Coyote Blog

One of the homilies one hears all the time from economists is "Never reason from a price change."  What does this mean?  Prices emerge in the market at the intersection of the supply and demand curve.  Often, when (say) a price of a commodity like oil decreases, pundits might reason that the demand for oil has suddenly dropped.  But they don't necessarily know that, not without information other than just the price change.  The price could have dropped because of a shift in the supply curve or the demand curve, or perhaps some combination of both.  We can't know just from the price change.

Which gets me thinking about the last election.  Trump won the election in part because several states like PA and WI, which had been safe Democratic wins in the last several elections, shifted to voting Republican.  Reasoning from this shift, pundits have poured forth today with torrents of bloviation about revolutionary changes in how groups like midwestern white males are voting.  But all these pundits were way wrong yesterday, so why would we expect them to suddenly be right today?  In my mind they are making the same mistake as reasoning from a price change, because the shift in relative party fortunes in a number of states could be because Trump is somehow doing better than Romney and McCain, or it could be because Clinton is doing worse than Obama.  Without other information, it is just as likely the story of the election is about a Clinton loss, not a Trump win.

Republican pundits want to think that they are riding some sort of revolutionary wave in the country.  Democratic pundits don't want to admit their candidate was really weak and like how they can spin white supremacist story lines out of the narrative that Trump won on the backs of angry white men.

The only way we can know the true story is to get more data than just the fact of the shift.  Let's go to Ramesh Ponnuru (and Kevin Drum from the other side of the political aisle makes many of the same points here and here).

The exit polls are remarkable. Would you believe that Mitt Romney won a greater percentage of the white vote than Donald Trump? Mitt took 59 percent while Trump won 58 percent. Would you believe that Trump improved the GOP’s position with black and Hispanic voters? Obama won 93 percent of the black vote. Hillary won 88 percent. Obama won 71 percent of the Latino vote. Hillary won 65 percent.

Critically, millions of minority voters apparently stayed home. Trump’s total vote is likely to land somewhere between John McCain’s and Romney’s (and well short of George W. Bush’s 2004 total), while the Democrats have lost almost 10 million voters since 2008. And all this happened even as Democrats doubled-down on their own identity politics. Black Lives Matter went from a fringe movement to the Democratic mainstream in the blink of an eye. Radical sexual politics were mainstreamed even faster. White voters responded mainly by voting in the same or lesser numbers as the last three presidential elections. That’s not a “whitelash,” it’s consistency.

As I know all too well, a portion of Trump’s online support is viciously racist. Conservative and liberal Americans can and must exercise extreme vigilance to insure that not one alt-right “thinker” has a place in the Trump administration, but it’s simply wrong to attribute Trump’s win to some form of great white wave. Trump won because minority voters let him win. The numbers don’t lie. The “coalition of the ascendant” stayed home.

Trump had roughly the same vote totals as Romney and McCain, and did relatively better with non-whites and Hispanics.   The difference in the election was not any particular enthusiasm for Trump, and certainly not any unique white enthusiasm, but a total lack of enthusiasm for Hillary Clinton.   Look at the numbers in Drum's post -- Hillary did worse with every group.  For god sakes, she did 5 points worse than Obama with unmarried women, the Lena Dunham crowd that theoretically should have been her core constituency.  She did 8 points worse than Obama with Latino women!

This is not a story of a Trump revolution.  This is a story of a loss by a really weak Clinton.  Obama would have dusted the floor with Trump.

Harry Reid should be thanked for admitting the sort of behavior everyone knows exists but none will confess.  The amazing thing to me is what yawns this elicits from the media:

Harry Reid, the top Democrat in the Senate, was asked by CNN’s Dana Bash this week if he regretted his 2012 accusation on the Senate floor that GOP presidential nominee Mitt Romney “hasn’t paid taxes for ten years.” Reid presented no evidence at the time and claimed he didn’t need any: “I don’t think the burden should be on me. The burden should be on him. He’s the one I’ve alleged has not paid any taxes.”

Reid’s response in the interview was fascinating. When asked by Bash if his tactic was McCarthyite he visibly shrugged on camera, smiled, and said “Well, they can call it whatever they want. Romney didn’t win, did he?” White House spokesman Josh Earnest refused to criticize Reid for his comment because it “was three years old,” when in reality Reid’s televised reveling in it was only three days old.

I do not agree with Mitt Romney's implied protectionism in his ads, particularly when he says

Obama took GM and Chrysler into bankruptcy and sold Chrysler to Italians who are going to build Jeeps in China

The problem with Obama's intervention in the GM and Chrysler bankruptcies was cronyism -- the protection of favored insiders to the detriment of the operation of the rule of law -- rather than any accelerated globalization.  The auto industry is a global business, deal with it. We should be thrilled that Chrysler is participating in the Chinese economy, an opportunity they would not have had a generation or two ago.  This kind of populist BS is exactly why I voted Johnson, not Romney, this morning.

Anyway, this statement has been subject to a lot of "fact-checking."  Chrysler head Sergio Marchionne wrote a letter in the Detroit News, and while he did not attempt to deny the part about Italians (though that would have been funny), he did write:

Chrysler Group's production plans for the Jeep brand have become the focus of public debate.

I feel obliged to unambiguously restate our position: Jeep production will not be moved from the United States to China.

OK, thanks for the clarification.  But wait, the letter goes on.  He spends a lot of time explaining how Chrysler is investing a lot in Jeep SUV development and production, and that many jobs are being added making Jeeps.  In fact, Jeep SUV's seem to be the big bright spot in the Chrysler turnaround, which is funny because Obama's logic for handing Chrysler over to Fiat for about a dollar was that Fiat would turn Chrysler around with all of its great small car designs.

Anyway, the really interesting part comes late in the article, where he says in paragraph 9:

Together, we are working to establish a global enterprise and previously announced our intent to return Jeep production to China, the world's largest auto market, in order to satisfy local market demand, which would not otherwise be accessible.

So Chrysler ... is going to build Jeeps in China.

This is why the whole "fact check" genre is so stupid.   We could fact-check this three ways, depending on what political axe we want to grind:

1. We could say that Romney's ad was exactly correct, that Chrysler's CEO says it is going to build Jeeps in China, just as Romeny said.  Romney's statement is literally true as written, which one would think might be a good criteria for a fact-check.
2. We could say that Romney's ad was misleading, because the implication was meant to be that Chrysler is shifting North American production to China, and they are not (Politifact took this tack).
3. We could argue that Romney's entire premise is wrong, because what matters to long-term economic health and wealth creation in this country is that Chrysler is making the optimum production decisions, wherever the factories end up.  And further, that making these decisions the subject of political discourse virtually guarantees they will be made for reasons other than optimizing efficiency.  This is the fact-check I would make but you will not hear in mainstream media fact-checks, because the level of economic ignorance on trade in most of the media is simply astonishingly high.

Apparently the most important issue is not the unsustainability of deficit spending, lack of fiscal responsibility, or the tough problems of balancing expensive bailouts with expensive defaults.  It is making sure the timing of a Greek default does not negatively affect Obama's re-election.  From the Independent (UK) entitled, "Obama asks eurozone to keep Greece in until after election day"

American officials are understood to be worried that if they decide Greece has not done enough to meet its deficit targets and withhold the money, it would automatically trigger Greece's exit from the eurozone weeks before the Presidential election on 6 November.

They are urging eurozone Governments to hold off from taking any drastic action before then – fearing that the resulting market destabilisation could damage President Obama's re-election prospects. European leaders are thought to be sympathetic to the lobbying fearing that, under pressure from his party lin Congress, Mitt Romney would be a more isolationist president than Mr Obama.

The Kennedy's have never been shy about using the government as their own personal plaything:

Senator Ted Kennedy, who is gravely ill with brain cancer, has sent a letter to Massachusetts lawmakers requesting a change in the state law that determines how his Senate seat would be filled if it became vacant before his eighth full term ends in 2012. Current law mandates that a special election be held at least 145 days after the seat becomes available. Mr. Kennedy is concerned that such a delay could leave his fellow Democrats in the Senate one vote short of a filibuster-proof majority for months while a special election takes place...

What Mr. Kennedy doesn't volunteer is that he orchestrated the 2004 succession law revision that now requires a special election, and for similarly partisan reasons. John Kerry, the other Senator from the state, was running for President in 2004, and Mr. Kennedy wanted the law changed so the Republican Governor at the time, Mitt Romney, could not name Mr. Kerry's replacement.

"Prodded by a personal appeal from Senator Edward M. Kennedy," reported the Boston Globe in 2004, "Democratic legislative leaders have agreed to take up a stalled bill creating a special election process to replace U.S. Senator John F. Kerry if he wins the presidency."

I got another boiler room broker call today, so I guess the recent downturn has not flushed out all the cockroaches.  A while back I discussed the frequent calls I get from boiler room stock promoters.  The approach they use with me is this:

So the other day, I accidentally let one of them go further than I usually allow.  He said he was from Olympia Asset Management.  (There is an Olympia Asset Management web page, but I don't know if it is the same company and the web page has not been updated for several years.)  I let him run for a bit because a friend of mine runs a very well-respected financial planning firm with a different name but also with Olympia in the title, and for a moment I thought it might have been one of his folks.

Anyway, he proceeds to try to convince me that we have talked before and discussed a certain security.  "Remember me, we talked six months ago about ____".  Of course, I had never heard of the guy.  At this point I usually hang up, because I have heard this crap before -- it is a common pitch.

Its pretty clear to me now that this is what he is doing:

1. Trying to imply that we have some kind of relationship we actually don't have.  Or worse...
2. Trying to convince me that he touted stock A six months ago, so now he can tell me stock A has gone up in price.  Many reputable brokers built their reputation by cold calling people and saying:  Watch these 3 stocks and see how they do and I will call you back in 6 months.  That way, you can evaluate their stock picking without risk.  The modern sleazy approach is to pick a stock that has gone up a lot in the last 6 months, and then call some harried business person and pretend you called them with that pick 6 months ago, hoping that they will give you the benefit of the doubt.

The call just went downhill from there.  I hung up after his discussion of throwing Molotov cocktails into the cars of people he doesn't like.  That was right after I asked him if Tony Soprano was standing beside him listening in on the call.

Anyway, beware.  The guy today called me and asked me if I remembered him calling 6 months ago predicting the downturn in the mortgage market and the crash of the financial stocks.  You are not crazy - no matter how certain the guy seems, you really did not talk to him 6 months ago.

By the way, I am not the only one getting this pitch.  Ed Moed got the same pitch from the same script from the same company.  Many of his commenters share similar experiences.

Update: Wow, they sure do like Mitt Romney over at Olympia Asset Management.  I'm sure there was no arm-twisting here, when every single employee of the company seems to have given the max donation to the same candidate, with no breaking of ranks.

Update #2: Mike Murphy, CEO of Olympia Asset Management, was "a member of the [Hoffstra's] elite football team."  Wow.  Remember that time Hoffstra ripped through all those SEC teams?  Yeah, neither do I.  Anyway, this achievement does not hold a candle to the fact that I was once captain of Princeton Tower Club's elite intramural coed field hockey team.

It is nothing new for politicians and the powerful to despise commerce and "traders."  In Medieval society, and continuing in Europe right up into the 19th century, the ruling elite scorned careers that involved actual productive effort.  If you were actually producing something, rather than indolently feeding yourself off the work of the masses, you were not a "gentleman."

It appears that this attitude is coming back in vogue, most notably from the presidential candidates of both parties.  From David Boaz in the WSJ:

Sen. Obama told the students that "our individual
salvation depends on collective salvation." He disparaged students who
want to "take your diploma, walk off this stage, and chase only after
the big house and the nice suits and all the other things that our
money culture says you should buy."

The people Mr. Obama is sneering at are the ones who
built America "“ the traders and entrepreneurs and manufacturers who
gave us railroads and airplanes, housing and appliances, steam engines,
electricity, telephones, computers and Starbucks. Ignored here is the
work most Americans do, the work that gives us food, clothing, shelter
and increasing comfort. It's an attitude you would expect from a
Democrat.

Or this year's Republican nominee. John McCain also
denounces "self-indulgence" and insists that Americans serve "a
national purpose that is greater than our individual interests." During
a Republican debate at the Reagan Library on May 3, 2007, Sen. McCain
derided Mitt Romney's leadership ability, saying, "I led . . . out of
patriotism, not for profit." Challenged on his statement, Mr. McCain
elaborated that Mr. Romney "managed companies, and he bought, and he
sold, and sometimes people lost their jobs. That's the nature of that
business." He could have been channeling Barack Obama.

Mr. Boaz mentions the hypocrisy of Obama having a million dollar house and being famous for his beautiful suits, and then telling graduates not to aspire for the same things.  But a bigger hypocrisy, or perhaps contradiction, is the fact that the candidates must know that the world won't function if everyone were to take their advice.  While bashing the productive, each relies on the productive to fund his plans.  While urging everyone to be parasites, they must know that some must ignore their advice to become the productive hosts on which the parasites feed.

But hypocrisy is not the biggest issue. The real issue
is that Messrs. Obama and McCain are telling us Americans that our
normal lives are not good enough, that pursuing our own happiness is
"self-indulgence," that building a business is "chasing after our money
culture," that working to provide a better life for our families is a
"narrow concern."

They're wrong. Every human life counts. Your life
counts. You have a right to live it as you choose, to follow your
bliss. You have a right to seek satisfaction in accomplishment. And if
you chase after the almighty dollar, you just might find that you are
led, as if by an invisible hand, to do things that improve the lives of
others.

OK, the comment thread in my post on Romney evolved into a good discussion on health care, but I did not get a very good answer on how Romney supporters could possibly consider him the inheritor of the Reagan small-government legacy.  Apparently, I am not the only one confused on this, as both Michael Tanner and Jerry Taylor chime in with the same question.

What does it say about the Republican Party when the leading fusionist conservative in the field - Mitt Romney, darling of National Review and erstwhile heir to Ronald Reagan -
runs and wins a campaign arguing that the federal government is
responsible for all of the ills facing the U.S. auto industry, that the
taxpayer should pony up the corporate welfare checks going to Detroit
and increase them by a factor of five, that the federal
government can and should move heaven and earth to save "every job" at
risk in this economy, and that economic recovery is best achieved by a
sit-down involving auto industry CEOs, labor bosses, and government
agents armed with Harvard MBAs to produce a well-coordinated strategic
economic plan? That is, what explains the emergence of economic fascism
(in a non-pejorative sense) in the Grand Old Party at the expense of
free market capitalism?

Unfortunately, 1970-style Nixonian Republicans are back in force.  Can "Whip Inflation Now" buttons be far behind?

Update:  Apparently William F. Buckley is happily returning to the 70's as well.

Well, I can't blame this bit of command and control on Mitt Romney, but it is still a great example of politicians doing exactly the opposite of what is needed to making US health care even more convenient and affordable.

In-store health care services offer cheap primary care, ease the
burden on emergency rooms, and help people who can't afford health
insurance"“or who have insurance but can't find a decent primary care
physician. They also boast stratospheric customer satisfaction ratings. 

So why is idiot Boston Mayor Thoma Menino against them?  Because they're driven by profit!

The decision by the state Public Health Council,
"jeopardizes patient safety," Menino said in a written statement.
"Limited service medical clinics run by merchants in for-profit
corporations will seriously compromise quality of care and hygiene.
Allowing retailers to make money off of sick people is wrong."

This is as opposed to doctors in hospitals, who everyone one knows don't make any money off of sick people.  Seriously, who in their right mind could possibly oppose a free market solution to cleaning out these non-life-threatening type cases from hospital emergency rooms?

I just don't understand the enthusiastic support for Mitt Romney and his description as an heir to the Reagan legacy.  In particular, he claims to single-handedly have implemented HillaryCare in Massachusetts, the program that was arguably responsible for sweeping the Republicans into Congress in 1994.  My sense is that Hillary in the intervening years has moved on to an even more socialist plan, but everything I see in the Romney plan looks very much like Hillary's original proposal. 

The plan is command and control at every turn -- for example, I am a huge believer in high deductible health insurance.  My family has saved a ton with it, and it shifts health insurance to be more like, you know, insurance -- meaning it covers catstrophic, bankrupting problems but not day to day expenses.  Well, this sort of very reasonable plan, which has the added benefit of bringing some price competition to medicine because people like me now care about prices, was made illegal in Massachusetts by Romney and Company.  Romney strikes me as just another 1970's-style big government Nixonian Republican, like nearly every other Republican in the race this time around.

Previous posts on Romney's plan here and here and here.

Mitt Romney promised his state a health care free lunch, and everyone believed him.  So much so that other states are copying his plan.  Well, the charade is ending:

Last year, then-Gov. Mitt Romney made headlines by signing legislation
to cover all the state's uninsured. . . Romney suggested that annual
premiums for a single worker might total $2,400. But when insurance
companies recently provided real estimates, the cost was much higher:
$4,560.

Arnold Kling cries "I told you so."    And, I did too.

Low-deductible health care insurance (Massachusetts does not allow, by law, any other kind) is nuts, but it is what everyone is used to.  For some reason, people have a huge aversion to paying for medical costs directly, even if it is demonstrably cheaper.  Samuelson gets at this in his article when he says:

For decades, Americans have treated health care as if it exists in a
separate economic and political world: When people need care, they
should get it; costs should remain out of sight

Let us take a quick example.  Let's say that the average family generates $1000 in medical costs in a normal year, that is, without any major hospitalizations.  This would mean that if I got an insurance policy with a $1000 deductible, my coverage should be (relatively) cheap, since I am only really insurance against catastrophes -- I am effectively paying my normal annual costs out of pocket.

Now let's say I switch to a zero deductible. The premiums are going to have to be at least a thousand dollars higher a year.  And, in fact, they are likely to be more, given markups and administrative costs.  And that extra $1000+ will now be unavoidable to me, whereas I might have managed my own out of pocket spending lower if I am paying the bills.  Paying for a health care plan that covers one's normal annual medical costs is a dead loss.  There is no free lunch  (except for tax -- historically, medical costs payed by the employer were tax deductible, whereas costs paid out of your own pocket were not, which is one reason our health care market is structured in such a silly manner).

A while back, I switched from a $500 deductible plan to a $3500 deductible plan (I pay for my own health care).  You know how much I save in annual premiums?  $3000!  Talk about the biggest no-brainer ever.  Even if my annual health care spending was $3500, this would still be a break-even decision.  But since my actual spending in a normal year is probably $1000-$1500  (depending mainly on whether my wife or I get sent for some weird test) this was a huge financial gain.  And remember, this decision would not have been available to me in Massachusetts, because they do not allow high-deductible health insurance.  For some reason we are all caught up in this paradigm that health care expenses remain out of sight.  Even my wife, the Harvard MBA  (but from Massachusetts!) took some time to get comfortable with the concept of paying medical expenses out of pocket -- you're not supposed to do that, that's what insurance is for!