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Regulating Rapture?

August 24th, 2009 . by economistmom

Before you get too excited about the title of this post, that’s a title suggested by a story in today’s Washington Post, and it’s about yoganot about something else that people might want to purchase to bring “rapture” to their lives…

The story is about Virginia trying to regulate yoga teacher training programs like they regulate other forms of “higher education.”  And it quotes one of the owners of BelovedYoga studio in Reston, VA, where–thanks to the owners’ vision and generosity–I’ve taught a charity yoga class for a few years now.  (You see, I’m really an EconomistYogiMom.)

Suddenly it’s a story of Virginia yogis “tussling” with Virginia bureaucrats:

The State Council of Higher Education for Virginia recently declared that studios offering yoga teacher instruction must be certified. That involves a $2,500 fee, audits, annual charges of at least $500 and a pile of paperwork.

Yogis, in an unlikely departure from their usual mission to foster harmony and balance, are pushing back. They launched a letter-writing campaign to Gov. Timothy M. Kaine (D) and state lawmakers and started a “Virginia Yoga Teachers” page on Facebook to organize it. Even Sen. Mark Warner’s former private yoga instructor said she asked his office to back their effort.

“We are all teachers, and we are just trying to deepen the journey of yoga,” said Maryam Ovissi, co-owner of Beloved Yoga in Northern Virginia, which trains about 15 teachers each year. “Maybe we shouldn’t call it teacher training — maybe it should be yoga immersion or an apprenticeship.”

As yoga grows into a mainstream activity for stressed professionals and parents, similar dust-ups are playing out nationwide…

What is the state’s (or more correctly, the “commonwealth’s”) reason for suddenly wanting to regulate yoga teacher training?  Here’s their story:

In Virginia, yoga teacher training first hit the state’s radar late last year after a state employee conducting school audits happened upon an advertisement, said Linda Woodley, the higher education council’s director of private and out-of-state postsecondary education.

Before that, Woodley said, “I was not aware they existed, and they were not aware we existed.”

Studios can teach lotus poses to as many clients as they like, state officials said. But teacher training programs, which the state views as similar to dog grooming, massage therapy or other classes intended to prepare someone for a job, must be certified under state law. (For instance, Simply Ballroom Dance Teachers Academy, Danny Ward Horseshoeing School and Jiggers Bartending School are certified.)

“We’re not looking at yoga classes. That itself is an avocation,” said Woodley, who has been pondering enrolling in a hot yoga class. “But the teacher training is preparing people for a job. They can take the skills they learn and open up their own studio or just teach.”

Woodley said it’s also about ensuring that students who plunk down cash for training programs that can run a few thousand dollars are getting their money’s worth. Plus, she said, being listed on the government registry will give schools a marketing tool, like a Good Housekeeping seal of approval…

But the yoga schools accurately point out that most certified yoga teachers don’t become such to start a new career or use it as much of a way to “support” themselves financially.  Believe me, the money (even if you teach for a fee and not for free) isn’t good enough, and you can only teach so many classes in a day.  And I’ve never known of a “full-time yoga teacher” who wasn’t actually the owner of his or her own studio.  And you can call me naive and idealistic, but I think the primary mission of a (good) yoga studio–like BelovedYoga–is not to make a big profit on teacher training from those who in turn will make big income from teaching and training more yoga teachers, and so on and so on–but to bring all the (much broader and non-pecuniary) benefits of yoga practice to people’s lives.

The real reason I think Virginia wants to start regulating yoga teacher training programs?  Because like all other states, they need the money that could come from the state fees on the regulated yoga programs.  It really amounts to a new tax on a particular type of small business, and right now all governments are looking for new ways to generate revenue that somehow don’t look like tax increases. “Educational licensing fee” sounds much better than “yoga studio tax,” doesn’t it?  Economically, it amounts to the same thing, and yes, the yoga schools would probably pass along most of those fees to the teacher trainees in the form of higher tuition, and yes, most people who can afford to pay for a yoga teacher training that might not even produce any new source of income aren’t exactly poor, so yes, this yoga school licensing fee could amount to something very similar to the tax increases on “only the rich” that the Obama Administration and Congress seem to favor these days.

But something else the Obama Administration and Congress are favoring these days is “game-changing” policy to help get health costs under control.  In the health reform debate we’ve heard a lot about how a shift toward greater preventative care would be an economically wise (and fiscally conservative) strategy.  (See this column by Dr. Andrew Weil who calls himself a “conservative” on health care reform because of his advocacy for greater investments in preventative strategies.  And see this site for some of the health benefits of yoga.)  It seems to me that if the government really wants to be encouraging preventative health care as a fiscally-wise alternative to the government-subsidized use of expensive drugs and medical procedures, the last thing they should be doing is taxing it.  Heck, they should be subsidizing us yoga teachers as part of the health reform package.  ;)

Talking Fiscal Policy (Too) at Jackson Hole

August 23rd, 2009 . by economistmom

jackson-hole-view-aug09

First, no, I wasn’t “talking it” there–I wasn’t invited.  But at least a few “fiscal hawkish” people were there (the photo is courtesy of one of them), and it seems that the fiscal policy discussions might have been the most interesting part of the mostly-monetary-policy Federal Reserve conference (sponsored by the Federal Reserve Bank of Kansas City).  From the Wall Street Journal’s Jon Hilsenrath (who, lucky him, is there in Jackson Hole):

JACKSON HOLE, Wyo. — Central bankers don’t make tax and spending decisions, but fiscal policy was a major focus of this year’s Federal Reserve conference here in the Grand Tetons. Three questions drew attention at a Saturday morning sessions: Are deficits a threat to the outlook that needs more attention? How well is the Obama Administration’s fiscal stimulus plan working? And is more stimulus warranted?

The answers to the questions: Yes. It not clear. And no.

Large, long-term deficits could cause “serious economic disruptions,” said economist Alan Auerbach of the University of California at Berkeley, who co-authored a paper presented here with William Gale of the Brookings Institution, a Washington think tank largely populated by Democrats. Over the next decade, they estimated, the U.S. budget deficit will add up to $10 trillion, and possibly more. Credit markets, they added, have begun to signal a risk of U.S. government default, something unheard of just a few years ago.

In their paper, the authors gave the Obama administration’s stimulus plan a mixed report card. While stimulus was needed, they said, it came a little too late and wasn’t optimally designed. For instance, some of the administration’s spending programs haven’t been implemented quickly. Other programs, like the Making Work Pay tax credit for low-income households, weren’t originally conceived as stimulus…

Alan and Bill also point out that the U.S. failed to provide enough stimulus in the 1930s (and Japan similarly failed in the 1990s), because of too much worry about the budget deficit–too much “fiscal hawkishness.”  But today?

But today, the two economists said, more stimulus isn’t warranted — in part because the economy shows signs of recovering and in part because of [more legitimate?] worries about long-term fiscal woes.

And yes, I did hear the news that snuck in during happy hour on Friday (and halfway through the Jackson Hole conference), about how the Administration’s ten-year budget outlook (which will come out Tuesday) will show a $2 trillion deterioration–to deficits totaling something over $9 trillion.  It is “new news” even though CBO had already estimated the President’s budget to lead to ten-year deficits of $9.1 trillion, because: (i) it means the Administration’s economic forecast has deteriorated significantly since the spring and leads one to wonder if CBO’s update (also coming out Tuesday) will move to a still worse outlook (maybe $10 trillion as Alan and Bill predict?); and (ii) the Administration had previously reacted to the CBO’s previous ($9.1 trillion) forecast with an acknowledgment that yes, if the deficits turned out to be as high as that, then that would be an “unsustainable” fiscal situation.  From an AP story back in March (emphasis added):

White House budget chief Peter Orszag said that CBO’s long-range economic projections are more pessimistic than those of the White House, private economists and the Federal Reserve, and that he remained confident that Obama’s budget, if enacted, would produce smaller deficits.

Even so, Orszag acknowledged that if the CBO projections prove accurate, Obama’s budget would produce deficits that could not be sustained.

“Deficits in the, let’s say, 5 percent of GDP range would lead to rising debt-to-GDP ratios that would ultimately not be sustainable,” Orszag told reporters.

I think we can anticipate that the Administration will spin their new $9 trillion+ projection in a couple ways:  (i) the economy has been struggling worse than we anticipated because of the lingering effects of failed Bush economic policy, that weak economy has taken a toll on revenues, and these worse-than-expected economic conditions are largely beyond the Obama Administration’s control; and (ii) this makes the case for doing something (quickly) about health care reform all the more critical, because health care costs are the greatest threat to our fiscal outlook and so should be our greatest fiscal policy priority.

A hint of this messaging comes from the Obama Administration’s Christina Romer, who had this to say to WSJ’s Jon Hilsenrath (from same story, although I’m not sure if she was actually in attendance at Jackson Hole; emphasis added):

Christina Romer, who chairs Mr. Obama’s Council of Economic Advisers, said reducing the deficit is a priority for the Obama Administration and that health care reform, which could bring down government health care spending in the long-term, is part of the administration’s solution to the problem. “Deficits do matter,” she said. “No one believes that more than the president.”

And you can expect that I’ll remind readers on Tuesday that we have a revenue crisis as much as a health care crisis, and that in a lot of ways fixing the revenue system would be easier than fixing the health care system, and that we shouldn’t be ignoring that big and reliable tax policy lever even as we struggle to find the handle on the health care one.

Oh Boy… It’s Shop for Colleges Time

August 21st, 2009 . by economistmom

My oldest is about to start her senior year in high school.  I can’t quite believe that we’re here already and facing a semester of campus visits and college applications.  She’s a brilliant student with a perfect math SAT score and a well-rounded list of activities, so I know she’ll have no trouble getting into some very good schools.  Still, I haven’t paid much attention to how kids apply to college since, well, since I applied myself a little over 30 years ago, and I know enough about how much tuition has gone up since then, so I’m feeling a bit anxious about the whole application and decision process ahead of us over the next few months–and years.  U.S. News and World Report just came out with their annual “America’s Best Colleges” guide, so this will be the first thing I’ll study carefully on this journey.  (Don’t worry, my daughter is way ahead of me on this.)

EconomistMom.com readers will get to “tag along” on my “shop for colleges” journey this fall.  And I will happily accept advice from those of you who have already been through this or otherwise have insights into the process of finding the best college for one’s kid and figuring out how to pay for it!  We’ll see if I stick to my own “living within our means” mantra.

Borrowing Good News on the Deficit?

August 20th, 2009 . by economistmom

Bloomberg and AP report this morning that the Obama Administration’s latest budget outlook, scheduled for release next Tuesday (same day as CBO’s summer update–watching the PR and press that day will be interesting), will show that they expect the fiscal year 2009 budget deficit to come in $262 billion lower than they predicted in May–at “only” $1.58 trillion, or 11.2 percent of GDP.  Cause for celebration?  Well, only if you don’t mind “premature celebration.”

Both articles point out that a $1.6 trillion deficit is not really qualitatively different from a $1.8 trillion deficit (both are “humongous”).  From the Bloomberg article (by Brian Faler and Roger Runningen):

The deficit figure, as revised, would amount to 11.2 percent of the nation’s economy, the official said. That would be the biggest share since 1945.

“It’s better than we expected but it’s still a huge deficit,” said Stan Collender, a former congressional budget aide who is a partner at Qorvis Communications in Washington.

And from the AP story (By Jim Kuhnhenn and Philip Elliott):

“Whether it’s $1.6 trillion or $1.8 trillion, it’s pretty bad,” said Robert Bixby, executive director of the bipartisan fiscal watchdog The Concord Coalition. “I hope no one tries to spin that as good news.”…

“The deficit is obviously very large and a problem,” said economist Mark Zandi of Moody’s Economy.com. “But it’s not quite as bad as what expectations were a few months ago.”

Both articles correctly point out that most of the lower-than-expected deficit is due to a contingency for $250 billion worth of additional financial rescue that had been penciled in by the Administration but was never pursued–not this year at least.  In their update, the Administration will reveal that total FY2009 federal spending will turn out to be $345 billion less than they had predicted in May ($3.653 trillion vs. $3.998 trillion).  All of the reasons I’ve seen cited for this lower spending have to do with lower-than-expected short-term countercyclical spending–spending on rescues, bailouts, and stimulus–not lower-than-expected spending on our longer-term (ongoing) commitments.

Meanwhile, the Administration will report that total FY2009 federal revenues will turn out to be $83 billion less than what they predicted in May ($2.074 trillion vs. $2.157 trillion).   That’s LESS — meaning that the revenue realization is bad news, contributing to a worsening, not improving, deficit outlook.  Incidentally, revenues of $2.074 trillion would put them at just around 14 1/2 percent of GDP–the lowest they’ve been since 1950 and perilously close to setting a new post-WWII record low (if they fall below the 1950 level of 14.4 percent).  This is more clear evidence that the federal revenue system faces a “crisis” as significant as the crises facing our entitlement programs.

With only shorter-term spending lower than expected, nothing yet accomplished to “bend down the curves” on longer-term spending, and revenues looking increasingly inadequate to fund our short-term and longer-term needs, it’s hard to be optimistic about what the $1.6 trillion (”not-as-bad-as-$1.8-trillion”) deficit really means.  What will be an important indicator of how the fiscal outlook has changed since May is what the Administration will show on Tuesday about the deficits in 2012 and 2013–well past the current recession.  Are revenues expected to be (more) sufficient by then, once the economy is growing strongly again?  Will the “recovery” spending have gone away by then, once the economy has “recovered” and it’s no longer needed?  Or we still have a version of “Cash for Clunkers” (or its latest equivalent) going on?  And will we still not have passed a form of health care reform that makes the hard choices necessary to really effectively “bend the health cost curve” down?  Standards (and the world) have surely changed when we fiscal hawks can “hope” that the previously-projected annual deficits of “only” half a trillion dollars by 2012-2015 (and only worsening after that) will come true.

Those are some of the reasons why I wouldn’t be surprised if the Administration says on Tuesday that their new projection for next year’s (fiscal year 2010) budget deficit is now worse than they previously thought–that it will turn out to be larger than $1.258 trillion (or 8.5 percent of GDP).  That’s why I worry that today’s “good news” on the deficit just borrows from what would have been better news about future deficits.  I worry this is just a case of “premature celebration.”  If anyone is really such an optimist that they’re actually celebrating about this, I mean.  ;)

Cutting Off One’s Healthy Foods to Spite One’s Grocer’s Health Reform Ideas?

August 19th, 2009 . by economistmom

wholefoods-veggies

The Washington Post’s Steven Pearlstein offered up lots of reasons why the so-called “public option” is not the “be-all and end-all” of health care reform.  That’s why it’s all the more puzzling why liberal organic-food lovers would choose to cut themselves off from their beloved Whole(some) Foods just because the CEO of Whole Foods weighed in with his personal opinion (and not his company’s profits) on health policy, which happened to not include endorsement of the “public option”:

Whole Foods aficionados who assumed the company’s management was as crunchy as the brand are feeling betrayed.

They have stormed Twitter, Facebook and the blogosphere to vent their rage at John Mackey, the chief executive. In an op-ed column in the Wall Street Journal last week, he argued for health-care savings accounts and declared that health care is not an intrinsic right– ideas with a conservative bent, which made Whole Foods’ liberal customer base go ballistic.

They are even talking about a boycott…

What’s wrong with this picture?

“A lot of people have been paying a premium for the Whole Foods brand for years,” said Mark Rosenthal, a playwright living in Massachusetts who founded the Boycott Whole Foods group a few days ago. It has nearly 14,000 members. “A lot of people are sad to look at this corporation and see that it is just like any other, if not worse.”

Whole Foods spokeswoman Libba Letton said that Mackey was expressing personal opinions in the op-ed and that the company has no official position on the issue. Whole Foods has sent letters to customers apologizing for any offense and created a forum on its Web site to discuss the issue. There are more than 10,000 posts, compared with 77 posts on the raw foods forum…

Why are these Whole Foods customers so willing to give up all that’s good about Whole Foods company policies and Whole Foods FOOD?  And how do those Whole Foods, pro-public-option customers know that the CEOs of the other places they could buy food from are any more aligned with their political views?  Imagine how hard it would be to buy anything if we had to interview every seller first to make sure we liked their soul as well as their merchandise?

Mad Over Myths

August 18th, 2009 . by economistmom

Another psychology lesson for health care reform:

When people get really worked up over far-fetched ideas, often the worst thing one can do is to point out that what they’re upset or angry about isn’t real.  It just pisses them off more

In the health care reform debate, myths abound:

Nearly half of Americans believe that a proposed overhaul of the health care system means the government will decide when to stop providing medical treatment to senior citizens, according to the latest polling by NBC News released this evening.

Some 45% said they believe the plan is likely to include such a provision that has become known as “death panels” despite bipartisan efforts by President Barack Obama and the provision’s author, Republican Georgia Sen. Johnny Isakson to dispel the idea. (Isakson, in a recent interview with the Washington Post called the confusion “nuts.”)…

The AARP tries to “intervene”:

There are special interest groups trying to block progress on health care reform by using myths and scare tactics. Like the notion that health care reform would ration your care, hurt Medicare or be a government takeover. Actually, these are false statements.

All of the health care reform plans currently being debated in Congress would ensure that you and your doctor are the ones making decisions about your health. The majority of working Americans will continue to receive their health care through their employer. In addition, health care reform will strengthen Medicare by eliminating billions of dollars in waste while lowering prescription drug prices.

Throughout the debate on how to fix what’s broken about our health care system, AARP pledges to help you cut through the noise and find the facts about what health care reform means for you and your family. When we see special interests using scare tactics, we’ll make sure you’re given the facts so you can make informed decisions about health care reform…

And this is the thanks they get:

(CBS) CBS News has learned that up to 60,000 people have cancelled their AARP memberships since July 1, angered over the group’s position on health care.

Elaine Guardiani has been with AARP for 14 years, and said, “I’m extremely disappointed in AARP.”

Retired nurse Dale Anderson has 12 years with AARP and said, “I don’t wanna be connected with AARP.”

Many are switching to the American Seniors Association, a group that calls itself the conservative alternative…

Obviously, honesty isn’t always the best policy if you care about making money.  The myths make for “mad members,” and while you might try to take the membership out of the madness, you often can’t take the mad out of (much of) the membership.

Psychology Matters in Health Care Reform

August 17th, 2009 . by economistmom

nytimes-leonhardt-fat-tax-photo-0812091

The New York Times’ David Leonhardt had an interesting column in the Sunday magazine.  He thinks that in the health care reform debate, policymakers aren’t paying enough attention to the influence that policy could have (and perhaps should have) on human psychology.  David leads with the story of the Cleveland Clinic, which adopted a “hire no smokers” policy two years ago:

[I]t is so striking to talk to Delos M. Cosgrove, the heart surgeon who is the clinic’s chief executive, about the initiative. Cosgrove says that if it were up to him, if there weren’t legal issues, he would not only stop hiring smokers. He would also stop hiring obese people. When he mentioned this to me during a recent phone conversation, I told him that I thought many people might consider it unfair. He was unapologetic. “Why is it unfair?” he asked. “Has anyone ever shown the law of conservation of matter doesn’t apply?” People’s weight is a reflection of how much they eat and how active they are. The country has grown fat because it’s consuming more calories and burning fewer. Our national weight problem brings huge costs, both medical and economic. Yet our anti-obesity efforts have none of the urgency of our antismoking efforts. “We should declare obesity a disease and say we’re going to help you get over it,” Cosgrove said.

David then points out that the largest contributor to people’s health, more than “substandard medical care” or social and physical environments or even genetics, is “behavior.”  And today’s worst health problem is a big behavioral problem called obesity.

What does David think public policy could do about changing the bad behavior that leads to obesity, short of arresting or just not hiring obese people?  He thinks we could use prices to create an economic incentive to avoid obesity.  We need to charge a penalty for obesity because obesity imposes costs on society, not just on the private citizens who “choose” (selfishly) to be obese:

Today, the great American public-health problem is indeed obesity. The statistics have become rote, but consider that people in their 50s are about 20 pounds heavier on average than 50-somethings were in the late 1970s. As a convenient point of reference, a typical car tire weighs 20 pounds.

This extra weight has caused a sharp increase in chronic diseases, like diabetes, that are unusually costly. Other public-health scourges, like lung cancer, have tended to kill their victims quickly, which (in the most tragic possible way) holds down their long-term cost. Obesity is different. A recent article in Health Affairs estimated its annual cost to be $147 billion and growing. That translates into $1,250 per household, mostly in taxes and insurance premiums.

A natural response to this cost would be to say that the people imposing it on society should be required to pay it…

One idea is surely too controversial because it seems to attack obese people so personally (some of whom have more of a genetic predisposition than others):

Cosgrove mentioned to me an idea that some economists favor: charging higher health-insurance premiums to anyone with a certain body-mass index. Harsh? Yes. Fair? You can see the argument.

So David’s favored approach is via what economists call a “corrective tax”–one which taxes an activity that generates external costs (social costs in excess of market prices) in order to bring private incentives more in line with socially optimal choices:

The solutions to these problems are beyond the control of any individual. They involve a different sort of responsibility: civic — even political — responsibility. They depend on the kind of collective action that helped cut smoking rates nearly in half. Anyone who smoked in an elementary-school hallway today would be thrown out of the building. But if you served an obesity-inducing, federally financed meal to a kindergartner, you would fit right in. Taxes on tobacco, meanwhile, have skyrocketed. A modest tax on sodas — one of the few proposals in the various health-reform bills aimed at health, rather than health care — has struggled to get through Congress.

It’s true that tobacco taxes have increased dramatically of late, and that will help to decrease smoking further (as well as provide needed revenue to fund children’s health care), but as an ex-smoker myself, I can attest that the social stigma from signals (or “cues”) that an activity is “bad” can often be a far more effective way to change behavior than are (just) higher prices.  Many policies that are designed to affect private economic (purely pecuniary) incentives have a bonus effect of signaling what society scorns or values–and I mean even beyond the size of the tax or subsidy.  Sometimes the easiest (and cheapest) way to get humans to change their behavior is to suggest that their current behavior is “totally uncool.”

Take the Cash for Clunkers program, for example.  It’s easy to complain that the program does not do the best job of encouraging fuel efficiency and resourcefulness; the mileage standards are pretty low, and to get the federal subsidy on the new car, you have to destroy (effectively waste) the old vehicle (which doesn’t necessarily have to be that old at all).  One doesn’t have to buy a hybrid or other highly-fuel-efficient vehicle to qualify–for example, one can do what my parents did and turn in their old Ford Explorer SUV for the smaller Ford Escape (even the non-hybrid version) which is nonetheless still an SUV.  Yet reports of the types of new vehicles purchased by Cash for Clunkers participants suggest that people haven’t been just “squeaking by” with the minimum mileage improvements; the most popular cars purchased have been the compact cars.  That observation is consistent with two explanations:  (i) a purely economic incentive in that the smallest cars tend to be the cheapest models, so the $4500 clunkers rebate is a larger percentage off the compact car’s price–plus there’s an “income effect” that should encourage more purchases of cheaper cars during a recession, even apart from the bigger markdown (price or “substitution” effect); OR (ii) a “social response” of consumers to “do the right thing” given that the government is rewarding them for their supposedly “common good behavior” (not just selfish gain) and that maybe they’re feeling a little guilty about destroying their old, less fuel efficient, but still useful vehicle.

OK.   Maybe my last theory sounded a little “touchy, feely” to you.  What kind of “economist” am I, saying that more than prices matter and talking about feelings driving people’s economic decisions?  Well, it turns out that I am, in Myers-Briggs speak, an “ENFP” economist–that’s an “Extroverted, iNtuitive, Feeling, Perceiving” economist.  Which sounds pretty crazy for an economist trained in neoclassical theory, doesn’t it?  It turns out the Myers-Briggs type of people that make the best economists are (at least according to this site) “INTJs” (Introverted, iNtuitive, Thinking, Judging)–the opposite of me in 3 out of 4 of the traits.  I’m currently trying to conduct a Facebook survey among my economist Facebook friends to see if most of them are indeed INTJs.  The problem is that those economist friends of mine who are also on Facebook are probably a biased sample of my economist friends; they’re probably the ones least likely to fall into the typical I, T, and J categories because they’re interested in being on Facebook, after all.  (They’re probably “weird” economists, like me.)  And I haven’t collected many data points because I think my economist friends on Facebook are actually the least likely to spend time on Facebook out of all my Facebook friends.  (This is sort of like being “the economist” on a Democratic congressional staff; take my experienced word for it–the economist always turns out to be the least liberal of the staffers.)

Which brings me to Part II of why “psychology matters in health care reform.”  I think the psychology of our political leaders matters in terms of how successful (or not) any health reform effort will be.  This past week while I’ve been so fascinated about my unusual-for-an-economist ENFP personality, I discovered that many people speculate that President Obama is also an ENFP.  From a Slate article written during the 2008 presidential campaign (by Emily Yoffe, emphasis added):

Barack Obama—no one will be surprised to learn—is an Idealist. His specific type is an ENFP, what [psychologist David] Keirsey calls “the Champion.” ENFPs, says Keirsey, are “filled with conviction that they can easily motivate those around them.” Champions work to “kindle, to rouse, to encourage, even to inspire those close to them with their enthusiasm.” Idealists “usually have a tongue of silver” and are “gifted in seeing the possibilities” of institutions and people. Here’s Obama on leadership: “[W]e need leaders to inspire us. Some are thinking about our constraints, and others are thinking about limitless possibility.”

This ability to move people through imagery and rhetoric carries a danger for the ENFP, says Keirsey—a belief in “word magic.” “Word magic refers to the ancient idea that words have the ability to make things happen—saying makes it so.”

Keirsey says Idealist leaders should be called catalysts because “[t]he individual who encounters such a leader is likely to be motivated, animated, even inspired to do his or her very best work.” The New Yorker’s Packer writes, “Obama offers himself as a catalyst by which disenchanted Americans can overcome two decades of vicious partisanship. …”

Idealists are deeply introspective. According to Keirsey, their “self-confidence rests on their authenticity,” which makes them “highly aware of themselves as objects of moral scrutiny.” Idealists, such as Thomas Paine, Mohandas Gandhi, and Martin Luther King Jr., tend to be leaders of movements, not office-holders. If Obama is elected, not only would he be the first black president, but according to Keirsey, he’d be the first Idealist president.  [According to this site though, Bill Clinton is a "verified" ENFP.] (Kroeger speculates that Lincoln may have been an Idealist.) Idealists are rare in any executive position…ENFPs themselves are rare—Keirsey estimates only about 2 percent of people are ENFPs. Kroeger says the ENFP can be an effective boss. “At their best they bring a refreshing alternative style to top management and decision making.”

Keirsey says that the Idealist is the unusual leader who is “comfortable working in a climate where everyone has a vote.” In a Vanity Fair profile, Todd Purdum quotes a Harvard Law School classmate of Obama’s describing his collaborative style as editor of the Law Review…In a speech, Obama described this ability: “If you start off with an agreeable manner, you might be able to … recruit some independents into the fold, recruit even some Republicans into the fold.”

As leaders, Keirsey says, the Idealists possess a “diplomatic intelligence.” They “seek common ground,” want to “forge unity,” arrive at “universal truths,” and are “trusting.” Given these qualities, it should be no surprise that Obama says that as president, he would quickly sit down with our enemies…

The ENFP can have a problem with “restlessness,” says Kroeger. “As a task or responsibility drags on and its mantle becomes increasingly routine, the ENFP can become more pensive, moody, and even rigid.” Obama himself referred in a debate to his disorganization and dislike of paperwork—and his self-knowledge that “I need to have good people in place who can make sure that systems run.” But as Purdum writes, it is Obama’s “restlessness” that prompted him “to take a chance, to aim higher—when others told him to wait his turn.”

Now that might not sound all that wonderful for Obama’s ability to get the health care reform job done quickly and efficiently.  But contrast that description of Obama’s ENFP personality with the same article’s explanation of how Hillary Clinton’s ESTJ personality may have doomed the Clinton Administration’s (ok, Hillary’s) health care reform effort:

ESTJs are most comfortable in the world of the specific. Keirsey says they will listen politely to “theoretical or fanciful” conversation—what an ESTJ surely thinks of as a certain other candidate’s gasbaggery—then “shift to more concrete things to talk about, more solid and sensible topics” using their ability to call up at will “an enormous fund of facts.” (Ever heard a Hillary speech?)

It is this ESTJ-ness that may explain the failure of Hillary’s health-care initiative as first lady. ESTJs like nothing better than digging deep into the specifics of a system and batting out proposals with trusted staff, then presenting the perfect fait accompli to a grateful public. As [consultant Otto] Kroeger points out, ESTJs can be stunned when the plans fail: “Having packaged the argument so neatly and precisely, how could anyone possibly disagree?” Keirsey says this blindness comes from the concrete-thinking ESTJ’s pronounced weakness at the abstract arts of strategy and diplomacy. Hillary neither foresaw the attacks by competing interests nor had the people skills to win over her opponents.

So those are a couple ways in which “psychology matters” in health care reform: (1) if we’re going to “bend the cost curve” in a cost-effective manner, we ought to devote some of our creative thinking toward clever ways to affect human psychology to get people to start losing weight; and (2) we better get our ENFP president to inspire not just the American public, but also those nasty partisans on both sides of the aisle in Congress, to come on board.

No Perfect, Painless Silver Bullet Out There

August 15th, 2009 . by economistmom

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I watched President Obama’s town hall meeting on health care today.  The best parts were in the Q & A, where the President’s inherent brilliance (and not just his rehearsed yet genuine eloquence) came through, in this response to a question that many in the audience seemed to interpret as a “hostile” one (slide ahead to 37:15 in this C-SPAN video of the full event).  From a full text transcript just published by the LA Times (emphasis added):

You know, health care is really hard.  I mean, this is not easy.  I’m a reasonably dedicated student to this issue.  I’ve got a lot of really smart people around me who have been working on this for months now…

And the truth is — I want to be completely honest here — there is no perfect, painless silver bullet out there that solves every problem, gives everybody perfect health care for free. There isn’t.  I wish there was.  I wish I could just say, you know what, we’re going to change the system, everybody will get as much care as they want any time they want, everybody will have it, and it won’t cost anything.  And doctors will be happy and nurses will be happy, hospitals will be happy, insurance companies will still make a lot of profits, drug companies will be able to charge as much as they want.  I can’t do it.  Nobody can…

[I]f we don’t change the delivery systems and change some of the incentives…[w]e’ll either have to cut Medicare, in which case seniors then will bear the brunt of it, or we’ll have to raise taxes, which nobody likes…

That’s pretty honest talk, but it’s also slightly optimistic in that last part.  Because to be completely honest, we’ll probably have to cut Medicare and raise taxes even if the President’s proposed health care reform becomes a reality.  It’s just that if the reform works as we hope, then we won’t have to cut Medicare or raise taxes quite as much as otherwise.

Have I Mentioned I Don’t Like the Bush (uh, Obama) Tax Cuts?

August 14th, 2009 . by economistmom

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I know–that’s a silly question; just use the search feature on this blog and plug in “Bush tax cuts” and you’ll find out.

Perhaps I’ve not mentioned as often or as explicitly that Bruce Bartlett, a Reagan Administration supply-side economist, isn’t that fond of the Bush tax cuts either.  Why, an entire chapter in Bruce’s book “Impostor: How George W. Bush Bankrupted America and Betrayed the Reagan Legacy” (gee, don’t be so shy, Bruce!) is called “Why the Bush Tax Cuts Didn’t Deliver.”  Bruce published this column on The Daily Beast this week–a condensed version of his scathing critique of Bush Administration economic policy, put in the context of the “GOP’s Misplaced Rage.”  In it, Bruce reminds us what’s not to love–even if you’re an ardent supply-sider–about the Bush tax cuts:

[C]onservatives have an absurdly unjustified view that Republicans have a better record on federal finances. It is well-known that Clinton left office with a budget surplus and Bush left with the largest deficit in history. Less well-known is Clinton’s cutting of spending on his watch, reducing federal outlays from 22.1 percent of GDP to 18.4 percent of GDP. Bush, by contrast, increased spending to 20.9 percent of GDP. Clinton abolished a federal entitlement program, Welfare, for the first time in American history, while Bush established a new one for prescription drugs.

Conservatives delude themselves that the Bush tax cuts worked and that the best medicine for America’s economic woes is more tax cuts; at a minimum, any tax increase would be economic poison. They forget that Ronald Reagan worked hard to pass one of the largest tax increases in American history in September 1982, the Tax Equity and Fiscal Responsibility Act, even though the nation was still in a recession that didn’t end until November of that year. Indeed, one could easily argue that the enactment of that legislation was a critical prerequisite to recovery because it led to a decline in interest rates. The same could be said of Clinton’s 1993 tax increase, which many conservatives predicted would cause a recession but led to one of the biggest economic booms in history.

According to the CBO, federal taxes will amount to just 15.5 percent of GDP this year. That’s 2.2 percent of GDP less than last year, 3.3 percent less than in 2007, and 1.8 percent less than the lowest percentage recorded during the Reagan years. If conservatives really believe their own rhetoric, they should be congratulating Obama for being one of the greatest tax cutters in history.

Conservatives will respond that some tax cuts are good while others are not. Determining which is which is based on something called supply-side economics. Because I was among those who developed it, I think I can speak authoritatively on the subject. According to the supply-side view, temporary tax cuts and tax credits are economically valueless. Only permanent cuts in marginal tax rates will significantly raise growth.

On this basis, we see that Bush’s tax cuts were pretty much the opposite of what supply-side economics would recommend. The vast bulk of his tax cuts involved tax rebates—which failed in 2001 and again in 2008, because the vast bulk of the money was saved—or tax credits that had no incentive effects. While marginal rates were cut slightly—the top rate fell from 39.6 percent to 35 percent—it was phased in slowly and never made permanent. Neither were Bush’s cuts in capital gains and dividend taxes.

Bruce didn’t get to elaborate on what seems a contradiction between his view that we haven’t been raising enough revenue and his suggestion that the marginal rate reductions would have been better if they were enacted permanently from the start.  I think Bruce would agree with me that even permanent cuts in marginal tax rates aren’t necessarily “worth it” from an economic growth perspective if they reduce national saving by increasing the federal budget deficit.  (Public saving plus private saving equals national saving.)  It’s a matter of the costs of the tax cuts relative to their benefits.  The best way to get “supply side” economics to work in tax policy is to reduce marginal tax rates while raising the same amount of revenue.  How do you do that?  Not by merely counting on the tax base to grow on its own after the (uncertain) incentive effects of the rate reduction kick in.  You raise the same amount of revenue right away (with certainty) by not limiting your policy levers to just adjusting tax rates.  The far more significant contributor to how efficient (or not) the tax system is, is the tax base and how broad and level you make it.  And yes, policymakers can make it as broad and level as the current economic base will allow.

That’s why the two concerns Bruce has about the Bush tax cuts–(1) that they were and are unaffordable; and (2) that they did not permanently reduce marginal tax rates and hence weren’t true “supply side” tax cuts–lead to only one conclusion, and that’s that we need to be thinking more seriously about fundamental (truly base-broadening, keep-rates-low) tax reform.

But of course, now it’s the Obama Administration who’s in charge, and they’ve decided to include $2 trillion worth of deficit-financed Bush tax cuts in their own 10-year budget–that’s $2 trillion of the possible $2.6 trillion of the entirety of the Bush tax cuts.

So left-leaning commentators are reiterating their disdain towards the Bush tax cuts:

[by Robert Creamer on Huffington Post:] [L]et’s be clear, the Bush tax cuts didn’t just produce fewer jobs than advertised. They didn’t produce any private sector jobs at all. The whole experiment in handing over money to the wealthiest people in America so they could use it to benefit the rest of us was a colossal - empirically verifiable - failure.

Turns out that when given the chance to use all of those tax cuts, the top two percent of the population used them to speculate in exotic derivatives, to drive up the prices of high end real estate, pay exorbitant prices to the designers of $4,000 blouses and $2,000 shoes. There is absolutely no evidence that they made any more investments in new manufacturing plants, or started up any more businesses than they would have had they paid the same tax rates that they did when Ronald Reagan took office and private sector job growth was 3% per year.

No, instead the rich used the Bush Tax Cuts to create the gigantic economic “bubble” that ultimately burst and caused immeasurable hardship and suffering to millions of average Americans and everyday people across the globe.

Bottom line is that the rich sold America a bill of goods. Give us big tax cuts and we’ll give you jobs growth, they told us. America kept its end of the bargain, and the rich reneged entirely on theirs.

In a word, the economic theories of the Republicans and the Right were simply wrong. In fact, they were elaborate intellectual justifications for the richest among us to enrich themselves even more…

…but are failing to recognize that almost all of the tax cuts that President Obama has proposed–and in fact all of the deficit-financed tax cuts President Obama has proposed–are in fact the old “Bush tax cuts,” which will now become the “Obama tax cuts” as soon as President Obama signs the extension into law before the end of next year.  And while those who have hated the Bush tax cuts but love President Obama would like to believe that President Obama is letting the worst part of the Bush tax cuts (those “for the rich”) expire, the truth is that the “Obama tax cuts” will still go disproportionately to “the rich,” even with the upper tax brackets expiring.

Yep.  The Bush/Obama tax cuts are a sad truth that all of us (Reagan supply-siders, Clinton fiscal conservatives, and even the most liberal of Obama supporters) don’t want to believe our new President who stood for “change” could let happen.

Is America Through the “Worst” of the Recession?

August 13th, 2009 . by economistmom

Well, I think it really depends on who you ask.  The recession has meant very different things to different (real) people.

But the Washington Post posed this question to me–and other economists–yesterday… not so much “real” people.  (I actually think they should do a follow-up where they do ask the question to real people.)

Anyway, this is how I answered, looking through my economist-biased lens but still trying to think about real people:

DIANE LIM ROGERS

Chief economist of the Concord Coalition; blogger at EconomistMom.com

In a purely technical sense, the latest economic data do suggest that the “worst of the recession” is over. The economy is still shrinking, but not as fast, and most economists think we will bottom out soon. But using aggregate economic data as an indicator of economic “well being” is misleading because such figures are dollar-weighted, not person-weighted: a “rich” family with a $300,000 income is counted nearly 30 times more than a 30-hours-per-week minimum-wage family.

It’s those Americans who are assigned the lowest statistical weights who are most likely to be still without a job or otherwise under-employed. The labor market is always the last aggregate piece of the economy to recover, and this recovery is expected to be unusually slow. The irony is that the economy as a whole could be officially “recovering” within a couple months, yet the vast majority of American families will not see an improvement in their own economic well being for at least another year.

On a positive note, the economic data also suggest that when American families eventually land on higher ground, it won’t just be back to where they started, but to a different, more sustainable place in terms of their jobs and financial security.

I was limited to 200 words, so that “positive note” at the end is surely a bit cryptic.  So here’s a bit of an elaboration of that point–why I’m optimistic that although this is a really tough recession, that our country has the opportunity to come out of this stronger than before:

The employment data show that the auto manufacturing sector has shed nearly 300,000 jobs since the start of the recession (in Dec. 2007), but that a large part of that is just a continuation of the permanent decline of the industry.  The last peak in auto manufacturing employment was in February 2000, when there were 1.330 million autoworkers, and by the start of the current recession we had already lost 372,500 of those jobs.  This is a permanent aggregate trend that might ultimately be a good thing, not just for efficiency in the U.S. economy as a whole (as we move toward producing other things we value more and are indeed better at producing) but for many of the currently under-employed autoworkers who will manage to move themselves into jobs in other (appropriately growing) industries as the economy recovers.

And the personal saving data show that people are actually capable of living within their means; it just took this crisis to get them to do it.  Some people were forced to save more by creditors who took their credit lines away, but others chose to save more when they were scared smart by the bankruptcies, foreclosures and unemployment surrounding them.  Since the start of this recession, the personal saving rate has moved from just 1 percent to the 5-6 percent range.  And that’s a good thing for the longer term; it’s what we needed to do.

So I think the economic outlook could be pretty good for precisely those people who will have to slog through the longest and most difficult journeys.  The hard journey forces them to think and plan more carefully for the future–to make some real changes in their lives–in ways that a shallow, mild recession would not.  And I’m convinced that the fact that families have had to get their act together during this economic crisis will make them more appreciative of the similar challenges the federal government faces, and will make them more receptive to the need to get the fiscal house in order–even if it involves the tough choices of tax increases and spending restraint.  This is what I see as the longer-term “silver lining” to this particularly painful recession.  I feel there’s a tremendous opportunity to use the current economic crisis as a great teachable moment that can help steer us all (in aggregate and individually) onto a better path.

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