Coyote Blog

I got this in the mail from the US EEOC:

EEO-1 filers should begin preparing to submit Component 2 data for calendar year 2017, in addition to data for calendar year 2018, by September 30, 2019, in light of the court's recent decision in National Women's Law Center, et al., v. Office of Management and Budget, et al., Civil Action No. 17-cv-2458 (D.D.C.).  The EEOC expects to begin collecting EEO-1 Component 2 data for calendar years 2017 and 2018 in mid-July, 2019, and will notify filers of the precise date the survey will open as soon as it is available.

As a reminder, the schedule 2 data is an order of magnitude increase in the amount of information the government wants on our employee's skin color and reproductive plumbing.  Instead of just asking for counts of employees by race and gender (a distasteful exercise every time I have to do it) but they want a hugely expanded amount of salary data for every race-gender combination.  As I wrote before:

Forget for a moment that the whole purpose of this rule is to provide litigation attorneys a database they can mine to legally harass businesses.  The reporting requirements here are incredibly onerous.  It takes the current EEO-1 (the annual exercise where we strive for a post-racial society by racially categorizing all of our employees) and makes it something like 15-20 times longer.  In addition, rather than simply "count" an employee as being on staff in a certain race-gender category, we now have to report their income and hours worked.  Either I will have to hire staff just to do this stupid report, or I will again (like with Obamacare) have to pay a third party thousands of dollars a year to satisfy yet another government reporting requirement.  This is utter madness.

Get this -- the report has 3600 individual cells that must be filled in.  And this is in addition to the current EEO-1 form, which also still has to be filled out.  The draft rule assumes 6-7 hours per company per year for this reporting.  They must be joking.

Making this worse, the email implies that they are going to demand retroactive data for 2017 and 2018, which is simply insane.  We pay an extra couple thousand dollars every year for extra payroll program functionality to be able to accommodate this madness, but certainly did not have it in place back in 2017.

So this is my second in a series of transpartisan proposals, the unintended consequence of which is likely to have me ostracized not just by the two major parties but by the libertarian community as well.  My first such proposal, on climate, helped get me ostracized from the climate skeptic community.  Much of this article is based on a proposal I first made in 2015.

I want to say at the top that unlike my climate plan, this is not a plan so much as a concept for a plan.  As in climate, tribalism and muddled thinking about goals has made it hard to make forward progress on the role of government in health care.  The Democrats in 2008 and 2018 and the Republicans in 2010 arguably won a lot of Congressional seats stirring up fears about health care, so it is a vital issue with the public.  For those who want to just dig in their heals and wait until it all goes away, I don't think this will happen.  And I think the logic I outline is superior to the typical political process described by Megan McArdle as 

1. Something must be done.
2. This is something.
3. Therefore, this must be done.

I think the key to creating a viable program for health care depends on being very clear on the goals that one is trying to achieve and matching those goals well with the capabilities of government.  Obamacare was a huge mess in this regard, weaving all over the place in terms of goals (increasing insurance coverage, lowering costs, improving care effectiveness) and assigning roles to the government that were laughably poorly matched to its skills.

Take increasing the percentage of Americans with health insurance, probably the number one goal of Obamacare and the metric most cited to evaluate its success.  Is the core need of Americans really to have health insurance, or it something else?  Is mandating that people buy insurance they don't value in order to improve this metric really improving individual well-being?  Does increased coverage really translate to increased health? (spoiler -- any causal link here is really tenuous in the data).  All these questions and more exist because increasing insurance coverage was the wrong goal.  So is anything having to do with "pre-existing conditions" as Democrats framed it (fairly successfully) in the recent election.

The #1 Consumer Need and Fear in Health Care

Here is my main assumption:  The real, core need of individuals is that a) when they or a family member get dreadfully sick, lack of money will not be a barrier to getting them the needed care and b) even if they can get the care, they would really prefer not to be bankrupted by it.  All these other things -- percent covered by insurance, mandates to accept pre-existing conditions, insurance mandates and subsidies -- are all imperfect proxies for this core need.

This is exactly the kind of need that we buy catastrophic insurance to cover.  I would be bankrupted and homeless if my house burned down and I was still responsible for the mortgage but relatively inexpensive fire insurance covers that.  Losses are not usually correlated (ie one loss does not make it more likely I have a second loss, except in flood insurance which is why there is no private flood insurance any more) so I don't worry about non-renewal even after a major fire.

But obviously health care is different.  Health problems this year greatly raise the probability of health problems in future years.  There is every incentive for an insurer to bail on you after one bad year.   This is the major fear that then follows the need - that catastrophic insurance will no longer be available after the first claim.  Had health insurance developed differently (e.g. with policies that covered more than just one year, more like term life) we might be in a different situation, but here we are.

Government is Good at Having Lots of Money on Call

And the good news is that the one thing the government is really, really good at is being an insurer of last resort -- they have the deep pockets and the fiat money power to do this better than anyone else -- that is why they are the insurer of last resort of bank deposits and for flood insurance (I am not saying that there are not moral hazards in these or unintended consequences, but the insurance works).  So there is the clear opportunity -- what people need most is catastrophic insurance even when the private market won't provide it and the government does really well is provide catastrophic insurance as a last resort.

Before we get into the plan itself, let's discuss a few things that the government does NOT do well:

Government is Bad at Cost control.

I feel like arguing that government is bad at cost control should be about as necessary as arguing that socialism always fails, but I guess it just needs to be repeated over and over.  A large part of the PPACA (Obamacare) was adding provisions meant to reap cost savings in health care.  None of it has worked.  The problem is that any real markets for health care have been disappearing for decades as more and more health care expenses get paid by third parties rather than individuals making price/value trade-offs (as they do with pretty much everything else -- the prosaic word for this is "shopping").

Now, Democrats are increasingly seeking "single payer" health care, arguing that aggregating all purchases in one entity will result in huge negotiating leverage.  But this never has been true.  It is impossible to have a real price negotiation without a market, and market price, to reference.   Look at another area of government spending where the government does 100% of the industry purchasing:  military hardware.  Do you really have the sense that the military is getting great pricing due to their purchasing power?  Supporters will site discounts that Medicare gets over other buyers for certain services and pharmaceuticals.  But note again that this is all in reference to a market price benchmark, that will disappear with single payer.  Further, many of the savings Medicare gets are not real savings, but cross subsidies where other customers end up paying more so Medicare can get something below cost.  When the government is buying everything, this cross-subsidy goes away.  And can you even imagine the lobbying and cronyism and opportunities for graft that will exist once government pricing is untethered from any market price?  Just think again about military procurement.

I suppose that the government could turn all health care suppliers into a huge regulated utility, for example paying pharmaceutical companies a utility-like cost plus a fixed return on drugs.  If this occurs, I hope you are satisfied with the range of treatments you have today because you won't get many others -- if you don't believe me, name the three most recent innovations that have come out of your local regulated utility.  Typically all they do is fight innovation (e.g. rooftop solar and co-generation).Finally, the government has a lot of regulations that Congress did not touch in the PPACA that restrict supply and greatly increase costs.  For example, many states and municipalities have certificate of need processes that prevent new entrants from adding hospitals or even new equipment without the permission of existing competitors.  The same is true in occupational licensing, which protects the most skilled (and expensive) health care workers from competition on simple procedures (e.g. why is someone required to go through a decade of medical training to put stitches in my kid's elbow?)

I will say that the PPACA has perhaps had an accidental effect on costs but not through any intended mechanism.  As deductibles in the gold/silver/bronze exchange plans have gone up to try to keep a lid on premiums, individuals previously used to first dollar health care now find themselves responsible for making spending choices.  This is a good thing, maybe the best part of the whole program.

Government is Bad at Service Effectiveness. 

The PPACA also sought to increase the effectiveness of health care providers.  The problem is that it is impossible for a small group of people in Washington to do this.  We are 300 million consumers who each make trade-offs in different ways and define effectiveness differently.  Take an example from another field:  Hair care.  In the state of AZ, hair cutters must go through 2000 hours of training to be licensed to cut hair -- they must demonstrate proficiency in all sorts of hair styles.  I personally don't give a cr*p about that -- I tend to choose the fastest, cheapest person who does a reasonable job.  But no one in government has anticipated that as a valid consumer need.

The PPACA was larded with expensive provisions that reflected the vision of a few elites about how they personally wanted health care performed.  A great example is the whole electronic medical records requirement, likely stuck in their based on a lot of intensive lobbying by makers of this software.  I have yet to meet a doctor who likes this software, or who feels that their patient service is improved by it, but everyone has to do it none-the-less.Perhaps even more than the cost issue, it is amazing to me that anyone believes that government involvement will make some service more effective.  If you think it can, I urge you to take two identical copies of documents, and go through the process of sending and tracking one by Fedex and sending and tracking one via the post office

Outlines of A Plan

I am not sure how you actually do this, but I think being clear on the goal and the useful (and not useful) roles of government in the process are good.  Rather than a plan, I offer some design goals for a plan

1. Make the government the insurer of last resort to make sure that all Americans are protected against catastrophic health care costs in a year.  One approach, though probably not the most compact, is to make the government responsible for all non-discretionary individual health care expenditures in a year above a certain percentage of that person's adjusted gross income for that year.   I am thinking personal responsibility numbers that start at 15% of AGI and could increase in higher income brackets. Yes, if you are a person making $50,000 a year, then $7,500 of out of pocket health care expenses will be difficult -- but likely not bankrupting and not a barrier to getting needed care.   Perhaps we exclude social security from AGI and apply this to seniors as well, effectively eliminating medicare and phasing out government benefits for wealthy seniors.I am open to a more compact way of doing this. Perhaps guaranteed-entry government subsidized high-risk pools for health insurance.  The problem is that insurance companies will just dump all their expensive customers into those pools and we will end up with a system as costly to the taxpayers as the one above but less rationally organized.
2. Shift as many of the individual spending price / value tradeoffs as possible into individual hands.  The step outlined above in #1 is a good start, at least for more routine purchases.  As a design goal, at every turn, try to build in ways for consumers to get money back or get rewarded for choices to use less or more inexpensive care.I do not think there is anything with more potential leverage for improving the health care world than bringing back individual shopping for medical care.  My kid used to injure himself a lot in sports and we had a high deductible on our insurance, so we found a sports medicine guy who charged us only $50 a visit if we paid cash.  Then he told us that when we went downstairs to the radiology company, to tell them we were paying cash.  Sure enough, the lady there pulled out a special book from behind the counter and the $300+ they charge to the insurance companies became $40 to us.  On the other hand, we have spent weeks talking to doctors and hospitals about  heart surgery my mother-in-law (who is covered by Medicare) needs.  You know what has not come up a single time?  Price.  I have zero idea how much it will cost -- but let's say it is $100,000.  Can you imagine buying anything else that expensive without discussing the price once?
3. Any medical benefits paid by the employer become fully taxable
4. Price transparency mandates -- every provider must disclose the best price it sells a product and service at, as well as your price.  For all but emergency procedures, a cost estimate must be given in advance (My dog had to have surgery and even in an emergency condition they gave me a detailed cost estimate in advance).
5. Systematic review of supply restrictions and rethinking of licensing arrangements. Banning of state and local certificate of need processes.
6. Accelerated and streamlined drug approval process.  Really what I would like to see is that there is a government led testing process that leads not to an approval/refusal but to the publication of safety/effectiveness data that doctors and patients can then use to make their own decisions.

Hat tip to Megan McArdle who has been suggesting something like this for years, probably long before I started thinking about it.

This is from the questions and comments I am getting on my Summer 2018 Regulation cover story, "How Labor Regulation Harms Unskilled Workers."   Here is my typical answer:

I don't and I am not.  But this sort of reaction, which you can find in the comments of this and other similar articles, is typical of how public policy discussion is broken nowadays.  When I grew up, public policy discussion meant projecting the benefits of a policy and balancing them against the costs and unintended consequences.  In this context, I am merely attempting to air some of the costs of these regulations for unskilled workers that are not often discussed.  Nowadays, however, public policy is judged solely on its intentions.  If a law is intended to help workers, then it is good (whether or not it will every reasonably achieve its objectives), and anyone who opposed this law has bad intentions.  This is what you see in public policy debates all the time -- not arguments about the logic of a law itself but arguments that the opposition are bad people with bad intentions.  For example, just look in the comments of this and other posts I have linked -- because Coyote points out underappreciated costs to laws that are intended to help workers, his intentions must be to harm workers.  It is grossly illogical but characteristic of our post-modernistic age.

I will retell a story about Obamacare or the PPACA.  Most of my employees are over 60 and qualify for Medicare.  As such, no private insurer will write a policy for them -- why should they?  Well, along comes Obamacare, and it says that my business has to pay a $2000-$3000 penalty for every employee who is not offered health insurance, and Medicare does not count!  I was in a position of paying nearly a million dollars in fines (many times my annual profits) for not providing insurance coverage to my over-60 employees that was impossible to obtain -- we were facing bankruptcy and the loss of everything I own.  The only way out we had was that this penalty only applied to full-time workers, so we were forced to reduce everyone's hours to make them all part-time.  It is a real flaw in the PPACA that caused real harm to our workers.  Do I hate workers and hope they all get sick and die just because I point out this flaw with the PPACA and its unintended consequence?

Name the field:  Housing, education, health care.  In most any industry you can name, the sum of the government's interventions tend to subsidize demand and restrict supply.  In health care for example, programs like Medicaid, Obamacare, Medicare, and others subsidize demand while physician licensing, long drug approvals and prescription requirements, certificates of need, etc restrict supply.

If you are wondering why, it turns out that most government regulatory processes are captured by current incumbents, who work to get the government to subsidize customers to buy their product or service while simultaneously having the government block upstart competitors, either foreign or domestic.  For example in housing, existing homeowners form a powerful lobby that limits housing supply through restrictive zoning while demanding that the government subsidize mortgage interest (as well as low-cost mortgage programs) and give special tax treatment to capital gains from homes.   The result in every industry is supply shortages and rising prices.

Yesterday, we saw another classic example.  Federal, state and local governments have spent billions of dollars over the last decades subsidizing solar panel installations in homes and businesses.  But now, they are also simultaneously restricting the supply of solar panels:

President Donald Trump is once again burnishing his protectionist bona fides by slapping imported solar cells and washing machines with 30% tariffs - his most significant action taking aim at the world's second-largest economy since he ordered an investigation into Chinese IP practices that could result in tariffs.

Acting on recommendations from US Trade Representative Robert Lighthizer, Trump imposed the sliding tariffs. Solar imports will face a 30% tarifffor the first year, then the tariff will decline to 15% by the fourth year.It also exempts the first 2.5 gigawatts of imported cells and modules, according to Bloomberg.

And... who would have guessed that Elon Musk would be on the receiving end of another government crony handout?  The patron saint of subsidy consumption will get yet another, as Tesla's solar city is currently building a large domestic panel manufacturing plant, an investment decision that makes little sense without tariff protection.

A while back I wrote about the Obama Administration's near exponential expansion of EEO reporting

 It takes the current EEO-1 (the annual exercise where we strive for a post-racial society by racially categorizing all of our employees) and makes it something like 15-20 times longer.  In addition, rather than simply "count" an employee as being on staff in a certain race-gender category, we now have to report their income and hours worked.  Either I will have to hire staff just to do this stupid report, or I will again (like with Obamacare) have to pay a third party thousands of dollars a year to satisfy yet another government reporting requirement.  This is utter madness.

Get this -- the report has 3600 individual cells that must be filled in.  And this is in addition to the current EEO-1 form, which also still has to be filled out.  The draft rule assumes 6-7 hours per company per year for this reporting.  They must be joking.

Fortunately, the Trump Administration has at least temporarily suspended this requirement:

On Tuesday, the White House suspended a burdensome reporting requirement for employers that would have cost them $400 million while yielding information of questionable value. It did so in rejecting changes to the EEO-1 form made at the end of the Obama administration.

The White House Office of Management and Budget stated that the pay collection and reporting requirements “lack practical utility, are unnecessarily burdensome, and do not adequately address privacy and confidentiality issues.” It explained its reasoning in a letter to the Chair of the Equal Employment Opportunity Commission, Victoria Lipnic.

The Obama administration had claimed that rewriting the form to include 3,660 boxes for companies to check or fill out would help identify wage discrimination. But very little of the information it sought would have shed any light on potential wage discrimination.

A few years ago I began to find the hard-core libertarian anarcho-capitalist advocacy to be getting sterile.  I would sit in some local discussion groups and the things we would argue about were so far outside of reality or what was realistically politically possible that they seemed pointless to talk about.  Taking a simplified example, baseball purists can argue all day the designated hitter rule should go away but it is never going to happen (players support it because it creates another starting roster spot and owners like it because it juices offensive numbers which drive ratings).  So I embarked on suggesting some left-right compromise positions on certain issues.

One result was my proposed climate compromise, which fit the classic definition of a good compromise (both sides don't like it) as many skeptics disowned me for writing it and the environmental Left campaigned hard against a similar proposal in Washington State.

I tried something similar with a proposal for restructuring the government role in health care.  First, I defined what I think are the two most important problems a government health care proposal has to address.  Most current and proposed plans fail to address at least one of these:

The first is a problem largely of the government's own creation, that incentives (non-tax-ability of health care benefits) and programs (e.g. Medicare) have been created for first dollar third-party payment of medical expenses.  This growth of third-party payment has eliminated the incentives for consumers to shop and make tradeoffs for health care purchases, the very activities that impose price and quality discipline on most other markets.

The second problem that likely dominates everyone's fears is getting a bankrupting medical expense whose costs are multiples of one's income, and having that care be either uninsured or leading to cancellation of one's insurance or future years.

I think the second point is key.  Everyone keeps talking about a goal of having coverage -- coverage even if you don't have money or don't have pre-existing conditions.  But that is not, I think, the real human need here.  The real need is to be protected from catastrophe, a personal health-care crisis so expensive it might bankrupt you, or even worse, might deny you the ability to get the full range of life-saving care.  Everything else in the health care debate and rolled up in Obamacare is secondary to this need.  Sure there are many other "asks" out there for things people would like to have or wish they had or might kind of like to have, but satisfy this need and the majority of Americans will be satisfied.

And so I proposed this:

So my suggestion ... was to scrap whatever we are doing now and have the government pay all medical expenses over 10% of one's income.  Anything under that was the individual's responsibility, though some sort of tax-advantaged health savings account would be a logical adjunct program.

I found out later that Megan McArdle, who knows way more about health care policy than I, has been suggestion something similar.

How would a similar program work for health care? The government would pick up 100 percent of the tab for health care over a certain percentage of adjusted gross income—the number would have to be negotiated through the political process, but I have suggested between 15 and 20 percent. There could be special treatment for people living at or near the poverty line, and for people who have medical bills that exceed the set percentage of their income for five years in a row, so that the poor and people with chronic illness are not disadvantaged by the system.

In exchange, we would get rid of the tax deduction for employer-sponsored health insurance, and all the other government health insurance programs, with the exception of the military’s system, which for obvious reasons does need to be run by the government. People would be free to insure the gap if they wanted, and such insurance would be relatively cheap, because the insurers would see their losses strictly limited. Or people could choose to save money in a tax-deductible health savings account to cover the eventual likelihood of a serious medical problem.

A few weeks ago I started reading the blog from the Niskanen Center after my friend Brink Lindsey moved there from Cato.  If I understand him, Niskanen has quickly become a home to many libertarian-ish folks who focus on real workable, executable policy proposals more than maintaining libertarian purity.  In that blog, Ed Dolan has proposed something he calls UCC (Universal Catastrophic Coverage) which would work very similarly to what I proposed earlier:

Universal catastrophic coverage is not meant to cover every healthcare need of every citizen. Instead, UCC would offer protection from those relatively rare but ruinous healthcare expenses that are truly unaffordable. (Note: As we use the term UCC here, it is not to be confused with the more narrowly defined catastrophic insurance that is available, in limited circumstances, under the ACA.)

Here is how UCC might work, as outlined in National Affairs by Kip Hagopian and Dana Goldman. Their version of the policy would scale each family’s deductible according to household income. The exact parameters would be subject to negotiation, but to use some simplified numbers, the deductible might be set equal to 10 percent of the amount by which a household’s income exceeds the Medicaid eligibility level, now about $40,000 for a family of four. Under that formula, a middle-class family earning $85,000 a year would face a deductible of $4,500 per family member, perhaps capped at twice that amount for households of more than two people. Following the same formula, the deductible for a household with $1 million of income would be $96,000.

The cost of the catastrophic policy would be covered by the government, either directly or through a refundable tax credit. The policies themselves could, as in the Swiss model, be offered by private insurers, subject to clear standards for pricing and coverage. Alternatively, they could take the form of a public option, for example, the right to buy into a high-deductible version of Medicare.

With UCC in place, people could choose among several ways to meet their out-of-pocket costs, which, for middle-class families, would be comparable to those of policies now offered on the ACA exchanges.

One alternative would be to buy supplemental insurance to cover all or part of expenses up to the UCC deductible. The premiums for such supplemental coverage would be far lower than policies now sold on the ACA exchanges, since the UCC policy would set a ceiling on claims for which the insurer would be responsible. If the supplemental policies included modest deductibles or co-pays of their own, they would be more affordable still. Although UCC itself would be a federal program, the supplemental insurance market would continue to be regulated by the states to meet their particular needs.

Very likely, many middle-class families would forego supplemental insurance and cover all of their routine health care costs from their regular household budgets, the way they now pay for repairs to their homes or cars. Doing so would be easier still if they took advantage of tax-deductible health savings accounts—a mechanism that is already on the books, and could be expanded as part of reform legislation.

The main thing that has always flummoxed me is that I have no idea how expensive this plan might be.  Dolan is claiming it could be done at reasonable cost.

As it turns out, the numbers don’t look all that bad. Because UCC leaves responsibility for routine care with individual families, in line with their ability to pay, it would be far less expensive than a system that offered first-dollar coverage to everyone. Hagopian and Goldman estimate that their version of UCC would cost less than half as much as the projected costs of the ACA.

The impact on the federal budget would be further moderated if the tax deduction for employer-sponsored insurance (ESI) were phased out as UCC came online. Tax expenditures for ESI currently cost the budget an estimated $235 billion per year, an

Free markets are governed and regulated by consumers.  If suppliers offer something, and consumers like it and like how that particular supplier provides it more than other choices they have, the supplier will likely prosper.  If suppliers attempt to offer consumers something they don't want or need, or already have enough of from acceptable sources, the supplier will likely wither and disappear.  That is how free markets work.  Scratch a Bernie Sanders supporter and you will find someone who does not understand this basic fact of consumer sovereignty.

Regulators generally are operating from a theory that says there is some sort of failure in the market, that consumers are not able to make the right choices or are not offered the choices they really want and only the use of force by regulators can fix this failure.  In practice, regulators have no way of mandating a product or service that producers cannot economically or technically provide (see: exit from Obamacare exchanges) and so all they actually do is limit choice by pruning products or services or individual features the regulators don't think consumers should be offered.   They substitute the judgement of a handful of people for the judgement of thousands, or millions, and ignore that there is not some single Platonic ideal of a product out there, but thousands or millions of ideals based on the varied preferences of millions of people.

A reader sends me a fabulous example of this from the Socialist Republic of Cambridge, Mass.

Month after month, in public meeting after public meeting, a trendy pizza mini-chain based in Washington, D.C., hacked its way through a thicket of bureaucratic crimson tape in the hopes of opening up shop in a vacant Harvard Square storefront. But when the chain, called &pizza, arrived at the Cambridge Board of Zoning Appeal in April, the thicket turned into a jungle.

Harvard Square already has plenty of pizza, board chairman Constantine Alexander declared, and though a majority of the board signed off on &pizza’s plans, approval required a four-vote supermajority. Citing the existence of five supposedly similar pizza joints in the area, as well as concerns about traffic congestion, a potential “change in established neighborhood character,” and even the color of the restaurant’s proposed signage, Alexander and cochair Brendan Sullivan dissented.

“A pizza is a pizza is a pizza,” Alexander said at one point during the April hearing, sounding suspiciously like someone who doesn’t eat much pizza or give much thought to the eating habits of the 22,000 or so college students who live in the city.

A city ordinance dictates that any new fast-food place should be approved only if it “fulfills a need for such a service in the neighborhood or in the city.” But the notion that an unelected city board should be conducting market research using some sort of inscrutable eye test to decide precisely what kind of cuisine is appropriate for Harvard Square stretches that to the point of absurdity.

I can't even call the Republican proposed changes to Obamacare awful -- they are senseless.   There is no framework I can devise, either ideological or pragmatic, in which they make sense.  Republican commentators seem to be divided between those who think this new legislation sucks and those who think it sucks but needs to be looked at in a larger legislative framework.   The latter argue that this first bill is merely all that can be done in reconciliation, and that other changes will be coming later.  But of course, no one will tell you what they plan for later (if they even know themselves).  This approach is at least as bad as the original Democrat "we have to pass the bill to find out what is in it" approach.  At least the full plan for Obamacare was there to be read, even if it was a stultifying 2000 pages.  How can we possibly assess what the Republicans are trying to do if they will not  outline their whole plan?

I refuse to even take the time to criticize this seriousness mess in detail.  If you really need that, see Megan McArdle for example.  What we have right now is the legislative equivalent of Trump's original half-baked, rushed immigration order.  This pile of garbage will likely last about as long.

This is a good video about various voting mechanisms for handling voting between more than 2 choices.

VotingParadoxes from Paul stepahin on Vimeo.  Via Alex Tabarrok

The video is about voting, but to make things simple it discusses voting among people for a single ice cream flavor they all have to share.   I don't think this video was meant to have any broader application beyond just highlighting basic paradoxes and strategies well-known in voting theory.   To me, though, this video highlights the strong advantages of capitalism over socialism in at least three ways

1. Forcing one-size-fits-all socialist and authoritarian solutions sucks vs. allowing individuals to make choices based on their personal preferences regardless of other preferences in the group.  While the video discusses a variety of voting approaches for forcing everyone into a single choice, all of these result in a lot of folks who don't get their first preference.  Obamacare is a great example, where product features have been standardized, essentially through a voting process (though indirectly) and huge numbers of people are unhappy.
2. The video fails to discuss one shortcoming of simple yes/no voting, and that is degree of preference.  In the real world, we both may prefer vanilla over chocolate, but your preference might be pretty close whereas I might be so allergic to chocolate that eating it will kill me.  Socialist and authoritarian approaches don't have a solution for this, but market capitalism does, as prices signal not only our preference but our degree of preference as well.  The real market for ice cream is a preference expression process orders of magnitude more sophisticated than voting.
3. It is almost impossible for even an autocrat who legitimately wants to maximize well-being to do so, because the mass of individual preferences are impossible to encompass in any one mind.  Towards the end of the video, it became harder and harder for a person to synthesize a best approach from the preference data, and this was just for 10 people.  Imagine 300 million preferences.

I am simply exhausted with the notion that seems to have taken over both political parties that trade with China is somehow the source of US economic woes.

Remember that voluntary trade can't happen unless both parties are benefiting from each trade.  Remember the masses of academic evidence that the (largely hard to see) benefits of trade in terms of lower costs and more choice tend to be greater than the (easier to see) job losses in a few trade-affected industries.  But even if none of that is compelling to you, consider that our trade deficit with China is just 2% of GDP.  It's almost a rounding error.

If politicians want to know why lower-skilled laborers struggle to find employment, they need to look past imports from China and Mexican immigration and look at their own policies that are making it more and more expensive for businesses to hire people in this country.   I have written about this many times before, but some of the most prominent include:

• minimum wage laws, rising to $15 an hour in many parts of the country, and increasingly draconian overtime rules, both of which substantially raise the cost of hiring someone.
• minimum benefit laws, including expensive health care requirements in Obamacare and a myriad of other state-level requirements such as mandatory paid sick leave or family leave
• payroll taxes that act as sales taxes on labor  -- we understand that cigarette taxes are supposed to reduce cigarette purchases but don't understand that payroll taxes reduce purchases of labor?
• employment regulations, such as chair laws and break laws in California, that make employing people more expensive and risky
• employer liability laws, that make employers financially responsible for any knuckleheaded thing their employees do, even when these actions violate company policy (e.g. making racist or sexist statements)**
• laws that make hiring far more risk, including those that limit the ability to do due diligence on potential employees (e.g. ban the box) and those that limit the ability of employers to fire poor performing employees.

And this is just employment law -- we could go on all day with regulations that make life difficult for lower income workers, such as the numerous laws that restrict the housing stock and drive up housing prices and rents for these same folks who are struggling to find a job.

Let's say you live in California.  Who has killed more jobs in your state -- China or the California legislature?  The answer is no contest.   The California legislature wins the job destruction race in a landslide.   While California's high-tech community enjoys a symbiotic relationship with China that has created immense wealth, the California legislature works overtime to make sure low-skilled workers in the state don't benefit.

**Postscript:  Of all the factors here, I won't say that this is the largest but I think it is the most underrated and least discussed.  But think about it.  If you are going to be personally financially libel for ignorant, insensitive, or uncouth remarks made by your employees, even when you have explicitly banned such behavior in company rules and don't personally tolerate it, how likely are you going to be to hire a high school dropout without a good work history to interact with customers?

There has been a lot written about "chaos" in UK government and financial markets since the Brexit vote, so much so there are supposedly folks who voted for Brexit who want a do-over.

A few thoughts:

• Short term changes in financial asset prices, like bank stock prices or currency futures, are largely irrelevant in the long-term.  The recent supposed "big drop" in US equities markets, for example, took the market all the way back to where it was in... March, barely 3 months ago.  You will see buying in these assets in the coming days and the drop of the last few days will be largely forgotten soon.   Financial markets don't react well to being surprised, but they will get over it.
• I don't see how the UK and the pound are necessarily weaker post-Brexit.  The US is fine.  The Swiss are fine.  Heck, the Swiss have to constantly fight to keep their currency lower.
• Unlike other EU nations, the majority of UK trade is with non-UK nations.  While trade with the EU will likely be on worse terms in the future (though the Swiss and Norwegians have pretty good deals), UK will be unshackled from the EU bureaucracy in negotiating new deals with the rest of the world.  If the US President had any vision whatsoever, he would already have offered the UK a free trade deal, rather than being petty and saying the UK goes to the back of the line for exiting a transnational body the US would never join itself.
• Much of the "chaos" in British government can be traced 100% to the anti-Brexit folks.  The Anti-Brexit folks very explicitly refused to craft any Brexit contingency plans, using threats of post-Brexit chaos to try to up the pressure against the Brexit vote.  President Obama did the exact same thing with Obamacare, refusing to create contingency plans if the SCOTUS overturned key parts of the ACA, hoping to ratchet up pressure against that outcome.  Had their been at least the outlines of a plan, they would be checking down it right now.  Things I would do as PM on the trade front:  1.  Demand the Swiss deal from the EU for Britain.  2.  Approach major trading partners with offers of free trade deals.  A British commonwealth free trade zone is a great idea.

Certainly the government's current permission-based approach to business regulation combined with an overt hostility of government (or at least those parties that influence it) to radically new business models (see: Uber) is a big part of the great stagnation story.

But insanity like this is also a big part:

Vague but expensive-if-not-correct rules on employee seating just got vaguer and harder to figure out

Weighing in on two California laws that require employers to provide suitable seating to workers when “the nature of the work” permits it, the California Supreme Court said the phrase refers to an employee's tasks performed at a given location for which the right to a suitable seat is asserted.

In response to questions certified by the U.S. Court of Appeals for the Ninth Circuit, the state high court said April 4 that the phrase “nature of the work” doesn't require a holistic evaluation of the full range of an employee's tasks completed during a shift.

An employer's business judgment and the layout of the workplace are relevant in determining whether sitting is permitted, but courts should apply an objective analysis based on the totality of the circumstances, the California Supreme Court said.

It held that “if an employer argues there is no suitable seat available, the burden is on the employer to prove unavailability.”

As a business owner in California, I am going to have to do a ton of research to figure out just how we can comply with all this, and even then I will likely be wrong because whether one is in compliance or not is never actually clear until it is tested in court.  I had to do the same thing with California meal break law (multiple times), California heat stress law, new California harassment rules, California sick leave rules, the California minimum wage, Obamacare rules, Obamacare reporting, the new upcoming DOL rules on salaried employees, etc.

Five or ten years ago, I spent most of my free time thinking about improving and growing the business.  Now, all my mental bandwidth is consumed by regulatory compliance.  I have not added a new business operation for years, but instead have spent most of my time exiting businesses in California.  Perhaps more important is what I am doing with my managers.  My managers are not Harvard MBAs, they are front-line blue collar folks who have been promoted to manager because they have proven themselves adept at our service process.  There are only a finite number of things I can teach them and new initiatives I can give them in a year.  And instead of using this limited bandwidth to teach some of the vital productivity enhancement tools we should be adopting, I spend all my training time on compliance management issues.

I have written here before that all the free time I used to invest thinking about how to improve my business has been spent over the last 4-5 years solely on figuring out how to comply with new government regulations.  We are still trying to figure out the ins and outs of required Obamacare reporting, we have no idea yet how we are going to comply with new rules turning all of our salaried managers into timeclock punchers, and now there is this:

On the anniversary of President Barack Obama signing the Lilly Ledbetter Fair Pay Act, the Equal Employment Opportunity Commission has announced proposed changes to its EEO-1 report, requiring employers to submit employee W-2 earnings and hours worked. All employers with at least 100 employees would be required to comply. EEOC and the Office of Federal Contract Compliance Programs (OFCCP) would jointly have access to the pay data for enforcement purposes.

Available are advance copies of the proposed rule and the proposed pay reporting form.

While the Obama Administration’s January 29 statement announcing the proposal focused mainly on the gender “pay gap” as the basis for the new requirements, the proposed changes will mandate submission of pay data broken down by race/ethnicity, in addition to gender.

For the past few years, at the President’s direction, EEOC and OFCCP have sought to develop a reporting tool that would require employers to submit pay data on employees nationwide so the agencies can target investigations to address the gender “pay gap.” This proposal is the culmination of that effort.

The proposed rule will be published on February 1 and interested parties will have 60 days to submit comments.

Forget for a moment that the whole purpose of this rule is to provide litigation attorneys a database they can mine to legally harass businesses.  The reporting requirements here are incredibly onerous.  It takes the current EEO-1 (the annual exercise where we strive for a post-racial society by racially categorizing all of our employees) and makes it something like 15-20 times longer.  In addition, rather than simply "count" an employee as being on staff in a certain race-gender category, we now have to report their income and hours worked.  Either I will have to hire staff just to do this stupid report, or I will again (like with Obamacare) have to pay a third party thousands of dollars a year to satisfy yet another government reporting requirement.  This is utter madness.

Get this -- the report has 3600 individual cells that must be filled in.  And this is in addition to the current EEO-1 form, which also still has to be filled out.  The draft rule assumes 6-7 hours per company per year for this reporting.  They must be joking.

In the past, I have merely asked each local manager to tell me how many folks they have in each racial category.  Now, I am going to have to put everyone's race and gender into the payroll system -- there is no other way to do this.  And by the way, I just checked.  I have a very capable payroll company and I don't see any way to report wages and hours by race.

Congratulations Obama Administration, but I believe you have made me a Republican voter in the next Presidential election.  I have not voted for a Republican for President since George HW Bush, generally voting for whatever libertarian candidate is present.  For a while, particularly when one compared GWB to Bill Clinton, Republicans just were not that much better on economic issues than Democrats and they were terrible on social issues and things like immigration.  Now I am going to have to hold my nose on all that stuff and become a one-issue voter like my wife (she votes solely on abortion availability) and vote solely for people who have some prospect of not larding on more of this kind of crap.  And while I don't know the R's very well, for sure Hillary and Bernie will just be more of the same.

Update:   More here from the same source, who has the same observations about what a joke the administrative burden calculations are that I had.

[This is first in a series of comments I would like to post at Mother Jones, but I have been banned]

Liberal Kevin Drum is crowing that the ACA is "doing exactly what it was designed to do" in "successfully browbeating" and "threatening" young people to buy health insurance, a product that in most cases they don't want and can ill afford -- particularly since the rules of Obamacare risk-rating jack up the prices to young healthy people in order to subsidize the premiums of older, wealthier, more politically powerful people.  Wow, the term "liberal" has sure come a long way, hasn't it?  Those of us who still respect the dignity and autonomy of individuals, and by the way are horrified at the idea of having younger lower income people forced to subsidize older higher income people, would like our term "liberal" back.

I will say, though, that it is nice to see Progressives being more up-front about their authoritarianism.

I would be all for reductions in tax levels, but I don't think that current Federal tax rates are particularly a barrier to growth and prosperity.  A much bigger, and ever-growing barrier to growth is regulation.

5-10 years ago, in my small business, I spent my free time, and most of our organization's training time, on new business initiatives (e.g. growth into new businesses, new out-warding-facing technologies for customers, etc).  Over the last five years, all of my time and the organization's free bandwidth has been spent on regulatory compliance.  Obamacare alone has sucked up endless hours and hassles -- and continues to do so as we work through arcane reporting requirements.  But changing Federal and state OSHA requirements, changing minimum wage and other labor regulations, and numerous changes to state and local legislation have also consumed an inordinate amount of our time.  We spent over a year in trial and error just trying to work out how to comply with California meal break law, with each successive approach we took challenged in some court case, forcing us to start over.  For next year, we are working to figure out how to comply with the 2015 Obama mandate that all of our salaried managers now have to punch a time clock and get paid hourly.

Greg Mankiw points to a nice talk on this topic by Steven Davis.  For years I have been saying that one effect of all this regulation is to essentially increase the minimum viable size of any business, because of the fixed compliance costs.   A corollary to this rising minimum size hypothesis is that the rate of new business formation is likely dropping, since more and more capital is needed just to overcome the compliance costs before one reaches this rising minimum viable size.  The author has a nice chart on this point, which is actually pretty scary.  This is probably the best single chart I have seen to illustrate the rise of the corporate state:

Postscript:  I had thought that all the difficult years converting all of our employees from full to part time to avoid Obamacare sanctions would be the end of our compliance hassles (no company will write health insurance for us, so our only defense against the mandates and penalties is to make everyone part-time).  But the hassles have not ended.  For every employee, next year we must provide a statement that has a series of codes, by month, for that employee's health care status.  It is so complicated that knowledgeable people are still arguing about what codes we should be using.  Here is a mere taste of the rules:

  A code must be entered for each calendar month January through December, even if the employee was not a full-time employee for one or more of the calendar months. Enter the code identifying the type of health coverage actually offered by the employer (or on behalf of the employer) to the employee, if any. Do not enter a code for any other type of health coverage the employer is treated as having offered (but the employee was not actually offered coverage). For example, do not enter a code for health coverage the employer is treated as having offered (but did not actually offer) under the dependent coverage transition relief, or non-calendar year transition relief, even if the employee is included in the count of full-time employees offered minimum essential coverage for purposes of Form 1094-C, Part III, column (a). If the employee was not actually offered coverage, enter Code 1H (no offer of coverage) on line 14.  For reporting offers of coverage for 2015, an employer relying on the multiemployer arrangement interim guidance should enter code 1H on line 14 for any month for which the employer enters code 2E on line 16 (indicating that the employer was required to contribute to a multiemployer plan on behalf of the employee for that month and therefore is eligible for multiemployer interim rule relief). For a description of the multiemployer arrangement interim guidance, see Offer of health coverage in the Definitions section. For reporting for 2015, Code 1H may be entered without regard to whether the employee was eligible to enroll or enrolled in coverage under the multiemployer plan. For reporting for 2016 and future years, ALE Members relying on the multiemployer arrangement interim guidance may be required to report offers of coverage made through a multiemployer plan in a different manner.

Here are some of the codes:

• 1A. Qualifying Offer: Minimum essential coverage providing minimum value offered to full-time employee with employee contribution for self-only coverage equal to or less than 9.5% mainland single federal poverty line and at least minimum essential coverage offered to spouse and dependent(s).

  This code may be used to report for specific months for which a Qualifying Offer was made, even if the employee did not receive a Qualifying Offer for all 12 months of the calendar year. However, an employer may not use the Alternative Furnishing Method for an employee who did not receive a Qualifying Offer for all 12 calendar months (except in cases in which the employer is eligible for and reports using the Alternative Furnishing Method for 2015 Qualifying Offer Method Transition Relief as described in these instructions).

• 1B. Minimum essential coverage providing minimum value offered to employee only.
• 1C. Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) (not spouse).
• 1D. Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to spouse (not dependent(s)).
• 1E. Minimum essential coverage providing minimum value offered to employee and at least minimum essential coverage offered to dependent(s) and spouse.
• 1F. Minimum essential coverage NOT providing minimum value offered to employee; employee and spouse or dependent(s); or employee, spouse and dependents.
• 1G. Offer of coverage to employee who was not a full-time employee for any month of the calendar year (which may include one or more months in which the individual was not an employee) and who enrolled in self-insured coverage for one or more months of the calendar year.
• 1H. No offer of coverage (employee not offered any health coverage or employee offered coverage that is not minimum essential coverage, which may include one or more months in which the individual was not an employee).
• 1I. Qualifying Offer Transition Relief 2015: Employee (and spouse or dependents) received no offer of coverage; received an offer that is not a qualifying offer; or received a qualifying offer for less than 12 months.

After criticizing Obamacare at a party, another person said something like "well you can't criticize it without suggesting an alternative."  This of course is total bullsh*t.  The passage of a bad law to imperfectly achieve objectives with which I disagree does not obligate me to craft alternative legislation to achieve those objectives.

But I decided to take a swing at it anyway.  Taking a step back, I said that I thought there were two overriding problems in health care that the government might address.

The first is a problem largely of the government's own creation, that incentives (non-tax-ability of health care benefits) and programs (e.g. Medicare) have been created for first dollar third-party payment of medical expenses.  This growth of third-party payment has eliminated the incentives for consumers to shop and make tradeoffs for health care purchases, the very activities that impose price and quality discipline on most other markets.

The second problem that likely dominates everyone's fears is getting a bankrupting medical expense whose costs are multiples of one's income, and having that care be either uninsured or leading to cancellation of one's insurance or future years.

So my suggestion I made up on the spot (and I am a little fuzzy on the details as my friend had actually cracked open a bottle of Van Winkle bourbon for a few of us, my first taste of that magic elixir) was to scrap whatever we are doing now and have the government pay all medical expenses over 10% of one's income.  Anything under that was the individual's responsibility, though some sort of tax-advantaged health savings account would be a logical adjunct program.

I obviously make policy better when I am drinking absurdly rare and expensive bourbons, because Megan McArdle (who knows a hell of a lot more than I about health care economics) has apparently been advocating something similar for quite a while

How would a similar program work for health care? The government would pick up 100 percent of the tab for health care over a certain percentage of adjusted gross income—the number would have to be negotiated through the political process, but I have suggested between 15 and 20 percent. There could be special treatment for people living at or near the poverty line, and for people who have medical bills that exceed the set percentage of their income for five years in a row, so that the poor and people with chronic illness are not disadvantaged by the system.

In exchange, we would get rid of the tax deduction for employer-sponsored health insurance, and all the other government health insurance programs, with the exception of the military’s system, which for obvious reasons does need to be run by the government. People would be free to insure the gap if they wanted, and such insurance would be relatively cheap, because the insurers would see their losses strictly limited. Or people could choose to save money in a tax-deductible health savings account to cover the eventual likelihood of a serious medical problem.

The missing piece here, as was in my plan, is I have no idea how much this would cost.

When politicians argue about small business growth, they argue about stuff like taxes and access to capital and, god help me, completely irreverent (to small business) stuff like the ExIm Bank.

I would argue that there has been a fundamental shift in the economy relative to small business over the last four years, but it has nothing to do with any of that stuff.  I would summarize this shift as follows:

Ten years ago, most of my company's free capacity was used to pursue growth opportunities and refine operations.  Over the last four years or so, all of our free capacity has been spent solely on compliance.

Let me step back and define some terms.  What do I mean by "free capacity?"  In a small, privately-held company, almost all the improvement initiatives spring from the head of, or must heavily involve, the owner.  That would be me.  I have some very capable staff, but when we do something new, it generally starts with me.

So OK, our free capacity is somewhat limited by my personal capacity as owner and President.   But actually, I have a head full of ideas for improving the company.  I'd like to do some new things with training that takes advantage of streaming video.  I'd like to add some customer service screening to our application process.  But my time turns out not to be the only limit -- and this is one of those things that HBS definitely did not teach me.

In the real world, there are only so many new things I can introduce and train my line managers to do, and that they can then pass down to their folks.  An organization can only accept a limited amount of new things (while still doing the old things well).  This is what I mean by "free capacity"  -- the ability to digest new things.

Over the last four years or so we have spent all of this capacity on complying with government rules.  No capacity has been left over to do other new things.  Here are just a few of the things we have been spending time on:

• Because no insurance company has been willing to write coverage for our employees (older people working seasonally) we were forced to try to shift scores of employees from full-time to part-time work to avoid Obamacare penalties that would have been larger than our annual profits.  This took a lot of new processes and retraining and new hiring to make work.  And we are still not done, because we have to get down another 30 or so full-time workers for next year
• The local minimum wage movement has forced us to rethink our whole labor system to deal with rising minimum wages.  Also, since we must go through a time-consuming process to get the government agencies we work with to approve pricing and fee changes, we have had to spend an inordinate amount of time justifying price increases to cover these mandated increases in our labor costs.  This will just accelerate in the future, as the President's contractor minimum wage order is, in some places, forcing us to raise camping prices by an astounding 20%.
• Several states have mandated we use e-Verify on all new employees, which is an incredibly time-consuming addition to our hiring process
• In fact, the proliferation of employee hiring documentation requirements has forced us through two separate iterations of a hiring document tracking and management system
• The California legislature can be thought of as an incredibly efficient machine for creating huge masses of compliance work.    We have to have a whole system to make sure our employees don't work over their meal breaks.  We have to have detailed processes in place for hot days.  We have to have exactly the right kinds of chairs for our employees.  We have to put together complicated shifts to meet California's much tougher overtime rules.  Just this past year, we had to put in a system for keeping track of paid sick days earned by employees.  We have two employee manuals:  one for most of the country and one just for California and all its requirements (it has something like 27 flavors of mandatory leave employers must grant).  The list goes on and on.  So much so that in addition to all the compliance work, we also spent a lot of work shutting down every operation of ours in California, narrowing down to just 3 contracts today.  There has been one time savings though -- we never look at any new business opportunities in CA because we have no desire to add exposure to that state.

Does any of this add value?  Well, I suppose if you are one who considers it more important that companies make absolutely sure they offer time off to stalking victims in California than focus on productivity, you are going to be very happy with what we have been working on.  Otherwise....

I fully understand the dangers of extrapolating from one data point**, but for folks who are scratching their head over recent plateauing of productivity gains and reduced small business origination numbers, you might look in this direction.

By the way, it strikes me that regulatory compliance issues set a minimum size for business viability.  You have to be large enough to cover those compliance issues and still make money.  What I see happening is that as new compliance issues are layered on, that minimum size rises, like a rising tide slowly drowning companies not large enough to keep their head above water.  We are keeping up, but at times it feels like the water is lapping at our chin.

**Unrelated Postscript:  I have found that in the current media/political world, people love to have only one data point.  Why?  Well, with two data points you are are stuck with the line those points define.  With just one, you can draw any line you want in any direction with any slope.

I just got the first year bill from my payroll company for the extra reporting we have to do each year vis a vis Obamacare:  $7195.50 for 2015.  Note that this adds absolutely no value -- this is not the cost of insurance or cost of any extra taxes sent to Uncle Sam.  This is merely the cost to handle all the new paperwork required in the law.

I will repeat what I have said before -- the Republicans tend to focus narrowly on taxes and often tend to miss or downplay the regulatory issues, which I think actually loom larger in destroying economic growth.

The title of this post is my alternative to Politico's headline which reads, "Barack Obama poised to hike wages for millions." What is actually happening is that Obama is proposing to raise the threshold for how much money an employee can make before he or she can be considered exempt from overtime rules (and thus exempt from filling in a time sheet).

As early as this week, the Labor Department could propose a rule that would raise the current overtime threshold — $23,660 – to as much as $52,000, extending time and a half overtime pay to millions of American workers.

The Obama Administration and its supporters (and apparently Politico, by how they wrote the headline) are smoking something if they think employers are going to react by raising salaries of current exempt employees being paid 23,660 or 30,000 or 40,000 to $52,000.  Absolutely no way.  There may be a few just under the $52,000 threshold that get a bump, but that will be a minor effect.

Everyone else is going to suddenly find themselves converted from a junior manager back to a wage earner.   Companies are not going to allow these newly minted wage earners to earn overtime, and so I suppose one good outcome is that we may see a new boost in productivity as companies find ways to automate or eliminate junior management tasks to get all these folks down to 40 hours a week.

Five years ago, I might have really been in a panic over this in my company, but fortunately our experience with Obamacare has given me confidence we'll figure it out.  With Obamacare we were facing enormous costs which we (like many service and retail companies) managed to eliminate by converting almost all of our full-time employees to part-time.   Compared to that effort, figuring out how to get all of our managers down to 40 hours seems like child's play.

As usual, most of the costs of this regulation will be born by workers.  As with other minimum wage-type laws, some will be better off, actually getting the "raise" promised by Politico, while some will be worse off, dropped to straight 40-hour work which does not pay as well, or out of work entirely.

However, this law has an even bigger impact-- it changes the relationship between the worker and their employer.  There are important differences between hourly and salaried work in the relationship with employers.  Some are psychological -- for better or worse, management things of salaried workers differently than hourly workers.  And some are real -- salaried workers can try to demonstrate that they are worthy of promotion by working extra hours and taking on extra tasks, things that hourly workers really can't do.

As a final note, I have to give the Coyote Academic Arrogance Award to Daniel Hamermesh of UT Austin who is quoted as follows:

“It’s hard to believe that somebody making $30,000 is a supervisor,”

He knows this, how?  We have supervisors who do a fabulous job for $2500 a month and are happy to be making that.

But that is actually not the Hamermesh statement that I would rank most ignorant of reality.  This is:

But Hamermesh said that to whatever extent employers reduced hours to avoid overtime the result would be more job creation, not less, since someone else must [be] hired to perform that work. Jared Bernstein, an economic adviser to Vice President Joe Biden during President Barack Obama’s first term, added that for many workers reduced hours would be a plus: “Their salary is the same but they have more time with their families.”

Are these guys for real?  Employers are not going to give employees the same salary for fewer hours.  They are going to try pay them less if they are getting fewer hours of work (of course their ability to do so depends on the labor supply).  But the change is worse than this.  They are not only getting fewer hours, but they are getting a different person and a different relationship.  Before, say for a junior manager job, employers could get go-getters who worked 60 hours a week to impress management with their diligence and dedication, signaling they were ready for promotion.  Now, employers will get time-clock punchers.

Well, the new meme on the Left in favor of higher minimum wages seems to be that since many minimum wage workers also receive government benefits, those benefits "subsidize" the employers paying minimum wage.  Example from Kevin Drum here.  This is utter madness.  A few responses:

• The implication is that the choice is between a job at $8 an hour or a job at $15 an hour.  But this assumes the jobs still all exist at $15 an hour.  Clearly, many would disappear over time, either as companies automate or as consumers reduce purchases at now higher cost establishments.  If the alternative to offering a $8 an hour job is in fact offering no job at all, then minimum wage employers are reducing government benefits payouts.
• The Left has pushed eligibility for many programs (e.g. the changes in Obamacare to Medicaid) into higher income bands of people making more than 100% of the poverty line.  How is this creeping up of transfer program eligibility somehow the fault of employers?
• Does this mean that all right-thinking Americans should oppose any future expansions of transfer programs as crony giveaways?  And if you say no, that they should not be thought of crony giveaways in advance of their passage, why should they be considered such afterwards?
• The whole point of many of these programs, like the EITC which is listed among the programs in Drum's post, is exactly this -- to provide transition assistance from not working to supporting oneself.  The Left's view on this is, as usual, entirely static.  What are the folks who are on benefits and working in food service doing 5-10 years from now?  Would they look back on that time as a stepping stone to something better?
• If you require that all employers pay a salary such that none of its workers are on assistance of any sort, which is the logical conclusion of this meme, then you divide the world into two classes -- those 100% employed and those 100% on benefits, with most people in the latter having little or no prospect of moving to the former.
• My company pays minimum wage to the vast majority of our 300+ campground workers.  But who is subsidizing whom?  Most of these folks are over 60 and on Social Security and find that they need or want more money than their Social Security can provide.  One reason for this is that Social Security is a horrible retirement savings program, essentially paying a negative interest rate on the money contributed to the system in the retiree's name.  If Social Security were a private retirement plan, its proprietors would be in jail by now.  Because Social Security is so lame, older people seek work, and come to me, happy to stay active and earn money to supplement their government checks.  So am I subsidizing the SSA's inability to provide a fair return?

Dynamic scoring of budget proposals has been on the Republican wish list for decades.  They have always been frustrated that tax cut proposals look like such budget losers with static scoring.  In their supply-side bones, Republicans know that tax cuts will stimulate economic activity and thus increase future tax revenues.  Taking this second order effect into account is what they mean by dynamic scoring (see: Laffer Curve).

I have some sympathy for this argument, but in making it Republicans are falling for the "this will work great when our guys are in charge" fallacy  (I need to find a name for that).  Democrats fall into this all the time, expanding government power only to be shocked at what their political enemies do with this power once in charge.

Because it is pretty clear what dynamic scoring will mean in a Democratic Congress.  Remember that stimulus bill?  Democrats all thought that expanded the economy, so its costs would, by their Keynesian assumptions, appear much lower under dynamic scoring.  The Left thinks the auto bailout was stimulative.  They even think that Obamacare was stimulative.  Do you really want some BS Keynesian fudge factor obscuring the true cost of such proposals in the future?

Related:  Greg Mankiw discusses why, if I read him right, dynamic scoring is impossible to do correctly

I followed a link the other day to this academic paper purporting to show that the bailout of GM and Chrysler was a success.  I was flabbergasted to see that the authors are Austan D. Goolsbee and Alan B. Krueger.  WTF?  These folks were part of the Obama Administration.  This is their own policy they are passing historical judgement on.  This is roughly equivalent to a economics journal seeking a paper on the success or failure of Obamacare and having Valerie Jarrett write it.  How does this kind of conflict of interest pass any kind of muster?

I only skimmed the paper.  I know these are two smart guys but it seems to include exactly the sort of facile analysis you would expect from a political hack, not two smart economists.  I can't believe these guys would have accepted many of the assumptions they make here had they not been directly involved.  Just to pick two things at random:

• They seem to stick with the assumption that millions of jobs would have simply gone *poof* had the government not intervened.  Yes, this happened at Solyndra, but in most cases industries operate almost seamlessly in bankruptcy.  The odds are, for example, that you have flown on an airline in Chapter 11 and didn't even know it.  They make a specific argument that somehow it would be bad to have both in bankruptcy at the same time, but I can remember several times when there were multiple major airlines in bankruptcy.  In fact, if both went bankrupt at the same time, one could argue it would lessen their market share loss since a major competitor was in the same boat.  To the extent that the companies would have continued to operate under Chapter 11, which is 99.9% likely, then all the government did was insert itself into the bankruptcy process to overrule laws about who gets what in a bankruptcy to redirect spoils to their favored constituencies
• Yes, GM and Chrysler are doing OK now, but they usually do OK at the top of a business cycle.  To my eye though, nothing fundamentally changed about how they are managed and operate.  The same structural and cultural problems that existed before exist today.  The same under-utilization of talented workers and valuable assets that existed before exists today.  No real reckoning occurred -- in fact the bailout looked to me at the time as an exercise to use taxpayer money to avoid a true housecleaning.  These companies have done OK, but what would they have done with a more thorough housecleaning?

We generally use startup activity as a proxy for positive innovation and future increases in productivity and consumer value.  But it is only a proxy - based on the theory that in a free economy new startups generally add new value or die.  Startups per se are not inherently positive, especially when all they are doing is fixing the inefficiencies and mandates imposed by government regulation

I wrote about a new study suggesting that new federal regulation doesn't inhibit the creation of new startup companies in an industry. In fact, it might actually stimulate the creation of startups. This seems counterintuitive, but a reader with some experience in the education and health care sectors—which were influenced by NCLB and Obamacare, respectively—proposes an explanation for this:

Healthcare startups have absolutely exploded post-ACA....This was pretty well anticipated by venture capital; a bunch of Sand Hill firms started putting together ad-hoc health IT teams shortly after the ACA was passed, on the basic logic that anything that changed an industry as much as the ACA did would necessarily create a lot of startup opportunities.

Drum says, well this may be good or may be bad.  Look, it HAS to be bad.  All this investment and activity is going into trying to get back to even from productivity losses imposed by the government, or is being spent addressing government mandates for new services that the market did not want or value.  This is a diversion of resources from new value-creation to fixing things, and as such is just the broken windows fallacy re-written in a new form.

The language he is using, of shaking things up, is a bit like that of chemistry.  He seems to imagine that markets can reach and get stuck in local maxima, so that government action that shakes the system out of these maxima (like annealing in a metal) is positive in that it allows the system to progress to a better state over time even if the government's action initially makes things worse.  I know of absolutely no evidence for this being true, and my strong suspicion given how many industries the government has trashed is that this is rare or non-existent.  And impossible to spot, even if it did exist.  Not to mention the fact it is a total joke to talk of health care as if it was some pristine untouched-by-government industry before Obamacare.

I wrote the other day about how Kevin Drum was confused at why broadband stocks might be rising in the wake of news that the government would regulate broadband companies as utilities.  I argued the reason was likely because investors know that such regulation blocks most innovation-based competition and tends to guarantee companies a minimum profit -- nothing to sneeze at in the Internet world where previous giants like AOL, Earthlink, and Mindspring are mostly toast.

James Taranto pointed today to an interesting Richard Eptstein quote along the same lines (though he was referring to hospitals under Obamacare):

Traditional public utility regulation applies to such services as gas, electric and water, which were supplied by natural monopolists. Left unregulated, they could charge excessive or discriminatory prices. The constitutional art of rate regulation sought to keep monopolists at competitive rates of return.

To control against the risk of confiscatory rates, the Supreme Court also required the state regulator to allow each firm to obtain a market rate of return on its invested capital, taking into account the inherent riskiness of the venture.

I have to say I told you so, but, from a reader, Staples threatens to fire anyone who works over 25 hours:

Part-time Staples workers are furious that they could be fired for working more than 25 hours a week.

The company implemented the policy to avoid paying benefits under the Affordable Care Act, reports Sapna Maheshwari at Buzzfeed. The healthcare law mandates that workers with more than 30 hours a week receive healthcare.

If Staples doesn't offer benefits, it could be fined $3,000 in penalties per person.

I can tell you from personal experience that $3000 is a staggering penalty.  For a full time worker at $8 an hour, this is over 2 months pay -- 2 months pay extra the company has to pay but the worker never sees.

As I have written before, we have moved heaven and Earth to get every employee we can in our company converted to part-time.  We had absolutely no alternative -- after seeking quotes from about 20 places, no one would offer our company any sort of health insurance plan at any price**.  So no matter what we did, we were facing the $3000 penalty for each full-time workers, so all we could do to manage the situation was convert full-time workers to part-time.

** We have seasonal workers, which makes insuring us awkward and expensive because there are high administrative costs with people constantly going on and off the plan.  We also have a very old work force.  Obamacare prevents insurers from charging the much higher premiums to older people that our costs might justify -- it milks younger people with prices well above their cost to serve to pay for subsidizing older people.  Insurers would be crazy to voluntarily add groups that are purely old people, they would lose their shirt.  So they refuse to quote us.