James Pethokoukis

Politics and policy from inside Washington

The case against Bernanke being reappointed as Fed chairman

Aug 20, 2009 17:52 UTC

David Rosenberg of Gluskin Sheff outlines the bear case on Ben Bernanke getting reappointed by Obama:

Bernanke was a giant cheerleader for the leverage-induced economy during his time as the chief economist at the White House and while he was aggressive (and likely broke every rule in the book of central banking) in getting the credit market and economy back on track, he failed at the outset to realize the severity of the credit collapse and treated it as a liquidity event only for months

The Fed’s economic forecast that was published just over a year ago for late 2008 and 2009 is an embarrassment, to say the least. Valuable time was lost under his watch and the question is (i) does the Administration look at his entire record as opposed to his period as a White Knight, and (ii) will Mr. B end up being a scapegoat once the economy relapses in the fourth quarter and the unemployment rate makes new post-WWII highs along the way. See the front page of the NYT for more — Bernanke, a Hero to his Own, Still Faces Fire in Washington. The search committee is already out, by the way, and the likes of Blinder, Yellen, Ferguson and Summers are on it.

Me: I notice that Intrade has Bernanke at 80 percent, but contract is pretty lightly traded. I just keep thinking about the House Government Oversight Committee meeting concerning BofA and Merill where members from both parties basically said Bernanke was lying about his role in the merger. That can’t be good.


They could eat their cake and have it too by keeping Bernanke and appointing a “Fed Czar” that Bernanke reports to. It’s a two-fer — the pesky Senate approval process could be skipped since “Czars” aren’t subject to that and Bernanke’s overlord would have the real power ;-)

Seriously though, how is anyone on that list a genuine improvement or change for the better?

Why not Paul Volcker? Agree or disagree with his philosophy, his appointment would represent a sea change.

Posted by Siobhan Sack | Report as abusive

Another look at the VAT

Aug 20, 2009 14:36 UTC

Chris Edwards of the Cato Institute notices that several New Europe countries are raising their VATs to deal with huge budget deficits and concludes thusly:

1) VATs are handy money machines for governments. Governments fear raising income taxes during recessions because of concerns over damaging their economies. But they have less such concerns with respect to VATs.

2) International tax competition continues to generate pressure for countries to keep income tax rates down. Policymakers don’t want businesses and investment capital fleeing abroad for lower taxes, particularly during economic downturns.

VATs are generally less damaging to economic growth than income taxes. But the flip side to that widely-understood result is that politicians have less fear about using them to grow the size of governments during good times and bad.



Surely you miss the political point – politicians won’t raise VAT because it hits the voters. Witness France changing its mind two years ago on a proposed 5% increase.

I guess the trick is to get an increase in early on in the election cycle – VAT in the US anyone?

I read an article on this site http://www.tmf-vat.com that everyone (UK, France, Spain etc) will have to increase VAT in the next 1-2 years to combat the crisis. Seems like it is not restricted to Central Europe.


Posted by Richard | Report as abusive

Turns out U.S. healthcare system is actually, like, really good

Aug 20, 2009 14:20 UTC
University of Pennsylvania researchers Samuel Preston and Jessica Ho have looked at the low-life expectancy numbers in the United States and asked the question: “Is the health care system at fault?” Here is their answer (bold is mine):
Life expectancy in the United States fares poorly in international comparisons, primarily because of high mortality rates above age 50. Its low ranking is often blamed on a poor performance by the health care system rather than on behavioral or social factors. …  We find that, by standards of OECD countries, the US does well in terms of screening for cancer, survival rates from cancer, survival rates after heart attacks and strokes, and medication of individuals with high levels of blood pressure or cholesterol. We consider in greater depth mortality from prostate cancer and breast cancer, diseases for which effective methods of identification and treatment have been developed and where behavioral factors do not play a dominant role. We show that the US has had significantly faster declines in mortality from these two diseases than comparison countries. We conclude that the low longevity ranking of the United States is not likely to be a result of a poorly functioning health care system.
So if not the healthcare system, then what?
But measures of population health such as life expectancy do not depend only on what transpires within the health care system – the array of hospitals, doctors and other health care professionals, the techniques they employ, and the institutions that govern access to and utilization of them. Such measures also depend upon a variety of personal behaviors that affect an individual’s health such as diet, exercise, smoking, and compliance with medical protocols. The health care system could be performing exceptionally well in identifying and administering treatment for various diseases, but a country could still have poor measured health if personal health care practices were unusually deleterious. This is not a remote possibility in the United States, which had the highest level of cigarette consumption per capita in the developed world over a 50-year period ending in the mid-80’s (Forey et al. 2002). Smoking in early life has left an imprint on mortality patterns that remains visible as cohorts age (Preston and Wang 2006; Haldorsen and Grimsrud 1999). One recent study estimated that, if deaths attributable to smoking were eliminated, the ranking of US men in life expectancy at age 50 among 20 OECD countries would improve from 14th to 9th, while US women would move from 18th to 7th (Preston, Glei, and Wilmoth 2009). Recent trends in obesity are also more adverse in the United States than in other developed countries (OECD 2008; Cutler, Glaeser, and Shapiro 2003).

So, the USA is #1 if you eliminate the worst demographics from the statistics? Woohoo!

Uh, wait a second. That’s nothing to pat yourselves on the back about, guys. That’s just disingenuous playing with statistics for purposes of propaganda. If you remove the worst demographics from ANY country’s statistics, its overall ratings improve. Placing the USA’s doctored statistics against other countries’ undoctored statistics is a dishonest comparison.

If the USA’s healthcare system were any good, it wouldn’t have the lowest satisfaction rating or the highest cost per capita of any industrialized nation (it has both!). You also wouldn’t need to be dishonest with statistics to make it look good.

Posted by Benjamin Pyke | Report as abusive