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Morning Reading

Scott Jagow Feb 23, 2010

Good morning. I told you recently about the Dynamite Prize in economics (for helping to blow up the economy). Well, we have the winners. Plus, more on the president’s health plan, a GM autoworker who commutes 1,000 miles to keep his job, and a novel that was written before the financial crisis eerily predicted the real events.

Dude, where’s my Cadillac Tax? (Real Clear Markets)

A weakening of the Cadillac Tax is regrettable for two reasons. First, it’s a “curve-bending” reform that encourages people to buy lower-cost plans with higher deductibles and co-payments. This would make health “insurance” more like actual insurance, instead of a pre-payment mechanism for routine care. Under such plans, patients consume care more thoughtfully, and health care costs fall.

The other problem is that the foregone revenues will be replaced with another tax that is much more economically damaging. The President proposes to more than make up for the lost Cadillac Tax revenue by extending Medicare Tax to high-income people’s unearned income.

Cadillac Tax? Wheres my public option? (The Nation)

But the real news is what it does not do.
Despite urging from House leaders and a growing number of senators, “The President’s Plan” does not include a public option.
Nor does it bow in any meaningful way to progressive proposals to expand access to Medicare and Medicaid.

GM autoworker commutes 1,000 miles to keep his job (Huffington Post) Wow:

“I like to say I gave up an eight-minute commute for an eight-hour commute,” he says wearily, running a hand though salt-and-pepper hair as he watches his two sons play basketball for the first time this season.

A novel written before the financial crisis portrays it (NPR)

Sections of the book read almost as if they were transcripts of meetings between officials at New York’s Fed and failing banks, including one scene in which Henry Graves tells bank officials that Union Atlantic will be allowed to fail rather than being bailed out — a bluff, as it turns out. But Haslett wrote that passage, and others like it, well before most Americans had any idea our major financial institutions could be so vulnerable. And Haslett sounds as surprised as anyone that his fiction dovetailed so neatly with reality.

And the winners(?) of the Dynamite Prize are… (Real World Economics Review Blog) Remember, this is awarded to the three people who most contributed to blowing up the global economy:

Alan Greenspan (5,061 votes): As Chairman of the Federal Reserve System from 1987 to 2006, Alan Greenspan both led the over expansion of money and credit that created the bubble that burst and aggressively promoted the view that financial markets are naturally efficient and in no need of regulation.

Milton Friedman (3,349 votes): Friedman propagated the delusion, through his misunderstanding of the scientific method, that an economy can be accurately modeled using counterfactual propositions about its nature. This, together with his simplistic model of money, encouraged the development of fantasy-based theories of economics and finance that facilitated the Global Financial Collapse.

Larry Summers (3,023 votes): As US Secretary of the Treasury (formerly an economist at Harvard and the World Bank), Summers worked successfully for the repeal of the Glass-Steagall Act, which since the Great Crash of 1929 had kept deposit banking separate from casino banking. He also helped Greenspan and Wall Street torpedo efforts to regulate derivatives.

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