Pelosi’s “Six for ‘06″ Plan
Written by YellowJacket on December 1st, 2006Let’s take a look at what Nancy Pelosi, incoming Democratic Speaker of the House, has established as the Democratic Agenda for the new house, or the “Six for 06″ plan (which by the way is actually 7… why not just say “Seven for ‘07?”):
** Draining the swamp — break the link between lobbyists and legislation and commit to pay-as-you-go budgeting, no new deficit spending
** Making America more secure — implement the independent 9/11 Commission recommendations
** Giving Americans a raise — increase the minimum wage
** Making college more affordable — cut the interest rate in half on federally subsidized student loans
** Making health care more affordable — negotiate for lower prescription drug prices
** Ending subsidies for Big Oil
** Giving hope to families with devastating diseases — allow stem cell research
Breaking it down one-by-one:
Draining the swamp — break the link between lobbyists and legislation and commit to pay-as-you-go budgeting, no new deficit spending
Democrats as well as Republicans in Congress live off of earmarks and lobbyists; I don’t see a firm break between special interests and Congressmen any more possible under Pelosi than it was under Hastert. “Pay-as-you-go budgeting” is a nice way of saying no more tax cuts that “drain from the deficit”; in Pelosi’s world, and others who show no knowledge of how supply-side economics works, the Bush tax cuts “cost” the federal government money. They completely ignore the fact that the tax cuts helped lend a hand to the growing economy and resulted in higher tax revenues for the government. They also make no reference to cutting spending. As bad as the Republicans may be with only fulfilling half of the solution, by cutting taxes yet embracing growth in spending, Democrats are absolutely blind with their desire to both raise taxes and - get this - raise spending. Tax cuts do not add to the deficit. Out-of-control spending does.
Making America more secure — implement the independent 9/11 Commission recommendations
We’ve already seen before Congress has even convened under the new Speaker that the Democrats are already backpedalling on this. No further comment is necessary.
Giving Americans a raise — increase the minimum wage
Funny, last time I checked Americans as a whole weren’t employed by the Federal Government, so how can the government “give Americans a raise”? Oh yes, that’s right, by legislating a labor cost that will be higher than the equilibrium cost in many markets, that will in the end only add to inflation, and that will surely enrich the Democrats’ union buddies just in time for 2008. Sounds grand!
Making college more affordable — cut the interest rate in half on federally subsidized student loans
I don’t see a problem with trying to help students go to college, and cutting interest rates on loans sounds like a good idea except for the fact that this will cost the government money - and neither the Dems nor the Republicans will cut spending elsewhere to make up for the loss in expected revenue from future loan interest payments. Good idea, but will be poorly implemented.
Making health care more affordable — negotiate for lower prescription drug prices
Read: price controls for a free-market commodity. Do I need to say anything more?
Ending subsidies for Big Oil
“Subsidies” that the Democrats love to rail against Big Oil for are not actual subsidies (like free money the government loves to give to farmers, etc, which the Democrats seem to have no problem with) - they are exemptions from taxes on royalties for oil exploration for oil companies. I do have a problem with favorable tax policies for certain companies, industries, or even people, but the Democrats have this ideologically backwards. I don’t see a problem with taxing every business the same (well, technically I do, I’d rather turn to the FairTax or a flat income tax, but I digress), but one can’t ignore the fact that giving these companies exemptions does free up more money they can use for research, for drilling, for their employees, etc. Memo to Democrats: there are no “subsidies” for Big Oil. If you’re going to make hay about something at least be honest about it. How about cutting those agricultural subsidies?
Giving hope to families with devastating diseases — allow stem cell research
This implies that the evil Bush has placed a ban on stem-cell research in the United States, which is flatly a lie. There is no ban or limitations on privately-funded stem-cell research. Bush was the first president to authorize federal spending on stem-cell research (which I disagree with, I say leave it to the free market and keep politicians out of it), which the Democrats and the media will not advertise to Americans. They are up in arms because Bush made a political and moral decision to fund research on the lines already open, but not on further opened lines (take advantage of the information already available, but don’t spend any more tax dollars on opening up new research that would result in the destruction of embryos). There is no ban on private stem-cell research. Private companies can conduct whatever research they wish, but Pelosi won’t bother to let the American people know about it. She and her counterparts in Congress will only seek to expand federally-funded research, wasting more taxpayers’ money on things that the private market can handle.
That’s my brief synopsis; Byron York at National Review delves into the issues in greater depth.
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You DO NOT UNDERSTAND the fundamental economic issues behind wage and price controls in any way, shape, or form.
Morons who take one semester of economics, know how to draw a supply/demand diagram and then presume to lecture everyone else about economics are as bad as high school students who take one semester of psychology and then irritate everyone with their psychobabble.
Among the assumptions embodied by 101-level supply and demand analysis are: no pricing power by firms, free entry and exit, firms price at marginal cost, perfect information, no external costs or benefits. If any one of these assumptions is violated, any conclusions drawn from your “economic analysis” are blown to pieces.
There is near consensus among REAL economists who ACTUALLY UNDERSTAND ECONOMICS about wage and price controls; if you look at ACTUAL DATA instead of just shooting off Reagonomics idiocy, you’d see that conclusions are quite the opposite from what you predict, as more complete economic models would suggest. I’m glad that idiots like you with one semester of rudimentary economics training (that’s just about useless given the way it’s taught in most places) have come to your own consensus — Gives you something to talk about between rounds at your little young conservatives meetings.
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Yeah what was I thinking, I mean Milton Friedman was SUCH AN IDIOT. Grow a pair, use a name, give us some links to back up your ranting, and QUIT YELLING and throwing around insults. It makes you appear to be sophomoric, which I’m sure must not be true due to your high-horse moralizing about how dumb everyone else is and how amazingly smart you are. It’s people like you who turn perfectly good debates into senseless yelling matches about whose mother is fatter.
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I saw an interesting interview with Milton Friedman once who claimed that he didn’t literally believe much of what he said, but that he was mainly trying to stimulate dialogue.
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Good for you. Want to provide a link to substantiate? I’m guessing not.
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Alright, I’ll try to explain more carefully:
The efficient price in a market is marginal cost. Supply/demand analysis only works under the assumption that firms price at marginal cost — and thus the equilibrium is efficient. Recall that if firms have ANY pricing power, supply/demand analysis is inappropriate — in particular, the “supply curve” doesn’t exist — and the market equilibrium will cease to be efficient.
If we take the case of prescription drug pricing, the *marginal* cost of providing the drugs is near-zero. Marginal-cost pricing maximizes total surplus in a market; any price over marginal cost will result in deadweight loss (particularly the case where firms with pricing power set prices to profit-maximize). The problem, of course, is that marginal-cost pricing fails to compensate firms for fixed costs like research and development. There are many interventions to restore efficiency in the market, the most straightfoward of which is to impose price controls near marginal cost and provide subsidies to firms to cover fixed costs like R&D expenditures.
Price controls can *increase* efficiency in markets where firms have pricing power.
3
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You might have to start explaining even more carefully. From an economic perspective (and for the record, I have had PLENTY more than Principles), this uses arguments that barely connect.
Micro theory argues that if firms have any pricing power, they will NOT set price equal to marginal cost.
The most extreme example is a monopoly. Textbook definition: “Monopolies maximize profit when total revenue exceeds total cost by the largest amount possible.” (Fixed costs, such as R&D, are included in total cost; remember Total Cost = Fixed Cost + Variable Cost). If you want to get all technical, monopolies will find out at what level of output their marginal revenue equals marginal cost, and then use that quantity on the *demand* curve to determine price. Granted, the drug market is probably not a pure monopoly for most drugs, but price only equals marginal cost when firms have no pricing power in perfect competition.
Also, any sort of public policy on a monopoly is NOT designed to compensate businesses for fixed costs such as research. If anything, it redistributes producer surplus into *consumer* surplus.
Finally, the phrase “marginal cost pricing” when used in context of firms with purchasing power refers to a certain method of government regulation of a monopoly (the government requires the monopoly to set its price at the level when price equals marginal cost). When monopolies use “marginal cost pricing,” however, the firm incurs a loss. Monopolies can’t make a profit with “marginal cost pricing,” and soon leave the market. (That’s why governments tend to use “average cost pricing” more often.)
There may be a case to make for Pelosi’s ideas, but it’s one that I don’t think holds, and it’s one that you’re certainly not making with your economic Jabberwocky.
3
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Your first three paragraphs are a long-winded way of making my point that monopoly firms don’t set price equal to marginal cost. Thank you for reciting details of monopoly pricing learned in 101. If you can tell me about optimal pricing strategies with a two-part tariff, then I’ll really be impressed. Oh, wait, you probably can’t copy that from your book.
Your next two paragraphs reflect utter misunderstanding of my point. Marginal cost pricing maximizes *TOTAL* surplus (which is the definition of efficiency). Allowing firms to set the profit-maximizing price (or, less so, average cost pricing) result in deadweight loss. You are correct in repeating my point that marginal cost pricing causes firms to make a loss, since it does not cover their fixed costs; all of the surplus accrued in this setup is consumer surplus. However, this is why we combine marginal cost pricing with subsidies to firms — so that total market surplus is maximized (i.e. efficiency), but firms still earn a return such that it makes sense to stay in the market.
Please make an effort to understand economics before you monkey back stuff from your textbook to me. Thanks.
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You are a such a blowhard. You must love to read your comments. Your arguments in favor of price controls assume much, namely that the government is going to act with perfect information and that they will improve the situation in a given market. Since the true “deadweight loss” in a market is almost impossible to measure industry-wide it would only be a ham handed way of intervening in the free market and would ultimately cause damage.
When will you liberals learn that it is impossible for any government to improve upon the efficiancy of the free market. Even if you assume that the government is well intentioned, uncorrupt, and educated (all of which are gigantic leaps of faith) they still won’t be as effective as two interested parties (the consumer and the producer) in resolving the ideal price.
Economists (for the most part) are the sadest people in the world. They know nothing about how the real world works and none of them could get a real job making any real money. You are living proof why no firm would ever trust you with real money. Those who can’t do . . . are economists.
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This is possibly the most boring argument I’ve ever read.
“blah blah big-word you’re an idiot”
“Yackety yack technical language you”re a jerk”
3
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Mike, that’s a joke — Look at the salary schedule of any university. Google “University of Wisconsin Red Book” for an example. With the possible exception of computer scientists and statisticians, economists are the most well-paid faculty at any University, typically earning 150%-200% of what a political scientist or law professor earns. If you don’t think Larry Samuelson’s $200+K salary is “real money”, then you’re mentally ill. The reason for these high salaries is precisely because economists have better outside job options than any other academic.
I’ll note Mr. Shiffman’s comment:
>
as evidence for why I will never attempt to engage in a substantive discussion on this board again.
1. Spouting off ideological shit you heard from Ann Coulter that’s not germane to the topic
2. Complaining that my argument is “boring”
I’m sorry if I’m not doing a tap dance to accompany it. I guess one could say the same thing about calculus, as well. What a “yakety-yak technical language” waste of time! This may explain why you guys listen to Rush Limbaugh screaming like a fool and liberals listen to NPR.
I thought that at least some people on this board might be able to engage in a serious discussion. No — You people are a bunch of white trash, room-temperature neanderthals and outstanding evidence in favor of Locke’s contention that votes should be weighted by IQ.
4
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Let me also note, in fairness, that I have just as much disdain for ridiculous left-wing noise. I consider you clowns the intellectual equivalent of the tree-hugging anti-free-trade crowd.
Much like yourselves, they’re actually quite dull and know next to nothing about the issues they’re so passionate about, but they like to make noise. Much like yourselves, rather than discussing evidence and original ideas — as you have neither of those things — they just rant and rave about their opinions and spew ideological crap.
You might be surprised to hear that I sent some money to Jim Talent’s reelection campaign this year (in addition to some democrats). I disagree with him on lots of things, but Talent is an example of a bright and thoughtful guy who contributes positively to the state of political dialogue in this country. People like you cheapen this country’s political dialogue.
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Anonymous,
Two quick things.
1) I actually am liberal, I frequent this blog primarily to pester Mark
2) It’s totally possible to get a coherent argument across without using needlessly complex language that serves only to make yourself appear smart.
4
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I love how you call us all whitetrash, stupid, ignorant chest-beaters yet you refuse to acknowledge that you’re the only one beating your chest around here. Not to mention the only people who fit the descriptions that you so frequently throw at us are people who act like you and can’t have an honest and real debate without trashing the other person’s intellect. Good luck ever having a real debate without an “anonymous” tagline to protect you; reading your comments on this blog are hard enough to put up with. If you don’t want to post here anymore, well fine, good riddance. All you have added is insults and nothing more. You are possibly the most consistent hypocrite I’ve ever had the pleasure of reading on this blog. Have a nice life, and don’t let the door hit ya on the way out.
4
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Well, for the sake of argument and general education, there actually is a valid, and widely accepted economic response to anonymous’ post.
I’m glad to see that we have come to the same terms and both agree that “marginal cost pricing” leads to a loss for a monopoly. Although most governments then tend to use “averag cost pricing,” which is the break even point for the monopoly, let’s assume that the government decides to force the monopoly into a loss, and then compensates the monopoly with a subsidy.
First of all, subsidies = lots and lots of problems. I’m not going to reinvent the wheel, but there is plenty of economic analysis out there about subsidies. Here are the biggest ones.
–First, let’s not forget that subsidies come from taxpayers. Taking taxpayers money, and then giving it to a monopoly can be quite pointless. Depending on the elasticity of the demand curve, the consumer benefit could even *decrease* if the amount of taxes needed for the subsidy is greater than the benefit of increased production. (This is why most governments use “average cost pricing” to accomplish the same goal and avoid creating a bureaucracy. Can you find a proposal, even internationally, that uses marginal cost pricing?)
–Additionally, as Mike pointed out, governments do NOT have complete information. It is often very hard, if not impossible, to quantify the efficient output of a market, or of any economic theory in general. This is why the CBO and OMB never seem to tell the same story.
–Finally, the strongest argument against a price ceiling and then subsequent subsidies can be found in the long term results of such a proposal. As long as firms are compensated for their losses, they have no incentive to minimize these losses. So managers can now justify giving themselves cushy expense accounts, increasing their employee’s wages, and acting without any incentive to keep their costs down.
Additionally, in the long run, price ceilings and subsidies remove any incentive for technological innovation. Subsidized monopolies are guaranteed their money from taxpayers, and they no longer have any economic incentive to improve their product. The easiest example of this is the telephone industry. Automatic switching equipment was invented for the telephone industry in the 1920s to replace telephone operators. But government managed monopolies, such as AT&T, kept using operator managed equipment until the mid-1970s - 50 years later!
So what is the solution? It is NOT to impose a price ceiling, force a monopoly into a loss, and then increase taxes for a subsidy. From a dynamic perspective, and unless the market is a natural monopoly, OPEN UP THE MARKET. I have already said that I do not believe that the drug market is a natural monopoly, and if anything, it is trending toward perfect competition. Allow other business to decrease any individual firm’s pricing power, and encourage more businesses to enter the market!
As a personal example, Walmarts in my area just entered the drug market and began selling some perscription drugs for $4. And do you know what Giant Eagle is now advertising? They will match Walmart’s prices (well, within a 5 mile radius), and the other local drug stores are bringing down their prices too!
So, encourage perfect competition in the market! Anyway, I doubt anonymous will have a change in heart, but this was a great form of procrastination from my real work! I do need to get some other things done now, so if anonymous decides to insult my intelligence again, I’ll be too busy to respond.
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Why would I insult your intelligence again? You’ve presented a perfectly coherent and germane argument. In a normal setting, I would proceed to engage in a discussion of these ideas. However, as this blog is not a forum for intelligent discussion, I’ll forgo for now.
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Thank God! Please feel free to not grace us with your wisdom in the future.
“If you don’t think Larry Samuelson’s $200+K salary is “real money”, then you’re mentally ill.”
My point exactly. You think $200,000 is “real money”. You live in a little academic bubble where reality is on permanent sabbatical. My point remains, if any of you knew as much about the economy as you claimed you could work on Wall Street or in Chicago for “real money”. Instead you talk a great game, but never have to back it up by actually earning profits.
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I don’t claim to know much of anything about the stock market. Didn’t your high school economics teacher teach you that “economics” and “the stock market” are not the same thing? For a 40-hour-a-week job, $200K is pretty good. If being in the top .5% of the income distribution isn’t “real money” to you, then there’s some disagreement about terms.
I’d bet lots of money on the following:
1. I make more money than you now and will make more money than you for every year of our lives.
2. I enjoy my job more than you enjoy yours.
I’ll llook forward in 20 years to failing your white trash kids out of college.
5
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I won’t be paying for them to go to Community College so I doubt you’ll have a chance.
Secondly, you probably can’t imagine how much money is considered “real money”. We exist in different economic circles. I might not work 40 hours a week, but I will love my job. Mostly because I won’t be around snotty, bitter academics who can’t hack it in the real world.
Do you ever go back and read the posts you make? I can’t believe you are sober when you write this crap.
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BTW, since when is Wall street considered “the stock market”. You must not know much about finance, just theory.
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Community college? Are you crazy? I don’t think a single person with a PhD from this University ended up placed at a community college. You can check our placement record for the last 12 years online to verify this.
Different economic circles? Is your grandfather Warren Buffett? I won’t get into my family’s economic history, because I think bragging about your family’s money is just about the most classless thing you can do, but suffice it to say that I’m quite sure you’re wrong. The combination of your political views, your illiterate writing style and your tone are indicitave of someone who’s either lying and jealous, or second-generation new money who still hasn’t quite learned how not to be white trash.
I can hack it in the “real world” just fine. You’ll note that at least 1/3 of our PhDs every year end up in the private sector.
Also, your high school economics teacher should also have taught you that “finance” and “economics” are not the same thing. I don’t claim to know much of anything about finance. One of my colleagues is in finance and does quite well in the stock market.
You’re a blowhard idiot — “I will love my job”. Note the future tense. You’re analogous to the bum selling “Get rick quick” videos.
I know those of you who are too stupid to score above the median on the GRE are jealous of those of us who are an order of magnitude brighter than you. You may have some opportunities, but the one opportunity you’ll NEVER have is to be a part of the intelligentsia, because you’re not smart enough. Talk around your “common sense” and “real life skills” all you want, but everyone knows that those are just excuses from people whose self-worth would be shattered if they had to actually admit that their IQs are stuck at 120 and there’s nothing they can do about it.
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Mike will love his job when he graduates from Tech with a degree that proves his intellect. Wow, your comments simply amaze me. Do you know any insults other than “white trash”? Not that I encourage insults on here, but if you’re going to do it, at least be creative every once in a while.
I wasn’t aware this blog was meant for comparing our IQ’s. We engage in the sharing of ideas, not test score numbers (GRE or otherwise). Say what you want, but your arrogant tone and refusal to even engage in honest discussion shows your immaturity and inability to have a coherent discussion with someone who you disagree with without resorting to name-calling and baseless accusations about the other party’s intellect. Grow up.
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You know what? You’re right.
“Never argue with a fool. People watching might not be able to tell the difference”
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You don’t engage in argument. You engage in name-calling. Nice try in your attempt to make me look like the “fool,” though. Must make you feel really warm inside.
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“Community college? Are you crazy? I don’t think a single person with a PhD from this University ended up placed at a community college. You can check our placement record for the last 12 years online to verify this.”
Look at it this way, you’ll be the first! What an honor!
“Different economic circles? Is your grandfather Warren Buffett?”
I was speaking of earned wealth, not inherited wealth. My family is firmly middle class.
“The combination of your political views, your illiterate writing style and your tone are indicitave of someone who’s either lying and jealous . . .”
An amazing coincidence, this describes you exactly! Projection is a powerful force. Don’t judge yourself too harshly though, you are surrounded by similar folks it would seem.
“. . . or second-generation new money who still hasn’t quite learned how not to be white trash.”
You must really hate white people, what did they ever do to hurt your feelings so badly? If you yourself are white, why such guilt? I have never seen anyone throw around that racial phrase as often as you do.
“I will love my job”. Note the future tense.”
Thanks, that was just the way I wrote it, glad it came through on your screen the same way. In the future you don’t have to check with me to make sure what you’re seeing is what I wrote.
“You may have some opportunities, but the one opportunity you’ll NEVER have is to be a part of the intelligentsia, because you’re not smart enough.”
Aw shucks. Well that’s it, you win. I can never be a part of the intelligentsia? Well I guess I just have to find a new life purpose.
Seriously though: I think you need help. You don’t have a very good self image if you feel the need to pump yourself up on the internet. I am sure you are a very smart guy, but somewhere along the way your sense of self worth became diminished.
Bottom line, no one cares about you being a member of the inteilligentsia. No one cares that you hate white people. No one cares about your GRE scores that you mention every five seconds. No one cares that you study at a top econ program. No one cares about anything but the validity of your thoughts and contributions to this blog. And quite frankly they are mediocre and tedious. Improve or be banned.
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Langley,
You really are quite dense. The quote was:
“Never argue with a fool. People watching might not be able to tell the difference.”
“Mike” is the fool. You were intended as part of the “people watching” in this context. I am now, however, calling you a fool.
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Congratulations. Glad you could clarify that for all of us “white trash” on here. Any other insults you want to throw out there?