Tag Archives: cbo

More Patents Does Not Equal More Innovation

by Mitchel123 Posted on November 25, 2014

Mother Jones

Via James Pethokoukis, here’s a chart from a new CBO report on federal policies and innovation. Needless to say, you can’t read too much into it. It shows the growth since 1963 of total factor productivity (roughly speaking, the share of productivity growth due to technology improvements), and there are lots of possible reasons that TFP hasn’t changed much over the past five decades. At a minimum, though, the fact that patent activity has skyrocketed since 1983 with no associated growth in TFP suggests, as the CBO report says dryly, “that the large increase in patenting activity since 1983 may have made little contribution to innovation.”

The CBO report identifies several possible innovation-killing aspects of the US patent system, among them a “proliferation of low-quality patents”; increased patent litigation; and the growth of patent trolls who impose a substantial burden on startup firms. The report also challenges the value of software patents:

The contribution of patents to innovation in software or business methods is often questioned because the costs of developing such new products and processes may be modest. One possible change to patent law that could reduce the cost and frequency of litigation would be to limit patent protections for inventions that were relatively inexpensive to develop. For example, patents on software and business methods could expire sooner than is the case today (which, with renewals, is after 20 years), reducing the incentive to obtain those patents. Another change that could address patent quality, the processing burden on the USPTO, and the cost and frequency of litigation would be to limit the ability to obtain a patent on certain inventions.

Personally, I’d be in favor of limiting software and business method patents to a term of zero years. But if that’s not feasible, even a reduction to, say, five years or so, would be helpful. In the software industry, that’s an eternity.

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More Patents Does Not Equal More Innovation

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The GOP Controls Congress So Now It Can Change How Math Works

by LilyRapphshaum Posted on November 24, 2014

Mother Jones

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When Republicans took control of both houses of Congress earlier this month, they won an important new power: They can change how Congress does math.

Seriously. Republicans, led by Rep. Paul Ryan (R-Wisc.), their budget guru, are considering altering the way Congress calculates the costs of tax cuts—a move that could make big tax cuts for the rich appear less costly than they really are.

Here’s how it would work. In January, Republicans will be in charge of Congress. And that includes the Joint Committee on Taxation (JCT), which calculates how tax laws affect revenue, and the Congressional Budget Office (CBO), which produces official budget projections. Right now, when the CBO and the JCT calculate the impact of tax laws on government income, they consider how Americans might alter their behavior in response to tax rate changes. But the tax-math bodies do not evaluate how tax legislation could affect economic growth—largely because those sorts of impacts are hard to predict. Republicans have long claimed that tax cuts lead to greater economic activity that inexorably yields more tax revenues—a point much disputed. But Ryan, who in January will head up the House Ways and Means committee—which has jurisdiction over tax reform—and his fellow GOPers are looking to enshrine this Republican belief into the hard and fast calculations of Capitol Hill’s number-crunchers.

Last THIS week, in an interview with the Washington Post, Ryan said he will push to make sure that the two congressional budget scorekeepers use this accounting method when evaluating GOP tax reform legislation. Orrin Hatch (R-Utah), who will chair the Senate finance committee starting in January, said last week that he was open to implementing the change.

Ryan and Hatch can implement dynamic scoring by simply ordering the two budget scorekeepers to accept this budgeting method. Not only that, Republicans can require the CBO and JCT to use very optimistic assumptions about how tax cuts affect the economy—including people’s motivation to work, the response of the Federal Reserve, and household and business decisions on how much to work, save, and invest. Budget analysts then plug those assumptions into several models estimating economic growth, and GOPers can cherry-pick the model that produces the largest number. “The risk is that a Congress that is politically motivated takes the most unrealistic models and plugs in highly rosy assumptions,” says Chye-Ching Huang, a budget expert at the left-leaning Center on Budget and Policy Priorities.

If Republicans don’t want to make these complex choices themselves, they can install directors at the CBO and JCT who they think will use the kind of assumptions they like, Huang adds. Neither congressional Dems nor President Barack Obama can prevent any of this.

Republicans have pushed for this budget-math tweak since the Reagan days. And for years, policy wonks have debated the merits of this novel budgeting method, known as dynamic scoring. Kenneth Kies, a GOP-nominated former director of the JCT, told the Washington Examiner last week that this accounting trick falls “somewhere between pure mathematics and theology.” Because this arcane tweak can make tax cuts for the wealthy appear to cost the government less than they actually do, it is extremely appealing to Republicans. If they make this change, they could argue that new tax cuts would partly pay for themselves.

Democrats say the budgeting trick is a gimmick designed to allow Republicans to chop taxes for the rich without paying the political cost. Ryan’s office did not respond to a request for comment.

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The GOP Controls Congress So Now It Can Change How Math Works

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Jonathan Gruber Says Nothing New, Gets Hammered For It

by ToddBainerry Posted on November 12, 2014

Mother Jones

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Jonathan Gruber is one of the intellectual godfathers of Obamacare. Here’s what he said last year about it:

“This bill was written in a tortured way to make sure CBO did not score the mandate as taxes,” he said during a panel discussion at the University of Pennsylvania in October, 2013. “Lack of transparency is a huge political advantage. And basically, call it the ‘stupidity of the American voter’ or whatever, but basically that was really, really critical to getting the thing to pass.”

….”In terms of risk-rated subsidies, if you had a law which explicitly said that healthy people pay in and sick people get money, it would not have passed,” he said. “You can’t do it politically, you just literally cannot do it. It’s not only transparent financing but also transparent spending.”

I gather this has created a mini-firestorm, and obviously I understand why. If you imply that a bill was structured to take advantage of the “stupidity” of the American voter, that’s just bound to come back to haunt you. So the radio yammerheads are having a field day, and I guess I don’t blame them.

But if we can take just a half step up from radio yammerhead land, did Gruber say anything that isn’t common knowledge? I’m not playing faux naive here. I’m serious. Basically, Gruber said two things.

First, he noted that it was important to make sure the mandate wasn’t scored as a tax by the CBO. Indeed it was, and this was a topic of frequent discussion while the bill was being debated. We can all argue about whether this was an example of the CBO scoring process being gamed, but it has nothing to do with the American voter. Rather, it has everything to do with the American congressman, who’s afraid to vote for anything unless it comes packaged with a nice, neat bow bearing an arbitrary, predetermined price tag.

As for risk-rated subsidies, I don’t even know what Gruber is talking about here. Of course healthy people pay in and sick people get money. It’s health insurance. That’s how it works. Once again, this was a common topic of discussion while the bill was being debated—in fact, one that opponents of the bill talked about constantly. They complained endlessly that healthy young people would pay relatively higher rates than they deserved, while older, sicker people would get a relative break on their premiums. This was no big secret, but the bill passed anyway.

It’s true that the average Joe didn’t know anything about this, but not because the average Joe is stupid. It’s because most people simply don’t pay attention to this stuff even slightly. The fraction of the electorate that cares about the minutiae of policymaking could be stored in a pickle jar. That’s just life.

So basically, Gruber foolishly made a comment about the stupidity of the American voter—a comment that wasn’t even right, I think. But that’s it. Everything else he said was common knowledge during 2009 and 2010 among the pickle jar set. If you cared about policy, you knew this stuff. If you didn’t, you didn’t. But that’s true of everything, isn’t it?

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Jonathan Gruber Says Nothing New, Gets Hammered For It

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Here’s Some Stunning and Unexpected Good News About Obamacare

by JuliaPage Posted on April 9, 2014

Mother Jones

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Today brings yet another take on Obamacare from Rand’s latest survey of the health insurance market. Rand’s sample size is fairly small, so there are large error bars associated with their numbers, but they also break them down in interesting ways. The number we’ve been tracking most closely in the other surveys on insurance is the number of uninsured who got coverage via Medicaid or the exchanges, which Rand displays in the top row of this table:

About 5 million previously uninsured people got coverage via Medicaid and the exchanges. This is slightly lower than other estimates, but only slightly. When you account for the March surge and the sub-26ers on their parents policies, you’re probably back up to about 8 million. We’ll have a better idea about this next month, but so far this is roughly consistent with other surveys we’ve seen.

But there’s one stunning number in the Rand survey that we haven’t seen before: the dramatic surge in people who have employer insurance (ESI). According to Rand, 8.2 million new people—7.2 million of them previously uninsured—have gotten employer insurance since mid-2013. Adrianna McIntyre is agog:

I can’t overstate how stunning this finding is if it’s true; CBO expected that ESI gains and losses would pretty much break even in 2014 and that employer coverage would decline modestly in future years.

If it’s correct, it was probably motivated multiple factors—I hate the word “synergy” on principle, but it comes to mind. The economy has been improving, so some of the previously unemployed have secured jobs with benefits. But CBO built in expectations about economic recovery, so I don’t think it’s quite right to try pinning all (or even most?) of the 8.2 million on that. The individual mandate, while weak in its first year, might be a stronger stick than we expected, nudging people to take their health benefits where they’d previously been opting out. Employers could be helping this move this trend along; the University of Michigan, for example, eliminated “opt out dollars” in 2014 (cash compensation for employees who declined coverage).

If this finding is confirmed, it’s a genuine shocker. Although CBO projected that ESI would stay steady, there’s been a lot of chatter about the likelihood of employers dropping coverage thanks to Obamacare. But that sure doesn’t seem to have happened. So in addition to the usual sources of coverage—Medicaid, exchanges, sub-26ers—it looks like Obamacare has yet another big success story to tell, one that was almost completely unexpected.

For now, this should all be considered tentative. We’ll have firmer numbers in April and May, once the March surge is fully accounted for and we know how many people have paid for coverage. But for now, it looks as if Obamacare is not merely hitting its target, but in a broadly unforeseen way, it’s wildly exceeding it. This is terrific news.

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Here’s Some Stunning and Unexpected Good News About Obamacare

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How Did the Media Blow It So Badly on Yesterday’s CBO Report?

by mirorita02 Posted on February 5, 2014

Mother Jones

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Yesterday the CBO released a long-term budget analysis that included a chapter about the effect of Obamacare. Among other things, the report concluded that in 2017 and beyond, it would have the effect of reducing employment by about 2 million jobs. This produced a gigantic raft of misleading headlines—some from outlets like Fox News, of course, but also from a wide variety of mainstream news sources. Among many others, Glenn Kessler of the Washington Post then explained what the CBO report really meant. Erik Wemple tells the story:

For a while Tuesday morning, the Internet was hopping with job-killing hype, when in fact the truth was vastly different. Obamacare’s impact, the CBO concluded, would lessen the supply of labor by encouraging certain folks not to work: “The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses’ demand for labor, so it will appear almost entirely as a reduction in labor force participation and in hours worked. . . .”

For someone approaching retirement, notes Kessler, Obamacare could well mean that they needn’t hold onto a bad job just to keep health insurance. That’s a far different dynamic from job-killing.

To illustrate just how the media had handled the CBO study, Kessler’s post included a number of headlines harvested from the Internet this morning, amid a backlash highlighting the finer points of the CBO report. In some cases, headline changes ensued; in others, news outlets stuck to their original phrasing. Below, we chronicle some of the action….

This is a debacle. I came into this story pretty cold, reading about the CBO report and then clicking on a link to take a look at it. At the time, I hadn’t read any news accounts, so I just scrolled down to the chapter on Obamacare and spent about ten minutes browsing through it. And here’s the thing: the CBO’s conclusions were crystal clear. The report explained in simple language what effect Obamacare was likely to have and what channels it worked through. It even had a handy bullet list showing the most important causes of lower employment.

And yet, lots of reporters and headline writers got it wrong. It’s crazy. This is policy 101, not some deeply technical report that you need a data sherpa to understand. Obamacare doesn’t kill jobs. It makes people more secure and thus less likely to keep a job they don’t want—or to work more hours than they need to just to stay eligible for health insurance. It also, like all means-tested programs, provides a modest disincentive for poor people to work more hours, since extra income will be accompanied by lower subsidies.

This is easy stuff. How is it that so many folks blew it? Obviously Fox News deliberately wanted to put the worst spin possible on this report. But why did everyone else go along? What’s the deal here?

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How Did the Media Blow It So Badly on Yesterday’s CBO Report?

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