The Sovereign Mind

Free thought on politics and real life

Posts Tagged ‘congress

How to Mislead with Charts: Who’s Responsible for the Great Divergence?

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I’ve been following with interest Timothy Noah’s series on income inequality in the United States. In the latest installment, he cites Larry Bartels’ book in which Bartels supposedly proves that Republicans are responsible for the “great divergence”:

Bartels came to this conclusion by looking at average annual pre-tax income growth (corrected for inflation) for the years 1948 to 2005, a period encompassing much of the egalitarian Great Compression and all of the inegalitarian Great Divergence (up until the time he did his research). Bartels broke down the data according to income percentile and whether the president was a Democrat or a Republican. Figuring the effects of White House policies were best measured on a one-year lag, Bartels eliminated each president’s first year in office and substituted the year following departure. Here is what he found:

That looks pretty impressive. According to the chart, not only have Democratic presidents created more equitable income growth, but they’ve created larger growth for every income category! This seems to be a slam dunk case against Republicans. But there are some problems. Firstly, is it really right to consider only a one-year lag before a president is fully responsible for the economy? President Obama might object to that! Secondly, of course the president is not the only one who affects economic growth. We don’t live in a dictatorship. What about the congress? Again, you can ask President Obama how easy it is for a president to get exactly the policy he wants, even when his own party controls congress, much less when it doesn’t. I decided to take a look at these two questions.

Firstly, I wanted to reproduce Bartels’ data. Unfortunately the Census Bureau’s historical tables that I found only go back to 1967, so I had to start from there. In any case, that’s about when the “great divergence” started, so that should be the most interesting data set anyway. I get similar results as Bartels:

But what happens when I tweak the parameters to have a two-year lag instead of a one-year lag?

Now we see a slightly different picture. Republican presidents still help the rich more, at the expense of the middle class, but the over-all economic growth picture is more fuzzy. Is a two-year lag better than a one-year lag? I don’t know. The point is that Bartels’ decision to use a one-year lag is arbitrary, and I’ve demonstrated that we get a very different result by just tweaking one arbitrary parameter. That’s not a sign of solid scientific evidence. What if I were to tell you that a climate model could be tweaked to predict global cooling instead of global warming just by tweaking one little parameter that was chosen arbitrarily to begin with?

Ok, but still even my tweaked graph doesn’t look good for Republicans: it still supports the argument that Republican presidents help the rich at the expense of the middle class. But what about congress? What if we looked at which party held the majority and ran the same analysis? I did that, dropping the years were there was a split legislature with one party controlling the senate and the other controlling the house. I’m actually left with only a handful of years with Republicans in control of both chambers, but that illustrates yet another problem with Bartels’ methodology: we’re talking about precious few data points to begin with, not to mention we’re not controlling for any other variables. In any case, here’s the result with a one-year lag:

Hmm… this graph looks very different from the first one we saw. Never fear, Democrats, using a two-year lag makes things look a little better for you:

So, which party’s policies are contributing more to income inequality? Which party is better at producing economic growth? My point is not to answer those questions. My point is to show that Bartels’ guess is no better than yours or mine. His methodology is interesting, but unfortunately fatally over-simplified.


Written by Mike

September 11, 2010 at 10:30 pm

Is Our Government Broken, or Are We?

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It seems the question of the moment is: is our government broken? Some have concluded that our elected officials in Washington have become so polarized and partisan that they can’t get anything done for the American people. Those on the left lament the fact that they can’t get their initiatives passed, despite having a majority of both houses of Congress and the President on their side. Those on the right complain that their government doesn’t seem to be interested in listening to what they have to say.

So, is it true? Is our government broken?

It is true that our representatives have been growing more polarized for some time now. This impressive chart, based on the data from these people, shows how the parties have become more polarized since the middle of the last century, and especially since 1980. While I don’t have the academic credentials to verify the correctness of their data or methodology, I trust that they are generally correct because their data is cited in a number of other academic articles I’ve run across, their conclusion coincides with the the popular consensus, and the only excuse for creating such a hideous website is if you are such a genius that spending any effort on website design is beneath you. Therefore, they must be right.

So, we can conclude that our government is becoming more polarized, and therefore more partisan. (It’s worth noting that polarization and partisanship are not necessarily the same thing, but surely they are highly correlated–if both parties had identical ideologies, of course they would not spend much effort opposing each other.)

But why has Washington become more polarized? Is it because, as many have assumed, it has lost touch with a mainly-centrist America due to district gerrymandering and voter apathy? Or is it that we, the American people, have become more polarized, and Washington is merely reflecting that shift? If it is that Washington has lost touch with mainstream America, then all we’d have to do to show that is ask mainstream America. We ought to be able to find a significant number of people who say that both parties have become too extreme. However, according to a Gallup poll from last year, that’s not what Americans are saying.

According to the poll, 50% of Americans say that the Democratic party’s views are “about right” or “too conservative”. Also, 51% of Americans think that the Republican party is “about right” or “too liberal”. In other words, 101% of Americans have views that align with one of the parties, or else they are actually more extreme than the party they are closest to. That leaves -1% of the population that have views in the middle of the two parties and feel that both parties are too extreme. Okay, Okay, math majors. Obviously there’s something wrong with those numbers: In addition to rounding error, there probably are some that say that both parties are “about right” (did they misunderstand the question?), and so those people would be counted twice in my numbers. But, even if there are some of those people, the number of people who said both parties are too extreme would have had to be even lower, so the point is still made: very few people think that both parties are too extreme. The vast majority agree with one party or the other, or are more extreme that either party.

So, it seems that Washington isn’t broken–it’s just a reflection of the people. So are we broken?

During elections, especially the general elections, we often hear politicians calling for us to come together by reminding us that “we are all Americans”. The implication is that despite our political differences, we share a lot in common. But, if we are truly becoming more polarized, as the poll suggests, then that common ground is shrinking. If the trend continues, we will have a divided nation, if we can still call it one nation at all. How can we expect one body to govern a nation that has such differing views on the direction we should take? On the other hand, will the pendulum start to swing the other way? For the sake of the country, I hope so, but honestly I don’t see any hint of hesitation on the path of continued polarization, leaving the -1% of us in the middle fearing for the future of our country.

So, what’s broken? Is it our government, or us?

Written by Mike

February 24, 2010 at 9:25 pm

Paul Krugman vs. Paul Curtman

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Paul Krugman, nobel prize winning economist, says that the people protesting at health care town hall meetings are anti-American and amount to a mob.

Tell that to Paul Curtman:

Our country was founded on freedom, not politeness.

For those who might be tempted to brush off his criticism, please read The Federalist #41, written by James Madison, known as the Father of the Constitution.

Written by Mike

August 8, 2009 at 6:25 am

What’s Wrong With the Health Care Bill: How Small is Small?

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Continuing my series I began a few days ago, here’s another little gem within the health care bill. The plan imposes a penalty on companies that don’t contribute to health care for their employees. But don’t worry, small businesses. The Democrats are fully committed to engaging in rhetoric to ensure that you don’t think this is going to affect you. From the summary, in a section ironically entitled “Assistance for small employers”:

Recognizing the special needs of small businesses, the smallest businesses (payroll that does not exceed $250,000) are exempt from the employer responsibility requirement. The payroll penalty would then phase in starting at 2% for firms with annual payrolls over $250,000 rising to the full 8 percent penalty for firms with annual payrolls above $400,000.

Democrats know that they must continue the charade of appearing to be on the side of small business. They argue that it will only be big business that will be penalized. You know those businesses with those big pockets. (On a side note, having big pockets doesn’t always mean they have anything in them, but that’s a matter for a different day.)

But now we learn that businesses with a payroll of as little as $250,000 would be hit by a tax. Now we know that Obama means it literally when he says he wants to help the “mom and pop” businesses. Just don’t hire the uncle and a few cousins–that might put you over the limit into evil big business territory. I know that isn’t a fair representation of Obama’s position–he probably does care about helping small business. But, as is common lately, his rhetoric doesn’t match the bill. Unfortunately, congress will not be voting on the president’s speeches. They will be voting on the bill before them that they (hopefully) have read.

But I’ll ask a more fundamental question: why should it be the employers’ responsibility to contribute to health care coverage? I don’t think you can argue that employers have a responsibility to do anything except fulfill the agreement they have made with the employee when he is hired. If I’m an employer looking to hire someone, and I put out the conditions of employment, and someone looking for a job agrees with those conditions, why should the government tell us we can’t make that arrangement, or punish us for doing so.

Those who support the tax on business will argue that businesses should pay for health care because they have the deep pockets. Those who make this argument don’t understand economics. The amount that the employer has to pay for health care is approximately the amount by which they will decrease their employees’ salaries. If it were not so, then I think we should mandate businesses to pay for my groceries and mortgage also. If the money that my employer pays comes out of thin air, we could easily solve our housing crisis that way. Of course that’s ridiculous. If my employer has to pay my mortgage, my salary would decrease.

There are several problems with employer-based health coverage:

1) If I lose or change jobs, I lose my coverage. Plans aren’t portable. This contributes to the problem of the uninsured, and also makes people stay in jobs they don’t like, rather than looking for greener pastures. That is detrimental to the labor market, as it means that employers don’t have to work so hard to keep their employees happy.

2) When employers offer health care plans, they offer limited choices. Choice is essential in a free market. If I don’t like my insurance provider, I ought to be able to easily switch to another. This keeps the insurance companies honest because they would know if they do not provide good service and a reasonable price, I’d go elsewhere.

So, considering those disadvantages, why is it that we have a employer-based health system?

1) Employers are offered a tax break to give health coverage to their employees. It still costs them money, of course, but it costs them less money then it would cost their employees to buy the plan themselves, since they would not qualify for the tax break. So, employers can provide something to their employees which is of high value to them, but costs the business less. This could be solved by equalizing the tax structure so that individuals who buy health insurance benefit just as much as businesses. Businesses that want to attract the best and brightest would still be able to contribute to the health care plans for their employees, but they would not get any additional benefit from the government for doing so. In addition, those who don’t have jobs or work for companies that don’t provide health care would not be disadvantaged in the insurance market.

2) Employees like the fact that when they sign up for a health care plan through their employer, they are part of a pool. That means their cost doesn’t depend on their health status, but rather the health status of the entire work force. It means that healthy employees subsidize the health care of the less healthy. Many people see this as a good thing, but a pool is just a crutch since we don’t have a better way to charge people. A better way would be to charge people based on their behavior, which eliminates the need for pools because everyone pays what they should pay, and everyone is equally able to lower their costs by making healthy choices, regardless of pre-existing conditions.

But even if the “charge on behavior” philosophy is not palatable to some who prefer the more tried-and-true mechanism of pools, we could set up such pools at the state level, instead of putting that responsibility on the employers.

But wouldn’t taking away the incentive to provide health care (or the punishment for not doing so) from businesses cause people to lose their health insurance? It might cause some businesses to drop coverage, but it would also add revenue to the system to provide tax credits to help individuals buy coverage, as well as more help for those with lower incomes.

What I’ve outlined is true change–way more than Obama wants to take on since he is determined to build on the current system. At the very least, that proves he is wrong to suggest that the only alternative to this bill is to do nothing. One alternative is to do more. But, really it’s not about less or more. It’s about what’s right. And pinning the responsibility of health care on “big” business is wrong, costs jobs, and leads to less choice in the marketplace.

Written by Mike

July 27, 2009 at 8:58 am

What’s Wrong With the Health Care Bill: What Happened to Personal Responsibility?

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I recently read the summary of the house bill and a few parts of the actual bill that I wanted to dive into in more detail. No, I don’t have time to read the entire bill. I have to say: it’s worse than I thought.

I won’t bother about the part about the “public option”. It is the most debated part of the bill, and most of the debate is ideological. Although personally I don’t like it as I fall on the more conservative small government side, but I don’t feel I have much to add to that debate. I’d like to focus on some things that are wrong because they are wrong–not because they don’t fit a certain ideology. So this is the first post in a series (if I get around to more) on what’s wrong with the health care bill.

The summary of the bill says this:

It also limits the ability of insurance companies to charge higher rates due to health status, gender, or other factors. Under the proposal, premiums can vary based only on age (no more than 2:1), geography and family size.

(You can read the part of the actual bill that relates to this issue here.)

I actually like the idea of preventing insurance companies from charging sick people more. The unregulated free market punishes people for having the nerve to get sick. Now, some diseases are preventable and one could argue that in some cases it is justified to charge people more if they get sick due to their own poor choices. However, there are two problems with this argument:

1) Many people get sick because of bad luck, not because of anything they did wrong.
2) Many people make bad health choices but don’t get sick.

If the intent of a free market is to encourage good choices by rewarding them and discourage destructive choices by punishing them, clearly the free market does not do this well in the health care world. As I’ve argued before, the free market is a great system, but is not perfect, especially in the areas of health care and education (I’ll leave education for another day).

So what’s wrong with this proposal, then? If we’re going to take away health status as a measure of how much someone should pay, what should we replace it with? I propose that we regulate insurance companies such that their premiums must be based on behavior, not health status. For example, someone who smokes can be charged more. Someone who is overweight, but loses weight over a certain amount of time, should see his premiums decrease. That would help accomplish two important goals:

1) Make the pricing system more fair. In our current system, someone with a chronic disease, whether they acquired it because of their own poor choices or not, would have to pay enormous premiums in order to be insured. Or, they have to be in a pool where healthy people help subsidize their care. Why not make people who are making poor health care choices, but who are not yet sick, subsidize the care for those who are sick?

2) Basing premiums on behavior would be a driver to improve health choices, and therefore lower health care costs. If people know they can lower their health care premiums by making better choices, they’d be more inclined to do so. Safeway has proven it, but according to my reading of the bill, Safeway’s program would not be approved.

Fortunately, I’m not the only one making this case. Although I haven’t heard much in the media, and have yet to find any other blog post regarding this important issue. Obama likes to talk about decreasing health care costs, but I don’t see much in the bill that actually does. This would be one way to do so, and it’s not even an partisan issue.

Written by Mike

July 24, 2009 at 10:22 pm

Unilateral Bipartisanship

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David Axerlrod on Meet the Press (my emphasis added):

MR. GREGORY: All right, so how was [the Republican party’s] influence felt [in the stimulus bill]?

MR. AXELROD: Well, I think in tax–in terms of tax cuts. I think the tax cuts reflect some of their, their thinking. I mean, we agreed with them in terms of tax cuts to help small businesses get through this. They–their–the AMT is now added. The AMT fix is now added to this. The, the, the Web site was suggested by Representative Cantor, the leader of the opposition in the House.

Maybe I’m reading too much into this, but I don’t think so. Notice the words he struggles with. He wants to portray the tax cuts as concessions to Republicans, but at the same time does not way to give away the credit for their inclusion from the Democrats. The worst thing Democrats could do right now is concede the point that Republicans have been making for a long time: that Democrats are against tax cuts. But at the same time they want to be able to point to the tax cuts as evidence of concessions to the Republicans. They’re walking a fine line and getting away with it for the most part.

My impression of the Democratic view of bipartisanship: “We welcome ideas from across the isle, as long as they are also our ideas.”

I don’t blame Democrats for wanting to limit the Republican influence on this bill. Let’s face it: they won that right in November. But don’t try to portray it as bipartisan because a Republican suggested a website. Because, you know, clearly the success or failure of the stimulus package hinges on

Written by Mike

February 17, 2009 at 7:35 pm

What’s Wrong with the Recovery and Reinvestment Act?

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One word: “and”

To understand my point, imagine that you wake up one morning to the sound of rushing water. You find that your basement is quickly filling with water, coming from somewhere that you can’t identify. In a panic you call the number for the first plumber you can find in the phone book, and he agrees to come immediately.

After the plumber inspects the situation, he said, “Well, this is serious, but I think we can fix it and find someone to clean everything up.”

“How much is that going to cost me?” you ask nervously.

“Well, I’d say around 900 billion dollars,” he responds.

“What?! For a flooded basement?”

“Yes, and a few other things that need to be taken care of.”

You watch as a roofer truck drives up, followed by a delivery truck for the local appliance store, followed by a few other trucks, and lastly comes a sodding company.

“What are they doing here?” You ask.

“Well, I noticed that your shingles are looking pretty old. I wouldn’t be surprised if you have some leaks up there, so we’ll have to redo the whole thing. And your furnace is not Energy Star compliant, so we’ll be replacing that. And you must be loosing a lot of heat out of those old windows. The new ones you’ll be getting will save you a lot of money on your utility bill, along with the new lighting we’ll be putting in. And, your lawn could use some help. It’s very unsightly. The sodding company will take care of that.”

“But I don’t want any of that!” You respond angrily, “I just want the water to stop and my basement cleaned up!”

“Sorry pal, this is a package deal. Do you want your basement fixed or not? We don’t have much time.”

I probably don’t have to explain what I mean by that analogy, but I will just to belabor the point. As the title of the stimulus bill states, there are two purposes to the bill:

  1. Stimulate the economy to help us recover from the recession we are in
  2. Make other investments designed to help us in the long term

Stimulus must be fast. We have to inject enough money to create jobs and jump start the economy. The main measure of success is how many jobs are created, and how quickly.

On the other hand, investment implies a long term outlook. Just as you would with any of your personal investment, smart investors will take the time to do their homework. They want to be sure the investment will pay off in the long term, and that they will be getting the most bang for the buck. Most of the time, the short term gain from investing is small, so there is usually not a sense of urgency.

So how can you do these two things at the same time? They are counteracting. The result is a bill that is too watered down to stimulate, and too hasty to be a good investment for the long term.

The logical conclusion is to separate the two. Let’s pass the Recovery/Stimulus portion of the bill now, and then hash out the Reinvestment portion when we have time to debate and consider our options more carefully.

So what should we put off until later? I’ve analyzed the information from the Congressional Budget Office, a non-partisan office intended to give law-makers feedback on the budget consequences of bills. Their analysis is that only 65% of the money in the bill will be spent in the next two years. Even with that broad definition of stimulus, there is a lot in the bill that is not stimulus, but is being pushed into this bill as an attempt to get it passed quickly, without much debate. Some of these measures might be worthwhile, just as the new roof might be worthwhile for the poor guy with a leaky basement. But we should make sure these investments are the best they can be, and that means a separate bill that does not have the urgency attached.

So what can we get rid of from this bill? I looked at the CBO report, and specifically targeted any portion of the bill which does not cause at least 30% of so to be spent in the next two years. After removing those parts, we can decrease the cost of the bill by 112 billion dollars, but only decrease the amount of spending in the next two years by 20 billion. That would significantly increase the percentage of the bill that is actually stimulus. Here are the pieces I’ve identified:

Spending Item Total Amount (in millions) Amount spent in next 2 years
Distance Learning, Telemedicine, and Broadband Program 2825 467
Wireless and Broadband Deployment Grants 2,825 250
Energy Efficiency and Renewable Energy 18,500 2,635
Other Energy Programs 17,350 3,388
Federal Buildings Fund 7,500 1,300
Health Information Technology 20,231 521
Innovative Technology Loan Guarantee Program 8,000 1,680
Clean Water and Drinking Water 8,116 2,333
Other Transportation 16,100 4,300
Housing Assistance 11,129 3,217
Total 112,576 20,091

Some might argue that in a bill this size, why make such a fuss over a mere 112 billion? If your sympathetic to that argument, please read the question again a little slower. However, my number is only obtained by assuming we can either leave in or remove entire sections as they exist now. We could save even more by looking at each section individually and seeing what sub-parts we could leave for later, and which parts are truly stimulus. Lastly, we can look at what parts of this bill will be spent soon, but not on creating jobs. Considering that as the bill exists currently, each job will cost us over $200,000 to create each job, there ought to be some of that in there as well. That number has been attacked as “Limbaugh math”, but I have yet to hear the argument for why we should be OK with spending so much money on each job.

David Axelrod, advisor to Obama, responded to that number like this on This Week with George Stephanopoulos:

He’s missing the fundamental point. We’re not just spending money to create jobs; we’re investing money to strengthen this economy. We’re investing in areas like energy independence. We’re investing in creating the classrooms of the 21st century for our kids to give us the kind of education system we need. We’re investing in computerizing the health-care records of this country so that we can reduce costs and improve care. These things will pay long-term dividends to this country, and we’ve been very careful about that.”

Agreed, but if we want to be careful about that long-term investment, why try to push it through on the back of short-term stimulus?

Answer: because they know that if they don’t milk the current crisis for all that it’s worth, they might have a tough time getting these programs through later, when everyone’s thinking more clearly.

But there’s still hope. The bill has to get passed the Senate, and I hope is will be passed… without the “and”.

Written by Mike

February 2, 2009 at 7:00 am