The sensible centrist

I’m for Gary Johnson because I believe the War on Drug Using Americans is the greatest problem facing this country.  But he won’t win.  Of those who might I’m increasingly impressed with Mitt Romney. 

1.  Romney doesn’t consider global warming to be a hoax.

2.  He refuses to join the other Republicans in criticizing fiat money and/or calling for tighter money.

3.  He understands that jobs are the big problem.

4.  He has Greg Mankiw advising him.

5.  He recently came out for UI personal accounts, a very Singaporean solution that even Singapore doesn’t have.

Yes, I’m sure you can find a few cases where he throws red meat to the populists, but mostly in areas that won’t tie his hands as President.  I’m not excited about the Mass health care reform, but at least he tried to solve a very real problem—45 million uninsured.  I don’t see many good alternative proposals coming out of the GOP.  And let’s not forget that lots of conservatives supported Romney’s bill, until Obama adopted the same idea. 

Matt Yglesais mentioned the personal UI accounts idea, but then went off on a tangent that seemed, in my eyes, slightly misleading.  He cites empirical results that support Romney’s proposal, and yet I’d bet the average reader of Yglesias’s post thinks he’s criticizing it.  See what you think.  The research shows that unemployment insurance has one inefficient effect (discouraging employment due to potential loss of benefits), but perhaps an even bigger beneficial effect (encouraging optimal job search by making workers less liquidity constrained.)  Ronney’s proposal is presumably aimed at getting the best of both worlds.  No disincentive effects from a potential loss of UI benefits, but also a financial cushion to fall back on while you search.

Josh Hendrickson does a good job explaining why Romney was right in saying that corporations are composed of people.  Romney’s critics would argue that they are rich people, but that’s not at all clear.  What is clear is that corporations should not pay taxes (on capital income), rich people should pay taxes (on consumption.)

The best argument for Romney?  Look at the other GOP figures considered to be “major candidates.”

BTW, with Perry entering the race there’s a lot of debate about Texas.  Although I don’t like Perry, I do like the Texas model.  I did a post defending Texas a few weeks back; here are a few highlights:

1.  Of the 7 south central states between Georgian and Arizona, 6 are seeing population growth below the national average.  Texas has seen very fast population growth, for quite a long time.

2.  Other south central states like Louisiana, Oklahoma, New Mexico, etc, are energy rich.  Texas grew extremely rapidly when the energy industry was depressed in the 1980s and 1990s.

3.  All seven south central states have very cheap housing prices.

4.  Texas has no state income tax, the other 6 south central states have one.

5.  Lots of poor, middle class, and rich people move to Texas every year.  Revealed preference anyone?

Conclusion:  Paul Krugman is wrong and Tyler Cowen is right.


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38 Responses to “The sensible centrist”

  1. Gravatar of Hyena Hyena
    16. August 2011 at 09:16

    Yeah, but Cowen’s thesis is that Texas is a low population density state with loose zoning rules. The Texas model can’t be implemented nationally because zoning rules can’t implemented nationally.

    Moreover, unless you think that some cities are inefficiently overpopulated or you think a Republican will dramatically increase immigration, there’s no way to replicate Texas’s growth even if the Feds could force Texas-like policies on the states.

  2. Gravatar of B B
    16. August 2011 at 09:18

    Romney on medical marijuana
    http://www.youtube.com/watch?v=SAsAxBdC3XE

  3. Gravatar of Steve Steve
    16. August 2011 at 09:28

    Romney is an awful hypocrite, as anyone from Massachusetts should know. Just two weeks ago, Romney opposed increasing the debt ceiling. He reasoned that we should balance the budget, but do so without tax increases or defense cuts.

    That said, the American political circus requires a process of elimination: Perry, NO! Bachmann, No. Obama, not likely. Romney, ???

  4. Gravatar of Adam2 Adam2
    16. August 2011 at 09:47

    If you want a Singaporean solution you are going to have to accept the MMT paradigm. Else should you not be worrying about the debt bomb?

    High Deficits. High Debt/GDP. Low inflation. Low unemployment. High savings because Net Financial Assets = Government Debt. Without that government debt there can be no forced savings.

  5. Gravatar of Richard A. Richard A.
    16. August 2011 at 09:51

    Where does Gary Johnson stand on monetary policy?

  6. Gravatar of B B
    16. August 2011 at 10:06

    Gary Johnson on monetary policy:
    http://www.youtube.com/watch?v=ZpFjDVGY_ug&feature=player_detailpage#t=390s

    In summary: inflation is evil, and abolish the Fed.

  7. Gravatar of Mike Sandifer Mike Sandifer
    16. August 2011 at 10:07

    Scott, Gary Johnson wants the gold standard and the end of child labor laws, among other absurdities.

  8. Gravatar of Mike Sandifer Mike Sandifer
    16. August 2011 at 10:14

    On Romney, of course I won’t vote for a Republican, but he might be running for the wrong party nomination. Otherwise, I can’t say I wouldn’t take him off the bench and put him in the game right now, if I could, just to see if he might pass a stimulus bill or something like that. What is there to lose?

    But, I didn’t even vote for Obama and I certainly won’t vote for Romney for similar reasons, in addition to the fact that something is perhaps very wrong with someone who seeks the nomination of the Republican party. And anyway, I don’t think Republicans should be rewarded in any way for the things they’ve done.

    I want a real liberal candidate and will probably have to vote third party again.

  9. Gravatar of beowulf beowulf
    16. August 2011 at 10:45

    The Texas model can’t be implemented nationally because zoning rules can’t implemented nationally.

    Not until President Romney appoints Ed Glaeser HUD Secretary, you mean. :o)
    “The goal, [Glaeser and Gyourko] suggest, should be to incentivize the high-demand, inelastically-supplied markets to allow more housing.
    They propose capping the home mortgage interest deduction at $300,000 for households in these markets… This cap would generate additional tax revenue. The federal government would then refund that revenue to the local governments (via the states) provided the local governments made sufficient progress toward increasing their housing supply. Glaeser and Gyourko essentially propose bribing local jurisdictions with their homeowners’ tax dollars.”

    http://www.austincontrarian.com/austincontrarian/2008/12/rethinking-federal-housing-policy.html

  10. Gravatar of Matthew Yglesias Matthew Yglesias
    16. August 2011 at 11:19

    I like Mitt Romney! Volunteered on his campaign in 2002 when he was running in Massachusetts and I thought he was a good governor, unfortunate anti-gay demagoguery after the marriage equality case aside.

  11. Gravatar of malavel malavel
    16. August 2011 at 11:53

    What’s wrong with Huntsman? Besides not being popular enough to win. He seemed pretty sensible in the Iowa debate.

  12. Gravatar of johnleemk johnleemk
    16. August 2011 at 12:01

    ^ Is that the real Matt Yglesias? If so, truly a validation of the wisdom of Sumner: “One could argue that the best argument for libertarianism is that someone like Tyler Cowen could be even a moderate libertarian, just as the best argument for progressivism is that someone like Matt Yglesias could be a progressive.”

    Had no idea Johnson is so stupid on monetary policy. A real shame, he’s excellent on most everything else. I wonder what Huntsman thinks…though he’d need to catch lightning in a bottle to even come close to winning the nomination.

  13. Gravatar of acarraro acarraro
    16. August 2011 at 12:38

    Could you explain why you think Yglesias is misleading?

    All I can think of is that showing that there is a liquidity effect in no way invalidates the theory that there is an incentive effect. But I don’t see how it can prove it either to be honest. And it casts doubt on the “true” source of the change in unemployment duration for time-limited UI since you might argue that it’s related to an increase in the lump sum which could increase the time spent on searching a job (since going from zero to something does). Not a fantastic argument, but at least based on data…

  14. Gravatar of Trumwill Trumwill
    16. August 2011 at 12:42

    This is sort of tangential, but a good part of Texas’ growth is attributable to immigration. That is not news, and even if you look at non-Hispanic growth, it is still growing at twice the national rate. However, if you look at non-Hispanic growth rates, a number of southern states are actually hovering at right about the average.

    Another thing I discovered: While Texas’ 8.2% unemployment rate may seem unimpressive, it gets remarkably more impressive (or less unimpressive, anyway) when you compare it to other fast-growing states. Among the top 10 (each having grown more than 15% between 2000-10), only Utah has a lower unemployment. Colorado is close. Most are over the national average.

  15. Gravatar of W. Peden W. Peden
    16. August 2011 at 12:51

    malavel,

    Jon Hunstman’s strengths are his experience, his pragmatism, his intelligence and his willingness to think issues through. Unfortunately, those are his fatal weaknesses as far as the primaries go.

  16. Gravatar of bill woolsey bill woolsey
    16. August 2011 at 13:46

    I favor abolishing the Fed and I think inflation is an evil.

    I very much oppose having monetary institutions that generate persistent inflation. On the other hand, I also oppose having monetary institutions that generate persistent deflation.

  17. Gravatar of cassander cassander
    16. August 2011 at 16:51

    Presidents are generally able to get the most accomplished when they betray their parties. Both Clinton (welfare reform, free trade) and Bush (Medicare part D, NCLB) got stuff passed that never would have been possible with the parties reversed. This makes me very wary of “moderate” republicans like Romney. I’d much rather have a Democrat in office not accomplishing anything then a Republican who’s “winning” by passing left wing legislation.

  18. Gravatar of Scott Sumner Scott Sumner
    16. August 2011 at 17:16

    Hyena, Well we could certainly cut income tax rates. And make regulation less burdensome.

    B, I heard he’s against it, is that right?

    Steve, They all do those sorts of things. Romney’s the lesser of evils among the major candidates.

    Adam2, I assure you that Singapore has no interest in MMT theories. They don’t even have a national debt of any significance.

    Richard and B. For me Johnson is merely about the War on Drugs. That’s his issue. He’s slightly better than Ron Paul on some other libertarian issues (trade, immigration?) but my memory is poor.

    Mike, I’m also opposed to child labor laws. I often broke the law by working as a child.

    I’m talking primary–I always vote libertarian in the general election.

    beowolf, Good idea, but I’d go further–eliminate the home interest deduction.

    Matt Yglesias, You said;

    “I like Mitt Romney!”

    Ouch! I think you just cost him the GOP nomination.

    Malavel, I forgot about him, I didn’t see the debates as I never watch TV. Yeah, I guess he’d be just as good (or bad) as Romney.

    acarraro, Both effects occur–didn’t even the paper Matt cited say that? Romney’s proposal addresses both issues. What’s not to like? Matt didn’t exactly say he disagreed with Romney, but I thought the post sort of gave that impression. Notice he came over here and didn’t complain I misrepresented his views. Believe, when you do misrepresent a blogger’s views, they do complain.

    Trumwill, Good observations. FWIW you might want to read the older post I link to, it has a more complete argument for Texas. BTW, many Hispanics in Texas have been there for a long while, and have good jobs. They also have a higher birth rate. So Hispanic doesn’t necessarily mean recent immigrant, although there is a correlation.

    Bill, I favor knee-capping the Fed.

    Cassander, Then there is Obama’s health care. In practice, legislation doesn’t much depend on who’s in office, it depends on which ideas are floating around Washington. During the Great Neoliberal Revolution, left and right wing governments cut tax rates, privatized and deregulated at roughly equal rates.

  19. Gravatar of B B
    16. August 2011 at 18:41

    Well Bill, when you can engineer a Goldilocks institution that always gets inflation/deflation just right, let me know. Until that day I’ll keep favoring persistent mild inflation, and I’ll keep showing up 30 minutes earlier than is optimal for a flight.

    And I think an institution that automatically stabilizes NGDP futures would still be seen as an evil central bank in Gary Johnson’s eyes. It would still have a big white marble building DC, it will still employ a bunch of bearded academics, and it will still buy/sell instruments on the open market. Still sorta sounds like the Fed.

  20. Gravatar of A. Carraro A. Carraro
    17. August 2011 at 01:36

    I don’t expect an answer, but how do individual account work?

    Is it just forced savings (so no transfers)? I can see the “nudge” behavioural effect as positive, but surely some people will exaust savings.

    Does the goverment lend you money on the account? If that’s the case at least some of those lent money will either die or retire (beacuase sick or whatever) with a negative balance. Where do you get the funding to balance that? Even the negative balance is in some way a disincentive to work I think.

    I would also like to make the argument that the increase in unemployment insurance might be less distorting than expected in the current circumstances.

    Let’s say that a fired worked expectes it takes a certain amount of time to find a new job (reading job ads, interviewing, etc…). If the average time to find a job is similar to the average duration of benefits, the worker should be roughly indifferent to a lump sum or a monthly check.

    If the economic situations slups, I think it would be reasonable to expect a longer average time to get an offer (more applicants, less job offers, etc…). In this situation, increasing the duration of benefits will be less detrimental than in normal circumstances.

    Is that unreasonable?

  21. Gravatar of Jeff Jeff
    17. August 2011 at 03:26

    B,

    Hardly anyone at the Fed is bearded. So there.

  22. Gravatar of Browsing Catharsis – 08.17.11 « Increasing Marginal Utility Browsing Catharsis – 08.17.11 « Increasing Marginal Utility
    17. August 2011 at 04:03

    [...] Sumner presents a surprisingly convincing case that Romney is the second best candidate behind Gary …. I guess this pushes me to think, what’s worse, establishment conservatism buttressed by perhaps the best neoclassical economics has to offer (Romney with Mankiw), or extremist folk libertarianism buttressed by the worst Austrian economics has to offer (Paul with the Mises Institute)? It’s hard to discern whether in the past Romney has been a pure politician in the sense of “maxing rent extraction subject to remaining in office,” or if he’s been “doing sane things subject to maintaining the support of populist Republicans.” Since my priors are against both the Republican party circa 2001 and any shape or form of populism (the latter of which Paul does represent), this does strain my worldview a little. [...]

  23. Gravatar of Adam Adam
    17. August 2011 at 07:44

    You know you could back Obama too, right? ;)

    The problem with Romney is that he seems entirely plastic and entirely willing to do or say whatever he thinks he needs to say for political reasons. That means that I do not trust him to say no to the crazies in his party, and I fear the Pauls, Ryans, and Cantors of the world having even more influence than they do with Obama caving to them.

  24. Gravatar of beowulf beowulf
    17. August 2011 at 11:03

    “I don’t expect an answer, but how do individual account work?”
    Easiest way to transition to it is when 2% payroll tax cut expires, direct the money to one of the TSP Lifcycle funds (investments automatically grow more conservative as one approaches retirement).
    https://www.tsp.gov/investmentfunds/lfundsheet/fundPerformance_L.shtml

    Of course FICA is really just another tax, SS and Medicare trust funds are always paid “out of any moneys in the Treasury not otherwise appropriated”, so SS and Medicare could roll along forever even if the whole 15.3% FICA go into TSP accounts (presumably, married couples would pool accounts).

    To take it to the next level, this would make Marty Feldstein’s idea of universal catastrophic health insurance quite feasible (the snag with Marty’s plan, income-scaled copayments would be a billing nightmare for providers). Suppose Medicare paid provider bills directly (liberals cheer) but at the end of the year– 100% of individual or family Medicare costs would be deducted from 15.3% of income savings account (conservatives slow clap). At every point of the income scale, everyone would have access to healthcare but no one would be indifferent to its costs.

  25. Gravatar of beowulf beowulf
    17. August 2011 at 11:32

    To clarify, 100% of individual or family Medicare costs would be deducted from (and up to) 15.3% of income Credited to savings account that same year.

  26. Gravatar of Scott Sumner Scott Sumner
    17. August 2011 at 13:03

    A. Carraro, I’m increasing convinced that extended UI is a big problem, despite the high unemployment. Our labor market is looking increasingly “European.”

    The accounts would probably need some government assistance, for younger low wage workers. It would be forced saving.

    Adam, You said;

    “The problem with Romney is that he seems entirely plastic and entirely willing to do or say whatever he thinks he needs to say for political reasons.”

    You think refusing to bash the Fed, or to call global warming a hoax, plays to the GOP? I don’t see it. He seems like the most courageous major candidate. Of course the 2nd tier can say whatever they believe.

    beowolf, But would people still be allowed to negotiate health care costs?

  27. Gravatar of Quick Update to Last Night’s Post « Portrait of the Economist as a Young Man Quick Update to Last Night’s Post « Portrait of the Economist as a Young Man
    18. August 2011 at 02:41

    [...] http://www.themoneyillusion.com/?p=10489 [...]

  28. Gravatar of A. Carraro A. Carraro
    18. August 2011 at 04:07

    beowulf,

    I understand what you are saying, but what happens when the account gets to zero? does it go negative? Or do you stop getting benefits?

    Assuming you allow negative balances, if you are including all kinds on benefits (unemployment, health, pension, food stamps, education, etc…), I think there will be a significant percentage (>20%) of the population that will build up fairly big negative balances over their life.

    Once you are in negative territory, the incentive goes out of the window. So it would constraint relatively well-off people, but it wouldn’t affect low income people (so maybe not so bad, but I think it would be politically difficult).

    I think it also acts as an incentive to not working (as it will generate a profit equivalent to the negative balance if you never work again).

    I guess you could tweak the system and have the goverment pay some basic amount in the account for everyone and stop benefits when you get to zero. But then we are back to square one. And I am not sure you can really stop some benefits.

    I think welfare is very important. I wish there was a way to improve it, but i don’t think this is it.

  29. Gravatar of beowulf beowulf
    19. August 2011 at 12:30

    “But would people still be allowed to negotiate health care costs?”

    Certainly, the Medicare price is a cap, not a floor. Today’s there’s no incentive for a Medicare recipient to negotiate it down. Even if the Medicare fees are used (and I have enough doctors in my family that I’ll concede the point that it underpays many procedures), the patient can certainly set the parameters of quantity and, to some degree, quality. For example, when my father practiced medicine, he’d prescribe drugs to patients and if they expressed concern that the could afford the brand drugs, he’d change the script to generic drugs. While not quite as effective in his opinion, they were available at Walmart for $4. Another thing the govt could do (my kid sister, who still practices, would love this) would be nationalize medical malpractice coverage.
    Today govt-employed doctors don’t need medmal insurance because they’re covered by Uncle Sam. Medmal suits by VA patients are filed against the United States of America, who pays any legal judgment out of the Judgment Fund (like debt service, lawsuit judgments are one of the few permanent appropriations). Congress has extended this coverage to any doctor (paid and unpaid) who work at nonprofit healthcare center. There was a Republican amendment (rejected of course) to the House “public option” bill that would have extended this same coverage to any doctor treating a Medicare, Medicaid or “public option” patient. Uncle Sam could always “fire” genuinely bad doctors from Medicare reimbursement the same way (and with the same due process) as the VA fire genuinely bad doctors today. An effective $200 billion tax cut to doctors would make the pill of universal Medicare go down easier.

    “I understand what you are saying, but what happens when the account gets to zero? does it go negative? Or do you stop getting benefits?”

    The key word in “universal catastrophic heath insurance” is catastrophic, once you hit the cap the insurer covers everything above it. I think that answers all of your points. :o)

    HEW Secretary Elliot Richardson, taking a page from Friedman, actually proposed something like this is in his 1973 “mega proposal” (Nixon disapproved and bounced Richardson to the Pentagon). Then, out of left field, Ford’s Tsy Secretary William Simon proposed a tax credit system (transaction costs would have been a bear) along these lines in his Blueprints for Tax Reform released just before he left office in 1977.

  30. Gravatar of ssumner ssumner
    19. August 2011 at 17:38

    Beowolf, Those are interesting malpractice ideas.

  31. Gravatar of Morgan Warstler Morgan Warstler
    19. August 2011 at 17:52

    beowulf,

    The issue is access to high priced treatment.

    Once someone goes negative they have to be ordering from last decades menu.

    The last three years of health care inventions are luxury goods. Stuff from 12 years ago, is the new KIA.

    Any healthcare plan that operates as welfare has to respect this fact.

  32. Gravatar of beowulf beowulf
    19. August 2011 at 20:20

    Thanks Scott, here’s the Republican amendment I mentioned.
    http://www.scribd.com/doc/25552884/Murphy3962-105

    In the mid 70s, The CBO took a look at Richardson’s mega proposal (pdf p. 66). As I mentioned above, a compulsory savings plan with end of the year “settling of accounts” was precisely what Richardson’ plan was missing.
    “The primary disadvantage of the plan is its adminis-
    trative complexity. Keeping track of each family’s deduc-
    tible and coinsurance requirements, which might change
    several times in a year, would be expensive.”

    http://webcache.googleusercontent.com/search?q=cache:co1Tp3Hgh6gJ:www.cbo.gov/doc.cfm?index%3D9171

    Morgan, the trouble with that is doctors are held to the community standard of care (by “community”, a surgeon at Mass General is held to a higher standard than a country doc at the county hospital/veterinary clinic). Encouraging doctors to half-ass it on some patients just creates a legal trainwreck for the doctor (or, as I’ve suggested, the United States of America) if it goes to a malpractice trial. By KIA, I take it you mean the car company and not Killed In Action.

    On the front end stuff, checkups and routine medical issues, I take your point there is ton of money to be saved by, what do you call it, soup kitchen clinics. The Native Alaskan Community Health Aide Program delegates a tremendous amount of primary care services to community college educated staff in each village. The Community Paramedic group is trying to bring that model to the rest of the country. Since there are far too many firefighters on city payrolls for the number of fires we have now, cross-train them as community paramedics.
    http://communityparamedic.org/

  33. Gravatar of beowulf beowulf
    19. August 2011 at 21:21

    I should added about the medmal suits against Uncle Sam; they’re filed in federal court (so same procedural and substantive rules nationwide), bench trial only (so no more John Edwards playing John Edward with a jury channeling an unborn baby’s thoughts) and there are no punitive damages.

  34. Gravatar of Scott Sumner Scott Sumner
    20. August 2011 at 14:43

    beowolf, I like the medmal suits against Uncle Sam idea. I’ll have to defer consideration of health care for another day–as I am running too far behind. I do understand that HSAs involve administrative costs, but so does insurance.

  35. Gravatar of beowulf beowulf
    24. August 2011 at 09:41

    Thanks Scott. I should point out the nearest thing to a HSA/Medicare hybrid in operation is Mitch Daniel’s Healthy Indiana Plan.
    http://www.kaiserhealthnews.org/Columns/2011/March/031611cohn.aspx

    I neglected to mention that Warren Mosler proposed a HSA/Medicare hybrid in his (Dem then Independent) CT Senate campaign last year. I think converting FICA into a mandatory HSA would have been a better policy, but Dick Blumenthal was unstoppable last year in any event.
    http://www.facebook.com/note.php?note_id=109398732417810

  36. Gravatar of Adam Adam
    24. August 2011 at 13:31

    To revisit ancient history, this sounded like a good point at first:

    “You think refusing to bash the Fed, or to call global warming a hoax, plays to the GOP? I don’t see it. He seems like the most courageous major candidate.”

    But I think it’s missing something. Romney’s not running for president of the Tea Party (as some of his opponents are). He isn’t going to be the top choice for those people anyway. He’s running for president of Wall Street, and bashing the Fed and calling global warming a hoax hurts him there.

  37. Gravatar of ssumner ssumner
    10. September 2011 at 08:10

    beowolf, Thanks for the info.

    Adam, Unfortunately, Romney’s started bashing the Fed for being too easy.

  38. Gravatar of Ranking of Presidential Candidates « Increasing Marginal Utility Ranking of Presidential Candidates « Increasing Marginal Utility
    5. January 2012 at 19:09

    [...] marks. I am somewhat a mark. 4. Mitt Romney. He’s higher than Paul if I’m channeling Scott Sumner or Thomas Sowell, which I am wont to do. He’s also the secondary Hayekian choice, especially [...]

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