Month: January 2010

Schumer and Hatch Almost Discover Incentives

Senators Charles Schumer and Orrin Hatch have a plan to help employment. As expected, the usual caveat about bi-partisan action applies.

Here’s the idea: Starting immediately after enactment, any private-sector employer that hires a worker who had been unemployed for at least 60 days will not have to pay its 6.2 percent Social Security payroll tax on that employee for the duration of 2010. The Social Security trust fund will then be made whole with spending cuts elsewhere in the budget between now and 2015. That’s it. Simple to understand, and easy to explain.

I’m going to leave the issue of economics, of whether or not this could work, to those more qualified to answer. For me, the issue is incentives. They’re trying to create an incentive for employers to expand employment. It’s fine if you like that sort of meddling, but I don’t. I’d rather they get the government out of the way than try to find the ‘correct’ plan to lead. They’ve already stated in the article that the Congress of the 1970s created ineffective, burdensome incentives. Our default assumption should be that today’s Congress will do the same whenever it tries.

To this plan, though, what about the worker who hasn’t been unemployed at least 60 days? Why is it fair to disadvantage her, however marginally? What’s magical about day 60 that isn’t burdensome about day 59? Day 58? I can think of many complicated individual circumstances – some ridiculous, some not – complicated by this arbitrary incentive.

More:

In addition, because the benefit starts on the date of hiring and does not have an arbitrary cap, more businesses will want to use it. And since it is an elimination of the employer’s share of the Social Security tax for these workers — rather than a fixed or capped dollar amount — the complexities of making the incentive work with a firm’s payroll software are greatly reduced because employers will know simply to zero out the tax for these workers.

I work with financial software systems. Contrary to what the good senators believe, software design often excludes “simply zero out the tax” for individual workers. Incorporating such changes is often supported in a company’s license with the software provider, but those changes must be implemented in some capacity. That takes time. Maybe it is “simply zero out the tax,” but it’s more likely to require a new field to turn this feature on and off. That requires testing to verify that it doesn’t create other problems. These changes may require new code to apply the proposed 60 day minimum requirement for unemployment history. There may also be new levels of approval, since you wouldn’t want everyone to have the authority to “simply zero out the tax.” All of this must be maintained.

In the current environment, no business wants to wait until 2011 to receive a tax credit for someone it hires today. Another obvious benefit of this proposal to forgive payroll taxes is that it keeps money in a business’s pockets, since the tax is simply not collected in the first place.

If these software changes can’t be implemented immediately, the tax will be collected in the first place, creating further paperwork to receive a refund.

There are some additional rules that would have to be put in place. For example, eligible workers would have to be hired for a minimum of 30 hours per week, and workers who are family members of the employer would not be eligible. The payroll tax reduction would be for private-sector jobs only; new jobs that are created by tax dollars in the first place would not be eligible. And any employer with a lower total payroll in 2010 than it had in 2009 would have to forfeit the benefit — businesses shouldn’t be allowed to shed jobs and still receive a tax benefit.

Isn’t this plan supposed to be simple?

Like all politics, this is about appearances hiding the desire for control. There’s no concern for productivity. Much can happen in the next eleven months that could cause a company to shed jobs, despite a good faith effort to expand. But it shouldn’t be allowed, because we need full employment, not full productivity. To a politician, digging unneeded holes is no less valuable than any other job. This is no more true than when the politician can claim credit for creating the hole-digging job.

Ezra Klein’s Fundamental Pact

It’s tempting to point and snicker at the schadenfreude in this Ezra Klein entry, Demoralized Democrats, but that’s rather pointless. Anyway, there’s a useful insight to be drawn from his partisan naivety. Consider:

The fundamental pact between a political party and its supporters is that the two groups believe the same thing and pledge to work on it together. And the Democratic base feels that it has held to its side of the bargain. It elected a Democratic majority and a Democratic president. It swallowed tough compromises on the issues it cared about most. It swallowed concessions to politicians it didn’t like and industry groups it loathed. But it persisted. Because these things are important. That’s why those voters believe in them. That’s why they’re Democrats.

The problem with Klein’s fundamental pact is that disaster must result from believing one can be all things to all people, even when “all people” is a subset of all people. He seems to believe the Democratic base consists of everyone who voted Democrat in November 2008. But the proof against his theory is within his paragraph. Where do concessions to politicians come from? Where do concessions to industry groups come from? Our corrupt two-party system requires compromises like this because the complexities of life must be divided into either-or options. But there are many people who possess ideas and preferences other than either-or. It’s a stupid way to run a government, but it’s obviously our current system. Klein’s fundamental pact doesn’t exist the way he thinks it does. I suspect his belief is widespread among all partisans, which is why this stomach-churning political pendulum continues.

The silliness of this supposed pact is why libertarians prefer a government of limited, enumerated powers. Everything else is left to individuals to decide for themselves. Concessions are voluntary or there is no agreement. Life isn’t viewed as a zero-sum game, as it must be in politics. The partisans continue playing this game, bloating our government more as each party’s minority-of-the-population base wins its next “decisive” victory to dictate public policy, believing that somehow its newest win is the final, lasting proof of its divine correctness. The rest of us must take solace in the predictable schadenfreude, which is expensive and unrewarding.

Why I Skim The Daily Dish

I still have Andrew Sullivan’s blog in my RSS reader, but only as a way to stay informed on what’s happening. Most days I only skim it, not carefully. Where he used to be open to questions, however scattered he may have bounced around on his emotional responses, now he usually exhibits a single with-me-or-against-me attitude. In anticipation of Brown’s victory in yesterday’s special election for the Massachusetts Senate seat previously held by Ted Kennedy, Sullivan wrote (emphasis in original):

The second explanation is the Brooks/Noonan theory that somehow everything feels wrong to the Independent or conservative-leaning voters. They have an instinctual fear of more government and, even though the Senate bill couldn’t be more minimalist within the confines of expanding access and controlling costs, this gnaws at them. I think this is a legitimate feeling (I have it too) – but an illegitimate argument.

Look: the markets conservatives have believed in have failed.

As the more honest conservatives (Greenspan, Posner, Bartlett) have noted, the financial crisis was a clear indicator that we need a more active and vigilant government in regulating the financial sector. And when you look at the results of America’s hybrid and dysfunctional healthcare system, it is more than clear that the status quo is unsustainable. Yes, this system has pioneered amazing breakthroughs and a pharmaceutical revolution that has transformed lives. But the cost and inefficiency of this is simply staggering. Look at the graph above. If you think it’s great, support the GOP. They don’t want to change anything, but a few tweaks.

Which part of America’s hybrid and dysfunctional health care system proves that the market has failed? It’s an interesting claim, but it’s not an argument. It’s a silly analysis of what the market should provide and how much it should cost. There’s nothing objective here. There’s only the expectation that we all agree that the government is the only way to fix the market failure of our hybrid health care system. As he writes later in his post:

At least Obama seems interested in government. The GOP seems interested only in politics and rhetoric that can sustain the bubble of deep denial they live in.

Obama and the rest of the Democrats are interested in government as the solution, which is the wrong approach. It’s easy to suggest that government will be reformed in the process, but that’s a rather nonsensical assurance when the problem is systemic in our interest-driven political system. Wishful thinking will not stop the flow of special handouts and exemptions that result with government involvement.

There’s a complex case to be debated, which hasn’t happened because it’s easier to spew anecdotes as universal fact. It’s easier to write “…Tea Partiers are just opposing the working poor having a chance to buy health insurance,” as Sullivan wrote in November, than it is to confront a group’s objections. In fairness, Sullivan has questioned what Republicans would do instead. But assuming indifference and malice in the face of silence is unhelpful speculation.

This is not to endorse the Republican approach. I find the party to be devoid of any value, which is to say I hold Democrats and Republicans in equal esteem. Nor am I endorsing Senator-elect Brown as a beacon of principled leadership newly arrived in Washington. From the little I’ve read, he’s more of the same, defending torture by the American government, for example. But him not having a coherent or satisfactory answer on the current Senate and House health care bills does not equate with there being no coherent or satisfactory rebuttals to the current bills. As Mark at The League of Ordinary Gentlemen wrote:

It is increasingly frustrating to me that, for many supporters of Obama, any belief that the existing health care reform bills will do more harm than good is automatically written off as being in bad faith or, as it were, “nihilistic.”

I believe I’ve advocated here that any health care reform aimed at reducing costs must start with untangling health care from employment. An individual’s employer is no more responsible for her health than it is for insuring her automobile or home. It’s a holdover from the ridiculous tax rates of the World War II-era, where offering health insurance as an employment benefit was economically wise. Rather than fix the rates, government enshrined the concept in tax law. That was stupid, but it worked when people worked at a single company for life. Today it’s uncommon to have had only a single employer by age 30. If we don’t fix that broken government-provided incentive, we’ll continue to have people lose their health insurance when they lose their jobs.

The current legislation keeps that tie, but punishes indiscriminately for receiving “too much” of a benefit. That’s just doubling down on the madness of the past, thinking that government can fix what government broke by adding more government. It’s the nonsensical thinking of the central planner, the kind who believes that anything that isn’t what it should be in a hybrid market is clear proof that the market has failed, requiring more of the planner’s expertise.

To show that other ideas exist, Megan McArdle offers her suggestion:

Raise the Medicare tax by half a percentage point, and eliminate the tax-deductibiity of health insurance benefits for people making more than $150K a year in household income, $100K for singles. Then make the federal government the insurer of last resort. Any medical expenses more than 15% or 20% of household income, get picked up by Uncle Sam.

I’m not a fan of this because it still messes with the tax code, encouraging employers and employees to tinker with non-cash compensation for borderline salaries. Other people may want that approach, but I’d rather have cash and make my own decisions. Social engineering is not good. For example, a $100k threshold means different realities in D.C. versus Omaha. It’s a lot of money either way, but that punishes people unfairly in areas with a higher cost of living. The tax code would need to be more complicated to rectify this problem, which proves the need to simplify away from government trying to influence “correct” decisions.

That said, I’m willing to consider it as an opening to ridding the tax code of the health insurance exemption.

So, alternative ideas clearly exist. But it’s easier for Sullivan to vent, lumping everyone who disagrees with him into a tidy, immature opposition. In a later post yesterday, he wrote in a post titled “A Libertarian Revolt?” (emphasis in original):

Since so much of the energy behind the Brown candidacy seems to be driven by anti-government sentiment, why is someone like me – who actually criticized Bush for being big government long before these late-comers – so dismayed?

Here’s why. The rage is adolescent. It did not exist when the Republicans were in power and exploded government during years of economic growth. Fox News backed Bush to the hilt through it all, as he added mounds of unfunded entitlements to the next generation’s debt, and then brought Beck in as soon as Obama inherited the mess. Scott Brown, moreover, has no plans to cut the debt or control government: none. He is running in d
efense of every cent in Medicare. He wants to increase the deficit by more tax cuts. He favors an all-powerful executive branch that can suspend habeas corpus and torture people. He has no intention of cutting defense. His position on the uninsured is: get your own states to help. His position on soaring healthcare costs is: stop the first attempt to control them.

We hear Karl Rove lamenting big government! We hear Dick Cheney worrying about deficits! The cynicism here is gob-smacking. And the libertarian right is just happy to go along.

Like I said, I don’t endorse Brown for these reasons. If I lived in Massachusetts, I wouldn’t have voted for him or Coakley in yesterday’s election. So why am I lumped into the nihilist group because I’m a libertarian who thinks the current health care bills would cause harm to the nation? Sullivan is aware enough to understand that Libertarians ≠ Republicans, yet he pretends they’re synonymous without looking at what libertarians offer because both groups oppose the solution he wants. It’s unfair to rant incomprehensibly against something that is clearly untrue. One might say it’s adolescent, which is why The Daily Dish is no longer must reading for me.

Our Security Makes Me Afraid

This:

The man who is believed to have slipped into a secured area of Newark Liberty International Airport and to have caused a six-hour shutdown of a major terminal on Sunday has been arrested, Port Authority officials said on Friday night.
…

Mr. [Haisong] Jiang’s arrest [on a charge of defiant trespass] came a day after a video showing security footage of the incident was released by Mr. Lautenberg. It shows a man in a light-colored jacket standing near where arriving passengers exit a secured part of the airport. When a security guard leaves his post, the man embraces a woman and slips across the rope into the secured part of the terminal. The two then walk away together.

I don’t have much to say on the facts of the case. I haven’t seen the video, so I can’t decide whether or not the Mr. Jiang’s alleged actions were intentional. Instead, I want to comment on this:

The security guard has been on administrative leave since Tuesday, and he faces disciplinary action, according to the Transportation Security Administration. Derrick F. Thomas, a national vice president with union representing the guard, told The A.P. that the guard has “been rated a model employee.”

While in high school, I worked at a drug store. One day, the assistant manager in charge of the store during my shift left for approximately 30 minutes to run personal errands. She left a senior clerk in charge. If my memory is correct, that clerk was a high school student like me. Nothing occurred at the store during her absence. The next time I reported to work, I learned the manager had fired the assistant manager for her action.

If secure restricted areas of an airport demands attention and scrutiny to each individual entering, as we’re told it does, what’s less severe here than what occurred at a drug store twenty years ago that makes administrative leave appropriate rather than immediate dismissal?

My initial conclusion is to accept the obvious distinction. The drug store was a private enterprise. The TSA is a government entity. The former requires accountability. The latter can’t. I’m inclined to be skeptical of this conclusion, since I don’t wish to be an ideologue. Then I read this (via KipEsquire):

A bystander waiting for an arriving passenger noticed the breach and told the guard. TSA officials then discovered that surveillance cameras at the security checkpoint had not recorded the breach and were forced to consult backup security cameras operated by Continental Airlines.

There could be any number of issues why such a lapse might occur, technical or otherwise. None of them are acceptable. This is security theater, not security. And we’re doubling down on our stupidity with every new, predictable incident.