Default choices again

It turns out I gained $2.40 because of the default choice I complained about last week. So I guess this isn't the biggest deal in the world. I am still annnoyed however.

Health care reform passes

Although I had thought it was dead, the Democrats this week managed to pass their health care reform package.

I don't like the bills as they basically establish a massive new welfare entitlement program. I don't like welfare in general and this is a particularly inefficient form of welfare as most of the benefit will accrue to the health care industry rather than to the poor, who given a choice would largely spend the money on other things. In my view the main problems with health care in the US are that it costs too much and that it is over utilized. The bills will make both of these problems worse.

Some Republicans have been whining about the process by which the bill was passed which seems silly to me, given that the Democrats have significant majorities in the Senate and House and control of the White House, it is reasonable that they should be able to pass this package, wrongheaded as it may be. And one should remember it was the Republicans disastrous performance when they were in control which directly led to the current Democratic majorities.

Also much of the Republican opposition seemed off point to me. If you accept that no American should ever be denied any health care treatment because of cost it is hard to construct a plan that doesn't have most of the problems of the Democrat's package. Hence Romney's embarrassment over the fact that the program he helped establish as Governor of Massachusetts was not all that different. I don't accept the above principle but this doesn't appear to be a position that politicians are willing to argue.

Investment Choice

As noted in the previous post I have signed up for a savings plan at my new job. I am putting the money into an inflation indexed bond fund. It seems to me that the ongoing large budget deficits create an inflation risk which is worth hedging against. And the alternative choices aren't all that appealing.

Default choices

There has been considerable discussion in recent years about encouraging people to make better choices by providing appropriate default choices. I was mildly sympathetic to such policies but my first encounter with them has proved extremely annoying. I signed up for a savings plan with my new employer and was given no opportunity to make an initial selection from the investment choices. So my first payment ended up in a default selection which I would not have chosen and which has some risk of loss. This is unlikely to cost me a lot of money as I have now changed the destination for future payments and exchanged the existing account to my desired choice. Still I will be mad if I lose any money at all because of this. And I am now warier of the arguments for paternalistic default choices in general.

Public Pensions

Last week I saw another article about the dishonest and irresponsible ways many states and other public entities handle their defined benefit pension obligations. Clearly some reform is needed. I believe a simple and effective reform would be to prohibit public entities from offering defined benefit plans at all as they have repeatedly proven their inability to manage them. This might seem a bit drastic but I believe lesser changes are likely to be ineffective as there are too many ways to game the accounting for defined benefit plans and this makes it too tempting for politicians to promise benefits today without adequately financing them.

Note public employees could still be given generous defined contribution plans. But it is unlikely they would be as generous as current plans as the costs would be harder to hide. This doesn't bother me as I don't think anyone is entitled to compensation based on dishonest accounting.

Fool's Gold

Last week I read "Fool's Gold" by Gillian Tett. This is another book about the recent financial crisis focusing on J. P. Morgan (now part of JPMorgan Chase). I didn't find it all that worthwhile. Much of it just recaps recent events with little new information if you were paying attention at the time. And if you weren't paying attention it isn't really a good history because its coverage is too spotty.

It also follows the careers of a few bankers who were together at J. P. Morgan in the 1990s devising innovative financial products. Again I didn't find this very interesting. The sketches of the bankers were not detailed enough to bring them alive for me or make me care much what became of them. The most interesting part for me was the material about Jamie Dimon who was not originally part of J. P. Morgan but became head of JPMorgan Chase after several mergers. But it suffers from the impression that Tett, like many journalists, has gained access by implicitly promising favorable coverage. None of the subjects are treated at all harshly and Dimon in particular is depicted favorably.

So while the book is readable and sometimes entertaining I don't think it contributes much to understanding the recent crisis.

Toyota

As a long time satisfied owner of Toyota cars I am a bit surprised by the company's current difficulties. Personally I am not convinced there is anything serious actually wrong with the cars. Which of course makes it difficult for Toyota to fix them.

Scapegoats

Apparently President Obama has endorsed the recent mass firing of the teachers in a Rhode Island school where students are performing poorly. This is not too surprising since in his book "The Audacity of Hope" Obama claimed to believe that teachers are the most important factor in student performance. Which would make it logical to blame their teachers when students perform poorly. However in the real world teacher quality (within the range commonly found in the United States) hardly matters. Student performance is primarily determined by characteristics of the students themselves and secondarily by the characteristics of their classmates.

So while I believe it can be absurdly difficult to fire individual teachers for gross misconduct I am sympathetic to making it difficult to fire teachers in cases like this where teachers are being blamed for things they have little influence on. Of course this is a difficult case for the teacher's unions to make as if teachers don't matter much there is not much reason for them to receive premium pay.