Are Red-Staters Stupid?

Imagine there's a Federal Government program that is designed to help people... oh, I don't know, let's say help people lose weight.

The Program chugs along for years, and then an economist notices a funny thing: the states that get the most money for The Program are full of people who hate The Program. And those same states have the highest rates of obesity!

I see two likely explanations:

1) The Program is doing what it is supposed to do, and putting more resources in the states with the biggest problem. It's not the government's fault that the ingrates in those states don't know what's good for them.

2) The Program is having an unintended negative effect and is somehow making people fatter. The people know this, and that's why they don't like The Program.

Personally, I'd lean towards explanation number 2, but that's because I'm biased towards bottom-up rather than top-down solutions. To actually figure out which explanation was more correct would take some careful analysis.

The above thought experiment was inspired by Paul Krugman's column last week "Moochers for Self-Reliance," where he talks about the fact that Red States get more money per-capita from the Federal Government than Blue States. Because they're fatter poorer.

The possibility that more government spending could make everybody poorer doesn't seem to ever enter Professor Krugman's mind. Which is odd, because he's written quite eloquently about how the Soviets managed to bankrupt their economy by spending lots of money.

Do Nothing

The popular perception is that our do-nothing Congress is going to drive our country into a financial ditch.

Tyler Cowen (one of my favorite economists, even though he's a Bitcoin skeptic) points out that's not actually true.

If Congress does nothing, then a bunch of things will happen which should balance the budget in ten or so years:

The Bush tax cuts will expire. Income tax rates go up for everybody (rich, poor and middle class) and the Federal Government will get a lot more revenue. If you're a Democrat who thought the Bush tax cuts were a really bad idea in the first place then that shouldn't bother you.

The SuperCommittee SuperFailure budget cuts will happen. Military and Domestic spending will be cut. I'd be pretty happy with that, I think we're spending way too much money on our military and don't think we get our money's worth from most Federal government spending.

Medicare spending will be cut, because there will be no "doc fix" to override a law that was passed several years ago that was supposed to limit doctor reimbursement of Medicare expenses. If that happens (I don't think it will), then it'll suddenly become very difficult to find a doctor willing to accept people on Medicare. It would, however, save a ton of money. It would also be a fascinating natural experiment in health-care economics-- given that there's a surprisingly weak correlation between health care spending and longevity or other measures of health maybe we'd all be better off if we collectively spent less money on doctors.

From my perspective, do-nothing looks like a pretty good second-best solution. I'd rather we cut military spending more, kept the tax cuts for people making under $50,000 per year, and implemented Megan McArdle's plan for national catastrophic health insurance. But Congress has shown that it is really good at doing nothing, and I don't expect that to change.

Zoning. Lots of Zoning.

Tomorrow night Amherst Town Meeting takes up Article 17, which rezones a couple of "Village Centers" to encourage more mixed-use, walkable, environmentally-friendly development.

The Sustainable Amherst website has a great summary of the reasons it is a good idea.

There are a couple of different things going on in the Article-- first is the proposal to change the zoning. That will bring out the NIMBYs who are afraid of change (which, as I've said before, is completely rational). I hope they can overcome their fear and think about all the nice things that might get built. I really enjoy being able to walk to coffee shops and restaurants and Captain Candy and the Farmer's Market, and I would think people living in North Amherst would enjoy more places to hang out and shop, too.

The second thing going on in Article 17 I'm not so enthusiastic about-- "Form-based zoning." The idea is to write zoning rules to encourage the creation of neighborhoods that 'feel' a desired way.

I'm not enthusiastic just because I would rather take a 'creative destruction' approach-- I believe that if you make it easier to redevelop, then neighborhoods will evolve over time towards whatever their residents most desire. I worry that adding Even More Pages to our Zoning Bylaw will just make redevelopment more difficult and expensive, and will give Nimby neighbors more opportunities to nit-pick a project to death.

But maybe I'm wrong about that. Maybe Form-Based Zoning is a really good idea and will speed the process of redevelopment along, so you get fewer strip malls along the way towards tomorrow's quaint, historic village centers that everybody adores. I'm willing to give it a try, and plan on voting for Article 17 tomorrow night.

Drug-testing before welfare

Is it OK to require people to pass a drug test before getting welfare benefits?

If you're a conservative, you probably think: "Sure! It is against the law to take drugs, and giving welfare to drug addicts just encourages their illegal, self-destructive behavior."

If you're a liberal, you probably think: "No! Drug users are some of the most disadvantaged members of our society, denying them benefits is just heartless and will make their problems worse, and testing innocent people is demeaning and violates their human rights."

Who is right? What should the government do?

I wish people would spend less time arguing about questions like this and realize that the real problem is we've got a winner-take-all system where "There Shall Be One Correct Answer."

It doesn't have to be that way.

Garbage Bikes

I like bicycles; our family of four owns eight (and a half, if you count my unicycle). My New Year's resolution for the last 8 or so years has been to ride my bike more (and like all good New Year's resolutions, I've failed miserably).

So I feel as if I should love the "Pedal People" who haul trash around Northampton.

What's not to like? They're working hard, getting exercise, keeping a dirty, polluting garbage truck off the road. And as our local newspaper said in a recent article, it takes 5 Pedal People to do the work of 1 person and a garbage truck, so they're great for the economy.

... except they're actually not so great for the economy. True, it takes 5 people to do the work of 1 person plus a truck. But by that logic, it would be better for the economy to hire 50 people to walk garbage to the dump. It isn't, because hiring 50 people is more expensive, and the extra 49 people could spend their time doing something more productive than hauling trash.

Is hauling trash by bike better for the environment? Well, it is a little more expensive, which means the people hiring the pedal people have less money in their pockets at the end of the month (comparing prices, looks likes about $1,000 $50 per year). If they were going to spend that money on a vacation in Tahiti gasoline for a trip to a Tea Party rally in Boston then the bikes are definitely a win for the environment. But if they were going to donate it to a charity dedicated to preserving the environment or lobbying for a carbon tax... then it isn't so clear-cut.

My practical, skeptical side thinks hauling trash by bike is probably a bad idea; I'd love to hear from some Pedal People 10 or 20 years from now to see if most of them are still riding strong or if they're recovering from knee replacement operations. But I do like bicycles, and if the people riding the bikes are happy and the people paying them to ride their bikes are happy maybe I should stop being such a curmudgeon. God knows I spend a fair bit of my money and time doing things that make me feel good for irrational reasons. (Go Patriots! 4 and 1!)

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Edited: I confused the Weekly Pedal People pickup schedule with Monthly prices. Sorry!

Defense is a Public Good. So spend less on it.

When economists talk about something being a "public good" they don't mean "nice stuff that the government does."

The definition of a public good is something that is non-rivalrous and non-excludable. Or in non-econogeek-speak, stuff that doesn't run out no matter how many people use it, and stuff that benefits everybody whether they pay for it or not.

National defense is a public good. I'm not saying all national militaries are "good" -- I think lots of militaries around the world are evil and the world would be a better place without them. But the idea of national defense is a public good-- assuming you're pretty happy with your government and don't want Foreign Invaders to take over your country, everybody benefits from a national military standing guard and keeping you safe. And assuming the Foreign Invader Threat doesn't grow as your population grows, the same military can protect 100 thousand people as easily as it can protect 100 million.

National defense is non-excludable and non-rivalrous.

One funny thing about public goods is since they're non-rivalrous, you can serve more and more people while spending the same amount of money. But we don't do that; we spend more and more money on the military. In all the debates about "cutting" military spending the most radical proposals still keep spending at some constant percentage of GDP.

Why?

We should be able to get the same level of safety from Foreign Invaders with a constant level of military spending, no matter how large our population or economy grows. We'd all be much better off, and much safer, if we cut military spending by 90% and spent the money on just about anything else.

Budget Battle Brainstorm

The big battle over raising the debt ceiling makes me wonder if there might be a better way of handling our national budget.

What would happen if Congress and the President agreed to a top-line number: We Shall Spend XYZ Trillion Dollars This Year.

But left the details of exactly what to spend it on to individual congressional representatives.

Just divide the budget by 435, and let each representative decide what to spend their portion on (maybe after paying out interest on the debt, and putting Social Security revenues/expenses into its own account).

Representatives from far-left-wing districts could decide to spend nothing on Defense, and lots on Medicaid and Food Stamps. Representatives from Florida could decide to spend lots on Medicare. Tea-Party representatives could decide to refund part (or all!) of their share back to the taxpayers in their district.

What would happen?

Would spending rise because voters knew their representatives would spend the money on stuff that they like, or would it fall because representatives would compete to give more and more tax dollars back to voters?

Would special interests gain more or less power?

Has anything like this ever been tried-- are there other countries or states or towns that simply elect a bunch of representatives and then divvy up a budget for them to spend however they wish?