Saturday, April 27, 2013

Conservative alternative to Obamacare would create new tax on healthy people

The political website Buzzfeed (via Ramesh Ponnuru) provides an entertaining if convoluted account of how US House and Senate Republicans (or rather one particular Senator, Ted Cruz) have fallen out over what seemed like a wizard wheeze to undermine Barack Obama's healthcare law. Specifically, the House faction had come up with a scheme to divert some of the act's funding to patch a loophole relating to pre-existing conditions, whereas some true believers (i.e. Ted Cruz) maintain under the magic of the free market, there'd be no such thing as pre-existing conditions on health insurance, therefore attempting to pass laws to deal with it is sacrilegious.

The theory underpinning the idea that there'd no problem with pre-existing conditions in a free market is sourced to Paul Krugman's occasional sparring partner, Professor John Cochrane at the University of Chicago. But much as with Senator Ted Cruz's claimed knowledge of Rawlsian philosophy, his staff might want to read the original source material for Cochrane's proposal before getting too excited.

Note to Cruz staff: the Cato 2009 paper setting out these seemingly appealing contracts -- the ability to insure against not getting insurance -- dances around a key detail of these contracts. But the 1995 Journal of Political Economy article is much clearer: the scheme works because people who turn out to be healthier than expected when they first got insurance pay money to the insurance company! Now this detail is dressed up in the language of incentive-compatible contracts, but that's what it boils down to: there would be a pre-assigned pot of money for each individual to transact with health insurance companies, and that money would be drawn down from healthier-than-expected people to pay for "excess" costs associated with sicker than expected:

Every period, the consumer pays a constant amount into the account, and the account pays a premium to an insurer for one-period insurance. Competition requires that sick people pay higher premiums and healthy people pay lower premiums. If a person is diagnosed with a disease that raises his premiums, the insurer pays into the account a lump sum equal to the increase in the present value of premiums. If he gets healthier so that his premiums decline, the account pays the insurer a lump sum equal to the decline in the present value of premiums ... The account may be used only for health insurance payments because, as long as the sum paid by the insurer when a consumer got sick is located in the account, it is easy to require that the consumer pay the lump sum back to the insurer if he gets healthier. If the lump sum were paid directly to the consumer, it might be hard to get it back. The consumer might spend the money and declare bankruptcy. Finally, one hopes that courts will enforce an insurer's right to receive payments from an account that is explicitly set up for that purpose, while they may not enforce severance payments taken directly from consumers.

And one thing he doesn't discuss, but which appears to be implicit in his proposal, is that the government would have to require that everyone participate in "health status insurance," since it just shifts up one level the problem of currently healthy people convincing themselves that they'll never need health insurance.

Anyway, the point is that a favoured proposal of those advocating a "free market" approach to health insurance wouldn't stand up to about one hour of creative sloganeering: "It's your money, not the insurance company's; Why should being healthy cost you money?" There's understandable concern among liberals that the Obama healthcare reform may be complicated to implement. But getting free markets to work is no picnic either.

Thursday, April 25, 2013

We'll understand the Treaty of Lisbon in 2030

Speech by Jörg Asmussen, Member of the Executive Board of the ECB, The Economist’s Bellwether Europe Summit, London, 25 April 2013 --

The enhancement of the governance framework shows that governments in the euro area have finally understood, what had been laid down in the Maastricht Treaty already: that in a monetary union, the economic policies of each country are “a matter of common concern” for all.

The Maastricht Treaty was agreed in 1992 and ratification was completed in 1993. Two decades later, an influential ECB board member says that only now have the governments finally understood it. Lucky that the pesky people were kept out of it or we would be waiting even longer!

Gulf Media Notes: 2

Saudi Arabia Friday news dump (noting that in Saudi Arabia, Friday is Wednesday) --

Tabuk, Saudi Arabia, Jumada II 14, 1434, Apr 24, 2013, SPA -- Director of police of Tabuk region Major General Matouk Al-Zahrani announced that Tabuk police has received, at about one o'clock afternoon, a tip that a car driven by an expatriate of U.S. citizenship was subject to a car collision and fire shooting by someone driving another car on a road in Tabuk city. He indicated no injuries resulting from the incident but just some damages afflicted the U.S citizen's car due to the collision and shooting. Major General Al-Zahrani also reported that the competent authorities of Tabuk Police had begun procedures for the criminal investigation into the incident. --SPA

Gulf media notes: 1

There's been a story circulating for over a week that Saudi Arabia deported three men from the UAE for being "too handsome." In terms of truth, the story stinks to high heaven. It doesn't sound right, and no one can produce an original source for it (note: saying it was an Arab language newspaper "Elaph" doesn't count). Our own view is that it's being circulated to distract attention from an actual documented event involving a Dubai resident Egyptian woman who was involved in a plausible and widely witnessed incident at the same festival -- Janadriyah -- at which the alleged deportations took place.

But the supposedly edgy media would rather chase the more implausible story, especially when they can show off the capability to stack tweets and write a few words around it.

UPDATE: There is zero evidence that Omar Borkan al Gala was one of the three deported men but since the claim that he was has "gone viral," it must be true, right?

Wednesday, April 24, 2013

What the Islamophobes fear most

Noted without further comment, story from Saudi Press Agency --

Riyadh, Jumada II 14, 1434, Apr 24, 2013, SPA -- The Undersecretary of the Ministry of Islamic Affairs for Mosques, Call and Guidance Dr. Tawfiq bin Abdulaziz Al-Sudairi received here today Member of Dutch right-wing Freedom Party Ernaud Van Doorn, who converted to Islam recently, and currently on a visit to the Kingdom of Saudi Arabia during which he performed Umrah rituals and met with a number of scholars and preachers in the Kingdom. During the meeting, Ernaud briefed Dr. Al-Sudairi on his experience in life, and how he converted to Islam and his change from anti-Islam to pro-Islam. Dr. Al-Sudairi congratulated Ernaud on converting to Islam, noting that Islam is the religion of mercy, love and peace. Ernaud expressed his thanks to the Undersecretary for the warm reception and generous hospitality accorded to him in the Kingdom of Saudi Arabia. On the other hand, Ernaud visited the Exhibition of the Construction of the Two Holy Mosques. At the end of the visit, he expressed his pleasure to visit the Kingdom, perform Umrah rituals, visit the Prophet's Mosque, and greet the Prophet (peace be upon him). Ernaud was one of the participants in the production of the film offending the Prophet. He converted to Islam last March. --SPA

Monday, April 22, 2013

You'll never beat the Euro-federalists

European Commission President Jose Manuel Barroso tells the Europe of nations that he feels their pain --

For European countries, most of which have fought long and hard to become united and/or independent, the thought of being a mere sub-federal entity is unbearable. This aversion to centralisation is both understandable and unsurprising. One of the classic 19th century Irish nationalist songs goes: 'and Ireland, long a province, be a nation once again'. It is only natural that such a nation does not want to go back to being, even if only symbolically, 'a province once again', and the same feeling lives just as strongly in many, if not in all Member States.

He then goes on to say that each crisis in the EU has been really helpful in promoting federalism because they have forced the countries into collective solutions to various problems.

We're going to need new rebel songs.


We have a post about George Osborne playing the selective quotation game over at A Fistful of Euros.

Saturday, April 20, 2013

Pulling a fast one

Slovenia is setting up a bad bank. It's a sign of the times in Europe that you have to pay attention to bad banks in Slovenia. The European Central Bank has issued a couple of legal opinions on the Slovenian case. They include comments on the role of the national central bank in the arrangements --

[September 2012] Banka Slovenije as the banking supervisor should be more actively involved in the activities of the BAMC (the bad bank), in particular in any procedure identifying the banks drawing on the measures under the draft law as well as identifying and defining the value of the assets to be transferred to the Fund. The draft law could clarify how the measures under the draft law fit into the system of supervisory measures taken by Banka Slovenije within its supervisory competence pursuant to the Law on banking. The ECB would therefore suggest explicitly providing for an appropriate role of Banka Slovenije either in the draft law or in any other relevant legal act3.  

[March 2013] In Opinion CON/2012/71 (i.e. the above), the ECB noted that Banka Slovenije should be more actively involved in the BAMC, in particular in any procedure identifying the banks that would be eligible to draw on the measures. Against this background, it should not be the Government or the Committee, but rather Banka Slovenije assessing and deciding whether the stability of the financial system is threatened20. Banka Slovenije should also be given a role in the valuation of assets to be transferred to the BAMC or any dedicated company. Article 16(2) provides that the long-term real economic value of assets is assessed by the bank and the assessment confirmed by an authorised independent auditor. While the ECB welcomes the involvement of an independent auditor, Banka Slovenije should be given a prominent, if not leading, role in determining the long-term real economic value, with the valuation to be confirmed by such auditor.

Ireland's National Asset Management Agency (NAMA) -- the Celtic Tiger's bad bank -- meets none of these requirements in terms of the role of the Irish Central Bank. Zero. Zilch. Nada.

It would be nice to know even after the fact why this was allowed to be the case and whether it actually matters. 

Embarrassing friend

Eurocrats recycle the wording for the statements from one event to the next. So what they leave out between statements is often as revealing as what's left in. Example: here's a sentence from the concluding statement of the EU finance ministers meeting in February --

EMPHASISES that sound and sustainable public finances are an essential prerequisite for market confidence and macroeconomic stability, and hence for growth.

Now here's the equivalent section of the sentence from the statement of EU Monetary Affairs Commissioner Olli Rehn to the IMF Spring Meetings --

Sound and sustainable public finances are an essential prerequisite for macroeconomic stability and hence for growth.

Note: they've dumped the claim that austerity has to be done to keep the markets happy. 

Friday, April 19, 2013

The USA has the worst approach to terrorism*

Except for all the other countries. France is busy paying ransoms to militants in Africa knowing that this will blow up on a future incident like the Algerian gas field attack, while Russia is busy facilitating Bashar al-Assad in a Chechnya approach to the Syrian insurrection, with the original version thereof now having arrived in Boston.

It's not just in the field of economic policy where we are ruled by idiots.

UPDATE: The emerging profile of the Tsarnaev brothers has some resemblance to the trajectory of Mohammed Merah.

The bad guy shuffle

Above is the Hezbollah operative trying to look like a dorky tourist waiting for Israelis to get on to a bus in Burgas, Bulgaria, into which he would then place his heavy black backpack containing a bomb which blew up, apparently ahead of schedule, since he was killed in the explosion.

Now in the case of Boston we're again looking at baseball capped young men looking like part of the crowd but upon reflection with overly large backpacks and looking a bit too much like trying to look like part of the crowd.

There are only so many ways to carry out atrocities like the Boston bombing and of course many different types of group could converge on the same modus operandi. But this particular MO looks like Hezbollah.

Photo: BBC.

UPDATE: As of Friday morning, the speculation in this post appears to be wrong.

Heckuva job Russian War on Terror.

Thursday, April 18, 2013

They seek him there

That Arab freedom agenda just keeps getting messier. The above is former member of the Kuwait National Assembly Musallam Al-Barrak, who popped up at a rally in his favour a few hours after special forces raided his house seeking to arrest him on foot of a 5 year jail sentence for insulting the Emir.

On the one hand, the good news is that you can pop up smiling at a supporters' rally a few hours after the police showed up to arrest you. On the other hand, a politician is now essentially a fugitive on the basis of words, not deeds, in what is the Gulf's most liberal country. And the one for which Maggie Thatcher expended the last of her overseas political capital in 1990. Bad timing.

Photo: Kuwait Times.

Tuesday, April 16, 2013

Reader service

Wall Street Journal news article on the gold price crash --

Gold bugs proliferated. Steve Forbes, the onetime Republican president candidate, predicted in 2011 that loss of confidence in paper currency would force the U.S. to return to the gold standard after the 2012 election. Peter Hambro, chairman of London-listed Petropvlovsk, which mines gold in Russia, was cited in a British newspaper as saying that a big U.S. bank sent a text message to him in the summer of 2011 saying that, if the Fed unleashed a third-round of money-printing and bond-buying (as it later did), gold prices would hit $5,000 an ounce.

The quote was given to the Daily Telegraph's Ambrose Evans-Pritchard.  

Saturday, April 13, 2013

If that's his original spot, I'm Arnold Palmer

Nothing seems more apt for the Tiger Woods/Masters/bad drop situation than the golf sequence from Goldfinger. Yes, we've changed the quote slightly to suit Tiger's situation.

Party like it's 1924

European Union Commission President Jose Manuel Barroso at a speech in New York, celebrating the results of European austerity --

Europe has a manufacturing trade surplus of almost 300 billion euro, five times as large as it was in 2000. Sometimes people tend to forget this, that even in the crisis, Europe is in fact increasing its surplus. Our services surplus has expanded to over 100 billion euro. And our agricultural trade has shifted from a deficit to a surplus.

John Maynard Keynes, "The German Transfer Problem," Economic Journal Vol 39 (March 1929) --

If, however, we suppose that, by agreement with the Reichsbank, deflation is enforced, how will this help? Only if, by curtailing the activity of business, it throws men out of work, so that, when a sufficient number of millions are out of work, they will then accept the requisite reduction of their money-wages. Whether this is politically and humanly feasible is another matter. Moreover, an attempt by foreign financiers to withdraw some part of their vast short-term loans to the German Money Market, estimated at $300,000,000, might be a by-product of a violent political and economic struggle aimed at the reduction of wages in the interests of foreign creditors.

Free trade is just other words for nothing left to lose

European Union Commission President Jose Manuel Barroso in New York City hyping up the benefits of an EU-USA free trade deal --

If the agenda and the ambition are undeniable, so are the potential benefits of such a deal. If we manage to come to a comprehensive agreement, the overall gains could add up to a 0.5% increase in GDP for both sides.

So all that excitement is over a once-off half of one percent increase in GDP. As EU Commission President, Jose Manuel Barroso is the chief technocratic advocate of austerity policies that are costing countries several percentage points of GDP every year.

Photo: Use of Dr Evil via Wikipedia for commentary purposes.

Friday, April 12, 2013

Slow Learners

The DUP's Nigel Dodds offering thoughts on Maggie Thatcher's role in Northern Ireland during the extended House of Commons session on her legacy on Wednesday --

On Northern Ireland, again, she was full of contradictions. We in the Democratic Unionist party, and indeed the entire Unionist community in Northern Ireland in the 1980s, opposed the Anglo-Irish agreement, and many Conservative Members and others opposed it too. Once she had said that Ulster was as British as Finchley; once she had said, rightly, that it was “out, out, out” to a united Ireland, a federal Ireland or joint authority. Yet a year later, in 1985, she signed the Anglo-Irish agreement without any consultation with the Unionist community, and without its consent. The reason why many Unionists felt and spoke so strongly at that time, and why there remain many strong feelings about that era, is that they remembered her strong stance during the hunger strikes, when she had stood up in defence of democracy and against terrorism; they remembered how, as the Prime Minister and others mentioned, she had suffered the loss of close colleagues to terrorism; and they remembered how she herself, just a year before, had survived an IRA assassination attempt. Despite that, she was persuaded to the sign the Anglo-Irish agreement. 

I am glad that in her later life, Margaret Thatcher came to recognise that the agreement was a mistake. Lord Powell, her former close adviser, said the other night on “Newsnight” that, as it is said of Mary Queen of Scots that the word “Calais” was inscribed on her heart, so he believed that the words “the Anglo-Irish agreement” would be inscribed on the heart of Margaret Thatcher, because she had become increasingly disillusioned with it. People say, “But was it not the template for what we now have in Ulster?” I say it was not, because we cannot base a future on exclusion. I say that as a Unionist in Northern Ireland, with all our history, because we must go forward with the inclusion of all communities. Today, there is little of the Anglo-Irish agreement left and instead we have a settlement that has been consulted on and has the consent and agreement of both communities in Northern Ireland. I am glad that we have that, as opposed to the previous approach.

Note his complaint that the Agreement overrode the Unionist veto and constituted the first direct deal between the UK and the Republic of Ireland about Northern Ireland since partition, whereas the Good Friday Agreement had Unionist consent.

That's not exactly what the contemporaneous reactions to the respective agreements would have led you to understand about their properties. Fianna Fail -- "the Republican Party" -- opposed the Anglo-Irish Agreement but negotiated GFA.


The FT's Philip Stephens with a Maggie Thatcher anecdote --

My turn came during her big fight with Nigel Lawson about the chancellor’s effort to tie the value of sterling to the Deutschmark. Surely, I had needled her, she would bend eventually to Treasury pressure to take the pound into the European exchange rate mechanism? The year was 1989 and the occasion a drinks party hosted by political journalists at Westminster. In response to my act of lèse-majesté, Thatcher took hold (quite literally) of the lapels of my jacket: “Mr Stephens! You don’t understand! I won’t have the Belgians decide the value of the pound!”

You can't teach an old tiger new tricks

New York Times article on "regulatory capital trades" i.e. bank transactions whose main purpose is to make their balance sheet look better to regulators --

Citigroup cut a deal at the end of last year with the private equity firm Blackstone Group, which insured the big bank against a portion of the losses on a roughly $1 billion pool of shipping loans. The bank used a special-purpose vehicle in Ireland called Cloverie to facilitate the trade, according to people briefed on the matter but not authorized to speak on the record. For its part, Blackstone put up about $100 million, or 12 percent of the value of the shipping portfolio, to cover any possible losses. If things go well, Blackstone will receive a return of about 15 percent, these people say. If the shipping loans go sour, Citigroup gets Blackstone’s money and the private equity firm loses its cash.

Sunday, April 07, 2013

Slippery slope

In the New York Times, Ross Douthat takes on the rumbling discussion triggered by a Princeton University graduate (and student parent) advice to Princeton undergraduate women to find their husbands while in college. Douthat goes for the angle that since American elites are so effective at perpetuating themselves through various means, including marrying each other, this advice was only inappropriate for being said out loud.

But if the elites really are so successful at perpetuating themselves through a lifetime of institutions (he cites where they live, work, attend school etc), then why should be there be a rush to get married specifically while in college?

Saturday, April 06, 2013

Everyone above average

Ireland still has a lot to do in figuring out precisely how and why the Celtic Tiger bubble got out of hand, but there's a clue in this RTE story about the current scandal concerning the salary of the former CEO of the Irish Medical Organisation (doctor's union) --

It has also emerged that the original CEO's contract was drafted in 2003 on the advice of independent outside consultants. The consultants were asked to benchmark it to comparable office holders in the public and private sectors at the time.

What this brings out is the creep of upper private sector pay practices into the Irish public sector and quasi-public sector. Coupled with existing relativities and parities embedded in the public sector system and the unquestioned instrument of percentage pay increases, there was a recipe for the trebles all round era of pay packages in Ireland, with the biggest personal windfalls of course going to those at the top.