Talking Points Alert: Lane Kenworthy's great graph about relative healthcare spending and outcomes.

Via Brad DeLong.  Link to the original article.

From Kenworthy:

Here’s a better way to compare. This chart shows trends in life expectancy by trends in health spending from 1970 to 2008:

Talking Points Alert: Mike Konczal/David Min and the "Zombie Idea" that Fannie and Freddie caused the housing crisis.

This is a great summary from Mike Konczal at Rortybomb of the faulty reasoning used to claim F&F were responsible for the housing crisis.  


I was asked to be more balanced in class, but instead I'm going to post a really good take down of one of the "other sides" golden calves.  I'll also sort of missed an opportunity to expand on my philosophy about this.  I know some of you in class disagree with me and that is 100% fine.  However, I do not view it as my job to be impartial or objective, I view it as my job to be honest.  I have been upfront about which way my views slant and that the extent to what I feel like I should do.  I feel we live in a world where acting like you are "objective" is just a dishonest rhetorical device and that most of the reason you will be graduating into a miserable job market is because a whole bunch of people "objectively" said housing prices can increase forever.


Anyway, here's Mike...

But first, as always, Wallison brings out the same argument that blames the crisis on Fannie and Freddie that he’s been using since 2009.  Introduction (my bold):

[G]overnment housing policies…fostered the creation of an unprecedented number of subprime and otherwise risky loans immediately before the financial crisis began….In March 2010, Edward Pinto, a resident fellow (and my colleague) at the American Enterprise Institute who had served as chief credit officer at Fannie Mae, sent the Commission a 70-page, fully sourced memorandum on the number of subprime and other high-risk mortgages in the financial system in 2008. Pinto’s research showed that he had found more than 25 million such mortgages (his later work showed that there were approximately 27 million). Since there are about 55 million mortgages in the U.S., Pinto’s research indicated that, as the financial crisis began, half of all U.S. mortgages were of inferior quality and liable to default when housing prices were no longer rising.
 This usually leads to the conservative talking point: half of all subprime and other high-risk mortgages were held by the GSEs!  But wait, what’s that “and other high-risk mortgages” doing there?

This zombie argument finally got fully dismembered by Center for American Progress’ David Min in his recent report taking apart Wallison’s FCIC dissent, Faulty Conclusions Based on Shoddy Foundations.

Wallison and Pinto claim that the GSEs were responsible for half of all subprime and subprime-like mortgages. They do this by making up a confusing definition of “subprime-like,” what above is mentioned as their “and other high-risk” mortgages.

The fun part of making up your own definition is that it can be whatever you want it to be. If we define a conventional loan made to a borrower with a FICO credit score between 620 and 660 as a “leprechaun” and a loan with a cash down payment of less than 10 percent as a “unicorn,” we can say that Fannie and Freddie was responsible for half of all leprechauns and unicorns under oath and while serving on the FCIC.

Now instead of a leprechaun they’ve created the definition of “subprime by characteristic” and instead of a unicorn they say “Alt-A by characteristic,” for the numbers mentioned above. This is a definition nobody in the financial markets use.

The three-card monte trick is pretty straightforward once you know where to watch. There’s a lot of statements that go: “Fannie and Freddie made a lot of subprime loans and other high-risk mortgages. And subprime loans had a 25% default rate!” And you naturally assume that the other high-risk loans must also have a gigantic default rate compared to regular mortgages. Except they don’t. From Min’s paper (p. 8):

That 8.45% and 10% are the “other high-risk loans” that they try and shoe-horn in with subprime.  That’s a high default rate, but it’s nowhere near as scary as the nearly 7% default rate on regular mortgage loans.  And this trick is even more apparent when you break it down by securitization (see below).  These so-called high-risk loans are much closer to regular loans when it comes to defaults, which are high across the board given the housing bubble and subsequent recession and high unemployment.

Min’s document goes through the rest of their claims related to the CRA and securitization as well.

Talking Points Alert: Dean Baker on Rep Ryan's proposed Medicare butchering..

Hey, finally I have an idea for a catchy feature. I'll post "Talking Point's Alerts" (TPAs) when someone posts a really well condensed or compelling summary of an issue. This way I have a good index of solid points and compelling number crunching that everyone can brush up on before Thanksgiving dinner, during an argument on a message board or before an appearance on Meet the Press.

The inaugural TPA: Dean Baker on shifting the burden of healthcare onto individual seniors (Here is the CBO Letter to Paul Ryan)

Representative Ryan Proposes Medicare Plan Under Which Seniors Would Pay Most of Their Income for Health Care

Wednesday, 06 April 2011 04:42

That is what headlines would look like if the United States had an independent press. After all, this is one of the main take aways of the Congressional Budget Office's (CBO) analysis of the plan proposed by Representative Paul Ryan, the Republican chairman of the House Budget Committee. Representative Ryan would replace the current Medicare program with a voucher for people who turn age 65 in 2022 and later. This voucher would be worth $8,000 in for someone turning age 65 in that year. It would rise in step with with the consumer price index and also as people age. (Health care expenses are higher for people age 75 than age 65.) According to the CBO analysis the benefit would cover 32 percent of the cost of a health insurance package equivalent to the current Medicare benefit (Figure 1). This means that the beneficiary would pay 68 percent of the cost of this package. Using the CBO assumption of 2.5 percent annual inflation, the voucher would have grown to $9,750 by 2030. This means that a Medicare type plan for someone age 65 would be $30,460 under Representative Ryan's plan, leaving seniors with a bill of $20,700. (This does not count various out of pocket medical expenditures not covered by Medicare.) According to the Social Security trustees, the benefit for a medium wage earner who first starts collecting benefits at age 65 in 2030 would be $32,200. (This adjusts the benefit projected by the Social Security trustees [$19,652 in 2010 dollars] for the 2.5 percent annual inflation rate assumed by CBO.) For close to 70 percent of seniors, Social Security is more than half of their retirement income. Most seniors will get a benefit that is less than the medium earners benefit described here since their average earnings are less than that of a medium earner and they start collecting Social Security benefits before age 65. Furthermore, the portion of income going to health care costs will increase through time according to the CBO analysis. This is due both to aging of individuals and to increasing health care costs through time. As noted insurance for older beneficiaries will cost more than insurance for younger beneficiaries, but Representative Ryan's voucher would still only pay the same amount for their care. This means that if the average 80-year-old cost twice as much to insure as the average 65-year-old, then the premium that would come out of a seniors' pocket would be twice as large. This implies that if the program had been in effect for 15 years in 2030 then the average senior would be paying $41,400 for a Medicare equivalent insurance package in 2030, 25 percent more than the medium earner's benefit in that year. The other reason that Representative Ryan's plan will lead to rising health care costs for seniors through time is that the voucher payment does not keep pace with health care cost inflation. As costs continue to rise relative to the voucher, seniors will be required to pay a larger portion of their health care costs themselves. It is worth noting that 2030 is only 8 years after the voucher program kicks in.