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Allan Sloan on Social Security

September 16th, 2009 . by economistmom

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I’m on the road again, in Chicago for a couple days, so I thought I’d do an easy post tonight by highlighting Allan Sloan’s very informative column on Social Security in Tuesday’s Washington Post.  (Oh yeah, remember Social Security, that other entitlement program we haven’t gotten quite right just yet–despite the fact that it’s not subject to those nasty rising per capita health costs?)

I especially like Allan’s explanation of how little the immigration issue affects Social Security’s fiscal position:

Social Security has big problems, which was the point of my article, and readers wanted to know how much of that is attributable to illegal residents’ getting benefits.

The answer is, little or nothing. Here’s why. If you’re an illegal resident and get a legitimate Social Security number, and work long enough to qualify for benefits, you can collect if you move outside the United States. (However, you can’t collect if you stay here, under Social Security rules.) But paying those benefits — which illegal immigrants have earned by paying Social Security taxes, along with their employers — is the same as paying a legal resident who has similar payment history. Social Security is an earned benefit — it’s not like Medicaid or welfare — and those who have paid into the system, whether or not they’re here legally, have earned it.

If you’re an illegal immigrant with a phony Social Security number, you’re helping Social Security, because you and your employer pay into the system but you don’t get any benefits from it. The money is credited to a “no-match” account at the Social Security Administration.

And please, don’t deluge me with mail about illegal workers. I’m not taking a position on the broader issue of immigration, I’m simply answering a legitimate question about its impact on Social Security, which seems to be negligible.

And I like this reader’s honesty which reveals how even the most sensible of policies to reform Social Security (as I think raising the retirement age is) will not be an easy sell to the American people (Allan’s response follows), emphasis added:

I enjoyed your article except when I got to your proposal of raising the retirement age to 70. I retired early this year at age 64, and let me tell you, there is no way I could have hung on to age 70 doing my job well, and I’m not a manual laborer. There is something about mid- and late 60s that makes it very difficult to continue working mentally and physically. The body starts breaking down and the mind slows down. Maybe you are an exception.

– S.H.

AS: Would that I were — at 64, I’m definitely getting creaky. But we have to do some painful things to make Social Security financially secure, and raising the retirement age for white-collar workers is one of them.

“Painful things?”  No thanks, the public says.  We’ll stick with more benefits and lower taxes; after all, it’s worked out for us thus far.

Here’s the link to Allan’s August column that generated all that mail from which he quoted (and from which the photo above came).  I liked how Allan explained today how his photo was doctored; that was more interesting than how I had altered mine (just blurring my number out) in my Obama “donut hole” post (from June 2008):

mom-donut-ss-compressed

(And speaking of “painful things”–the fact that my spam blocker isn’t working and is letting some clearly inappropriate comments get by (Mom, don’t read them!) is really “painful” to me… Another reason for tonight’s no-brainer post.)

EconomistMom: A Glimpse of the Video Version

September 14th, 2009 . by economistmom

Today I gave a 90-minute talk (well 20-some minutes “presentation” followed by an hour of Q and A) to a group of 20 journalists here for a conference at the University of Maryland’s Knight Center for Specialized Journalism. They live webcasted it and put the video up on their website. This is a first glimpse of EconomistMom: The Video Version–although 90 minutes is far from a “glimpse” and far from what my “vlog” posts will be on my video channel that I’ll eventually get up on the Thomson-Reuters Project Insider network. (By the way, please don’t watch the whole thing if you are not my own mother, or I will worry about you and your undue fascination with me…) If you watch any more than a few minutes you’ll have to put up with a lot of my personal stories and perhaps-biased (but nonpartisan) opinions, but then you can decide if you would be inclined to watch my vlog as much as you read my blog.

At some point late in the Q&A I talk about how GDP doesn’t measure economic welfare; how economists think we should be able to put dollar values on everything, including environmental quality, but the fact is we’re not very good at translating social values into dollars when there’s no real market in which to observe market prices. And then this evening while driving home from work I heard this story on NPR which was right up that alley.  Apparently French President Sarkozy and I think alike…

It’s hard for me to watch myself. I move around way too much. And I should have brushed my hair. And did I really need to wear my reading glasses when I wasn’t reading?!  I really should get lasik–but of course, I can’t afford it on my Concord salary as “frugal” as Concord is (as I note in the talk).  I hope I don’t get in trouble for this…

Oh–look out for the sound…They had to adjust it after the first few minutes when it was obvious that I talk too loudly, too.  I was a cheerleader before I was an economist or a yoga teacher, after all…  ;)

**CORRECTION:  My oldest daughter is not a “senior in college“; she’s a senior in high school.  Obviously getting ahead of myself and maybe a little preoccupied with the college application process coming up.  (”College on the brain”…)

What Exactly Are They Protesting?

September 13th, 2009 . by economistmom

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On Saturday the “Tea Party” movement’s “Taxpayer March on Washington” was held.  According to the Washington Post (emphasis added):

Saturday’s throng appeared to number in the many tens of thousands. A sea of people surrounded the Capitol reflecting pool, spilling across Third Street and along the Mall. The sound system did not reach far enough for people at the edges of the rally to hear the speakers onstage.

“You will not spend the money of our children and our grandchildren to feed an overstuffed government,” Rep. Tom Price (R-Ga.) said of the Obama administration, drawing raucous applause.

“Our history is decorated by those who endured the burden of defending freedom,” Price said. “Now a new generation of patriots has emerged. You are those patriots.”

The group’s sponsors included FreedomWorks, a Washington-based group headed by former House majority leader Richard Armey (R-Tex.), and the groups Tea Party Patriots and ResistNet. They and others involved in the rally comprise a loose coalition of conservative groups that helped organize the health-care and anti-tax demonstrations in the spring and summer

Which leads me to wonder if most of these protesters really understand what they’re protesting.  I doubt these folks would object to expanded health care coverage if they didn’t have to pay higher taxes (which the Obama Administration is proposing as at least part of the way they’ll accomplish deficit-neutral health-care reform).  And if these protesters are not willing to pay higher taxes and yet don’t want their existing health benefits cut, then how can they possibly argue that they’re the “fiscal conservatives” and that it’s the other side who is spending “the money of our children and our grandchildren”?

Below are some photos of the march that I found via the flickr link on the Taxpayer March website; they well illustrate that these people are clearly “caught up in the moment” and the “movement” and don’t really understand what they’re protesting.  (If I were video blogging already, I would have attended and interviewed people a la Jay Leno’s “Jaywalking” segments.)  What’s really troubling to me is that these protesters seem especially delusional when it comes to what their “no new taxes” and (yet) “no cutting my (government) benefits” position means for the burden that’s passed on to future generations.  And when you use a child as a “prop” to argue the anti-tax position that’s exactly the mentality that jeopardizes that child’s economic future–well, I think that probably qualifies as child abuse [edited 9/15:] that strikes me as poor judgment–almost as poor judgment as calling it “child abuse.”

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The (Virtual) Fiscal Wake-Up Tour on Health Care Reform

September 12th, 2009 . by economistmom

At the Concord Coalition we’re trying to spread our word more efficiently lately using video technology. Here’s an example–this set of video clips of the “first string” “Fiscal Wake-Up Tour” team (my boss Bob Bixby, the Peterson Foundation’s Dave Walker, the Heritage Foundation’s Stuart Butler, and the Brookings Institution’s Belle Sawhill) talking about health care reform.

I myself will soon venture into video blogging; I’ve recently been invited by Thomson-Reuters to be a “vlogger” on their new “Project Insider” internet video network, where I’ll eventually have my own “channel”. (How cool is that?!) Stay tuned; I’ll be soliciting ideas…although it’s probably going to take a few months for me to get up to speed. (I don’t even have my own video camera yet–apart from the one that I think is built into my laptop but which I’ve never used…)

Waste Is in the Eye of the Beneficiary

September 10th, 2009 . by economistmom

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Around the Concord Coalition offices today (the day after the big speech) my colleagues and I were talking about how President Obama likes to make it sound as if all we have to do to save health care costs (to “bend the health cost curve”) is cut the “waste” and “abuse” that no one should want anyway.  That’s how he can claim his plan would reduce federal health spending without cutting any federal health care “benefits”–because it wouldn’t cut any spending that actually “benefits” people.

But as I said late last night, one man’s “waste” is another man’s precious benefit.  It seems there are a lot of different meanings in different people’s minds when they hear the terms “waste” and “benefits.”  So what we really need to do to better inform the health reform debate is to better define those terms and the grey areas between them, and then get the Administration and the other policymakers in town to explain exactly what it is they would cut and what they would not.

So I’ve come up with a “workbook” exercise of sorts for the policymakers to “fill in” that could really help us better understand what it is they’re proposing and better figure out whether we’re willing to accept the tradeoffs their policies imply.  Here it is:

FILL-IN-THE-DETAILS INSTRUCTIONS for “EconomistMom’s Health Care Reform Workbook”:

Step 1: Consider this spectrum of the value or wastefulness of health care spending, from most beneficial down to most wasteful:

  • “Valuable Benefits”:  many people like them, and they’re essential;
  • “Unnecessary Benefits”:  many people like them, but they can live without them;
  • “Unworthy Benefits”:  some people might like them, but they are “uneconomic” in that they wouldn’t pass a cost-benefit test;
  • Beneficial Waste” (not necessarily an oxymoron):  only a few people like them, and they fail the cost-benefit test miserably, because there’s a lot of “deadweight” loss in getting the “benefits” to those few people;
  • “Complete Waste”no one “likes” them because the spending is completely thrown into the wind–pure and utter waste.

Step 2: List specific examples of health care spending that you consider to fall under each of the five categories above.  (e.g., “Medicare spending that goes toward these procedures: [list] or to those households making $_____ or more.”)  More points/extra credit given for greater specificity and more examples.

Step 3: “Draw the line” somewhere within the list above that allows you to fill in these blanks:

“Our plan, by having the federal government stop paying for/subsidizing any health care spending below the line, is estimated to reduce federal health spending by $___ billion over the first ten years AND $___ billion over the next ten years.  Coupled with a sustainable new source of revenue from [name the sensible revenue-raising policy], our plan would expand health coverage to ___ million more Americans, including/not including (circle) illegal immigrants, in a deficit-neutral or (better yet) even deficit-reducing manner over the first ten years and beyond.

Step 4: Listen to the cheers or the boos…

Step 5: If cheers outweigh boos, CONGRATULATIONS. You’ve just come up with a fiscally-responsible bill that might actually pass.  If boos outweigh cheers, go back to Step 1.

Ok, so who’s gonna try first?  President Obama?  I’ll even let you have Peter take the test for you.  ;)

Courage or Cunning?

September 10th, 2009 . by economistmom

The President sounded strong–certainly not “wimpy”–tonight.  But having that “tough” and “forceful” demeanor doesn’t necessarily mean one is being “courageous.”  I did find myself listening with my head and heart and not just my ears, and to be honest, vacillating between smiles and cringes.

(UPDATE Thurs. morning:  here’s a link to CNN’s video of the full speech.)

These parts (copied from the CNN transcript) offered me some evidence of the President’s “courage” (my emphasis added):

…what we’ve also seen in these last months is the same partisan spectacle that only hardens the disdain many Americans have towards their own government. Instead of honest debate, we’ve seen scare tactics. Some have dug into unyielding ideological camps that offer no hope of compromise. Too many have used this as an opportunity to score short-term political points, even if it robs the country of our opportunity to solve a long-term challenge. And out of this blizzard of charges and counter-charges, confusion has reigned.

Well, the time for bickering is over. The time for games has passed.

Now is the season for action. Now is when we must bring the best ideas of both parties together and show the American people that we can still do what we were sent here to do…

Here’s what you need to know. First, I will not sign a plan that adds one dime to our deficits, either now or in the future.

I will not sign it if it adds one dime to the deficit now or in the future. Period. And to prove that I’m serious, there will be a provision in this plan that requires us to come forward with more spending cuts if the savings we promise don’t materialize…

[W]e will…create an independent commission of doctors and medical experts charged with identifying more waste in the years ahead…

Reducing the waste and inefficiency in Medicare and Medicaid will pay for most of this plan…

Much of the rest would be paid for with revenues from the very same drug and insurance companies that stand to benefit from tens of millions of new customers.

And this reform will charge insurance companies a fee for their most expensive policies, which will encourage them to provide greater value for the money — an idea which has the support of Democratic and Republican experts.

And according to these same experts, this modest change could help hold down the cost of health care for all of us in the long run…

But other parts made me realize it was probably more style than substance (my emphasis and commentary (in green) added):

Now, part of the reason I faced a trillion-dollar deficit when I walked in the door of the White House is because too many initiatives over the last decade were not paid for, from the Iraq war to tax breaks for the wealthy.

I will not make that same mistake with health care... [Note that he didn't say he wouldn't make that same mistake, period (i.e., including not making the same mistake with extended tax cuts)...]

The only thing this plan would eliminate [from Medicare] is the hundreds of billions of dollars in waste and fraud

[T]hese steps will ensure that you — America’s seniors — get the benefits you’ve been promised. They will ensure that Medicare is there for future generations…  [The Administration's rationalization appears to be that if it's just "waste and fraud" they're cutting, by definition that wouldn't cut anything of real "benefit" to the "beneficiaries."...But as we know, one man's "waste and fraud" is typically another man's treasured health procedure.]

I will protect Medicare. [Meaning he will not cut any Medicare benefits?  Then where will the real savings (beyond just useless "waste and fraud") come from?  Or meaning that he will cut them (beyond the useless "waste and fraud") to "save" the program--like "pruning" a starving plant?]

The middle class will realize greater security, not higher taxes. [...because people won't pay the higher taxes, only "insurance companies" and other "naughty businesses" will?...]

But the President closed his speech with a really moving, inspiring, and motivating reference to Senator Kennedy (emphasis added):

[In a letter written back in May, Senator Kennedy] expressed confidence that this would be the year that health care reform — “that great unfinished business of our society,” he called it — would finally pass.

He repeated the truth that health care is decisive for our future prosperity, but he also reminded me that “it concerns more than material things.”

“What we face,” he wrote, “is above all a moral issue; at stake are not just the details of policy but fundamental principles of social justice and the character of our country.”

And by the end of the speech, all I could say was “wow.”  And my first reaction to my colleagues (over email) was that the President had delivered a really strong and powerful and courageous speech.  It wasn’t until the “spell” wore off a little later that I could see [those little green comments of mine] between the lines.  ;)

So what did you think?  Was it more courage, or just cunning?

What We Need to Hear Tonight

September 9th, 2009 . by economistmom

Notice I didn’t say “what we want to hear tonight.”  But what we really need to hear is a little honest talk, from our courageous leader.  Talk like…

this (from a CNN-Money column by Alan Auerbach and Bill Gale, emphasis added):

President Obama says reforming health care is central to the task of getting the government’s long-term financial problems under control. And he’s right.

But fixing the health care system, even if it brings down costs, is not enough.

Obama and other policymakers need to pay more attention to a fundamental conflict underlying the health care debate: People want the federal government to do much more than they are willing to pay for through their taxes.

As a result, the nation faces not only a growing health care crisis, but also a related long-term fiscal problem — a sizable and growing imbalance between the federal government’s future revenues and spending. And the pending health care reform proposals could even make the fiscal problem worse, if expansions of coverage outweigh achievements at cost saving…

As yet, it is unclear how such cost-saving might be achieved via health reform…

This is a difficult problem. It is not hopeless, but it is far too large to be addressed through narrow measures alone, such as taxes on those with very high incomes or on soda consumption.

The necessary changes will affect all Americans in significant ways, and so they will require broad-based support from the American people. Achieving such support could begin with some frank talk about the costs, as well as the benefits, of health care reform, and the size of the long-term gap that health care reform alone cannot solve...

…and this (from Steven Pearlstein’s column in today’s Washington Post, emphasis added):

What makes reform such a difficult puzzle is that the fundamental policy goals of universal coverage and cost containment are inconsistent with the political instincts to assure Americans who already have health insurance that they will be able to keep everything they already have, to assure that nobody will get a tax or cost increase and to assure those in the health-care industry that there will be no reduction in their income. Obama’s mistake so far is not that he left it to Congress to hammer out the details of competing reform plans, but that he failed to give Congress political cover by helping people understand that there can be no gain from reform without at least some fairly apportioned pain.

Deals negotiated with doctors, hospitals, health insurers and drug companies represented a good running start on the path of shared sacrifice, but the president failed to follow through with other key players…

While there are no silver bullets in health-care reform, there are plenty of promising ideas on the table [if we just had the courage to choose to follow through on them]…

After a summer that exposed a virulent strain of public cynicism and distrust, the president’s challenge is to rededicate himself to restoring faith in government and rekindling the “yes we can” spirit that swept him into office. And at some point he needs to look straight into the eyes of those who would have him fail and promise to do whatever it takes to break the partisan stranglehold and make health-care reform a reality.

…and this from Bruce Bartlett, who joined Capital Gains and Games yesterday (congrats to Bruce but even more to the rest of his CG&G team for getting him!) and who already beat me to the punch today in terms of quoting from Steven’s column (although I bet I emailed my kudos to Steven first–last night at 1 am!):

I think Democrats were not completely clear about what their ultimate goal was at the beginning of the process. Obama talked a lot about bending the curve and reducing health costs during the campaign. Had he proposed legislation that did only that he might well have gotten a bill with bipartisan support. But there would no payoff for liberals in such a bill. They want universal coverage.

This has led to the muddled mess we are in today that Pearlstein identifies. Obama has tried to achieve both universal coverage and reduce costs at the same time and that’s not really possible without a total government takeover of the health system.

At the same time, it is unfortunately the case that Republicans have never had anything they hoped to get out of health reform, so there has never really been any possibility of making a deal with them. It’s hard to think of anything Obama could offer Republicans that would induce them to support any health reform. Their only interest is in maintaining the status quo even if it means defending Medicare, a program most House Republicans actually voted to abolish in April…

and even more like this–Bruce’s post yesterday about tax reform, not just because (as Bruce emphasizes) the previous experience with the process of tax reform in the 1980s should serve as a model for how any major fiscal policy reform should be pursued, but because an honest rethinking about tax policy is an essential part of well-designed health care reform as well.

So I’ll be listening between the lines of the President’s address tonight hoping to hear something that sounds at least a little like what Alan, Bill, Steven, and Bruce have said.  Something that gets beyond perpetuating the myths and rhetoric that suggest that the “right size of government” is the government spending that benefits ME only and the “right level of taxes” is the amount that doesn’t raise any of MY taxes.  Something that recognizes that the “right size of government” is that which we as a (civilized) society are willing to pay for, and the “right level of taxes” is that which pays for the government spending that we as a (civilized) society want to do.

…And Johnny Had Chicken Nuggets for Lunch Today

September 8th, 2009 . by economistmom

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Well, everyone’s waiting in great anticipation of the President’s Wednesday night address to Congress and the American people, hoping to get more clarity on how the President plans to actually change how health care works, hopefully for the better.  The Concord Coalition today released this statement written by Coalition co-chairs (and former U.S. senators) Warren Rudman and Bob Kerrey.

But the Senate is still struggling to come up with a single, bipartisan plan (despite Senator Baucus’ attempts to make it look as if one is very close), and the House Democrats are still in disarray–with the Progressives insisting that it’s the public way or the highway, and the Blue Dogs today making it clearer that they want just the opposite.

We can still hope for “real change” in terms of getting bipartisanship, political compromise and cooperation, mutual sacrifice, tough choices for the greater and longer-term good–all that good stuff that the President has been great at talking about.  And the opportunities for “real change” might actually be there for the taking.  But hope and opportunity are not sufficient, because to actually accomplish “real change” we still have to choose to change.

And with today’s first day of school, there was this story in the Washington Post about school lunches.  You see, the President wants to improve the quality of school lunches, which could easily be interpreted as part of his broader agenda for health care reform, contributing to the “preventive” care part of the strategy.  The Post’s Jennifer LaRue Huget explains (emphasis added):

President Obama has asked for $1 billion more for child nutrition programs, including the school lunch program, in his 2010 budget proposal. Among the changes school-nutrition advocates hope Congress will consider: increasing the per-meal reimbursement the government gives schools, banning trans fats from school menus and encouraging schools to include more locally grown foods in the lunches they provide.

The subsidized meals are built in part around surplus edibles that the federal government buys from farmers to keep prices steady; these foods include far more meat and dairy products than vegetables or whole grains. The subsidized meals must meet certain nutrition standards, but processed and fatty foods such as chicken nuggets and french fries remain staples in many school-lunch programs.

Why? Part of the problem is money. According to the SNA [School Nutrition Association], the federal government reimburses schools $2.68 for each lunch served, while those meals cost about $2.92 to produce. Cooper says that two-thirds of this expense goes toward salaries and overhead. She challenges anyone to take the remaining dollar or so to the grocery store and come out with a well-balanced, nutritious and tasty meal. It’s no surprise, she says, that many schools simply resort to “highly processed, cheap food.”

There are glimmers of hope. The SNA points out that 37 percent of school programs consistently offer locally grown fruits and vegetables, 99 percent offer fat-free or low-fat milk, 96.3 percent offer whole-grain items and more than 91 percent offer salad bars or prepackaged salads. Nearly 64 percent offer vegetarian meals. (All of which is not to say that kids are necessarily eating those foods or that chicken nuggets have lost their place on lunch trays.)

You see, just like how health reform is going, changing what our kids actually eat at school isn’t that easy either.  You can tell them that the healthy food is better for them and hope that the message sinks in, and you can give them the opportunity to choose the healthier options alongside the not-so-healthy options.  But if you’re not willing to force them to eat the healthy food–i.e., limit or “ration” their choices so that there isn’t as much of a “choice”–you’re not going to be assured that “real change” in their diets will happen.

So today, my son Johnny bought lunch at his Fairfax County public school cafeteria for the first time this school year.  Today’s menu offered a choice (for main dish) among chicken tenders (with brown rice, which is supposed to make it healthier I guess), cheese quesadilla, peanut butter and jelly sandwich, and something called a “yogurt biteable” (gosh, I hope they’re all “biteable”…).  Johnny chose the chicken tenders, because he always chooses the breaded chicken option as long as it’s an option–same as he’s done for years.

And the photo above is an intentional “reenactment” done at dinnertime tonight with McDonald’s chicken nuggets.  But Johnny actually ate them (for dinner).  (Yes, I know, bad mother!… I asked Johnny’s dad to buy them for him after his baseball practice, for the sake of a better blog entry!… It is a good thing my family tends to make up for our not-so-good diets with lots of physical activity and pretty great genes.)

Let’s hope President Obama will do better to help our nation choose to do the right (or at least better) thing.

Back to School: Time to Get Our Bipartisan “Outfits” Ready

September 7th, 2009 . by economistmom

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Well, today’s the last day of summer vacation for my kids, and at least my girls will be making sure their “first day outfits” are just right and ready to go.  It’s what the Washington Post’s Jenna Johnson playfully (yet accurately) wrote about on Saturday in her story on “flip-flop fashionistas” planning “The Outfit” (an example pictured above with these two 12-year-old rising 7th graders–just the position my 3rd daughter is in).

Also in Saturday’s Post Joel Achenbach reminds us that Congress and the Administration go “back to school” in a way, too, this week, and that the “kids” that are the flashiest dressers and get the most attention aren’t exactly the bipartisan centrists (my emphasis added):

President Obama came into office vowing to end the old divisions of Washington. That may be his signature failure to date. The divide between the parties has turned into a gulf. There is essentially no middle anymore. If you see a prone body in the Capitol, it belongs to someone who toyed with being a centrist

Congress-watchers see this not as an aberration but as a long-term trend — “hyperpartisanship.” The parties used to be more eclectic and less ideologically regimented. In the past two decades or so, they’ve become more philosophically homogeneous — there are no liberal Republicans to speak of, for example. Party leaders are more prone to crack down on anyone showing signs of apostasy. Buck the party caucus and you’ll lose a plum committee assignment or party help with fundraising.

The media are complicit. Cable TV news channels require guests to meet certain standards of stridency. Anyone wishing to express a moderate opinion will be upbraided and mocked. [I mentioned I saw this earlier this weekend when MSNBC was making fun of Al Franken for being too moderate and restrained.]…

“Being sober and reasoned in the national interest is often less entertaining than being hyperbolic and accosting the other side,” says Jason Grumet, a Democrat who directs the Bipartisan Policy Center, a Washington think tank that is parked in the lonely middle of the spectrum.

There might be moderates out there, but they don’t march. They don’t go to town-hall meetings to berate a member of Congress. The people who do go seem to have a tendency to worry about such nonexistent things as “death panels.” At least, that’s how it looks on TV.

“You gotta rebuild the dormant center,” says Lee Hamilton, the former Democratic congressman who was known as a centrist during his decades in the House…

Well, that all sounds kind of exciting–like we just have to “fire up” the centrists and moderates out there–those folks willing to work in a bipartisan manner.  Trouble is, whenever we talk about building up the “sensible center” (as Dave Walker has often referred to it), it often sounds, well, kind of boring. Again from Joel Achenbach’s article:

Says Democrat Richard Gephardt, the former House leader: “It’s always easier to defeat something than pass something.” He adds, “The only way to change any of this is for the public to demand public servants who want to solve problems and want to act in a bipartisan way.”

There is, in fact, a bipartisan health-care proposal. It’s being pushed by Democratic Sen. Ron Wyden of Oregon and Republican Sen. Robert Bennett of Utah…

I often reflect on the set of personalities that get put into the “centrist” and “moderate” camp and think that yes, these are a bunch of very smart and reasonable men and women, but let’s face it–there’s a little blandness there, too.  And that doesn’t help get them much notice, and it certainly doesn’t help them get their way.

I say the centrists need to pick their bodies off of the floor, pick out a flashy new “first day outfit”, and get ready to “start school” in a more assertive, engaging, persistent, confident, and courageous way.  I think they even should get more aggressive in their “noodging” and “nagging”–but in a “cooler” way.  In Sunday’s Washington Post there was a cute article about how many parents use text messaging to effectively “nag” their kids.  I’m certainly guilty.  Here’s an idea for a text message I’d like to send President Obama:

“POTUS: OMG, Y R U extending the BUSH tax cuts?!”

(And if he didn’t respond, I’d send back:  “HELLO?–R U there?”)

And the “hyperpartisans” need to stop bullying.  We need to urge for “tolerance” in the halls of Congress just as we demand it in the halls of school.  From the same psychology book I quoted from about “courage” earlier this weekend, this in the “tolerance” chapter:

“With rare and precious exceptions, politicians demonstrate through their actions a striking lack of tolerance and maturity because they flourish within a system where posturing, blaming, lying, goading, defaming, egotism and lack of personal responsibility can bring success.  To listen to politicians elaborate their refusals to take responsibility for actions that were ill-advised or even stupid, and to hear how the fault lies always somewhere else, is to hear the language of profound immaturity and lack of tolerance, which is also, all too often, the language of our communities and even our homes.”  –Stephanie Dowrick, Forgiveness & Other Acts of Love, 1997, page 256.

So, it’s back to school time!  Time for a fresh start, so let’s pick out THE really great “OUTFIT” for the first day.  And let’s make sure it’s a little OUT of what we were comfortable FITting into last year.  It’s the opening shot for the “image” that will carry us through the rest of the schoolyear–how others will “see” us.  I hope to see those centrist, moderate, bipartisans turn out to be the most popular “kids in school” this year–not just the smartest (and nerdiest) ones with whom no one wants to dance.

Krugman: Economists Choose Beauty Over Truth

September 5th, 2009 . by economistmom

freshwater-saltwater-economists-nytimes-krugman-090209

There’s a very thoughtful and thought-provoking article by Paul Krugman in this weekend’s New York Times Magazine about why economists failed to anticipate the severity of the current recession.  I happen to believe that the naivety of the economics profession is pretty well explained by the “certain type of personality” that tends to get drawn into studying graduate-level economics and the even narrower set of Ph.D. economists who then go on to develop the latest economic theories (as opposed to those Ph.D. economists like me who merely try to apply existing economic theory to policymaking in practice and get told that our research is too “policy oriented” and “applied” to get us tenure in an economics department).  I personally feel (mostly) flattered when people tell me: “gosh, you don’t seem like the typical economist”…   ;)

Paul simplifies the explanation of why “economists get it so wrong” into a perhaps much kinder story about economists “mistaking beauty for truth” (emphasis added):

As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth. Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn’t sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations. The renewed romance with the idealized market was, to be sure, partly a response to shifting political winds, partly a response to financial incentives. But while sabbaticals at the Hoover Institution and job opportunities on Wall Street are nothing to sneeze at, the central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess.

Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. They turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets — especially financial markets — that can cause the economy’s operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don’t believe in regulation…

Paul tells a fascinating tale of the “freshwater economists” (the largely Chicago-and-Minnesota-schooled neoclassical theorists) versus the “saltwater economists” (the east and west coast academics, including Paul himself, who better incorporate the lessons of Keynes).  Their “differences” are playfully pictured above, in a cartoon that accompanied Paul’s article, but you should read the article for the more complete story.  I spent some time this evening trying to decide if I was more a “freshwater” or a “saltwater” economist.  I think I don’t really qualify as either, although I did grow up in the Great Lakes and yet now live on the East Coast, and in some ways that geographic relocation reflects my intellectual evolution as an economist as well…

At both Brown University (M.A.) and the University of Virginia (Ph.D.) I was taught graduate macroeconomics by primarily “freshwater” economists, but to be honest, I never really had any intuition for what the mathematical models based on “rational expectations” (which I really had to memorize) really meant.  I never “got” how to apply that theory to practice.  I think that’s why I was drawn more to macroeconomic models that were built up from “micro foundations”–starting from models of individual and firm behavior and aggregating up to the full economy.  Even those models were still “neoclassical” in nature, however, in that they assumed people saw and responded to market prices perfectly rationally and that markets always cleared (the “equilibrium” would always settle back at full employment).  Over the years as I gathered more experience observing how economics tended to work “in the real world” I would try to explain to people how I still believed in the usefulness of the models I had worked with in the early part of my career, but how I viewed that usefulness as coming from their qualitative lessons (what sort of moving parts do we need to consider?) more than their quantitative precision (exactly how much are those moving parts moving?).  And while my Ph.D. dissertation involved a fairly sophisticated general equilibrium model of the U.S. economy with a lot of moving parts and “bells and whistles”–with the size of the movements in the model dependent on many different parameters (which economists call “elasticities”)–I would frequently explain my intellectual evolution this way:  “As I’ve gotten older, my elasticities have shrunk.”  (Perhaps only the economists out there will get that joke.)  Well, in the limit, if those elasticities shrink all the way to zero, then the “bells and whistles” are pointless, because there’s no longer any ringing or whistling going on.  So then I began to think that building big economic models where you have to make a lot of assumptions about the kinds of responses households and businesses will make, would just not be “worth it” if those responses turn out to be (in the real world) pretty darn puny.  (If a tree never falls in a forest, then who cares if no one’s there to hear the sound that never happens?)

So now I’m not a “freshwater” or a “saltwater” economist but perhaps a “nirvana-seeking” economist (the picture would be me on a yoga mat I guess…) who seeks truth over beauty.  I do want to better understand how our economy works when we acknowledge all our human foibles and quirks, and I certainly no longer turn to the “beauty” of elegant mathematical models of the economy, which I honestly never ever found that “beautiful”–just conveniently simple. Now that I’m older, I recognize that life and the economy are often inconveniently complex.

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