Archive

  • Cutting Back I.R.S. Enforcement Staff

    David Cay Johnston has a great piece in today's NYT reporting on the Bush administration's plan to halve the number of lawyers who audit estate tax filing. According to the article, these lawyers generate an average of more than $2,000 per hour of work in revenue for the government. This implies, that unless they are paid more than $4 million a year, the government will lose money by laying them off. --Dean Baker
  • Is the Federal Government Going Bankrupt? Maybe it Should Stop Spending Money Publishing Scare Stories

    What would the long-term federal deficit look like if the cost of the country's health care system continued to explode, so that in thirty years it costs four times as much per person as that of other rich countries? Well, if I had nothing else to do with my time, I might calculate these numbers. Fortunately, I have a busy life, so I really don't have a great deal of time for such trivia. Unfortunately, other economists are less busy and do calculate such trivia. Even more unfortunate is the fact that the St. Louis Federal Reserve Board publishes these calculations as though they are serious economics. However, the real problem is that columnists in the Times use this stuff to make the case for cutting Social Security. The story here is real simple. The U.S. has a broken health care system. If it is never fixed, it will have a devastating impact on the economy. It will also lead to severe budget problems. Any competent economist/ reporter would see these projections as another way of...
  • Bad Advice on Mortgages from the NYT

    The Sunday Times has an article reporting that many homebuyers who took out adjustable rate mortgages 3 years ago, are now refinancing to avoid higher mortgage rates. The article (actually the accompanying chart) also adds that many are refinancing with negative amortization loans, under which the outstanding principle increases through time. The chart tells readers that this could make sense, as long as house prices continue to rise. Okay, let's check the numbers here. Three years ago, homeowners were taking out adjustable rate mortgages at rates in the neighborhood of 4.5 percent. Many are now resetting at rates that are 2.0 percentage points higher, or close to 6.5 percent. The article reports that the national average for adjustable rate mortgages is now 6.28 percent. Throw in fees of 0.5 to 1.0 percent and it's hard to find the savings. In other words, simply exchanging adjustable rate mortgages will not in general save homeowners any money. Now, the point may be that homeowners...
  • Housing Appraisals: The Accounting Scandal of the Housing Bubble

    Financial bubbles breed accounting fraud. Those of us who warned of the stock bubble in the late nineties were not surprised by the Enrons and WorldComs that surfaced when the bubble deflated. Bubbles make it possible to paper over all sorts of questionable accounting or outright fraud. When the bubble deflates, these practices can no longer be hidden. The analogous problem in the housing bubble is with appraisals. The basic story is simple. Mortgage issuers make their money by issuing mortgages. Once the mortgage is issued they sell it to someone else (in many cases, the key figure is actually a broker who never holds the mortgage), so they have little interest in accurately assessing the quality of the mortgage. To get a mortgage issued, it is necessary to have a house appraised at a value that justifies the mortgage. The issuer generally chooses the appraiser. Okay, suppose an appraiser comes in with a low number and the mortgage can't then be issued? The issuer is very unhappy, no...
  • The Problems of Protectionism: Another Prescription Drug Scandal

    In econ 101, we teach that when the government intervenes in a market to keep prices above marginal costs, it will encourage all sorts of undesirable and harmful rent-seeking behavior. This is one reason that all right-thinking economists are strong opponents of tariffs and quotas that can raise the price of things like shoes, shorts, and steel by 20-30 percent above the competitive market price. Given what we teach in econ 101, it is very difficult to explain why economists are not more concerned about things like patent protection for prescription drugs. This form of protectionism raises the price of drugs by several hundred percent, or even several thousand percent, above the marginal cost of production. Drugs that would sell for $20-$30 a prescription in a competitive market often sell for $300-$500 per prescription when they have patent protection. When the government creates this sort of opportunity for large rents, economic theory tells us to expect corruption. The NYT gives an...
  • ABOUT TIME. I...

    ABOUT TIME. I finally got around to reading today's New York Times op-eds, and I have only one thing to say to Paul Krugman : "Thank you." Can we all please stop treating the neocons like serious people now? Also, in a media environment that rewards people for being provocatively wrong rather than quietly right, can we finally recognize that those who prefer attention over attentiveness are not serious actors, but clowns? Just because someone has a strong conviction, a lot of self-confidence, and some area studies knowledge does not make that person a serious thinker. It makes them dangerous. Writes Krugman : Today we call them neoconservatives, but when the first George Bush was president, those who believed that America could remake the world to its liking with a series of splendid little wars � people like Dick Cheney and Donald Rumsfeld � were known within the administration as �the crazies.� Grown-ups in both parties rejected their vision as a dangerous fantasy.... Would the...
  • JUST POSTED TAP...

    JUST POSTED TAP ONLINE: COURTS DISMISSED. So should gay marriage proponents really be grateful that the New York Court of Appeals refused to overturn the state's gay marriage ban? The argument is a familiar one: judicial interventions into hot-button public debates invariably provoke a bigger public backlash than legislative actions. Scott Lemieux says it's bunk . --The Editors
  • THE PEACE PRESIDENT....

    THE PEACE PRESIDENT. Remember this ? "The enemy declared war on us," Bush told a re-election rally in Cedar Rapids. "Nobody wants to be the war president. I want to be the peace president... The next four years will be peaceful years." Bush used the words "peace" or "peaceful" a total of 20 times. And Condi today : Secretary of State Condoleezza Rice ruled out a quick "false promise" cease-fire in the Middle East Friday and defended her decision not to meet with either Syrian or Hezbollah leaders in her upcoming visit to the region. Welcome to Orwellian America: Our "peace president" dispatches his Secretary of State to explain that America won't support a cease-fire until after Israel's invasion. It's one thing to support Israel's actions, another to offer them full protection, giving them a blank check to conduct military operations and tacitly signaling that the second Israel wants out, the United States will release the roadblocks delaying the insertion of an international...
  • JO-ANN MORT: DISPATCH...

    JO-ANN MORT: DISPATCH FROM TEL AVIV The weekend begins on Friday in Israel -- and this weekend, the war is settling in. The initial shock and feeling of righteous justification have begun to yield to wonderment about where all this is going. The change in mood is slight so far, but questions are beginning to be asked, concerns beginning to be raised -- particularly as Israeli soldiers start taking casualties. (Unlike in the United States, every soldier who dies in a war or attack is written up in the media. Often, his family is interviewed on television). People in the North -- those still there -- are growing weary of life in bomb shelters. According to Israeli press reports, 30 to 50 percent of the residents in the North have left for the short term. The Tel Aviv Hotel in which I�m staying is completely filled, largely with residents of Northern Israel. The weekend papers are filled with articles questioning where this is heading for Israel and how success and victory will be...
  • MARMOSETS FOR LIEBERMAN....

    MARMOSETS FOR LIEBERMAN. Now that angry liberal blogging crazypeople have achieved their ultimate goal of destroying civility in American politics, as demonstrated by the fact that Aunt Pittypat Kondracke has keeled over on her fainting couch, here's something that's rather gotten lost in the whole Connecticut senatorial business. Joe Lieberman , an Establishment darling and former vice-presidential candidate, is getting his withered hindquarters handed to him daily to a guy who is not exactly the second coming of Huey Long . As much as I admire the fervor of his supporters, Ned Lamont seems to me to be a perfectly amiable plutocrat, smart enough and capable, but neither overly charismatic nor particularly inspirational. (Disclaimer: I haven't been in the same room with the man yet.) He's run a good campaign that is now a great one at least partly because the opposing campaign seems to be a) on the wrong side of every issue; and b) run by marmosets. That Lieberman is now life-and-...

Pages