Monday, August 09, 2010

Quotes of the day

... should current economic weakness spread beyond what now appears likely, having a tax cut in place may, in fact, do noticeable good.--Alan Greenspan, 2001

They should follow the law and let [Bush's tax cuts] lapse.--Alan Greenspan, 2010

As a non-state-employee taxpayer, your stock market beta is double. If stocks go down, not only does the value of your portfolio go down, but your future taxes to pay state pensions go up. The state does not make up your losses. But you make up the state's.--Arnold Kling

... the relentless approach of age, infirmity, and death assumes a greater and greater reality and presence of mind as one ages. Most young people below the age of 30 simply cannot comprehend—on a visceral, emotional level—the ineluctable fact of their approaching decrepitude and eventual obliteration. This lurking thought grows slowly in one's mind as one ages, hiding in the shadows but never forgotten, and it begins to affect almost every aspect of one's behavior. For men, fear of death can make one grasp at youth, and excitement, and beauty in a desperate subconscious bid to stave off the Reaper.--Epicurean Dealmaker

... while characters in novels may improve their lives immeasurably when they learn to stop worrying about what other people think and just be true to themselves, this is not a life path that is open to political figures.--Megan McArdle

[I don't oppose school vouchers] for any economic reason; all the economic reasons favor school vouchers. It is because what made me an American is the United States Army and the public school system.--Robert Solow

Admirable in its candor and lucidity, Solow’s reply suggests a solution to a broader conundrum. If government intervention creates an official and common frame of reference, a set of cultural focal points, a sense of togetherness and common experience, then almost any form of government intervention can help to “make us Americans.” If people see government activism as a singular way of binding society together, then they may favor any particular government intervention virtually for its own sake—whether it be government intervention in schooling, urban transit, postal services, Social Security, or anything else—because they love the way in which it makes them American.--Daniel Klein

There is a strong likelihood that the cost projections in the new trustees report under current law understate the actual future cost that Medicare will face. A strong likelihood. I've gone so far as to say that I don't think it's a reasonable projection of what will really happen.--Rick Foster, the chief actuary of Medicare

Given Americans' near-religious objections to both taste-based and statistical discrimination, it's puzzling that the law doesn't merely allow, but actively facilitates them. Most Americans, I suspect, would defend these laws with arguments that would make them cringe in other contexts. E.g. "Consumers have a right not to support countries of which they don't approve," or "Knowing what country a product comes from helps consumers make a wise choice."--Bryan Caplan

Part of my view of modern U.S. economic history is that the pre-automobile economy died in the 1930's and the automobile-oriented economy emerged in the 1950's. [David] Halberstam's description of those four businesses, which I read years ago and am now re-reading (boy, does the book suffer from horrible editing--many paragraphs have two versions of the same sentence, slightly reworded), is what put the idea into my head. I am inclined to view what is happening today as the death of the pre-Internet economy.--Arnold Kling

The minimum wage has increased steadily in the U.S. even as the average skill of a high school graduate has fallen.--Philip Greenspun

A study published this week by Dr Catherine Hakim of the London School of Economics has found that men do slightly more work than the women they live with when employment and domestic work are measured together. This is the first time I can remember in 40 years that an authoritative study on a key issue of so-called gender politics has come out with a self-evident truth that runs directly contrary to orthodox feminist ideology. The fact that it has been written and published by a woman makes it even more delightful.--Neil Lyndon

Under the long reign by the conservative Christian Democratic Union, little was done to reform the German labor market. In a reminder again of the “Nixon going to China” doctrine, the socialistic Social Democrats, led by Gerhard Schroder, introduced various labor market reforms in 2003 after being elected to power in 1998. He cut the length of the period of eligibility for unemployment compensation, extended the age of retirement and reduced retirement pensions, and made it a little easier for companies to layoff workers. In good part as a result of these policies, while Germany unemployment had been close to 10%, it fell to 7.5% prior to the onset of the recession, perhaps mainly due to these reforms. ... Let it be clear that I am not claiming that US employment and unemployment has been very sluggish in recovering to pre crisis levels mainly because the US has had a large stimulus package and large fiscal deficits. They probably have been factors, but the evidence is still too uncertain to reach such a judgment. But it is clear that the stimulus package completely failed relative to the explicit predictions of the Obama administration and its Council of Economic Advisers about what would happen to unemployment. They predicted unemployment would decline by about 1.5 percentage points from a much lower peak, whereas so far the total decline from the higher unemployment peak of 10.2% is only 0.7 percentage points. I continue to believe that the biggest factor in the sluggish employment recovery of the US is that many of the actual new and proposed anti-business legislation, as well as the large fiscal deficits, made businessmen and investors cautious about taking on new workers. These proposals and laws include the health care bill, the pro-union bias and anti-business rhetoric of Congress and the president, suggested increased taxes on higher earners, changes in anti-trust laws to be less pro-consumer, and the endlessly complicated and largely misplaced financial “reform” law. Germany, by contrast, has continued with the same coalition government headed by the mainly pro-investment, pro trade Christian Democrats. Germany surely made various mistakes during this recession, but the US has made many more.--Gary Becker

Judging from surveys of how Americans describe themselves, most of the privileged don’t feel all that privileged. Why is that? One reason is the American mythology of middle-classness. Another is geography: in a place like Manhattan, where the average apartment sells for nine hundred thousand dollars, your money doesn’t go as far. And then there’s a larger truth about how wealth is getting concentrated in this country. As the economists Thomas Piketty and Emmanuel Saez have documented, people who earn a few hundred thousand dollars a year have done much worse than people at the very top of the ladder. Between 2002 and 2007, for instance, the bottom ninety-nine per cent of incomes grew 1.3 per cent a year in real terms—while the incomes of the top one per cent grew ten per cent a year. ... Our system sets the top bracket at three hundred and seventy-five thousand dollars, with a tax rate of thirty-five per cent. (People in the second-highest bracket, starting at a hundred and seventy-two thousand dollars for individuals, pay thirty-three per cent.) This means that someone making two hundred thousand dollars a year and someone making two hundred million dollars a year pay at similar tax rates. LeBron James and LeBron James’s dentist: same difference.--James Surowiecki

If you're a journalist in a two income couple that makes $300,000 and still has to give up vacations in order to pay school tuition, it hardly seems fair that LeBron James and you are in the same tax bracket--not while you're living in less than 2000 square feet. But if you're someone who has to give up vacations in order to pay the dentist and the electric bill, this probably seems eminently fair. ... The other question is, isn't there some upper limit on tax brackets for the wealthy? When the Bush tax cuts expire, that top rate will go to 39.5%. Then there's the 2.9% Medicare tax, and the 0.9% Medicare surtax we just enacted. There are, for those living in places like New York, New Jersey, California, or DC, state and local income taxes that can add an extra 5-10% onto the tax bills. We're now well over 50% marginal rates before we've even considered things like property and sales taxes. When more of your extra dollars are going to the government than yourself, I think it's a problem, even if you're very rich. I think that has to be factored into any argument about the "fairness" of the tax system.--Megan McArdle

On the one hand, it's terrible to think that aid is keeping economies from developing--and this isn't the only such critique; there are also fears that aid acts like a "resource curse", insulating political leaders from the need to win public support for their spending, and breeding corruption. On the other hand, I'm not sure I'm quite willing to walk up to a woman dying from malnutrition to tell her that I'm sorry, we'd like to help, only unfortunately it would distort the local economy and so I'm afraid you'll need to lean into the strike zone and take one for the team. On the third hand, I'm conscious that in this scenario, I am biased towards the seen harm, rather than the unseen--I'll never identify the people who might have been pulled out of poverty if we hadn't screwed up their economy, so my tendency is to discount them. Aid is the most depressing topic in economics. I don't know how William Easterly and Jeffrey Sachs stand it.--Megan McArdle

The NYT revealed today a new way to launder contributions to Congress for purposes of influencing legislation. Corporate lobbyists help fund a chair or research institute at a university, naming it after the Congressperson they want to influence. This naturally excited the fundraising department of Aid Watch. We welcome suggestions from readers on which corporate lobbies we could suck up to for funding and which politicians can be bought honored with these funds. Right now we are conducting a search for the new Sarah Palin Professorship in Geographical Studies.--Aid Watch

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