Sunday, August 23, 2009

President telling a whopper on health care

At two seperate appearances, the President stated that health care reform would cost $80 to $90 billion/yr. He makes that assumption based on the $800-$900 billion cost of HR3200 over 10 years.

Here's what he doesn't tell you: the plan doesn't go into effect until 2013. So that $800-$900 billion cost isn't over ten years, it's over six. The CBO says that in 2019, the bill will cost $202 billion. And will continue to grow faster than revenues after that into the longterm, widening the deficit and pushing us headlong towards bankruptcy.

The left loves to whine about all the right-wing lies, but their credibility might be helped if the President himself wasn't telling such frequent whoppers of his own.

And while I'm on the topic, the ever-changing rationale for health care reform reminds me of something that happened under the last adminstration. Wonder what that was?

Tuesday, August 18, 2009

Evidence that the stimulus was a waste of time

Why are Europe and Japan pulling out of recession before we are? that almost never happens. And Paul Krugman was bitching for weeks during our own recession debate how the US is the only one trying to do a serious stimulus and that without world cooperation it won't do much good.

Well, we did do a stimulus and we're doing about as well as was predicted without one. Meanwhile, Europe and Japan are recovering sooner than expected.

What, you mean busting a hole in the budget doesn't bring prosperity? I'm shocked!

I have a new blog

Link here

I will still be keeping this blog for general commentary, but I've started a new blog dedicated to commenting on issues brought up by Matt Yglesias' blog. Yglesias fans or haters will appreciate this more than the casual blog reader who isn't familiar with him, but for political junkies it does contain some pretty good political commentary, if I do say so myself.

And if you're a political junkie, why aren't you reading Matt Yglesias' blog already?

Liberal Democrats making empty threats

Would liberal Democrats really not vote for a bill without a public option? We're hearing threats that without a public option, 100 Democrats will vote against it, which would mean no health care bill at all, since a bill with a public option can't pass and a bill without one can't pass.

Personally, I don't think they would, and it's not about guts or spine, it's about incentives. the Blue Dogs come from districts that are against the public option vehemently. If no bill passes, it's no skin off their backs.

So that leaves liberals with an empty threat, and the Blue Dogs know it.

Monday, August 17, 2009

On bubbles

There's been a lot of posts on Matt's blog recently, as well as on Brad Delong and Kevin Drum's blogs, about bubble. How to detect them, what to do about them.

Now I'm not a financial expert. At best, I'm financially literate and not a bad investor. I saw the stock market bubble and the housing bubble before they popped, as well as the oil bubble. When things get insanely overpriced, it's not hard to tell. The only part that's impossible is figuring out when investors will finally realize how fast prices have outpaced value and start selling. But from the perspective of policymakers, they don't need to know that. They just need to know that a market is fundamentally overpriced by quite a bit. You don't know precisely when a bubble starts or when it's going to end, but you know when one is going on once it's really gotten inflated.

But that's not really relevant either. What causes bubbles? Is it that investors aren't aware of them? Many investors aren't, but I think most investors are. They just assume it will make them big profits and they'll get out and some other sucker will be holding the bag, usually inexperienced investors who hear during the height of the bubble how they can make massive returns with little risk. So it's probably not ignorance. It's greed.

So how do you deal with that? I have an idea: why not jack short term capital gains rates to 50%? And to encourage investment for the long term, reduce long term capital gains to a nominal amount like 10%, or even 5%. If you're worried about that being regressive since rich people tend to be more likely to have long term investments, you could just keep the current long term capital gains rate on people making more than $250,000 and reduce the capital gains rate to 10% for everyone else if they hold an investment for at least five years.

Something that was particularly to blame for the housing bubble was the recent favorable treatment of capital gains on the sale of a primary residence. Taxes change incentives. Especially for smaller investors, what could make more sense than to invest in your home, since when you sell it, you don't pay capital gains taxes unless your profit is $250,000 or more if you're single? Since it also applied to second homes, it encouraged house flipping. That not only encouraged people to overpay for housing, it also led people to put all their eggs in the real estate basket. The favorable treatment of capital gains on housing should be eliminated, or at least require that the home be owned for longer before sale.