Friday, October 24, 2008

Great Britain's Economy Shrinks

For the record, I'm not blaming the contraction of Great Britain's economy on Barack Obama. But it is important economic news.

Great Britain's economy contracts by 0.5 percent
The U.K. economy shrank more than forecast in the third quarter, evidence that Britain is in the grips of its first recession since 1991. Gross domestic product dropped 0.5 percent from the second quarter, the first contraction in 16 years, the Office for National Statistics said today.
It looks like a worldwide recession is on the horizon, if it has not already started. How long it lasts will have something to do with what kinds of economic policies are enacted.

Sunday, October 19, 2008

Soup Lines Instead of Bread Lines

Columnist John Kass is probably going to be running a blog that competes directly with mine called The Obama Soup Lines.
"Spread the wealth around" is regular Joe speak for redistributionist tax policy, in which the government takes from the Joes and keeps a fee for handling Joe's money, then gives it out to other folks who want Joe's money, so the other folks will love the politicians who run the government and vote for them again and again.

This is a system that works remarkably well for politicians, government workers with fat pensions and others who get Joe's money. It doesn't work out for the Joes, but there aren't as many of them as there used to be. Increasingly, Joes are encouraged to get in the government soup line for what is called "their fair share."

Anybody from Illinois understands how this works. In Illinois, it is an art form. Illinois Republican politicians do it. Illinois Democratic politicians really, really do it. Soon, perhaps, the rest of the nation will understand our way of doing it.

Obama's Health Care Plan

Greg Mankiw, a professor of economics at Harvard, has an interesting post regarding Barack Obama's health care plan titled, Taxing the Uninsured.
Now consider the Obama health plan. A major element of the plan is an extra payroll tax on firms that do not give their workers health insurance. By the basic theory of tax incidence, this is equivalent to a tax on workers without insurance.

In other words, the Obama plan is much the same as imposing a health insurance mandate, backed up by the penalty of a tax surcharge on your earnings if you fail to have coverage.

One difference: If an individual buys his own health policy, rather than getting it through his employer, he still pays the tax. That is, the Obama policy continues, even reinforces, a strong policy-induced preference for employer-provided over individually-purchased health insurance.
The post goes on to say that McCain's plan is attempting to partially sever the link between where one works and their health insurance. We should change the economic incentives of health insurance so that one's employer has less to do with an employee's health insurance.