Archive for August, 2009

Cash for Clunkers: Cooked Books for Domestic Manufacturers?

It won’t come as any surprise to readers that I’m not exactly a fan of Cash for Clunkers.  All this $3,000,000,000 Chinese borrowing program did was push forward some demand.  If car dealers are going to permanently reduce their months of inventory, that’s all to the good, but it’s hard to see how C4C did anything other than hasten the process a little.  (If they’re not, then it did even less good.)  The environmental effects are minuscule, given the size of the US auto fleet and the small per-unit increase in mileage.  And many dealers ended up pulling out of the program because the interest-free loans they were floating to the feds (with the notable exception of government-owned GM), were putting them in a cash crunch.  As reimbursement trickles in, they’ll see sales drop back to lower-then-previous levels, and there’s no particular reason to think the dealers will be better off for having moved revenue from one quarter to another.  In the meantime, it’s taken a large chunk of older cars and their replacement parts off the market, hurting most those who need cheap local transportation, the working poor.

However, there’s one complaint that isn’t particularly valid: that most of the cars bought were Japanese models, and that this hurts the domestic manufacturers.  According to the final numbers, the Big 3 ended up with about 38% of the cars sold.  But of the biggest foreign sellers, many are either made or assembled here in the US.  The Toyota Corolla had a US-made engine and was assembled in the company’s Fremont, Calif. plant.  At least, until they decided to shutter the place late last week.   Honda Civic sedans also have US engines and are assembled in Indiana.  The Camry has both US transmissions and engines, and is assembled locally (not so the hybrid, which is only assembled here).  The Accord has both local engines and transmissions, and is assembled in Ohio.  Presumably parts for all of those models are also produced domestically.

The Fit, Elantra, Versa, and Prius, seem to be produced exclusively overseas, but those are also down the list.

So while union shops may have a lot to complain about (especially since the doomed Fremont plant is the only union shop among the foreign-owned group), it’s not clear that US shops have really suffered here.  If conservatives are going to promote free trade on the grounds that non-union foreign plants also employ people, we need to be honest enough to recognize when they benefit from ill-conceived government programs, too.

Still, the political power of pitting domestic vs. foreign cars is undeniable, which makes these numbers interesting.  As of August 4, according to the LA Times and “numbers floating around Capitol Hill,” almost half the 157,000 cars sold had been from the Big 3.  Two weeks and $2,000,000,000 later, an additional 533,000 cars had been sold, 2/3 of which were from foreign producers.  It’s unclear what the source of the original numbers was – the LA Times doesn’t give one – but I’m extremely skeptical that first-week buyers were so radically different from 2nd- and 3rd-week buyers.  And it wouldn’t surprise me at all to hear that some “creative estimating” was done in order to boost the apparent benefit of the program to domestic manufacturers.

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Denver Post and Those Darned Think Tanks

I know it’s accepted by now that the MSM group will label any conservative group, “conservative,” any libertarian group, “conservative,” and any liberal group, “left-leaning” or “centrist,” when they bother to label them at all.  But when a new one comes along, it’s good to put both that group’s leanings, and the MSM’s failure to note them, on the record.

The Denver Post recently ran a story about small business’s internal divide over health care “reform.”  In it, this:

Despite those fears, a study from the nonprofit Small Business Majority found health reform, even with a mandate, would save small business more than $500 billion over the next decade.

“Should everybody be in?” asked Elisabeth Arenales, an analyst with the Colorado Center on Law and Policy. “What’s the contribution of the business sector? Businesses stand to gain a lot from health-insurance reform.”

The CCLP may be talking about small business, but that doesn’t mean it’s speaking for small business.  Far from it.

As for the Small Business Majority, it’s definitely a “left-leaning” advocacy group, with a pretty typical pedigree for such recent endeavors.  Founded by a liberal Silicon Valley dot-com boomer, (he’s given exclusively to Democrats and Democrat causes), the group boasts that it, “works with the White House to organize policy discussions that focus on small business issues.”  It’s an advocate of greater government involvement in health care, and appears to have been founded specifically in order to promote that goal.  It examines reform proposals, but only those that increase government involvement.

There’s nothing necessarily the matter with this.  Most groups claim to be “unbiased.”  But only a biased paper would accept such claims at face value.

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Rangel Should Go

In case you’ve been too busy watching Obamacare implode like the latter stages of a supernova, House Ways and Means Committee Chairman Charlie Rangel has a little integrity problem.  He has a problem reporting his income and assets – and thus his tax liability.  He’s had to file amended disclosures on a number of occasions, with excuses that would have gotten you or me a trip to the slammer with a detour through bankruptcy court.  He has a problem remembering which house he’s living in.  He has a problem taking free vacations from cronies.  He has no problem taking taxpayer-funded trips to the Caribbean.  All of which has earned him what must be a record for Ethics Committee investigations into a sitting chairman.  Despite which, the Democrat leadership re-appointed him to the chairmanship.

This is all from the guy who’s responsible for writing – although if he’s anything like the rest of his fellow committee chairmen, not reading – changes to the tax law.  It’s not original to point out that there’s apparently one set of rules for you and me, and another set of rules for the people who write them.

It’s time for Charles Rangel to go, and at least until January 2011, it’s up to his fellow Democrats to do it.  There is a process for removing errant committee chairmen.  Each party caucus has a committee whose job it is to recommend to the entire caucus committee assignments and chairmanships.  The Democrats’ is called the “Steering and Policy Committee,” although in their case, it appears that the policy is to let the steering take care of itself, with predictable results for the guardrails.

Our own Rep. DeGette, as a Chief Deputy Whip, is a member of this committee.  How did she vote on Rangel’s re-appointment, and when will she move to undo that mistake?

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Senator Bennet: “Fleeing From Colorado Families Tour”

Senator Michael Bennet has just announced a “Health Care Conversation” tomorrow in Pueblo.

100 tickets are available. Details, and the sign-up form for Sen. Bennett’s Health Care Lottery here:

(We can only hope it works better than the Health Care Lottery the Democrats have in mind.)

Senator Bennet has been running from Front Range voters during the August recess. During his “Fleeing from Colorado Families Tour,” he scheduled only one event in Denver, an invitation-only discussion at Denver Health. (Photos here:  You can see about a dozen doctors and nurses in the photo.

I can’t blame him for spending the summer in the high country and the western slope.  If I didn’t have to work for a living, that’s where I’d be, too.  But while I recognize the importance of including the entirety of our state in this debate,  Sen. Bennet’s scarcity to most of Colorado’s population speaks volumes about his lack of confidence in the proposals he appears ready to embrace.

For most Coloradoans, this may be the only chance they get to confront their selected official on this issue.  Let’s make the most of it.

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To Whom It May Concern

Stay out.  Just stay out for a while.

Now, it looks as though the NRSC isn’t getting involved in our Senate primary after all.  At least not for now.  I spoke with Dick Wadhams yesterday and he said that he hadn’t seen any indications that the NRSC was getting ready to jump in.  They do usually coordinate this sort of thing with the state party chairman in question, and he hadn’t heard anything.  He repeated his adamant position that he isn’t taking sides, and that he trusts the process to sort out the best candidates for the party.

That said, it’s not as though the NRSC hasn’t pulled stunts like this in the past.  And to be sure, that Pennsylvania seat is the reason the Dems are still one vote shy of 60 in the Senate.  Oh, wait.  Never mind.  Well, it’d be even worse without Lincoln Chaffee up there in Rhode Island to..what’s that?  Wow.  Still, you have to admit, favored candidate Charlie Crist did himself some good today…then again.

There’s no secret that the NRSC, looking from a great distance, doesn’t have great confidence in the declared field thus far.  And there’s no secret that Jane Norton will be a dynamite fundraiser for herself, especially from out of state, leaving the NRSC free to deploy money elsewhere.

But the NRSC’s involvement most resembles the conservative theory of arms control: where it’s needed, it’s not effective, and where it’s effective, it’s not needed.  Mrs. Norton is far from a sure thing as a campaigner; she’s never won office on her own, becoming Lt. Governor as part of the Bill Owens steamroller in 2002.

I can’t actually endorse boycotts of Republican organizations, but it stuff like this, as well as rumors that the NRSC is trying to knock Pat Toomey off in a primary, that encourage Republicans to withhold their money from the NRSC.

And Hugh.  What’s with CD-4?  With the exception of a certain state house race with the credibility of the party at stake – we don’t forget our friends – you’ve not exactly had a sterling record in picking winners here.  I know you and Tom Lucero are friends, but Cory Gardner’s a fine candidate up there, and Congress is a logical step up for a state legislator.  Your involvement here is somewhat less problematic than the NRSC’s meddling, since you’re not part of the official party hierarchy, but I’m really not sure you’re making the right call up there, and in a situation with two credible candidate, shouldn’t this sort of thing be left to the citizens?

When I ran last year, it was often frustrating both for me and for party officials to have to keep their mouths shut about my primary.  But I emerged as a better candidate, and one with more credibility, for having won without the state party or the county party getting officially involved.   Now, as one of those party officials, I can tell you that having someone come in from out of state and bigfoot the people here on the ground doing the work is not only annoying, it’s insulting.

When we have a nominee or a clear front-runner, feel free to come on in.  But until then, how about letting Coloradoans sort out Colorado’s representation?

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Home and Away

With’s radio subscription, I find that I enjoy listening to the opponents’ broadcasts, not just for the variety, but also because I’ve never really warmed to the local guys here in Denver.  I guess I’ve been spoiled by Jon Miller and Joe Angel all those years for the Orioles.  I always liked Charlie Steiner at ESPN, and have kind of missed him since he left to go do the Bums games.

In any case, on tonight’s KABC broadcast for the Dodgers, the LA Federation of Labor was running pro-union ads, not only boosting “union jobs,” but also putting pressure on Diane Feinstein to vote for the Employee Forced Collectivization Act.  The spot claimed that it would make it easier for workers to unionize, which is indisputably true, although it would be more accurate to say that it would make it easier for unions to force workers into unions.

Still, it’s an interesting place to be advertising.  The Los Angeles Dodgers have never really had an image as a blue-collar team, unlike the Brooklyn Dodgers.  So it’s unclear how much of their target audience the Lords of Labor are reaching with these spots.

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How ‘Bout Them Rockies?

I should know by now.  After the Giants put two across in the top of the 14th, I turned off the broadcast.  It had been a nice game, but the Rocks had more or less tossed it away earlier on Tulowitzski’s baserunning error, and their inability to make anything of all their men on third.  That had made it 3-1, and I figured I needed to concentrate on the County website.

So naturally, when I go to check the scores, they’ve won 6-4.   Instead of being back where they started when the Giants came into town, they’ve opened up a 4 game lead for the Wild Card, and closed to within 3 of the Dodgers.  The Dodgers, by the way, are in town for a 3-game set starting tomorrow night, so it’s possible – although extraordinarily unlikely – that the Rockies could be tied for first by the weekend, and playing for home field in the NL playoffs.  They have played close to .700 ball since the beginning of June, come back from almost dead last in the league (the Nationals have had that pinned down since early April), and are now seriously thinking about playing in October again.

Apparently, the Colorado Rockies are simply a force of nature.

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Old Guy Moment

Dramatis Personae:
A young co-worker

Me (approaching the coffee station): Oh, we’re out of high-test.

Young Co-worker: What’s high-test?

Me (pausing momentarily): You know, from when there was leaded gas.

Young Co-worker: Leaded gas?  I’ve heard of unleaded gas…

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Health Care Microeconomics

When Susie was living in Oceanside, the local hospital was located at – I’m not making this up – One Healthy Way.   Evidently the Democrats had already implemented their health care plans.

Of course, there are many healthy ways, but the only way to get all of them going at once is to put decision-making power in the hands of actual consumers.  In the latest Atlantic, David Goldhill takes a close look at the perverse economic incentives currently embedded in our health care system, incentives that create all sorts of inefficiencies.  In this case, “inefficiencies” can mean longer waits for worse care at higher prices.  Virtually all of these distortions originate from a house of cards of government policies, each policy intended to fix the problems that the previous ones created, all the while making things steadily less stable.

It’s a brilliant piece, really, applying basic supply-and-demand economics and marketplace dynamics to the pieces of this system, and showing how they explain what’s wrong, and why our health care and insurance are costing us so much.

As with housing, directing so much of society’s resources to health care is stimulating the provision of vastly more care. Along the way, it’s also distorting demand, raising prices, and making us all poorer by crowding out other, possibly more beneficial, uses for the resources now air-dropped onto the island of health care.

Starting with insurance,virtually everything we do in health policy prevents prices from finding their own levels, providers and consumers from adjusting to dynamic market forces, confuses prices with costs, discourages cost competition, and then punishes people for responding to the incentives that policy creates.  Fundamentally, the problem is an unwillingness to confront actual costs and to pay for what we use.  We expect insurance to cover routine expenses, which ought not be insurable events.  Medicare gets away paying less than cost for services that are only available because someone else picks up the difference.  We’re recklessly borrowing from our future.   The patient is rarely the customer, and when he tries to be cost-conscious, hospitals won’t let him.

Every distortion we complain about has some weird incentive behind it.  Insurance costs so much because we expect it to pay for too much.  We have to restrain hospitals from buying new equipment because we subsidize it.  We prevent specialty facilities from competing with hospitals because we overpay for some services and underpay for others.  And the hospitals’ objections to competition mirror those of the railroads 100 years ago.  Britain right now is suffering through the Conrail of public health.  He doesn’t specifically address the growing wait-times for specialists, but there’s probably a perfectly good awful policy behind that, too.

Goldhill also comes up with reasonable estimates of how much the current bogeymen actually cost us.  You could take the entire insurance industry profit for 2009 and pay for America’s medical care for 4 days.  Think about that.  The “excess profit” that insurance-company-haters rail about amounts to 1% of our health spending.  IT efficiencies would probably improve service, but would also return about 3% of actual costs.

Goldhill proposes shifting the decision-making and purchasing back to the actual patient.  You pay for routine expenses out of income.  You pay for big expenses out of savings and credit.  And a single, government-run policy would backstop against catastrophe.

It shouldn’t be a surprise that, in an article full of what should be commonplace economic observations, the one false note is political.  A government-run catastrophic health plan would be under constant political pressure to carve out exceptions to favored groups and to lower the ceiling for everyone.   Competing catastrophic plans would be able to experiment with coverage amounts and price points.

Still, this is the kind of rigorous application of basic economics that’s been missing from the debate, and especially missing from any Democrat proposals on the table right now.

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Civil Society Subsumed

A couple of weeks ago, the Mercatus Center noticed that Brad Pitt’s non-profit was seeking stimulus money for its mission to help rebuild New Orleans:

The Make It Right Foundation (profiled here on ABC’s 20/20) — as well as dozens if not hundreds of other local initiatives and non-profits — have done incredible work in rebuilding the Gulf Coast after Hurricane Katrina. But much of this success is due to their independence from large government bureaucracies. Stimulus funding has the potential to act as what Jane Jacobs called “cataclysmic money.” There is a real danger that if social entrepreneurs and non-profits like Pitt’s become dependent upon federal funds, they will in effect become arms of the federal government. This would have a dangerous effect on civil society, and reduce our resilience to disasters and shocks, whether natural or economic.  (emphasis added -ed.)

Well, the news is that this has pretty much already happened with lots of non-profits.  Many derive the overwhelming portion of their income from Medicare/Medicaid, or from state government grants and purchases of their services.  Here in Colorado, for instance, Jewish Family Services reported in 2007 that roughly $2.5 million of $7 million in contributions, or 36%, came from government grants.  Compare this with something like the Gathering Place, a drop-in shelter for homeless women, which received no direct government aid, and whose government purchases amounted to less than 10% of total income.  No wonder organizations like JFS were lined up around the block to support Referendum C.

The degree to which these non-profits have become courtiers, to which they’ve essentially outsourced their fundraising operations to governments and a couple of lobbyists, is probably largely unknown to the public.  It’s a whole new dependency class.  If these guys get their way, there will soon be another effort to raise taxes, this time in the middle of a recession.  And once again, the government-dependent non-profits will be complaining about how their critical services are about to be cut.

As Arnold Kling has pointed out, the ability to exit is ultimately more important than the ability to vote.  The reason these non-profits are more responsive in the first place is that failure has consequences in their ability to fundraise.

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