Debt Ceiling

Consider a person who is well to do and has good credit. He decides to semi-retire for 10 years and then buys two fast cars. The cars keep breaking down and he's not earning enough. So he borrows money to make up for it. Folks are happy to lend him because he has good prospects and he has always paid back the money he owes. Then he signs a magnanimous contract to pay regularly to a charity even though he doesn't have the money. But folks are again happy to lend him cos' he always pays back with interest. Suddenly, his accountants skip town with a lot of his cash and folks begin to question his prospects. But he still continues to pay the interest on his loans. He needs to have good credit because he's not making as much as he's spending and he needs to continue to borrow to keep things running. He tries to revive his prospects with advertising. This costs more money but he shortchanges on the advertising and his prospects continue to be bleak. But he continues to pay interest on his loans.

Then, he decides cold that he just won't borrow anymore even though he knows he doesn't have enough to pay for what he has borrowed already and his prospects for income are still bleak. He's gonna have to get out of semi-retirement, dump his cars and re-negotiate with that charity. But he'd rather cut down on his essentials than give up on those things. And if that isn't enough to pay folks back, he'll just default on his loans. His lenders are livid and stop lending him money and his credit rating tanks.

This is as close an analogy as I can conjure to explain the debt ceiling fight going on in Congress.

Update:
Apologies to Felix Salmon for the metaphor.

Vegetarianism - good for the environment!

The chart shows greenhouse gas emissions of various food items while they are being produced (green) and after production until disposal (orange). Vegetarian - good, Meat -  bad. And yikes, don't eat Lamb! [h/t Matt Yglesias].


And Kevin Drum makes a great point:

This, of course, highlights the genius of the best answer to all of this: a carbon tax. If you tax carbon, nobody makes these decisions for you. You make them for yourself just by deciding what you want to spend your money on. If a carbon tax increases the price of carbon-intensive activities, some people will prefer giving up their hot rod to going without beef. Some will prefer eating more vegetables to giving up their SUV. Some will end up doing neither and giving up something else. But whatever it is, each individual will reduce his or her carbon use in the way that's the least personally onerous. No regulation can do that and no PR campaign can do that, but a price on carbon can. And in addition to all the awesomeness of letting the market work its magic to reduce carbon emissions with minimum pain and maximum consumer surprlus, it also produces a pot of money that can be used to motivate research into better energy alternatives for everyone. We are almost literally insane for not doing this.

Beautiful!

Gimme Shelter..

And this is also from the same group.. Fantastic.

Capitalism and Healthcare

Great article with an anecdotal example of what drives the medical industry in a capitalistic environment and why this can result in more expensive and relatively poor care. Its mostly marketing!

A medical technology company is going public to generate the money it needs to advertise its products to hospital directors and insurance-company reimbursement officers. This entails significant extra expenditures for marketing, the new stocks issued to fund the marketing will ultimately have to pay dividends, banks will have to be paid to supervise the IPO that was needed to generate the funds to finance the marketing campaign (presumably charging the industry-cartel standard 7%)...and all this will have to be paid for by driving up the price the company charges to deliver its technologies. But beyond the added expense, why would anyone think that a system in which marketing plays such a large role is likely to be more effective, to lead to better treatment, than the kind of process of expert review that governs grant awards at NIH or publishing decisions at peer-reviewed journals? Why do we think that a system in which ads for Claritin are all over the subways will generate better overall health results than one where a national review board determines whether Claritin delivers treatment outcomes for some populations sufficiently superior to justify its added expense over similar generics? What do we expect from a system in which, as ProPublica reports today, body imaging companies hire telemarketers to sell random people CT scans over the phone?

Also,

The other key thing to pay attention to is who this marketing campaign was targeted at: key decision makers at providers and insurance companies. Those are the people who decide whether medical procedures get ordered. It's not patients. Patients aren't going to experience a loss of freedom or satisfaction because an expert reviewer at the Independant Payment Advisory Board makes the call as to whether a procedure is medically beneficial, rather than the corresponding bureaucrat at their insurance provider or at the for-profit clinic they're attending. Health care is different from buying shoes. Which is why it wouldn't be at all surprising if a board of 15 experts could play a major role in reducing expenses and improving care outcomes in the American medical industry.

Good read. [h/t Paul Krugman]

Return of the Oligarchy!

The chart shows the income share of the Top 5% in the United States from 1913 to 2008. Generated from this excellent and free income database site. As you can see, the income share of the rich was pretty high before and during the Great Depression. Then it tanked after the signing of the New Deal in direct response to the depression. It stayed even during the better part of the New Deal Era when the American middle class has its greatest growth. Then it started climbing again back to the those old levels when the New Deal policies were slowly dismantled.

Chart of the day

The Center on Budget and Policy Priorities put together this nice chart showing what the main causes of the growing deficit are.

Anyone complaining about the size of the government and the monstrous government spending should take a careful look at this chart. The budget shortfall going forward are mainly due to three factors: The economic downturn, The Bush tax-cuts and The ongoing war expenditures. Not the economic stimulus, TARP or Unemployment benefits. While recovery measures (Stimulus, TARP, GSE etc.) add to the deficit in the short-term (2009-2011), their contribution to the deficit fades pretty quickly.

So how do the good folks in the GOP address this issue? Privatize Medicare! Cut Medicaid! Repeal the Health Care Law (which actually reduces the deficit in the long run)! Bust up Unions! Don't let the Bush tax cuts expire! In fact, add to it for Corporations and Millionaires! Gotta invade Iran!

Good policy cannot become law unless there is common sense in both parties. Unfortunately, one of them is mostly bent on misinformation and winning the next election.

The Debt to GDP ratio is growing at an alarming rate. So, how should we address the issue?

The most urgent recommendation from the CBPP is to let the Bush-era tax cuts expire after 2012. Not just for individuals making $200K or more and couples making $250K or more. Of course, if the economy is still in bad shape, Congress can continue some of the tax cuts for those making less but they have to come up with steps to offset the cost.  A second chart shows that the curve flattens if we just take this one step.

Any concrete attempt at addressing our mushrooming debt should begin with a factual examination of what is causing the debt. Will more folks become aware of the facts so we can have a better Congress?

Last Book I read

How to Teach Physics to Your Dog by Chad Orzel




Well written. Explains complex topics with simple analogies. Wonderful monologues (dialogs?) with his Dog.