Repeal Fuel Economy Standards and Replace Them with a Tax

The Wall Street Journal reports that automakers are asking the EPA to repeal automobile fuel economy standards, known as Corporate Average Fleet Economy (CAFE) standards, which are set to rise to 56 miles per gallon by 2025. Repealing the standards would be a good idea, provided they were replaced by tax designed to achieve an equivalent saving in fuel. A carbon tax would do the job nicely, but an increase in the existing tax on motor fuels would also work.

What, exactly, is wrong with the CAFE standards? The fundamental problem is that they attack the third-party effects, or negative externalities, of motor fuel use, such as pollution, highway congestion, and accidents, only partially and indirectly. As a result, the cost of achieving a given reduction in fuel use via CAFE standards is higher than it would be if the same result were achieved more directly through a carbon tax or an increase in the federal gasoline tax.

What Happened to the OMB Data? Mystery Solved (Partially)

Yesterday I wanted to retrieve some data from the OMB archives, so I went to the usual spot, https://www.whitehouse.gov/omb. There was almost nothing there. All I found were links to “budgetary analysis” of the new administration’s executive orders. The “analysis” pages themselves contain nothing but short paragraphs signed by Acting Budget Director Mark Sandy, which say that the executive orders will not have any significant budgetary impacts. 

I had read of the efforts of paranoid climate scientists to download data from NASA, NOAA, and other sites, fearing that the Trump administration would scrub them all clean, so I got a little paranoid myself. Could it be that the new gang doesn’t want us to have any background data that might be used to put their budget efforts in a bad light?

It turns out that the situation is a little less sinister than it first looked. Turns out that the Obama administration had a “digital transition plan” that archived all the old data. The OMB archives are here, for example. There are no permalinks, though. Any old links you have saved to Obama-era materials take you to a broken link page on the Trump White House site that has a link to the Obama digital transition page. Down at the bottom of that page there is a long list of agency archives, including the one for the OMB. Eventually you can find what you are looking for.

On Thursday, the Senate finally got around to confirming Mick Mulvaney as the new budget director. We can hope he will assign someone to get to work on the amateurish OMB web page that is still there as of today. We can hope that Mulvaney’s people will give us links to the Obama archives. When a new, professional-looking, user-friendly, OMB website appears, we will know that the chaos has settled down in at least one branch of the Trump White House.

Crop Insurance Targeted By Budget Cutters As Deficit Debate Looms

Congress will soon start debating the federal budget for the 2018 fiscal year. As the following figure shows, the Congressional Budget Office projects that after shrinking for several years, the budget gap will soon begin to widen if there are no changes in current policy. Crop insurance is one of several farm programs in the crosshairs of Congressional budget hawks who hope to keep that from happening.

Crop insurance may seem like small change compared to massive programs like health insurance subsidies under the Affordable Care Act, but critics have long targeted it as wasteful. The Heritage Foundation, a consistent ally of budget cutters, characterizes crop insurance, along with other farm subsidy programs, as “a massive transfer of wealth from taxpayers to mostly large agribusinesses that are (or should be) fully capable of managing their business operations without this special treatment.”

Universal Basic Income: The Complete Caplan-Dolan Dialog

Bryan Caplan is Professor of Economics at George Mason University and Senior Scholar at the Mercatus Center. He is the author of The Myth of the Rational Voter: Why Democracies Choose Bad Policies, named "the best political book of the year" by the New York Times, and Selfish Reasons to Have More Kids: Why Being a Great Parent Is Less Work and More Fun Than You Think. He has published in the New York Times, the Washington Post, the Wall Street Journal, the American Economic Review, the Economic Journal, the Journal of Law and Economics, and Intelligence, and has appeared on 20/20, FoxNews, and C-SPAN. He is now working on a new book, The Case Against Education.

Ed Dolan is a retired economist, active blogger, and Adjunct of the Niskanen Center. At various times, he taught at Dartmouth College, the University of Chicago, George Mason University, the American Institute of Business and Economics in Moscow, the University of Economics in Prague, and the Stockholm School of Economics in Riga. He is the author of TANSTAAFL: A Libertarian Perspective on Environmental Policy and editor of Foundations of Austrian Economics. He contributes regularly to Economonitor.com, SeekingAlpha.com, The Milken Institute Review, and Ed Dolan’s Econ Blog. He holds a PhD in economics from Yale University.

This impromptu dialog took place over several days in early 2017 on several different platforms. For readers’ convenience, I have put all the separate segments together here. To help keep things straight, everything written by Caplan is set in the Helvitica font and everything written by Dolan in Times

CAPLAN: Opening Statement (Econlog, Jan 24, 2017)

The Many Faces of Means Testing

Isn't a Universal Basic Income just another name for a negative income tax, such as Tax = -$10,000 + .3*Income?  If so, isn't a Universal Basic Income means-tested by definition?
The answer to the first question is Yes.  UBI is just Milton Friedman's negative income tax in new packaging.
The answer to the second question, however, is more equivocal.  The UBI is means-tested in the weak sense that your net payment falls with income.  But the UBI dispenses with many other traditional forms of means-testing.  Most notably:
1. Means-testing by age.  Most welfare states prioritize children and the elderly.  The implicit theory is that, unlike prime-age adults, the very young and the very old are unable to provide for themselves.
2. Means-testing by dependents and marital status.  Most welfare states prioritize single moms with minor children.  The implicit theory is that single moms have reduced opportunities to work due to their family responsibilities.
3. Means-testing by health.  Most welfare states prioritize the disabled.  The implicit theory is that they're not healthy enough to work.
4. Means-testing by job history.  Most welfare states prioritize people who recently lost their jobs over people who have never worked, or lost their jobs a long time ago.  The implicit theory is that the short-term unemployed are unlucky, while the long-term unemployed are lazy.
If your UBI proposal includes factors like these in its formula, it's very hard to see what makes it a UBI. 

Where Will An Expanding Economy Find New Workers? Clues From The Non-Employment Index

The hope of faster economic growth is a major factor behind the upturn in markets since the November election, but where will an expanding economy find the workers it needs? If it cannot find them, then any stimulus from tax cuts, regulatory reform, or infrastructure spending risks turning into inflation rather than healthy growth.

Some observers place their hopes on tapping the reserve of workers who have left the labor force. The percentage of the population who participate in the labor force has fallen from its peak of around 67 percent in the 1990s to about 63 percent today.  Just how likely are those labor-force dropouts will return to work? We can get an idea by looking at data on transition rates, by which we mean the probabilities that a non-employed worker in any labor-force category will find a job in the next month.>>>

Follow this link to read the complete chart at SeekingAlpha.com

 

CNN’s Sanders-Cruz Healthcare Debate: A Scorecard

CNN, Senator Sanders, and Senator Cruz deserve congratulations for a great town hall. Real focus, real exchange of views, even real agreement now and then on some important ideas. Worth viewing, or if you missed it, worth reading the transcript.

Still, articulate and well prepared though the participants were, there were things they should have said that they didn’t say. I often had the feeling that Cruz was changing the subject when he didn’t have answers and glossing over some key points that needed closer examination. At the same time, I think Sanders missed some chances to hold him to account. Here is my scorecard, organized by topic.

Pre-existing conditions

The ACA (or Obamacare) has many detractors, and it has flaws that Sanders himself admits, but some parts are popular. None is more popular than the mandate that insurance companies must cover people regardless of pre-existing conditions. Probably fewer than one in ten Americans falls into that category, but almost everyone has a parent or child or spouse or friend who is in the ten percent. Together that ten percent of patients account for about two-thirds of all personal healthcare spending. Even if you are healthy, your biggest fear is that you might develop cancer, or diabetes, or have a bad auto accident, and end up in the ten percent without adequate healthcare coverage.

Why So Many Healthcare Risks are Uninsurable and Why It Matters

As the US begins a great national debate over healthcare policy, investors in affected industries will need to understand some basic principles of healthcare economics. This post focuses on one such principle-that of insurability. I hope to deal with others in future posts.

A risk must meet certain well-known conditions in order to be economically insurable. Healthcare risks meet some of these conditions. For example, large numbers of people are similarly exposed, and the magnitude and probability of risk are usually calculable. However, healthcare risks, at least for many people, fail to meet two other key conditions of insurability: They are not always fortuitous , and actuarially fair premiums are not always affordable.

The problems of fortuity and affordability arise from an inconvenient but inescapable fact of healthcare economics-the highly skewed distribution of medical expenses. >>>

Follow this link to read the full post on SeekingAlpha.com