Sorry. No Vanilla.

One facet of the response to the financial crisis is the possible creation of a Consumer Financial Protection Agency. An agency which, among other things, would promote plain-vanilla contracts. Professor Elizabeth Warren describes them this way:

The Agency will promote plain vanilla contracts—short, easy to read mortgages and credit card agreements. The key principle behind the new agency is that disclosure that runs on for pages is not real disclosure—it’s just a way to hide more tricks.

It's easy to say that people shouldn't enter in to contracts and agree to terms that they don't understand, but that is totally unrealistic in today's legalistic atmosphere. I would bet that the vast majority of Americans do not understand the terms of their mortgage or credit cards well enough to explain them to you. I don't mean the people that get in over their heads, I am talking about smart, sophisticated people that just happen to not be lawyers.

I also don't mean the basic terms of these contracts like the payment due date, interest rate, and monthly payment (though certainly there are some people who can't explain these either). I mean the gnarly terms hidden on page 17 of the disclosure you get that is single-spaced in 6-point font on a piece of rice paper folded to look like one page, but is in fact about twenty. You know, things like universal default.

While I certainly don't believe that all problems have simple solutions, this idea of plain vanilla appealed to me.

Opposition to this simple solution has been a bipartisan affair and has apparently succeeded in killing it.

Mike Konczal at Rorty Bomb has posted his lament over the loss of the vanilla option and includes this:

Rather than a creeping socialist plot, the vanilla contract is actually creating the conditions where innovation could flourish, where we could see consumers and markets do what they do best – express choices over what they want to spend their money on, what goods and services they would like to bundle with their default contracts, and have businesses compete to provide those services. Without it, we get “gotcha fees” and people become cynical about what innovations in consumer finance can actually accomplish.

Opponents of the plain vanilla idea claimed it would stifle innovation and drive up costs. As someone who looks to save money wherever he can, I am certainly sensitive to costs; the time required to understand, compare, and avoid so-called innovations that do nothing to benefit me as a consumer also represent a cost. A cost that doesn't appear to be going away anytime soon.

Kagen on the Public Option

Wisconsin Public Radio had a report today in which Congressman Kagen indicated that he felt confident that the House would pass a health care bill with a public option. This remark was in response to the fact that the Senate Finance Committee defeated two amendments this week that would have added public option to the health care bill they are currently considering.

Kagen went on to say that the public option is still a possibility because the final legislation will have to go through a conference committee to work out the differences between the House and Senate versions. Though he didn't say so directly, his mention of the conference committee seemed to imply that the public option has a real chance of making it through conference and into the final bill.

I'm not sure why Kagen thinks there is even a remote chance of such an outcome. Prominent progressive blogger Chris Bowers had this to say on the conference committee and the public option:

Conference committee (almost certainly) won’t work. Even if the House passes a public option, which they are highly likely to do, do not expect them to overpower the Senate in conference committee. This is because the Senate will already have voted down adding a public option via amendment, and the White House will have already demonstrated that it isn’t going to demand the public option in the final bill. It wil be difficult to convince them to change their mind by the conference committee.

Regardless of whether or not you think the public option is a good idea, Kagen seems to be clueless about the politics of the matter.

H/T OpenCongress

End to the ammo shortage?

McClatchy is reporting a let-up in the shortage of ammunition that has taken place in recent months:

"We're seeing the light at the end of the tunnel," said DeWayne Irwin, owner of Cheaper Than Dirt, a Fort Worth store and online retailer. "I’ve been doing this business since 1988, and I’ve never seen something like this happen with ammunition. But it’s not going to be like this forever."

Demand for guns and ammo began growing last year before the November presidential election. It continued partly because many gun owners were concerned that President Barack Obama and Democrats in Congress would reinstate an assault weapons ban or drastically hike taxes on ammunition, guns and firearms materials, analysts have said.

This isn't my area of expertise, so I'll take this with a grain of salt for now.

I won't consider this matter settled until Dad29 pronounces an official end to the drought.

New Twist on the Roudabout

From the Green Bay Press Gazette:

The Wisconsin Department of Transportation plans a gated roundabout at the intersection of PDQ Drive, Mid Valley Drive and Scheuring Road, making room for long trailers coming from Robinson Metal 1740 Eisenhower Drive, to fit through the intersection. The state is finalizing details of the plan.

A few times a month, trucks with loads measuring more than 100 feet leave Robinson, according to DOT project manager Chad DeGrave. The single-lane roundabout planned for the intersection couldn't handle that size truck and trailer, he said.

This location is basically at Scheuring Road and US41 in West De Pere.While we have had roundabouts for a few years here in De Pere, we don't have one with a gate in it.

I like the roundabouts, but I think this is a minority position. While I don't think they cut down on congestion, I like the fact that unless there is a moderate traffic, you don't have to even stop at the intersection. Waiting at a light or coming to a complete stop when there is no one else around always seems like such a waste.

Roundabouts have become something of punching bag in Brown County. Their use has increased in recent years and the people that don't like them, really don't like them and are quite vocal about it. I can understand how older drivers might be hesitant to use these since they are unfamiliar with them. But for most of us there really is no excuse.

Of course some of this ire is really just residual bad feelings left over from the proposed changes to Green Bay's Military Avenue. Those plans included what seemed like way too many roundabouts, even for someone who is supportive of their use like me.

Book Recommendation on the Financial Crisis

From Tyler Cowen at Marginal Revolution:

Robert Pozen's Too Big to Save: How to Fix the U.S. Financial System is the single best source for figuring out what happened. It is the go-to book if you are a non-specialist and want to understand: how credit default swaps work, the significance of Basel II, mark-to-market, how the various Fed bailouts operated, the meaning of the toxic asset plans, and many other matters.

Cowen is an economics professor, author, blogger, and if press accounts are true, maintains a seemingly inhuman reading regimen. I think he gives up on more books than most people read in a year. This type of high praise from him should be taken seriously.

Successful Blogs Have Links

No points for originality, I know. But you might find something interesting here.

The ghost-fleet indicator. A sign of just how bad the world economy is.

TARP Results Blog asks if we get a free toaster with every bank bailout?

The unintended consequences of getting rid of all the pigs in Egypt.

"you'll get Plotz's Fresca when you pry it from his cold, dead hands." When the liberals at Slate are worried about government overreach, how are the rest of us supposed to feel?

Baseball's increasing immaculate innings.

Sometimes I read the news and I think of The Call:

I don't think there are any Russians
And there ain't no Yanks
Just corporate criminals
playin' with tanks

What's worse than toxic?

The plan to sell the toxic assets using government guarantees (the PPIP) has finally made its first sale. The only problem is that it is an incredibly bad deal for the US taxpayer.

The toxic assets they sold are not from a struggling, but still functioning bank, which will then be able to resume normal operations unencumbered by the consequences of its previous bad decisions. The toxic assets that the FDIC arranged to be sold are from an insolvent bank. This means the FDIC already owned the toxic assets.

So why is this bad? James Kwak of The Baseline Scenario lays it out for us:

Our government is providing large subsidies to private investors to buy toxic assets. The only possible justification for these subsidies is that they are necessary to restore health to the banking system, by taking toxic assets off the balance sheets of banks. But these toxic assets [in this deal] are already the property of the U.S. government. This means that the government owns 100% of the upside and 100% of the downside on those assets.

Or at least it did until last week. Then it gave half the upside to an investment fund....and kept all of the downside to itself. What could they possibly have been thinking?[E.A]

So we gave away half of the potential gains on these assets. But for what? So that this particular bank can start lending again? No! This bank is dead.

The taxpayer is providing a government guaranteed loan to a private enterprise called Residential Credit so that they can buy mortgages that the taxpayers already own. Residential Credit is using that loan to bet that this particular pool of mortgages will eventually be worth something to someone and that they can then sell it for a profit, which they will split with the FDIC.

I thought privatizing profits and sticking taxpayers with the risk in the name of restoring bank lending was a bad idea. Doing so for a bank that will not ever lend again is even worse.

More time under the TARP

Senatus reports that Assistant Secretary for Financial Stability Herbert M. Allison went to Capitol Hill and knocked 'em dead with his Hank Paulson impersonation:

The Treasury Department “is unlikely to discontinue its $700-billion relief program by the year’s end,” according to The Hill.

Lawmakers originally scheduled the Troubled Asset Relief Program (TARP) to conclude this December, but they also permitted Treasury Secretary Tim Geithner to extend the program until October if he felt he needed the extra time to rehabilitate struggling firms.

While lawmakers have recently signaled their dissatisfaction with that idea, Assistant Secretary for Financial Stability Herbert M. Allison suggested to the Senate Banking Committee on Thursday that an extension was still likely.

"Declining prices in the commercial real estate market could put additional pressure on bank balance sheets and capital positions, while continued downward pressure on housing prices could stall a nationwide recovery," he said during the hearing. "In this context, it is prudent to maintain capacity to address new developments. By bolstering confidence, having such capacity may actually reduce the need to use it." [E.A.]

You may recall that Paulson used this same logic in pushing the various bailout packages through Congress last fall. I believe his version revolved around not needing to use a "bazooka" as long as everyone knew you had it.

Well, it didn't work then and it won't work now. The Obama administration should drop this utterly senseless defense of the program. I'm not buying it and neither should any sane person.

The overwhelming message from various administration officials has been that the economy is recovering. If that is the case, why the need to continue the TARP?

The real answer is that once power is ceded to the government it is difficult to get it back. Ever. This is particularly the case when it comes to the federal government.

To be sure this is one area where Washington demonstrates the much ballyhooed bipartisanship. Therefore it is very important that voters think twice before we surrender any more power over our affairs to government at any level.

Candidate Andy Williams

Andy Williams is a Brown County Supervisor, and a Republican candidate for the Wisconsin 8th Congressional District seat currently held by Steve Kagen.

Last week Williams was the guest at the Outagamie County Republican Women's meeting in Appleton where he took a few minutes to introduce himself then took questions from the audience for about an hour.

Williams is a graduate of Marquette Law School and he served in the United States Navy. He spoke with pride when he discussed his Navy service and it was obvious from his demeanor that this is a period of his life that he looks back on with fond memories. It seemed that Williams tries to maintain an upbeat outlook, even when life is difficult, and he kept a smile on his face even while discussing some trying personal circumstances that he has gone through in his life.

When asked about his top issue, Williams indicated that it is his belief that America is second to none, and that politicians should work to maintain and enhance this reputation.

When it comes to philosophy of governance, Williams advocated for what he called "subordination" - the idea that decisions should be pushed down to the lowest level of government possible (our Catholic friends may recognize this as subsidiarity). Williams said, "decisions need to be more local."

In discussing particulars, the question of education came up, about which Williams said there was no issue, "more local than education." He advocated for getting the federal government out of education.

With the wide range of issues on voter's minds these days, there were some that weren't addressed directly during the discussion such as taxes. The Andy Williams for Congress website, however, does have detailed information about Williams' positions on many issues.

On taxes he advocates for a national sales tax:

The American worker cannot continue allowing the government to blind them to the true cost of their employment. That's why I am a proponent of the FairTax.

On health care:

I cannot advocate any solution that puts the central government into the market in competition with insurance companies. Instead reform must target those areas central to the runaway nature of medical costs. At the top of the list is Tort Reform and the litany of unnecessary tests run by doctors in their attempt to avoid a costly malpractice allegation.

The election is now a little over one year away. The three declared Republican candidates all seem to be taking those first steps toward their ultimate goal of the nomination. Williams admitted that he was fired up now, but would probably have to wait until the spring for campaigning to really get going.

While Representative Kagen was battered throughout the month of August, it is no sure thing that he will be defeated. I believe that the Democratic national leadership looks at WI-8 as competitive, even tough, but as still within their reach. It will take a smart, unified, and vigorous Republican response to defeat Kagen and the Democratic party's wrongheaded policy prescriptions. It remains to be seen if Williams will be the candidate to lead that response.

Are RTA's in Northeast Wisconsin's Future?

RTA's are Regional Transit Authorities. The Press Gazette reports that they came under consideration at Tuesday's city council meeting:

Proponents say a regional authority is needed if Green Bay Metro is to survive a likely cut in federal funding next year. Opponents say a regional authority would become another taxing body in a community that already pays too many taxes....

On Tuesday’s agenda was a recommendation by the city’s Advisory Committee to send a resolution to the state legislature supporting the enabling legislation....

The proposal survived several attempts to delay it. In the end, the council voted in favor of a plan that would ask the state to pass enabling legislation for an elected authority but that would require approval by the council and by voters in a referendum before such an authority could actually be formed.

The last state budget negotiation included consideration of an RTA for the Fox Valley, but that never came to pass.

At that time, the lack of an RTA raised some alarm bells here in De Pere. City Administrator Larry Delo sent an email to Representative Phil Montgomery urging him to support creation of the RTA due to its impact on a large De Pere employer, Humana. Delo's email included this ominous note(you can find the whole email at this link to WisPolitics):

Humana has indicated bus service is very, very important to them and will likely play a part in their decision for expansion on site or moving to a new location. We believe it is very unlikely that we will be able to keep Humana in Wisconsin if they move from this location due to the level of incentives other states are willing to offer that Wisconsin does not.We also believe Humana may consider moving their other locations out of State if they move their largest facility out of State since they are also considering additional consolidations of facilities. The total job loss to our region and the State could approach 3,500 positions. [Emphasis in original]

In a June 5th email to me, however, Mr. Delo indicated that the situation wasn't as dire as it had been. He wrote:

After further discussions with Humana representatives, they have indicated they do not have any intention of leaving the area.

While this is good news for De Pere, it is clear that this is not the end of the issue.

This episode demonstrates how consideration of an RTA can be a difficult decision, balancing the burden of taxation and the need for infrastructure to support local jobs. This is true for elected officials and for voters, who will ultimately have to decide how to proceed.

WI-8 Candidate Andy Williams Event

Andy Williams, Republican candidate for Wisconsin's 8th Congressional District, will be at the monthly meeting of the Outagamie County Republican Women this Thursday, September 17th.

The meeting is open to the public and is held at The Appleton Yacht Club-1200 South Lutz Street, Appleton. The meeting starts at 6:20 PM and Andy will take questions.

If you are at all interested in Wisconsin 8th district politics I encourage you to attend.

I attended the meeting last month with candidate Reid Ribble and it was well worth the time. The OCRW begin their meetings right on time. Questions are taken in order from a list that you can sign in on, but the meeting itself is quite casual. Last time several people brought their drinks from the bar into the meeting room.

Here's a link to Andy's website. His site includes some details on where he stands on the issues under the 'Platform' tab.

Navy Seals in Somalia

Fox reports:

Navy Seals from US Special Operations Forces conducted a raid in southern Somalia on Monday that killed Saleh Ali Saleh Nabhan, one of 4 co-conspirators wanted in the 2002 bombing of an Israel owned hotel in Mombasa, Kenya, two senior U.S. military officials told Fox News.

Excellent work. My thanks goes out to all involved.

I realize this is overly simplistic, but why isn't this type of operation the paradigm for the war on terror? I think the support for anti-terror activities among the American people would be much higher if this type of operation was at the forefront of our efforts. After all, this still fits the case of "fighting them over there so we aren't fighting them here".

It's easy to say this type of small scale attack simply isn't sufficient against an enemy like Al Qaeda, but it's hard for me to see how destroying two nations and then spending a decade, billions of dollars, and thousands of American lives rebuilding them accomplishes this either.

The view from Lehman Brothers plus one

We are now at the anniversary of the collapse of Lehman Brothers. An event that certainly did not trigger the current crisis, but likely will always hold a special place in the history of this episode.

I would call Lehman's bankruptcy the moment when it became clear we had left the frying pan and moved most definitely into fire territory. This is true whether you agree with all or none of what we have done since in terms of our response.

Given the date, the press, in all its forms, is full of histories, theories, recriminations, etc. So here, in no particular order, is a round-up

Joe Nocera in the New York Times:

Almost everyone I’ve ever spoken to in Hank Paulson’s old Treasury Department agrees that without the immediate panic caused by the Lehman default, the government would never have agreed to make the loans needed to save A.I.G., a company it knew very little about. In effect, the Lehman bankruptcy caused the government to panic, which in turn caused it to save the firm it really had to save to prevent catastrophe. In retrospect, if you had to choose one firm to throw under the bus to save everyone else, you would choose Lehman.

Barry Ritholtz offers some myths of the collapse:

• Housing’s special status caused the collapse: Housing has long had a special status in America. But the mortgage interest rate deduction has been around for a century. It did not cause the collapse — the abdication of lending standards is at the heart of this crisis.

Jeffrey Friedman, Editor, Critical Review

Contrary to popular belief, then, the crisis of 2008 is best described as a crisis of regulation—not a crisis of capitalism.

Tyler Cowen writing in the New York Times:

But we are now injecting politics ever more deeply into the American economy, whether it be in finance or in sectors like health care. Not only have we failed to learn from our mistakes, but also we’re repeating them on an ever-larger scale.

Megan McArdle of The Atlantic:

Your best shot is at trying to structure firms that can withstand a crisis, and quickly shutter those that can't. The problem with that is that this was the mandate we gave our regulators before September 2008.

Simon Johnson at The Baseline Scenario:

Longer term U.S. growth prospects remain particularly uncertain – has consumer behavior really changed; if finance doesn’t drive growth, what will; is the budget deficit under control or not (note: most of the guarantees extended to banks and other financial institutions are not scored in the budget)? The implication, presumably, is higher taxes on the productive nonfinancial part of the economy – to pay for the implicit subsidies and ongoing rents of the financial sector.

Click through and read the whole thing on any or all. Feel free to leave a link in the comments section to any other articles on the subject.

Either/Or - Healthcare edition

Matthew Yglesias writes:

The private system is slowly but surely failing, and only public programs are preventing lack of health insurance from spiraling out of control.

And provides corresponding numbers of decreasing private insurance rolls and increasing public ones.

While there's nothing wrong with his numbers, his conclusion appears suspect to me.

Why isn't declining private insurance enrollment proof that the current "private insurance system is slowly but surely failing"? Why are public programs the only viable alternative to the current system? I suspect that in this case, Yglesias' preferred alternative is being presented as the "only" alternative.

I am still waiting for someone to come up with a plan that represents a real break with the current system and the current proposed solution. I believe a plan that represents such a break would include the following:

• An acknowledgment that the current system doesn't work for many people and the fact that it is employer based is an impediment to labor mobility.
• Willingness to concede that $3 or $4 thousand of health care expenses in a year doesn't mean that the government needs to employ an army of doctors or insurance agents just to make sure you are insulated from the cost of maintaining your own health. If it's valuable, why should it be free?
  
• A refusal to call health care a right, but a recognition that one of the richest and greatest nations on earth has a moral obligation to help care for those citizens that need help.
• Acceptance of the idea that getting sick should not mean financial ruin.
• A realization that a health care safety net should kick in when you need an organ transplant or have a chronic illness that requires lots of expensive treatment not when your ear hearts and you want someone at the emergency room to shine a light in it at 3am and give you some pills.
• A belief that the government, in its unique position, can play a temporary role in transitioning us from the current system to a different, better, but still private system.
• Understanding that once the government is involved, there is no assurance that it will leave, but the introduction of a government-run public option will guarantee that government will never leave. And that this represents a level of government intervention in the private sphere that is ultimately incompatible with a free society.

None of these notions seems particularly radical to me and seem to have portions that would appeal to those on both sides of the current debate. Given that, why is such a synthesis completely missing from the discussion?

Mark Twain's Depth

You see my kind of loyalty was loyalty to one's country, not to its institutions or its office-holders. The country is the real thing, the substantial thing, the eternal thing; it is the thing to watch over, and care for, and be loyal to; institutions are extraneous, they are its mere clothing, and clothing can wear out, become ragged, cease to be comfortable, cease to protect the body from winter, disease, and death. To be loyal to rags, to shout for rags, to worship rags, to die for rags—that is a loyalty of unreason, it is pure animal; it belongs to monarchy, was invented by monarchy; let monarchy keep it. I was from Connecticut, whose Constitution declares "that all political power is inherent in the people, and all free governments are founded on their authority and instituted for their benefit; and that they have at all times an undeniable and indefeasible right to alter their form of government in such a manner as they may think expedient."

Under that gospel, the citizen who thinks he sees that the commonwealth's political clothes are worn out, and yet holds his peace and does not agitate for a new suit, is disloyal; he is a traitor. That he may be the only one who thinks he sees this decay, does not excuse him.it is his duty to agitate anyway. and it is the duty of the others to vote him down if they do not see the matter as he does.

From A Connecticut Yankee in King Arthur's Court.

H/T Mrs. RhymesWithClown

How do you say 'bubble' in Chinese?

From The Baseline Scenario:

Lou Jiwei, the chairman of China’s sovereign wealth fund said recently, “It will not be too bad this year. Both China and America are addressing bubbles by creating more bubbles and we’re just taking advantage of that. So we can’t lose.”

China's sovereign wealth fund is a major purchaser of U.S. government debt, so don't be fooled into thinking what this guy says and does has no bearing on your life.

And when he says 'we' can't lose, I can't tell exactly to whom he is referring, can you?

The Medicare Advantage Disadvantage

I don't know what the President is going to say in his address on health care tomorrow night, but I know one item that Representative Steve Kagen will be listening for: The fate of Medicare Advantage plans. These are the plans that some seniors buy to supplement Medicare.

At Kagen's listening session on August 31st this subject came up a number of times; primarily due to the fact that these plans are popular among those that have them and they have been targeted to receive reduced funding as a means of paying for comprehensive health care reform. Plans to reduce popular spending programs are, to say the least, unpopular.

Kagen tried to reassure the crowd that he believed in the Medicare Advantage program, but it was the Democratic leadership that had targeted these programs for a reduction. At least two separate times he tried to explain how he was fighting to keep these programs intact. Since the question came up more than once, he apparently wasn't very convincing.

My own quick research on this topic has only confused the issue.

In discussing these plans, Kagen said that they worked well for rural districts like the Wisconsin 8th. But the Kaiser Family Foundation May 2009 Medicare Advantage fact sheet indicates that in rural counties enrollment in Advantage plans is only 13%. Maybe WI-8 doesn't qualify as rural.

It also notes that in Wisconsin statewide, enrollment is only 26%. This surprised me given the fact that it was raised as an issue several times at the listening session. More telling though, was the fact that Kagen immediately recognized it as an issue and had come prepared to discuss it specifically. It was clear that somehow he had gotten the message that people were concerned about Medicare Advantage.

At this point, I can't tell if this is an issue of substance or of perception. Regardless, it is an issue to watch as the health care debate continues and one that will likely effect next year's race for Wisconsin's 8th District seat.

The shifting political winds

The Department of Education should not be producing paid political advertising for the president, it should be helping us to produce smarter students,...And the president should be doing more about education than saying, 'Lights, camera, action.

That was Democrat and House Majority Leader Dick Gephardt speaking in 1991 about GHW Bush's speech to students. (H/T McArdle)

Then there's this item(H/T MR):

The controversy about carrying guns in public is not new. In 1967, however, the political alignments on this issue were completely different. Many conservatives (and others) objected when the Black Panthers insisted on exercising this right. In response, Governor Ronald Reagan signed the Mulford Act banning the carrying of guns in public.

The capacity to disregard inconvenient facts is absolutely staggering and apparently a bipartisan affliction.

Can you be pro-market and pro-union?

The belief that labor unions can substantially raise real wages over the long run and for the whole working population is one of the great delusions of the present age...

All this does not mean that unions can serve no useful or legitimate function. The central function they can serve is to improve local working conditions and to assure that all of their members get the true market value of their services.

For the competition of workers for jobs, and of employers for workers does not work perfectly. Neither individual workers nor individual employers are likely to be fully informed concerning the conditions of the labor market. An individual worker may not know the true market value of his services to an employer. And he may be in a weak bargaining position.

That is Henry Hazlitt from his book Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics.

Unions knowing and carrying out their proper function is a critical part of the labor market. It is when they go beyond this true function that that results in bad outcomes, often for both employers and employees.

Hazlitt has impeccable free market credentials. This is from his biography on Mises.org:

If you want to know where American supporters of free markets learned economics, take a look at Economics in One Lesson by Henry Hazlitt. A brilliant and pithy work first published in 1946, at a time of rampant statism at home and abroad, it taught millions the bad consequences of putting government in charge of economic life.

Those within the labor movement would be well served to take Mr. Hazlitt's lesson to heart. And those that support free market principles would do well to remember that unions serve an important legitimate role in a truly free labor market.

Will a change in strategy save Kagen? The Democrats?

On Monday, I attended Steve Kagen's health care listening session at Green Bay's Southwest High School. The crowd was vocal, but not nearly as raucous as Kagen's listening session at the library earlier this month.

While there were more (and more vocal) Kagen supporters this time around, I would say the room was at least 5 to 1 against. This time, Kagen was clearly more prepared for the onslaught and had his talking points memorized. The two major points were uniform disclosed pricing and a prohibition on the typical pre-existing condition exclusion. In other words, health insurance reform.

And you know what, this is a good strategy politically. Even the people that denounced HR3200 and it's monstrous page count got up and said they did think knowing the price of things was helpful (that's how markets work after all). They did say that not allowing for pre-existing conditions made purchasing insurance harder (though I'm not convinced that anyone has thought about the longer term consequences of basically prohibiting underwriting.) This is why I thought Kagen's tactics were the right move in terms of getting re-elected. And it looked like there was some movement in that direction nationally.

Here's Dad29 on September 1st discussing the President's new approach:

...they say that the goal is to give his side -- Democrats -- a true presidential plan that they can sell. That includes the rebranding of several consensus initiatives, like the insurance reforms, as his own. The effect of this sales job, if it works, will be to associate the president with parts of the reform bills that are almost certainly likely to pass -- assuming the Senate doesn't bog down.

Apparently he got the hint.

Okay, so it looks like the Democrats are going to scale back their proposals in order to preserve their majority in 2010. But wait!

Here's liberal blogger Matthew Yglesias also on September 1st:

But Brian Beutler points out that going the reconciliation route might force a more left-wing version of the public option:

...According to Martin Paone, a legislative expert who’s helping Democrats map out legislative strategy, a more robust public option–one that sets low prices, and provides cheap, subsidized insurance to low- and middle-class consumers–would have an easier time surviving the procedural demands of the so-called reconciliation process.

By now my head is spinning. It seems to me that at this point Kagen's re-election prospects are entirely in the hands of Nancy Pelosi, Harry Reid, and President Obama and how they decide to move the health care legislation forward.

Here's political blogger Nate Silver*:

That's why Nancy Pelosi and Harry Reid's vote-whipping skills are going to be so essential: they have to help Democrats out of a prisoner's dilemma in which each member's individual interest harms the party's collective interest. It's also why if a health care bill passes, it's almost certainly going to be by a very narrow margin.

In some respects you have to feel for Kagen. Queen Nancy may go over great at the Golden Gate, but in Peshtigo? Not so much.

If I was a marginal Democrat, like Kagen surely is, I would be on the edge of my seat waiting to see what the Democratic leadership does next. Having to vote 'yes' on a bill that is not going to pass the Senate, especially under reconciliation if that process really does move the bill Left, is a tough way to go out. Of course, what is bad news for Kagen could be good news for the people of WI-8.
_________________________
*I'm not sure what Silver is describing is actually a prisoner's dilemma. If all Democrats cooperate and pass an unpopular bill, how does that improve the outcome for those marginal Democrats?

Getting it wrong

Economist Paul Krugman has a New York Times Magazine article entitled How Did Economists Get It So Wrong? which has a nice description of the mainstream of economic thinking since the Great Depression.

He winds up arguing that the only way forward is a return to government spending as a response to business cycle downturns. He treats this as a far more settled conclusion than I believe it to be. Regardless, Krugman's walk through recent economic thinking has value even if you don't think we ought to double down on Keynesian spending the way Krugman does so you should go read the whole thing.

Of particular importance to understanding this crisis is understanding the role of finance:

By 1970 or so, however, the study of financial markets seemed to have been taken over by Voltaire’s Dr. Pangloss, who insisted that we live in the best of all possible worlds. Discussion of investor irrationality, of bubbles, of destructive speculation had virtually disappeared from academic discourse. The field was dominated by the “efficient-market hypothesis,” promulgated by Eugene Fama of the University of Chicago, which claims that financial markets price assets precisely at their intrinsic worth given all publicly available information. (The price of a company’s stock, for example, always accurately reflects the company’s value given the information available on the company’s earnings, its business prospects and so on.)

The notion that market actors are always rational and that market prices are always correct seems foolish regardless of where you fall on the political spectrum. To accept such a notion, one would have to accept a fundamental change in human nature.

If you are one who believes we live in a fallen world, there is absolutely no way, short of split personalities, that you can also believe in the perpetual accuracy of market prices. The flip side to this of course, is the fact that no amount of government intervention is going to permanently alleviate all human suffering whether caused by economic striving or not.

This is not to say we should do nothing. Nihilism is not an option. A measured approach to implementing prudential but substantial changes is my preferred course. It's possible, perhaps even likely, that the Obama approach will be one of highly publicized cosmetic changes and then business as usual on Wall St.

Economists that overturned the thinking of Keynes in the academy weren't right, and it's not at all clear that Keynes' approach still holds true. Given this state of affairs, without some new thinking when it comes to finance, we could find ourselves continuing to 'get it wrong' for a very long time.

Fact-Checking Kagen

I attended Kagen's health care listening session at Green Bay's Southwest High School on Monday night.

In response to a question that touched on illegal immigration, Kagen made the assertion that all of the 47 million uninsured in America are citizens. This elicited skeptical groans from the crowd. Groans that were correct, it would appear.

It looks like the actual number of uninsured is closer to 46 million and it seems clear that not all of them are citizens. Here's The Numbers Guy Blog from the WSJ on 6/24/09:

The Census Bureau estimates that the number of uninsured amounts to 45.7 million people. But the agency might be overcounting by millions due to faulty assumptions. Another problem: That 45.7 million figure includes undocumented immigrants, even though they aren't likely to be covered under new laws....

Clouding future projections of uninsured are tricky methods of counting them today. Even though legislation won't cover many of them, illegal immigrants are especially difficult to enumerate: Few raise their hands to be counted. Prof. Gruber estimates they make up about 13% of the uninsured today, or nearly six million people of that 45 million number.

On 8/5/09 Yahoo News had an AP article which included this:

All the plans would exclude illegal immigrants, who account for as much as 17 percent of the uninsured, according to the Pew Hispanic Center.

A sensible debate and decision on how to address health care in this country starts with accurate facts.

It is clear that on this particular point Congressman Kagen simply doesn't have his facts straight, so how can we trust his conclusions?

Why I hate government regulation

The Consumer Product Safety Improvement Act (CPSIA) was a law enacted in the wake of some tainted toy scandals and requires testing of toys for lead and other harmful chemicals.

The law was written so broadly that items like clothing and books would also have to be tested, not just toys for infants, who are most likely to put them in their mouths. This wide net of testing requirements has been a cause of particular concern among second-hand sellers and those that shop at such venues regularly.

Well who would be for such a regulation you ask. Surely not a toymaker, right? Wrong.

So while most small toymakers had no idea this law was coming down the pike until it was too late, Mattel spent $1 million lobbying for a little provision to be included in the CPSIA permitting companies to test their own toys in "firewalled" labs that have won Consumer Product Safety Commission approval.

The million bucks was well spent, as Mattel gained approval late last week to test its own toys in the sites listed above—just as the window for delayed enforcement closed.

Instead of winding up hurting, Mattel now has a cost advantage on mandatory testing, and a handy new government-sponsored barrier to entry for its competitors.

This is the definition of Regulatory Capture. It is the ability of the rich and connected to carve out advantages to themselves within a complex regulatory regime by manipulating a corrupt political system.

I like interstate highways, the Marine Corps, and non-tainted beef, but this kind of thing will never stop as long as we continue to implement unnecessarily complicated regulatory schemes.

An environment where the interests of The State align with those of The Corporation is the least conducive to freedom this side of Stalin's Russia.

The Fed Audit Roller Coaster

Ron Paul's bill HR1207 to audit the Federal Reserve continues to make news, at least in the blogosphere. Some recent coverage indicated that Barney Frank (D-MA) has indicated Paul's bill will pass the House in October. This is important because Frank chairs the House Financial Services Committee.

The excitement even seemed to catch the more sober blogs like Open Congress who recently titled a post "Audit the Fed" Bill Will Pass This Fall.

Apparently, this was pronouncement was based on a faulty transcript of Frank's remarks and was overly optimistic.

From RonPaul.com:

The transcript is missing an essential sentence, which is marked in bold:

That will be part of the overall federal regulation that we are redacting. This will probably pass in October.”

(Accurate transcript here.)

With “This will probably pass in October”, Frank is referring not to HR 1207, but to his own financial regulation bill, which might or might not include some aspects of Ron Paul’s HR 1207. The preceding sentence, “That will be part of the overall federal regulation that we are redacting,” is for some reason missing from the widely distributed transcript, and has therefore been completely ignored by bloggers and commentators.

In recent weeks Ron Paul repeatedly warned against just this sort of thing happening: that HR 1207 might become part of a more comprehensive financial regulation bill and be watered down so that it appeases the angry masses without instituting any real changes. It would be an irony of history if that happened — if HR 1207 were watered down and integrated into an unconstitutional bill that Ron Paul would have to vote against.

Based on the corrected transcript, Frank is talking about making information on what the Fed buys public, not on Paul's bill itself.

For more on the Ron Paul bill to audit the Fed click here.