T.R. Reid hosts a Presentation of Money-Driven Medicine on Link TV (see reception information) As taken from Maggie Mahar’s Health Beat Blog. A special investigative TV program is being aired detailing healthcare costs and the healthcare system. The topic is timely and well worth the time watching in order to gain a greater understanding on what is wrong with healthcare in the US.

Robert Waldmann

Let me join Brad DeLong in Saying

Let Me Join Pete Davis in Saying: "Thank You Marjorie Margolies-Mezvinsky"
Pete Davis expresses the sentiment very well:

Thank You Marjorie Margolies-Mezvinsky: I've always wanted to thank Marjorie Margolies-Mezvinsky (D-PA) for her courageous deciding vote for President Clinton's 1993 deficit reduction bill. Her Republican colleagues jeered her as she walked down the aisle to cast her vote with shouts of "Bye, Bye Marjorie!" Her crime -- voting for the Omnibus Budget Reconciliation Act of 1993 that reduced the FY94-FY98 deficits by an estimated $496 b., with $241 b. of tax increases and $255 b. of spending cuts. The bill capped a 12-year deficit reduction effort, leading to the budget surpluses of FY98-FY01. She paid the political price, losing her seat in suburban Philadelphia after her first term in office, but she set the U.S. economy on course for its strongest decade since the 1960s.

Unhappy is the country which needs heroines.

So she lost her seat, but who else's service in Congress do I remember with such gratitude ? Answer, Senator George [ed] Mitchell*.

It is important that Marjorie Margolies-Mexvinsky's political heroism is not forgotten. The fact that it is remembered might help some current Representatives find some courage.

* He turned down a seat on The Supreme Court and didn't run for re-election so that he could concentrate on passing Clintoncare. No good deed goes unpunished. For his virtue he was sent to try to solve the damnable question of Northern Ireland. He succeeded. No great deed goes unpunished either and he is now in charge of mideast negotiations. In a just world, Newt Gingrich would be trying to get Israel and Hamas to make peace, and Mitchell would be cashing in** and appearing on TV to pontificate. But, in a just world we wouldn't need Marjorie Margolies-Mezvinsky or George Mitchell.

** Of course he has cashed in, but that was long ago, and in another country (the USA).

Angry Bear Ken Houghton will be a panelist, and other participants in the conference include Mike Shedlock, Mark Thoma, Paul Romer, Alex Tabborak.

Economics Bloggers Forum
8:30 a.m. - 4:00 p.m. CDT
Friday, March 19, 2010

Watch leading economics, technology, and finance bloggers discuss key policy issues and cutting-edge research on topics related to entrepreneurship, innovation, and growth.

View Webcast

Agenda (all Central Times) includees:

9 a.m. Keynote Speaker
David Warsh, author of the online economics column www.economicprincipals.com, will discuss his experiences in and assessment of the nascent business of blogging in the context of the evolving print journalism industry. Warsh was a long-time economics columnist for the Boston Globe where he wrote online weekly for seven years. He is the author of three books, most recently Knowledge and the Wealth of Nations: a story of economic discovery.

9:30 a.m. Panel 1-Great Recession: Impact on America's Future?
Moderator: Paul Kedrosky
Panelists: Bob McTeer, Megan McArdle, Mark Thoma

1:00 p.m. Persuasion and Norms
Paul Romer

1:30 p.m. Panel 2-Is Growth a Mystery? Haiti, Afghanistan, Africa...
Moderator: Tim Kane
Panelists: Alex Tabarrok, Allison Schrager

2:30 p.m. Panel 3-U.S. Fiscal Mess: How Does It End?
Moderator: Robert Litan
Panelists: Donald Marron, Ryan Avent, Ken Houghton, Mike Shedlock

3:45 p.m. Closing Remarks
Carl Schramm, president and CEO, Kauffman Foundation

Robert Waldmann

I am very glad that John Quiggin has found a group even less worthy or respect than us macroeconomists. He writes

It seemed for a little while as if the delusionists had scored another win, when Phil Jones, the scientist who has been most viciously target by the hackers/harassers gave an honest answer to a deliberately loaded question prepared by them and put to him in a BBC interview

BBC: Do you agree that from 1995 to the present there has been no statistically-significant global warming?

[kip]

Looking at the responses of ’sceptics’ to this episode we can distinguish four or five sets (depending on your views about set theory)

[skip]

5. Those genuine sceptics who pointed out the dishonesty of the claim, and called out those on their own side of the debate who promoted it. Obviously, members of this set deserve some serious respect and attention in the future. Unfortunately, the intersection between this set and the set of “sceptics” in the currently prevailing sense appears to be the empty set[2]

That's 5 sets Professor Quiggin. It's also statistically significant evidence that global warming skeptics are, on average, either more clueless, more dishonest or both than the general population. Also the data set does not contain statistically significant evidence against the hypothesis that all global warming skeptics are incapable of understanding basic statistics, recklessly irresponsible and total liars.

Quiggin assumes that most are only one or two of these things, but there is no evidence for his belief in the data set he analyses.

Thin comfort for macroeconomics. What Quiggin has shown is that climate science is science, just as he has shown that macroeconomic science is not science in "Zombie Economics."

by cactus

A Tale of Two Clients - And Lessons Lehman Learned Late or Not at All

My first "real" job (i.e., after grad school) was at what was then a Big 6 accounting firm (and is now a Big 4 accounting firm) doing "transfer pricing." I wasn't right for the job (or the environment), nor was the job (or the environment) right for me. But I did learn a lot about how the world works.

One of the big clients serviced by the transfer pricing group from the office I was working is a household name. Other than North Koreans and people with some form of mental impairment, I doubt there's anyone anywhere in the world over age eight who would fail to recognize the company name or its logo. And to be honest, I'm not sure about the North Koreans. Another big client has a name that is only slightly less recognizable. I'll call them Co. 1 and Co. 2.

Now, when I was there, Co. 1 was very aggressive on tax issues - which means it was willing to push the envelope and see how far it could push the IRS. The odd fine or two for going too far was just a cost of doing business, and it expected its highly priced Big 6 accounting firm to produce, ahem, tax plans that fit the bill. Essentially that meant coming with, ahem, tax plans that were cutting edge enough that the IRS hadn't seen them yet but that on the face of it resembled something that had in the past gotten an official OK, either through a regulation or some court decision. That would be enough to get a law firm to write a letter saying it was their opinion this was OK, no matter how much what was being done might sound, to the uninitiated, to be questionable or even illegal. Incidentally - on the rare occasions when the firm came up with a scheme on its own, it was the job of its advisers (i.e., accounting firms and law firms) to get the client to make sure that whatever changes were necessary to keep things on the right side of the blurry line were made.

Co. 2 took more the pussycat approach with the IRS. They seemed to feel that if they didn't push too hard, they'd avoid a lot of hassle from disputes with the IRS. They were, of course, right, and it cost the Big 6 accounting firm, but then the Big 6 accounting firm wasn't exactly losing money on this client so it was happy to oblige.

In other words, accounting firms are like criminal attorneys - they represent the client and try to do what their client believes is in their best interest. They advise their client when they think their client has taken a suboptimal turn, but when the client wants to do X, if its not explicitly illegal, the firm finds a way to make it happen.

All of which is to say, if the allegations that came out last week about Lehman's accounting schemes are true, and if as those stories indicate, Lehman was forced to find a non-American law firm to sign off on what they were doing, one of the following must be true:
a. Ernst & Young personnel working on the account had no idea what Lehman was doing.
b. E & Y personnel working on the account knew what Lehman was doing (perhaps having peddled the scheme to Lehman themselves) but had no idea it was an obvious no-no to the IRS.

Either way, it looks to a casual outsider like me that E & Y had a B-team made up of PONIs (partner of no importance) on the job, and that should have been obvious to Lehman. Now Lehman should have been a big enough client to warrant a few POGIs (partner of great importance). If Lehman did not seek out out or deliberately avoided the best possible representation, they were guaranteeing an eventual disaster. Deliberate ignorance or deliberate evasion (the allegations would imply one of these two to be true) of the law doesn't go over well when the doo-doo hits the fan.

But it goes the other way too. E & Y's POGIs should have realized that Lehman's business model involved taking big risks. Why would they have assumed that Lehman was going to be satisfied with orthodox accounting practices? And as the old saying goes, you don't send a boy to do a man's job. The Anderson/Enron debacle is a clear demonstration that if some partners certify a client's shenanigans, and those shenanigans come to light, the entire firm will take a hit. (And that, of course is the flip side of everyone benefits from the shenanigans as long as they haven't been forced to a complete halt.)

So, what do you think about the situation?

Cactus

American Conservative Magazine considers who is feeling the the new anger against 'liberals' from the Feb.17 Mt. Vernon statement of the Conservative statement of principles:

One of the things that many people have noticed since the release of Mount Vernon statement on Wednesday is the sharp contrast between the youth of the creators (my link) of the Sharon statement and the notable absence of students and young people from the latest gathering. Christopher Buckley quotes Sam Tanenhaus on this point, “The new/old submission seems more like Geriatrics Against Obama.” Fifty years ago, one could have written, as Nile Gardiner does today, that “conservatism is the future” with some reason for believing the claim to be true, and in the decades that followed there was a significant conservative political coalition that seemed to be growing in strength over time. Today it is increasingly difficult to believe anything of the kind.
....
On average, Millennials’ underlying social and political views put them well to the left of their elders. If you dig into the full report, you will see that the recent Republican resurgence owes almost everything to the dramatic shift among members of the so-called “Silent Generation,” whose voting preferences on the generic ballot have gone from being 49-41 Democrat in 2006 to 48-39 Republican for 2010. There have been small shifts in other age groups toward the Republicans, but by far it is the alienation of voters aged 65-82 that has been most damaging to the Democrats’ political strength*. As we all know, these are the voters who are far more likely to turn out than Millennials, which is why Democratic prospects for this election seem as bad as they do even though the Pew survey says that Democrats lead on the generic ballot in every other age group. Among Boomers, Democrats lead 46-42, and among Gen Xers they barely lead 45-44. In other words, the main reason why the GOP is enjoying any sort of political recovery is that many elderly voters have changed their partisan preferences since the last midterm. Republicans remain behind among all voters younger than 65. That does not seem to herald the future revival of movement conservatism of the sort Gardiner is so embarrassingly praising.

To be sure, the U.S. government deficit is shocking; but it's not anymore shocking than the recession through which we have all lived. Tax receipts plummeted (see the second chart from this post) and spending on cyclical social programs (like unemployment benefits) is surging. This adds up to an exponentially rising budget deficit, and thus an increasing debt burden.

The resulting hysteria leads to headlines like that from Reuters on March 11, 2010: "Fed's Dudley: Waiting to fix fiscal problems risky".

Be very careful when reading these articles, as the title implies that William Dudley, president of the New York Federal Reserve Bank, is advocating "fixing fiscal problems" right now - cutting spending and/or raising taxes now - while that is not the case at all. According to Reuters, Dudley says:

The issue, Dudley said, is not fiscal stimulus, which he noted had been necessary in the United States to stabilize the economy, even though it drove up the deficit. That spending is temporary, he added. The bigger long-term problem for the United States and other advanced economies is structural deficits -- those likely to persist absent changes in tax and spending policies.

A link to Dudley's speech. He does refer to structural deficits that may result from recent countercyclical policy. However, these long-term structural deficits have essentially nothing to do with the current downturn, in my view. In fact the effects of the current deficits are simply a speed bump on the road to structural indebtedness.

Just look at the CBO's extended-baseline projection for the long-term budget published in June 2009.

This above scenario projects the spending share on social security, Medicare and Medicaid, and Other Federal Noninterest Spending through the medium and long term under current law. Notice the blip that is 2009 and 2010?

Read more »

Since we are on the topic of men, business, and regulations, Yves Smith points us to a relevent avenue for thought:

Indefensible Men.

On the right is a poll put up by the San Francisco FED that I translated to here. I personally use cash and checks to monitor my emotional response to spending, which can become numb using all credit card purchases. Online payments work if not automatic. Then again, I don't use a lot of checks.

Business accounts (sole proprietorships) I treat differently. Quirky behavior which works for me.