So goes the logic (with only mild exaggeration) of one of the most ridiculous policy proposals I've read in a while -- to make up for falling gas tax revenues with a new tax on miles driven.  Ashley Halsey III is on the case in The Washington Post yesterday. 

The appropriate tax instrument to make up for declining or inadequate gas tax revenues is ... a higher gas tax rate.  Compared to a higher gas tax rate, a tax on miles driven ignores the amount of fuel used to drive those miles.  Highway travel is taxed the same as city travel.  Gas guzzlers are taxed the same as hybrids. Neither change makes any sense from an environmental perspective. 

Reports of strong growth in the fourth quarter of 2009 were a welcome addition to the positive growth in the prior quarter, but I remain concerned about the sustainability of that growth.  The recession took down the financially weakest firms and weakened the rest.  Without robust growth in the rest of the economy, we will see the financially weakest of the remaining firms contract as well.  My home institution of Dartmouth is a case in point. 

For those not following the local news, the College has tasked itself with trimming $100 million from its annual expenditures over a two-year window.  The number comes from the simple arithmetic of having lost a billion dollars of endowment (which, at a 5% spending rate, is $50 million) and from making a prudent decision to reduce its spending rate down by 2 percentage points to about 5% (creating the other $50 million, when applied to the remining $2.5 billion).  The College's president has stated, correctly, that this cannot happen without reductions in staffing. 

At the Economix blog on Thursday, Catherine Rampell posted a must-read analysis of the composition of the unemployed population.  But I think her conclusion is too pessimistic.  She writes:

Whatever the underlying cause, the result is disconcerting: compared with previous recessions, many more of the employment gains in this recovery will have to come from new jobs.

That is much easier said than done.

Workers whose entire occupations — not just the previous payroll positions they held — are disappearing (think: auto workers) will need to start over and find a new career path. But the new skills they will need take a long time to acquire.

Even if the employment gains in this recovery will have to come from new jobs, it is not necessarily the workers whose entire occupations are disappearing that will have to fill the new jobs in emerging fields. 

I give President Obama high praise for the parts of his speech this evening where he chastised his own party in the Congress for its ineffectiveness and for telling the Senate Republicans that if they are going to insist on supermajorities to get any policy passed, then they are going to have to share in the responsibility for governing.  Good for him.  Nobody's perfect, but I cannot help but think that the conduct of the Congress in recent years, and the Senate in particular, would be enough to make a Founding Father vomit.

Despite the unusual circumstances of January 2010, much of the speech was the standard fare in January -- everybody should go to college, everybody should be healthy, the environment should be clean, people should save for retirement, and I've got the token programs in my budget to give me the credibility to pay lip service to it.  And, new this year, we will do all of these token programs and giveaways while insisting that we will freeze non-defense discretionary spending at current levels.

One item that stood out as different was the acknowledgement that we are on our way to export-led growth, if we are to have growth at all. 

In today's USA Today, Gene Steuerle discusses the "Fiscal Democracy Index," defined as the percentage of federal revenue not allocated for mandatory programs, including interest payments.  It is not a pretty picture:

and here is something that I did not know (links in the original):

For the first time in U.S. history, in 2009 every single dollar of revenue was committed before Congress voted on any spending program. Meanwhile, most of government's basic functions — from justice to education to turning on the lights in the Capitol — are paid for out of swelling, unsustainable deficits.

Tuesday's special election in Massachusetts was but the first of a number of interesting contests in New England this year.  Likely to rise to prominence over the spring and summer is the contest to succeed Senator Judd Gregg of New Hampshire.  Current Representative Paul Hodes is unopposed on the Democratic side of the ballot, and former Attorney General Kelly Ayotte will likely emerge from the herd of Republicans.  Here is how my very local paper reported on it today:

Hodes currently trails Ayotte by 9 percentage points but beats both Binnie and Lamontagne in one-on-one match-ups, according to the poll.

Mark Bergman, communications director for the Hodes campaign, said the polling numbers do not change Hodes’ campaign strategy.

“This election is going to be about choice,” Bergman said in an interview with The Dartmouth. “The Republicans all support the same failed economic agenda of [former President] George W. Bush that would return us to the failed policies that got us into this [economic crisis].”

If you had told me in November 2008 that Massachusetts would be represented by a Republican in the Senate, I would have had you committed.  And yet that has what has occurred.  From my admittedly biased viewpoint on the periphery of the Boston media market, I thought Martha Coakley ran an arrogant and nasty media campaign.  For example, I'm not sure what she hoped to accomplish by interrupting my football playoffs with ads attacking a guy I had never heard of and blatantly overstating her own accomplishments.What she should have done was to simply say that she was a firm vote in the Democratic camp on the key issues of the day; principally, extending the benefits of more universal health care to the rest of the nation. 

What the nation got, instead, was something other than a firm vote in that camp.  But don't overstate what this means.  President Obama does not now find himself negotiating directly with Senator Brown over his health care agenda. 

Some will say that the new deal reached on the tax on so-called Cadillac health care plans is a giveaway to unions -- and they won't be wrong -- but in isolation it is a step toward "the least worst way to do the wrong thing," which is what passes for success in Washington these days.  Buried in The Washington Post article by Lori Montgomery and Robert D. Shear:

The deal cut Thursday would raise the value of policies subject to the tax to $24,000 for families and $8,900 for individuals. Plans with significant numbers of women or older workers would receive an additional break, as would workers in high-cost states and high-risk professions. Dental and vision plans would be exempt starting in 2015. And workers with collective-bargaining agreements and government employers would be exempt until 2018, giving labor leaders time to negotiate new contracts.

Maybe the best four-minute explanation of how screwed up our policies toward financially distressed firms have been.  What does it say about us that The Daily Show is the best TV news program? That we are lucky to have The Daily Show.

Watch it here.

Donald Marron calls it "sobering," and James Pethokoukis gives nine reasons why it is "bad news" for Democrats.  Mark Thoma discusses the story beneath the story, which is that the decline in labor force participation kept the unemployment rate from rising despite the loss in jobs.  Menzie Chinn also discusses some subtle aspects of the report.

Franklin Mixon and Kamal Upadhyaya present rankings of popular economics blogs according to the scholarly impact of their main bloggers, published here in the Eastern Economic Journal.  Yours truly is ranked #13 (see Table 1).

Curiously, the article bases its rankings on the database of Anne-Wil Harzing, which in turn is based on Google Scholar.  This is the first time I have seen rankings done this way, as opposed to ISI.

Apparently, it is possible to write a whole New York Times article on Harold Ford considering a run for Senate in New York without mentioning a single position he has on any issue.  Read it here.  It's about donors and fundraising, not issues and constituencies.  And even with all the political commentary in the article, I still cannot figure out if the presumed dissatisfaction with incumbent Kirsten Gillibrand is because she is too far to the Left or to the Right.

Looking for more disappointment?  Consider these three excerpts:

Those who have expressed interest in a Ford campaign remain skittish about discussing it publicly, citing Ms. Gillibrand’s power over billions of dollars in financing around the state.

Following up on Pete's post, I am far out of my depth trying to understand this "ping pong" procedure to get around a conference committee.  Fortunately, Keith Hennessey is on the case.  Read it and weep (again) for our two-party democracy.

Here's more from Newsweek over the weekend on the details of the breakdown in U.S. security to prevent the attempted attack on Northwest Flight 253 on Christmas Day:

Comes to us courtesy of Frances Townsend, who served as Assistant to President George W. Bush for Homeland Security and Counterterrorism, in last week's Washington Post:

The Obama administration needs to take a clear, tough line with Yemen: Take care of the terrorism problem within your borders so you are no longer a threat to the United States and our allies in the region, or allow the international community to come in and clean it up for you. The time for polite diplomacy is long past.

I couldn't stop laughing when I read this in my local paper.  To what international community is she referring?  The one still bogged down in Afghanistan?  The one that hung together so well in Iraq?

Put simply, why haven't the Al Qaeda backed suicide bombers launched more attacks on the U.S.?  In the Wall Street Journal this week, Holman Jenkins answers this question in the context of the underwear bomber:

Considering the ease with which a suicide bomber could stroll into a Starbucks in any American city and kill a dozen people, you have to wonder at al Qaeda's obsession with targeting commercial airliners.

If 19 terrorists (the number who carried out the 9/11 attacks) each blew himself up at one- or two-week intervals in a shopping mall or a movie theater, America likely would become a seething nation of paranoid shut-ins. That it hasn't happened tells you something: Al Qaeda doesn't have a ready supply of competent suicide bombers, domestic or imported, to carry off serious attacks.

I'd like to address two comments on recent posts -- one by Michael and one by Jonah -- regarding the "tax" on "Cadillac" health plans.

As a matter of tax policy, I favor eliminating the exclusion of health insurance premiums from taxable income.  So does Jon Gruber.  I think economists can agree on this because of the reasons indicated in the original articles and comments -- it promotes spending on health care that may be wasteful.  We could finance quite a lot of expansions in coverage with a chunk of the $200 - $250 billion in foregone tax revenue.  We would also make the tax code more progressive in the process.

What I am criticizing in these posts is a proposal to selectively eliminate it for the most expensive health insurance plans without regard to whether the expense is due to the design of the plan or the expected health expenditures of the insured population based on their health status.

In The Washington Post today, Jonathan Gruber of MIT defends the provision in the Senate bill to lessen the tax advantages of health insurance plans with premiums of more than $8,500 for singles and $23,000 for families.  I mentioned in my post on the Senate bill that I was not a fan of the "Cadillac tax."  Gruber acknowledges but then ignores the main criticisms of this provision:

But there have been numerous criticisms of the Senate financing. Perhaps the strongest is that some insurance plans will be "unfairly" burdened. For example, firms with older employees may have higher insurance costs not because their plans are more generous but because the employees themselves are more expensive to insure.

Here are two quick hits today about how resources are going to be divided up among the states.

First, the Census Bureau gives us a preview of what population growth may look like in the 2010 census with last week's release of the latest annual population numbers.  According to this news summary:

In Nevada, for example, the population has risen 32.27% since the 2000 Census, more than any other state in the past decade. Nevada currently has three seats in the House and will almost certainly pick up another as a result of its population growth.

On the other hand, large states that have grown slowly over the past nine years such as Ohio (1.67%), Pennsylvania (2.64%), New York (2.98%) and Michigan (3.13%) could lose at least one seat each.

The future of the so-called Sand States - California, Arizona, Nevada and Florida - is still in question, though. The rapid rise of many of these states through the early part of the decade has been curtailed by the housing crisis.

Second, this New York Times report explains how states that have already expanded their eligibility rules for Medicaid may see less reimbursement from the federal government than those states that will do so only as part of the health care reform that eventually gets signed into law.

With the Senate's passage of its version of health care reform, I'd like to compare it against what I described earlier this year as my ideal reform.  That reform included four elements:

1. Community Rating
2. Guaranteed Issue
3. Ex Post Risk Adjustment
4. An Individual Mandate (with Medicaid for a fee as the backup option)

I think the first two elements are well represented in the Senate bill, and, importantly, they apply to all health insurance plans.