Major protests have been taking place in Iran the past two days. I saw nothing on CNN or MSNBC yesterday, and didn't notice it on the New York Times or Washington Post web sites yesterday, although I didn't hunt because I wasn't aware of it. Andrew Sullivan has been covering it extensively on his blog. The Times has it today.
Instead of coverage of a major political change that could be underway in a nation of 66 million people, with major implications for security throughout the Middle East and the world, we get wall-to-wall coverage of an incompetent terrorism attempt on a single plane.
The ongoing protests in Iran, with deepening public resentment toward the Islamist government, also provide potent support for Obama's attempts at engagement with the Ahmedinejad government. An external threat can provide a powerfully unifying force in domestic politics. Recall that George W. Bush's public approval ratings went from below 50% to near 90% after the 9/11/2001 terrorist attacks. Obama is smart not to become a foil for Ahmedinejad to demagogue about.
Monday, December 28, 2009
Major protests have been taking place in Iran the past two days. I saw nothing on CNN or MSNBC yesterday, and didn't notice it on the New York Times or Washington Post web sites yesterday, although I didn't hunt because I wasn't aware of it. Andrew Sullivan has been covering it extensively on his blog. The Times has it today.
Sunday, December 27, 2009
On international flights headed for the US, passengers must sit with their hands folded on their laps for the last hour of the flight. (That sounds so much like the Catholic school I attended in first and second grade.) Bags away, computers away, no objects on your lap. It seems not even a book or a blanket is allowed. But only for the last hour of the flight? Doesn't that just mean any would-be terrorists should do their thing before the last hour of the flight? Am I missing something here?
Nate Silver has a great analysis of the actual terrorism risk in US commercial air travel.
And remember, 40,000 people a year die in automobile crashes in the US. More than 10,000 people in the US are murdered on the ground, away from airports, each year.
Tuesday, November 24, 2009
President Obama has directed everyone on the White House staff to read A Milestone in the Health Care Journey by Ronald Brownstein at The Atlantic. The takeaway from the article: the current Senate bill contains a whole lot of good ideas for controlling costs, with a built-in exploratory process for service improvement and cost containment. There are no guarantees that it will work, but it sure will try hard. It seems this just might be the rare bird that has been improved (so far) by Senate delay and tweaking. We'll have to see what happens on the floor, but Brownstein's assessment gives me hope that the final product could be something good.
Just in case you might have been thinking not enough has been written about tax reform, Bruce Bartlett has assembled an impressive list (hat tip Ezra Klein). This is to get out ahead of a plan to simplify the US tax system expected to come from the White House next week.
This reminds me of an article (fee required) in the New York Times by Russell Baker back in 1985 about complifying the tax code in the reform act that eventually passed in 1986. That reform simultaneously added a bunch of new deductions and exemptions while removing a lot of existing ones and reducing the number of tax brackets.
If I were king, I would:
- Eliminate the corporate income tax and replace it with a consumption-based value-added tax (VAT). Invite state governments to replace their sales and corporate income taxes with a VAT that could be collected on their behalf by the federal government and also collected on all internet purchases.
- Broaden the base of the personal income tax and reduce the marginal rates by eliminating most deductions and exemptions from the personal income tax, including the home mortgage deduction and the medical insurance exemption, while simultaneously raising the standard deduction and the Earned Income Tax Credit (EITC).
- Do away with separate treatment of capital gains and tax them like ordinary income.
- Eliminate the income caps on the Social Security tax (FICA) and reduce the marginal rate.
- Levy a carbon tax. This would include a rise in the gasoline tax to $2 per gallon, by 3 cents per month over many months, and use these revenues to reduce income taxes.
Piece of cake. Let's see what the White House comes up with.
Friday, November 20, 2009
Cutting off the nose to spite the face department:
Barbara Ann Radnofsky, a Houston lawyer and Democratic candidate for attorney general, says that a 22-word clause in a 2005 constitutional amendment designed to ban gay marriages erroneously endangers the legal status of all marriages in the state.
The amendment, approved by the Legislature and overwhelmingly ratified by voters, declares that "marriage in this state shall consist only of the union of one man and one woman." But the troublemaking phrase, as Radnofsky sees it, is Subsection B, which declares:
"This state or a political subdivision of this state may not create or recognize any legal status identical or similar to marriage."
Uh-oh! The rest of the article from the Fort Worth Star-Telegram is here.
Thursday, November 12, 2009
Evidently there are naturally occurring minerals that absorb carbon dioxide from the atmosphere. These minerals are abundant. There may be enough in the United States, for example, to store 500 years' worth of US carbon dioxide emissions. But the rock absorbs CO2 slowly. It would take thousands of years to absorb an amount needed to have a significant impact on global warming. Trying to speed up the process is expensive and in the lone demonstration project cited in the article, the process consumed so much energy that it created more carbon dioxide than it absorbed. More in a recent news article here.
The article makes an argument for more research funding on mineral sequestration:
Insufficient research funding is the working scientist's perennial complaint. But considering how much money the federal government has already extended toward dubious climate solutions like biofuel, and considering how overwhelming the need to develop big solutions to climate change has become, it's difficult to understand why mineral sequestration — the potential merits of which are so impressive — hasn't garnered more attention.
The article doesn't address the costs of mining the material. How much digging would it take to mine a significant amount, and what would be the environmental consequences of the mining? Here is an older academic paper that raises some of these issues.
Here's another short summary with nice graphics that identifies these other issues as well, from about 2002. An interesting bit of overoptimism: this paper cites a prediction that mineral sequestration will be successfully demonstrated at a cost of one cent per kilowatt-hour by 2007. (Average cost per kwh in the United States currently is between 10 and 11 cents.)
Still, it doesn't seem we'd lose much if we shifted to mineral sequestration research some of the money currently allocated to corn ethanol or underground injection of CO2 gas.
Posted by Glenn Cassidy at 11:37 AM
Monday, November 09, 2009
The House of Representatives passed the health insurance bill Saturday night, moving near-universal health insurance in the US the farthest it has ever progressed in the 60 years since Truman first tried to enact it. But in order to pass, Speaker Pelosi had to allow a vote on an amendment to the bill that prevents any plan in the "public exchange" from covering expenses for abortions (except in cases of incest, rape, or threat to the health of the mother).
Had the unamended bill passed, no federal money would have been allowed to be spent on abortions. Insurance plans that covered abortions would have had to segregate public and private funds, using only private funds to pay for abortions. The amendment says the plans in the exchange will not be able to pay for abortions at all. The public exchange will include any public option, should it survive passage in the Senate, as well as private plans offered as individual policies or small group plans.
Not all private plans cover abortion, and current federally subsidized plans like Medicaid and the federal employee plan also do not cover abortion. The insurance exchange has potential to grow in the future to include a large portion of the population, including many families who will pay entirely with their own funds and no federal subsidy. Even these families will not be able to buy a plan that covers abortion and will have to pay out of pocket should they ever find themselves in need of one.
Much of the credit for passage of the abortion amendment belongs to a high-profile lobbying effort by Catholic bishops, who said they would oppose any legislation that didn't ban abortion coverage for insurance policies offered in the public exchange. They lined up a bloc of Democrats big enough to defeat the bill (along with all the Republicans) if it did not ban abortions.
This is an interesting position for the Catholic bishops to take. If federal money touches an insurance policy (or even if it doesn't, but the policy is in the public exchange), then it violates the conscience of some taxpayers to be funding (or not funding) abortions. This is exactly the opposite of the Catholic Church's argument concerning school vouchers.
Many primarily urban school districts have school voucher plans that allow poor children or children from underperforming schools to use public vouchers to attend private schools. Many of these schools are Catholic. The Catholic schools and their supporters argue that public money flowing to religious schools does not violate the establishment clause of the first amendment because the government is not making the decision; individual voucher recipients are. The Supreme Court, in the Zelman case, accepted this argument and upheld the practice in a 5-4 vote in 2002.
So families are entitled to freedom of conscience when using public money to pay tuition at private schools. This is not establishment of religion. This is not an offense to taxpayers who are not Catholic (or not other denominations whose schools might receive voucher funding). But when families use vouchers partially funded with public money (or not funded at all with public money) to buy insurance, the policies must comply with Catholic tenets. The recipients of public money (or not recipients) are not entitled to freedom of conscience when making a decision about their own health insurance.
Some people opposed to school vouchers make the argument that the Catholic Church should oppose funding tuition at religious schools via public vouchers, because the public financing may lead to restrictions on the funds that will permit government influence over the religious schools' curricula.
I think this argument is mostly disingenuous, made by people who aren't religious, but the possibility is there. This should also be a warning to the political left when they argue for expansion of government-funded services. As seen with the public-exchange abortion ban, government micromanagement is hard to avoid.
Sunday, October 04, 2009
A very disturbing article in today's New York Times retraces the path of contaminated ground beef that left a woman paralyzed after a severe E. Coli infection in 2007. Ground beef in a single patty could use material from several different suppliers and could pick up contamination from dozens of places along the way, subject to minimal inspection. The scariest news: many slaughterhouses insist that the meatpackers they sell to may not inspect the beef they send. For example, a spokesman for Costco says that Tyson will not ship ground beef to Costco because Costco insists on testing all incoming shipments for pathogens, and Tyson does not allow any of its customers to test for pathogens. This is legal?
This also illustrates a current issue in financial regulation - conflicting responsibilities within a regulatory agency. The Food and Drug Administration (FDA) regulates food safety for most foods and has the expertise to regulate food safety in meat products if allowed to do so. But meat is regulated by the US Department of Agriculture (USDA). The FDA has one mission with regard to food - ensure food safety. The USDA's primary mission is to promote agriculture and American agricultural products. Of course Congress could move enforcement to the FDA if it so chose, but agriculture defenders in Congress would not let that happen.
Which brings us to financial services regulation. The Federal Reserve is like the USDA. Their primary regulatory mission is to ensure the safety of the US financial system, which means protecting the safety of financial institutions. For example, with many large banks currently undercapitalized, any practices by banks to aggressively generate fees from checking accounts and credit card accounts add to the banks' bottom lines and help the banks to recover more quickly. The Fed recently proposed rules to limit some of the most egregious bank practices. The Fed is only offering these proposed rules because they are required to do so to implement regulations recently passed by Congress. The Fed has had the power to ban misleading financial products, but has not taken this particular action until directed by Congress.
A Consumer Financial Protection Agency (CFPA) would take responsibility for regulating the specific consumer products banks issue, such as credit cards. The CFPA would have to approve the terms of credit card contracts to make more apparent the costs that banks try to hide. Similarly, the CFPA would regulate terms on checking account fees, mortgages, and other products.
Baseline Scenario, citing a study by Adam Levitin at the Pew Financial Reform Project, makes the case for the CFPA.
The New York Times and Ezra Klein have articles on recent developments in gaining passage of CFPA legislation through Congress, particularly about how the proposed CFPA is being weakened in order to garner more congressional support.
Monday, September 14, 2009
You may have noticed that President Obama said more than 30 million people are uninsured in the United States, versus the 46 to 47 million estimate more widely cited. Clearly, 46 million is more than 30 million. Anthony Wright at The New Republic explains why Obama chose the 30 million number.
Also, I'm disappointed in the coverage of Congressman Joe Wilson's "You lie" exclamation in the middle of President Obama's speech. The coverage has emphasized the rudeness of shouting at the president in middle of an address to Congress. Anybody who is asked to comment should say they are indeed offended, not by the timing, but by Joe Wilson's lie. He asserts that the president's claim that no subsidies will go illegal aliens is a lie. In fact, as Politifact verifies, the legislation in the House specifically bars spending any public money on illegal aliens.
Here are links to a number of good recent articles about health insurance. Ezra Klein's blog at the Washington Post is an especially good place to follow this issue, both for policy discussions and updates on the political process. Nate Silver has been following the polling on the topic. Mark Thoma on his blog and the writers at Baseline Scenario have good economic analysis on many things, including occasional articles on health insurance.
I'm feeling optimistic that major reform is going to pass in the next two months. Legislation looks likely to include an individual mandate, expanded subsidies to lower income households, exchanges to make individual policies less expensive and more widely available, and a ban on exclusion due to pre-existing conditions. I hope cost controls such as the independent commission to review treatment effectiveness an independent board to set Medicare reimbursement rates can pass. The public option looks unlikely, but as the Thoma link below argues, the public option as proposed lacks a lot of the teeth that could make it an effective cost control. I hope the alleged states' rights advocates don't try to preclude states taking action independently to create their own public options.
Ezra Klein, channeling Newsweek channeling Ezra Klein, on why it would be beneficial for legal, taxpaying residents to have illegal aliens get health insurance.
Ezra Klein again on a state's choice option for a public health insurance option.
Mark Thoma channeling Ezra Klein and adding his own two cents on how the proposed public option is not the same thing as cost control.
Robert Reich with some history on attempts to provide universal health insurance in the US, from Truman to today, along with some political lessons learned.
James Kwak at Baseline Scenario on the continuing shrinkage of employer-provided health insurance. People who have employer-provided coverage today may feel that the Democratic proposals don't help them or, worse, that these proposals threaten their current coverage. The lesson is, they shouldn't count on the permanence of their current coverage, whether or not the proposed changes are enacted.
StatsGuy, a guest blogger at Baseline Scenario on rationing of health care, and why this would be a good thing.
Nate Silver at FiveThirtyEight on polling people about "public option." Many people, including pollsters, don't know what it means. When people do understand what it means, a majority is in favor of a public option.
Posted by Glenn Cassidy at 3:30 PM
Thursday, August 20, 2009
The Atlanta Journal Constitution has provided a treasure of a sentence. Here's the second paragraph in "Atlanta officials scramble to avoid losing $30M in federal aid," dated August 18:
This sentence is a work of art. The first misplaced modifier, "federal program created to help the city’s poorest residents from expiring Dec. 31" gives you a laugh, but then the sentence keeps on giving. If those residents do in fact expire on December 31, the program will make sure their expiration causes great impact on the community. Or something like that. And on account of the federal program, there will be heavy spending on administration after all those people expire. No free lunch here. I'm sure there's fierce competition from other cities to get a piece of this deal.
The idea, floated by Councilman Kwanza Hall, could keep a federal program created to help the city’s poorest residents from expiring Dec. 31 with little impact on communities and heavy spending on administration.
An interesting article in today's Washington Post about the effect that Twitter might have on attendance at movies. People who see the movie can tweet to dozens or hundreds of friends, possibly amplifying the effect of word of mouth, both positive and negative. The following paragraph caught my attention, especially amid an astro-turf campaign to stop reform of health insurance:
"I think Twitter can't be stopped," says Stephen Bruno, the Weinstein Co.'s senior director of marketing. "Now you have to see it as an addition to the campaign of any movie. People want real-time news, and suddenly a studio can give it to them in a first-person way."Hmm? A studio can give it to them in a first-person way. Will movie studios come up with fake tweets? Ones that seem to come from friends? If astro-turf is fake grass roots, what should fake tweets be called? Bird calls? Duck calls? And how long until fake tweets become an instrument of politics? I can see people protesting fake tweets by massing and honking away with plastic duck calls.
Tuesday, June 23, 2009
Landing on the FBI's terror watch list can prevent you from boarding an airplane, but evidently it does not prevent you from buying a gun. From Huffington Post:
There were 963 people from the watch list who were recorded trying to buy guns in the last five years, according to a new Government Accounting Office report. Well over 800 purchases were permitted under the current law. Only 10 percent of all those who tried to purchase guns were actually turned down.
It seems to me that these 800+ people either do not belong on the watch list, in which case they should be able to challenge their inclusion on the list to remove their names and allow them to fly without harassment, or they have rightfully earned a spot on the list and we shouldn't be giving them guns. I look forward to the due process arguments coming from the gun-advocate senators who have been deaf to the due-process concerns of the watch list otherwise.
Monday, June 22, 2009
Paul Krugman has an interesting blog post today on competition in the health insurance industry, citing a post from Digby. The US senators opposing a public option claim that they are trying to protect competition in the market for health insurance. Digby takes Senator Blanche Lincoln to task for defending competition in Arkansas, where Blue Cross/Blue Shield holds 75% of the market, and where a public provider could potentially provide the only real competition. Krugman hypothesizes that there is likely to be little competition in many of the states whose senators are labeling a public option as a threat to competition.
Digby notes that the US Department of Justice classifies any market in which the leading provider holds a market share of 42% or more as "highly concentrated." This GAO report on small group health insurance providers (Table 1, pages 4-6)shows, in 27 of 47 reporting states, the leading provider has a market share of 42% or more, sometimes much more. Omitting the 7 states listed as NA, in 27 of 40 states for which sufficient data were available the market is highly concentrated. Small group coverage is defined differently in the various states, but it describes the insurance available to small firms (in 45 of the 47 reporting states, 50 employees is the maximum firm size considered as small group.)
In a related matter, Nate Silver discusses recent opinion polls concerning the public's thoughts on a federal government public option, with posts discussing the New York Times poll and other polls. Based on the polls that Nate considers most reliable, it looks like the public option has strong public support, with about 2/3 of the public liking the idea of a public option.
Sunday, June 14, 2009
An ever-more-apparently stolen election in Iran, massive public demonstrations, paramilitary violence against protesters, political opposition members in jail. This is the biggest international news development of the year. Where do I go to find news about it? Broadcast networks? They've had all the usual sports, etc. all day. MSNBC? They don't do news anymore, just Democratic apparatchik vs. Republican apparatchik for three-minute throwdowns all day on weekdays, followed hibernation on the weekend. CNN? Little bits of news on Iran widely scattered during the live news programming (which is only part time on Sunday), and most of the coverage is the anchor reading internet posts from the CNN website, by American viewers making comments or asking questions. If I want internet, I can go directly to the source where people who actually know something about Iran and/or are communicating with people IN Iran. In desperation I even checked Faux News, but they were doing their regular opinion shtick.
In 1989, when the Tiananmen demonstrations occurred and the Berlin Wall came down, the revolution was indeed televised. I guess we'll just have to wait for the hurricane season to ramp up before we see any significant deployment of reporters in the field in 2009.
Thursday, June 11, 2009
An interesting new blog from Harvey Sapolsky, former director of the Security Studies Program at MIT (and I had a class with him at MIT when I was an undergrad). He suggests the US can stop acting as the world's policeman with little risk to American security. An excerpt from a very insightful post:
America should come home, very soon from Europe and Asia and only a bit more slowly from Iraq and Afghanistan, but home nevertheless. We have natural strategic depth offered by our geography and it is time to reclaim it. There is no need to stand between our friends and their neighbors. Our friends face no great threats that would endanger us unless we act as their protectors. On the contrary, our security is weakened by our inclination to rush to sound of the guns which allows others to assume that we are responsible for solving their conflicts with their neighbors or ending their civil wars. Our rewards for this constant meddling are unfulfillable expectations, new enemies, and misspent resources.
He's not suggesting we pursue an isolationist foreign policy, just that we dismantle our Cold War infrastructure and exercise greater restraint in projecting military power. He lays out a vision for a post-NATO, post-Iraq, post-Afghanistan international strategy. A tip of the hat to the Washington Note for the link.
Thursday, May 28, 2009
Monday, May 25, 2009
From Talking Points Memo:
TPM Reader BB, a "proud citizen of the Netherlands," says it's time the U.S. man up and stop NIMBYing the Gitmo detainees:
If you live outside of the US, or the US centric bubble. then the incredible stupidity of the this viewpoint is obvious.
Where does the World Court reside? It resides in the Hague in the Netherlands. the Netherlands has a population of 16 million (that are not allowed to bear arms or such).
The world courts deals with the worst of the worst, anything in Gitmo pails to what these folks have done.
Sunday, May 24, 2009
An interesting paper by Lawrence H. Goulder, Mark R. Jacobsen, and Arthur A. van Benthem, "Impacts of State-Level Limits on Greenhouse Gases per Mile In the Presence of National CAFE Standards" comes at the same time that Obama makes a deal with California for a uniform national CAFE standard.
The paper by Goulder, Jacobsen, and van Bentham finds that differential CAFE standards between states has very little impact on national CAFE standards. Their finding is one of those "why didn't I think of that" results, surprising at first, but completely obvious after you look at it. National CAFE standards are currently 27.5 mpg for passenger cars. If we assume that is binding, and it seems to be, then you can expect car manufacturers to offset any higher average fuel economy in California (and the 13 other states) by selling cars with lower averages in the remaining states. The federal regulations apply to the entire fleet sold by a manufacturer, so an increase of 1 mpg in California could theoretically be offset by, say, a reduction of 1.3 mpg in Texas (Texas's market is smaller than California's, so the mpg offset would be greater than the increase in California's mpg standard.) The paper finds that about 80% of the gains in fuel economy in the states with higher standards would be offset by lower fuel economy in the remaining states. The paper also finds that the added cost of the fuel efficiency gain by the two-tier system would be 50% higher than if the federal government simply set a higher uniform CAFE to gain the same net fuel efficiency increase.
You can read the paper here. Warning: after the abstract it gets very technical.
California recently won its court fight to set greenhouse gas (GHG) emissions standards for new cars sold in the state that will effectively set higher fuel economy standards for California cars than are required by federal CAFE regulations. This week the Obama administration announced a deal whereby EPA will set higher CAFE standards than those currently on the books and California will adopt the federal standards rather than set its own more stringent ones. All other states are preempted from forming independent standards, although they are allowed to choose California's or the federal standards. 13 other states have so far adopted the California GHG standard. All will now have only one choice since California will match the federal standards. This means Obama's deal will be more effective than the two-tier CAFE standard, and it will cost less than the two-tier system. The manufacturers are willing to go along with the higher standard because of the cost savings.
Thursday, May 21, 2009
The US Senate, by a vote of 90-6, declared that they are afraid of holding 240 alleged terrorists in the United States. Even former Secretary of the Navy Jim Webb. Even former POW John McCain, who pledged to close Guantanamo while running for president last year. Even Diane Feinstein, who submitted a bill in 2007 to close Guantanamo within a year, voted to prevent President Obama from closing Guantanamo now.
Rachel Maddow (at YouTube or at MSNBC) has a theory: it's because an ad run by the Senate Republicans invoked Carmina Burana. Orffophobia taints anything that's accompanied by O Fortuna.
You'd never guess that the US once held about a half million German POWs during World War II, based in 45 of the 48 (at the time) U.S. states. Or that there are over 1.5 million felons in state and federal prisons. Or that 15 thousand people are murdered in the US each year (almost all by fellow Americans), and just about that many people are captured, tried, and jailed for murder every year, some in every state of the union.
It was refreshing to see President Obama give a sober and detailed discussion of the issue in a speech today. I am troubled about his assumption that every accused terrorist will be convicted. His category 5, people who the government thinks are dangerous but cannot be tried, is deeply disturbing, although he proposes a quasi-judicial process to make that determination. The judicial system is supposed to make independent assessments of guilt.
Nonetheless, he did a great job of putting the issue into context and explaining why Guantanomo needs to be closed. Dan Froomkin gives a good analysis of the speech and posts the transcript.
Obama promised at his inauguration to talk to us like adults. Let's see whether the Senate is capable of the same. Or maybe we just need to ban O Fortuna.
Tuesday, May 19, 2009
While watching the local news with breakfast this morning, I wanted to throw my oatmeal at the traffic nerd who twice exclaimed "Walla!" The word is Voila. It's not half a city in Washington or Australia, not a pop musician, and not a misspelling of a Hindi word. It's French, literally see it, idiomatically there it is. If you were to write it quasi-phonetically, it would be vwalla. While channel surfing I got to hear it again on a home improvement show. And yesterday I saw it actually spelled out walla in a news item. I've heard it malapropised dozens of times before, but the clusterbombing has pushed me over the edge. You're welcome to your own walla moment next time you see it or hear it.
Ah, I'm better now and ready to get back to work.
Wednesday, April 29, 2009
The current swine flu outbreak is frequently compared to the 1918 Spanish flu pandemic. An article (that I found via Boing Boing) by Stephen Hume in the Vancouver Sun puts the individual risk of the Spanish flue in perspective:
It's estimated that about 28 per cent of Canadians and Americans contracted the Spanish flu. Worldwide, an estimated 2.5 per cent of the sick died of complications, which made the pandemic one of the most lethal flu outbreaks in recorded history. Certainly it was one that imprinted itself upon human consciousness for several generations.
But there's another way to look at those statistics. You might observe, for example, that they mean that even during the worst ravages of the 1918 flu, 97.5 per cent of those infected survived and recovered. Or that 72 per cent of the population -- even in the absence of the sophisticated public health planning and infrastructure that Canada and the U.S. have since built -- was not infected during the pandemic.
A pandemic on the scale of the 1918 flu is clearly a public health threat. With the same rates of infection and mortality on the current U.S. population, this would imply 300M * 0.72 * 0.025 = 5.4 million deaths. Yet the risk to the average individual is 0.72 * .025 = .018 or 1.8%. The risk of the current swine flu outbreak is not known, and neither Hume no I mean to imply that the risks are comparable.
In a typical year flu kills about 30,000 people in the United States, mostly the elderly.
Saturday, April 04, 2009
An interesting idea to improve Treasury Secretary Geithner's plan to create a market for toxic asests held by American banks, from an Italian blog by Sandro Brusco.
The big problem is that major banks hold lots of mortgage-backed securities of uncertain value. Geithner's plan essentially puts up a big subsidy from the US government to private entities that purchase these assets from the banks. The banks are reluctant to sell, claiming that the value of the assets is much higher than anyone is willing to pay to buy the assets from the banks. The Financial Accounting Standards Board this week weakened rules that required banks to mark to market (i.e., value assets held on their books at current market prices). Many think that some big banks could become insolvent if they did write down the value of these assets to current market valuations and that the banks therefore are not anxious to sell any part of these assets and establish a clearer market price.
One of many concerns with the Geithner plan is that the subsidy to private buyers of the toxic assets will raise prices well above fair value, and banks will sell only their most distressed assets. This is a version of the lemon problem and creates an incentive for adverse selection. Brusco proposes that Treasury should require managers of the banks to back up the value of the assets they sell by investing a significant part of their salaries in the assets that they sell to government and the government's partners. Then, if the assets are overpriced, the managers will lose money. Since the bank managers are the ones who know the most about the toxic assets, this will reduce the incentive for adverse selection.
I'd like to take Brusco's proposal one step further. Require all the banks to assign a value to their toxic assets and allow them a period in which to sell at those prices, say three months. At the end of that period bank managers must use a large chunk of their pay to buy shares in those assets based on the bank's stated prices. Bruno suggests that Treasury set some income level and require all executive pay above that level be used to buy shares in the assets that are purchased with federal subsidies; i.e., the bank transforms part of their paycheck into shares in these assets. I'd suggest doing the same with my plan, except part of the managers' pay is converted into shares of the assets the bank holds onto, converted at the values for the assets the bank claims on its books. This could provide a disincentive to overpricing the assets.
Tuesday, March 17, 2009
Talking Points Memo has assembled a slide show of US Senators and Representatives who voted against the omnibus FY 2009 spending bill because of its earmarks, even after having personally inserted a good number of earmarks for their own districts. I agree that earmarks are in general a bad idea, but they only make up a percentage or two of the total budget. On a scale of government waste that's pretty small. I could imagine making an effort to keep earmarks out of a bill, then voting for the final bill even if it contained earmarks I tried to stop. I couldn't imagine larding up a bill with as many of my own earmarks as possible, then voting against the final bill because of all those earmarks. Disingenuous to say the least.