Economics & Finance

This Has Got To Be a Typo

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From Sweetness and Light [h/t Instapundit]:

And speaking of jobs, according to the Southern Policy Center (a 501c3 “charity”) 990 forms as reported, they received  $33,526,228 in 2007. The same form reports that their net assets or fund balances in 2007 were  $219,551,849.

Holy farken snit! What the hell is a charity group doing with assets of $219 million dollars on an income of 33 million? What good could they possibly do by sitting on that kind of money?

People need to spend more time researching organizations before they donate. People expect the money they donate to be put to work helping the causes they support, not shoveled into a bank vault somewhere to build up corporate assets. How many people would donate their hard-earned money if they knew that the Southern Policy Center was already sitting on $219 million?

It might be time for a law that requires non-profits to publish their income, assets and even the pay of their top executives in every donation solicitation.

Why We Think We Can’t Afford Health Care

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In 1900, most people walked to work, school, shopping and socializing. The percentage of the average household’s budget devoted to transportation was so low that the Census bureau didn’t even bother to collect data on it. Today, the average household spends 21% of its budget on transportation. It’s the second biggest single cost after housing yet people take such spending for granted and easily factor it in to their personal budgets. We do so because transportation costs rose slowly over the course of the last half century while other costs, such as food, decreased. Decade after decade we gradually became used to spending more and more for transportation till now the average middle-class family easily accepts spending several thousand dollars a year in transportation costs.

As a thought experiment, imagine that for some reason people never had to individually pay the cost of their own transportation.

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The Dangers of Decompartmentalized Health Care Spending

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So the Democrats have a problem convincing senior citizens that socialized medicine won’t diminish the already dubious quality of care they receive through Medicare. [h/t Instapundit]

Seniors no doubt base this suspicion in large part on their 50+ adult years of watching politicians over-promise and under-deliver. They probably remember back to 1965 when Medicare itself was sold as a cost-saving measure, and today we’re told it’s going to bankrupt the government unless we socialize 15% of the economy. They no doubt wonder how long it will be before Obama’s ideological descendants will tell us that Obama’s miracle plan is a disaster than can only be solved by more socialism.

Seniors have another reason to be nervous. Obama’s plan will put them in direct competition with everyone else for health care spending.

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Rationing Versus Allocation

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Economists commonly talk about the entire economy as a “rationing” system because all resources are finite and human desire is infinite. In terms of standard dictionary terminology, the day-to-day economy does not ration. We use the term rationing only to describe situations when an individual gets a fixed amount of something regardless of price. For example, during a mass evacuation, we stop using a price mechanism to control an individual’s access to gasoline and instead set a fixed limit of gallons per vehicle.

When opponents of politically-managed health care claim that politically-managed health care will lead to rationing, they use the term in the ordinary sense. Proponents of politically-managed health care have dishonestly tried to obscure the debate by substituting the specialized definition that economists use for the standard definition, so they can claim the current system already “rations” care so nothing will change.

It’s thinly possible that some proponents of politically-managed health care are honestly confused and aren’t just intentionally employing rhetorical tricks to hide the real consequences of the policies they advocate. For those people, I offer the following explanation that uses the common definition of rationing.

It involves tires.

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Quote of the Day

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Chet Richards, in a comment on this thread at Belmont Club:

For an economics professor, Gregory Clark has a very poor grasp of U.S. economic history. The real question is: what have we lost through our current redistributionist (i.e. socialist) policies?
 
LBJ instituted the “Great Society” as a redistributionist scheme. I well remember that at the time critics were saying that LBJ’s program was grossly underfunded and that it would have a very negative impact on the US economy. LBJ not only publicly admitted that the critics were right, he even openly gloated that future generations would just have to live with the consequences. On top of LBJ’s ego we had to suffer from the adoption of the “Limits to Growth” policy that was enacted in the early 70’s by liberal neoluddites including Nelson Rockefeller’s gang (and Richard Nixon). This policy choked off growth during the 1970’s by doubling the Capital Gains Tax.
 
So what have we lost? The long term economic growth of the US from its founding to 1970 was 4.5% through thick and thin. Growth losses during recessions and depressions were compensated by growth overshoots during the recovery period. Since the population was also growing, the per capita growth rate works out to about 3.5%. In 1970 the long term per capita growth rate dropped to 1.5% and has remained at that level ever since. (These days an annual total GDP growth of 4% is regarded as phenomenally good!)
 
Working the numbers for the period from 1969 to 2009 we have a per capita GDP growth of 4x with a 3.5% per capita growth rate. With the true per capita growth rate of 1.5% the per capita growth during this period was actually 1.8x. If we had not had LBJ and “Limits to Growth” our per capita economy would now be about 2.2x larger than it currently is. Factoring in the population growth gives us about the same ratio.
 
Conclusions: 1) Almost all of us have suffered a profound loss of the prosperity that should have been ours. 2) Revenues to the Government would have been substantially larger than they currently are and taxes would have been much lower. 3) Inflation would have been much lower which means our savings would not have been eaten away (and taxed) by inflation. 4) Current policies to expand redistribution are going to create even more loss of wealth and increase in poverty.
 
Shed a tear, folks, for what might have been, and what we likely will still lose.