Comments on: Some unsolicited advice for John Kerry

By: Buck

Buck — Fri, 05 Mar 2004 04:26:24 +0000

While American and Canadian voter attitudes display distinct differences, the underlying similarities in human nature, etc, might make it useful to look at an identical situation that has recently occurred in Ontario, Canada. The provincial (i.e. State) government was just been replaced and the new government has had to go back on numerous cautious spending promises they made during the election. This is due of course to a greater than expected deficit discovered after the election. The new government has still held on to their popular mandate, but it’s been close. Quite probably the only thing that’s saved them is that the previous government always promised that they were in fact balancing the budget (when they weren’t, see above) and that the policy pain they were causing was for that cause, when obviously they weren’t really accomplishing anything. The result has realistically shifted blame for the tied hands of the new government, onto the previous government. Contrast this to the U.S., where everyone already knows for certain that Bush is running a huge deficit. Can Kerry realistically expect to keep popular support and the flexibility that comes with it if he tries anything other than option 1?

By: Thorley Winston

Thorley Winston — Thu, 04 Mar 2004 21:32:40 +0000

Here’s the link to the study which didn’t get put in my previous post: http://www.brook.edu/dybdocroot/views/papers/orszag/20030714.pdf

By: Thorley Winston

Thorley Winston — Thu, 04 Mar 2004 21:12:27 +0000

Bob wrote:

In my opinion, the safe bet is that gridlock and a difference in parties b/t Congress and the President would mean that spending will almost certainly be less under Kerry than Bush.

As I see it, there are two obvious problems with betting on “gridlock.” First, Social Security and Medicare are on auto-pilot to stick my and future generations with about a $56 Trillion unfunded liability (click on my name to go to the Berkley study for the details) unless we enact some decent reforms (see above) to one or both programs, preferably before the baby boom generation retires. Republicans have generally been more conducive to supporting reform than Democrats on these issues and Bush is clearly more likely to support reform than Kerry. Gridlock in this case simply means that we won’t get any reforms and the problem will get worse the longer it gets put off. Second, the “divided government” meme which some have touted really over-simplifies spending issues and actually is inaccurate in several respects. The Medicare prescription drug benefit which was passed was actually a compromise which was made more expensive in order to get it through a narrowly divided Senate. The farm and education bills passed through the Democratic-controlled Senate were also more expensive than the one the President and Republican controlled House wanted, so it is just as likely that spending could go up with divided government in order to “get things done.” In so far as Kerry wants to spend even more than Bush (e.g. his current proposals and his support for a more expensive prescription drug benefit), it makes little sense to vote for a Kerry presidency in the hopes of restraining spending, especially since it prolongs the problem of entitlement spending.

By: Thorley Winston

Thorley Winston — Thu, 04 Mar 2004 21:10:05 +0000

Sebastian Holsclaw wrote:

Really? Lets see. Like Bush, they don’t have a good way of dealing with the looming multi-trillion dollar Social Security mess. Unlike Bush they want to create a hugely expensive socialized health care system. Oh and they want a mild tax increase that wouldn’t cover either. I can’t imagine how that would cause large deficits. More spending with not enough taxation to cover it = deficits.

I agree with this for the most part except for the question of Social Security. Bush has consistently supported letting younger workers invest a portion of their FICA dollars in exchange for partially opting out (which would have a greater long-term benefit for the solvency of the program as the unfunded liability is caused by each worker being promised more in benefits than they pay in taxes) and has said he would not rule out raising the retirement age. His commission also endorsed switching from wage-indexing to price-indexing which alone could fix the problem. The only thing he has ruled out is a tax increase or a cut in benefits for people currently on the system. Kerry, on the other hand has publicly opposed any sort of personal retirement account option, COLA adjustment (judging by his and Edward’s hysterical reaction to Chairman Greenspan’s comments over a week ago), and opposes raising the retirement age. About the only thing he has not ruled out is a tax increase. Based on the available facts, unless Bush or Kerry suddenly reverse positions or one of the endorses means-testing as you suggest, Bush is clearly the only candidate to favor any sort of reform (PRA, retirement age, changing to price-indexing) to the Social Security system before the baby boom generation retires.

By: nick

nick — Thu, 04 Mar 2004 19:58:36 +0000

those portions of the tax cuts most likely to be conducive to capital formation and long-term economic growth. Yeah, right. Come back to us when you’ve discussed your funny ideas about fiscal policy with Warren Buffett, and he’s told you what he thinks of them. Unlike Bush they want to create a hugely expensive socialized health care system. Yawn. This is such a canard. Blue Cross of Massachusetts employs more administrators than the entire Canadian healthcare system. Administrative costs are lower for countries with universal healthcare; there’s greater opportunity to negotiate discounts on pharmaceuticals… and I really can’t be bothered addressing people who simply talk utter bullshit about this issue again and again and again. Cut out those payments, make a real safety net, and we could actually afford it. There are a lot of problems with turning universal benefits into means-tested ones: primarily, the cost of means-testing. Possibly the best way to handle it, although it relies upon a degree of charitable sacrifice among the better off, is to treat Social Security payments as the British administer child benefit. Tony Blair can pick up a not insignificant amount of child benefit for his sprogs—about £40/week—but I suspect that Cherie doesn’t go to the post office to collect it.

By: AzRez

AzRez — Thu, 04 Mar 2004 19:16:37 +0000

There are a number of healthcare economists (from both sides of the aisle, if you will) who now endorse “Hillary’s” health care plan from the mid-90s. I happened to be in grad school at that time and we scrutinized the proposals in a healthcare econ class. Even my Chicago-schooled instructor was struck by the efficiencies of the plan. It is not socialized, and has many multiplier benefits. I never could figure out why small business owners and the self-employed aren’t screaming for it. I will spare readers the details but read up on it, Mr. Holsclaw. You really do your fellow citizens a disservice by being so dismissive of a potentially great solution to the US healthcare mess.

By: Daniel Lam

Daniel Lam — Thu, 04 Mar 2004 18:10:55 +0000

More nouns used in party names: Labor Party Country Party Reform Party Whig Party Freedom Party War Party Peace Party Natural Law Party Costume Party Garden Party Dinner Party

By: bob

bob — Thu, 04 Mar 2004 17:17:03 +0000

Why does everyone always engage in this political fantasy game? The Republicans are keeping their House majority, and likely their Senate majority as well. The Kerry proposals for spending are practically DOA. He’ll negotiate them away in no time. In my opinion, the safe bet is that gridlock and a difference in parties b/t Congress and the President would mean that spending will almost certainly be less under Kerry than Bush. So-called fiscal conservatives in Congress can go back to being fiscal conservatives, and neither side will be able to get all of their priorities through, as opposed to now where most Republicans in Congress have chosen to campaign on fiscal conservativism and govern on deficit spending.

By: Sebastian Holsclaw

Sebastian Holsclaw — Thu, 04 Mar 2004 17:03:56 +0000

“First of all, you must be in the saddest of denials if you believe that ANY Democratic president would run bigger deficits than Bush has done or will do.” Really? Lets see. Like Bush, they don’t have a good way of dealing with the looming multi-trillion dollar Social Security mess. Unlike Bush they want to create a hugely expensive socialized health care system. Oh and they want a mild tax increase that wouldn’t cover either. I can’t imagine how that would cause large deficits. More spending with not enough taxation to cover it = deficits. Can we deal with Social Security and Medicare? Everything else is just a rounding error unless you add another big ‘entitlement’ on top of those. And for those who hate whining about problems without potential solutions, I suggest that Social Security payments don’t need to go to rich and middle class people. Social Security is always defended as a ‘safety net’ but the bulk of the payments go to the rich and middle class. Cut out those payments, make a real safety net, and we could actually afford it.

By: MattB

MattB — Thu, 04 Mar 2004 15:59:50 +0000

Uncap FICA!

By: JRoth

JRoth — Thu, 04 Mar 2004 15:50:59 +0000

Sorry, Thorley, but your counterfactual arguments won’t wash. First of all, you must be in the saddest of denials if you believe that ANY Democratic president would run bigger deficits than Bush has done or will do. What, exactly, would it take for you to accept the reality that Bush wants debt, loves debt, hungers for debt? Because 3.2 years of policies that all lead in that direction are clearly not enough. Secondly, your silly claims about tax cuts have also been given a little test out, and found desperately wanting. I know, let’s run an experiment. Let’s have a time period with lower taxes on the $200k+ crowd, then raise those taxes, then lower them again. Your thesis, Thorley, clearly states that periods [forty] one and [forty] three would show the best “capital formation and long-term economic growth,” while period two would be a disaster of poverty. You’re wrong, Thorley. Your economic thesis is as discredited as Lenin’s. We’ve tried it your way, and it failed, so get out of the way while we fix your mess.

By: Thorley Winston

Thorley Winston — Thu, 04 Mar 2004 15:06:01 +0000

Praktike wrote:

Clearly, repealing all of the cuts is tantamount to losing the election, and is therefore inoperable. But he could restore estate taxes, dividend taxes, capital gains, and the cuts to the 200K-plus crowd.

In other words, those portions of the tax cuts most likely to be conducive to capital formation and long-term economic growth.

By: Ophelia Benson

Ophelia Benson — Thu, 04 Mar 2004 14:54:02 +0000

Yeah, what Jay and Bad Jim said. Those are fair points, John, but the fact is it wasn’t a problem until the Republicans had the bright idea of making it one. The whole meme is entirely partisan and deliberate and they should not be assisted with it, I think.

By: Dr. Dave

Dr. Dave — Thu, 04 Mar 2004 14:24:18 +0000

Clearly Option 2 (sort of) is the choice. Get elected; rolling back the tax cut on those wealthy sob’s probably plays to the suffering middle class. After the election (especially if you can discern that you have a mandate) discover the enormity of the book cooking and take the necessary stronger action.

By: Doug Turnbull

Doug Turnbull — Thu, 04 Mar 2004 14:03:37 +0000

As others have already alluded to, what’s missing from you r analysis is some weighting factor about the effect on elections. You’re correct that, assuming Kerry won, option 1 would be the best option. But option 1 is also the option which gives him the lowest chance of winning the election. If you wanted to decide which choice, on average, would produce the best outcome, then you’d need to go with: <1> = P(win given 1) * Outcome(1) <2> = P(win given 2) * Outcome(2) etc. Of course, then you could go to the next level and argue that, even if you lose with option 1, it will give you credibility when the government budget does tank. But that’s likely to be more than 4 years down the line, plus prophets are rarely honored in their own country.