Marc Short and Brian Blase write,
The CBO’s methodology, which favors mandates over choice and competition, is fundamentally flawed. As a result, its past predictions regarding health-care legislation have not borne much resemblance to reality. Its prediction about the Senate bill is unlikely to fare much better.
1. Note that both authors work in the Trump Administration.
2. Sherry Glied and others wrote,
This analysis finds that the CBO overestimated marketplace enrollment by 30 percent and marketplace costs by 28 percent, while it underestimated Medicaid enrollment by about 14 percent. Nonetheless, the CBO’s projections were closer to realized experience than were those of many other prominent forecasters.
I would not take the position that there is an obviously better model than what the CBO uses. The problem in the policy environment is that CBO estimates are treated as scientific truth. This misleads participants in the policy process into believing that predicting the outcomes of policy is a science. This in turn biases policy toward aggressive intervention.
The false belief in economic science imposes a real cost. Legislators and bureaucrats become overconfident in their ability to manage market processes.
Catherine Rampell takes the opposite point of view as mine.
Contrary to the predictions of economists everywhere, the HHS propaganda document claims that the Cruz amendment would cause insurance coverage to go up and premiums to fall. Astoundingly, even premiums for people in the Obamacare-compliant plans — which, again, economic theory suggests would get stuck with only the very sickest, most expensive Americans — would allegedly decline relative to current law. (Compare “2020 Current Law Enrollment Weighted Average” to “2020 Silver ACA Compliant” in the chart below.)
This is garbage, and exactly why we need nonpartisan scorekeepers like the CBO.
Rampell is right to attack the memo that she criticizes. But she is wrong to wish to anoint the CBO as a scientific umpire.
Suppose that the CBO were asked to “score” the employment effects of a minimum wage increase, and suppose that their most preferred model projected a large decrease in employment. Would the Catherine Rampells and the Mark Thomas be so eager to say that “this is exactly why we need a CBO”–in order to settle the argument about the minimum wage?
If the science is not definitive with respect to the employment effect of the minimum wage, then it is surely not definitive with respect to the insurance-market effect of allowing health insurance companies to offer less comprehensive policies with lowerpremiums. The CBO should not be the ultimate arbiter of contested economic analysis.
I guess I am struggling here on:
1) The CBO had misses but got a number of things right on Obamacare especially the number of uninsured in 2016. The CBO predicted the relatively right outcomes but missed some of the inputs which always happens. And the big miss was the Employer Based Insurance Model did not continue to weaken after 2010. I feel the CBO said the Chicago Cubs would win the World Series but in 6 games instead of 7.
2) Given the CBO has misses, so I like to see other analysis to judge. I wish the Trump Administration released their own findings to compare
You can always say they were close relative to a non-existent comparison.
They could put their model on a website and let us tweak the inputs.
My comment is awaiting moderation?!? My comments are always moderate I’m the extreme, believe me!
Is the CBO non-biased in the actual bias that would matter: pro-DC bias?
But the impact of the minimum is well established. Holding everything else constant a moderate hike in the minimum wage will have a minor negative impact. Neither liberals or conservatives disagree with that. Liberals say the minor negative impact is offset by other positive impacts on demand and incomes. Conservatives refuse to consider any other factors. They take the position that any negative impact on employment is sufficient to make minimum wages always bad policy.
Show me any conservative/libertarian not taking that position, including yourself and the major economic 101 textbooks.
This is typical of you and the other GMU mafia, you make up strawmen about liberals
that is designed to brainwash the young who read your blog.
Right here. It’s just that what you consider positives I don’t. I believe that profits are distributed to labor and I understand why you would consider that a positive. But I doubt you know why I don’t.
And as little as I know, I do know that there is disagreement on the effects. That is why they always bring up the Card and Krueger study that suggested a zero or positive effect.
I would be remiss if I don’t also note that you are crazy as hell. Arnold does not “design” anything to “brainwash young people.”
And what you erroneously call a mafia is simply the one department that isn’t as brainwashed as a large portion of the leftist group-think academia.
This is just plain false. Talk about a straw man. The anti-minimum wage position has always been that the price increase, the production decline, the disemployment, and loss of benefits and work experience in total outweigh the wage increase for those who keep their jobs. Read Neumark and Wascher.
It is the supporters of minimum wage who ignore other factors like the negative effects of wage compression on low wage but non-minimum wage jobs. Or who make the rather absurd arguement that if the increase is mild enough the negative employment effects become negligible, without realizing that the positive effect on income also becomes negligible; e.g., if I add small enough amount of water to a pool I can pretend I’m not increasing its level because the increase isn’t measurable.
Let me try and anticipate a criticism of your point. Not a valid criticism, just one I think is likely to emerge from high-status progressive-leaning economists in the style of a MacLean-esque conspiracy theory should your general critique gain more currency. In fact, its the recent discussion of MacLean’s book that inspired this idea.
They are just going to accuse you of trying to bias things in the direction of outcomes libertarians prefer, by manipulating what modes of rhetoric and analysis are considered acceptable, keeping the ones that produce answers libertarians prefer, and excluding the ones that don’t. That is, the claim that Macroeconomic Model Estimates (MMEs) don’t work and are unreliable is both untrue and just a “cover story” for a strategy to delegitimate arguments that work against the libertarian agenda.
Let’s say we abandon the idea of policy based on MMEs, to include the use of those forecasts in the political rhetoric attempting to build support and provide legitimacy for various proposals for reform.
How then is the political class supposed to discuss and debate the potential merits and downsides of various measures? Examples could include rent control and minimum wage laws.
There are really only two acceptable approaches or frameworks in which to do it these days. Consequences and Values.
In a Values framework, certain acts are good or bad in a way that is highly insensitive to consequences. Libertarians would argue that liberty and government non-intervention is a good in itself, and the progressives would argue that intervention for equalization is a good in itself. But matters of value lead to politically irreconcilable conflict in circumstances of opposition, and in those cases the party with the most power wins.
And in our system it’s hard for progressive values to get ahead of libertarian values because the Constitution and American cultural skepticism biases against interventions, which always have to be justified in terms of consequences. The only way progressives can argue to courts or the public that libertarian values ought to be overruled is to make a showing that a large net positive benefit would be a consequence of doing so. By trying to eliminate the possibility of this showing, libertarians are just trying to bias the outcomes of these debates in their direction.
In a consequences framework, if we get rid of MMEs, then what do we have left? There are plenty of studies, but we all know each side just uses confirmation bias to both produce and latch onto the studies with results they like. What’s left is only the crude, oversimplified, and unreliable “Econ-101, Spherical-Cow, Folk Macro” (SCFM). “Price controls bad. Taxes bad. Free markets good. Minimum wage bad. Rent controls bad.”
But SCFM is wrong – it’s based on assuming Micro ideas scale up to Macro situations, which we’ve known forever is just plain incorrect. At least MMEs can be adjusted with new information via parameters that can be adjusted to match new data and observations of the actual economy. Yes, the CBO isn’t perfect, but look, it’s not that bad either. But SCFM can’t even be salvaged at all and can’t even get close, at least, not without the more sophisticated adjustments and tools of the type that you are specifically trying to exclude. As such, political rhetoric using SCFM is also inherently and structurally biased in a libertarian direction.
Consider the parallelism of the following two statements.
and
That is probably the most significant difference between sides. If the preponderance of the evidence did indicate that result, they (Rampells and Thoma) would agree with the CBO, while if the preponderance of the evidence strongly disputed it, would object. The other side would agree with the CBO regardless of the evidence, because for them, it isn’t an issue of data and facts, but arguments and wishes, and nothing is too important to place over them. In this interventionists want their interventions to succeed, so want to know the truth. Non interventionists want non intervention whatever the result.
“My side smart, your side dumb” would have perfectly encapsulated the message of your post while wasting far fewer words.
Which isn’t what I said at all. Some prefer the status quo and intervention represents a change to it, even if less than optimal. They may be dumb for thinking there is a choice, but it doesn’t make them dumb to prefer the familiar. Intervention is forced on us all the time as all is change. Wanting to minimize it is economical until forced to which then becomes traumatic.
And the evidence for this is he isn’t concerned the CBO may be right, only that they may be listened to.
The science IS definitive on the employment effect of the minimum wage. To believe otherwise is to disbelieve the theory of supply and demand, which is the most thoroughly tested and proven theory in the social sciences, a more thoroughly proven theory – by far – than evolution (and it’s not even in the same uncertainty universe as AGW).
https://www.forbes.com/sites/theapothecary/2017/07/22/cbo-three-fourths-of-coverage-difference-between-obamacare-gop-bills-driven-by-individual-mandate/#2d277f243627