope of staving off wider collapse, with some degree of success. At the end of each phase, regulators and financial institutions declared that lessons had been learnt. While measures were implemented which, if they had been introduced five years earlier, might have prevented the most recent crisis from taking the particular form it did, these responses addressed the particular problem that had just occurred, rather than the underlying generic problems of skewed incentives and dysfunctional institutional structures.

The public support of markets provided on each occasion the fuel needed to stoke the next crisis. Each boom and bust is larger than the last. Since the alleviating action is also larger, the pattern is one of cycles of increasing amplitude.

I do not know what the epicenter of the next crisis will be, except that it is unlikely to involve structured debt products. I do know that unless human nature changes or there is fundamental change in the structure of the financial services industry – equally improbable – there will be another manifestation once again based on naive extrapolation and collective magical thinking. The recent crisis taxed to the full – the word tax is used deliberately – the resources of world governments and their citizens. Even if there is will to respond to the next crisis, the capacity to do so may not be there.

The citizens of that most placid of countries, Iceland, now backed by their president, have found a characteristically polite and restrained way of disputing an obligation to stump up large sums of cash to pay for the arrogance and greed of other people. They are right. We should listen to them before the same message is conveyed in much more violent form, in another place and at another time. But it seems unlikely that we will.

We made a mistake in the closing decades of the 20th century. We removed restrictions that had imposed functional separation on financial institutions. This led to businesses riddled with conflicts of interest and culture, controlled by warring groups of their own senior employees. The scale of resources such businesses commanded enabled them to wield influence to create a – for them – virtuous circle of growing economic and political power. That mistake will not be easily remedied, and that is why I view the new decade with great apprehension. In the name of free markets, we created a monster that threatens to destroy the very free markets we extol.

While Hyman Minsky was the first clearly formulate the financial instability hypothesis, Keynes also understood this dynamic pretty well. He postulated that a world with a large financial sector and an excessive emphasis on the production of investment products creates instability both in terms of output and prices. In other words it automatically tends to generate credit and asset bubbles.  The key driver is the fact that financial professionals generally risk other people’s money and due to this fact have asymmetrical incentives:

This asymmetry is not a new observation of this systemic problem. Andrew Jackson noted it in much more polemic way long ago:

“Gentlemen, I have had men watching you for a long time and I am convinced that you have used the funds of the bank to speculate in the breadstuffs of the country. When you won, you divided the profits amongst you, and when you lost, you charged it to the bank. You tell me that if I take the deposits from the bank and annul its charter, I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I intend to rout you out, and by the grace of the Eternal God, will rout you out.”

This asymmetrical incentives ensure that the financial system is structurally biased toward taking on more risk than what should be taken. In other words it naturally tend to slide to the casino model, the with omnipresent reckless gambling as the primary and the most profitable mode of operation while an opportunities last.  The only way to counter this is to throw sand into the wheels of financial mechanism:  enforce strict regulations, limit money supplies and periodically jail too enthusiastic bankers. The latter is as important or even more important as the other two because bankers tend to abuse "limited liability" status like no other sector.

Asset inflation over the past 10 years and the subsequent catastrophe incurred is a way classic behavior of dynamic system with strong positive feedback loop.  Such behavior does not depends of personalities of bankers or policymakers, but is an immanent property of this class of dynamic systems. And the main driving force here was deregulation. So its important that new regulation has safety feature which make removal of it more complicated and requiring bigger majority like is the case with constitutional issues.

Another fact was the fact that due to perverted incentives, accounting in the banks was fraudulent from the very beginning and it was fraudulent on purpose.  Essentially accounting in banks automatically become as bad as law enforcement permits. This is a classic case of control fraud and from prevention standpoint is make sense to establish huge penalties for auditors, which might hurt healthy institutions but help to ensure that the most fraudulent institution lose these bank charter before affecting the whole system.  With the anti-regulatory zeal of Bush II administration the level of auditing became too superficial, almost non-existent. I remember perverted dances with Sarbanes–Oxley when it was clear from the very beginning that the real goal is not to strengthen accounting but to earn fees and to create as much profitable red tape as possible, in perfect Soviet bureaucracy style.

Deregulation also increases systemic risk by influencing the real goals of financial organizations. At some point of deregulation process the goal of higher remuneration for the top brass becomes self-sustainable trend  and replaces all other goals of the financial organization. This is the essence of  Martin Taylor’s, the former chief executive of Barclays,  article FT.com - Innumerate bankers were ripe for a reckoning in the Financial Times (Dec 15, 2009), which is worth reading in its entirety:

City people have always been paid well relative to others, but megabonuses are quite new. From my own experience, in the mid-1990s no more than four or five employees of Barclays’ then investment bank were paid more than £1m, and no one got near £2m. Around the turn of the millennium across the market things began to take off, and accelerated rapidly – after a pause in 2001-03 – so that exceptionally high remuneration, not just individually, but in total, was paid out between 2004 and 2007.

Observers of financial services saw unbelievable prosperity and apparently immense value added. Yet two years later the whole industry was bankrupt. A simple reason underlies this: any industry that pays out in cash colossal accounting profits that are largely imaginary will go bust quickly. Not only has the industry – and by extension societies that depend on it – been spending money that is no longer there, it has been giving away money that it only imagined it had in the first place. Worse, it seems to want to do it all again.

What were the sources of this imaginary wealth?

In the last two of these the bank was not receiving any income, merely “booking revenues”. How could they pay this non-existent wealth out in cash to their employees? Because they had no measure of cash flow to tell them they were idiots, and because everyone else was doing it. Paying out 50 per cent of revenues to staff had become the rule, even when the “revenues” did not actually consist of money.

In the next phase instability is amplified by the way governments and central banks respond to crises caused by credit bubble: the state has powerful means to end a recession, but the policies it uses give rise to the next phase of instability, the next bubble…. When money is virtually free – or, at least, at 0.5 per cent – traders feel stupid if they don’t leverage up to the hilt. Thus previous bubble and crash become a dress rehearsal for the next.

Resulting self-sustaining "boom-bust" cycle is very close how electronic systems with positive feedback loop behave and   cannot be explained by neo-classical macroeconomic models. Like with electronic devices the financial institution in this mode are unable to provide the services that are needed.

As Minsky noted long ago (sited from Stephen Mihm  Why capitalism fails Boston Globe):

Modern finance, he argued, was far from the stabilizing force that mainstream economics portrayed: rather, it was a system that created the illusion of stability while simultaneously creating the conditions for an inevitable and dramatic collapse.

...our whole financial system contains the seeds of its own destruction. “Instability,” he wrote, “is an inherent and inescapable flaw of capitalism.”

Minsky’s vision might have been dark, but he was not a fatalist; he believed it was possible to craft policies that could blunt the collateral damage caused by financial crises. But with a growing number of economists eager to declare the recession over, and the crisis itself apparently behind us, these policies may prove as discomforting as the theories that prompted them in the first place. Indeed, as economists re-embrace Minsky’s prophetic insights, it is far from clear that they’re ready to reckon with the full implications of what he saw.

And he understood the roots of the current credit bubble much better that neoclassical economists like Bernanke: 
As people forget that failure is a possibility, a “euphoric economy” eventually develops, fueled by the rise of far riskier borrowers - what [Minsky] called speculative borrowers, those whose income would cover interest payments but not the principal; and those he called “Ponzi borrowers,” those whose income could cover neither, and could only pay their bills by borrowing still further.

As these latter categories grew, the overall economy would shift from a conservative but profitable environment to a much more freewheeling system dominated by players whose survival depended not on sound business plans, but on borrowed money and freely available credit.

Minsky’s financial instability hypothesis suggests that when optimism is high and ample funds are available for investment, investors tend to migrate from the safe hedge end of the Minsky spectrum to the risky speculative and Ponzi end. Indeed, in the current crisis, investors tried to raise returns by increasing leverage and switching to financing via short-term—sometimes overnight— borrowing (Too late to learn?):

In the church of Friedman, inflation was the ol' devil tempting the good folk; the 1980s seemed to prove that, let loose, it would cause untold havoc on the populace. But, as Barbera notes:

The last five major global cyclical events were the early 1990s recession - largely occasioned by the US Savings & Loan crisis, the collapse of Japan Inc after the stock market crash of 1990, the Asian crisis of the mid-1990s, the fabulous technology boom/bust cycle at the turn of the millennium, and the unprecedented rise and then collapse for US residential real estate in 2007-2008. All five episodes delivered recessions, either global or regional. In no case was there a significant prior acceleration of wages and general prices. In each case, an investment boom and an associated asset market ran to improbable heights and then collapsed. From 1945 to 1985, there was no recession caused by the instability of investment prompted by financial speculation - and since 1985 there has been no recession that has not been caused by these factors.
Thus, meet the devil in Minsky's paradise - "an investment boom and an associated asset market [that] ran to improbable heights and then collapsed".

According the Barbera, "Minsky's financial instability hypothesis depends critically on what amounts to a sociological insight. People change their minds about taking risks. They don't make a one-time rational judgment about debt use and stock market exposure and stick to it. Instead, they change their minds over time. And history is quite clear about how they change their minds. The longer the good times endure, the more people begin to see wisdom in risky strategies."

Current economy state can be called following Paul McCulley a "stable disequilibrium" very similar to a state  a sand pile.  All this pile of  stocks, debt instruments, derivatives, credit default swaps and God know corresponds to a  pile of sand that is on the verse of losing stability. Each financial player works hard to maximize their own personal outcome but the "invisible hand" effect in adding sand to the pile that is increasing systemic instability. According to Minsky, the longer such situation continues the more likely and violent an "avalanche".

The late Hunt Taylor wrote, in 2006:

"Let us start with what we know. First, these markets look nothing like anything I've ever encountered before. Their stunning complexity, the staggering number of tradable instruments and their interconnectedness, the light-speed at which information moves, the degree to which the movement of one instrument triggers nonlinear reactions along chains of related derivatives, and the requisite level of mathematics necessary to price them speak to the reality that we are now sailing in uncharted waters.

"... I've had 30-plus years of learning experiences in markets, all of which tell me that technology and telecommunications will not do away with human greed and ignorance. I think we will drive the car faster and faster until something bad happens. And I think it will come, like a comet, from that part of the night sky where we least expect it."

This is a gold age for bankers as Simon Johnson wrote in New Republic (The Next Financial Crisis ):

Banking was once a dangerous profession. In Britain, for instance, bankers faced “unlimited liability”--that is, if you ran a bank, and the bank couldn’t repay depositors or other creditors, those people had the right to confiscate all your personal assets and income until you repaid. It wasn’t until the second half of the nineteenth century that Britain established limited liability for bank owners. From that point on, British bankers no longer assumed much financial risk themselves.

In the United States, there was great experimentation with banking during the 1800s, but those involved in the enterprise typically made a substantial commitment of their own capital. For example, there was a well-established tradition of “double liability,” in which stockholders were responsible for twice the original value of their shares in a bank. This encouraged stockholders to carefully monitor bank executives and employees. And, in turn, it placed a lot of pressure on those who managed banks. If they fared poorly, they typically faced personal and professional ruin. The idea that a bank executive would retain wealth and social status in the event of a self-induced calamity would have struck everyone--including bank executives themselves--as ludicrous.

Enter, in the early part of the twentieth century, the Federal Reserve. The Fed was founded in 1913, but discussion about whether to create a central bank had swirled for years. “No one can carefully study the experience of the other great commercial nations,” argued Republican Senator Nelson Aldrich in an influential 1909 speech, “without being convinced that disastrous results of recurring financial crises have been successfully prevented by a proper organization of capital and by the adoption of wise methods of banking and of currency”--in other words, a central bank. In November 1910, Aldrich and a small group of top financiers met on an isolated island off the coast of Georgia. There, they hammered out a draft plan to create a strong central bank that would be owned by banks themselves.

What these bankers essentially wanted was a bailout mechanism for the aftermath of speculative crashes -- something more durable than J.P. Morgan, who saved the day in the Panic of 1907 but couldn’t be counted on to live forever. While they sought informal government backing and substantial government financial support for their new venture, the bankers also wanted it to remain free of government interference, oversight, or control.

Another destabilizing fact is so called myth of invisible hand which is closely related to the myth about market self-regulation. The misunderstood argument of Adam Smith [1776], the founder of modern economics, that free markets led to efficient outcomes, “as if by an invisible hand” has played a central role in these debates: it suggested that we could, by and large, rely on markets without government intervention. About "invisible hand" deification, see The Invisible Hand, Trumped by Darwin - NYTimes.com.

The concept of Minsky moment

The moment in the financial system when the quantity of debt turns into quality and produces yet another financial crisis is called Minsky moment. In other words the “Minsky moment” is the time when an unsustainable financial boom turns into uncontrollable collapse of financial markets (aka financial crash). The existence of Minsky moments is one of the most important counterargument against financial market self-regulation.  It also expose free market fundamentalists such as "former Maestro" Greenspan as charlatans. Greenspan actually implicitly admitted that he is and that it was he, who was the "machinist"  who helped to bring the USA economic train off the rails in 2008 via deregulation  and dismantling the New Deal installed safeguards. 

Here how it is explained by Stephen Mihm in Boston Globe in 2009 in the after math of 2008 financial crisis:

“Minsky” was shorthand for Hyman Minsky, an American macroeconomist who died over a decade ago.  He predicted almost exactly the kind of meltdown that recently hammered the global economy. He believed in capitalism, but also believed it had almost a genetic weakness. Modern finance, he argued, was far from the stabilizing force that mainstream economics portrayed: rather, it was a system that created the illusion of stability while simultaneously creating the conditions for an inevitable and dramatic collapse.

In other words, the one person who foresaw the crisis also believed that our whole financial system contains the seeds of its own destruction. “Instability,” he wrote, “is an inherent and inescapable flaw of capitalism.”

Minsky believed it was possible to craft policies that could blunt the collateral damage caused by financial crises. As economists re-embrace Minsky’s prophetic insights, it is far from clear that they’re ready to reckon with the full implications of what he saw.

Minsky theory was not well received due to powerful orthodoxy, born in the years after World War II, known as the neoclassical synthesis. The older belief in a self-regulating, self-stabilizing free market had selectively absorbed a few insights from John Maynard Keynes, the great economist of the 1930s who wrote extensively of the ways that capitalism might fail to maintain full employment. Most economists still believed that free-market capitalism was a fundamentally stable basis for an economy, though thanks to Keynes, some now acknowledged that government might under certain circumstances play a role in keeping the economy - and employment - on an even keel.

Economists like Paul Samuelson became the public face of the new establishment; he and others at a handful of top universities became deeply influential in Washington. In theory, Minsky could have been an academic star in this new establishment: Like Samuelson, he earned his doctorate in economics at Harvard University, where he studied with legendary Austrian economist Joseph Schumpeter, as well as future Nobel laureate Wassily Leontief.

But Minsky was cut from different cloth than many of the other big names. The descendent of immigrants from Minsk, in modern-day Belarus, Minsky was a red-diaper baby, the son of Menshevik socialists. While most economists spent the 1950s and 1960s toiling over mathematical models, Minsky pursued research on poverty, hardly the hottest subfield of economics. With long, wild, white hair, Minsky was closer to the counterculture than to mainstream economics. He was, recalls the economist L. Randall Wray, a former student, a “character.”

So while his colleagues from graduate school went on to win Nobel prizes and rise to the top of academia, Minsky languished. He drifted from Brown to Berkeley and eventually to Washington University. Indeed, many economists weren’t even aware of his work. One assessment of Minsky published in 1997 simply noted that his “work has not had a major influence in the macroeconomic discussions of the last thirty years.”

Yet he was busy. In addition to poverty, Minsky began to delve into the field of finance, which despite its seeming importance had no place in the theories formulated by Samuelson and others. He also began to ask a simple, if disturbing question: “Can ‘it’ happen again?” - where “it” was, like Harry Potter’s nemesis Voldemort, the thing that could not be named: the Great Depression.

In his writings, Minsky looked to his intellectual hero, Keynes, arguably the greatest economist of the 20th century. But where most economists drew a single, simplistic lesson from Keynes - that government could step in and micromanage the economy, smooth out the business cycle, and keep things on an even keel - Minsky had no interest in what he and a handful of other dissident economists came to call “bastard Keynesianism.”

Instead, Minsky drew his own, far darker, lessons from Keynes’s landmark writings, which dealt not only with the problem of unemployment, but with money and banking. Although Keynes had never stated this explicitly, Minsky argued that Keynes’s collective work amounted to a powerful argument that capitalism was by its very nature unstable and prone to collapse. Far from trending toward some magical state of equilibrium, capitalism would inevitably do the opposite. It would lurch over a cliff.

This insight bore the stamp of his advisor Joseph Schumpeter, the noted Austrian economist now famous for documenting capitalism’s ceaseless process of “creative destruction.” But Minsky spent more time thinking about destruction than creation. In doing so, he formulated an intriguing theory: not only was capitalism prone to collapse, he argued, it was precisely its periods of economic stability that would set the stage for monumental crises.

Minsky called his idea the “Financial Instability Hypothesis.” In the wake of a depression, he noted, financial institutions are extraordinarily conservative, as are businesses. With the borrowers and the lenders who fuel the economy all steering clear of high-risk deals, things go smoothly: loans are almost always paid on time, businesses generally succeed, and everyone does well. That success, however, inevitably encourages borrowers and lenders to take on more risk in the reasonable hope of making more money. As Minsky observed, “Success breeds a disregard of the possibility of failure.”

As people forget that failure is a possibility, a “euphoric economy” eventually develops, fueled by the rise of far riskier borrowers - what he called speculative borrowers, those whose income would cover interest payments but not the principal; and those he called “Ponzi borrowers,” those whose income could cover neither, and could only pay their bills by borrowing still further. As these latter categories grew, the overall economy would shift from a conservative but profitable environment to a much more freewheeling system dominated by players whose survival depended not on sound business plans, but on borrowed money and freely available credit.

Once that kind of economy had developed, any panic could wreck the market. The failure of a single firm, for example, or the revelation of a staggering fraud could trigger fear and a sudden, economy-wide attempt to shed debt. This watershed moment - what was later dubbed the “Minsky moment” - would create an environment deeply inhospitable to all borrowers. The speculators and Ponzi borrowers would collapse first, as they lost access to the credit they needed to survive. Even the more stable players might find themselves unable to pay their debt without selling off assets; their forced sales would send asset prices spiraling downward, and inevitably, the entire rickety financial edifice would start to collapse. Businesses would falter, and the crisis would spill over to the “real” economy that depended on the now-collapsing financial system.

From the 1960s onward, Minsky elaborated on this hypothesis. At the time he believed that this shift was already underway: postwar stability, financial innovation, and the receding memory of the Great Depression were gradually setting the stage for a crisis of epic proportions. Most of what he had to say fell on deaf ears. The 1960s were an era of solid growth, and although the economic stagnation of the 1970s was a blow to mainstream neo-Keynesian economics, it did not send policymakers scurrying to Minsky. Instead, a new free market fundamentalism took root: government was the problem, not the solution.

Moreover, the new dogma coincided with a remarkable era of stability. The period from the late 1980s onward has been dubbed the “Great Moderation,” a time of shallow recessions and great resilience among most major industrial economies. Things had never been more stable. The likelihood that “it” could happen again now seemed laughable.

Yet throughout this period, the financial system - not the economy, but finance as an industry - was growing by leaps and bounds. Minsky spent the last years of his life, in the early 1990s, warning of the dangers of securitization and other forms of financial innovation, but few economists listened. Nor did they pay attention to consumers’ and companies’ growing dependence on debt, and the growing use of leverage within the financial system.

By the end of the 20th century, the financial system that Minsky had warned about had materialized, complete with speculative borrowers, Ponzi borrowers, and precious few of the conservative borrowers who were the bedrock of a truly stable economy. Over decades, we really had forgotten the meaning of risk. When storied financial firms started to fall, sending shockwaves through the “real” economy, his predictions started to look a lot like a road map.

“This wasn’t a Minsky moment,” explains Randall Wray. “It was a Minsky half-century.”

Minsky is now all the rage. A year ago, an influential Financial Times columnist confided to readers that rereading Minsky’s 1986 “masterpiece” - “Stabilizing an Unstable Economy” - “helped clear my mind on this crisis.” Others joined the chorus. Earlier this year, two economic heavyweights - Paul Krugman and Brad DeLong - both tipped their hats to him in public forums. Indeed, the Nobel Prize-winning Krugman titled one of the Robbins lectures at the London School of Economics “The Night They Re-read Minsky.”

Today most economists, it’s safe to say, are probably reading Minsky for the first time, trying to fit his unconventional insights into the theoretical scaffolding of their profession. If Minsky were alive today, he would no doubt applaud this belated acknowledgment, even if it has come at a terrible cost. As he once wryly observed, “There is nothing wrong with macroeconomics that another depression [won’t] cure.”

But does Minsky’s work offer us any practical help? If capitalism is inherently self-destructive and unstable - never mind that it produces inequality and unemployment, as Keynes had observed - now what?

After spending his life warning of the perils of the complacency that comes with stability - and having it fall on deaf ears - Minsky was understandably pessimistic about the ability to short-circuit the tragic cycle of boom and bust. But he did believe that much could be done to ameliorate the damage.

To prevent the Minsky moment from becoming a national calamity, part of his solution (which was shared with other economists) was to have the Federal Reserve - what he liked to call the “Big Bank” - step into the breach and act as a lender of last resort to firms under siege. By throwing lines of liquidity to foundering firms, the Federal Reserve could break the cycle and stabilize the financial system. It failed to do so during the Great Depression, when it stood by and let a banking crisis spiral out of control. This time, under the leadership of Ben Bernanke - like Minsky, a scholar of the Depression - it took a very different approach, becoming a lender of last resort to everything from hedge funds to investment banks to money market funds.

Minsky’s other solution, however, was considerably more radical and less palatable politically. The preferred mainstream tactic for pulling the economy out of a crisis was - and is - based on the Keynesian notion of “priming the pump” by sending money that will employ lots of high-skilled, unionized labor - by building a new high-speed train line, for example.

Minsky, however, argued for a “bubble-up” approach, sending money to the poor and unskilled first. The government - or what he liked to call “Big Government” - should become the “employer of last resort,” he said, offering a job to anyone who wanted one at a set minimum wage. It would be paid to workers who would supply child care, clean streets, and provide services that would give taxpayers a visible return on their dollars. In being available to everyone, it would be even more ambitious than the New Deal, sharply reducing the welfare rolls by guaranteeing a job for anyone who was able to work. Such a program would not only help the poor and unskilled, he believed, but would put a floor beneath everyone else’s wages too, preventing salaries of more skilled workers from falling too precipitously, and sending benefits up the socioeconomic ladder.

While economists may be acknowledging some of Minsky’s points on financial instability, it’s safe to say that even liberal policymakers are still a long way from thinking about such an expanded role for the American government. If nothing else, an expensive full-employment program would veer far too close to socialism for the comfort of politicians. For his part, Wray thinks that the critics are apt to misunderstand Minsky. “He saw these ideas as perfectly consistent with capitalism,” says Wray. “They would make capitalism better.”

But not perfect. Indeed, if there’s anything to be drawn from Minsky’s collected work, it’s that perfection, like stability and equilibrium, are mirages. Minsky did not share his profession’s quaint belief that everything could be reduced to a tidy model, or a pat theory. His was a kind of existential economics: capitalism, like life itself, is difficult, even tragic. “There is no simple answer to the problems of our capitalism,” wrote Minsky. “There is no solution that can be transformed into a catchy phrase and carried on banners.”

It’s a sentiment that may limit the extent to which Minsky becomes part of any new orthodoxy. But that’s probably how he would have preferred it, believes liberal economist James Galbraith. “I think he would resist being domesticated,” says Galbraith. “He spent his career in professional isolation.”

Stephen Mihm is a history professor at the University of Georgia and author of “A Nation of Counterfeiters” (Harvard, 2007). © Copyright 2009 Globe Newspaper Company.

 

Some important albeit random (and overlapping) points about instability of financial system

The first thing to understand is that attempt to weaken positive feedback looks via regulation, approach that can be called  “regulation as a Swiss knife” does not work without law enforcement and criminal liability for bankers, as there is an obvious problem of corruption of regulators. In this sense the mechanism of purges might be the only one that realistically can work.

In other words it’s unclear who and how can prevents the capture of regulators as financial sector by definition has means to undermine any such efforts. One way this influence work is via lobbing for appointment of pro-financial sector people in key positions. If such "finance-sector-selected" Fed chairman does not like part of Fed mandate related to regulation it can simply ignore it as long as he is sure that he will be reappointed. That happened with Greenspan.  After such process started it became irreversible and only after a significant, dramatic shock to the system any meaningful changes can be instituted and as soon as the lessons are forgotten work on undermining them resumes.

In essence, the Fed is a political organization and Fed Chairman is as close to a real vice-president of the USA as one can get.  As such Fed Chairman serves the elite which rules that country, whether you call them financial oligarchy or some other name. Actually Fed Chairman is the most powerful unelected official in the USA. If you compare this position to the role of the Chairman of the Politburo  in the USSR you’ll might find some interesting similarities.

In other words it is impossible to prevent appointment of another Greenspan by another Reagan without changes in political power balance.  And the transition to banana republic that follows such appointment is irreversible even if the next administration water boards former Fed Chairman to help him to write his memoirs.  That means that you need to far-reaching reform of political system to be able to regulate financial industry and you need to understand that the measures adopted need vigilant protection as soon as the current crisis is a distant history.

Additional reading

Several other source of financial instability were pointed out by others:

There are some outstanding lectures and presentation on YouTube on this topic. Among them:

See an expended list at Webliography of heterodox economists

Dr. Nikolai Bezroukov


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[In casino capitalism] financial institutions make a living screwing over their customers so their biggest concern is how to avoid losing lawsuits when they get sued

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[Mar 28, 2017] Somebody did well with the Obama health plan:

Mar 28, 2017 | economistsview.typepad.com
Tom aka Rusty, March 27, 2017 at 10:28 AM
Somebody did well with the Obama health plan:

http://www.beckershospitalreview.com/healthcare-information-technology/epic-systems-judy-faulkner-makes-forbes-billionaires-list-2017.html

Faulkner was appointed to the committee that wrote the EMR standards, and not surprisingly EPIC was the template for the standards.

Much cost and misery inflicted on providers.

[Mar 28, 2017] The fact is that the mainstream economists, and most mainstream economists who were heard in the public sphere were not against austerity, but rather split, with, if anything, louder and larger voices on the pro-austerity side

Brad DeJong is staunch despicable neoliberal, but something he has the courage to admit obvious things...
Notable quotes:
"... Simon needs to face that fact squarely, rather than to dodge it. The fact is that the "mainstream economists, and most mainstream economists" who were heard in the public sphere were not against austerity, but rather split, with, if anything, louder and larger voices on the pro-austerity side. ..."
"... When Unlearning Economics seeks the destruction of "mainstream economics", he seeks the end of an intellectual hegemony that gives Reinhart and Rogoff's very shaky arguments a much more powerful institutional intellectual voice by virtue of their authors' tenured posts at Harvard than the arguments in fact deserve. ..."
Mar 28, 2017 | economistsview.typepad.com

anne, March 27, 2017 at 11:08 AM

http://www.bradford-delong.com/2017/03/the-need-for-a-reformation-of-authority-and-hierarchy-among-economists-in-the-public-sphere.html

March 27, 2017

... ... ...

and then there is Reinhart and Rogoff, where I think Unlearning Economics is right.

So Unlearning Economics is batting 0.170 in their examples of "mainstream economics considered harmful". But there is that one case. And I do not think that Simon Wren-Lewis handles that one case well. And he needs to--I need to. And, since neither he nor I have, this is a big problem.

Let me put it this way: Carmen Reinhart and Ken Rogoff are mainstream economists.

The fact is that Carmen Reinhart and Ken Rogoff were wrong in 2009-2013. Yet they had much more influence on economic policy in 2009-2013 than did Simon Wren-Lewis and me. They had influence. And their influence was aggressively pro-austerity. And their influence almost entirely destructive.

Simon needs to face that fact squarely, rather than to dodge it. The fact is that the "mainstream economists, and most mainstream economists" who were heard in the public sphere were not against austerity, but rather split, with, if anything, louder and larger voices on the pro-austerity side. (In my humble opinion, Simon Wren-Lewis half admits this with his denunciations of "City economists".)

When Unlearning Economics seeks the destruction of "mainstream economics", he seeks the end of an intellectual hegemony that gives Reinhart and Rogoff's very shaky arguments a much more powerful institutional intellectual voice by virtue of their authors' tenured posts at Harvard than the arguments in fact deserve.

Simon Wren-Lewis, in response, wants to claim that strengthening the "mainstream" would somehow diminish the influence of future Reinharts and Rogoffs in analogous situations. But the arguments for austerity that turned out to be powerful and persuasive in the public sphere came from inside the house!

* https://mainly macro.blogspot.co.uk/2017/03/on-criticising-existence-of-mainstream.html

** https://medium.com/@UnlearningEcon/no-criticising-economics-is-not-regressive-43e114777429#.ptzhjr87b

-- Brad DeLong

There are no gains from trade liberalization - just ask the people of Youngstown , March 27, 2017 at 03:31 PM
American economists bear much of the blame for the collapse of US living standards.

After fifty years of real economic decline, they prattle on about the benefits of trade liberalization.

[Mar 28, 2017] DeLongs takeaway is that economists do need to recognize that they operate in a political environment (the sewers of Romulus) in which their work will be seized upon by interested groups, with real practical outcomes

Notable quotes:
"... "DeLong's takeaway is that economists do need to recognize that they operate in a political environment (the sewers of Romulus) in which their work will be seized upon by interested groups, with real practical outcomes. " ..."
"... Mainstream economists have used mathematics to hide ideology. ..."
"... They have cherry-picked mathematical constructions with highly restrictive, idealized properties and then wedged-in economic parameters to fit their purposes. That is the case with the neoclassical production function and with the Arrow-Debreu general equilibrium model. The objective was to "prove" that economies free from government control were "natural" and best. They have been sophists from their first emergence. ..."
Mar 28, 2017 | economistsview.typepad.com
Peter K. -> pgl... March 27, 2017 at 07:25 AM
Peter Dorman:

"DeLong's takeaway is that economists do need to recognize that they operate in a political environment (the sewers of Romulus) in which their work will be seized upon by interested groups, with real practical outcomes. "

.... ... ...

Peter K. , March 27, 2017 at 07:20 AM
... ... ...

http://econospeak.blogspot.com/2017/03/economics-part-of-rot-part-of-treatment.html

SUNDAY, MARCH 26, 2017

Economics: Part of the Rot, Part of the Treatment, or Some of Each?

Is mainstream economics, with its false certitudes and ideological biases, one of the reasons for the dismal state of policy debate in countries like the UK and the US, or are its rigorous methods an important antidote to the ruling political foggery? That's being debated right now, live online.

Our starting point is a post on Unlearning Economics, dated March 5, which argues that the flaws of mainstream economics contribute to lousy policy on several fronts: downplaying the role of monopoly, cheerleading for the shareholder value imperative in the corporate world, knee-jerk support for trade agreements under the banner of comparative advantage, and regressive macroeconomic policy, among others. A particularly pointed paragraph brought up the Reinhart-Rogoff 90% affair and accused the economics profession of dereliction of duty by not taking action to rebuke the wrongdoers:

Where was the formal, institutional denunciation of such a glaring error from the economics profession, and of the politicians who used it to justify their regressive policies?

UE's conclusion is that mainstream economics needs to be taken down several notches, which would open more space for alternative approaches to economics and, indeed, alternative approaches to policy that place more weight on human outcomes, broadly understood, than the formalistic criteria of efficiency, etc.

Simon Wren-Lewis responded by arguing that UE has it exactly backwards. Restricting himself to UE's critique of macroeconomics, SWL says, yes, reactionary politicians have invoked "economics" to support austerity, but "real" economists for the most part have not gone along. True, there were a few, like Reinhart and Rogoff and those in the employ of the British financial sector ("City economists") who took a public stand against sensible Keynesian policies in the wake of the financial crisis, but they were a minority, and, in any case, what would you want to do about them? Economists, like professionals in any field, will disagree sometimes, and having a centralized agency to enforce a false consensus would ultimately work against progressives and dissenters, not for them. Let's put the blame where it really belongs, says SWL-on the politicians and pundits who have brushed aside decades of theoretical and empirical work to promulgate a reactionary, fact-free discourse on economic policy.

Yes-but, adds Brad DeLong. He largely agrees with SWL, but delves more deeply into the Reinhart-Rogoff affair. He shows that, even without the famed Excel glitch, a cursory look would reveal that R-R were trumpeting nonexistent results:

• The 90% debt cliff was an artifact of the way R-R set up their bins. Replace binning with a continuous relationship between growth and debt and the cliff disappears.

• The correlation between growth and debt supported no particular causal interpretation, and R-R provided no other evidence to support their particular causal argument.

• The correlation itself was so weak that the practical implication of R-R's claim was nil. Fiscal stimulus that could make or break a recovery was being rejected on the basis of future economic growth effects that would be too small to measure.

So the R-R claim that fiscal consolidation was necessary and urgent was unfounded from the get-go, and these two were both respected mainstream economists, so what can we infer? DeLong's takeaway is that economists do need to recognize that they operate in a political environment (the sewers of Romulus) in which their work will be seized upon by interested groups, with real practical outcomes. In this situation, the profession as a whole has a responsibility to assess high profile but dubious work. Although he isn't explicit, my reading is that DeLong wants some sort of professional quality control, but not institutionalized in the way UE seems to call for.

...

pgl -> Peter K.... , March 27, 2017 at 07:44 AM
Yep - try reading this portion:

"reactionary politicians have invoked "economics" to support austerity, but "real" economists for the most part have not gone along. True, there were a few, like Reinhart and Rogoff and those in the employ of the British financial sector ("City economists") who took a public stand against sensible Keynesian policies in the wake of the financial crisis, but they were a minority, and, in any case, what would you want to do about them? Economists, like professionals in any field, will disagree sometimes, and having a centralized agency to enforce a false consensus would ultimately work against progressives and dissenters, not for them. Let's put the blame where it really belongs, says SWL-on the politicians and pundits who have brushed aside decades of theoretical and empirical work to promulgate a reactionary, fact-free discourse on economic policy."

Peter K. , March 27, 2017 at 07:27 AM
https://medium.com/@UnlearningEcon/no-criticising-economics-is-not-regressive-43e114777429#.gihe5thlj

Unlearning EconomicsFollow
Mar 5

No, Criticising Economics is not Regressive

Simon-Wren Lewis (SWL) and Chris Dillow have both recently argued that criticising economics for the 2008 financial crisis distracts from the real source of the blame, which is banks, and therefore undermines the progressive cause. While I don't disagree that the banks deserve blame, I want to push back a bit on their argument that economics as a discipline has little to do with regressive ideas.

But firstly, it is my view that criticising economics needn't have an ideological motivation. Many critics, myself included, simply believe that neoclassical economics has severe shortcomings and that in order to understand the economic system properly we need better ideas. In many cases criticisms of neoclassical economics are so abstract that it's not even clear to me what the political implications of either side would be (e.g. the fact that Arrow-Debreu equilibrium might be unstable has no bearing on my view of whether capitalism itself is). I respect both SWL and Dillow immensely, but taken alone I consider this line of argument a rather feeble attempt to shut down an important scientific and philosophical debate.

Despite this, the point has some force to it: why devote so much intellectual effort to criticising economics when we could be devoting it to getting the big banks and other corporate wrongdoers? And here I think SWL and Dillow both paper over the extent to which economics has served those in power, as I will try to illustrate with a number of examples. To be clear, I'm not 'blaming' economists for all of these occurrences, but I do think the discipline seems to eschew responsibility for them, and that progressive economists have a blind spot when it comes to the practical consequences of their discipline.

Economics in Practice

I've always acknowledged that economists themselves are probably more progressive than they're usually given credit for. Nevertheless, the absence of things like power, exploitation, poverty, inequality, conflict, and disaster in most mainstream models - centred as they are around a norm of well-functioning markets, and focused on banal criteria like prices, output and efficiency - tends to anodise the subject matter. In practice, this vision of the economy detracts attention from important social issues and can even serve to conceal outright abuses. The result is that in practice, the influence of economics has often been more regressive than progressive.

Consider the case of monopoly. The economics textbooks may be against monopoly, but this is largely on the grounds that it reduces consumer welfare by increasing prices. Building on this logic, the Chicago School of anti-trust regulation has shifted the focus of anti-trust law to lowering prices for consumers. As this recent article on Amazon details, this has hidden other forms of monopoly abuse such as predatory pricing, market dominance and reduced bargaining power for workers, consumers and smaller companies.

Similarly, textbook ideas about profit maximisation and rational agents responding to incentives featured prominently in the promotion of shareholder value by Milton Friedman and other economists, which has been dominant over the past few decades and has been instrumental in increasing inequality and corporate short-termism. The potential macroeconomic impacts of corporate concentration have also been ignored by discipline until very recently - a consequence, perhaps, of the narrowing of particular subfields and the neglection of more critical systemic analysis (something similar could perhaps be said for the 2016 Prize in contract theory, though I am no expert in this area).

One type of institution which is dominated by economic ideas is central banks, yet many of their policies have had regressive elements. For instance, SWL praises economists at the Bank of England for implementing Quantitative Easing, but forgets that the Bank itself admitted that this has disproportionately benefited the wealthy. This problem goes even deeper: as J W Mason has argued, inflation targeting - a key central bank policy across the world - in practice results in workers' wages being kept down and their jobs being made more insecure in the name of combating inflation. In both cases what is painted as a relatively benign process - reducing interest rates and managing inflation, respectively - actually has quite serious social consequences, which generally aren't discussed in class or by policymakers.

In the realm of international trade, economists have been all too inclined to support trade deals - often quite vociferously - on the basis of simple ideas like comparative advantage, while ignoring (a) the actual details of the trade deals, which as Dean Baker frequently points out, tend to favour the rich and corporations and (b) their own more complex economic models, which as Dani Rodrik frequently points out, do imply that trade will harm some people while benefitting others. Uneven and unfair international trade has been a key element of the harm to workers over the past few decades, and was undoubtedly a factor in the election of Trump.

Global trade institutions like the IMF and World Bank have been dominated by economics since their inception, and using economics they inflicted massive pain through their free market 'structural adjustment' policies, which can only be described as regressive but which were fundamentally based on context-free neoclassical ideas about markets. True, these institutions may have softened somewhat in recent years, but that doesn't undo the harm they have caused. In fact, even their more recent 'bottom up' policies such as microcredit and Randomised Control Trials - both inspired by economic ideas - often seem to have benefited global and local elites at the expensive of the poorest. As Jamie Galbraith once noted in the context of the financial crisis, the discipline just has a blind spot for how ideas interact with power to produce unfair outcomes, sometimes taking the form of outright abuse and fraud. Which leads me nicely to my next argument.

Abusing Economics

Economists may complain that economic ideas have been misused by vested interests, and that this isn't their responsibility. But a huge problem with the discipline of economics is that it has virtually no institutional shields against mistakes and wrongdoing. Merton and Scholes won the biggest prize in the profession for their model of financial markets - which had become commonly adopted in options trading - in 1997. A year later those same economists required a hefty bailout when the use of their model was implicated in the collapse of the hedge fund Long-Term Capital Management, where they were both partners. Was the prize revoked? No. Were they discredited? No. Actually, even the model is still widely used, despite massively underestimating fat tails and therefore being implicated in a number of other financial crises, including 2008.

Or consider Reinhart and Rogoff's famous '90% debt threshold', where their statistics purportedly showed that after a country reaches 90% of sovereign debt, its growth would stall. This was used by many politicians, including George Osborne, to justify austerity - until it was revealed to be based on 'statistical errors'. Sure, R & R received a fair amount of flak for this, but they have been incredibly stubborn about the result. Where was the formal, institutional denunciation of such a glaring error from the economics profession, and of the politicians who used it to justify their regressive policies? Why are R & R still allowed to comment on the matter with even an ounce of credibility? The case for austerity undoubtedly didn't hinge on this research alone, but imagine if a politician cited faulty medical research to approve their policies - would institutions like the BMA not feel a responsibility to condemn it? (Answer: yes, even when the politician was in another country).

There are many more examples like this, such as Andrei Shleifer, who despite being prosecuted for fraud in post-Soviet Russia was awarded the John Bates Clark medal, probably the second most prestigious prize in the discipline, was subsequently allowed to publish papers in respected journals about how well privatisation went in Russia, and was eventually bailed out of the case by his incredibly wealthy university to the tune of $26 million. This is not to mention the disastrous Russian privatisation as a whole and the role of certain economists/economic ideas in it.

Even worse were the Chicago boys, who advised Augusto Pinochet's horrific economic policies (and no, they were not just humble advisors, they were knee deep in the absolute worst excesses of the regime.) Without any substantive ethical code and without procedures for weeding out corrupt, dishonest or discredited work, the profession creates an environment where people can act like this and get away with it, all under the banner of the intellectual credibility 'economics' seems to confer on people.

And this leads me to my last point, which is the rhetorical power that invoking 'economics' has in contemporary politics. 'You don't understand economics' is - rightly or wrongly - a common refrain of those attacking progressive policies such as Ed Miliband's proposed energy price freeze, the minimum wage, or fiscal expansion. As with the above abuses of economics, those such as SWL complain (perhaps correctly) that these are inaccurate representations of the field.

But these same economists then invoke 'economics' in a similar way to justify their own policies. In my opinion, this only reinforces the dominance of economics and narrows the debate, a process which is inherently regressive. The case against austerity does not depend on whether it is 'good economics', but on its human impact. Nor does the case for combating climate change depend on the present discounted value of future costs to GDP. Reclaiming political debate from the grip of economics will make the human side of politics more central, and so can only serve a progressive purpose.

Peter K. -> Peter K.... , March 27, 2017 at 07:29 AM
Think about how Republicans use "Science" and scientists fight back against their misuse. In recent decades Republicans have left the field and now "scientist" has become a bad word for them.

Same thing needs to happen with Economics.

RGC -> Peter K.... , March 27, 2017 at 09:25 AM
Mainstream economists have used mathematics to hide ideology.

They have cherry-picked mathematical constructions with highly restrictive, idealized properties and then wedged-in economic parameters to fit their purposes. That is the case with the neoclassical production function and with the Arrow-Debreu general equilibrium model. The objective was to "prove" that economies free from government control were "natural" and best. They have been sophists from their first emergence.

RGC -> RGC... , March 27, 2017 at 09:33 AM
Consider the Arrow-Debreu model:

In the 1950s, Arrow and others proved a theorem that, many economists believe, put a rigorous mathematical foundation beneath Adam Smith's idea of the invisible hand. The theorem shows -- in a highly abstract model -- that producers and consumers can match their desires perfectly, given a particular set of prices.

In this rarified atmosphere of "general equilibrium," economic activity might take place efficiently without any central coordination, simply as a result of people pursuing their self-interest.

It's an insight that economists have used to argue for de-unionization, globalization and financial deregulation, all in the name of removing various frictions or distortions that prevent markets from achieving the elusive equilibrium.

Yet the theorem trails a dense cloud of caveats, which Arrow himself recognized could be more important than the proof itself. For one, it worked only in a perfect world, far removed from the one humans actually inhabit.

Equilibrium is merely one of many conceivable states of that world; there's no particular reason to believe that the economy would naturally tend toward it. Beautiful as the math may be, actual experience suggests that its magical efficiency is purely theoretical, and a poor guide to reality.

Remarkably, academic macroeconomists have largely ignored these limitations, and continue to teach the general equilibrium model -- and more modern variants with same fatal weaknesses -- as a decent approximation of reality.

Economists routinely use the framework to form their views on everything from taxation to global trade -- portraying it as a value-free, scientific approach, when in fact it carries a hidden ideology that casts completely free markets as the ideal.

Thus, when markets break down, the solution inevitably entails removing barriers to their proper functioning: privatize healthcare, education or social security, keep working to free up trade, or make labor markets more "flexible."

Those prescriptions have all too often failed, as the 2008 financial crisis eloquently demonstrated. The result is widespread distrust of economic experts and rejection of globalization.

In his recent book "Economism: Bad Economics and the Rise of Inequality," James Kwak credits conservative think tanks funded by corporations and the wealthy for spreading the oversimplified belief in markets as wise machines for producing optimal social outcomes. He certainly has a point, yet such propaganda stemmed from an intellectual model that had been lurking at the center of economics all along -- and remains there now, still widely revered.

This perversion isn't Arrow's fault. He merely helped to prove a mathematical theorem, and was no blind advocate for markets. Indeed, he actually thought the theorem illustrated the limitations of capitalism, and he was prescient in understanding how economic inequality might come to impair the workings of democratic government.

Perhaps it would be best to use his own words: "In a system where virtually all resources are available for a price, economic power can be translated into political power by channels too obvious for mention. In a capitalist society, economic power is very unequally distributed, and hence democratic government is inevitably something of a sham."

https://www.bloomberg.com/view/articles/2017-03-09/the-misunderstanding-at-the-core-of-economics

RGC -> RGC... , March 27, 2017 at 09:47 AM
Note that neo-classical(mainstream) economists did NOT do what scientists do.

They did not observe phenomena and then try to construct a theory to explain the phenomena.

Rather, they constructed a theory that supported their ideology and then tried to argue that the theory was representative of the real world.

anne -> RGC... , March 27, 2017 at 02:55 PM
I do appreciate this essay.
Egmont Kakarot-Handtke , March 27, 2017 at 07:50 AM
The non-existence of economics
Comment on Simon Wren-Lewis on 'On criticising the existence of mainstream economics'

There is no such thing as economics, there are FOUR economixes and they are constantly played against each other. First, there is theoretical and political economics. The crucial distinction within theoretical economics is true/false, the crucial distinction within political economics good/bad. Economics exhausts itself since 200+ years in crossover discussion, that is, by NOT keeping science and politics properly apart. As a result, it got neither science nor politics right.

Heterodox economists say that orthodox economics is false and in this very general sense they are right. Heterodox economists have debunked much of Orthodoxy but this has not enabled them to work out a superior alternative. The proper task of Heterodoxy is not the repetitive critique of Orthodoxy but to fully replace it, that is, to perform a paradigm shift: "The problem is not just to say that something might be wrong, but to replace it by something ― and that is not so easy." (Feynman)

Because Heterodoxy has never developed a valid alternative it advocates pluralism, more precisely, the pluralism of false theories. The argument boils down to: if Orthodoxy is allowed to sell their rubbish in the curriculum, Heterodoxy must also be allowed to sell their rubbish. Economics is not so much a heroic struggle about scientific truth but about a better place at the academic trough.

The fact of the matter is that neither Orthodoxy nor Heterodoxy has the true theory and that, by consequence, the political arguments of BOTH sides have NO sound scientific foundation.

Traditional Heterodoxy knows quite well that it has nothing to offer in the way of progressive science and therefore argues for dumping scientific standards altogether and to focus on politics pure and simple: "The case against austerity does not depend on whether it is 'good economics', but on its human impact. Nor does the case for combating climate change depend on the present discounted value of future costs to GDP. Reclaiming political debate from the grip of economics will make the human side of politics more central, and so can only serve a progressive purpose."

This is a good idea, economists should no longer pretend to do science but openly push their respective political agendas, after all, this is what they have actually done the past 200+ years. Neither Orthodoxy nor traditional Heterodoxy satisfies the scientific criteria of material and formal consistency. So, both, orthodox and heterodox economists have to get out of science because of incurable incompetence.

It was John Stuart Mill who told economists that they must decide themselves between science and politics: "A scientific observer or reasoner, merely as such, is not an adviser for practice. His part is only to show that certain consequences follow from certain causes, and that to obtain certain ends, certain means are the most effectual. Whether the ends themselves are such as ought to be pursued, and if so, in what cases and to how great a length, it is no part of his business as a cultivator of science to decide, and science alone will never qualify him for the decision."

Both, orthodox and heterodox economists violate the principle of the separation of science and politics on a daily basis. Economics is what Feynman famously called cargo cult science and neither right wing nor left wing economic policy guidance has a sound scientific foundation since Adam Smith/Karl Marx. It is high time that economics frees itself from the corrupting grip of politics.

Egmont Kakarot-Handtke

Peter K. -> Egmont Kakarot-Handtke ... , March 27, 2017 at 08:14 AM
"It is high time that economics frees itself from the corrupting grip of politics."

How does it do that exactly? Part of the solution maybe be that economics has to highlight the political context of its debates and results. Who wins and who loses.

The Republican health care plan was very blatant about: allow 24 million to lose their insurance so that we can cut taxes for the rich.

It was good to the extent the news media and economists reported that.

It's why the plan was so unpopular.

RGC -> Egmont Kakarot-Handtke ... , March 27, 2017 at 11:33 AM
Science is not capable of devising a theory that adequately explains all the human elements and serendipitous effects of an economy - and may never be capable.

However, humans are capable of organizing a society according to their needs and wants. They do it on a corporate scale all the time. It isn't perfect but it works pretty well.

Mainstream economists have fought against a managed economy because it would reduce the influence of themselves and their plutocrat sponsors.

Peter K. , March 27, 2017 at 08:22 AM
I like that Thoma is linking to Campbell who has some interesting blog posts, like in today's links:

http://douglaslcampbell.blogspot.com/2017/03/corporations-in-age-of-inequality.html

"The story of inequality they tell is also one which is essentially technology based (IT and outsourcing), as they find that inequality is almost entirely driven by changes in between firm inequality. They deserve credit for presenting an interesting set of facts.

However, while intriguing, I'm not yet totally convinced this is the key to understanding inequality. Macromon [sic] also had an excellent discussion of this research awhile back...

...
I took issue with this comment "Since 1980, income inequality has risen sharply in most developed economies". As my blog readers know, income inequality has not risen dramatically in Germany, France, Japan, or Sweden according to Alvaredo et al.. Thus, this comment threw me: "This means that the rising gap in pay between firms accounts for the large majority of the increase in income inequality in the United States. It also accounts for at least a substantial part in other countries, as research conducted in the UK, Germany, and Sweden demonstrates." Right, but the increases in inequality in Germany and Sweden have been quite minor relative to the US, and are also associated with changes in top marginal tax rates. So, between firm inequality isn't actually explaining much is what I'm hearing.

..."

Peter K. , March 27, 2017 at 08:22 AM
pgl -> Peter K....
Try this single line:

"the profession as a whole has a responsibility to assess high profile but dubious work."

As in that awful paper by Gerald Friedman. Peter Dorman ripped it. I ripped. And yes the Romers ripped it.

That is what economists are suppose to do. But you have whined about this for the last 14 months.

Reply Monday, March 27, 2017 at 07:47 AM

Yes it was a priority to demonize Friedman b/c he was coming from the left and was supposedly supporting Bernie Sanders. It was a way for the center-left to discredit Bernie Sanders and call him "unPresidential" and "unserious" as Hillary did.

Meawhile PGL continuously name-drops Mankiw as if he has a man crush on him.

[Mar 28, 2017] Is mainstream economics, with its false certitudes and ideological biases, one of the reasons for the dismal state of policy debate in countries like the UK and the US, or are its rigorous methods an important antidote to the ruling political foggery?

Notable quotes:
"... Few mainstream economists predicted the global financial crash of 2008 and academics have been accused of acting as cheerleaders for the often labyrinthine financial models behind the crisis. Now a growing band of university students are plotting a quiet revolution against orthodox free-market teaching, arguing that alternative ways of thinking have been pushed to the margins. ..."
"... Our starting point is a post on Unlearning Economics, dated March 5, which argues that the flaws of mainstream economics contribute to lousy policy on several fronts: downplaying the role of monopoly, cheerleading for the shareholder value imperative in the corporate world, knee-jerk support for trade agreements under the banner of comparative advantage, and regressive macroeconomic policy, among others. A particularly pointed paragraph brought up the Reinhart-Rogoff 90% affair and accused the economics profession of dereliction of duty by not taking action to rebuke the wrongdoers: ..."
"... Simon Wren-Lewis responded by arguing that UE has it exactly backwards. Restricting himself to UE's critique of macroeconomics, SWL says, yes, reactionary politicians have invoked "economics" to support austerity, but "real" economists for the most part have not gone along. True, there were a few, like Reinhart and Rogoff and those in the employ of the British financial sector ("City economists") who took a public stand against sensible Keynesian policies in the wake of the financial crisis, but they were a minority, and, in any case, what would you want to do about them? Economists, like professionals in any field, will disagree sometimes, and having a centralized agency to enforce a false consensus would ultimately work against progressives and dissenters, not for them. Let's put the blame where it really belongs, says SWL-on the politicians and pundits who have brushed aside decades of theoretical and empirical work to promulgate a reactionary, fact-free discourse on economic policy. ..."
Mar 28, 2017 | economistsview.typepad.com
JohnH -> Peter K.... March 27, 2017 at 06:51 PM

So true; "SWL has never addressed what is happening in the real world."

And that's the reason UK economics students revolted: "Few mainstream economists predicted the global financial crash of 2008 and academics have been accused of acting as cheerleaders for the often labyrinthine financial models behind the crisis. Now a growing band of university students are plotting a quiet revolution against orthodox free-market teaching, arguing that alternative ways of thinking have been pushed to the margins.

Economics undergraduates at the University of Manchester have formed the Post-Crash Economics Society, which they hope will be copied by universities across the country. The organisers criticise university courses for doing little to explain why economists failed to warn about the global financial crisis and for having too heavy a focus on training students for City jobs."
https://www.theguardian.com/business/2013/oct/24/students-post-crash-economics

pgl is a classic example. He regularly preaches what theory says but is clueless to explain what's really happening.

Peter K. , March 27, 2017 at 07:20 AM
I like Peter Dorman much, much better than PGL. He always has interesting things to say. Here he stays on topic, unlike PGL.

http://econospeak.blogspot.com/2017/03/economics-part-of-rot-part-of-treatment.html

SUNDAY, MARCH 26, 2017

Economics: Part of the Rot, Part of the Treatment, or Some of Each?

Is mainstream economics, with its false certitudes and ideological biases, one of the reasons for the dismal state of policy debate in countries like the UK and the US, or are its rigorous methods an important antidote to the ruling political foggery? That's being debated right now, live online.

Our starting point is a post on Unlearning Economics, dated March 5, which argues that the flaws of mainstream economics contribute to lousy policy on several fronts: downplaying the role of monopoly, cheerleading for the shareholder value imperative in the corporate world, knee-jerk support for trade agreements under the banner of comparative advantage, and regressive macroeconomic policy, among others. A particularly pointed paragraph brought up the Reinhart-Rogoff 90% affair and accused the economics profession of dereliction of duty by not taking action to rebuke the wrongdoers:

Where was the formal, institutional denunciation of such a glaring error from the economics profession, and of the politicians who used it to justify their regressive policies?

UE's conclusion is that mainstream economics needs to be taken down several notches, which would open more space for alternative approaches to economics and, indeed, alternative approaches to policy that place more weight on human outcomes, broadly understood, than the formalistic criteria of efficiency, etc.

Simon Wren-Lewis responded by arguing that UE has it exactly backwards. Restricting himself to UE's critique of macroeconomics, SWL says, yes, reactionary politicians have invoked "economics" to support austerity, but "real" economists for the most part have not gone along. True, there were a few, like Reinhart and Rogoff and those in the employ of the British financial sector ("City economists") who took a public stand against sensible Keynesian policies in the wake of the financial crisis, but they were a minority, and, in any case, what would you want to do about them? Economists, like professionals in any field, will disagree sometimes, and having a centralized agency to enforce a false consensus would ultimately work against progressives and dissenters, not for them. Let's put the blame where it really belongs, says SWL-on the politicians and pundits who have brushed aside decades of theoretical and empirical work to promulgate a reactionary, fact-free discourse on economic policy.

Yes-but, adds Brad DeLong. He largely agrees with SWL, but delves more deeply into the Reinhart-Rogoff affair. He shows that, even without the famed Excel glitch, a cursory look would reveal that R-R were trumpeting nonexistent results:

So the R-R claim that fiscal consolidation was necessary and urgent was unfounded from the get-go, and these two were both respected mainstream economists, so what can we infer? DeLong's takeaway is that economists do need to recognize that they operate in a political environment (the sewers of Romulus) in which their work will be seized upon by interested groups, with real practical outcomes. In this situation, the profession as a whole has a responsibility to assess high profile but dubious work. Although he isn't explicit, my reading is that DeLong wants some sort of professional quality control, but not institutionalized in the way UE seems to call for.

...

[Mar 28, 2017] Trumpism is faux populism that appeals to white identity but actually serves plutocrats. That fundamental contradiction is now out in the open

Mar 28, 2017 | economistsview.typepad.com
DeDude , March 27, 2017 at 08:35 AM
This is an excellent discussion of populism and where Trump support comes from.

http://www.vox.com/conversations/2017/3/27/15037232/trump-populist-appeal-culture-economy

Peter K. -> DeDude... , March 27, 2017 at 08:39 AM
"Why Trump's populist appeal is about culture, not the economy"

Nope. Vox and the center-left are really pushing this propaganda for obvious reasons.

It's funny that even Sanjait and PGL disagree. Even funnier still that they refuse to talk about it!

Don't want to give the hippies ammunition when your job is to punch the hippies. Here's the blog post from Krugman on the same subject which they didn't want to talk about:

"This ties in with an important recent piece by Zack Beauchamp on the striking degree to which left-wing economics fails, in practice, to counter right-wing populism; basically, Sandersism has failed everywhere it has been tried. Why?

The answer, presumably, is that what we call populism is really in large degree white identity politics, which can't be addressed by promising universal benefits. Among other things, these "populist" voters now live in a media bubble, getting their news from sources that play to their identity-politics desires, which means that even if you offer them a better deal, they won't hear about it or believe it if told. For sure many if not most of those who gained health coverage thanks to Obamacare have no idea that's what happened.

That said, taking the benefits away would probably get their attention, and maybe even open their eyes to the extent to which they are suffering to provide tax cuts to the rich.

In Europe, right-wing parties probably don't face the same dilemma; they're preaching herrenvolk social democracy, a welfare state but only for people who look like you. In America, however, Trumpism is faux populism that appeals to white identity but actually serves plutocrats. That fundamental contradiction is now out in the open."

Populism and the Politics of Health by Krugman

https://krugman.blogs.nytimes.com/2017/03/14/populism-and-the-politics-of-health/

[Mar 27, 2017] As soon as any intelligence agency becomes a political player this means effective end of any, even traditional the USA form of façade-based , two party oligarchical rule called democracy

Notable quotes:
"... Actually "after 9/11" national security state is already a huge step forward in this direction, so we are almost arrived at the point when the USA democratic "façade" became Potemkin village for tourists. ..."
"... That's essentially the difference between "surface state" and the "deep state" that is now actively discussed in the USA due to attempt of color revolution against Trump with intelligence agencies and FBI coming out as political players. ..."
"... And as soon as any intelligence agency becomes a political player this means effective end of any, even traditional the USA form of "façade-based", two party oligarchical rule called "democracy." ..."
Mar 27, 2017 | economistsview.typepad.com

libezkova -> im1dc... March 26, 2017 at 07:58 PM

"That's European History not ours"

Hardly so.

Legitimacy of the US "democratic" governance can survive only as long as:

  1. 1. People of America had an expectation that if they work hard they can gain a better life. This is not true now for the majority (say, lower 80%) of population.
  2. 2. Or at least that their children could gain that better life, if they get some college degree and work hard. This is also not true now for majority of graduates. Only those, who graduates at the top of the class, or from Ivy League universities can expect to get decent positions. Most graduation are happy to land at helpdesk, doing job that does not require any college education, because it is better then being a waiter.

IMHO, if neither (1) not (2) are applicable the legitimacy of the democratic government evaporates.

And that creates favorable condition for the transition to the dictatorship in some form.

Actually "after 9/11" national security state is already a huge step forward in this direction, so we are almost arrived at the point when the USA democratic "façade" became Potemkin village for tourists.

That's essentially the difference between "surface state" and the "deep state" that is now actively discussed in the USA due to attempt of color revolution against Trump with intelligence agencies and FBI coming out as political players.

And as soon as any intelligence agency becomes a political player this means effective end of any, even traditional the USA form of "façade-based", two party oligarchical rule called "democracy."

That's a dictatorship: a form of government where a country is ruled by one person or by one or several non-elected political agencies (like the Communist Party, or STASI). And were the power is exercised through mechanisms that are completely outside the control of electorate.

If somebody here tells that Comey, or in the past Clapper and Michael Morell, were not a political players in this presidential cycle, the danger is that half of Mexico and Canada readers of this blog can die laughing.

[Mar 26, 2017] Next AEA meeting should be held in Youngstown so economists can admire the fruit of their labors

Mar 26, 2017 | economistsview.typepad.com
xxx , March 26, 2017 at 07:58 AM
Next American Economics Association meeting should be held in Youngstown so economists can admire the fruit of their labors. See all the destroyed buildings, the raging heroin epidemic and mass poverty your support of de-industrialization and free trade brought to America.

Every regional meeting should be held in any number of America's thousands of destroyed dilapidated cities - E. St. Louis, Rochester, Cleveland, Greensboro NC, San Bernadino - there are so many de-industrialized ghettoes from which to choose!

Tom aka Rusty -> Next AEA meeting should be held in Youngstown so economists can admire the fruit of their labors... , March 26, 2017 at 09:41 AM
I've been recommending Detroit for years.

libezkova -> Tom aka Rusty ... March 26, 2017 at 03:34 PM

That might not help. Those guy have no morals. Simply none. Nothing is left from 10 commandment in their brains. They have only "Greed is good" etched in it.

Just look at Mankiw. Noting can stop him from cashing in on all this neoclassical crap.

Or, for a change, Krugman's behavior during elections. What a despicable neoliberal stooge he proved to be. His dirty attacks on Sanders should probably be re-printed as a leaflet and distributed nationwide -- as a warning.

It is so difficult to understand that "when nothing left on the left, working class and lower middle class turns to far right." ?

What a despicable stooge of financial oligarchy. Another Rubin's boy, much like Summers...

And now he has the audacity to criticize Trump, the person he was working to put in power for more then a decade. I do not defend Trump, but it is important to ask a simple question: Are the members of the criminal Clinton gang (who essentially practiced racketeering via Clinton Foundation) and "over-connected" to intelligence services Obama paragons of virtue?

Are they conceptually any different from Trump ?

In the past they practices the same dirty neoliberal tricks as Trump tying to squeeze the majority of population in favor of financial oligarchy (Obama "non-prosecution" after 2008 is a telling example, and shows who he really is), but probably with more polish and better PR. That's the only difference.

http://www.salon.com/2013/03/09/the_world_according_to_milton_friedman_partner/

== quote ==

Discussions of neoliberalism, on both the left and the right, suffer from what Paul Krugman and others have called "zombie" ideas. These are economic concepts that have been long discredited, but continue to shamble on. On the right, a central zombie idea is that reduced state regulation of markets leads to sustainable economic growth. If you believe this, then the rise of neoliberalism is a no-brainer.

Neoliberalism is simply the economic philosophy that works. But why should anyone believe this?

The idea that unleashing free markets then leads to good economic times should never have survived the Great Depression, and should surely be killed for good by the Great Recession and its aftermath.

[Mar 26, 2017] There is no such thing as a "natural rate of interest"

Mar 26, 2017 | economistsview.typepad.com
RGC , March 26, 2017 at 07:06 AM
In short, there is no such thing as a "natural rate of interest".

........................

What then? It is difficult to say, exactly, whether the prevalent confusions are the result of sloppy thinking, an incoherent textbook pedagogy, or a deliberate desire to cover for the Federal Reserve and to obstruct potential criticism of the independent central bank. As a next step, let us ask: is there a better theory of interest rates out there, somewhere in the great work of the economists?

In the CEA paper, as in most of this so-called literature, the 20th century British economist John Maynard Keynes is not cited. Yet it is a fact that Keynes did write an influential book with the word "Interest" in the title. It was called The General Theory of Employment Interest and Money, published in 1936. In which Keynes states, of the classical theory of interest – that theory of loanable funds overlying a natural rate – that his own analysis "will have made it plain that this account of the matter must be erroneous" (p. 177). Perhaps it is worthwhile to seek Keynes's counsel at this point?

Keynes's theory of interest does not rest on the capital stock. And in Keynes as in the real world, there is no "capital market" that equates household saving with business investment.

Instead, Keynes's theory of interest is about the market for money – a market that definitely does exist in the real world. He wrote: "The rate of interest is not the 'price' which brings into equilibrium the demand for resources to invest with the readiness to abstain from consumption. It is the 'price' which equilibrates the desire to hold wealth in the form of cash with the available quantity of cash" (p. 167). In other words, interest rates are a portfolio issue. They are determined in the money markets, by how – in what form – people with wealth choose, at any given time, to hold that wealth. You pay interest, in order to get people to hold their wealth in less-liquid forms, such as bonds – and this is what provides firms with a secure source of financing, which then permits them to invest.

Keynes's theory of interest is the pure common sense of how financial markets work. So why is it treated, by our leading liberal economists, as though it didn't exist? Why all this confusing folderol about natural and neutral rates? The apparent answer is damning. In the theories our economists like, a technical theory of interest creates a technical theory of income distribution, since interest rates govern the incomes of creditors against debtors, of the rich against the poor, of profits against wages. Thomas Piketty's recent book is a nice instance of this point, with its argument that the great inequalities of capitalism are due to interest rates higher than the rate of economic growth. If interest somehow reflects the physical productivity of the capital stock, then the consequences may be unfortunate – but they are inevitable and not something of which it is proper to complain.

http://www.paecon.net/PAEReview/issue78/Galbraith78.pdf

RGC -> RGC... , March 26, 2017 at 07:39 AM
"Why all this confusing folderol about natural and neutral rates? The apparent answer is damning. In the theories our economists like, a technical theory of interest creates a technical theory of income distribution, since interest rates govern the incomes of creditors against debtors, of the rich against the poor, of profits against wages..........If interest somehow reflects the physical productivity of the capital stock, then the consequences may be unfortunate – but they are inevitable and not something of which it is proper to complain."

[Is that clear enough?......Galbraith is accusing mainstream economists of acting as apologists for rentiers.]

[Mar 26, 2017] They are an American Taliban: I have never read such a vitriolic comments section. Lots of Americans a seething mad.

Notable quotes:
"... The GOP and this administration are overwhelmingly self-avowed Christians yet they try to deny the poor to benefit the rich. This is not Christian but evil pure and simple. ..."
"... They are an American Taliban, just going about their subversion in a less overtly violent way. ..."
"... Much like Russian people viewed the country under Bolshevism, outside of brief WWII period. That's probably why we have Anti-Russian witch hunt now. To stem this trend. But it is the US neoliberal elite, not Russians, who drive the country to this state of affairs. By spending God knows how many trillions of dollar of wars of neoliberal empire expansion and by drastic redistribution of wealth up. And now the majority of citizens is facing substandard medical care, sliding standard of living and uncertain job prospects. ..."
"... US elections have been influenced by anyone with huge money or oil since the Cold War made an excuse for the US' trade empire enforced by half the world's war spending. ..."
"... The fake 'incidental' surveillance of other political opponents is a gross violation of human rights and the US' Bill of Rights. ..."
"... The disloyal opposition and its propagandists are running Stalin like show trails in their media... ..."
Mar 26, 2017 | economistsview.typepad.com
reason , March 25, 2017 at 03:01 PM
I just read this:

https://www.washingtonpost.com/news/wonk/wp/2017/03/25/why-republicans-were-in-such-a-hurry-on-health-care/?utm_term=.590e103e2761

I have never read such a vitriolic comments section. Lots of Americans a seething mad.

reason -> reason... , March 25, 2017 at 03:03 PM
By mad - I mean angry. And at the Republican party more than Trump.
libezkova -> reason... , March 25, 2017 at 05:10 PM
I like the following comment:

Farang Chiang Mai, 7:39 PM EDT

The GOP and this administration are overwhelmingly self-avowed Christians yet they try to deny the poor to benefit the rich. This is not Christian but evil pure and simple.

I would love to see this lying, cheating, selfish, crazy devil (yeah, I know I sound a bit OTT but the description is fact based) of a president and his enablers challenged on their Christian values.

They are an American Taliban, just going about their subversion in a less overtly violent way.

libezkova -> libezkova... , March 25, 2017 at 05:31 PM
An interesting question arise:

Are the people who consider our current rulers to be "American Taliban" inclined to become "leakers" of government activities against the citizens, because they definitely stop to consider the country as their own and view it as occupied by dangerous and violent religious cult?

Much like Russian people viewed the country under Bolshevism, outside of brief WWII period. That's probably why we have Anti-Russian witch hunt now. To stem this trend. But it is the US neoliberal elite, not Russians, who drive the country to this state of affairs. By spending God knows how many trillions of dollar of wars of neoliberal empire expansion and by drastic redistribution of wealth up. And now the majority of citizens is facing substandard medical care, sliding standard of living and uncertain job prospects.

ilsm -> libezkova... March 26, 2017 at 05:42 AM

I see the angst over Sessions talking to a Russia diplomat twice as a red herring.

US elections have been influenced by anyone with huge money or oil since the Cold War made an excuse for the US' trade empire enforced by half the world's war spending.

The fake 'incidental' surveillance of other political opponents is a gross violation of human rights and the US' Bill of Rights.

The disloyal opposition and its propagandists are running Stalin like show trails in their media.....

[Mar 26, 2017] The story of working class and lower middle class turning to the far right for help after financial oligarchy provoke a nationwide crisis and destroy their way of life and standards of living is not new

Mar 26, 2017 | economistsview.typepad.com
libezkova , March 26, 2017 at 04:03 PM
Trump victory was almost 30 years in the making, and I think all presidents starting from Carter contributed to it.

Even if Hillary became president this time, that would be just one term postponement on the inevitable outcome of neoliberal domination for the last 30 years.

I think anybody with dictatorial inclinations and promise to "drain the swamp" in Washington, DC now has serious changes on victory in the US Presidential elections. So after Trump I, we might see Trump II.

So it people find that Trump betrays his election promised they will turn to democratic Party. They will turn father right, to some Trump II.

Due to economic instability and loss of jobs, people are ready to trade (fake) two party "democracy" (which ensures the rule of financial oligarchy by forcing to select between two equally unpalatable candidates) that we have for economic security, even if the latter means the slide to the dictatorship.

That's very sad, but I think this is a valid observation. What we experience is a new variation of the theme first played in 1930th, after the crash of 1928.

The story of working class and lower middle class turning to the far right for help after financial oligarchy provoke a nationwide crisis and destroy their "way of life" and standards of living is not new. In 1930th the US ruling class proved to be ready to accept the New Deal as the alternative. In Germany it was not.

Please read

https://en.wikipedia.org/wiki/National_Socialist_Program

to understand that.

Now the neoliberal oligarchy wants to go off the cliff with all of us, as long as they can cling to their power.

[Mar 26, 2017] In addition to the public option and age 55+ Medicare buy-in, one thing that might work is abollishing the mandate and penalty and replaciing them with automatic enrollment. Call it Youre employed, youre covered!

Mar 26, 2017 | economistsview.typepad.com
New Deal democrat -> Lee A. Arnold ...

One issue going forward is whether the Dems should offer their own plan. I think they should.

As a few others have pointed out, Trump is not wedded to the GOP establishment. If he thinks he can "WIN bigly!" by allying with Dems, he will do so. I happen to think that he is mainly against "Obamacare" because Obama humiliated him at the White House Correspondents' Dinner once upon a time, and he is nothing if not vengeful. He wants to obliterate Obama's legacy.

So Dems need to make a big stink any time Trump administrativley undercuts Obamacare provisions to try to make it fail. But also they should give him the chance to do something he can call Trumpcare that actually works.

Obamacare does have some major problems (the individual mandate is hated, and the penalty isn't big enough. More young people need to buy in. Some of the Exchanges and health care provider networks are too narrow.

In addition to the "public option" and age 55+ Medicare buy-in, one thing that might work is abollishing the mandate and penalty and replaciing them with automatic enrollment. Call it "You're employed, you're covered!"

Just like SS, Medicare, unemployment and disability deductions to paychecks, establish a Health Care automatic deductible. If your employer offers healthcare, the deductible is reduced by the amount of the premium, all the way to zero if applicable.
If your employer doesn't offer healthcare, if you are under age 40, you are automatically enrolled in the least expensive Bronze plan in your state. If you are 40 or older, you are automatically enrolled in the least expensive Silver plan in your state.

The deductible would also include a small contribution towards Medicaid. Then, if you are unemployed, you are automatically enrolled in Medicaid, but can continue with the silver or bronze plan as above if you choose.

Dems could turmpet such a plan to "Reform and Improve" Obamacare, and campaign on pushing for it if they get a Congressional majority. Call it Trumpcare and President Caligula might sign on.

Reply Saturday, March 25, 2017 at 07:35 AM Lee A. Arnold , March 25, 2017 at 04:48 AM
"Medicare for all" may be the best battle cry. 65-70% of the U.S. people want a single-payer. Bernie Sanders has effectively destroyed the old Democratic Party and sits in a commanding position as spokesman, he gets 6 TV cameras with an hour's notice and he is probably the most popular politician in the U.S. The Democrats don't have to push it for now, they can wait for news to develop. This is all on the Republicans. Let the managerial disaster of Trump and the utter immorality of the "Freedom Caucus" sink in a little more, this story has "legs" as they say in show biz.
mulp -> Lee A. Arnold ... , March 25, 2017 at 04:48 AM
Name the Senators, representatives, and governors Bernie Bros have delivered?

Where are the Bernie Bros Newts, Cruz, Marcos, ...?

I'm in my 70th year. Conservatives attacked liberals in the 60s, my youth, as promising free lunches to gain power. But what they really hated was liberals convinced voters to tax all voters to pay for the things most voters wanted everyone to have, BASED ON SOUND ECONOMICS TO MAXIMIZE EFFICIENCY AND WELFARE.

Friedman led the effort to distort theory to eliminate the broad meaning of general welfare in economics. He did it by eliminating the hard connection between labor cost and gdp. He argued that labor costs and consumption can be cut to increase profits, and that contrary to theory, higher profits is more efficient.

Laffer applied operations theory to taxes, as if government was taxing to maximize profits.

Thus supply side theory of profit maximization. The result delivered was the imperative to cut taxes. To cut labor costs. Thus they argued that every economic measure improves if taxes and wages are cut.

Reaganomics would deliver more stuff at lower cost, higher profut, and that makes everyone better off, especially those in poverty. Friedman saw consumption as a bad thing. He wanted higher gdp, less consumption. In other words, he rewrote Adam Smith attack on mercantile economics into a justification of returning to mercantile economic policy.

So, who do Bernie Bros offer as the Milton Friedman and Laffer to create an intellectual foundation to refute Adam Smith, FDR, Keynes, Galbraith, are return to hunter gatherer economics? Who is the economist who can convince us that Marxist economic theory will work, as long as it's not captured by right wing capitalists like Fidel Castro, Chavez, Stalin, Lenin, the founders of Israel, ....

Bernie certainly must be influenced by the same economic theory that created Israel. It grew from the same Marxist roots in Germany that powered Stalin and Lenin. Bernie is a pre-WWII Zionist as best I can tell.

Why wouldn't Bernie deliver Israel governance to the US? How would he prevent the greedy from joining the Movement?

And Israel has the social welfare state system Bernie wants. Hundreds of thousands of men do not work so they can study supported by welfare. Universal health care. Women are very equal in status.

I grew up heating the Zionist Dream, theory, much like Bernie did, but from conservative Indiana. Seemed very idealist virtue becoming reality in the 50s and 60s. I have often used Israel as the example of a good universal health care system, of education, of welfare. Never heard Bernie say, "I want the US to be like Israel." Why not? Why Sweden?

jonny bakho , March 25, 2017 at 04:54 AM
Frank is wrong. What the GOP establishment dislikes most about Obamacare is the taxes on the wealthy. Medicare for all would have to be paid for by taxes on the wealthy or substantial payroll tax increases on the working class.
This does not meet GOP or Trump objectives for tax cuts on the wealthy.
The TV and radio talk uses Obamacare bashing to sell ads. They can easily change the subject to some other click bait.
Medicare for all? NaGonnaHappN
RC AKA Darryl, Ron -> jonny bakho... , March 25, 2017 at 05:14 AM
Frank was not suggesting that the GOP establishment would support Medicare for all. Frank was suggesting that Trump would essentially change parties to become a Democrat. As dubious as that notion is, more importantly it is premature. If Democrats win back both chambers of Congress, then it would at least be mechanically possible if still extraordinarily dubious. Mostly though Frank was just reaching for something worth saying. Now is a tuff time for commentary on the political economy.
Lee A. Arnold -> jonny bakho... , March 25, 2017 at 06:10 AM
Jonny Bakho: "Medicare for all would have to be paid for by taxes"

Theoretically you don't have to raises taxes if you get private insurers out of the game. They are a big expense, and give no value-added.

Doesn't mean that is politically possible, with Trump and a GOP Congress. But Trump and a Democratic Congress? I couldn't predict. Keep in mind that this man is almost an ideological vacuum, no managerial skills, has no constant concerns for anything except keeping himself in the spotlights, to be loved. And he just learned that the Freedom Caucus is implacably nuts.

RC AKA Darryl, Ron -> Lee A. Arnold ... , March 25, 2017 at 07:30 AM
"They are a big expense, and give no value-added."

[Someone has to do claims processing. The resistance against growing the federal payroll is an unnecessary hurdle for Medicare for all (MFA) to jump. Better administer it more like Medicaid. Let insurance companies handle the operations for a fee. Federal claim payments are handled on a pass thru. Then let the operational administration default to the MFA supplemental plan carrier if the insured has one, else the lowest cost carrier in the insured's state. For MFA clients then there could be a single claims process for providers even for patients with both MFA and MFA supplemental policies. That lowers the hurdle for MFA to leap over the insurance company lobby as well.]

RC AKA Darryl, Ron -> Lee A. Arnold ... , March 25, 2017 at 11:29 AM
Most of health insurance claims processing has been automated for a long time. Still it takes a lot of worker-hours to reconcile the errors.

Imagine how many worker hours it will take to reconcile liabilities for the first multi-car multi-fatality pile up of robot cars on the LA freeway. It will not matter that in total there have been less collisions and less fatalities when the big one hits. Computers are incapable of intuitive judgement which leads to blunders of potentially a colossal scale occurring that could have easily been foreseen by a human. To err is human but it takes a computer to really screw things up beyond all recognition. It is just a matter of time and time is always on Murphy's (that which can go wrong will go wrong) side. I know that myths about computers that never make mistakes and never need to be programmed again abound and I am sure that they will still be with us 20,000 years from now, when we are not even in any memory banks. I spent my entire career about to be replaced by software, but I was finally laid off because of administrative concerns with regards to legacy managed employees in context of the re-compete of the NG/VITA outsourcing contract (which is far less catchy). Computers have the potential to speed transit and reduce fatalities, but that potential will not be permanently realized as long as people are intent upon removing all human control and intervention. Computers can be capable copilots under almost all circumstances, but their owners cannot weather the fallout from their inability to conceive a response on their own when confronted with conditions that they were not programmed for. Such dramatic consequences will eventually raise a great furor, horror, deep sorrow, and extensive liability concerns. Even if you could sue a computer it is unlikely that they could demonstrate the means to pay. Incarceration of a computer for criminal negligence seems a bit ludicrous as well. The owner of the offending property better have their insurance premiums all paid up, but what then? Who will insure the next owner? Advocates of computer driven cars are planning on no fault insurance being mandated in each and every state. Good luck with that.

My wife works for Anthem although not in claims processing. She used to work in membership which is also automated. Software developers for health insurance mostly use Agile methods. One facet of that is that they only expect automation to handle roughly 90% (ideally more) of the workload because they have learned that there will never be a no defects computer system and they are saving expensive labor time in development by allowing lower paid workers to pick up a lot of the more complicated cases manually. That reduces time spent in the iterative process of testing and correcting defects. I am sure that you remember the problems with the ACA's automated insurance membership market. Stuff happens all the time in IT.

It is not that I had to work in IT for 47 years to understand the limitations. Merely my childhood education on the mathematical system of logic that underlies their circuitry and programming would have been sufficient, but a bit of empirical confirmation never hurts. Understanding reality is unfortunately a pre-requisite, but once that is accomplished then there are great opportunities to achieve improved results. Computers are not the problem, but can often be an essential part of the solution rather than a faceless soulless panacea. Does not compute can happen anywhere, but worse though when it happens at 75 MPH.

Lee A. Arnold -> mulp... , March 25, 2017 at 11:27 AM
Every serious study that looks at current costs in the multipayer healthcare insurance concludes that moving to single-payer will save 15-20% of total spending. Here is yet another one:
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4283267/
RC AKA Darryl, Ron -> Lee A. Arnold ... , March 25, 2017 at 11:40 AM
There is nothing about that paper that would not hold true or even truer of a two tiered system of Medicare for all with administrative processing collocated with the supplemental insurer whenever there is one. Just do a work flow model and note how many steps are cut out at each the provider and insurer if primary and secondary coverage administrative processing for membership, claims, and policy holder services are collocated.
RGC -> jonny bakho... , March 25, 2017 at 11:40 AM
Government Funds 60% of U.S. Healthcare Costs - Far Higher than Previously Believed

"We Pay for National Health Insurance but Don't Get It"

"Universal coverage is affordable - without a big tax increase," continued Dr. Himmelstein. "Because taxes already fund 60% of health care costs, a shift about the size of the recent tax cut ($130 billion a year) from private funding to public funding would allow us to cover all the uninsured and improve benefits for everyone else. Insurers/HMOs and drug companies buy-off our politicians with huge campaign contributions and hordes of lobbyists."


http://www.pnhp.org/news/2002/july/government_funds_60.php

RGC -> Chris G ... , March 25, 2017 at 08:04 AM
Beyond the Affordable Care Act: A Physicians' Proposal for Single-Payer Health Care Reform

During a transition period, all public funds currently spent on health care – including Medicare, Medicaid, and state and local health care programs – would be redirected to the unified NHP budget. Such public spending – together with tax subsidies for employer-paid insurance and government expenditures for public workers' health benefits – already accounts for 60% of total U.S. health expenditures.28 Additional funds would be raised through taxes, though importantly these would be fully offset by a decrease in out-of-pocket spending and premiums.

http://www.pnhp.org/nhi

RGC -> RC AKA Darryl, Ron... , March 25, 2017 at 08:04 AM
Is Donald Trump still 'for single-payer' health care?


"Perry said Trump is "for single-payer health care."


Fifteen years ago, Trump was decidedly for a universal healthcare system that resembled Canada's system, in which the government pays for care for all citizens.

Recently, he's said he admires Scotland's single-payer system and disses the Affordable Care Act as incompetently implemented.

However, a Trump spokesman denied that the candidate supported "socialized medicine" and suggested Trump prefers a "free-market" solution. Other than that, though, the Trump campaign has been silent about what his specific health care policies are; perhaps Trump will be pressed on this point during the Aug. 6 debate.

Given the current evidence, Perry's attack is partially accurate, but leaves out details. We rate the statement Half True.

http://www.politifact.com/truth-o-meter/statements/2015/aug/02/rick-perry/donald-trump-still-single-payer-health-care/

[Mar 26, 2017] The good news is they now own health care. They now own Obamacare said Trump

Mar 26, 2017 | economistsview.typepad.com
Fred C. Dobbs , March 25, 2017 at 07:35 AM
In a Call to The Times, Trump Blames Democrats for the
Failure of the Health Bill https://nyti.ms/2nNPHD9
NYT - MAGGIE HABERMAN - MARCH 24, 2017

WASHINGTON - Just moments after the Republican plan to repeal and replace the Affordable Care Act was declared dead, President Trump sought to paint the defeat of his first legislative effort as an early-term blip.

The House speaker, Paul D. Ryan, was preparing to tell the public that the health care bill was being withdrawn - a byproduct, Mr. Trump said, of Democratic partisanship. The president predicted that Democrats would return to him to make a deal in roughly a year.

"Look, we got no Democratic votes. We got none, zero," Mr. Trump said in a telephone interview he initiated with The New York Times.

"The good news is they now own health care. They now own Obamacare."

Mr. Trump insisted that the Affordable Care Act would collapse in the next year, which would then force Democrats to come to the bargaining table for a new bill.

"The best thing that can happen is that we let the Democrats, that we let Obamacare continue, they'll have increases from 50 to 100 percent," he said. "And when it explodes, they'll come to me to make a deal. And I'm open to that."

Although enrollment in the Affordable Care Act declined slightly in the past year, there is no sign that it is collapsing. Its expansion of Medicaid continues to grow.

In a later phone interview with The Times, the Senate minority leader, Chuck Schumer, ridiculed Mr. Trump's remarks about Democrats being at fault.

"Whenever the president gets in trouble, he points fingers of blame," Mr. Schumer said. "It's about time he stopped doing that and started to lead. The Republicans were totally committed to repeal from the get-go, never talked to us once. But now that they realize that repeal can't work, if they back off repeal, of course we'll work with them to make it even better."

Mr. Trump said that "when they come to make a deal," he would be open and receptive. He singled out the Tuesday Group moderates for praise, calling them "terrific," an implicit jab at the House Freedom Caucus, which his aides had expressed frustration with during negotiations. ...

Fred C. Dobbs -> Fred C. Dobbs... , March 25, 2017 at 08:02 AM
On health-care, as on so much else,
President Trump passes the buck, reports
https://www.theatlantic.com/politics/archive/2017/03/the-buck-doesnt-stop-here-anymore/520839/
The Atlantic - David A. Graham - March 24, 2017

Speaking in the Oval Office Friday afternoon, President Trump surveyed the wreckage of the Obamacare repeal effort and issued a crisp, definitive verdict: I didn't do it.

The president said he didn't blame Speaker Paul Ryan, though he had plenty of implied criticism for the speaker. "I like Speaker Ryan. He worked very hard," Trump said, but he added: "I'm not going to speak badly about anybody within the Republican Party. Certainly there's a big history. I really think Paul worked hard." He added ruefully that the GOP could have taken up tax-reform first, instead of Obamacare-the reverse of Ryan's desired sequence. "Now we're going to go for tax reform, which I've always liked," he said.

As for the House Freedom Caucus, the bloc of conservatives from which many of the apparent "no" votes on the Republican plan were to come, Trump said, "I'm not betrayed. They're friends of mine. I'm disappointed because we could've had it. So I'm disappointed. I'm a little surprised, I could tell you."

The greatest blame for the bill's failure fell on Democrats, Trump said.

"This really would've worked out better if we could've had Democrat support. Remember we had no Democrat support," Trump said. Later, he added, "But when you get no votes from the other side, meaning the Democrats, it's really a difficult situation."

He said Democrats should come up with their own bill. "I think the losers are Nancy Pelosi and Chuck Schumer, because they own Obamacare," he said, referring to the House and Senate Democratic leaders. "They 100 percent own it."

Trump was very clear about who was not to blame: himself. "I worked as a team player," the president of the United States said, demoting himself to bit-player status. He wanted to do tax reform first, after all, and it was still early. "I've been in office, what, 64 days? I've never said repeal and replace Obamacare within 64 days. I have a long time. I want to have a great health-care bill and plan and we will."

Strictly speaking, it is true that Trump didn't promise to repeal Obamacare on day 64 of his administration. What he told voters, over and over during the campaign, was that he'd do it immediately. On some occasions he or top allies even promised to do it on day 1. Now he and his allies are planning to drop the bill for the foreseeable future.

It is surely not wrong that there is lots of blame to go around. Congressional Republicans had years to devise a plan, and couldn't come up with one that would win a majority in the House, despite a 44-seat advantage. The House bill was an unpopular one, disliked by conservatives and moderates in that chamber; almost certainly dead on arrival in the Senate; and deeply unpopular with voters. Even before the vote was canceled, unnamed White House officials were telling reporters that the plan was to pin the blame on Ryan. ...

The Republicans fold and
withdraw their health-care bill https://www.theatlantic.com/politics/archive/2017/03/trump-republicans-failure-obamacare/520788/
The Atlantic - Russell Berman - March 24, 2017

... Defeat on the floor dealt Trump a major blow early in his presidency, but its implications were far more serious for the Republican Party as a whole. Handed unified control of the federal government for only the third time since World War II, the modern GOP was unable to overcome its internecine fights to enact a key part of its policy agenda. The president now wants to move on to a comprehensive overhaul of the tax code, but insiders on Capitol Hill have long believed that project will be an even heavier lift than health care.

As the prospect of a loss became more real on Friday, the frustrations of GOP lawmakers loyal to the leadership began to boil over. "I've been in this job eight years, and I'm wracking my brain to think of one thing our party has done that's been something positive, that's been something other than stopping something else from happening," Representative Tom Rooney of Florida said in an interview. "We need to start having victories as a party. And if we can't, then it's hard to justify why we should be back here."

Nothing has exemplified the party's governing challenge quite like health care. For years, Republican leaders resisted pressure from Democrats and rank-and-file lawmakers to coalesce around a detailed legislative alternative to Obamacare. That failure didn't prevent them from attaining power, but it forced them to start nearly from scratch after Trump's surprising victory in November. At Ryan's urging, the party had compiled a plan as part of the speaker's "A Better Way" campaign agenda. Translating that into legislation, however, proved a much stiffer challenge; committee leaders needed to navigate a razor's edge to satisfy conservatives demanding a full repeal of Obamacare and satisfy moderates who preferred to keep in place its more popular consumer protections and Medicaid expansion. They were further limited by the procedural rules of the Senate, which circumscribed how far Republicans could go while still avoiding a Democratic filibuster. ...

[Mar 26, 2017] Our constitutional dollar democracy with its gerrymandering, limitless congressional revolving doors, SCOTUS unanswerable to the electorate, and first past the post voting provides loads of punch lines, not the least of which is the de facto two party system itself. Two competitors is merely duopoly

Mar 26, 2017 | economistsview.typepad.com
RC AKA Darryl, Ron -> ilsm... , March 25, 2017 at 07:09 AM
There is more than one joke. Our constitutional dollar democracy with its gerrymandering, limitless congressional revolving doors, SCOTUS unanswerable to the electorate, and first past the post voting provides loads of punch lines, not the least of which is the de facto two party system itself. Two competitors is merely duopoly. It takes a minimum of three viable choices to have any returns from competition that are significant to the consumers' preferences. Two competitors merely play off each other in predictable and increasingly ossified patterns.
New Deal democrat -> RC AKA Darryl, Ron... , March 25, 2017 at 07:17 AM
One very big quibble: >>SCOTUS unanswerable to the electorate<<

As bad as the SCOTUS can be, it would be unimaginably worse if it were subject to elections.

The big problem is that the Founders did not imagine life expectancies into the 80s. Throughout the 19th Century, the median time on the bench was about 14 years, and about 1/3 of all Justices served less than 10 years -- they got sick or died. Now the median time on the bench is 25 years, which is totally unacceptable.

If SCOTUS terms were set at 18 years, with a new Justice appointed every 2 years, independence would be preserved without the imposition of the "dead hands." Emeritus Justices could continue to serve on the appellate courts, and provisions would have to be made for deaths or retirements during the 18 year terms, but you get the idea.

RC AKA Darryl, Ron -> New Deal democrat... , March 25, 2017 at 07:36 AM
I did not mean elections. One of my favorite planks of the 1912 Bull Moose Party was the right for popular petition and referendum to overturn an unpopular SCOTUS decision. Roe V. Wade could not be overturned by referendum (which some fear but votes are measured by heat count rather than audible volume). Citizen United would be overturned by referendum. I trust democracy more than most, but still I don't get silly about it.

OTOH, SCOTUS term limits are also a good idea.

RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , March 25, 2017 at 07:38 AM
"...heat count..."

[No, HEAD count. If votes were measured by heat count then Bernie Sanders would be POTUS now.]

[Mar 26, 2017] Democrats are a joke for refusing to sack a sclerotic, corrupt, and inept congressional leadership that had lost three straight elections

Mar 26, 2017 | economistsview.typepad.com
ilsm -> RC AKA Darryl, Ron... , March 25, 2017 at 09:06 AM
cnn resembles deep red tea party fox news..... and the run of the mill dems should fit their tri-corn hats
RC AKA Darryl, Ron -> ilsm... , March 25, 2017 at 09:37 AM
I will take your word for it. We don't watch either CNN nor Fox News at my house. Mostly we watch local (same news and weather crew here appears on each the WWBT/WRLH local NBC/Fox affiliates) news with some sampling of MSNBC and Sunday morning ABC and CBS shows along with the daily half hour of NBC network following the evening local. Cable news is sort of an oxymoron given the prevailing editorial slants. The now retired local TV news anchor Gene Cox laid the groundwork for the best news team in central VA by setting a high bar at his station. Gene laid it all out southern fried with satirical humor and honesty unusual in TV news.
RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , March 25, 2017 at 09:38 AM
Maybe more sarcasm than satire, but the point is the same - wit and honesty.
JohnH -> Chris G ... , March 25, 2017 at 07:52 AM
Apparently we have two jokes alternating to lead America: the Republican jokes vs. the Democratic jokes.

But Democrats are right to expect that, when two jokes vie for power, their turn as joke in power will eventually come.

JohnH -> mulp... , March 25, 2017 at 07:52 AM
Maybe a post mortem would simply reveal that Democrats should have had a coherent economic message and pursued a strategy of standing up for working America for the past 8 years. For example, having Pelosi demand votes on increasing the minimum wage as often as Ryan demanded votes on killing Obamacare...

Any honest post mortem would have revealed that standing with billionaires and the Wall Street banking cartel--and not prosecuting a single Wall Street banker--is not a winning strategy...

Chris G -> JohnH... , March 25, 2017 at 12:33 PM
That Pelosi did not resign immediately following the 2016 election or, not having offered her resignation, that Congressional Democrats did not demand it is an indication that the party still has deep-rooted problems. (Pelosi may not be the cause of those problems but given how badly they've fared since 2010 she's clearly not the solution. She has no business remaining as minority leader.) I'm fine with Perez as DNC chair but Ellison should be minority leader.

[Mar 26, 2017] Staggering cost of Finance Sector under neoliberalism

Notable quotes:
"... Originally published at the Tax Justice Network ..."
"... US finance sector is a net drag on their economy ..."
"... It is a cleverly worked out system for wealth transfer. Complex laws, political backing and protection even if you break the law. At least in the old days when you got robbed you had the signal of having a pistol pointed at you. The modern version, with all the insider media psyops, leaves those who are preyed upon feeling that they are the ones to blame. ..."
"... The business model is straight out of the Cosa Nostra playbook – except there is media, political and legal backing. ..."
"... As an Italian friend of mine (who rarely goes north of 14th Street) once remarked, "The difference between the Mafia and bankers is that the Mafia always leaves a few crumbs on the table." ..."
"... Did I hear that right – the private finance sector will have cost us (in the US) 23Tr$ by 2020. And from 1990 to 2005 big finance cost us (already) 14Tr in fees, pay, fraud, misallocation and lost productivity. Yet we continue to deregulate even though all governments know how destructive deregulated finance is. ..."
"... yes, the EU does seem to be hungry to grab up all that finance for itself I keep thinking about Schaeuble coming to NYC c2012 and holding an impromptu news conference wherein he said it was fine with him if some banks went down because "we are overbanked." But we do have to admit that "overbanked" is an understatement since there are no productive investments and it's just self-defeating. I mean, how long can this go on? ..."
"... I don't know, how much money do you have left? ..."
"... It pays to remember that prior to 2008, hot (sovereign state backed) money flowed unimpeded like water across all EU borders, regardless of regulation, in search of quick handsome and easy returns, and much of it from subsequently bailed out by the ECB backdoor major lenders in France and Germany lending recklessly to poorer EZ members. ..."
"... The lasting results of this and its hasty, damaging retreat and the inequitable socialisation of the debt across the EZ are, of course, still being felt today. ..."
"... One of the major causes of the financial crisis was lax global regulation period. So let's not kid ourselves that by removing the UK from the European Union equation it is suddenly going to render it a bastion of sound prudential banking practice, particularly given various members recent comments that they intend to do anything in their power to tempt a post Brexit UK's financial services at the earliest opportunity. ..."
"... I do subscribe to the belief that the UK financial services sector has been and still is toxic to its economy and long-term future, and without a doubt this informed the Brexit vote, albeit in some cases on a subconscious level. ..."
Mar 26, 2017 | www.nakedcapitalism.com
Posted on March 25, 2017 by Yves Smith Originally published at the Tax Justice Network

In our March 2017 Taxcast: the high price we're paying for our finance sectors – we look at staggering statistics showing how the US finance sector is a net drag on their economy .

Also, as the British government initiates Brexit divorce negotiations to leave the EU, we discuss something they ought to know, but obviously don't – they're actually in a very weak position. Could it mean the beginning of the end of the finance curse gripping the UK economy?

Featuring: John Christensen and Alex Cobham of the Tax Justice Network, and Professor of Economics Gerald Epstein of the University of Masachusetts Amhurst , author of Overcharged: The High Cost of High Finance . Produced and presented by Naomi Fowler for the Tax Justice Network.

Professor Gerald Epstein:

If you look at particular finance centres, say London and New York, the problem is that the net cost of this system is quite significant, it imposes a cost not only on people who use finance but for the whole economy. So, what we need to think about is what are the more productive activities that ought to be substituted for these excessive aspects of finance?

John Christensen, Tax Justice Network on Britain's weak position in Brexit negotiations:

We might be seeing the start of the end of Britain's grip by the Finance Curse

https://www.youtube.com/embed/E7oOiJl1n1I

Download the mp3 to listen offline anytime on your computer, mobile/cell phone or handheld device by right clicking here and selecting 'save link as'.

Want more Taxcasts? The full playlist is here .

Want to subscribe? Subscribe via email by contacting the Taxcast producer on naomi [at] taxjustice.net OR subscribe to the Taxcast RSS feed here OR subscribe to our youtube channel, Tax Justice TV OR find us on iTunes

skippy , March 25, 2017 at 3:01 am

Drag = Rentier = bottle neck economics which in the end becomes a death spiral due to lack of demand and jobs quality .

Si , March 25, 2017 at 3:45 am

It is a cleverly worked out system for wealth transfer. Complex laws, political backing and protection even if you break the law. At least in the old days when you got robbed you had the signal of having a pistol pointed at you. The modern version, with all the insider media psyops, leaves those who are preyed upon feeling that they are the ones to blame.

The business model is straight out of the Cosa Nostra playbook – except there is media, political and legal backing.

Genius.

Hayek's Heelbiter , March 25, 2017 at 6:14 am

As an Italian friend of mine (who rarely goes north of 14th Street) once remarked, "The difference between the Mafia and bankers is that the Mafia always leaves a few crumbs on the table."

Watt4Bob , March 25, 2017 at 11:00 am

"Wouldn't you rather give me my money, that you have in your pocket, rather than force me to take the pistol out of my pocket, and point it at you, and rob you, and become a criminal?"

As you can clearly see, the logic is flawless, we are all much better off acquiescing to the reasonable demands of the FIRE sector, the only alternative being an admission that we're in the clutches of a deeply organized criminal element.

susan the other , March 25, 2017 at 11:44 am

thanks for this Taxcast, very to the point.

Did I hear that right – the private finance sector will have cost us (in the US) 23Tr$ by 2020. And from 1990 to 2005 big finance cost us (already) 14Tr in fees, pay, fraud, misallocation and lost productivity. Yet we continue to deregulate even though all governments know how destructive deregulated finance is.

And we know that the US is the biggest and most secret tax haven of them all

The first part of Taxcast speculated that Brexit will actually free the UK from the stranglehold of big finance and the country will be able to move on to more productive economic activity. So let us hope the US comes to its senses – just as the EU has finally isolated the rot of UK finance, maybe the rest of the world will isolate us.

Regulation seems to be hand-in-glove with national sovereignty. Whereas globalized finance might have escaped national regulation bec. there was always a safe haven for banksters, now with a backlash of indignant people all over the world there will be re-regulation at national levels. Since there is no global authority that can do that yet. Anyway, now that economies are trashed, there is way too much hot money to find good investments. It has already become absurd.

Colonel Smithers , March 25, 2017 at 11:51 am

Thank you, Susan.

I would not be so hasty thinking that the EU(27) has finally isolated the rot of UK finance. Much of that finance was not UK, but using the UK. The EU(27) is no less corrupt than the UK and as susceptible to big finance's charms.

I worked as a lobbyist in Brussels (and Basel and DC) for years.

susan the other , March 25, 2017 at 12:31 pm

yes, the EU does seem to be hungry to grab up all that finance for itself I keep thinking about Schaeuble coming to NYC c2012 and holding an impromptu news conference wherein he said it was fine with him if some banks went down because "we are overbanked." But we do have to admit that "overbanked" is an understatement since there are no productive investments and it's just self-defeating. I mean, how long can this go on?

Watt4Bob , March 25, 2017 at 3:21 pm

I mean, how long can this go on?

I don't know, how much money do you have left?

Gman , March 25, 2017 at 6:25 pm

Great piece. Thank you.

I'm not sure I get the 'rules on financial services are different than other goods and services' line being peddled here though. Maybe in theory, but it's pretty much a moot point.

It pays to remember that prior to 2008, hot (sovereign state backed) money flowed unimpeded like water across all EU borders, regardless of regulation, in search of quick handsome and easy returns, and much of it from subsequently bailed out by the ECB backdoor major lenders in France and Germany lending recklessly to poorer EZ members.

The lasting results of this and its hasty, damaging retreat and the inequitable socialisation of the debt across the EZ are, of course, still being felt today.

One of the major causes of the financial crisis was lax global regulation period. So let's not kid ourselves that by removing the UK from the European Union equation it is suddenly going to render it a bastion of sound prudential banking practice, particularly given various members recent comments that they intend to do anything in their power to tempt a post Brexit UK's financial services at the earliest opportunity.

I do subscribe to the belief that the UK financial services sector has been and still is toxic to its economy and long-term future, and without a doubt this informed the Brexit vote, albeit in some cases on a subconscious level.

[Mar 25, 2017] stock, bond and commodities historical returns

Mar 25, 2017 | economistsview.typepad.com
im1dc :, March 25, 2017 at 10:40 AM
FYI

For those who may be interested in quality data at your fingertips for free

Some you know, some you may not

http://www.marketwatch.com/story/ben-carlson-my-12-favorite-and-free-websites-for-investing-information-and-tools-2017-03-24

"Ben Carlson: My 12 favorite (and free) websites for investing information and tools"

By Ben Carlson...Mar 25, 2017...9:39 a.m. ET

..."I get a lot of questions from readers asking what data sources or models I use. I've been building my own Excel models and formulas for a while and have access to a handful of professional subscription-based offerings. But you don't have to spend tens of thousands of dollars on historical data providers to access useful financial data in the internet age. There are plenty of useful free websites that have historical market data, back-testing tools, risk statistics and scenario analysis capabilities.

Here are some that I have found helpful over the years:

NYU's stock, bond and cash historical returns

NYU professor Aswath Damodaran uses this site to update the performance numbers for stocks (S&P 500 SPX, -0.08% ), bonds (10-year Treasuries) and cash (three-month T-bills) once a year. It shows the annual returns for these three asset classes going back to 1928. You can download an Excel file that contains historical interest rates, bond yields and dividend yields. I use these numbers frequently.

Portfolio Visualizer

This site has one of the best free asset allocation back-testing programs I've come across. There are probably 20-30 different asset classes and sub-asset classes you can back-test to the 1970s with historical returns, drawdowns, real (after-inflation) returns, and growth of your initial investment. This site enables you to perform Monte Carlo simulations on withdrawal strategies, correlation matrixes between different assets, risk factor analysis and back-test real world portfolios using actual mutual funds and ETFs. That this website is free is pretty remarkable.

Robert Shiller's online data

Shiller has one of the longest-running data sets I've seen. His famous CAPE spreadsheet has the monthly stock price, interest rate, earnings and dividend data from 1871. This site has his comprehensive real estate data on home prices from 100 years ago.

Twitter

People on social media love to complain about social media, but I find a ton of value in the information I receive from Twitter TWTR, +1.41% I'm constantly finding helpful research, graphs, data and analysis that I wouldn't be exposed to otherwise. Twitter is my go-to source for what's going on in the world of finance and the markets, along with under-the-radar research.

Fama-French

Ken French updates this site using much of the research he's done over the years with Eugene Fama. This one is a factor investing nerd's dream, although the site does take some time to figure out how to use efficiently (at least in my experience). French updates his data regularly with historical returns on factors such as small-cap stocks, value stocks, quality stocks and momentum stocks dating to the 1920s. This site has great data on sector and industry historical returns. All of the data are easily exportable to Excel.

Credit Suisse Global Investment Returns Yearbook

Researchers Elroy Dimson, Paul March and Mike Staunton update this report once a year with numbers on stocks, bonds and inflation going back to 1900 for a number of countries. It's worth going through the entire report at least once.

MSCI

MSCI provides the most comprehensive free source of historical market data on foreign stock markets. It has performance numbers dating to 1970 for different countries, regions and markets, both developed and emerging.

Abnormal Returns

The best curated content each and every day on investing, personal finance, research and anything else in the world of finance. If you miss anything worth reading, you can be sure it will be here.

Federal Reserve Economic Data (FRED)

Econ geeks love this site because the Federal Reserve has data on almost anything related to economics you can think of. There's also plenty of good market data on stocks, bonds and interest rates as well. And the site enables you to personalize the graphs and data sets.

Morningstar

I find that Morningstar MORN, -0.36% has the best data on mutual funds and ETFs for performance purposes. You can see annual returns going back 10 years, and monthly and quarterly returns going back five years. The company provides after-tax returns and fund behavior gaps, which I find really useful for seeing what investors are actually earning in these funds. You can find breakdowns of fund holdings, investment styles, geographic allocations and more.

Yahoo Finance

I like Yahoo YHOO, -0.43% Finance for daily historical data on stocks, interest rates and indexes. It has annual and quarterly performance numbers for mutual funds from inception, many of which give you decades of returns.

Portfolio Charts

This is another great asset allocation back-testing tool that enables you to see how a number of well-known portfolios have performed over the years. This site has the best visuals of any I've played around with. You can also stress-test a large number of asset classes and strategies.

And here are a few more I've used over the years:

[Mar 25, 2017] Like most integral metrics (and, especially, like GDP) productivity growth is very suspect. Its importance was artificially amplified under neoliberalism to the sacred cow status

Notable quotes:
"... The long term absence of convergence in productivity growth between developed and developing countries should be of considerable concern, but seems overlooked even in settings such as trade negotiations in which such concerns especially need to be addressed. ..."
"... You need to understand that like most "integral" metrics (and, especially, like GDP) productivity growth is very suspect. Its importance was artificially amplified under neoliberalism to the "sacred cow" status. ..."
"... While the strong earnings growth of US-based corporations might, at least partially, be real and not all accounting tricks, the question arise what part of those gains are coming from improvements in domestic productivity and what part from offshoring. ..."
"... Productivity growth is an important part of the system of neoliberal myths (along with "cult of GDP" ) and this mythology is directed at deceiving the public that it is indirectly benefitting from the neoliberal transformation of the society, while in reality we observe impoverishment of the majority of population. As in " The USA is the country with fastest productivity grown." Rejoice. ..."
Mar 25, 2017 | economistsview.typepad.com

anne -> anne... March 25, 2017 at 10:31 AM

The long term absence of convergence in productivity growth between developed and developing countries should be of considerable concern, but seems overlooked even in settings such as trade negotiations in which such concerns especially need to be addressed.

libezkova -> anne..., March 25, 2017 at 04:42 PM

Anne,

You need to understand that like most "integral" metrics (and, especially, like GDP) productivity growth is very suspect. Its importance was artificially amplified under neoliberalism to the "sacred cow" status.

Government bureaucrats also are afraid to tell the truth. Richard Benson , a well-known critic of government labor statistics, who wrote several insightful papers on the subject, noted "The BLS is mindful of how politically sensitive any reported job data is to the White House, so there is a strong bias for the government bureaucrats to publish a favorable jobs report."

One hidden fact is that it is offshoring that is the driver of corporate profits and it distorts "productivity" statistics.

While the strong earnings growth of US-based corporations might, at least partially, be real and not all accounting tricks, the question arise what part of those gains are coming from improvements in domestic productivity and what part from offshoring.

Rising stratification of the society also affects this metric (via the ratio of "have more" vs "have not")

Productivity growth is an important part of the system of neoliberal myths (along with "cult of GDP" ) and this mythology is directed at deceiving the public that it is indirectly benefitting from the neoliberal transformation of the society, while in reality we observe impoverishment of the majority of population. As in " The USA is the country with fastest productivity grown." Rejoice.

It is also simplifies the adoption of pro financial oligarchy policies masked with technocratic jargon -- policies that destroyed New Deal and hurt the majority of the population ("rising labor costs" is one such usage).

Adopting technocratic posture (economics like Boeing there by using certain controls you can change flight course) serves like anesthetic. Rephrasing Marx we can say "neoliberal economics is the opium for the people". And it is by design. which confirms the iron law of oligarchy in a very interesting, unexpected way.

That's why jargon use by priests of neo-classical economics is almost in-penetrable for an ordinary person. The well known neoliberal stooge Greenspan was a real master of it.

So the importance assigned to such measures as GDP and productivity is, to a certain extent, politically motivated.

For example, in the denominator we have all those hedge funds managers and other members of financial oligarchy bonuses, and top managers exorbitant remuneration within all kinds of firms (which definitely drives productivity growth down ;-)

In the numerator are military expenses and income of financial sector (and now another somewhat parasitic sector close to banking -- medical insurance industry).

Both are essentially money stolen from people and, to a certain extent, from "real" economy.

Of cause, not all money are wasted as military spending in addition to war for neoliberal empire expansion (and related loot) also employs a lot of people and fund fundamental research; the myth about innovation of Silicon Valley is partially a myth; in reality in many cases this is a direct transfer of technology from the military sector.

Among the examples are integrated circuits, laser, wireless, Internet, multiprocessing, etc; even some algorithmic languages :-).

So when you have such fuzzy numerator and denominator, the result is also fuzzy and all conclusions based on them might be not worth electrons with which they are depicted on our screens.

As I mentioned before, productivity should be somewhat inversely correlated with the oil price, as "amount of energy per worker" is what defines at the end worker's productivity (via the level of automation, mechanization of his work). That's were the USA strong (or week, if you wish) point is -- it has the largest consumption of energy per capita in the world. If we normalize productivity via per capita energy consumption we will get a more interesting picture.

[Mar 25, 2017] Its Not Just Unfair: Inequality Is a Threat to Our Governance

Notable quotes:
"... As recognized since ancient times, the coexistence of very rich and very poor leads to two possibilities, neither a happy one. The rich can rule alone, disenfranchising or even enslaving the poor, or the poor can rise up and confiscate the wealth of the rich. The rich tend to see themselves as better than the poor, a proclivity that is enhanced and even socially sanctioned in modern meritocracies. The poor, with little prospect of economic improvement and no access to political power, "might turn to a demagogue who would overthrow the government - only to become a tyrant. Oligarchy or tyranny, economic inequality meant the end of the republic." ..."
"... Some constitutions were written to contain inequalities. In Rome, the patricians ruled, but could be overruled by plebeian tribunes whose role was to protect the poor. There are constitutions with lords and commoners in separate chambers, each with well-defined powers. Sitaraman calls these "class warfare constitutions," and argues that the founding fathers of the United States found another way, a republic of equals. The middle classes, who according to David Hume were obsessed neither with pleasure-seeking, as were the rich, nor with meeting basic necessities, as were the poor, and were thus amenable to reason, could be a firm basis for a republic run in the public interest. There is some sketchy evidence that income and wealth inequality was indeed low in the 18th century, but the crucial point is that early America was an agrarian society of cultivators with an open frontier. No one needed to be poor when land was available in the West. ..."
"... Jefferson was proud of his achievement in abolishing the entail and primogeniture in Virginia, writing the laws that "laid the ax to the root of Pseudoaristocracy." He called for progressive taxation and, like the other founders, feared that the inheritance of wealth would lead to the establishment of an aristocracy. ..."
"... Madison tried to calculate how long the frontier would last, and understood the threat to the Constitution that industrialization would bring; many of the founders thought of wage labor as little better than slavery and hoped that America could remain an agrarian society. ..."
"... In perhaps the most original part of his book, Sitaraman, an associate professor of law at Vanderbilt Law School, highlights the achievements of the Progressive movement, one of whose aims was taming inequality, and which successfully modified the Constitution. There were four constitutional amendments in seven years - the direct election of senators, the franchise for women, the prohibition of alcohol and the income tax. To which I would add another reform, the establishment of the Federal Reserve, which provided a mechanism for handling financial crises without the need for the government to be bailed out by rich bankers, as well as the reduction in the tariff, which favored ordinary people by bringing down the cost of manufactures. Politics can respond to inequality, and the Constitution is not set in stone. ..."
"... It's interesting that the language of inequality is the language of technocrats, however worthy. It's a way to talk about the politics without referring to Marxist or populist/labor traditions which often involve social movements. ..."
Mar 25, 2017 | economistsview.typepad.com
anne : March 25, 2017 at 11:26 AM
https://www.nytimes.com/2017/03/20/books/review/crisis-of-the-middle-class-constitution-ganesh-sitaraman-.html

March 20, 2017

It's Not Just Unfair: Inequality Is a Threat to Our Governance
By ANGUS DEATON

THE CRISIS OF THE MIDDLE-CLASS CONSTITUTION
Why Economic Inequality Threatens Our Republic
By Ganesh Sitaraman

President Obama labeled income inequality "the defining challenge of our time." But why exactly? And why "our time" especially? In part because we now know just how much goes to the very top of the income distribution, and beyond that, we know that recent economic growth, which has been anemic in any case, has accrued mostly to those who were already well-heeled, leaving stagnation or worse for many Americans. But why is this a problem?

Why am I hurt if Mark Zuckerberg develops Facebook, and gets rich on the proceeds? Some care about the unfairness of income inequality itself, some care about the loss of upward mobility and declining opportunities for our kids and some care about how people get rich - hard work and innovation are O.K., but theft, legal or otherwise, is not. Yet there is one threat of inequality that is widely feared, and that has been debated for thousands of years, which is that inequality can undermine governance. In his fine book, both history and call to arms, Ganesh Sitaraman argues that the contemporary explosion of inequality will destroy the American Constitution, which is and was premised on the existence of a large and thriving middle class. He has done us all a great service, taking an issue of overwhelming public importance, delving into its history, helping understand how our forebears handled it and building a platform to think about it today.

As recognized since ancient times, the coexistence of very rich and very poor leads to two possibilities, neither a happy one. The rich can rule alone, disenfranchising or even enslaving the poor, or the poor can rise up and confiscate the wealth of the rich. The rich tend to see themselves as better than the poor, a proclivity that is enhanced and even socially sanctioned in modern meritocracies. The poor, with little prospect of economic improvement and no access to political power, "might turn to a demagogue who would overthrow the government - only to become a tyrant. Oligarchy or tyranny, economic inequality meant the end of the republic."

Some constitutions were written to contain inequalities. In Rome, the patricians ruled, but could be overruled by plebeian tribunes whose role was to protect the poor. There are constitutions with lords and commoners in separate chambers, each with well-defined powers. Sitaraman calls these "class warfare constitutions," and argues that the founding fathers of the United States found another way, a republic of equals. The middle classes, who according to David Hume were obsessed neither with pleasure-seeking, as were the rich, nor with meeting basic necessities, as were the poor, and were thus amenable to reason, could be a firm basis for a republic run in the public interest. There is some sketchy evidence that income and wealth inequality was indeed low in the 18th century, but the crucial point is that early America was an agrarian society of cultivators with an open frontier. No one needed to be poor when land was available in the West.

The founders worried a good deal about people getting too rich. Jefferson was proud of his achievement in abolishing the entail and primogeniture in Virginia, writing the laws that "laid the ax to the root of Pseudoaristocracy." He called for progressive taxation and, like the other founders, feared that the inheritance of wealth would lead to the establishment of an aristocracy. (Contrast this with those today who simultaneously advocate both equality of opportunity and the abolition of estate taxes.) Madison tried to calculate how long the frontier would last, and understood the threat to the Constitution that industrialization would bring; many of the founders thought of wage labor as little better than slavery and hoped that America could remain an agrarian society.

Of course, the fears about industrialization were realized, and by the late 19th century, in the Gilded Age, income inequality had reached levels comparable to those we see today. In perhaps the most original part of his book, Sitaraman, an associate professor of law at Vanderbilt Law School, highlights the achievements of the Progressive movement, one of whose aims was taming inequality, and which successfully modified the Constitution. There were four constitutional amendments in seven years - the direct election of senators, the franchise for women, the prohibition of alcohol and the income tax. To which I would add another reform, the establishment of the Federal Reserve, which provided a mechanism for handling financial crises without the need for the government to be bailed out by rich bankers, as well as the reduction in the tariff, which favored ordinary people by bringing down the cost of manufactures. Politics can respond to inequality, and the Constitution is not set in stone.

What of today, when inequality is back in full force? ...

Angus Deaton, a professor emeritus at Princeton, was awarded the Nobel in economic science in 2015.

anne -> anne... , March 25, 2017 at 11:26 AM
https://www.brookings.edu/wp-content/uploads/2017/03/6_casedeaton.pdf

March 17, 2017

Mortality and morbidity in the 21st century
By Anne Case and Angus Deaton

Summary

We build on and extend the findings in Case and Deaton (2015 * ) on increases in mortality and morbidity among white non-Hispanic Americans in midlife since the turn of the century. Increases in all-cause mortality continued unabated to 2015, with additional increases in drug overdoses, suicides, and alcoholic-related liver mortality, particularly among those with a high-school degree or less. The decline in mortality from heart disease has slowed and, most recently, stopped, and this combined with the three other causes is responsible for the increase in all-cause mortality. Not only are educational differences in mortality among whites increasing, but mortality is rising for those without, and falling for those with, a college degree. This is true for non-Hispanic white men and women in all age groups from 25-29 through 60-64. Mortality rates among blacks and Hispanics continue to fall; in 1999, the mortality rate of white non-Hispanics aged 50-54 with only a high-school degree was 30 percent lower than the mortality rate of blacks in the same age group; by 2015, it was 30 percent higher. There are similar crossovers between white and black mortality in all age groups from 25-29 to 60-64.

Mortality rates in comparable rich countries have continued their pre-millennial fall at the rates that used to characterize the US. In contrast to the US, mortality rates in Europe are falling for those with low levels of educational attainment, and are doing so more rapidly than mortality rates for those with higher levels of education.

Many commentators have suggested that the poor mortality outcomes can be attributed to slowly growing, stagnant, and even declining incomes; we evaluate this possibility, but find that it cannot provide a comprehensive explanation. In particular, the income profiles for blacks and Hispanics, whose mortality has fallen, are no better than those for whites. Nor is there any evidence in the European data that mortality trends match income trends, in spite of sharply different patterns of median income across countries after the Great Recession.

We propose a preliminary but plausible story in which cumulative disadvantage over life, in the labor market, in marriage and child outcomes, and in health, is triggered by progressively worsening labor market opportunities at the time of entry for whites with low levels of education. This account, which fits much of the data, has the profoundly negative implication that policies, even ones that successfully improve earnings and jobs, or redistribute income, will take many years to reverse the mortality and morbidity increase, and that those in midlife now are likely to do much worse in old age than those currently older than 65. This is in contrast to an account in which resources affect health contemporaneously, so that those in midlife now can expect to do better in old age as they receive Social Security and Medicare. None of this implies that there are no policy levers to be pulled; preventing the over-prescription of opioids is an obvious target that would clearly be helpful.

* http://www.pnas.org/content/early/2015/10/29/1518393112

Peter K. -> anne... , March 25, 2017 at 01:18 PM
"Of course, the fears about industrialization were realized, and by the late 19th century, in the Gilded Age, income inequality had reached levels comparable to those we see today. In perhaps the most original part of his book, Sitaraman, an associate professor of law at Vanderbilt Law School, highlights the achievements of the Progressive movement, one of whose aims was taming inequality, and which successfully modified the Constitution. There were four constitutional amendments in seven years - the direct election of senators, the franchise for women, the prohibition of alcohol and the income tax. To which I would add another reform, the establishment of the Federal Reserve, which provided a mechanism for handling financial crises without the need for the government to be bailed out by rich bankers, as well as the reduction in the tariff, which favored ordinary people by bringing down the cost of manufactures. "

It's interesting that the language of inequality is the language of technocrats, however worthy. It's a way to talk about the politics without referring to Marxist or populist/labor traditions which often involve social movements.

[Mar 25, 2017] Its interesting that the language of inequality is the language of technocrats, however worthy. Its a way to talk about the politics without referring to Marxist or populist/labor traditions which often involve social movements

Mar 25, 2017 | economistsview.typepad.com
anne -> anne... , March 25, 2017 at 11:26 AM
https://www.brookings.edu/wp-content/uploads/2017/03/6_casedeaton.pdf

March 17, 2017

Mortality and morbidity in the 21st century
By Anne Case and Angus Deaton

Summary

We build on and extend the findings in Case and Deaton (2015 * ) on increases in mortality and morbidity among white non-Hispanic Americans in midlife since the turn of the century. Increases in all-cause mortality continued unabated to 2015, with additional increases in drug overdoses, suicides, and alcoholic-related liver mortality, particularly among those with a high-school degree or less. The decline in mortality from heart disease has slowed and, most recently, stopped, and this combined with the three other causes is responsible for the increase in all-cause mortality. Not only are educational differences in mortality among whites increasing, but mortality is rising for those without, and falling for those with, a college degree. This is true for non-Hispanic white men and women in all age groups from 25-29 through 60-64. Mortality rates among blacks and Hispanics continue to fall; in 1999, the mortality rate of white non-Hispanics aged 50-54 with only a high-school degree was 30 percent lower than the mortality rate of blacks in the same age group; by 2015, it was 30 percent higher. There are similar crossovers between white and black mortality in all age groups from 25-29 to 60-64.

Mortality rates in comparable rich countries have continued their pre-millennial fall at the rates that used to characterize the US. In contrast to the US, mortality rates in Europe are falling for those with low levels of educational attainment, and are doing so more rapidly than mortality rates for those with higher levels of education.

Many commentators have suggested that the poor mortality outcomes can be attributed to slowly growing, stagnant, and even declining incomes; we evaluate this possibility, but find that it cannot provide a comprehensive explanation. In particular, the income profiles for blacks and Hispanics, whose mortality has fallen, are no better than those for whites. Nor is there any evidence in the European data that mortality trends match income trends, in spite of sharply different patterns of median income across countries after the Great Recession.

We propose a preliminary but plausible story in which cumulative disadvantage over life, in the labor market, in marriage and child outcomes, and in health, is triggered by progressively worsening labor market opportunities at the time of entry for whites with low levels of education. This account, which fits much of the data, has the profoundly negative implication that policies, even ones that successfully improve earnings and jobs, or redistribute income, will take many years to reverse the mortality and morbidity increase, and that those in midlife now are likely to do much worse in old age than those currently older than 65. This is in contrast to an account in which resources affect health contemporaneously, so that those in midlife now can expect to do better in old age as they receive Social Security and Medicare. None of this implies that there are no policy levers to be pulled; preventing the over-prescription of opioids is an obvious target that would clearly be helpful.

* http://www.pnas.org/content/early/2015/10/29/1518393112

Peter K. -> anne... , March 25, 2017 at 01:18 PM
"Of course, the fears about industrialization were realized, and by the late 19th century, in the Gilded Age, income inequality had reached levels comparable to those we see today. In perhaps the most original part of his book, Sitaraman, an associate professor of law at Vanderbilt Law School, highlights the achievements of the Progressive movement, one of whose aims was taming inequality, and which successfully modified the Constitution. There were four constitutional amendments in seven years - the direct election of senators, the franchise for women, the prohibition of alcohol and the income tax. To which I would add another reform, the establishment of the Federal Reserve, which provided a mechanism for handling financial crises without the need for the government to be bailed out by rich bankers, as well as the reduction in the tariff, which favored ordinary people by bringing down the cost of manufactures. "

It's interesting that the language of inequality is the language of technocrats, however worthy. It's a way to talk about the politics without referring to Marxist or populist/labor traditions which often involve social movements.

[Mar 25, 2017] New Health Care Plan: Open Source Drugs, Immigrant Doctors, and a Public Option

Mar 25, 2017 | economistsview.typepad.com
anne : March 25, 2017 at 07:54 AM , 2017 at 07:54 AM
http://cepr.net/blogs/beat-the-press/new-health-care-plan-open-source-drugs-immigrant-doctors-and-a-public-option

March 25, 2017

New Health Care Plan: Open Source Drugs, Immigrant Doctors, and a Public Option

Now that the Republican health care plan has been sent to the dust bin of history, it's worth thinking about how Obamacare can be improved. While the Affordable Care Act was a huge step forward in extending insurance coverage, many of the complaints against the program are justified. The co-pays and deductibles can mean the plans are of little use to middle income people with relatively low bills.

This is a great time to put forward ideas for reducing these costs and making other changes in the health care system. Obviously this congress and president are not interested in reforms that help low and middle income families, but the rest of us can start pushing these ideas now, with the expectation that the politicians will eventually come around.

There are two obvious directions to go to get costs down for low and middle income families. One is to increase taxes on the wealthy. The other is to reduce the cost of health care. The latter is likely the more promising option, especially since we have such a vast amount of waste in our system. The three obvious routes are lower prices for prescription drugs and medical equipment, reducing the pay of doctors, and savings on administrative costs from having Medicare offer an insurance plan in the exchanges.

Taking these in turn, the largest single source of savings would be reducing what we pay for prescription drugs. We will spend over $440 billion this year for drugs that would likely sell for less than $80 billion in a free market without patent monopolies and other forms of protection. If we paid as much as people in other wealthy countries for our drugs, we would save close to $200 billion a year. We spend another $50 billion a year on medical equipment which would likely cost around $15 billion in a free market.

If the government negotiated prices for drugs and medical equipment its savings could easily exceed $100 billion a year (see "Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer" * ). It could use some of these savings to finance open-source research for new drugs and medical equipment.

We already fund a huge amount of research, so this is not some radical departure from current practice. The government spends more than $32 billion on research conducted by the National Institutes of Health. It also picks up 50 percent of the industry's research costs on orphan drugs through the Orphan Drug Tax Credit. Orphan drugs are a rapidly growing share of all drug approvals, as the industry increasingly takes advantage of this tax credit.

The big change would not be that the government was funding research, but rather the research results and patents would be in the public domain, rather than be used by Pfizer and other drug companies to get patent monopolies. As a result, the next great breakthrough drug will sell as a generic for a few hundred dollars rather than hundreds of thousands of dollars. And MRI scans would cost little more than X-rays.

The second big potential source of savings would come from reducing the protectionist barriers which largely exclude foreign-trained physicians. Under current law, a foreign doctor is prohibited from practicing in the United States unless they complete a U.S. residency program. This keeps hundreds of thousands of well-qualified from physicians from practicing in the United States. As a result, our doctors earn on average more than $250,000 a year, roughly twice the average pay in other wealthy countries. (There are similar protectionist restrictions which inflate the pay of dentists.)

If we removed this barrier and allowed qualified foreign doctors to practice in the United States, we would likely get their pay down to levels comparable to that of doctors in countries like Canada and Germany. This could save us close to $100 billion a year on our health care bill, at least half of which would be savings to the government.

There is a concern that we would attract more doctors from developing countries. We could easily offset this brain drain by paying these countries enough so that they can train two or three doctors for every one that comes to the United States, thereby ensuring they gain from this arrangement as well. It is worth noting that these countries receive zero compensation now for the doctors they pay to train, but who then practice in the United States.

The third big source of saving would be having Medicare offer an insurance plan in the exchanges. This would ensure both that everyone had at least one good option regardless of where they lived and also that the private insurers in the system would face real competition. In 2010, the Congressional Budget Office projected that a public option would save the government $23 billion a year by 2020 and $29 billion by 2023.

The total savings to the government from these three changes easily exceed $150 billion a year, in addition to large savings that individuals outside the exchanges would see in their health care expenses. This is far more than enough to make the deductibles zero for each of the roughly 10 million people now in the exchanges. That would make Obamacare considerably more attractive.

Of course if the plans in the exchanges became more generous more people would opt to take advantage of them and we would see people leaving employer-provided plans. That is a problem that we can deal with at the time it happens. (We would need to have a portion of workers' current payments for employer provided plans go to the government to cover the cost of additional enrollees in the exchanges.) But the way forward in improving Obamacare is to use the market to make our health care system more efficient and reduce the ridiculous rents that now go to the wealthy as a result of waste in the system.

* http://deanbaker.net/images/stories/documents/Rigged.pdf

-- Dean Baker

anne -> anne... , March 25, 2017 at 07:56 AM
http://deanbaker.net/images/stories/documents/Rigged.pdf

October, 2016

Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer
By Dean Baker

The Old Technology and Inequality Scam: The Story of Patents and Copyrights

One of the amazing lines often repeated by people in policy debates is that, as a result of technology, we are seeing income redistributed from people who work for a living to the people who own the technology. While the redistribution part of the story may be mostly true, the problem is that the technology does not determine who "owns" the technology. The people who write the laws determine who owns the technology.

Specifically, patents and copyrights give their holders monopolies on technology or creative work for their duration. If we are concerned that money is going from ordinary workers to people who hold patents and copyrights, then one policy we may want to consider is shortening and weakening these monopolies. But policy has gone sharply in the opposite direction over the last four decades, as a wide variety of measures have been put into law that make these protections longer and stronger. Thus, the redistribution from people who work to people who own the technology should not be surprising - that was the purpose of the policy.

If stronger rules on patents and copyrights produced economic dividends in the form of more innovation and more creative output, then this upward redistribution might be justified. But the evidence doesn't indicate there has been any noticeable growth dividend associated with this upward redistribution. In fact, stronger patent protection seems to be associated with slower growth.

Before directly considering the case, it is worth thinking for a minute about what the world might look like if we had alternative mechanisms to patents and copyrights, so that the items now subject to these monopolies could be sold in a free market just like paper cups and shovels.

The biggest impact would be in prescription drugs. The breakthrough drugs for cancer, hepatitis C, and other diseases, which now sell for tens or hundreds of thousands of dollars annually, would instead sell for a few hundred dollars. No one would have to struggle to get their insurer to pay for drugs or scrape together the money from friends and family. Almost every drug would be well within an affordable price range for a middle-class family, and covering the cost for poorer families could be easily managed by governments and aid agencies.

The same would be the case with various medical tests and treatments. Doctors would not have to struggle with a decision about whether to prescribe an expensive scan, which might be the best way to detect a cancerous growth or other health issue, or to rely on cheaper but less reliable technology. In the absence of patent protection even the most cutting edge scans would be reasonably priced.

Health care is not the only area that would be transformed by a free market in technology and creative work. Imagine that all the textbooks needed by college students could be downloaded at no cost over the web and printed out for the price of the paper. Suppose that a vast amount of new books, recorded music, and movies was freely available on the web.

People or companies who create and innovate deserve to be compensated, but there is little reason to believe that the current system of patent and copyright monopolies is the best way to support their work. It's not surprising that the people who benefit from the current system are reluctant to have the efficiency of patents and copyrights become a topic for public debate, but those who are serious about inequality have no choice. These forms of property claims have been important drivers of inequality in the last four decades.

The explicit assumption behind the steps over the last four decades to increase the strength and duration of patent and copyright protection is that the higher prices resulting from increased protection will be more than offset by an increased incentive for innovation and creative work. Patent and copyright protection should be understood as being like very large tariffs. These protections can often the raise the price of protected items by several multiples of the free market price, making them comparable to tariffs of several hundred or even several thousand percent. The resulting economic distortions are comparable to what they would be if we imposed tariffs of this magnitude.

The justification for granting these monopoly protections is that the increased innovation and creative work that is produced as a result of these incentives exceeds the economic costs from patent and copyright monopolies. However, there is remarkably little evidence to support this assumption. While the cost of patent and copyright protection in higher prices is apparent, even if not well-measured, there is little evidence of a substantial payoff in the form of a more rapid pace of innovation or more and better creative work....

geoff -> anne... , March 25, 2017 at 08:43 AM
Medicare for all is a great idea but still well out of political reach for a while. On the other hand, cheaper drugs is a goal even trumpers could support with the right sales pitch.

the pushers are unusually profitable:

https://www.statista.com/statistics/272720/top-global-biotech-and-pharmaceutical-companies-based-on-net-income/

and they make for a pretty scummy pond in the swamp:

https://www.opensecrets.org/lobby/indusclient.php?id=h04

hey, it could happen here:

https://www.law360.com/articles/903111/canada-prevails-in-383m-eli-lilly-case

Peter K. -> geoff ... , March 25, 2017 at 08:59 AM
Trump met with the heads of the drug companies and decided the solutions was more deregulation.
DeDude -> anne... , March 25, 2017 at 10:23 AM
I generally love most of what Dean Baker does. But his weaknesses are on display in this piece. Just enough insights to sound convincing, but not enough to be the real McCoy. Yes we pay our medical doctors a lot more than France. However, ours first come out of undergraduate training having paid over $200K for that, then add another $300K for medical school. So that is a cool $500K in debt that their French counterparts don't have to deal with. Next (and before they can se any patients are internships (3 years) where they are not paid enough to begin paying down the student debt, followed by another 2-5 years of specialty training again with a compensation that cover living but not paying down the debt. Finally after becoming specialists (and those who don't are not paid $250K per year), they can begin paying down that student debt which in the meantime has grown substantially (with its private market interest rates).

If you were to put all those foreigners with their free education in direct competition with the domestic crop there would be no US born doctors. But that would be the least of the problems. American medical schools are for the most part outstanding and even the least of those graduating are quite good. That cannot be said for many of the other places in the world where we get most of our foreign trained doctors. There is a very good reason we demand that foreigners go through a US residency program before they can practice medicine. Regardless of what their (real or fake) papers say about their education, they have to perform up to US standards to pass the US residency programs and be licensed – and that is a good thing.

anne : , March 25, 2017 at 08:10 AM
https://www.nytimes.com/2017/03/24/upshot/health-insurance-medicare-obamacare-american-health-care-act.html?ref=business

March 24, 2017

What Comes Next for Obamacare? The Case for Medicare for All
By ROBERT H. FRANK

Republicans are in a bind. They've been promising to repeal Obamacare for seven years, and having won control of the White House and Congress, they had to try to deliver. But while their bitter denunciations of the Affordable Care Act may have depressed its approval numbers, they didn't make replacing it any easier.

On the contrary, the repeal-and-replace bill designed by House Speaker Paul D. Ryan drew withering criticism from the left and the right. Liberals condemned its use of reductions in health coverage for the poor to pay for large tax cuts for the wealthy, while conservatives bemoaned its retention of many subsidies adopted under Obamacare.

In the end, the repeal effort's biggest hurdle may have been loss aversion, one of the most robust findings in behavioral science. As numerous studies have shown, the pain of losing something you already have is much greater than the pleasure of having gained it in the first place. And the nonpartisan Congressional Budget Office estimated that Mr. Ryan's American Health Care Act (A.H.C.A.) would have caused more than 14 million people to lose coverage in the first year alone, with total losses rising to 24 million over the next decade. Many Republicans in Congress were nervous about the political firestorm already provoked by the mere prospect of such losses.

Loss aversion actually threatened the repeal effort on two fronts: voters' fear of losing their coverage, and lawmakers' fear of losing their seats. Like the first fear, the second appeared well grounded. Republican voters wouldn't have been the only ones losing coverage, of course, but early studies suggested that losses would have been concentrated among people who voted for President Trump. The Congressional Budget Office estimated, for example, that the A.H.C.A. would have caused premiums to rise more than sevenfold in 2026 for 64-year-olds making $26,500.

Now that Republicans have withdrawn Mr. Ryan's bill from consideration, attention shifts to what comes next. In an earlier column, I suggested that Mr. Trump has the political leverage, which President Obama did not, to jettison the traditional Republican approach in favor of a form of the single-payer health care that most other countries use. According to Physicians for a National Health Program, an advocacy group, "Single-payer national health insurance, also known as 'Medicare for all,' is a system in which a single public or quasi-public agency organizes health care financing, but the delivery of care remains largely in private hands." Christopher Ruddy, a friend and adviser of the president, recently urged him to consider this option.

Many Republicans who want to diminish government's role in health care view the single-payer approach with disdain. But Mr. Trump often seems to take pleasure in being unpredictable, and since he will offend people no matter which way he turns, he may want to consider why liberals and conservatives in many other countries have embraced the single-payer approach.

Part of the appeal of Medicare for all is that single-payer systems reduce financial incentives that generate waste and abuse. Mr. Ryan insisted that by relegating health care to private insurers, competition would lead to lower prices and higher quality. Economic theory tells us that this is a reasonable expectation when certain conditions are met. A crucial one is that buyers must be able to compare the quality of offerings of different sellers. In practice, however, people have little knowledge of the treatment options for the various maladies they might suffer, and policy language describing insurance coverage is notoriously complex and technical. Consumers simply cannot make informed quality comparisons in this industry.

In contrast, they can easily compare the prices charged by competing insurance companies. This asymmetry induces companies to compete by highlighting the lower prices they're able to offer if they cut costs by degrading the quality of their offerings. For example, it's common for insurance companies to deny payment for procedures that their policies seem to cover. If policy holders complain loudly enough, they may eventually get reimbursed, but the money companies save by not paying others confers a decisive competitive advantage over rivals that don't employ this tactic. Such haggling is uncommon under single-payer systems like Medicare (though it is sometimes employed by private insurers that supplement Medicare).

Consider, too, the mutually offsetting expenditures on competitive advertising and other promotional efforts of private insurers, which can exceed 15 percent of total revenue. Single-payer plans like Medicare spend nothing on competitive advertising (although here, also, we see such expenditures by supplemental insurers).

According to the Kaiser Family Foundation, administrative costs in Medicare are only about 2 percent of total operating expenditures, less than one-sixth of the rate estimated for the private insurance industry. This difference does not mean that private insurers are evil. It's a simple consequence of a difference in the relevant economic incentives.

American health care outlays per capita in 2015 were more than twice the average of those in the 35 advanced countries that make up the Organization for Economic Cooperation and Development. Yet despite that spending difference, the system in the United States delivers significantly less favorable outcomes on measures like longevity and the incidence of chronic illness....

anne -> anne... , March 25, 2017 at 08:15 AM
http://www.oecd.org/health/health-systems/oecd-health-statistics-2014-frequently-requested-data.htm

November, 2016

Organisation for Economic Co-operation and Development Health Data

Total health care spending per person, 2015 *

United States ( 9451)
OCED average ( 3814)

France ( 4407)

Total health care spending as a share of GDP, 2015

United States ( 16.9)
OCED average ( 9.0)

France ( 11.0)

Pharmaceutical expenditure per person, 2014 *

United States ( 1112)
OECD average ( 538)

France ( 656)

Practising physicians per 1,000 population, 2014

United States ( 2.6)
OECD average ( 3.3)

France ( 3.3)

Practising nurses per 1,000 population, 2014

United States ( 11.2)
OECD average ( 8.9)

France ( 9.6)

Physician consultations per person, 2014

United States ( 4.0)
OECD average ( 6.8)

France ( 6.3)

Medical graduates per 100,000 population, 2014

United States ( 7.3)
OECD average ( 11.4)

France ( 10.0)

* Data are expressed in US dollars adjusted for purchasing power parities (PPPs), which provide a means of comparing spending between countries on a common base. PPPs are the rates of currency conversion that equalise the cost of a given "basket" of goods and services in different countries.

[Mar 25, 2017] The good news is they now own health care. They now own Obamacare saidTrump

Mar 25, 2017 | economistsview.typepad.com
Fred C. Dobbs : , March 25, 2017 at 07:35 AM
In a Call to The Times, Trump Blames Democrats for the
Failure of the Health Bill https://nyti.ms/2nNPHD9
NYT - MAGGIE HABERMAN - MARCH 24, 2017

WASHINGTON - Just moments after the Republican plan to repeal and replace the Affordable Care Act was declared dead, President Trump sought to paint the defeat of his first legislative effort as an early-term blip.

The House speaker, Paul D. Ryan, was preparing to tell the public that the health care bill was being withdrawn - a byproduct, Mr. Trump said, of Democratic partisanship. The president predicted that Democrats would return to him to make a deal in roughly a year.

"Look, we got no Democratic votes. We got none, zero," Mr. Trump said in a telephone interview he initiated with The New York Times.

"The good news is they now own health care. They now own Obamacare."

Mr. Trump insisted that the Affordable Care Act would collapse in the next year, which would then force Democrats to come to the bargaining table for a new bill.

"The best thing that can happen is that we let the Democrats, that we let Obamacare continue, they'll have increases from 50 to 100 percent," he said. "And when it explodes, they'll come to me to make a deal. And I'm open to that."

Although enrollment in the Affordable Care Act declined slightly in the past year, there is no sign that it is collapsing. Its expansion of Medicaid continues to grow.

In a later phone interview with The Times, the Senate minority leader, Chuck Schumer, ridiculed Mr. Trump's remarks about Democrats being at fault.

"Whenever the president gets in trouble, he points fingers of blame," Mr. Schumer said. "It's about time he stopped doing that and started to lead. The Republicans were totally committed to repeal from the get-go, never talked to us once. But now that they realize that repeal can't work, if they back off repeal, of course we'll work with them to make it even better."

Mr. Trump said that "when they come to make a deal," he would be open and receptive. He singled out the Tuesday Group moderates for praise, calling them "terrific," an implicit jab at the House Freedom Caucus, which his aides had expressed frustration with during negotiations. ...

Fred C. Dobbs -> Fred C. Dobbs... , March 25, 2017 at 08:02 AM
On health-care, as on so much else,
President Trump passes the buck, reports
https://www.theatlantic.com/politics/archive/2017/03/the-buck-doesnt-stop-here-anymore/520839/
The Atlantic - David A. Graham - March 24, 2017

Speaking in the Oval Office Friday afternoon, President Trump surveyed the wreckage of the Obamacare repeal effort and issued a crisp, definitive verdict: I didn't do it.

The president said he didn't blame Speaker Paul Ryan, though he had plenty of implied criticism for the speaker. "I like Speaker Ryan. He worked very hard," Trump said, but he added: "I'm not going to speak badly about anybody within the Republican Party. Certainly there's a big history. I really think Paul worked hard." He added ruefully that the GOP could have taken up tax-reform first, instead of Obamacare-the reverse of Ryan's desired sequence. "Now we're going to go for tax reform, which I've always liked," he said.

As for the House Freedom Caucus, the bloc of conservatives from which many of the apparent "no" votes on the Republican plan were to come, Trump said, "I'm not betrayed. They're friends of mine. I'm disappointed because we could've had it. So I'm disappointed. I'm a little surprised, I could tell you."

The greatest blame for the bill's failure fell on Democrats, Trump said.

"This really would've worked out better if we could've had Democrat support. Remember we had no Democrat support," Trump said. Later, he added, "But when you get no votes from the other side, meaning the Democrats, it's really a difficult situation."

He said Democrats should come up with their own bill. "I think the losers are Nancy Pelosi and Chuck Schumer, because they own Obamacare," he said, referring to the House and Senate Democratic leaders. "They 100 percent own it."

Trump was very clear about who was not to blame: himself. "I worked as a team player," the president of the United States said, demoting himself to bit-player status. He wanted to do tax reform first, after all, and it was still early. "I've been in office, what, 64 days? I've never said repeal and replace Obamacare within 64 days. I have a long time. I want to have a great health-care bill and plan and we will."

Strictly speaking, it is true that Trump didn't promise to repeal Obamacare on day 64 of his administration. What he told voters, over and over during the campaign, was that he'd do it immediately. On some occasions he or top allies even promised to do it on day 1. Now he and his allies are planning to drop the bill for the foreseeable future.

It is surely not wrong that there is lots of blame to go around. Congressional Republicans had years to devise a plan, and couldn't come up with one that would win a majority in the House, despite a 44-seat advantage. The House bill was an unpopular one, disliked by conservatives and moderates in that chamber; almost certainly dead on arrival in the Senate; and deeply unpopular with voters. Even before the vote was canceled, unnamed White House officials were telling reporters that the plan was to pin the blame on Ryan. ...

The Republicans fold and
withdraw their health-care bill https://www.theatlantic.com/politics/archive/2017/03/trump-republicans-failure-obamacare/520788/
The Atlantic - Russell Berman - March 24, 2017

... Defeat on the floor dealt Trump a major blow early in his presidency, but its implications were far more serious for the Republican Party as a whole. Handed unified control of the federal government for only the third time since World War II, the modern GOP was unable to overcome its internecine fights to enact a key part of its policy agenda. The president now wants to move on to a comprehensive overhaul of the tax code, but insiders on Capitol Hill have long believed that project will be an even heavier lift than health care.

As the prospect of a loss became more real on Friday, the frustrations of GOP lawmakers loyal to the leadership began to boil over. "I've been in this job eight years, and I'm wracking my brain to think of one thing our party has done that's been something positive, that's been something other than stopping something else from happening," Representative Tom Rooney of Florida said in an interview. "We need to start having victories as a party. And if we can't, then it's hard to justify why we should be back here."

Nothing has exemplified the party's governing challenge quite like health care. For years, Republican leaders resisted pressure from Democrats and rank-and-file lawmakers to coalesce around a detailed legislative alternative to Obamacare. That failure didn't prevent them from attaining power, but it forced them to start nearly from scratch after Trump's surprising victory in November. At Ryan's urging, the party had compiled a plan as part of the speaker's "A Better Way" campaign agenda. Translating that into legislation, however, proved a much stiffer challenge; committee leaders needed to navigate a razor's edge to satisfy conservatives demanding a full repeal of Obamacare and satisfy moderates who preferred to keep in place its more popular consumer protections and Medicaid expansion. They were further limited by the procedural rules of the Senate, which circumscribed how far Republicans could go while still avoiding a Democratic filibuster. ...

[Mar 25, 2017] In addition to the public option and age 55+ Medicare buy-in, one thing that might work is abollishing the mandate and penalty and replaciing them with automatic enrollment. Call it Youre employed, youre covered!

Mar 25, 2017 | economistsview.typepad.com
New Deal democrat -> Lee A. Arnold ...

One issue going forward is whether the Dems should offer their own plan. I think they should.

As a few others have pointed out, Trump is not wedded to the GOP establishment. If he thinks he can "WIN bigly!" by allying with Dems, he will do so. I happen to think that he is mainly against "Obamacare" because Obama humiliated him at the White House Correspondents' Dinner once upon a time, and he is nothing if not vengeful. He wants to obliterate Obama's legacy.

So Dems need to make a big stink any time Trump administrativley undercuts Obamacare provisions to try to make it fail. But also they should give him the chance to do something he can call Trumpcare that actually works.

Obamacare does have some major problems (the individual mandate is hated, and the penalty isn't big enough. More young people need to buy in. Some of the Exchanges and health care provider networks are too narrow.

In addition to the "public option" and age 55+ Medicare buy-in, one thing that might work is abollishing the mandate and penalty and replaciing them with automatic enrollment. Call it "You're employed, you're covered!"

Just like SS, Medicare, unemployment and disability deductions to paychecks, establish a Health Care automatic deductible. If your employer offers healthcare, the deductible is reduced by the amount of the premium, all the way to zero if applicable.
If your employer doesn't offer healthcare, if you are under age 40, you are automatically enrolled in the least expensive Bronze plan in your state. If you are 40 or older, you are automatically enrolled in the least expensive Silver plan in your state.

The deductible would also include a small contribution towards Medicaid. Then, if you are unemployed, you are automatically enrolled in Medicaid, but can continue with the silver or bronze plan as above if you choose.

Dems could turmpet such a plan to "Reform and Improve" Obamacare, and campaign on pushing for it if they get a Congressional majority. Call it Trumpcare and President Caligula might sign on.

Reply Saturday, March 25, 2017 at 07:35 AM Lee A. Arnold : , March 25, 2017 at 04:48 AM
"Medicare for all" may be the best battle cry. 65-70% of the U.S. people want a single-payer. Bernie Sanders has effectively destroyed the old Democratic Party and sits in a commanding position as spokesman, he gets 6 TV cameras with an hour's notice and he is probably the most popular politician in the U.S. The Democrats don't have to push it for now, they can wait for news to develop. This is all on the Republicans. Let the managerial disaster of Trump and the utter immorality of the "Freedom Caucus" sink in a little more, this story has "legs" as they say in show biz.
mulp -> Lee A. Arnold ... , -1
Name the Senators, representatives, and governors Bernie Bros have delivered?

Where are the Bernie Bros Newts, Cruz, Marcos, ...?

I'm in my 70th year. Conservatives attacked liberals in the 60s, my youth, as promising free lunches to gain power. But what they really hated was liberals convinced voters to tax all voters to pay for the things most voters wanted everyone to have, BASED ON SOUND ECONOMICS TO MAXIMIZE EFFICIENCY AND WELFARE.

Friedman led the effort to distort theory to eliminate the broad meaning of general welfare in economics. He did it by eliminating the hard connection between labor cost and gdp. He argued that labor costs and consumption can be cut to increase profits, and that contrary to theory, higher profits is more efficient.

Laffer applied operations theory to taxes, as if government was taxing to maximize profits.

Thus supply side theory of profit maximization. The result delivered was the imperative to cut taxes. To cut labor costs. Thus they argued that every economic measure improves if taxes and wages are cut.

Reaganomics would deliver more stuff at lower cost, higher profut, and that makes everyone better off, especially those in poverty. Friedman saw consumption as a bad thing. He wanted higher gdp, less consumption. In other words, he rewrote Adam Smith attack on mercantile economics into a justification of returning to mercantile economic policy.

So, who do Bernie Bros offer as the Milton Friedman and Laffer to create an intellectual foundation to refute Adam Smith, FDR, Keynes, Galbraith, are return to hunter gatherer economics? Who is the economist who can convince us that Marxist economic theory will work, as long as it's not captured by right wing capitalists like Fidel Castro, Chavez, Stalin, Lenin, the founders of Israel, ....

Bernie certainly must be influenced by the same economic theory that created Israel. It grew from the same Marxist roots in Germany that powered Stalin and Lenin. Bernie is a pre-WWII Zionist as best I can tell.

Why wouldn't Bernie deliver Israel governance to the US? How would he prevent the greedy from joining the Movement?

And Israel has the social welfare state system Bernie wants. Hundreds of thousands of men do not work so they can study supported by welfare. Universal health care. Women are very equal in status.

I grew up heating the Zionist Dream, theory, much like Bernie did, but from conservative Indiana. Seemed very idealist virtue becoming reality in the 50s and 60s. I have often used Israel as the example of a good universal health care system, of education, of welfare. Never heard Bernie say, "I want the US to be like Israel." Why not? Why Sweden?

[Mar 25, 2017] The President had come to regret going along with Ryan's idea of making health care his first legislative priority

Notable quotes:
"... The larger lesson here is that conservatism failed and social democracy won. ..."
"... After seven years of fulminating against the Affordable Care Act and promising to replace it with a more free-market-oriented alternative, the House Republicans-who are in the vanguard of the modern conservative movement-failed to come up with a workable and politically viable proposal. Obamacare survived, and that shouldn't be so surprising. When it comes to health-care policy, there is no workable or politically viable conservative alternative. ..."
"... in cutting federal support for Medicaid, they dismantle the element of Obamacare that has been the most successful at insuring more people at a reasonable cost. ..."
"... The evil Obama created Obamacare that was so conservative that conservatives can't find an alternative that benefits the majority of conservatives. ..."
"... Many Republicans who want to diminish government's role in health care view the single-payer approach with disdain. But Mr. Trump often seems to take pleasure in being unpredictable, and since he will offend people no matter which way he turns, he may want to consider why liberals and conservatives in many other countries have embraced the single-payer approach. ..."
Mar 25, 2017 | economistsview.typepad.com

Peter K. : March 25, 2017 at 10:24 AM

http://www.newyorker.com/news/john-cassidy/the-health-care-debacle-was-a-failure-of-conservatism

THE HEALTH-CARE DEBACLE WAS A FAILURE OF CONSERVATISM

By John Cassidy March 24, 2017

Let the recriminations begin! Actually, the health-care-failure finger-pointing got under way well before Friday, when Donald Trump and Paul Ryan cancelled a House vote on the American Health Care Act. A day earlier, aides to the President let it be known that he had come to regret going along with Ryan's idea of making health care his first legislative priority.

In the coming days and weeks, there will be more of this blame shifting, and, in truth, there is plenty of blame to go around. Ryan failed to unify the House Republican caucus. Trump's staff allowed him to endorse a bill that made a mockery of his campaign pledge to provide health insurance for everybody. And Trump himself blundered into a political fiasco, apparently believing he could win over recalcitrant Republican members of Congress simply by popping over to Capitol Hill.

But this is just politics. The larger lesson here is that conservatism failed and social democracy won.

After seven years of fulminating against the Affordable Care Act and promising to replace it with a more free-market-oriented alternative, the House Republicans-who are in the vanguard of the modern conservative movement-failed to come up with a workable and politically viable proposal. Obamacare survived, and that shouldn't be so surprising. When it comes to health-care policy, there is no workable or politically viable conservative alternative.

Of course, that isn't how conservative lawmakers, pundits, and policy wonks will spin this. They will argue that Trump and Ryan betrayed free-market principles: if only they had proposed the outright repeal of Obamacare, and put forward a bill that genuinely liberated the health-care industry from federal intervention, everything would have worked out well. That will be the story-and it is a fairy tale.

The fact is that the health-care industry, which makes up about a sixth of the American economy, isn't like the market for apples or iPhones. For a number of reasons (which economists understand pretty well), it is riven with problems. Serious illnesses can be enormously costly to treat; people don't know when they will get ill; the buyers of health insurance know more about their health than the sellers; and insurers have a strong incentive to avoid providing their product to the sick people who need it the most.

Since the days of Otto von Bismarck, most developed countries have dealt with these problems by setting up a system in which the state provides medical insurance directly, or else mandates and subsidizes the purchase of private insurance, setting strict rules for what sorts of policies can be sold. Obamacare amounts to a hybrid model. It supplements employer-provided insurance, the traditional American way of obtaining health care, with a heavily regulated (and subsidized) individual insurance market and an expanded Medicaid system.

It is far from perfect. But, in combining mandates with subsidies, regulation, and access to a state-administered system for the poverty-stricken and low-paid, it is intellectually coherent. (Many of the problems it has encountered arose because the mandate to purchase insurance hasn't been effectively enforced, and not enough young and healthy individuals have signed up.) Since it leaves in place the basic structure of private insurance and private provision, Obamacare is also conservative. As is well known, parts of it resemble a proposal that the Heritage Foundation put forward in 1992.

Today's conservatives act as if they can simply wish away some of the problems that Obamacare was created to deal with. The original version of the American Health Care Act left in place many of the A.C.A.'s regulations but cut back the subsidies and gutted its Medicaid expansion. Had it been enacted, it would have led to higher premiums, at least in the short term, and a huge drop in coverage-twenty-four million people over ten years, according to the Congressional Budget Office. As these implications of the G.O.P. proposal became known to the public, the plan's approval rating fell and fell. In the end, according to a Quinnipiac poll, only nineteen per cent of Americans supported it.

The Freedom Caucus, a group of right-wing conservatives in the House, wanted a bill that stripped away more regulations, which they claimed would enable insurers to offer cheaper and more flexible plans. On the eve of the vote, Ryan agreed to change a clause defining the "essential health benefits" that insurers are required to provide if they sell policies on the Obamacare exchanges-benefits including maternity and mental-health services. But this change would have created two insurmountable problems.

Once insurers were able to craft individual policies without adhering to any list of required benefits, buyers would self-select. Young, healthy people would choose cheap, crappy policies, and older, sicker people would choose more comprehensive policies. Insurers, knowing this, would raise the prices of the good policies. "Worthless policies would get really cheap, but comprehensive policies would get astronomically expensive," Mother Jones's Kevin Drum pointed out. "Virtually no one would be able to afford them."

The other problem was political. Americans need maternity coverage, mental-health benefits, prescription drugs, pediatric services, lab tests, and the other things included on the list of essential health benefits. When moderate Republicans in places like New York, New Jersey, and Pennsylvania heard that these services might be eliminated under the amended legislation, they abandoned it in significant numbers. It was their desertion that ultimately killed the bill.

O.K., you might say: The American Health Care Act was a disaster, but what about all the other Republican health-care proposals that are out there? Maybe one of them provides a workable alternative to Obamacare. Let's briefly look at a few of them.

When he was in Congress, Tom Price, the Secretary of Health and Human Services, who supported the A.H.C.A., put forward a bill of his own. But it was basically a less generous version of the bill that just died: in gutting Medicaid and strictly limiting federal funding for high-risk pools to insure sick people, it would surely lead to a big rise in the number of uninsured. Something similar applies to a bill put forward by Senator Orrin Hatch, who chairs the Senate Finance Committee.

There are a few other plans kicking around conservative think tanks, some of which, like Obamacare, tie the level of subsidies to income. But all of these plans have other serious problems. In eschewing purchasing mandates, they run into the issue of younger people being unlikely to sign up for coverage. In giving insurers more freedom to offer different plans and different pricing structures, they encourage self-selection and undermine the risk-pooling that is at the heart of successful insurance schemes. And in cutting federal support for Medicaid, they dismantle the element of Obamacare that has been the most successful at insuring more people at a reasonable cost.

Another Republican plan that may now attract some attention is the proposal put forward by Senators Bill Cassidy, of Louisiana, and Susan Collins, of Maine. But, far from dismantling Obamacare, the Cassidy-Collins plan would allow big, populous states like New York and California to keep the current system in place, including the Medicaid expansion and the surtaxes on high earners. Red states that don't like Obamacare would be able to take federal money and design their own systems to provide basic, catastrophic coverage plans to everybody.

Because it retains so much of Obamacare, this proposal seems unlikely to receive majority support inside the G.O.P. In the coming weeks, Republicans in the Senate and the House will be trying anew to come up with an alternative that they can unite around, portray as a big break from the A.C.A., and sell to the American public. The lesson of the past few weeks is that they are likely to fail. As a novice to the subject noted recently, health care is complicated. Too complicated for ad-hoc policymaking and simplistic conservative nostrums.

mulp -> Peter K.... , March 25, 2017 at 10:44 AM
The evil Obama created Obamacare that was so conservative that conservatives can't find an alternative that benefits the majority of conservatives.

A few conservatives have prided themselves on commuting suicide by not treating their cancer in principled opposition to Obamacare, but most simply bitch about the high premiums which requires they get huge Obamacare tax credits while still paying a lot out of pocket because they bought the high deductible policy that makes the patient have skin in the game.

They want patients to pay out off a savings account to have skin in the game without needing to actually "save" to fill the HSA and have low premiums for insurance you buy with cancer treatment only when you have cancer. After all, if you buy insurance without cancer coverage, you qualify to buy insurance with cancer treatment because you have continuously bought insurance for five years.

... ... ...

Peter K. : , March 25, 2017 at 10:32 AM
https://www.nytimes.com/2017/03/24/upshot/health-insurance-medicare-obamacare-american-health-care-act.html?partner=rss&emc=rss&_r=1

"...

Now that Republicans have withdrawn Mr. Ryan's bill from consideration, attention shifts to what comes next. In an earlier column, I suggested that Mr. Trump has the political leverage, which President Obama did not, to jettison the traditional Republican approach in favor of a form of the single-payer health care that most other countries use. According to Physicians for a National Health Program, an advocacy group, "Single-payer national health insurance, also known as 'Medicare for all,' is a system in which a single public or quasi-public agency organizes health care financing, but the delivery of care remains largely in private hands." Christopher Ruddy, a friend and adviser of the president, recently urged him to consider this option.

Many Republicans who want to diminish government's role in health care view the single-payer approach with disdain. But Mr. Trump often seems to take pleasure in being unpredictable, and since he will offend people no matter which way he turns, he may want to consider why liberals and conservatives in many other countries have embraced the single-payer approach.

..."


[Mar 25, 2017] The issue isn't about loyalty . The issue is about establishing reasonable and affordable healthcare for at least the majority of American citizens that have gross earnings under a hundred thousands annually

Mar 25, 2017 | economistsview.typepad.com
llisa2u2, March 25, 2017 at 08:30 AM
President Donald Trump said on Friday that he was disappointed that a conservative faction in the House of Representatives blocked his healthcare legislation and said "we learned a lot about loyalty" from the effort. OMG. Who's playing political games? Who is NOT focused on not draining anything, except draining the pockets of the "relatively poor" majority for the profits of a "relatively wealthy" majority?

The issue isn't about "loyalty". The issue is about establishing reasonable and affordable healthcare for at least the majority of American citizens that have gross earnings under $250,000 annually.

Peter K. , March 25, 2017 at 08:36 AM
Neoliberal DeLong is good on the Insane Clown Posse of the Republican Party.

http://www.bradford-delong.com/2017/03/should-read-it-was-always-just-dingbat-kabuki-all-the-way-down-joe-barton-_representative-r-tx_-asked-by.html#more

Should-Read: It was always just dingbat kabuki all the way down:

Joe Barton: Representative, R-TX: "[Asked by] reporters... why, after Republicans had held dozens of nearly-unanimous votes to repeal ObamaCare...

"... under President Obama, they were getting cold feet now that they control the levers of power. "Sometimes you're playing Fantasy Football and sometimes you're in the real world", [Rep. Joe Barton R-TX] admitted. "We knew the president, if we could get a repeat bill to his desk, it would almost certainly be vetoed. This time we knew if it got to the president's desk it would be signed.""

t has, as far as the Republican congressional caucus is concerned, always been dingbat kabuki--at least, ever since Gingrich's revolt against George H.W. Bush at the start of the 1990s, if not ever since the passage of the Reagan "none of us really understands what's going on with all these numbers" tax cut in 1981.

David Brooks: "Any large vision...

...was beyond the drafters of this legislation.... They were more concerned with what this internal faction.... In 24 hours of ugly machinations, the Trump administration was willing to rip out big elements of the bill and insert big new ones, without regard to substance or ramification. House members were rushed to commit to legislation even while major pieces of it were still in flux... when the Congressional Budget Office had no time to score it, when the effect on health outcomes of actual Americans was an absolute mystery....

This House Republican plan would increase suffering, morbidity and death among the middle class and poor in order to provide tax cuts to the rich. It would cut Medicaid benefits by $880 billion between now and 2026. It would boost the after-tax income for those making more than $1 million a year by 14 percent.... This bill takes the most vicious progressive stereotypes about conservatives and validates them.... This bill has just a 17 percent approval rating....

If we're going to have the rough edges of a populist revolt, you'd think that at least somebody would be interested in listening to the people. But with this bill the Republican leadership sets an all-time new land speed record for forgetting where you came from.... The Republicans can't run policy-making from the White House because they have a marketing guy in charge of the factory. But they can't run policy from Capitol Hill because it's visionless and internally divided.... The politics driving the substance, not the other way around. The new elite is worse than the old elite-and certainly more vapid.

Peter K. -> Peter K.... , March 25, 2017 at 08:37 AM
The irony is that the failure of the neoliberal centrism of Brooks and DeLong to deliver shared prosperity is churning up a populist revolt against the establishment.

[Mar 25, 2017] It's Not Just Unfair: Inequality Is a Threat to Our Governance

Mar 25, 2017 | economistsview.typepad.com
anne : March 25, 2017 at 11:26 AM

, March 25, 2017 at 11:26 AM
https://www.nytimes.com/2017/03/20/books/review/crisis-of-the-middle-class-constitution-ganesh-sitaraman-.html

March 20, 2017

It's Not Just Unfair: Inequality Is a Threat to Our Governance
By ANGUS DEATON

THE CRISIS OF THE MIDDLE-CLASS CONSTITUTION
Why Economic Inequality Threatens Our Republic
By Ganesh Sitaraman

President Obama labeled income inequality "the defining challenge of our time." But why exactly? And why "our time" especially? In part because we now know just how much goes to the very top of the income distribution, and beyond that, we know that recent economic growth, which has been anemic in any case, has accrued mostly to those who were already well-heeled, leaving stagnation or worse for many Americans. But why is this a problem?

Why am I hurt if Mark Zuckerberg develops Facebook, and gets rich on the proceeds? Some care about the unfairness of income inequality itself, some care about the loss of upward mobility and declining opportunities for our kids and some care about how people get rich - hard work and innovation are O.K., but theft, legal or otherwise, is not. Yet there is one threat of inequality that is widely feared, and that has been debated for thousands of years, which is that inequality can undermine governance. In his fine book, both history and call to arms, Ganesh Sitaraman argues that the contemporary explosion of inequality will destroy the American Constitution, which is and was premised on the existence of a large and thriving middle class. He has done us all a great service, taking an issue of overwhelming public importance, delving into its history, helping understand how our forebears handled it and building a platform to think about it today.

As recognized since ancient times, the coexistence of very rich and very poor leads to two possibilities, neither a happy one. The rich can rule alone, disenfranchising or even enslaving the poor, or the poor can rise up and confiscate the wealth of the rich. The rich tend to see themselves as better than the poor, a proclivity that is enhanced and even socially sanctioned in modern meritocracies. The poor, with little prospect of economic improvement and no access to political power, "might turn to a demagogue who would overthrow the government - only to become a tyrant. Oligarchy or tyranny, economic inequality meant the end of the republic."

Some constitutions were written to contain inequalities. In Rome, the patricians ruled, but could be overruled by plebeian tribunes whose role was to protect the poor. There are constitutions with lords and commoners in separate chambers, each with well-defined powers. Sitaraman calls these "class warfare constitutions," and argues that the founding fathers of the United States found another way, a republic of equals. The middle classes, who according to David Hume were obsessed neither with pleasure-seeking, as were the rich, nor with meeting basic necessities, as were the poor, and were thus amenable to reason, could be a firm basis for a republic run in the public interest. There is some sketchy evidence that income and wealth inequality was indeed low in the 18th century, but the crucial point is that early America was an agrarian society of cultivators with an open frontier. No one needed to be poor when land was available in the West.

The founders worried a good deal about people getting too rich. Jefferson was proud of his achievement in abolishing the entail and primogeniture in Virginia, writing the laws that "laid the ax to the root of Pseudoaristocracy." He called for progressive taxation and, like the other founders, feared that the inheritance of wealth would lead to the establishment of an aristocracy. (Contrast this with those today who simultaneously advocate both equality of opportunity and the abolition of estate taxes.) Madison tried to calculate how long the frontier would last, and understood the threat to the Constitution that industrialization would bring; many of the founders thought of wage labor as little better than slavery and hoped that America could remain an agrarian society.

Of course, the fears about industrialization were realized, and by the late 19th century, in the Gilded Age, income inequality had reached levels comparable to those we see today. In perhaps the most original part of his book, Sitaraman, an associate professor of law at Vanderbilt Law School, highlights the achievements of the Progressive movement, one of whose aims was taming inequality, and which successfully modified the Constitution. There were four constitutional amendments in seven years - the direct election of senators, the franchise for women, the prohibition of alcohol and the income tax. To which I would add another reform, the establishment of the Federal Reserve, which provided a mechanism for handling financial crises without the need for the government to be bailed out by rich bankers, as well as the reduction in the tariff, which favored ordinary people by bringing down the cost of manufactures. Politics can respond to inequality, and the Constitution is not set in stone.

What of today, when inequality is back in full force? ...


Angus Deaton, a professor emeritus at Princeton, was awarded the Nobel in economic science in 2015.

anne -> anne... , March 25, 2017 at 11:26 AM
https://www.brookings.edu/wp-content/uploads/2017/03/6_casedeaton.pdf

March 17, 2017

Mortality and morbidity in the 21st century
By Anne Case and Angus Deaton

Summary

We build on and extend the findings in Case and Deaton (2015 * ) on increases in mortality and morbidity among white non-Hispanic Americans in midlife since the turn of the century. Increases in all-cause mortality continued unabated to 2015, with additional increases in drug overdoses, suicides, and alcoholic-related liver mortality, particularly among those with a high-school degree or less. The decline in mortality from heart disease has slowed and, most recently, stopped, and this combined with the three other causes is responsible for the increase in all-cause mortality. Not only are educational differences in mortality among whites increasing, but mortality is rising for those without, and falling for those with, a college degree. This is true for non-Hispanic white men and women in all age groups from 25-29 through 60-64. Mortality rates among blacks and Hispanics continue to fall; in 1999, the mortality rate of white non-Hispanics aged 50-54 with only a high-school degree was 30 percent lower than the mortality rate of blacks in the same age group; by 2015, it was 30 percent higher. There are similar crossovers between white and black mortality in all age groups from 25-29 to 60-64.

Mortality rates in comparable rich countries have continued their pre-millennial fall at the rates that used to characterize the US. In contrast to the US, mortality rates in Europe are falling for those with low levels of educational attainment, and are doing so more rapidly than mortality rates for those with higher levels of education.

Many commentators have suggested that the poor mortality outcomes can be attributed to slowly growing, stagnant, and even declining incomes; we evaluate this possibility, but find that it cannot provide a comprehensive explanation. In particular, the income profiles for blacks and Hispanics, whose mortality has fallen, are no better than those for whites. Nor is there any evidence in the European data that mortality trends match income trends, in spite of sharply different patterns of median income across countries after the Great Recession.

We propose a preliminary but plausible story in which cumulative disadvantage over life, in the labor market, in marriage and child outcomes, and in health, is triggered by progressively worsening labor market opportunities at the time of entry for whites with low levels of education. This account, which fits much of the data, has the profoundly negative implication that policies, even ones that successfully improve earnings and jobs, or redistribute income, will take many years to reverse the mortality and morbidity increase, and that those in midlife now are likely to do much worse in old age than those currently older than 65. This is in contrast to an account in which resources affect health contemporaneously, so that those in midlife now can expect to do better in old age as they receive Social Security and Medicare. None of this implies that there are no policy levers to be pulled; preventing the over-prescription of opioids is an obvious target that would clearly be helpful.

* http://www.pnas.org/content/early/2015/10/29/1518393112

Peter K. -> anne... , March 25, 2017 at 01:18 PM
"Of course, the fears about industrialization were realized, and by the late 19th century, in the Gilded Age, income inequality had reached levels comparable to those we see today. In perhaps the most original part of his book, Sitaraman, an associate professor of law at Vanderbilt Law School, highlights the achievements of the Progressive movement, one of whose aims was taming inequality, and which successfully modified the Constitution. There were four constitutional amendments in seven years - the direct election of senators, the franchise for women, the prohibition of alcohol and the income tax. To which I would add another reform, the establishment of the Federal Reserve, which provided a mechanism for handling financial crises without the need for the government to be bailed out by rich bankers, as well as the reduction in the tariff, which favored ordinary people by bringing down the cost of manufactures. "

It's interesting that the language of inequality is the language of technocrats, however worthy.

It's a way to talk about the politics without referring to Marxist or populist/labor traditions which often involve social movements.

[Mar 25, 2017] Our constitutional dollar democracy with its gerrymandering, limitless congressional revolving doors, SCOTUS unanswerable to the electorate, and first past the post voting provides loads of punch lines, not the least of which is the de facto two party system itself. Two competitors is merely duopoly

Mar 25, 2017 | economistsview.typepad.com
RC AKA Darryl, Ron -> ilsm... , March 25, 2017 at 07:09 AM
There is more than one joke. Our constitutional dollar democracy with its gerrymandering, limitless congressional revolving doors, SCOTUS unanswerable to the electorate, and first past the post voting provides loads of punch lines, not the least of which is the de facto two party system itself. Two competitors is merely duopoly. It takes a minimum of three viable choices to have any returns from competition that are significant to the consumers' preferences. Two competitors merely play off each other in predictable and increasingly ossified patterns.
New Deal democrat -> RC AKA Darryl, Ron... , March 25, 2017 at 07:17 AM
One very big quibble: >>SCOTUS unanswerable to the electorate<<

As bad as the SCOTUS can be, it would be unimaginably worse if it were subject to elections.

The big problem is that the Founders did not imagine life expectancies into the 80s. Throughout the 19th Century, the median time on the bench was about 14 years, and about 1/3 of all Justices served less than 10 years -- they got sick or died. Now the median time on the bench is 25 years, which is totally unacceptable.

If SCOTUS terms were set at 18 years, with a new Justice appointed every 2 years, independence would be preserved without the imposition of the "dead hands." Emeritus Justices could continue to serve on the appellate courts, and provisions would have to be made for deaths or retirements during the 18 year terms, but you get the idea.

RC AKA Darryl, Ron -> New Deal democrat... , March 25, 2017 at 07:36 AM
I did not mean elections. One of my favorite planks of the 1912 Bull Moose Party was the right for popular petition and referendum to overturn an unpopular SCOTUS decision. Roe V. Wade could not be overturned by referendum (which some fear but votes are measured by heat count rather than audible volume). Citizen United would be overturned by referendum. I trust democracy more than most, but still I don't get silly about it.

OTOH, SCOTUS term limits are also a good idea.

RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , March 25, 2017 at 07:38 AM
"...heat count..."

[No, HEAD count. If votes were measured by heat count then Bernie Sanders would be POTUS now.]

Paine -> New Deal democrat... , March 25, 2017 at 07:58 AM
New deal (D)emocrat

Is not a democrat

Or at least it would seem
NdD is no small d democrat

The court system we inherited is like many institutions
Ormed in our ante bellum era
an artifact of slave power

Paine -> Paine... , March 25, 2017 at 08:01 AM
Post bellum
The emerging big corporate power
found this arrangement congenial to its interests

The one challenge time ?


The new deal


The very era our sincere progressive liberal
NdD likes to impersonate at lawn parties

Paine -> Paine... , March 25, 2017 at 08:02 AM
The FED as drafted and redrafted
Is the supreme wanna be
mulp -> New Deal democrat... , March 25, 2017 at 08:18 AM
Yeah, Republicans should have appointed more of the judges.
New Deal democrat -> mulp... , March 25, 2017 at 09:56 AM
Democrats have held power for 10 of the last 18 years which would mean 5 of the current Justices would have been appointed by DSL.

[Insert snide remark about math abilities here.]

New Deal democrat -> New Deal democrat... , March 25, 2017 at 09:59 AM
Further, since 1968 (that's almost a half century ago, Dems have appointed exactly 5 Justices in total.

Under my system they would have appointed 10.

ilsm -> RC AKA Darryl, Ron... , March 25, 2017 at 09:06 AM
cnn resembles deep red tea party fox news.....

and the run of the mill dems should fit their tri-corn hats

RC AKA Darryl, Ron -> ilsm... , March 25, 2017 at 09:37 AM
I will take your word for it. We don't watch either CNN nor Fox News at my house. Mostly we watch local (same news and weather crew here appears on each the WWBT/WRLH local NBC/Fox affiliates) news with some sampling of MSNBC and Sunday morning ABC and CBS shows along with the daily half hour of NBC network following the evening local. Cable news is sort of an oxymoron given the prevailing editorial slants. The now retired local TV news anchor Gene Cox laid the groundwork for the best news team in central VA by setting a high bar at his station. Gene laid it all out southern fried with satirical humor and honesty unusual in TV news.
RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , March 25, 2017 at 09:38 AM
Maybe more sarcasm than satire, but the point is the same - wit and honesty.
JohnH -> Chris G ... , March 25, 2017 at 07:52 AM
Apparently we have two jokes alternating to lead America: the Republican jokes vs. the Democratic jokes.

Democrats are a joke for rallying their elite around a candidate who had huge negatives and for trying to block more popular candidates from running.

Democrats are a joke for having to rig the primaries in favor of a candidate who had already lost in 2008.

Democrats are a joke for refusing to sack a sclerotic, corrupt, and inept congressional leadership that had lost three straight elections.

Democrats are a joke for refusing to seize the issue that had propelled two Democrats into office--it's the economy, stupid!

Democrats are a joke for pigheadedly refusing to do a post mortem of their failure and insisting on blaming Putin instead!

But Democrats are right to expect that, when two jokes vie for power, their turn as joke in power will eventually come.

mulp -> JohnH... , March 25, 2017 at 08:29 AM
Ok, so, who do you want a post mortum to produce as the Democratic Trump?

Who would be the Democratic Freedom caucus obstructing all change unless all private property is confiscated?

You are merely saying Democrats must be more like Republicans. More extreme.

Democrats are centrists and moderates and thus unable to promise silver bullet solutions, free lunches, ...

Democrats just can't lie like Republicans have increasingly done since Reagan promised free lunches and failed to deliver, causing increasing anger among those Reagan betrayed.

JohnH -> mulp... , March 25, 2017 at 09:01 AM
Maybe a post mortem would simply reveal that Democrats should have had a coherent economic message and pursued a strategy of standing up for working America for the past 8 years. For example, having Pelosi demand votes on increasing the minimum wage as often as Ryan demanded votes on killing Obamacare...

Any honest post mortem would have revealed that standing with billionaires and the Wall Street banking cartel--and not prosecuting a single Wall Street banker--is not a winning strategy...

jonny bakho -> JohnH... , March 25, 2017 at 10:53 AM
Do you understand how Congress Works?
Pelosi has not had power to demand any votes since 2010.
As soon as the Dems came to power in 2007, they raised the MinWage and Bush signed.
There were several yearly increases.
You are repeating GOP nonsense
JohnH -> jonny bakho... , March 25, 2017 at 11:26 AM
Do you understand how Congress works? Pelosi could have proposed legislation in 2009-2010 to increase the minimum wage and index it to inflation. With a filibuster proof majority in the Senate it could have passed.

The Senate could have repeatedly proposed increasing the minimum wage any time until 2015...and Democrats could have attempted to attach minimum wage legislation as a budget rider any time they wanted. They didn't.

Chris G -> JohnH... , March 25, 2017 at 12:33 PM
That Pelosi did not resign immediately following the 2016 election or, not having offered her resignation, that Congressional Democrats did not demand it is an indication that the party still has deep-rooted problems. (Pelosi may not be the cause of those problems but given how badly they've fared since 2010 she's clearly not the solution. She has no business remaining as minority leader.) I'm fine with Perez as DNC chair but Ellison should be minority leader.

Lee A. Arnold : , March 25, 2017 at 04:48 AM
"Medicare for all" may be the best battle cry. 65-70% of the U.S. people want a single-payer. Bernie Sanders has effectively destroyed the old Democratic Party and sits in a commanding position as spokesman, he gets 6 TV cameras with an hour's notice and he is probably the most popular politician in the U.S. The Democrats don't have to push it for now, they can wait for news to develop. This is all on the Republicans. Let the managerial disaster of Trump and the utter immorality of the "Freedom Caucus" sink in a little more, this story has "legs" as they say in show biz.
jonny bakho -> Lee A. Arnold ... , March 25, 2017 at 05:04 AM
David Frum, the excommunicated conservative wrote in 2010:
""The real leaders are on TV and radio"

Bernie Sanders is the Dems TV leader.
Simple ideas repeated endlessly, easy to memorize slogans
Knows how to manipulate emotions
In the Twitter Age, this is how all successful politicians must message

Chris G -> jonny bakho... , March 25, 2017 at 06:29 AM
It doesn't hurt that his ideas are good ones;-)

Simple slogans repeated often isn't a new approach to politics. It goes back well over a century. "Keep it simple and take credit." Liberals haven't been very good at that in recent decades. (In contrast, FDR was.) Most people aren't wonks nor do they desire to become one. Messaging which presumes that they are or do is not a recipe for success.

Chris G -> Chris G ... , March 25, 2017 at 06:31 AM
Jack Meserve, Keep It Simple and Take Credit - http://democracyjournal.org/arguments/keep-it-simple-and-take-credit/
jonny bakho -> Lee A. Arnold ... , March 25, 2017 at 05:09 AM
Sanders has not "destroyed" the old Democratic Party.
He is a better TV messenger and ambassador to the public
He plays the Paternalistic Grandfather who does not trigger culture shock among white voters on TV
Lee A. Arnold -> jonny bakho... , March 25, 2017 at 05:59 AM
More like the cranky uncle, whom you had better listen to. Bernie Sanders is currently the most popular politician in the United States, by a long shot:

http://thehill.com/blogs/pundits-blog/the-administration/325647-stunning-polls-show-sanders-soaring-while-trumpcare

Peter K. -> jonny bakho... , March 25, 2017 at 08:24 AM
you minimize how well he did in the primary as do all of you dishonest center-left types
Peter K. -> Peter K.... , March 25, 2017 at 08:31 AM
Sanders won New Hampshire, Colorado, Minnesota, Oklahoma, Vermont, Kansas, Nebraska, Maine, Michigan, Idaho, Utah, Alaska, Hawaii, Washington, Wisconsin, Wyoming, Rhode Island, Indiana, West Virginia, Oregon, Montana, North Dakota.

*and he was close in many states like losing Massachusetts 606k to 589k. And the entire second half of the primary the DNC was repeating how Hillary had won mathematically over and over even though people hadn't voted.

DeDude -> jonny bakho... , March 25, 2017 at 08:38 AM
"Sanders has not "destroyed" the old Democratic Party"

No he is not stupid. What he has done is moving the Overton window - something that was long overdue. There is definitely an opening to make ObamaCare the first step towards MediCare for all (as it always was intended by by all but the bluedogs). But as good as Sanders is at message and getting the crowds going, he is going to need help with the politicking to actually get it done.

ilsm -> Lee A. Arnold ... , March 25, 2017 at 05:35 AM
too hard....

two party system

both obey FIRE

why no indeps

go for 'serious'

dems

Russians

cannot mess

this up

New Deal democrat -> Lee A. Arnold ... , March 25, 2017 at 07:35 AM
One issue going forward is whether the Dems should offer their own plan. I think they should.

As a few others have pointed out, Trump is not wedded to the GOP establishment. If he thinks he can "WIN bigly!" by allying with Dems, he will do so. I happen to think that he is mainly against "Obamacare" because Obama humiliated him at the White House Correspondents' Dinner once upon a time, and he is nothing if not vengeful. He wants to obliterate Obama's legacy.

So Dems need to make a big stink any time Trump administrativley undercuts Obamacare provisions to try to make it fail. But also they should give him the chance to do something he can call Trumpcare that actually works.

Obamacare does have some major problems (the individual mandate is hated, and the penalty isn't big enough. More young people need to buy in. Some of the Exchanges and health care provider networks are too narrow.

In addition to the "public option" and age 55+ Medicare buy-in, one thing that might work is abollishing the mandate and penalty and replaciing them with automatic enrollment. Call it "You're employed, you're covered!"

Just like SS, Medicare, unemployment and disability deductions to paychecks, establish a Health Care automatic deductible. If your employer offers healthcare, the deductible is reduced by the amount of the premium, all the way to zero if applicable.
If your employer doesn't offer healthcare, if you are under age 40, you are automatically enrolled in the least expensive Bronze plan in your state. If you are 40 or older, you are automatically enrolled in the least expensive Silver plan in your state.

The deductible would also include a small contribution towards Medicaid. Then, if you are unemployed, you are automatically enrolled in Medicaid, but can continue with the silver or bronze plan as above if you choose.

Dems could turmpet such a plan to "Reform and Improve" Obamacare, and campaign on pushing for it if they get a Congressional majority. Call it Trumpcare and President Caligula might sign on.

Peter K. -> New Deal democrat... , March 25, 2017 at 08:22 AM
Yes, good succinct comment by Arnold.
DeDude -> New Deal democrat... , March 25, 2017 at 08:52 AM
I agree that there might be an opening for that after the midterms. If Trump pushes on the weak spots of ObamaCare rather than fixing them, he will have backed himself into a corner that only the democrats can help him get out of. Right now democrats just need to do a lot of nice talk about being willing to sit down with the President and negotiate a common sense bipartisan solution.
mulp -> DeDude... , March 25, 2017 at 09:46 AM
No. Republicans must be driven by fear to sit down with Democrats to get their help. Republicans must own whatever they get Democrats to support so Republicans can't turn around and attack the result like they attacked the Republican defined Obamacare.

Medicaid is Republican defined - Medicare for the poor gave too much to the inferior poor and disabled. The old were superior because they are the fit who survived, thus they are rewarded with Medicare.

The Obamacare public option is Medicaid. Government health care for losers. Anyone can qualify by choosing to be losers. Obamacare does have the public option progressives demanded, but it's not the public option for winners.

Paine -> Lee A. Arnold ... , March 25, 2017 at 08:04 AM
Excellent commentary Lee A A
Peter K. -> Lee A. Arnold ... , March 25, 2017 at 08:22 AM
Yes, good succinct comment by Arnold.
mulp -> Lee A. Arnold ... , March 25, 2017 at 09:37 AM
Name the Senators, representatives, and governors Bernie Bros have delivered?

Where are the Bernie Bros Newts, Cruz, Marcos, ...?

I'm in my 70th year. Conservatives attacked liberals in the 60s, my youth, as promising free lunches to gain power. But what they really hated was liberals convinced voters to tax all voters to pay for the things most voters wanted everyone to have, BASED ON SOUND ECONOMICS TO MAXIMIZE EFFICIENCY AND WELFARE.

Friedman led the effort to distort theory to eliminate the broad meaning of general welfare in economics. He did it by eliminating the hard connection between labor cost and gdp. He argued that labor costs and consumption can be cut to increase profits, and that contrary to theory, higher profits is more efficient.

Laffer applied operations theory to taxes, as if government was taxing to maximize profits.

Thus supply side theory of profit maximization.

The result delivered was the imperative to cut taxes. To cut labor costs.

Thus they argued that every economic measure improves if taxes and wages are cut.

Reaganomics would deliver more stuff at lower cost, higher profut, and that makes everyone better off, especially those in poverty.

Friedman saw consumption as a bad thing. He wanted higher gdp, less consumption.

In other words, he rewrote Adam Smith attack on mercantile economics into a justification of returning to mercantile economic policy.

So, who do Bernie Bros offer as the Milton Friedman and Laffer to create an intellectual foundation to refute Adam Smith, FDR, Keynes, Galbraith, are return to hunter gatherer economics? Who is the economist who can convince us that Marxist economic theory will work, as long as it's not captured by right wing capitalists like Fidel Castro, Chavez, Stalin, Lenin, the founders of Israel, ....

Bernie certainly must be influenced by the same economic theory that created Israel. It grew from the same Marxist roots in Germany that powered Stalin and Lenin. Bernie is a pre-WWII Zionist as best I can tell.

Why wouldn't Bernie deliver Israel governance to the US? How would he prevent the greedy from joining the Movement?

And Israel has the social welfare state system Bernie wants. Hundreds of thousands of men do not work so they can study supported by welfare. Universal health care. Women are very equal in status.

I grew up heating the Zionist Dream, theory, much like Bernie did, but from conservative Indiana. Seemed very idealist virtue becoming reality in the 50s and 60s.

I have often used Israel as the example of a good universal health care system, of education, of welfare.

Never heard Bernie say, "I want the US to be like Israel." Why not? Why Sweden?

jonny bakho : , March 25, 2017 at 04:54 AM
Frank is wrong. What the GOP establishment dislikes most about Obamacare is the taxes on the wealthy. Medicare for all would have to be paid for by taxes on the wealthy or substantial payroll tax increases on the working class.
This does not meet GOP or Trump objectives for tax cuts on the wealthy.
The TV and radio talk uses Obamacare bashing to sell ads. They can easily change the subject to some other click bait.
Medicare for all? NaGonnaHappN
RC AKA Darryl, Ron -> jonny bakho... , March 25, 2017 at 05:14 AM
Frank was not suggesting that the GOP establishment would support Medicare for all. Frank was suggesting that Trump would essentially change parties to become a Democrat. As dubious as that notion is, more importantly it is premature. If Democrats win back both chambers of Congress, then it would at least be mechanically possible if still extraordinarily dubious. Mostly though Frank was just reaching for something worth saying. Now is a tuff time for commentary on the political economy.
jonny bakho -> RC AKA Darryl, Ron... , March 25, 2017 at 05:47 AM
Trump is not going to raise the taxes required to fund Medicare For All.
Frank is delusional
Lee A. Arnold -> jonny bakho... , March 25, 2017 at 06:10 AM
Jonny Bakho: "Medicare for all would have to be paid for by taxes"

Theoretically you don't have to raises taxes if you get private insurers out of the game. They are a big expense, and give no value-added.

Doesn't mean that is politically possible, with Trump and a GOP Congress. But Trump and a Democratic Congress? I couldn't predict. Keep in mind that this man is almost an ideological vacuum, no managerial skills, has no constant concerns for anything except keeping himself in the spotlights, to be loved. And he just learned that the Freedom Caucus is implacably nuts.

New Deal democrat -> Lee A. Arnold ... , March 25, 2017 at 07:21 AM
"the Freedom Caucus is impacably nuts."

Thank the Great Flying Spaghetti Monster for that!!!!

Everytime the centrist dems - or mainly GOPers - try to sell out social insurance programs, the Freedom Caucus stands in their way. As a progressive, I am deeply and profoundly grateful!

/ snark

New Deal democrat -> New Deal democrat... , March 25, 2017 at 07:22 AM
"every time" and "main line"

G*d I hate autocorrect.

ilsm -> New Deal democrat... , March 25, 2017 at 09:10 AM
socialists should all be glad

trump is running the wreckage

more 'social progress' for big FIRE

RC AKA Darryl, Ron -> Lee A. Arnold ... , March 25, 2017 at 07:30 AM
"They are a big expense, and give no value-added."

[Someone has to do claims processing. The resistance against growing the federal payroll is an unnecessary hurdle for Medicare for all (MFA) to jump. Better administer it more like Medicaid. Let insurance companies handle the operations for a fee. Federal claim payments are handled on a pass thru. Then let the operational administration default to the MFA supplemental plan carrier if the insured has one, else the lowest cost carrier in the insured's state. For MFA clients then there could be a single claims process for providers even for patients with both MFA and MFA supplemental policies. That lowers the hurdle for MFA to leap over the insurance company lobby as well.]

RC AKA Darryl, Ron -> RC AKA Darryl, Ron... , March 25, 2017 at 07:31 AM
Hell, that would even lower the provider and patient hurdles.
Lee A. Arnold -> RC AKA Darryl, Ron... , March 25, 2017 at 10:08 AM
Claims processing by humans is going to become a thing of the past.
RC AKA Darryl, Ron -> Lee A. Arnold ... , March 25, 2017 at 11:29 AM
Most of health insurance claims processing has been automated for a long time. Still it takes a lot of worker-hours to reconcile the errors.

Imagine how many worker hours it will take to reconcile liabilities for the first multi-car multi-fatality pile up of robot cars on the LA freeway. It will not matter that in total there have been less collisions and less fatalities when the big one hits. Computers are incapable of intuitive judgement which leads to blunders of potentially a colossal scale occurring that could have easily been foreseen by a human. To err is human but it takes a computer to really screw things up beyond all recognition. It is just a matter of time and time is always on Murphy's (that which can go wrong will go wrong) side. I know that myths about computers that never make mistakes and never need to be programmed again abound and I am sure that they will still be with us 20,000 years from now, when we are not even in any memory banks. I spent my entire career about to be replaced by software, but I was finally laid off because of administrative concerns with regards to legacy managed employees in context of the re-compete of the NG/VITA outsourcing contract (which is far less catchy). Computers have the potential to speed transit and reduce fatalities, but that potential will not be permanently realized as long as people are intent upon removing all human control and intervention. Computers can be capable copilots under almost all circumstances, but their owners cannot weather the fallout from their inability to conceive a response on their own when confronted with conditions that they were not programmed for. Such dramatic consequences will eventually raise a great furor, horror, deep sorrow, and extensive liability concerns. Even if you could sue a computer it is unlikely that they could demonstrate the means to pay. Incarceration of a computer for criminal negligence seems a bit ludicrous as well. The owner of the offending property better have their insurance premiums all paid up, but what then? Who will insure the next owner? Advocates of computer driven cars are planning on no fault insurance being mandated in each and every state. Good luck with that.

My wife works for Anthem although not in claims processing. She used to work in membership which is also automated. Software developers for health insurance mostly use Agile methods. One facet of that is that they only expect automation to handle roughly 90% (ideally more) of the workload because they have learned that there will never be a no defects computer system and they are saving expensive labor time in development by allowing lower paid workers to pick up a lot of the more complicated cases manually. That reduces time spent in the iterative process of testing and correcting defects. I am sure that you remember the problems with the ACA's automated insurance membership market. Stuff happens all the time in IT.

It is not that I had to work in IT for 47 years to understand the limitations. Merely my childhood education on the mathematical system of logic that underlies their circuitry and programming would have been sufficient, but a bit of empirical confirmation never hurts. Understanding reality is unfortunately a pre-requisite, but once that is accomplished then there are great opportunities to achieve improved results. Computers are not the problem, but can often be an essential part of the solution rather than a faceless soulless panacea. Does not compute can happen anywhere, but worse though when it happens at 75 MPH.

mulp -> Lee A. Arnold ... , March 25, 2017 at 09:57 AM
So, your answer is higher unemployment?

"They are a big expense, and give no value-added."

You clearly buy in too free lunch economics!

Cut costs (of paying workers) to give everyone more stuff and create more higher paying jobs!!!

By the way, Medicare employs as many people as insurers to administer the benefits and provider payments. After all, it's all outsourced to insurers who already do that work for employers.

Do not assume that the 10% of insured individuals and small groups with high sales and marketing cost represent the costs of the 80% with very low sales and marketing costs, handled by insurer backroom operations.

Your argument is like saying that nationalizing Apple would cut food costs by 50% because Apple sales, marketing, profits are 50% of Apple revenue and thus 50% of everything is sales, marketing, profit.

Lee A. Arnold -> mulp... , March 25, 2017 at 11:27 AM
Every serious study that looks at current costs in the multipayer healthcare insurance concludes that moving to single-payer will save 15-20% of total spending. Here is yet another one:
https://www.ncbi.nlm.nih.gov/pmc/articles/PMC4283267/
RC AKA Darryl, Ron -> Lee A. Arnold ... , March 25, 2017 at 11:40 AM
There is nothing about that paper that would not hold true or even truer of a two tiered system of Medicare for all with administrative processing collocated with the supplemental insurer whenever there is one. Just do a work flow model and note how many steps are cut out at each the provider and insurer if primary and secondary coverage administrative processing for membership, claims, and policy holder services are collocated.
Chris G -> jonny bakho... , March 25, 2017 at 06:46 AM
Ah, but Trump is both delusional and vengeful. He might wake up one morning and decide that Republicans are enemies to be destroyed. He has no interest in let alone understanding of policy. He could take a position just out of spite. And if he thought it would make people who weren't his enemies love him then who knows. (Odds of him being struck by lightning are probably comparable - low but not zero.)
RGC -> jonny bakho... , March 25, 2017 at 06:50 AM
Government Funds 60% of U.S. Healthcare Costs - Far Higher than Previously Believed

"We Pay for National Health Insurance but Don't Get It"

"Universal coverage is affordable - without a big tax increase," continued Dr. Himmelstein. "Because taxes already fund 60% of health care costs, a shift about the size of the recent tax cut ($130 billion a year) from private funding to public funding would allow us to cover all the uninsured and improve benefits for everyone else. Insurers/HMOs and drug companies buy-off our politicians with huge campaign contributions and hordes of lobbyists."


http://www.pnhp.org/news/2002/july/government_funds_60.php

Chris G -> RGC... , March 25, 2017 at 07:20 AM
Reference is from 2002. Current numbers?
RGC -> Chris G ... , March 25, 2017 at 08:04 AM
Beyond the Affordable Care Act: A Physicians' Proposal for Single-Payer Health Care Reform

During a transition period, all public funds currently spent on health care – including Medicare, Medicaid, and state and local health care programs – would be redirected to the unified NHP budget. Such public spending – together with tax subsidies for employer-paid insurance and government expenditures for public workers' health benefits – already accounts for 60% of total U.S. health expenditures.28 Additional funds would be raised through taxes, though importantly these would be fully offset by a decrease in out-of-pocket spending and premiums.

http://www.pnhp.org/nhi

RGC -> RGC... , March 25, 2017 at 07:36 AM
Many employers now pay for employees' health insurance and that employee compensation is tax-exempt.

If employers health insurance comp were replaced by medicare for all, employers could replace it with wages.

Employees could get health insurance from medicare instead of from private plans. Thus instead of private health insurance paid by employers (and partially by the government via tax exemptions), medicare could pay it from the taxes the government didn't use to collect.

RGC -> RGC... , March 25, 2017 at 10:13 AM
Which would you rather do - pay taxes for Medicare or pay a larger amount than the taxes to private insurers?
ilsm -> RGC... , March 25, 2017 at 09:12 AM
when a "kid" of 50 needs

quad bi-pass they must

thank medicare those

cardio ICU's would be

gone without the

75 years olds' "demand"

as if FIRE would finance

$2M units

that don't

have positive ROI

RGC -> RC AKA Darryl, Ron... , March 25, 2017 at 07:08 AM
Is Donald Trump still 'for single-payer' health care?


"Perry said Trump is "for single-payer health care."


Fifteen years ago, Trump was decidedly for a universal healthcare system that resembled Canada's system, in which the government pays for care for all citizens.

Recently, he's said he admires Scotland's single-payer system and disses the Affordable Care Act as incompetently implemented.

However, a Trump spokesman denied that the candidate supported "socialized medicine" and suggested Trump prefers a "free-market" solution. Other than that, though, the Trump campaign has been silent about what his specific health care policies are; perhaps Trump will be pressed on this point during the Aug. 6 debate.

Given the current evidence, Perry's attack is partially accurate, but leaves out details. We rate the statement Half True.

http://www.politifact.com/truth-o-meter/statements/2015/aug/02/rick-perry/donald-trump-still-single-payer-health-care/

RC AKA Darryl, Ron -> RGC... , March 25, 2017 at 07:40 AM
Trump will need to leave the Republican Party to get that done and first he will need the Republican Party majority to leave Congress.
RGC -> RC AKA Darryl, Ron... , March 25, 2017 at 07:51 AM
You mean like in 2018?
ilsm -> RGC... , March 25, 2017 at 09:15 AM
Trump single payer

need the dems off

wall st as well

what Trump said

US not ready

bi partisan thugs

must plunder more

to make US

ready

RC AKA Darryl, Ron -> RGC... , March 25, 2017 at 09:40 AM
Well, 2018 would be about time for it, but the Democratic Party has proven an unreliable source before.
DeDude -> RC AKA Darryl, Ron... , March 25, 2017 at 09:05 AM
Trump is actually apolitical - the only reason he right now is Trumpeting hard right wing and neocon ideas is that he is being feed them, and he got snookered into thinking they would work for him. When he realize that crap is pulling his reputation and popularity down the drain, he will be ready for someone to offer him a lifeline.
RC AKA Darryl, Ron -> DeDude... , March 25, 2017 at 09:42 AM
Well, that would certainly be my hope. There is evidence that he has been all over the map politically which confirms what you say.
ilsm -> jonny bakho... , March 25, 2017 at 05:36 AM
gop and dem

establish

the same

Peter K. -> ilsm... , March 25, 2017 at 08:20 AM
New Deal democrat -> Lee A. Arnold...

"the Freedom Caucus is impacably nuts."

Thank the Great Flying Spaghetti Monster for that!!!!

Everytime the centrist dems - or mainly GOPers - try to sell out social insurance programs, the Freedom Caucus stands in their way. As a progressive, I am deeply and profoundly grateful!

/ snark

Reply Saturday, March 25, 2017 at 07:21 AM

My thoughts exactly. EMichael and PGL said it was the Wall Street Democrats we had to worry about? What?

Tax reform will also crash and burn now. PGL has been all worried whining for months without telling his readers that there is a large business and conservative opposition to Paul Ryan's reform.

ilsm -> Peter K.... , March 25, 2017 at 09:17 AM
the DLC/Clinton cabal

implacably corrupt!

RC AKA Darryl, Ron -> ilsm... , March 25, 2017 at 09:45 AM
The nature of dollar duopoly is implacably corrupt. Until we change that system then we will have to make do with what we got. It has largely been that way since the ink dried on the US Constitution.
Gerald : , March 25, 2017 at 05:30 AM
"The president...may consider changing course and working across party lines to develop support for universal access to Medicare." Would that this were possible; Trump doesn't care nearly enough about the millions who would benefit to make the slightest move in this direction.
ilsm -> Gerald ... , March 25, 2017 at 05:38 AM
aside from

early tax returns

trump has

early view

of EU style

health system

look it up

Fred C. Dobbs -> ilsm... , March 25, 2017 at 07:26 AM
So, most here will agree,
let it be Bernie, going forward?

I could accept & work with that.

ilsm -> Fred C. Dobbs... , March 25, 2017 at 09:18 AM
yup!
DeDude -> Gerald ... , March 25, 2017 at 09:10 AM
The thing he cares about is his approval ratings and popularity. He will soon enough recognize that supporting issues that has support from 2/3 or more of the population is the way to improve his popularity. If the democrats play it right they can get a lot of their own priorities through with his help. Remember how Bush II got a $ trillion MediCare prescription drug benefit through a conservative congress (and it is funded through the regular progressive tax system). That was a democratic policy that could not have been passed by a democratic President.
marcus nunes : , March 25, 2017 at 06:09 AM
"The EU will celebrate on March 25th the 60th anniversary of its founding (Treaty of Rome, 1957), while its future is in doubt. What went wrong?"
https://thefaintofheart.wordpress.com/2012/05/27/meade-swann-and-how-two-simple-lines-perfectly-illustrate-the-eurozone-conundrum/
point : , March 25, 2017 at 06:43 AM
https://growthecon.com/blog/Profit-Accounting/

"If your house is worth 500,000, a 3% return would mean charging 15,000 in rent per year, or 1,250 per month. Now, if you look out at the market and find out that you could actually rent your house out for 2,000 per month, you are making 750 in economic profit. The price you can charge for your house, 2,000, is higher than the marginal cost to you, 1,250. Profits!"

The idea that the difference in market value and PV rents represents economic profits does not sit well with me, but I can't exactly explain why. It seems more like speculative profit. And the idea that the difference should systematically persist, as seems to be the case in the discussion, also does not sit well. The discussion implies, after all, that rents, representing non-production, are becoming increasingly large in aggregate. I know that we subsidize the pyramid accumulation of rent streams, for no good reason in my opinion, but if this is true it seems to say there is another kind of hollowing out underway where rents displace real return on investment. All this in the context where renters, in general, cannot fund the sum of housing, education, medical care and retirement

DeDude -> point... , March 25, 2017 at 09:18 AM
That calculation doesn't take into account the depreciation of the property or the taxes and maintenance. A lot of people who buy houses to rent them out use the rule of 100. If you want to make good money on a rental property you have to be able to get a rent of no less than 1% of your purchase price. So a $100K property should rent out for $1000 per month.
point -> DeDude... , March 25, 2017 at 10:30 AM
So the guy's 3% may be in error.
DeDude -> point... , March 25, 2017 at 11:07 AM
Yes big time. He is considering the house an investment asset with no cost (like a bond or stock). However, houses have all kinds of cost and they also lose value for every year they get older. An investment return of 3% is only "reasonable" for basically risk free investments (government or government guaranteed bonds) that have absolutely no cost associated with owning them.
Fred C. Dobbs : , March 25, 2017 at 07:35 AM
In a Call to The Times, Trump Blames Democrats for the
Failure of the Health Bill https://nyti.ms/2nNPHD9
NYT - MAGGIE HABERMAN - MARCH 24, 2017

WASHINGTON - Just moments after the Republican plan to repeal and replace the Affordable Care Act was declared dead, President Trump sought to paint the defeat of his first legislative effort as an early-term blip.

The House speaker, Paul D. Ryan, was preparing to tell the public that the health care bill was being withdrawn - a byproduct, Mr. Trump said, of Democratic partisanship. The president predicted that Democrats would return to him to make a deal in roughly a year.

"Look, we got no Democratic votes. We got none, zero," Mr. Trump said in a telephone interview he initiated with The New York Times.

"The good news is they now own health care. They now own Obamacare."

Mr. Trump insisted that the Affordable Care Act would collapse in the next year, which would then force Democrats to come to the bargaining table for a new bill.

"The best thing that can happen is that we let the Democrats, that we let Obamacare continue, they'll have increases from 50 to 100 percent," he said. "And when it explodes, they'll come to me to make a deal. And I'm open to that."

Although enrollment in the Affordable Care Act declined slightly in the past year, there is no sign that it is collapsing. Its expansion of Medicaid continues to grow.

In a later phone interview with The Times, the Senate minority leader, Chuck Schumer, ridiculed Mr. Trump's remarks about Democrats being at fault.

"Whenever the president gets in trouble, he points fingers of blame," Mr. Schumer said. "It's about time he stopped doing that and started to lead. The Republicans were totally committed to repeal from the get-go, never talked to us once. But now that they realize that repeal can't work, if they back off repeal, of course we'll work with them to make it even better."

Mr. Trump said that "when they come to make a deal," he would be open and receptive. He singled out the Tuesday Group moderates for praise, calling them "terrific," an implicit jab at the House Freedom Caucus, which his aides had expressed frustration with during negotiations. ...

Fred C. Dobbs -> Fred C. Dobbs... , March 25, 2017 at 07:41 AM
Failure of health care bill is a huge setback for Trump
http://www.bostonglobe.com/news/politics/2017/03/24/trump-massive-loss-endangers-his-young-presidency/Czat7MDmwHa7us43qJeEbM/story.html?event=event25
via @BostonGlobe - Annie Linskey - March 25, 2017

WASHINGTON - Donald Trump famously said that if he became president he would win so much, Americans would get tired of winning. But so far he's mostly losing, bigly.

Even with a wide Republican majority in the House, the president failed to deliver on the centerpiece of his legislative agenda - repealing the Affordable Care Act - raising loud questions about the effectiveness of his young presidency and whether Republicans are capable of making the transition from an opposition party to one that governs.

"It's a catastrophic legislative failure," said Rick Tyler, a Republican strategist who didn't support Trump during the election. "It's the equivalent of having a cardiac arrest. You can recover from it, but it will take a lot of rehab."

He added: "Political experience is a hard teacher. You get the test first and learn the lesson next."

Even former House speaker Newt Gingrich, a close Trump ally, delivered a harsh verdict Friday. "Why would you schedule a vote on a bill that is at 17 percent approval?" he asked on his Twitter feed, referring to a Quinnipiac University poll.

The tweet went viral, and in an interview Gingrich added: "When I saw the numbers - that is everything I have opposed in my entire career. That's how the Republicans lost the majority."

Still, the defeat of Trump's first request of Congress represents a further deterioration of his already shaky credibility in Washington and among the American people.

He has cast himself as a master salesman and the "closer" who can win over allies in the most difficult of circumstances through some combination of his winning personality and take-no-prisoners approach to negotiations.

But that picture of Trump is becoming about as questionable as his unsubstantiated claims that he had huge crowd sizes at his inauguration, his unproven accusations that bus loads of Massachusetts voters cast illegal ballots in New Hampshire, and his much rejected insistence that then-President Obama put a wiretap on his phone.

The pattern, in the eyes of his harshest critics, is that there's little evidence to back up his boasts.

He could not close this deal. Republican members of the House of Representatives, who have voted to repeal the Obama health law more than 50 times in the past seven years, refused Trump's entreaties to support the Republican replacement for the law.

The setback comes as other storm clouds are gathering over the Trump presidency. There's the FBI investigation into whether his campaign staff coordinated e-mail leaks designed to influence the election, along with the Russians.

FBI director James Comey was spotted going in and out of the West Wing on Friday, which was a reminder of the investigation, even if the White House claimed Comey was there for a routine meeting. ...

Tom aka Rusty -> Fred C. Dobbs... , March 25, 2017 at 07:47 AM
This was bound to happen.
Fred C. Dobbs -> Tom aka Rusty ... , March 25, 2017 at 08:08 AM
Hillary Clinton ✔ ‎@HillaryClinton

Today was a victory for all Americans.

5:21 PM - 24 Mar 2017

(statement at https://twitter.com/HillaryClinton/status/845385004389666816 )

Fred C. Dobbs -> Tom aka Rusty ... , March 25, 2017 at 08:19 AM
Elizabeth Warren ✔ ‎@SenWarren

But I'm not doing a touchdown dance today. Not
when the GOP is still hell-bent on rigging the
system for the rich & powerful.

5:56 PM - 24 Mar 2017

https://twitter.com/SenWarren/status/845393852219478022

ilsm -> Fred C. Dobbs... , March 25, 2017 at 09:24 AM
Comey going in

to talk jail

not gop targets

story is not only

uncovering DLC corruption

it is leaking

surveillance of Russian

diplomats' conversation with

US citizens that have no

intelligence to leak

'colluding' to put the truth

out is only crime

to DLC Leninists

Obama Leninism

crushing the

Bill of Rights

is the story

Fred C. Dobbs -> Fred C. Dobbs... , March 25, 2017 at 08:02 AM
On health-care, as on so much else,
President Trump passes the buck, reports
https://www.theatlantic.com/politics/archive/2017/03/the-buck-doesnt-stop-here-anymore/520839/
The Atlantic - David A. Graham - March 24, 2017

Speaking in the Oval Office Friday afternoon, President Trump surveyed the wreckage of the Obamacare repeal effort and issued a crisp, definitive verdict: I didn't do it.

The president said he didn't blame Speaker Paul Ryan, though he had plenty of implied criticism for the speaker. "I like Speaker Ryan. He worked very hard," Trump said, but he added: "I'm not going to speak badly about anybody within the Republican Party. Certainly there's a big history. I really think Paul worked hard." He added ruefully that the GOP could have taken up tax-reform first, instead of Obamacare-the reverse of Ryan's desired sequence. "Now we're going to go for tax reform, which I've always liked," he said.

As for the House Freedom Caucus, the bloc of conservatives from which many of the apparent "no" votes on the Republican plan were to come, Trump said, "I'm not betrayed. They're friends of mine. I'm disappointed because we could've had it. So I'm disappointed. I'm a little surprised, I could tell you."

The greatest blame for the bill's failure fell on Democrats, Trump said.

"This really would've worked out better if we could've had Democrat support. Remember we had no Democrat support," Trump said. Later, he added, "But when you get no votes from the other side, meaning the Democrats, it's really a difficult situation."

He said Democrats should come up with their own bill. "I think the losers are Nancy Pelosi and Chuck Schumer, because they own Obamacare," he said, referring to the House and Senate Democratic leaders. "They 100 percent own it."

Trump was very clear about who was not to blame: himself. "I worked as a team player," the president of the United States said, demoting himself to bit-player status. He wanted to do tax reform first, after all, and it was still early. "I've been in office, what, 64 days? I've never said repeal and replace Obamacare within 64 days. I have a long time. I want to have a great health-care bill and plan and we will."

Strictly speaking, it is true that Trump didn't promise to repeal Obamacare on day 64 of his administration. What he told voters, over and over during the campaign, was that he'd do it immediately. On some occasions he or top allies even promised to do it on day 1. Now he and his allies are planning to drop the bill for the foreseeable future.

It is surely not wrong that there is lots of blame to go around. Congressional Republicans had years to devise a plan, and couldn't come up with one that would win a majority in the House, despite a 44-seat advantage. The House bill was an unpopular one, disliked by conservatives and moderates in that chamber; almost certainly dead on arrival in the Senate; and deeply unpopular with voters. Even before the vote was canceled, unnamed White House officials were telling reporters that the plan was to pin the blame on Ryan. ...

The Republicans fold and
withdraw their health-care bill https://www.theatlantic.com/politics/archive/2017/03/trump-republicans-failure-obamacare/520788/
The Atlantic - Russell Berman - March 24, 2017

... Defeat on the floor dealt Trump a major blow early in his presidency, but its implications were far more serious for the Republican Party as a whole. Handed unified control of the federal government for only the third time since World War II, the modern GOP was unable to overcome its internecine fights to enact a key part of its policy agenda. The president now wants to move on to a comprehensive overhaul of the tax code, but insiders on Capitol Hill have long believed that project will be an even heavier lift than health care.

As the prospect of a loss became more real on Friday, the frustrations of GOP lawmakers loyal to the leadership began to boil over. "I've been in this job eight years, and I'm wracking my brain to think of one thing our party has done that's been something positive, that's been something other than stopping something else from happening," Representative Tom Rooney of Florida said in an interview. "We need to start having victories as a party. And if we can't, then it's hard to justify why we should be back here."

Nothing has exemplified the party's governing challenge quite like health care. For years, Republican leaders resisted pressure from Democrats and rank-and-file lawmakers to coalesce around a detailed legislative alternative to Obamacare. That failure didn't prevent them from attaining power, but it forced them to start nearly from scratch after Trump's surprising victory in November. At Ryan's urging, the party had compiled a plan as part of the speaker's "A Better Way" campaign agenda. Translating that into legislation, however, proved a much stiffer challenge; committee leaders needed to navigate a razor's edge to satisfy conservatives demanding a full repeal of Obamacare and satisfy moderates who preferred to keep in place its more popular consumer protections and Medicaid expansion. They were further limited by the procedural rules of the Senate, which circumscribed how far Republicans could go while still avoiding a Democratic filibuster. ...

Fred C. Dobbs -> Fred C. Dobbs... , March 25, 2017 at 08:27 AM
It would appear that the 'Freedom Caucus', of
about 30 GOPsters in the House, was barely
enough to stop the AHCA because it 'wasn't
conservative enough', but the moderate
Tuesday Group of about 50 surely was,
because it was too 'conservative'.
ilsm -> Fred C. Dobbs... , March 25, 2017 at 09:28 AM
even with super majority

Obama got a severely flawed

pro FIRE ACA

not Affordable

only replace is

medicare for all

mulp -> ilsm... , March 25, 2017 at 10:16 AM
But you need better free lunch economics to beat the free lunch economics of conservatives, Republicans, Tea Party, Freedom caucus, and Trump.

You need free lunch economics that work and deliver something for nothing. The failure Friday was free lunch economics hitting reality. Getting government and insurance companies out of the lives of Trump and Republican voters did not make these voters richer, healthier, and freer.

Bernie has his own free lunch economics which will likewise turn out to be ashes in the mouths of voters who might get him into the White House, he wants to cut spending based on "not paying workers will not make those workers worse off". Exactly the same theory Reagan to Trump use. Gutting costly regulations that require paying workers to comply will not result in workers being worse off. Or property owners.

Bernie campaigned on eliminating fossil fuels in a way that his voters will be able to keep burning fossil fuels to drive to his rallies and to heat their homes.

anne : , March 25, 2017 at 07:54 AM
http://cepr.net/blogs/beat-the-press/new-health-care-plan-open-source-drugs-immigrant-doctors-and-a-public-option

March 25, 2017

New Health Care Plan: Open Source Drugs, Immigrant Doctors, and a Public Option

Now that the Republican health care plan has been sent to the dust bin of history, it's worth thinking about how Obamacare can be improved. While the Affordable Care Act was a huge step forward in extending insurance coverage, many of the complaints against the program are justified. The co-pays and deductibles can mean the plans are of little use to middle income people with relatively low bills.

This is a great time to put forward ideas for reducing these costs and making other changes in the health care system. Obviously this congress and president are not interested in reforms that help low and middle income families, but the rest of us can start pushing these ideas now, with the expectation that the politicians will eventually come around.

There are two obvious directions to go to get costs down for low and middle income families. One is to increase taxes on the wealthy. The other is to reduce the cost of health care. The latter is likely the more promising option, especially since we have such a vast amount of waste in our system. The three obvious routes are lower prices for prescription drugs and medical equipment, reducing the pay of doctors, and savings on administrative costs from having Medicare offer an insurance plan in the exchanges.

Taking these in turn, the largest single source of savings would be reducing what we pay for prescription drugs. We will spend over $440 billion this year for drugs that would likely sell for less than $80 billion in a free market without patent monopolies and other forms of protection. If we paid as much as people in other wealthy countries for our drugs, we would save close to $200 billion a year. We spend another $50 billion a year on medical equipment which would likely cost around $15 billion in a free market.

If the government negotiated prices for drugs and medical equipment its savings could easily exceed $100 billion a year (see "Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer" * ). It could use some of these savings to finance open-source research for new drugs and medical equipment.

We already fund a huge amount of research, so this is not some radical departure from current practice. The government spends more than $32 billion on research conducted by the National Institutes of Health. It also picks up 50 percent of the industry's research costs on orphan drugs through the Orphan Drug Tax Credit. Orphan drugs are a rapidly growing share of all drug approvals, as the industry increasingly takes advantage of this tax credit.

The big change would not be that the government was funding research, but rather the research results and patents would be in the public domain, rather than be used by Pfizer and other drug companies to get patent monopolies. As a result, the next great breakthrough drug will sell as a generic for a few hundred dollars rather than hundreds of thousands of dollars. And MRI scans would cost little more than X-rays.

The second big potential source of savings would come from reducing the protectionist barriers which largely exclude foreign-trained physicians. Under current law, a foreign doctor is prohibited from practicing in the United States unless they complete a U.S. residency program. This keeps hundreds of thousands of well-qualified from physicians from practicing in the United States. As a result, our doctors earn on average more than $250,000 a year, roughly twice the average pay in other wealthy countries. (There are similar protectionist restrictions which inflate the pay of dentists.)

If we removed this barrier and allowed qualified foreign doctors to practice in the United States, we would likely get their pay down to levels comparable to that of doctors in countries like Canada and Germany. This could save us close to $100 billion a year on our health care bill, at least half of which would be savings to the government.

There is a concern that we would attract more doctors fro