Archives: 07/2016

The Six Most Important Takeaways from CBO’s New Long-Run Fiscal Forecast

The Congressional Budget Office has just released the 2016 version of its Long-Term Budget Outlook.

It’s filled with all sorts of interesting data if you’re a budget wonk (and a bit of sloppy analysis if you’re an economist).

If you’re a normal person and don’t want to wade through 118 pages, you’ll be happy to know I’ve taken on that task.

And I’ve grabbed the six most important images from the report.

First, and most important, we have a very important admission from CBO that the long-run issue of ever-rising red ink is completely the result of spending growing too fast. I’ve helpfully underlined that portion of Figure 1-2.

And if you want to know the underlying details, here’s Figure 1-4 from the report.

Once again, I’ve highlighted the most important portions. On the left side of Figure 1-4, you’ll see that the health entitlements are the main problem, growing so fast that they outpace even the rapid growth of income taxation. And on the right side, you’ll see confirmation that our fiscal challenge is the growing burden of federal spending, exacerbated by a rising tax burden.

And if you want more detail on health spending, Figure 3-3 confirms what every sensible person suspected, which is that Obamacare did not flatten the cost curve of health spending.

Medicare, Medicaid, Obamacare, and other government health entitlements are projected to consume ever-larger chunks of economic output.

Now let’s turn to the revenue side of the budget.

Figure 5-1 is important because it shows that the tax burden will automatically climb, even without any of the class-warfare tax hikes advocated by Hillary Clinton.

And what this also means is that more than 100 percent of our long-run fiscal challenge is caused by excessive government spending (and the Obama White House also has confessed this is true).

Let’s close with two additional charts.

We’ll start with Figure 8-1, which shows that things are getting worse rather than better. This year’s forecast shows a big jump in long-run red ink.

There are several reasons for this deterioration, including sub-par economic performance, failure to comply with spending caps, and adoption of new fiscal burdens.

The bottom line is that we’re becoming more like Greece at a faster pace.

Last but not least, here’s a chart that underscores why our healthcare system is such a mess.

Figure 3-1 shows that consumers directly finance only 11 percent of their health care, which is rather compelling evidence that we have a massive government-created third-party payer problem in that sector of our economy.

Yes, this is primarily a healthcare issue, especially if you look at the economic consequences, but it’s also a fiscal issue since nearly half of all health spending is by the government.

P.S. If these charts aren’t sufficiently depressing, just imagine what they will look like in four years.

Should Police Robots Prompt a Use-of-Force Rethink?

Last week police in Dallas used an explosive attached to a robot to kill a man suspected of killing five Dallas-area police officers and wounding eleven other people, including two non-officers. The detonation-by robot is widely believed to be the first killing of its kind in the history of American policing, and has prompted much discussion and debate. In the days since the Dallas shooting, questions have been raised concerning when police should be permitted to kill citizens and if lethal use-of-force policy should change depending on the tool police officers use the kill citizens. While it is tempting to view new technologies as devices worthy of a special set of rules, policymakers should consider regulations that make police-citizen interactions safer and less frequent rather than craft new use-of-force rules for robots.

For the purposes of this post, assume that what Dallas Police Chief David Brown said about the killing of the suspect is true. According to Brown, following hours of failed negotiation “[Dallas police] saw no other option but to use our bomb robot and place a device on its extension for it to detonate where the suspect was.” He also said, “Other options would have exposed our officers to grave danger.”

Given America’s federalist system, it is appropriate that there is no universal use-of-force policy guiding this country’s roughly 18,000 law enforcement agencies. Yet police officers are generally permitted to use force in order to make a suspect comply with a lawful order or arrest. Such force is deemed excessive when it goes beyond what is necessary, although there isn’t a nationwide consensus on what is deemed excessive. For instance, in some jurisdictions chokeholds are permitted while in others they’re banned.  

Despite the diversity of American police departments, most use-of-force policies allow for a police officer to use deadly force if he reasonably believes that a suspect poses a threat of serious injury or death to the officer himself or others. The Dallas shooting suspect clearly fits into this category.

While the use of robots to kill suspects may prompt a sense of unease among some–evoking scenes from dystopian science fiction movies–there are few reasons to think that a robot should be treated differently from a handgun or sniper rifle under deadly use-of-force policy.

Could an Independent Candidate Still Make It onto the Ballot in November?

As we enter the summer of Crump (or Trinton, take your pick), many Americans are unsatisfied with the two-party oligopoly that has produced the two most unpopular presidential candidates in modern memory. While some of these will nevertheless hold their noses and pick whomever they see as the “lesser evil,” others can’t fathom pulling that proverbial lever. Of these, some are gravitating toward Gov. Gary Johnson and look forward to becoming part of what will likely be the best showing for a Libertarian Party candidate. Still, others are less enamored with Johnson so, like Bill Kristol at his rolodex, are hoping for an as-yet unnanounced candidate of whatever ideological stripe.

Not to rain on anybody’s parade, but as a lawyer – or at least someone who plays a lawyer on TV – I have to ask the question of whether this is even legally possible (forget the political and financial practicalities). During the primary season, when Donald Trump was lumbering towards the GOP nomination, we heard nervous #NeverTrumpers discussing ballot-access deadlines in Texas and elsewhere.

And indeed, the Lone Star State’s deadline for an independent candidate to collect and file the requisite signatures – 79,939 for those counting at home – came and went on May 9. We’re now past seven other states’ deadlines, with a further six being hit this week. These 13 states account for 178 of the 538 electoral votes, and include red, blue, and purple states. (There are separate, generally earlier deadlines for so-called “minor” parties, but I’ll stick to analyzing the rules for independent candidates because the logistics of having a theoretical white knight “take over” an existing third party with already-qualified ballot access are even more complicated.)

Stop Treating NATO as a Social Club

Members of NATO are meeting in Warsaw. They are dragging the U.S. back into its traditional role of guaranteeing the security of Europe, even though the continent is well able to defend itself.

The North Atlantic Treaty Organization was a necessary part of Containment, preventing the Soviet Union from dominating or conquering Western Europe. But after recovering from World War II the Europeans remained dependent on America.

NATO lost its raison d’etre once the Warsaw Pact disbanded and Soviet Union collapsed. Alliance officials eventually added “out of area” activities, that is, wars of choice irrelevant to Europe’s defense (Balkans, Libya, Mideast, Afghanistan). Such conflicts have wasted lives and resources with no benefit to Europe and America.

A Monetary Policy Primer, Part 6: The Reserve-Deposit Multiplier

In my last post in this series, I observed that an economy’s “base” money serves as the “raw material” that commercial banks and other private-market financial intermediaries employ in “producing” deposits of various kinds that can themselves serve as means of exchange.

Multiplier2If they could do so profitably, these private intermediaries would, by making their substitutes more attractive than base money itself, collectively gain possession of every dollar of base money in existence. In some past monetary arrangements, most notably that of Scotland before 1845, banks came very close to achieving this ideal, thanks to the their freedom to supply their customers with circulating paper banknotes as well as with deposits, and to the fact that between them these two substitutes could serve every purpose coins might serve, and do so more conveniently than coins themselves.

All save a handful of commercial banks today are, in contrast, able to supply deposits only, so that only base money itself can serve as currency, that is, circulating money. The extent to which national money stocks have been “privatized,” in the sense of being made up mainly of private IOUs of various kinds rather than officially-supplied base money, has been correspondingly limited, as has the extent to which private money holdings have served as a source of funding for bank loans.

Measles Vaccination Rates and Immigration

A recent outbreak of measles at the Eloy Detention Center has raised some concerns over disease and immigration.  The disease was carried in by an immigrant who was detained, allowing it to spread among some of the guards who were not vaccinated.  The Detention Center has since claimed that it vaccinates all migrants who are there and is working on getting all of its employees vaccinated.  Regardless, how much should we worry about measles brought in by unvaccinated immigrants?  Very little.

First, measles vaccines are highly effective at containing the disease.  There are two primary measles vaccinations.  The first is the MCV-1 which should be administered to children between the ages of nine months and one year.  MCV-2 vaccinations are administered later, at the age of 15 to 18 months in countries where measles actively spreads.  In countries with very few cases of measles, like the United States, the MCV-2 is optional and is not typically administered until the child begins schooling. 

Second, the nations that send immigrants tend to have high vaccination rates.  The World Health Organization (WHO) and UNICEF report the measles vaccination rates for most countries.  Figure 1 shows those rates for 2014 by major immigrant sending country.  For the MCV-1, the United States is in the middle of the pack with 92 percent coverage and no data reported for MCV-2.  The countries of El Salvador, Costa Rica, Mexico, Vietnam, Cuba, China, and South Korea all have higher MCV-1 vaccination rates than in the United States. 

Six countries do have lower vaccination rates than the United States although Indian and Filipino immigrants are more highly educated than their former countrymen, indicating that their vaccination rates are higher before beginning the immigration process.  Furthermore, legal immigrants must show they are vaccinated, meaning that the relatively low vaccination rates in some of those countries of origin don’t reflect vaccination rates among the population of immigrants here.  

However, the U.S. government’s vaccination requirements indicate that unauthorized immigrants are possibly less likely to be immunized than legal immigrants.  One way to increase vaccination rates among all immigrants, legal and illegal, would be to make green cards available to immigrants who are more likely to come unlawfully, thus guaranteeing that they are vaccinated.

 

Figure 1

MCV-1 Vaccination Rates, 2014

 

Source: WHO-UNICEF

In a more worrying trend, vaccine refusal rates are up among the native-born Americans in wealthy enclaves in California.      

Exit the Korean Imbroglio to Solve the North Korean Problem

North Korea is likely to be one of the worst headaches, or maybe nightmares, for the next president. He or she “must find a way to neuter Mr. Kim’s outlandish and frightening peril,” intoned the Washington Post.

Of course, four successive presidents have sought to do so. Yet, nothing they tried worked. Experience suggests that “neutering” Pyongyang is beyond the power of the U.S. president, at least at a cost Americans are willing to bear.

The United States should try a different approach. Washington should withdraw from the Korean vortex. Then the Democratic People’s Republic of Korea would be primarily a problem for its neighbors, who have the most at stake.