Must-Read: Dan Walters: Finally, War on Prop. 13 Breaks Out

Must-Read: The truly extraordinary thing about California’s Proposition 13 was not that it nearly froze residential real estate taxes as long as residents owned the property, but that it nearly froze commercial and industrial real estate taxes essentially forever. I do not understand how that provision made it into Jarvis-Gann in the first place–or how it has survived in California for so long…

Dan Walters: Finally, war on Prop. 13 breaks out: “A political war over taxes that’s been brewing for nearly four decades finally erupted Thursday–maybe…

…A union-led coalition of liberal groups launched a campaign to change Proposition 13, the iconic 1978 property tax limit, seeking billions more in revenue from commercial and industrial property owners. The coalition, Make It Fair, declared its intention to place a ‘split roll’ measure on the 2016 ballot, keeping Proposition 13’s limits in place for homes, residential rental properties and farms, but allowing upward revisions in taxable values on other properties. The ‘maybe’ qualifier is that… sponsors… indicated it would be dropped if many of the same groups decide to ask voters to extend Proposition 30, the temporary sales and income tax hike approved in 2012…

“Establishing” Health Exchanges: Ways Out of the King v. Burwell Trap

The trouble that is the King v. Burwell case arises because of one sub-sub-section of the law which says “established by the state” rather than “established in the state” or “established for the state”. The purpose of “established by the state” in its context:

…the monthly premiums for such month for 1 or more qualified health plans offered in the individual market within a State which cover the taxpayer, the taxpayer’s spouse, or any dependent (as defined in section 152) of the taxpayer and which were enrolled in through an Exchange established by the State under 1311…

is not to keep subsidies from being paid to those who purchase insurance on the federal exchange but rather to restrict subsidies to health plans purchased by residents of California from the California exchange–rather than, say, from the Nevada exchange. But it says “by” rather than “in” or “for”. And misreading has its day. (Never mind that elsewhere in the law it says that if the state takes no action the federal government shall establish “such exchange”–where “such exchange” is that very exchange established by the state under 1311: you have to misread the “by” and not read the “such” at all to make the plaintiff argument.

Now comes Ann Marie Marciarille to focus on “establish”. As Nicholas Bagley writes:

Nick Bagley: King v. Burwell: “As the ACA uses it…

‘establish’ means ‘[t]o make or form; to bring about or into existence’…

And every single state has taken steps to bring its state exchange into existence and make it function, one example of which being where exchange coverage and state Medicaid coverage meet:

Ann Marie Marciarille: Missouri State of Mind: Pennsylvania Keeps the Door Open: “It is official, Pennsylvania has given notice…

…that it may choose to switch to a state operated exchange, should that be necessary to preserve subsidies after a potential ruling adverse to these subsidies through the federally facilitated exchanges under King v. Burwell. The letter leaves open whether or not this is something Pennsylvania will do as well as the terms of a potential jointly operated exchange. Of course, all exchanges (federal or state) are jointly operated in the functional sense, since the back-of-the-house operations have to merge state-specific Medicaid enrollment standards with nationalized-standardized federally-operated exchange applications and subsidies.

On one level, I just don’t get it. Every exchange, to a certain extent, is state operated and federally operated…. Post-Burwell… other states [could] announce and then implement hybrid exchanges.  But isn’t that what they already are functionally?

Must-Read: Ashok Rao: How Do Net International Positions Matter

Must-Read: Where the smart young whippersnapper Ashok Rao shies at the jump here is in failing to specify where he thinks the market failure is, and how to correct it. Is the demand by foreigners for safe dollar-denominated assets an improper one? And why today is it only the U.S. government–rather than, say, Apple or Wal-Mart–that can tap this funding source? Or is there a deeper problem in that Apple and Wal-Mart could tap this funding source but really do not want to–that they already have all the capital and funding that they think they can use? These are the questions that people are worrying…

Ashok Rao: How Do Net International Positions Matter?: “Capital is supposed to flow from rich countries to poor countries…

…to finance development abroad, just like water should roll down a hill. Clearly that doesn’t square with the incredible amounts of cheap cash flowing into America, and the safe-asset squeeze (whether something that’s an actual market reality, or something that is an artifact of mercantilist/crisis-weary state policy) has a lot to do with it…. Foreign investors… are largely official, and have a single-minded interest in preventing the 1999 sort of debacle where a shortage of dollars resulted in… havoc…. American investors are almost exclusively private corporations that don’t have a shortage of dollar-assets, that almost never borrow in a foreign currency, and live in a world of really, really cheap basis trades. So private, social, and market valuations diverge…. The more simple description of the entire argument is that US treasuries provide a liquidity service to foreign governments and there is an inefficient shortage thereof. Or, even simpler, the US is a classical bank earning a profit on the spread between its borrowing and lending rates. Sometimes returns paint a more useful picture than valuations.

Must-Read: Jesse Cross-Call: Medicaid Expansion Is Producing Large Gains in Health Coverage and Saving States Money

Must-Read: Jesse Cross-Call: Medicaid Expansion Is Producing Large Gains in Health Coverage and Saving States Money: “Among the states that have documented significant budget savings from the Medicaid expansion are:

Arkansas: Medicaid expansion… cumulative savings of nearly $120 million by the end of fiscal year 2015, includ[ing] $72.9 million in savings within the Arkansas Medicaid program from moving people who previously received care under specialized Medicaid categories… into the expansion’s new eligibility group, for which the federal government pays the full cost…. The state expects to collect $34.4 million in new revenue… from taxes… producing a total gain for the state budget of over $150 million in 18 months.

Kentucky: Medicaid expansion saved Kentucky $25.8 million in fiscal year 2014, and is expected to lead to another $83.1 million in savings in fiscal year 2015… $30… on behavioral health programs, $16.4 million from spending less on inpatient hospital costs for prisoners, and $16.4 million from moving people who previously received Medicaid coverage through a medically needy spend-down program into the expansion’s new eligibility group.

Michigan: Medicaid expansion saved the state $180 million in fiscal year 2014 and is projected to save Michigan $190 million in the state’s current fiscal year…. In addition, the state projects two-year savings of $19.2 million in its corrections system, as the federal government now covers the costs of prisoners hospitalized outside the corrections system, as a result of the Medicaid expansion.

New Jersey: As a result of the Medicaid expansion, Governor Chris Christie’s fiscal year 2016 budget proposal spends $148 million less on charity care and $417 million less on beneficiaries previously covered at the state’s regular matching rate…. The state expects the latter category to result in nearly $3 billion in savings to the state through 2020.

New Mexico: New Mexico will save $60 million from 2014 to 2016 by transitioning low-income adults who were receiving Medicaid coverage through a waiver prior to health reform into the expansion eligibility group… an additional $15.3 million in the current fiscal year because of lower demand for state-funded behavioral health…. The state also collected $30 million in new revenue in 2014 and expects to collect another $30 million this year from its premium taxes….

Washington: Medicaid expansion saved Washington $105.5 million in fiscal year 2014, and the state expects to save an additional $286.6 million in fiscal year 2015… $64.6 million in reduced behavioral health… $147.9 million from transferring adults awaiting a disability determination for Supplemental Security Income… to Medicaid… [plus] a $33.9 million increase in premium tax revenue in fiscal year 2015….

Must-Read: Joshua Brown: The Magnificent Five: Some Ridiculously Kind Words from Tren Griffin

Must-Read: Joshua Brown: The Magnificent Five: Some Ridiculously Kind Words from Tren Griffin: “I’m literally blushing at some praise from Tren Griffin…

…What I like best about Ben Carlson is that he is young and very savvy about not only investing but the tools of social and other forms of modern media like Twitter and Tumblr. Too many of the people I write about who are able to teach others about investing are, well, either old or very old. People like Ben Carlson, Patrick O’Shaughnessy, Morgan Housel, James Osborne and Josh Brown (the Magnificent Five) represent the next generation in financial writing. They are fearless in confronting financial advice poseurs of all kinds. That they all are moving swiftly into media formats like video makes me hopeful they can successfully combat more of the hucksters pushing ‘easy wealth in seven steps’ style schemes. I am rooting for them, especially when they go after people like constantly self-promoting old coots flogging their financial flim-flams that hurt ordinary investors….

The coolest thing about this is that I know the other four guys personally and have hung out with them offline. They mean what they say and are the real deal. I’m totally flattered to be associated with this crew.

The Brookings-Okun Event: “As Our Case Is New, We Think Anew, and Act Anew…”

The Brookings-Okun Event

UPDATE: Oh, excellent! Here is the transcript.

Heather Boushey and Larry Summers posted their prepared thoughts for last week’s Brookings-Okumn event. They are very good, and are well worth reading. The others–Wessel, Mankiw, Kearney, Wolfers–alas, did not. I am told that they were very good in the panel discussion. But where am I going to find the hour and a half to listen to it? And there appears to be no transcript. Serious bummer.

The most important point to emphasize, of course, is that Arthur Okun wrote his Equality and Efficiency: The Big Tradeoff in an America in which the top 0.01% got 1% of the income and the top 0.01-1% got 9% of the income, while today we live in America in which the top 0.01% gets 6% of the income and the top 0.01-1% got 18% of the income.

Income Inequality is Getting Lots of Press Today The Economic Populist

It was not completely implausible to argue back in the early 1970s that the United States had, for white guys and only for white guys, gone over the top of the redistributional Laffer curve and that further increases in social insurance no longer both raised the level of material prosperity and increased the rate of economic growth. Now, however, the claim that we are on the far side of some redistributional Laffer curve is ludicrous–our rich today are, in bulk and on average, not an entrepreneurial minority who are insufficiently incentivized but rather a rent-extracting minority who hobble the rest of us with their control over the levers of political-economic power.

Heather Boushey: Today’s Trade-Off Isn’t Equality or Efficiency: “Okun… examines a United States where… the most pressing question was how much equality was enough….

…In the 40 years since… the bottom 90 percent saw their income grow by an annual rate of ¼ of 1 percent… while the top 1 percent saw theirs grow by 4.4 percent…. Okun pondered a trade-off between equality and efficiency just when those at the top of the wealth and income ladder began hauling off all the gains of economic growth…. When Okun was writing, the typical CEO earned about 25 times the typical worker. How could he know that today, they earn nearly 300 times the typical worker?… It’s hard not to see Okun’s legacy as the problem rather than the solution. His view… that the real problem was ensuring that we didn’t veer too far into ensuring equality steered us in the wrong direction…

Lawrence H. Summers: Okun’s Equality and Efficiency: “Rereading the book in preparation for writing a new forward for it, I was struck at one level by how well it reads today…

…I suspect he would have rejected the terms of the debate slated to follow these remarks…. He would have recognized that there were likely limits on the amount of inequality reduction that could be achieved with policies that also accelerated growth. And so he would have recognized that as usual in economics there are tradeoffs…. So his balanced advice would have been to first implement policies that increase growth while increasing equality, and then consider those measures that involve trading off efficiency and equality….

For many years now, it has been the case that the income distribution has been growing much more unequal… the share of… the top 1% has risen… from about 8%… to around 20 percent…. With inequality higher and progressivity lower the case for progressive reform is strong…. Concern with issues relating to the cost of capital and the adverse effects of taxes in increasing it has been very legitimate at points in the past…. [But] at present… [with] zero interest rates… [and] corporate profits… at record levels, there needs to be much… more concern with the distributional aspects of capital taxation…. Okun recognizes the minimum wage can be dangerously high and excessively strong unions can do damage if jobs are taken away and inflation is promoted. These risks are remote…. The financial sector has shown itself to be less of a source of diversification and stability and more of a source of instability than most judged a generation ago…. The simultaneous emergence of high profits and low interest rates raises the question of whether monopoly power is on the increase. So the question of regulatory actions looms much larger…. Abraham Lincoln had it right when he said “As our case is new, so we think anew, and act anew.”

UPDATE:

JUSTIN WOLFERS: “I’m willing to stipulate there’s an efficiency/equity tradeoff…

…I think Okun’s focus on it is the result of the great confidence of economists of the day 50 years ago that we lived in an economy where we were somewhat close to that frontier. I think if you thought about today’s politics, you would be less confident. If you looked at the policy development subsequently, you would be less confident. I also think the scope of economics has changed now from a discipline that’s far more infused in both sociology and political science, and I think that pushes you to look beyond tax and transfer policy…. If you turn the question around and said is the implication of Okun that the pie needs to be smaller in order for each of us to have more equal slices, I think the answer is certainly not….

Discrimination. The effect of emancipation of women over the past 50 years has been one of the most important engines of economic growth, and of course, reducing inequality within households and within families. We have seen in some industries a rise in monopoly… rents…. Much of the American growth miracle was the result of people going to school. Thirty years ago, American men decided to stop going to school, so we haven’t had increases in educational attainment in several decades. American women, I think, have been somewhat more sensible…. When you look at pictures of Baltimore and you look at pictures of Ferguson, you see neighborhoods where investments could surely help both growth and inequality. The problem with mass incarceration was not on the agenda in Okun’s day, but surely is a huge issue in terms of both inequality and growth. We have seen the decline of the American Union movement. Unions certainly helped hold inequality down, the more functional among them could also help raise productivity. The less functional… maybe not…

DAVID WESSEL: “It seems to me it is striking when you read Okun’s book and he describes…

…inequality 40 years…. Okun writes that the richest one percent of American families have about a third of all the wealth, and the bottom half hold about five percent…. [Today] the richest one percent have over 40 percent of the wealth, and the bottom half have only one percent. Doesn’t that suggest there is a chance we are farther from the frontier?…

After the Social Studies Problematic?

Suppose, for a moment, you were teaching your college students social theory—but that you were back in 1750.

Who would you want your students to have at hand to read?

We will not do the boring think of confining you to assigning solely authors who had written before 1750. Assume that the appropriate time machine is available. But, equally, we will not do the boring thing of allowing you to assign historical accounts of what in 1750 was then the future. This is an intellectual exercise: we are interested in analytical perspectives on societies and how they work.

The century after 1750 is, of course, the century of the Democratic Revolution and of the Industrial Revolution. It also contains the first stirrings of racial equality, or at least of anti-slavery. It contains the first reduction in social pressure on women to focus on reproduction and household production only. And it contains the first descents of theology: the first intrusions into this world of the apocalyptic eschatological utopianism that had been sought by prayer more than political action—the first intrusions of what my teacher Jeff Weintraub calls “the total conception of virtue”.

What five thinkers would best prepare students as of 1750 to analyze the century that was to come?

I would say:

  • Karl Marx for the Industrial Revolution;
  • John Stuart Mill fill for human equality, and the coming of democracy as a political phenomenon;
  • Alexis de Tocqueville for democracy as a social cultural phenomenon, both the persistence and the decline of the old régimes;
  • Emile Durkheim for collective effervescence; and
  • Adam Smith for the market economy.

Now let’s move forward a century to 1850. Who are the best five theorists to read to prepare students for the Belle Époque and then the Age of Horrors that was to follow? In my estimation, at least, John Maynard Keynes and Karl Polanyi are the most obvious choices to cover all of the coming of the globalized economy, the initiation of modern economic growth, and the dilemmas of political-economic management. After that, however, it gets much harder. There are many possibilities—and they all seem to me to be grossly inadequate to the task. I am tempted to go with Mill and Durkheim and Tocqueville again. But in the final analysis it seems to me that they miss too much. I choose Max Weber on modes of domination. I choose Vladimir Lenin over Karl Marx, for what one wants is for people to understand not the empyrean theories so much as the ideas that moved people to struggle, kill, and die. And I choose Hannah Arendt. All of these are very contestable, And I contest them in my own mind every day, even as I write this.

Now let us shorten our view somewhat.

Let us move ahead to 1950. And let us try to think not who would be most useful for analyzing 1950-2050 but merely for 1950-2015—for that is all that we have seen. We do know what was taught in social theory in 1950. What was taught is what I call the “Social Studies problematic”: Mill, Marx, Weber, Durkheim, with others (Freud, Foucault, Tocqueville, Smith, pick your favorite) added to that core. But that was what was taught, not what should have been taught. What should have been taught would have been theorists who would have enabled students to analyze and grapple with:

  • Les Trente Glorieuses;
  • The ossification and then collapse of the Soviet Empire;
  • Decolonization, and the economic rise of East Asia;
  • The coming of the Neoliberal Era and then of the Second Gilded Age.
  • The conspicuous failure to resolve or even to balance off the dilemmas of political-economic management; and
  • Equality and diversity.

Who would have been the best five to assign back in 1950, assuming that you had at your disposal then the proper time machine to pull the books off of today’s library shelves?

And then, after you have answered that question to your satisfaction, the kicker. Over at http://io9.com I see:

Robert Charles Wilson: “I’m tempted to repeat the old adage that science fiction doesn’t predict…

…it speculates. But science fiction does make one prediction that always comes true, and it’s the deep Heraclitian truth at the heart of the genre: change happens. Change is inevitable. It devours everything familiar and builds strange new structures on the quicksand of contingency. Step in the same river twice? Kid, we don’t even have that river anymore. We paved it over back when the rain stopped falling.

So what might be new and different in the next 10 years? We can start by asking what’s already beginning to feel old. And what feels old (to me) is our political and economic discourse. Here we stand, on the brink of a global climate catastrophe and embedded in an emerging oligarchy armed with a surveillance apparatus of unprecedented reach and power, discussing politics in terms Victorian philosophers would have recognized. There is a tinderbox of unmet expectations and frustrated idealism out there, and a genuinely captivating new political or economic idea—good or bad—could start a global conflagration.

How might such an idea arise? I would point at recent progress in cognitive science. We’re standing on the verge of a profound new understanding of the one subject Enlightenment philosophy could never really get a grip on: human nature. As we come to know ourselves better, we’ll begin to understand our political and social behavior differently—and, inevitably, we’ll find ways of manipulating and modifying that behavior. And how will that play out? Beats me. I’m just a science-fiction writer. But it invites some interesting speculation.

It is, I think, not 10 years but 50. But the question is very urgent: who are the five thinkers who should head social theory courses’ syllabuses today—and if those five have not yet written their books, what do their books say?

Things to Read at Lunchtime on May 11, 2015

Must- and Should-Reads:

Might Like to Be Aware of:

Must-Read: David Frum: British Election: What Republicans Can Learn From David Cameron

Must-Read: David Frum: British Election: What Republicans Can Learn From David Cameron: “Center-right parties in Australia, Canada, New Zealand, and the United Kingdom…

…have all made peace with government guarantees of healthcare for all… accept that universal health coverage in some form has joined old-age pensions and unemployment insurance in the armature of an advanced modern economy…. None seek to police women’s sexual behavior or to impose restrictions on women’s reproductive choices. All have accepted gay equality… comfortable with racial inclusion and competitive with ethnic-minority voters…. The parties are all unapologetically nationalist…. The parties are tough on terrorism, extremism, and international disorder…. Unlike their U.S. counterparts, these conservatives don’t fetishize the music, fashion, or religious practices of some of their voters in a way that prevents them from reaching all of their potential voters…