Foolippic

CARPE DIEM

America’s Health Insurance Plans (AHIP), the industry’s trade association representing 1,300 members (how could that be a monopoly?), recently reported that annual health insurance premiums averaged $2,985 for individual coverage and $6,328 for family plans in 2009. Using the industry average profit margin of 3.3% means that insurance companies make less than $100 per policy in profits for individual coverage, and a little more than $200 in profits for each family policy. Doesn’t seem too “excessive” or an indication of monopoly power, does it?

Alternatively, even if we could strip away 100% of the health insurance profits, it would only result in about $100-200 of annual savings for consumers of health insurance. Is that what we could expect then from a government-sponsored “public option” that wasn’t “profit-driven” – annual savings of only $100-200?

And here’s the graphic, showing the profit margins in the health insurance industry compared to other industries:

Among the companies making more profit than the average health insurance company? Tupperware, the railroads (!), Hershey, and Yum food brands.

So remember this the next time you hear Obama blame health insurance profits for out-of-control health care costs. And he will, because demonizing the people who disagree with him is one thing he’s good at.

TaxProf Blog: 47% Will Pay $0 Income Tax in 2009

CNN, 47% Will Pay No Federal Income Tax:

In 2009, roughly 47% of households, or 71 million, will not owe any federal income tax, according to estimates by the nonpartisan Tax Policy Center.

Some in that group will even get additional money from the government because they qualify for refundable tax breaks.

If you don’t have to pay income tax, but can vote to raise taxes on others…

Personally, I’d like to see a VAT instead of an income tax. Naturally, the Obama administration is contemplating pushing for one on top of the current income tax.

Economics in One Lesson, The Lesson Applied, Public Works Mean Taxes

There is no more persistent and influential faith in the world today than the faith in government spending. Everywhere government spending is presented as a panacea for all our economic ills. Is private industry partially stagnant? We can fix it all by government spending. Is there unemployment? That is obviously due to “insufficient private purchasing power.” The remedy is just as obvious. All that is necessary is for the government to spend enough to make up the “deficiency”.

An enormous literature is based on this fallacy, and, as so often happens with doctrines of this sort, it has become part of an intricate network of fallacies that mutually support each other. We cannot explore that whole network at this point; we shall return to other branches of it later. But we can examine here the mother fallacy that has given birth to this progeny, the main stem of the network.

Did I say today? I meant 1946, when this was first written.

CARPE DIEM: Almost 4 Out of 10 Uninsured Americans Live in Households Making More Than $50,000 Per Year

Almost 4 Out of 10 Uninsured Americans Live in Households Making More Than $50,000 Per Year

According to this Census Bureau report “Income, Poverty, and Health Insurance Coverage in the United States: 2008″ (released today), there were 46.34 million uninsured Americans in 2008, up from 45.6 million in 2007.

The chart above shows the household income levels of those 46.34 million uninsured Americans. There are 9.725 million uninsured Americans living in households making $75,000 per year or more, and this represents more than 1 out every 5 unisured (21% of the total). There are about 8 million Americans without health insurance in households making between $50,000 and $75,000, representing 17.3% of the uninsured. With those two groups combined, 38.3% of Americans without health insurance (17.75 million people) lived in households with $50,000 or more of household income in 2007 (see Table 7 for these data).

This is important, because there is no reason that we should be considering families that make over $50,000 as part of the group of uninsured that need to be addressed by urgent Federal action.  This is a favorite tactic of the crisis-mongers, lumping unlike things into one big number the better to scare you with (as when they count the two nights you spent with relatives while moving from your old apartment to your new one as making you “homeless”).

Uninsured Subpopulations

Note that the analysis done ensures that the categories don’t overlap, so that e.g. you’re only in the Childless adults 18-34 category if you do not also belong to the over 300% of poverty category (for a single person that’s about $30k, for a family of 4, about $60k).

One final statistic: according to the CBO analysis of the actual bills, the number of Americans who would be over the threshold for subsidy, still unable to afford health insurance and have to pay substantial tax penalties because of the mandate would be about 8 million.

So tell me, is it really worth paying One Trillion Dollars for a health care policy that swaps 10 million uninsured because they can’t afford it for 8 million uninsured because they can’t afford it who must now pay stiff penalties?

Do We Need a Second Stimulus? – WSJ.com

With the economy weak and the labor market continuing to decline, there is now talk of a second stimulus (which is actually the third, counting President Bush’s 2008 tax rebates). This would be a mistake. The truth is there hasn’t been any stimulus to speak of so far this year. Moreover, what’s being called stimulus is just a smoke screen for a permanent expansion of government.

Actually, since so little of the first stimulus has been spent, and so little of it was actually directed towards stimulus instead of permanent expansion of the government, I’d be willing to entertain the idea of a second stimulus paid for by cancelling the remainder of the first. Take all the unspent money and direct it towards a real stimulus. My understanding is that the first-best form of stimulus would be a relatively small amount (still huge in absolute terms) of direct money to states and cities to tide them over and the bulk of it in a payroll-tax holiday that would reduce the cost to employers of keeping people employed or hiring new people and would have almost none of the predictable and predicted effects that the Obama administration is now complaining about that it’s hard to get the Federal government to spend money fast. But I’d settle for a stimulus of the kind that Obama and the Democrats love, with the Feds shelling out largesse in ways that the politicians can take credit for, if this time they’d actually follow the mantra of “Timely, Targetted and Temporary.” But only if they repeal the porkulus bill they passed in the first place.

Wanted: Honesty on Health Care: The president’s health care lies might be injurious to your health – Reason Magazine

Lie One: No one will be compelled to buy coverage.
Lie Two: No new taxes on employer benefits.
Lie Three: Government can control rising health care costs better than the private sector.
Lie Four: A public plan won’t be a Trojan horse for a single-payer monopoly.
Lie Five: Patients don’t have to fear rationing.

The first two are the most blatant. Not only does what the current proposals actually contain contradict Obama’s campaign promises and on points that Obama attacked both Clinton and McCain over (hey, he might have changed his mind, even though he would never admit that his opponents might have had a point) but these two are lies he’s uttered in the town hall infomercial in which he was selling his plan to the public while at the same time his administration was telling Congress the opposite.

Three I’m more inclined to give a pass on.  Many Lefties sincerely believe it, despite overwhelming evidence to the contrary;  the magical cost containment abilities of government programs is the Creationism of the left.  It at least could conceivably be true, as long as Five was an utterly malicious falsehood. The Government can control costs better than private enterprise, as long as it’s willing to ruthlessly ration and see the quality of care go to hell (another form of rationing). See England’s National Health Service for plenty of examples.

Four could be believed by an economically ignorant person who doesn’t see how the mere presence of a government backed and subsidized agency, even without explicit guarantees, could distort the market. Someone, say, who had no idea what Fannie Mae and Freddie Mac do or their role in the current financial crisis, or for that matter how Medicare works to drive up prices for non-Medicare patients. I’ll leave it to the reader to decide whether Obama is such a person, or just a garden-variety liar.

Five…well, actually Five might be the most blatant of all, since one of the innovations that is part of Obamacare is setting up a council to determine based on “comparative effectiveness studies” what treatments will be covered. There might be some wiggle room there for someone who sincerely believes that comparative effectiveness is binary, so the only rationing that would occur would be the elimination of completely ineffective treatments so there’s no reason to fear…but you’d have to be stupid or foolish person prone to wishful thinking to believe that. Is Obama such a person?

And less of the other kind:

Home taping didn’t kill music – Bad Science

On the billions lost it says: “Estimates as to the overall lost revenues if we include all creative industries whose products can be copied digitally, or counterfeited, reach £10 billion (IP Rights, 2004), conservatively, as our figure is from 2004, and a loss of 4,000 jobs.”

What is the origin of this conservative figure? I hunted down the full CIBER documents, found the references section, and followed the web link, which led to a 2004 press release from a private legal firm called Rouse who specialise in intellectual property law. This press release was not about the £10bn figure. It was, in fact, a one page document, which simply welcomed the government setting up an intellectual property theft strategy. In a short section headed “background”, among five other points, it says: “Rights owners have estimated that last year alone counterfeiting and piracy cost the UK economy £10 billion and 4,000 jobs.” An industry estimate, as an aside, in a press release. Genius

Reader survey results: probabilities, halos, and leaders (Aid Watch)

On one level, A is the right answer, because B is a subset of A. A contains all successes, both (1) those achieved with wise leadership, and (2) those achieved with any other means. B only contains (1), and so is less likely than A. Well known psychology experiments find the same thing — that many people have what is called the “conjunction fallacy” (again from my continuing Mlodinow and Kahneman obsession) that would cause them to choose (B). A set of outcomes that fits a plausible story is thought to be larger than one unrestricted by ANY story, even though ANY restriction on the set of possible outcomes always makes that set less likely than an unrestricted set. An explanation usually trumps no explanation, even if it gets the probabilities wrong!

Interestingly, though, Easterly goes on to say that he thinks is phrasing was sloppy, so that a number of people chose B because they read it as “when is development success more likely?” So although the split was 60-40 in favor of A (the answer I thought was obvious), it’s not clear how many of the 40% were falling for the conjunction fallacy, and how many read the question as meaning something else.

What Does the Human Development Index Measure? – Freakonomics Blog – NYTimes.com

Given this debate, I wondered whether Gelman’s critique might also apply to the U.N.’s original cross-national Human Development Index, so I downloaded the latest data. The graph below compares a country’s ranking on the human development index with its ranking on average income. The correlation between the two is even stronger — a massive 95 percent! For all but a handful of countries, your ranking on average income is the same as your ranking on this multi-dimensional index.

so, granting Catherine Rampell’s point that  “U.N.’s index was not designed to capture the levels of variation that would occur within a single country. It was designed to make international comparisons.”  What is the non-evil (or at least massively tendentious) explanation for how it was designed if all the factors basically collapse into average income?

William Easterly asks the following question of his readers:
Reader survey (Aid Watch)

Please tell me which you think is more probable:

(A) a country succeeds at economic development, or
(B) a country succeeds at economic development with a wise and capable leadership.

But it seems like it’s completely obvious unless I’m misunderstanding how “with” is meant.  P(A) > P(A & B) as long as P(A & ~B) > 0.  That is, as long as there’s even one country that succeeds at economic development without wise and capable leadership, the probability that a country succeeds is greater than the probability that it succeeds and has wise and capable leadership. No?  Maybe the question really means which is greater P(A) or P(A|B), but I really find that quite a stretch for that phrasing.