The chief charge against the Fed is that former chairman Alan Greenspan kept interest rates at very low levels far longer than necessary, which in turn sparked the bubble in housing prices and mortgage lending. Looking back, the Fed's behavior does seem bizarre. It kept the key Federal funds rate at 2 percent or lower from November 2001 right through to the end of 2004.

Those rate decisions showed that Greenspan had chosen to use the housing market as his main instrument to prop up the economy after the 9/11 attacks. Using monetary policy to encourage a rise in home prices would be a highly unorthodox move for a central bank. But evidence suggests that Greenspan was overly keen to use housing for exactly that.

In 2002 he called mortgage markets a "powerful stabilizing force" because they allowed people to extract equity from their homes, and in 2004 he said that homeowners should consider using adjustable-rate mortgages to save on interest and prepayment costs. In 2005, when a record $625 billion in subprime mortgages were made, Greenspan gave a speech that blessed the creation of new loan products, including subprime home loans.

As a result, Greenspan has lost a lot of favor in Washington. In March, Senator Christopher Dodd, chairman of the Senate Banking Committee, laid much of the blame for the current crisis at the feet of Greenspan's Fed, saying that it "seemed to encourage the development and use of adjustable-rate mortgages that today are defaulting and going into foreclosure at record rates."

America’s uninsured are in the news again, by virtue of a Census Bureau report released late last month showing that, as The Washington Post put it, “The nation's poverty rate declined last year for the first time this decade, but the number of Americans without health insurance rose to a record 47 million,” or to about 16 percent of the population...

Absent from this story, however, is any meaningful breakdown that helps us understand just who is uninsured, for how long, and why. Also absent is the fact that the total of 47 million is disputed.

...According to Census data, a little less than 46.6 million persons in America are uninsured, not 47 million. By rounding up to the next whole number, it does bring that figure up to 47 million, but it also makes the problem seem just a little worse than it really is...

But the Census data also show that 9.5 million of the uninsured listed themselves as “not a citizen”: they aren’t Americans. The total now drops to 37.1 million, about 12 percent of the population.

The Census report also shows that there are 8.3 million uninsured people who make between $50,000 and $74,999 per year and 8.74 million who make more than $75,000 a year. That’s roughly 17 million people who ought to be able to “afford” health insurance. If we are concerned about the number of Americans that cannot afford health insurance, should we really count those that can afford it?

...So, 37.1, minus 8.3, minus 8.7, now leaves us with 20.1 million people without health insurance, which is approximately seven percent of the population, a far cry from the 16 percent we have been led to believe by the socialized medicine lobby and the compliant media, who either support socialized medicine or are too lazy to actually examine these claims.

...If we believe the Kaiser Family Foundation, which is a frequent source for the mainstream media, Americans who do not qualify for current government programs and who make less than $50,000 a year total somewhere between 13.9 million and 8.2 million, no more than 5 percent of the population. Furthermore, according to the Congressional Budget Office, 45 percent of uninsured people will be uninsured for less than four months.

Which brings us to the ultimate question: Does it make any sense to destroy a health care system that 5 out of 100 people do not have adequate access to?

Update... Robert Ferguson adds,

You could have been even more effective by noting that the real issue is the percentage of the population that desires access to healthcare but does not have it. The fact that emergency room healthcare is available at approximately no dollar cost (if you know how to play the system) reduces the percentage to approximately zero.

Update [9/8/07]... Reader Rich Sinda notes,

Chait might actually be on to something here. If the government taxes at 100% and then uses force and coercion to force people to work, the Laffer curve would be incorrect. I'm surprised he used the Soviet Union as an example, he could have just pointed to slavery. Though I don't know if the Laffer curve included a 100% loss of freedom to go along with the 100% tax rate. I know they are close to the same thing but not exactly. The Laffer curve describes a world where I have alternatives like leave the country, black markets ect...

I have read Chait before and he has a hard time with the issue of freedom. Many of us support Supply Side economics not just because of the potential gains, but because many of us value freedom even more than the fruits of our labors. I'm sure that many of us would sacrifice our wealth rather than live in slavery. I'm sure even more of us would sacrifice some of our wealth to keep from treading close to it.

This war was entirely unnecessary, as testified to by your own reports. And among the most capable of those from your own side who speak to you on this topic and on the manufacturing of public opinion is Noam Chomsky, who spoke sober words of advice prior to the war, but the leader of Texas doesn't like those who give advice... It is time for humankind to know that talk of the rights of man and freedom are lies produced by the White House and its allies in Europe to deceive humans, take control of their destinies and subjugate them...

Those with real power and influence are those with the most capital...In fact, the life of all of mankind is in danger because of the global warming resulting to a large degree from the emissions of the factories of the major corporations, yet despite that, the representative of these corporations in the White House insists on not observing the Kyoto accord...

This is why I tell you: as you liberated yourselves before from the slavery of monks, kings, and feudalism, you should liberate yourselves from the deception, shackles and attrition of the capitalist system.

For every three dollars they give away, the federal government typically gives up a dollar or more in tax revenue, because of the charitable tax deduction and by not collecting estate taxes...

The charitable deduction cost the government $40 billion in lost tax revenue last year, according to the Joint Committee on Taxation, more than the government spends altogether on managing public lands, protecting the environment and developing new energy sources.

Rob Reich, an assistant professor of political science and ethics in society at Stanford, goes so far as to say that the tax code promotes inequities through the breaks it provides for charitable giving.

As the title leads one to expect, it is full of name-calling. Chait (who is not a trained economist) calls those who advocate supply-side economics "extremists," "greedy," "possibly insane," and much more We are reminded by Chait (who is not a trained economist) that two of supply-side economics' leading lights, Jude Wanniski and George Gilder, are not trained economists. We are reminded that George H. W. Bush (who is not a trained economist), a conservative whose opinion liberal Chait (who is not a trained economist) would never trust, except in this one instance in which Bush's opinion counts because it agrees with that of Chait (who is not a trained economist), once called supply-side economics "voodoo economics." Chait (who is not a trained economist) chooses not to remind us that Robert E. Lucas, Jr. (who is a Nobel Prize-winning economist) once wrote that "The supply-side economists...have delivered the largest genuinely free lunch I have seen in 25 years in this business, and I believe we would have a better society if we followed their advice." Chait (who is not a trained economist, and who wrote about unrelated topics before he wrote about supply-side economics) reminds us that Gilder once wrote about unrelated topics before he wrote about supply-side economics, and became rather vain during the tech bubble of 1999-2000 (though that has nothing to do with supply-side economics). We are reminded that Wanniski once supported Louis Farrakhan (though that has nothing to do with supply-side economics). Chait (who is not a trained economist) fails to mention to the liberal audience for which his article is intended that Wanniski bitterly opposed the US invasion of Iraq (though that has nothing to do with supply-side economics, it would count in his favor).

Chait (who is not a trained economist) acknowledges that the Laffer Curve is "correct in theory." But he faults Dick Cheney for not pointing out in 1974, when the Curve was shown to him, that "there was no evidence that the U.S. income tax was on the downward slope of the curve--that is, that rates were then high enough that tax cuts would produce higher revenue." Yet a few paragraphs later, Chait (who is not a trained economist) states that "there have been periods in American history when, nearly any contemporary economist would agree, top tax rates were too high, such as the several decades after World War II." If Chait (who is not a trained economist) were a trained economist, he would realize that the "several decades after World War II" takes one up to 1974, the year in which he says ""there was no evidence" that tax rates were too high.

Thanks to several readers who sent links to this. I'll be writing more on it later.

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Wednesday, September 05, 2007

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