- With both parties gearing up to battle over the debt ceiling, Republicans need to stop apologizing for spending cuts and argue for a smaller government.
- Pat Michaels sat down with Caleb Brown to talk about the influence of politics on science.
- There are many answers that Osama bin Laden’s death does not provide.
- A scalpel is more effective than a sledgehammer against terrorists.
- Please join us on Monday at 4 p.m. as Prof. Amitai Etzioni of George Washington University Law School debates Cato vice president for legal affairs Roger Pilon on the moral implication of deficits, debt and the budget battles ahead. Cato executive vice president David Boaz will be moderating. Complimentary registration is required by noon, eastern, May 6, 2011. If you can’t join us in person, we hope you can join us online.
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Want to Repeal ObamaCare? Stay On Message
Yesterday, I reluctantly dinged House Majority Leader Eric Cantor (R‑VA) and House Budget Committee chairman Paul Ryan (R‑WI) for veering off-message after bravely introducing and winning House passage of badly needed Medicare reforms. Each said ill-advised things to the media that undermined the long-term goal of Medicare reform. I even emailed some colleagues, “Why can’t they stay on-message, as they have with ObamaCare?”
As if on cue, it appears that House Ways & Means Committee chairman David Camp (R‑MI) may have outdone both Cantor and Ryan. Huffington Post reports that Camp used the word “dead” to describe the effort to repeal ObamaCare.
I know, I know, he probably only meant that repeal is dead in this Congress. Yes, yes, he was backed into it by a reporter. Yeah, he will probably push for repeal in the next Congress, just as he did in this Congress. Is Huffington Post seizing on the word dead and painting an inaccurate picture of just how much Camp really, really wants to get rid of this intolerable law? No doubt all of this is true. None of it matters one bit.
Camp is the chairman of a powerful congressional committee. He should know that’s exactly what reporters are trying to do. And he should know how to stick to the script. Rather than use his comments to signal once again how committed he is to ensuring that ObamaCare never takes full effect in 2014, he gave us a news cycle — hopefully no more than one — where the words ObamaCare, repeal, and dead appear in the same sentence.
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On Prisoner Treatment and Interrogation
More Trade, More Jobs
Our friends at the Economic Policy Institute are at it again, issuing another study this week that shows some particular trade agreement has cost X thousands of jobs over a certain number of years.
The latest target of EPI’s flawed model is the North American Free Trade Agreement. Enacted in 1994, NAFTA has created a free trade zone comprising the United States, Canada, and Mexico. According to the EPI report,
U.S. trade deficits with Mexico as of 2010 displaced production that could have supported 682,900 U.S. jobs; given the pre-NAFTA trade surplus, all of those jobs have been lost or displaced since NAFTA. This estimate of 682,900 net jobs displaced takes into account the additional jobs created by exports to Mexico.
The report’s author, Robert Scott, claims it foreshadows job losses if Congress passes pending trade agreements with South Korea, Colombia, and Panama.
The EPI model has little relevance to the real American job market. As I’ve pointed out before (here and here), its model is based on an overly narrow view of trade’s impact on the job market. Yes, some people do lose their jobs because of import competition, no news there, but trade also creates jobs through increased exports. And even if we run a trade deficit with a country such as China or Mexico, jobs are also being created by the net inflow of foreign capital, which spurs domestic job creation through lower interest rates and direct investment. The money we save from lower-priced imports also liberates consumer dollars to fuel growth elsewhere in our economy, and cuts costs for import-consuming businesses, boosting their sales and employment.
Next, consider the EPI numbers on their face. Those alleged 682,900 net jobs lost came over a 16-year period. That’s a bit more than 40,000 jobs lost per year. That is a drop in the bucket in a dynamic economy like ours that creates and eliminates about 15 million jobs each year. Even when unemployment is low, 300,000 or more Americans file for unemployment insurance in a typical week. So even if true, the EPI job loss numbers amount to less than one day’s worth of job displacement for the whole year.
When we look at the actual job market performance since NAFTA was enacted, the irrelevance of the EPI model becomes plain. In the first five years after NAFTA’s passage, 1994–98, when we could have expected it to have the most impact, the U.S. economy ADDED a net 15 million new jobs, including 700,000 manufacturing jobs. In the 16 years since its passage, despite two recessions, our economy still employs 20 million more workers than it did the year before NAFTA passed. (Check out the employment tables in the latest Economic Report of the President.)
In my own April 2011 study of trade and the economy, “The Trade-Balance Creed,” I found that civilian employment in the past 30 years has actually grown quite a bit faster during periods of rising trade deficits compared to periods of declining deficits, just the opposite of what EPI’s distorted model would predict.
Drinking Away Your Constitutional Problems
Santa Clara law professor Brad Joondeph, who runs the very helpful — as a primary document aggregator for all the Obamacare cases — ACA Litigation Blog, thinks he’s stumbled onto something :
So after reading my roughly 500th ACA-litigation-related brief, motion, or filing of some sort, I think I have gotten a little punchy. But it occurs to me that a a great new drinking game for those ACA litigation buffs who sit around on Friday nights drinking beers — a huge cohort, I am sure — would be to read aloud briefs filed by the challengers, and take turns drinking when the word “unprecedented” is used.
Indeed, the argument that there is no Supreme Court precedent sanctioning the assertion of power the government claims — that the individual mandate is, quite literally, unprecedented — goes back to the earliest articulated constitutional arguments against Obamacare, particularly by the “intellectual godfather” of the legal challenges. I can tell you that Cato’s latest Obamacare brief, which we’ll be filing in the Eleventh Circuit — the Florida-led 26-state case — next week, uses the word three times. (We also use “novel.”)
The drinking game that Joondeph proposes, however, is not, um, unprecedented. Josh Blackman has been talking about it incessantly at least since our time writing about the Privileges or Immunities Clause. He even blogged about it last August!
I would suggest that Brad and Josh play the “unprecedented” drinking game to settle the score once and for all, but alas Josh doesn’t drink. Maybe I should step in for him; if I can bet Yale law professor Akhil Amar $100 on the outcome of the litigation, I can certainly do this.
For other connections between booze and the Commerce Clause, see my recent post on the (unfortunately not unprecedented) Care Act.
Yes, Cut Medicaid – It Won’t Be as Painful as You Think
That’s the title of my latest Kaiser Health News column. An excerpt:
The budget blueprint passed last month by House Republicans… would encourage states to cut their Medicaid rolls. As it should: the evidence shows there are millions of people enrolling in Medicaid who don’t need taxpayer subsidies to obtain coverage, and experience shows that Medicaid cuts will not be as painful as you might think.…
The president and the Republicans agree that balancing the federal budget is impossible without restraining Medicaid spending. That will be much easier, Mr. President, if we could stop pretending that every single Medicaid enrollee needs to be there.
Read the whole thing here.
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Are Higher House Prices Better for the Real Estate Industry?
I’ve long suspected that the primary reason much of the residential real estate industry supports subsidies such as Fannie Mae or the mortgage interest deduction is in the belief that such subsidies increase house prices. And when your income is commission based, higher prices do indeed sound pretty good from the perspective of the industry. Of course, we also hear that the industry supports these subsidies because they want everyone to be a homeowner, wave the flag and have plenty of apple pie. Yes, those seemingly industry subsidies are really for all of us. Perhaps the best one I heard recently was that homeownership subsidies promoted self-reliance. Here I was thinking subsidies are the opposite of self-reliance. Silly me.
But if the price of a good increases, especially relative to income, it can increasingly become unaffordable, with the result that few sales take place. No sales, no commission income. I think even the industry folks would agree something like a $2 million median house price, given current incomes, would be bad for business. So what is the impact of high prices, relative to income, on market turnover?
The chart below the jump presents a scatter diagram of the ratio of median house price to median household income by annual home sales as a percent of the occupied housing stock by metro area. 490 U.S. cities represented from the 2005 American Community Survey, conducted by the Census Bureau.
It is generally considered that a house price to income ratio between 3 and 4 is a balanced, healthy market. Some of this is driven by consumer preferences; part by mortgage underwriting standards. Fortunately, even in the bubble year of 2005, about 360 of the 490 cities examined had price to income ratios below 4. But this sample does include small cities like Enterprise, Alabama. Within these balanced cities the relationship between affordability (price/income) to turnover is slightly positive, almost zero, implying that relatively small price increase in affordable housing markets do not have detrimental impacts on sales activity.
When we look at markets with price to income ratios above 4, the highest being Key West, FL, where median home prices were 14 times median household income, we see this relationship become much stronger and negative (-.31). Unsurprisingly when housing markets become increasingly unaffordable, sales volumes fall. These markets are also likely to be supply-constrained, so that subsidies that are demand based, like those that are mortgage based, will largely push up prices.
The point here is to be careful what you ask for. When subsidies end up pushing prices above the price to income ratio of 4, sales turnover tends to fall. So what extra one makes on price, you might more than lose on volume.