Category: Health care

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Domestic issues Economics Health care

The Medical Loss Ratio

[digg-reddit-me]In most industries, when a customer pays for something – and then asks to get what they paid for – it’s not considered a big deal. It’s the basic transaction that the business engages in. The health insurance industry works differently. You make regular payments so that the insurance company will pay your irregular medical bills and so that they will protect against the possibility that you will be one of the unlucky few who has some serious condition which requires extensive medical treatment. Most people aren’t – and so they just give over money regularly and receive very little in return. But a few people end up needing serious medical care. That’s the purpose of insurance – to distribute the risks and costs more evenly. This is what it was designed to do – this is why people buy it – it is what they are paying for. But the health insurance industry sees their role differently. They’re in it to make as much money as possible – not to provide a service for a fee and make a profit from this. Thus, when anyone who has duly paid for health insurance for years makes a claim for a condition that requires serious and expensive medical treatment, they try to find every possible basis to deny and revoke their coverage. It would be as if – after I had paid for a soda – the store then tried to deny me the right to open the soda and leave the store.

Obama’s attempt to reform health care is partly about reforming the way we provide care (with electronic records, comparative effectiveness studies, etc.) – but it is mainly the way in which we provide health care insurance. In this fight, there is one statistic we have not heard enough about but which critics of the current system should bring up whenever they can: the medical loss ratio. This statistic describes the percentage of dollars that a health insurance company takes in from its premiums that it uses to actually pay for medical services. For example, back in the 1990s – when the health care insurance industry was quite profitable – the figure was generally in the mid-90s. In other words, about 95% of all dollars collected in premiums were used to pay for medical services. Since then, structural changes in the health insurance industry have led it to focus more on profits – as a Wall Street mentality took hold. Since the 1990s, the medical loss ratio has dropped significantly. Today it is in the mid 70s to low 80s – meaning $20 to $30 of every $100 paid in insurance premiums is not used to provide the services paid for. These profits – and the quest to increase such profits – has led to the health insurance industry becoming more like a Wall Street financial firm – with massive bonuses to its top executives and large dividends to shareholders as they skim greater profits from a rising bubble in the field in which it operates in. Our health insurance system is run by Wall Street tycoons.

How does this affect the quality of the service that health insurance companies provide? It forces them to reduce their medical loss ratio as much as possible. Wendell Potter, a former executive at CIGNA, explains several ways:

Rescission is one thing. Denying claims is another. Being, you know, really careful as they review claims, particularly for things like liver transplants, to make sure, from their point of view, that it really is medically necessary and not experimental. That’s one thing. And that was that issue in the Nataline Sarkisyan case.

But another way is to purge employer accounts, that – if a small business has an employee, for example, who suddenly has have a lot of treatment, or is in an accident. And medical bills are piling up, and this employee is filing claims with the insurance company. That’ll be noticed by the insurance company.

And when that business is up for renewal, and it typically is up, once a year, up for renewal, the underwriters will look at that. And they’ll say, “We need to jack up the rates here, because the experience was,” when I say experience, the claim experience, the number of claims filed was more than we anticipated. So we need to jack up the price. Jack up the premiums. Often they’ll do this, knowing that the employer will have no alternative but to leave. And that happens all the time.

They’ll resort to things like the rescissions that we saw earlier. Or dumping, actually dumping employer groups from the rolls. So the more of my premium that goes to my health claims, pays for my medical coverage, the less money the company makes.

The health insurance industry uses any possible reason to revoke coverage that an individual has been paying for as soon as they actually need the service they have paid for – for example, they will point to some minor preexisting condition that was not disclosed when they agreed to provide the insurance as an excuse to cancel coverage. Robin Beaton of Texas had her policy revoked as her doctors were scheduling her double mastectomy for her breast cancer because she had failed to disclose to her insurance company that she had the pre existing condition of acne and a rapid heartbeat.

So – essentially, these organizations accept contracts to provide health insurance in the event someone needs it. But as soon as a significant claim is made, they try to find a reason to deny it. And the executives at these companies have refused to say that they will not continue these practices.

Our system of health insurance has created a Wall Street-run health care business. For all the worry Republicans are trying to gin up about government bureaucrats reporting to Congress or the White House being in between you and your doctor – what we have now is a system where faceless corporate bureaucrats are making medical decisions reporting to Wall Street tycoons. Like the Wall Street firms, health insurance companies have driven up prices exponentially, creating a bubble; the CEOs take enormous salaries; they are accepting money for insurance from anyone, but will look for any way out of any of their commitments if they can get away with it. In normal businesses, profits are the primary side-effect of providing a product or service; in a Wall Street style corporation, profits are the sole and only goal – with the product or service they are selling merely a means to this end. This is what our health insurance industry has become.

This is the royally fucked system we have today. This isn’t the only issue health care reform needs to address – but it is a major one.

Continue reading “The Medical Loss Ratio”
Categories
Health care Libertarianism Political Philosophy The Opinionsphere

There Is Such A Thing As A Right to Health Care

[digg-reddit-me]F. Paul Wilson had a post that was reddit-famous last week (in the Libertarian subreddit) in which he declared “There ain’t no such thing as a right to health care.” He proposed “the alone-on-a-desert-island rule [as] a convenient way to differentiate genuine human rights from the poseurs.” The genuine human rights are inherent, according to Wilson – and he says – on this desert island alone – one has the right to life, liberty, the pursuit of happiness, the right to free speech, free sexual expression, freedom of religion, and freedom to smoke or inject anything you want. What you don’t have – according to Wilson – are the right to a house (because there is no one to build it), the right to three solid meals a day (because there are no farmers), or the right to health care (because there are no doctors.)

But by Wilson’s “alone-on-a-desert-island rule” Iran would be considered quite free. Fine – they don’t have freedom of assembly – but you can’t have that on a desert island. They don’t have free speech in public – but they would in the privacy of their own homes (in their own, walled-in desert island), especially if no one was listening. The Iranian authorities actually  allow their people a broad range of rights as long as they keep their activities private.

The problem is – as social animals, humans cannot fully express their freedom of sexuality, the freedom of religion, the freedom of speech, or many of their other freedoms except in the presence of others. Many of the rights we take for granted are social rights – relying on others to a society to make these rights possible.

Perhaps the distinction Wilson is trying to make is between negative rights – rights which constrain the government – and positive rights – rights which impose responsibilities on the government.

The right to health care is one of the latter – but that does not make it any less a right. While the right to health care is not absolute – as if one is alone on a desert island, one has no such right, just as one has no right to assemble, or vote – few today would deny that each individual has a right to some level of care if they are sick and injured. While Wilson is concerned about imposing a burden on doctors, they have already sworn an oath to provide such care if it is needed, a responsibility they take upon themselves with their profession.

This right to health may not be inherent – but that does not make it less substantive. All humans live in some sort of society – as it is our nature. One of the most basic purposes of a society is to take care of the sick and hurt. As a citizen in such a society, I have a right to health care – even as it imposes a burden on others, just as I have a right to vote, even though others must then count my vote, and as I have the right to an attorney if accused of a crime, even though this imposes another burden. It is a right inherent in my citizenship, in my status as a member of a society.

[Image by Matthew Winterburn licensed under Creative Commons.]

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Barack Obama Criticism Domestic issues Health care The Web and Technology

An idea for a new health care public service announcement

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Domestic issues Economics Health care Political Philosophy

How the Problem of Health Care Undermines the Legitimacy of the Market-State

[digg-reddit-me]Philip Bobbitt and other use the term “market-state” to describe the next (and to some extent current) role of the state – in contrast to its previous historical roles. While throughout most of the 20th century, the state’s role was to provide basic services and goods to its people, by the turn of the century – starting in the late 1970s and early 1980s, the state’s role had evolved to providing opportunities to its citizens. The United States has been on the leading edge of this evolution – from Jimmy Carter’s first steps towards deregulation to the Ronald Reagan’s riding of this zeitgeist to power – as he ushered in an era of increasing deregulation and privatisation, and a reduction of all government interventions in the economy. In proposing that “Government is not the solution to our problem – government is the problem!” Reagan placed the Republican Party at the head of this evolution in the government’s role – making Democrats who opposed this seem out-of-touch.

But if a market-state’s success is judged by the extent to which it maximizes opportunities for its citizens – the problems of global warming and health care now threaten to undermine the legitimacy of America’s market-state. The problem in each case began long before the transition to the market-state – but in both, this transition escalated the scale of the problem and made it harder to manage. However, for this post, I’m only focusing on health care.

Coinciding with the deregulation of various industries and other market-state reforms that began in the early 1980s, health care costs began to grow substantially faster than other products and services in America (though without providing better results.) This growth in the costs of health care has created three problems that undermine America’s market-state:

  1. Given the government and state insurance plans for the poor and elderly, this growth undermined the fiscal solvency of the government overall.
  2. The rapid rise in costs has undermined the faith of many citizens in the market.
  3. The business model private health insurance companies have adopted creates extreme insecurity for citizens – thus dampening economic growth and the entrepreneurial spirit needed for a market-state to thrive. Paul Waldman describes the perversity of this model in The American Prospect:

    4. [T]he central pathology of our deeply pathological health-care system is that most of us have no choice but to get health coverage from an entity whose sole reason for being is to take our money and then try to avoid paying for our care when we get sick.

With prices increasing so rapidly and with people feeling less secure in their coverage and the government deficit exploding in the next fifty years, the sense of an impending crisis is palpable. The crisis in health care thus undermines the entire market-state model.

To date, most Repbulicans and right-wingers do not seem to have realized the scope of this problem – the extent to which it undermines the very legitimacy of the type of state they have been promoting. The best proposals that have been made from the right have focused on the ideology of anti-governmentism rather than a focus on the market-state expansion of citizen opportunity that was the true core of Reagan’s success. For example, John McCain, in a bold move, sought to overthrow the system of health care insurance as we know it – and to place the responsibility for paying for health care squarely on the shoulders of individual citizens – instead of the collective pools that spread out such risk, whether organized by employers or the government. This would hold down health care costs – because individuals would be constrained from making health decisions by the amount of money they had to spend. The theory behind this was that the increasing costs of health care stemmed directly from the fact that consumers were going to the doctor or hospital or otherwise using health care more because they did not bear the direct consequences of their decisions. Of course, being out of power and with their ideas generally unpopular with the public, Republicans have instead merely sought to minimize or deny the clear problems with health care and simply be obstructionist.

Alternately, liberals, progressives, Democrats describe health care as a place in which the market has simply failed. As Paul Krugman has recently pointed out, health care economists have long maintained that:

[T]he standard competitive market model just doesn’t work for health care: adverse selection and moral hazard are so central to the enterprise that nobody, nobody expects free-market principles to be enough.

Their are various solutions being worked out by the Democrats – to create regulations that prevent health insurance firms from maintaining their exploitative business model; to create a competitor to these firms that will operate on a different model to keep them honest; to link payment of health care to outcomes instead of time and services.

The great irony is that if the Democrats are successful in reforming health care, they will have legitimized the market-state which many on the left are suspicious of – but they will have done so by firmly rejecting the Republican dogma that the government is always the problem. As Bill Kristol wrote in his famous 1993 memo on Bill Clinton’s attempt at health care reform:

[T]he long-term political effects of a successful Clinton health care bill will be … worse … It will revive the reputation of the party that spends and regulates, the Democrats, as the generous protector of middle-class interests. And it will at the same time strike a punishing blow against Republican claims to defend the middle-class by restraining the growth of government.

Today,  it is only the Democrats who will be able to preserve the legitimacy of the market-state in the midst of this crisis.

[Image by FoxTongue licensed under Creative Commons.]

Categories
Barack Obama Domestic issues Health care Politics

Organizing a Grass Roots Movement for Health Care Reform


[digg-reddit-me]About a week ago, I got an email from Mitch Stewart, the Director of Organizing for America, the organization that is tasked with marshalling the remnants of Obama’s campaign organization to create grass roots pressure for change. It read almost as if it were a campaign email:

Joseph –

The fight to pass real health care reform will come down to one thing: you.

That’s because the efforts in Washington, D.C., to fix our broken health care system and provide affordable coverage for all Americans are only part of the battle.

By teaming up with your friends and family and organizing for real reform in your community, you can make the difference in this debate. Together, we’ll make sure the President’s plan succeeds across the country…
In communities around the country, folks will be knocking on doors, making phone calls, and doing all they can to seize what may be our last opportunity to change health care in America forever – as the President has said, reform needs to “happen this year, or not at all.”

The goal of the email was to get people to buy “Health Care 09” t-shirts. But unlike the campaign emails – which often led to me buying whatever they were hawking to demonstrate my support, reading up on the issue (if I had not already) and blogging about it, this email prompted me to no action. A few months ago, I wrote about this issue in a post about the “Paradox of Organizing for America.” The problem I saw then was that while “Obama for America” had a clear, singular goal – electing Barack Obama president – and citizens were faced with the motivating factor of being directly involved in achieving this goal – voting, and convincing others to vote as they were – neither of these factors which were essential to the success of Obama for America are present for Organizing for America.

But this email demonstrates another problem, a problem inherent in the legislative-centered approach to policy that Obama has taken in general – and his rugby-scrum strategy for achieving health care reform in particular. How can he motivate the grass roots to back him if there is no clear bill or idea to rally behind?

Clearly, their strategy is to make this a binary question: Are you for or against health care reform? Everyone is for health care reform – as our system is quite obviously unsustainable. But there are many, many valid questions critics and supporters of the various progressive-type health care reform plans have:

  • Will this reform be sufficient to “bend the curve”?
  • Should medical malpractice awards be capped?
  • Should we be moving towards a single-payer system?
  • Would non-profit insurance organizations be a better approach?

On policy grounds, many of those who support health care reform disagree about how it should be done. Now, Organizing for America is asking them to push for reform, with details unrevealed and undecided. What they are asking for is, simply, a leap of faith – to trust that the Obama administration knows what they are doing, and that they will do the best they can.

They key fact that the Obama administration and Organizing for America are pushing is that this is the time. As the email quotes Obama: “[R]eform needs to ‘happen this year, or not at all.'”

The grounds for this claim are political rather than policy-oriented. As a matter of reflective policy-making, it would undoubtedly be better to gradually experiment with different approaches, testing them to see which are successful and gradually building support for a wholesale reorganization of health care. But politically, this is untenable. First – with the retirement of the worst generation of Americans and the exponential rise in health care costs, our federal deficit is set to explode in the next thirty years. The longer we wait, the harder it will be to reign in costs and “bend the curve.” This is a problem that should have been dealt with while the Baby Boomers were in power, when the problem first became evident – but, as usual, they abdicated their responsibilities. Second, Obama now has more going for him domestically than he likely will at any other point, including if he were to win a second term. Obama’s popularity is high; he has 60 Democrats in the Senate and a sizeable majority in the House (and the president’s party has traditionally lost seats in the first midterms after the presidential election); he has several key Republicans willing to compromise – and various business and other interests willing to support some legislation.

The difficulty Organizing for America faces is motivating the many policy-oriented and otherwise savvy Obama-supporters to support the administration on this issue without having set its position in advance. Organizing for America seems to have a clear idea of what it wants from the grass roots: pressure for the idea that we need reform now. What’s less clear is how to get the grass roots to buy into their part of the strategy. Buying t-shirts is what you do after you buy into the strategy – not before.

It’s not clear to me that Organizing for America has realized its job is no longer to preach to the converted – but to convert bystanders into activists.

[Image by tandemracer of her baby’s six-month doctor visit licensed under Creative Commons 2.0]

Categories
Barack Obama Domestic issues Health care Politics The Opinionsphere

Are The Pieces Aligning on Health Care?

[digg-reddit-me]David Brooks’s column is quickly becoming one of the most insightful, inside looks at the larger plans of the Obama administration (which suggests a column kneecapping Obama is forthcoming so Brooks can maintain his conservative cred). His latest column is practically gushing – but it certainly paints a plausible picture of what the Obama administration sees as it’s game plan on health care. Brooks starts his piece with this half-jesting, half-admiring set-up:

Let’s say that you are President Obama. You’ve inherited a health care system that is the insane spawn of a team of evil geniuses from an alien power. Pay is divorced from performance. Users are separated from costs. Rising costs threaten to destroy your nation and everything you hold dear.

You also know that [the only] two approaches [to actually fixing this] have one thing in common. They are both currently politically unsellable. Others have tried and perished. There are vast (opposing) armies arrayed against them. The whole issue is a nightmare.

You are daunted by the challenges in front of you until you remember that by some great act of fortune, you happen to be Barack Obama. This calms you down.

He then goes on to describe a strategy which runs like this:

  1. Table-setting. Court everyone – get everyone to the table and agreeing on some basic meaningless “pablum.”
  2. Congress. Ask Congress to put something together, keeping your distance as they investigate and write many competing proposals.
  3. The Long Tease. Refuse to rule anything out or commit to anything – thus keeping all the interest groups at the table.
  4. The Scrum. At the end of the summer session, when Congress actually begins to assemble health care in a series of all-night sessions, take a stronger role. But be willing to compromise. This scrum needs to end quickly – and send the bill off to be passed before the interest groups have time to realize who has and hasn’t been taken care of.
  5. MedPAC. Include in the bill this medical equivalent of the Federal Reserve – an independent, technocratic body to oversee the industry. This is where the real reform will stem from.

This scenario sounds plausible – although a David Brooks column explaining it would seem to undermine the strategy itself.

So far, the Obama administration has been extremely impressive in how it has managed the health care debate. They make it seem as if things really are going according to plan so far – an extraordinary thing given the history of Washington and health care. For example, Ezra Klein provided some insight into why the American Medical Association quickly retracted it’s direct opposition to a public option in the health care debate, citing this Roll Call piece:

Top aides to Senate Finance Chairman Max Baucus (D-Mont.) called a last-minute, pre-emptive strike on Wednesday with a group of prominent Democratic lobbyists, warning them to advise their clients not to attend a meeting with Senate Republicans set for Thursday.

[Meeting] with a bloc of more than 20 contract lobbyists, including several former Baucus aides…“They said, ‘Republicans are having this meeting and you need to let all of your clients know if they have someone there, that will be viewed as a hostile act,’” said a Democratic lobbyist who attended the meeting.

“Going to the Republican meeting will say, ‘I’m interested in working with Republicans to stop health care reform,’” the lobbyist added.

Ezra Klein explains what this means:

They’re saying that you’re either with health reform, or you’re against it. And if you’re against it, you can’t expect to be taken care of in the final legislation. They’re not going to save your seat at the table while you’re trying to burn down the room. And the AMA, it seems, got the message.

This hardball strategy with interest groups plus the extraordinary wooing of legislators by the Obama administration that Matt Bai described in a piece this Sunday, the general agreement among most Americans including business interests that our health care system is broken, the impending deficit crisis, Obama’s mandate, and the unusual role ultra-conservative Orrin Hatch appears to be willing to play to help his good friend Teddy Kennedy achieve a dying wish (Suzy Khimm in The New Republic describes it as, “a particularly senatorial way to pay tribute to a dying friend.”) – with all of these pieces falling together, the Democrats may finally be able to achieve what Harry Truman started all those years ago.

[Image by JonathanHannpberger licensed under Creative Commons.]

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Barack Obama Domestic issues Economics Financial Crisis Health care Iran Politics The Opinionsphere

Mirror Neurons, Iran’s Fissures, Yglesian Insights, The Deficit Crisis, Rare Minerals

Once again, it’s Friday, so it’s time for my weekend reading recommendations.

1. Mirror Neurons. Daniel Lametti explains the importance of mirror neurons in the Scientific American.

2. Iran’s Fissures. Roger Cohen has been prominently writing about Iran for the past year or so – predicting and pushing for a thaw in relations. Now, on the cusp of an important election, Roger Cohen discusses Iran:

Iran, its internal fissures exposed as never before, is teetering again on the brink of change. For months now, I’ve been urging another look at Iran, beyond dangerous demonization of it as a totalitarian state. Seldom has the country looked less like one than in these giddy June days.

3. Yglesian insights. Matt Yglesias’s blog has long been on my must-read list – but he’s offered some especially insightful observations in various contexts about the free market in recent weeks. Here Yglesias speculates about the advantages of non-profit-maximizing corporations in a free market:

After all, profit-maximization is not a natural form of human behavior. I think it’s best understood as a very idiosyncratic kind of pursuit. It happens to be one that’s economically rewarded because with money to invest tend to want to invest it with would-be profit-maximizers. Thus, in fields of endeavor where the ability to raise large sums of capital on reasonable terms is a huge advantage, a profit-maximization impulse winds up being a huge advantage.

In a later post about health care, Yglesias makes a related point:

[P]art of what’s wrong with the world is that the very same people who spend a lot of time cheerleading for free markets and donating money to institutions that cheerlead for free markets—businessmen, in other words—are the very people who have the most to gain from markets being totally dysfunctional. The absolute worst place on earth you can find yourself as a businessman is in the kind of free market you find in an Economics 101 textbook. As a market approaches textbook conditions—perfect competition, perfect information, etc.—real profits trend toward zero. You make your money by ensuring that textbook conditions don’t apply; that there are huge barriers to entry, massive problems with inattention, monopolistic corners to exploit, etc.

4. How to tackle the deficit crisis. Set off by David Leonhardt’s excellent look at the forthcoming deficit crisis, the Opinionsphere quickly took this up as a theme of the week. Noah Millman at The American Scene had the best take on how to tackle the deficit crisis – once we decide to get serious. One of the main ways he suggests is to reform the tax code:

We have an income tax that is riddled with deductions that undermine its purported progressivity, and we rely on increasingly steep progressivity to justify every additional change to said code. A 1986-style reform that eliminated many deductions and lowered rates would not only be a likely booster of the economy, but would probably raise revenue – certainly on the corporate side.

5. China’s Great Game. And of course, the Financial Times reported that China has almost cornered the world market in rare minerals needed for most high tech products. I’m looking forward to some analyst really following up on this and explaining what implications – if any – this has.

Categories
Barack Obama Domestic issues Economics Financial Crisis Health care The Opinionsphere

The Master Plan Always Has Flaws

Daniel Drezner at Foreign Policy summarizes my feelings about Krugman in almost as complete a way as Evan Thomas did:

The fundamental question is whether Krugman is a brilliant hedgehog, an insecure pain in the ass, or – as frequently is the case – both at the same time. 

One suspects that Krugman is at least part right – and that Obama and his team realize this. Obama’s response to the financial crisis has been significant – and more than any government response in history – but it is dwarfed by the scale of the crisis, as Krugman is fond of pointing out. Nicholas Lemann in the New Yorker tries to explain why Obama seems to be ignoring Krugman’s advice so far:

[Obama] has to address the crisis, and he is trying to add enough new controls to the system to prevent a repeat of it, but it looks as if his heart is with the big new programs in his budget and with his foreign-policy initiatives. Bank nationalization would drive the stock market down and increase theagita of people with 401(k) plans. Moderate Democrats in Congress would further soften in their support for the Administration’s legislation. The price of bank nationalization might be Obama’s super-ambitious plans in other realms, which, if history is a guide, are likely to pass only in this first year of his Presidency. If they do pass, he will have generated tax revenues from affluent people for social purposes far beyond those of the House’s tax on A.I.G. bonuses, and he will have significantly eased the distress of people who can’t get good health care or education. That is a lot to put at risk.

At the same time, Obama’s team seems to think that, to quote my post of yesterday:

[I]n the short term, the Geithner plans will work to restart the “old” economy. In this moment before that happens though, pressure from Europe and internal critics as well as a desire to avoid a repeat of this fiasco will enable enough forward-looking, gradualist regulation and legislation to correct the long-term problems with high finance.

E. J. Dionne Jr. in the Washington Post explains where the administration’s focus is:

Obama’s top budget officials seem confident that they can deal with this immediate difficulty. His larger challenge is to take on the politics of evasion promoted by those who would indefinitely delay health-care reform, energy conservation and the expansion of educational opportunities. Already, his lieutenants are signaling how he will cast the choice: between “taking on the country’s long-term challenges” or just “lowering our sights and muddling through,” as one senior aide put it.

If Geithner is responsible for fixing the current crisis, Peter Orszag is responsible for the long-term outlook – of balancing Obama’s plans to expand government’s role and stabilizing our deficit spending. As Jodi Kantor in the New York Times explained:

Mr. Orszag embodies the administration’s awkward fiscal policy positioning: big spending now, with a promise to scrub the budget of waste and a bet that economic recovery and changes to health care will gradually reduce the deficit.

A lot of pieces need to fall together for this to work. I have confidence in each piece of this plan – but together, the venture seems a bit bolder than is wise.

Perhaps this is a perfect moment in history for Obama’s plan – and Obama has the insight to see this; perhaps Obama is a master of politics who is able to get all of these items through; but it’s hard for me not to be discomfited by the manner in which everything is coming together.

Categories
Barack Obama Domestic issues Economics Financial Crisis Green Energy Health care Politics The Opinionsphere

The Larger Narrative

[digg-reddit-me]David Brooks:

The crisis was labeled an economic crisis, but it was really a psychological crisis.

Republican pollster David Winston:

[Obama]’s going to have to fit other issues into the larger narrative of the economy.

Michael D. Shear and Paul Kane in the Washington Post:

Whichever side proves to be right, the sharp, partisan lines over the stimulus bill make it plain that both parties intend to exact a political cost over last week’s votes. And their leaders are looking to history for inspiration as they consider how to maneuver in the weeks and months ahead…

Republicans have made it clear that they intend to try to shift the economic debate toward concern about the federal deficit.

Obama is now completing the three-step jig he planned from the beginning, with his address to Congress tonight focused on the Grand Bargain needed to shore up our economy for the forseeable future.

The first step of this jig was supposed to be easy, nonpartisan, and uncontroversial – a spending and tax cutting bill to stimulate the economy. The second step was supposed to be harder but still nonpartisan – dealing with the mortgage and banking messes. In both cases, Obama has approached these problems as a mechanic trying to figure out what has gone wrong and taking whatever steps are necessary to fix it. Just as a mechanic does not make moral judgments about springs and gears but focuses instead on doing what is necessary to get the machine working again, so Obama approached the economy. Most Americans appreciate this, as polls show that while many dislike the specific measures he has had to take, they approve of the job he is doing. The question was: how to get growth started again – greedy bankers and lying loan applicants and wasteful consumers all are being bailed out – because the problems they have caused are “gumming up the works.” And the consumers at least are being encouraged to continue in their spendthrift ways – at least for now, as Dana Milbank explained:

[Ben Bernanke] even indulged in a bit of economist humor when talking about the paradox of encouraging people to spend even though overspending caused the problem: “Somebody once called this the Augustinian principle, which says something like, ‘Let me be moral, but not quite yet.’ “

The third step is more complicated and politically fraught – as Obama seeks to tackle the third-rail of American politics – Social Security; and at the same time, health care reform; and deficit reduction; and tax reform; and possibly climate change legislation. Obama argues that this economic crisis – and the borrowing to stimulate us out of the economic crisis – have created a “fierce urgency of now” – and that all these issues must be tackled at once. 

John Harwood of The New York Times spoke with Senator Judd Gregg about this:

To protect America’s currency and its borrowing capacity, Mr. Gregg said in an interview, “the world has to be told that we’re going to be fiscally disciplined in the out years.”

Efforts to tame long-run entitlement spending may find more Republican support than Mr. Obama achieved on the stimulus. “He has extremely fertile ground in the Senate,” Mr. Gregg said, crediting the president’s early outreach and “courageous position of saying the can’s been kicked down the road long enough.”

Yet despite the bipartisan consensus that these issues must be tackled, here is where the real disagreements should be. Contra George F. Will who argued constantly that the stimulus bill and banking and mortgage bailouts should be opposed by Republicans and supported by Democrats on based their principles, the initial stimulus and other emergency measures should only have raised principled objections from those with an unflagging belief in the free market – which describes only a minority of Republicans. These measures violate the ideologies of both parties – as big business is bailed out and the market is intervened in. There were issues to be raised as to what the most effective methods of dealing with the crisis were – but to oppose measures wholesale as the Republicans did – indicates a lack of seriousness.

The real debate should come now as we decide the shape of things to come and address the moral and political and long-term issues instead of the emergency measures taken to attempt to stimulate the economy.

But in this challenge is an opportunity, as Richard Florida explained in The Atlantic:

The Stanford economist Paul Romer famously said, “A crisis is a terrible thing to waste.” The United States, whatever its flaws, has seldom wasted its crises in the past. On the contrary, it has used them, time and again, to reinvent itself, clearing away the old and making way for the new. Throughout U.S. history, adaptability has been perhaps the best and most quintessential of American attributes. Over the course of the 19th century’s Long Depression, the country remade itself from an agricultural power into an industrial one. After the Great Depression, it discovered a new way of living, working, and producing, which contributed to an unprecedented period of mass prosperity. At critical moments, Americans have always looked forward, not back, and surprised the world with our resilience. Can we do it again?

David Brooks writes with both concern and a carefully measured dose of hope:

[Obama’s] aides are unrolling a rapid string of plans: to create three million jobs, to redesign the health care system, to save the auto industry, to revive the housing industry, to reinvent the energy sector, to revitalize the banks, to reform the schools — and to do it all while cutting the deficit in half.

If ever this kind of domestic revolution were possible, this is the time and these are the people to do it. The crisis demands a large response. The people around Obama are smart and sober. Their plans are bold but seem supple and chastened by a realistic sensibility.

Brooks is still concerned about how this may turn out. As are we all. 

With tonight’s speech, Obama will begin to craete his legacy – beyond fixing the problems accrued during Bush’s tenure. He will begin to, at long last, deal with the stability issues raised by the combination of FDR’s New Deal revision of the social contract and Reagan’s counter-revolution, as he sets a fiscally sane course for the future. In the midst of this crisis, if Obama is to be the leader we need him to be, he needs to see the opportunity to re-write the social contract and create a more stable economic, financial, and international system. Tonight is his chance to make that case. 

Here’s hope it is not wasted.

Categories
Barack Obama Domestic issues Economics Energy Independence Financial Crisis Foreign Policy Green Energy Health care Politics

An Ambitious Presidency

In his interview with Time magazine, Barack Obama listed those issues on which he believes his first two years as president should be judged:

Domestic Policy

  • Have we helped this economy recover from what is the worst financial crisis since the Great Depression?
  • Have we instituted financial regulations and rules of the road that assure this kind of crisis doesn’t occur again?
  • Have we created jobs that pay well and allow families to support themselves?
  • Have we made significant progress on reducing the cost of health care and expanding coverage?
  • Have we begun what will probably be a decade-long project to shift America to a new energy economy?
  • Have we begun what may be an even longer project of revitalizing our public-school systems so we can compete in the 21st century?

Foreign Policy

  • Have we closed down Guantánamo in a responsible way, put a clear end to torture and restored a balance between the demands of our security and our Constitution?
  • Have we rebuilt alliances around the world effectively?
  • Have I drawn down U.S. troops out of Iraq, and have we strengthened our approach in Afghanistan — not just militarily but also diplomatically and in terms of development?
  • Have we been able to reinvigorate international institutions to deal with transnational threats, like climate change, that we can’t solve on our own?

Intangibles

  • And, two years from now, can the American people say: “Government’s not perfect; there are some things Obama does that get on my nerves. But you know what? I feel like the government’s working for me. I feel like it’s accountable. I feel like it’s transparent. I feel that I am well informed about what government actions are being taken. I feel that this is a President and an Administration that admits when it makes mistakes and adapts itself to new information, that believes in making decisions based on facts and on science as opposed to what is politically expedient.” Those are some of the intangibles that I hope people two years from now can claim.

So, basically, a rather limited agenda here.