Tuesday, January 15, 2013

Paul Krugman is an Asshole

I'm a regular reader of his blog, but man Paul Krugman is a dick. From this blog post:

Decisions, decisions. Refusing to expand Medicaid would impose huge suffering on lots of poor people, and kill some of them; for people like Jan Brewer, that’s a plus. But it would also hurt the profits of big health-industry corporations. What’s a conservative to do?

First of all, I think it says a lot about Krugman's worldview when he suggests that making poor people suffer and die would be a "plus" for Jan Brewer. I know it was a joke, I know he didn't mean it literally, but he throws out comments like that all the time.

Secondly, read the article he links to. It's about Jan Brewer deciding the state should expand its Medicaid program in order to receive funding from the Affordable Care Act. Slate takes the position that this is a big surprise, since Brewer - a conservative - opposed Obamacare and is therefore expected to reject its funding. Okay, but how does that support Krugman's paranoid assertion that conservatives are torn between hurting poor people and lining the pockets of Big Pharma?

Finally, why does Krugman link to such stupid articles? Here's how the Slate piece ends:

States with large uninsured populations will get a windfall from Medicaid expansion that will provide new clients for local health care providers, while increasing the disposable incomes of the formerly uninsured. Under the circumstances, it's remarkable that Brewer's decision is remarkable. And yet it is.

Here's the no-brainer problem with that analysis: you can oppose the tax without opposing the spending. Arizona is going to help fund Obamacare whether it likes it or not (the tax). Given that reality, we would be fools to turn down our share of what we paid for (the spending). If someone stole a hundred dollars from you, you might hate them but you'd still let them pay for your dinner.

I think the problem with Krugman - and the problem with Slate, for that matter - is that they assume the absolute worst about their opponents, and consequently they spend their time attacking straw men and sounding foolish.

Thursday, January 3, 2013

Taxes vs Benefits

I was having a facebook discussion yesterday that got me thinking about how we think about the benefits we receive from the federal government. The claim was that some states receive more in benefits than they pay in taxes. I googled that and sure enough found a chart that lists states according to how many dollars they receive in benefits vs how many they pay in taxes. For more than half of the states, that number is positive. That's got to be wrong.

What do we mean by benefit? Let's say that there are two types of benefits given by the federal government: 1. direct transfers in the form of subsidies, grants, supplemental aid, etc.; and 2. public goods like defense, the court system, foreign aid, all the government agencies, etc. Let's leave out Social Security and Medicare for now because they are mostly not financed from general revenues (although with Medicare it's getting close to fifty percent). 

So we have direct transfers and public goods. There's just no way that a majority of states receive more in direct transfers alone than they pay in federal taxes, so the chart must mean transfers + public goods when it talks about benefits. But how do you calculate how much benefit an individual state receives from something like defense? Well, maybe you say that each state receives 1/50 of the total benefit. In that case, those states that contribute the least will always receive more than they contribute. 

But what is the total benefit of defense, anyway? Do we just say that the benefit of defense is equal to the defense budget? What if the defense budget is funded with borrowed money? In that case, each state receives the benefit of defense, but it also incurs the liability of debt. How does it balance out then?

And suppose the federal government gives a state highway funds, but those funds are conditioned on the state modifying some of its internal laws. What are the costs of compliance? Do those costs factor in?

Regulations have associated costs. Suppose you have a federal regulation that delays the release of a product by one year. It's hard to quantify the cost exactly, but it would likely include one year of lost revenue, legal and administrative fees, and decreased market activity due to barriers to entry. So if a state contributes to the general revenues, and those revenues go to fund an agency that decreases the efficiency of a given market, are those costs factored in too?

Suppose all the regulations have the combined effect of decreasing the growth rate of GDP by 3% per year. If that's the case, doesn't the total cost increase exponentially over time?

And then what about crowding out? Dislocations and distortions? Government waste?

I don't know how you measure total government benefit, but I do know you cannot do it without also measuring the costs. Given that there is no consensus on how to quantify the costs, no measure of the benefit can be reliable. The idea that a majority of states receive a net benefit from the federal government sounds pretty crazy to anyone with market-oriented views on the economy. My guess is that if you consider the effect of federal expenditures on the growth function, over time the net benefit probably becomes very negative.

Wednesday, January 2, 2013

A Winning Coalition

Psst! Gay people! Come join the libertarian coalition! We welcomed you before the democrats did!

Psst! Religious people! Atheists and agnostics too. How does freedom sound? Come join us libertarians! We are all about toleration.

Psst! Mainstream economists! Oh, you guys are already here with us? Cool.

Psst! Environmentalists! How does a carbon tax sound to you? Yep, this is actually one area where we think government should be most aggressive.

Psst! Jaded humanitarians! Disappointed that all those progressive reforms didn't work? Maximizing social welfare is the name of our game. Just ask all the economists among us.

Psst! Intellectuals! Want to hang with the smartest people in the world? We have a disproportionate share of the top legal and economic minds on earth.

Psst! Open-minded pragmatists! Come hang out with us for a while and listen to the conversations. We're confident we will win you over.

Psst! Immigrants! Guess who has been advocating free trade and open borders since forever? [thumbs pointed at us] these guys!

Psst! Pacifists! Our mantra is make trade, not war.

Psst! Poor people! Our policies will make you richer!

Psst! Middle class and rich people! Our policies will make you richer too!

Now that we have built this amazing coalition, which political party wants to embrace our platform and get our votes?