Next, a few points on taxes and economics:
- Pearlstein writes convincingly that, "The old Republican fantasy was that tax cuts were the magic elixir that would solve every problem. Now that the public has finally rejected it, it's disappointing to see Democrats offering up the equally fantastic notion that Americans can have all the government they want while getting someone else to pay for it." He goes through the numbers and shows that all of us are going to have to pony up some more to get the budget in good shape.
- Dean Baker writes, "Too-often ignored, the basic economic principles of marginal-cost pricing and gains from trade have much to offer in the area of health care. They need to be brought into the discussion." Why does running a medical scan that requires a few dollars of electricity and a few hundred dollars of technician and doctor time to run and read (respectively) get billed at thousands upon thousands of dollars?
- Simon Johnson believes politics, rather than pure economics, lay at the foundation of our country's financial woes. "His argument, in a nutshell, is that the last 25 years have seen deregulatory policies driven by the banking interests, leading to an over-large financial sector that has captured the political process. Financiers promoted free-market ideals, served in government, and funneled millions into the political process. Now, the risky behavior of major financial institutions, combined with the public policy they promoted, has created a major crisis. But the bankers' political power hasn't waned, and they are preventing the government from acting aggressively to start recovery." Sounds reasonable to me -- the people with their hands on the levers of power before Obama's inauguration haven't disappeared overnight, and they tend to be disproportionately connected to Wall Street.
- Of course, Johnson has his critics (Scheiber), " The logical chain is typically something like: 1.) I've seen corrupt elites prevent governments from resolving financial crises in emerging markets. 2.) The finanical crisis dogging the United States shares some features with emerging-market crises--for example, overleveraged institutions enjoyed an outsize share of corporate profits prior to imploding. 3.) Ergo, it must be the case that corrupt elites are preventing the U.S. government from resolving the crisis. Problem is, the third point doesn't necessarily follow from the second. Logically, it's like saying: 1.) Cancer patients don't get well when they're treated by witch doctors. 2.) The top oncologist at Mass General has lost a few patients lately--some of them inexplicably, under mysterious circumstances. 3.) Ergo, the top oncologist at Mass General was practicing witchcraft. Maybe, but it would be much more persuasive if you could establish causality."
