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Friday, December 11th, 2009

1. The Personal Toll TARP Exacted. Laura Blumenfeld profiled Neel Kashkari for the Washington Post – the Treasury employee and Hank Paulson confidante who presided over TARP and assisted with much of the government’s response to the bailout who is now “detoxing” from Washington by working with his hands in an isolated retreat. The piece focuses not on what happened and the enormous impact, but on the personal toll this crisis exacted on Kashkari and those around him: the heart attack by one of his top aides; the emotional breakdowns; the trouble in his marriage as he didn’t come home for days, sleeping on his office couch and showering in the Treasury’s locker room:

Thoughts tended toward the apocalyptic. During midnight negotiations with congressional leaders, Paulson doubled over with dry heaves. A government economist broke into Kashkari’s office sobbing, “Oh my God! The system’s collapsing!” Kashkari counseled her to focus on things they could control. (Minal: “So you offered her a bag of Doritos.”)

“We were terrified the banking system would fail, but the thing that scared us even more was, what would we do the day after? How would we take over 8,000 banks?”

The piece seems to ask us to feel pity for these men and women who toiled under difficult circumstances, but it seems inappropriate to feel pity for those who assume power because they also feel its heavy weight. But the piece acknowledges that Kashkari himself seeks to get back to Washington again, “Because there’s nowhere else you can have such a large impact — for better and for worse.” Lionize them for their heroic sacrifices if you will, but there is no place for pity. Those who choose to take on the burdens of power should not be pitied because it proves too weighty.

2. New Ideas. The New York Times briefly discusses the Year in Ideas. Some of the more interesting entries:

3. Obama’s Afghanistan Decision. Fareed Zakaria and Peter Beinart both tried to place Obama’s Afghanistan decision into perspective last week in important pieces. Both of them saw in Obama’s clear-eyed understanding of America’s power shades of the foreign policy brilliance that was Richard Nixon and Henry Kissinger. Zakaria:

More than any president since Richard Nixon, he has focused on defining American interests carefully, providing the resources to achieve them, and keeping his eyes on the prize.


Nixon stopped treating all communists the same way. Just as Obama sees Iran as a potential partner because it shares a loathing of al-Qaeda, Nixon saw Communist China as a potential partner because it loathed the U.S.S.R. Nixon didn’t stop there. Even as he reached out to China, he also pursued détente with the Soviet Union. This double outreach — to both Moscow and Beijing — gave Nixon more leverage over each, since each communist superpower feared that the U.S. would favor the other, leaving it geopolitically isolated. On a smaller scale, that’s what Obama is trying to do with Iran and Syria today. By reaching out to both regimes simultaneously, he’s making each anxious that the U.S. will cut a deal with the other, leaving it out in the cold. It’s too soon to know whether Obama’s game of divide and conquer will work, but by narrowing the post-9/11 struggle, he’s gained the diplomatic flexibility to play the U.S.’s adversaries against each other rather than unifying them against us.

Perhaps this accounts for Henry Kissinger’s appreciation for Obama’s foreign policy even as neoconservative intellectuals such as Charles Krathammer deride Obama as “so naïve that I am not even sure he’s able to develop a [foreign policy] doctrine“:

“He reminds me of a chess grandmaster who has played his opening in six simultaneous games,” Kissinger said. “But he hasn’t completed a single game and I’d like to see him finish one.”

4. The Unheeded Wisdom of Frum. It seems that almost every week a blog post by David Frum makes this list. This week, he rages at how the Republican’s “No, no, no” policy is forcing the Democrats to adopt more liberal policies (which Frum believes are worse for the country, but in the case of health care, more popular among voters):

I hear a lot of talk about the importance of “principle.” But what’s the principle that obliges us to be stupid?

5. Fiscal Imbalances. Martin Wolf in the Financial Times identifies the imbalance between America’s deficit spending and China’s surplus policy as the root of our financial imbalances in a piece this week:

What would happen if the deficit countries did slash spending relative to incomes while their trading partners were determined to sustain their own excess of output over incomes and export the difference? Answer: a depression. What would happen if deficit countries sustained domestic demand with massive and open-ended fiscal deficits? Answer: a wave of fiscal crises.

While he says both sides have an interest in an orderly unwinding of this arrangement, both also have the ability to resist:

Unfortunately, as we have also long known, two classes of countries are immune to external pressure to change policies that affect global “imbalances”: one is the issuer of the world’s key currency; and the other consists of the surplus countries. Thus, the present stalemate might continue for some time.

Niall Ferguson and Morris Schularack offered a few suggestions in a New York Times op-ed several weeks ago as to how best unwind this. I had written about it some months ago as well, albeit with a pithier take.

6. War & Peace. Obama’s Nobel Prize acceptance speech was an audacious defense of American power and ideals. If you read nothing else on this list, read this.

7. Song of the week: Pinback’s “Charborg.”

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Posted in Barack Obama, Criticism, Economics, Financial Crisis, Foreign Policy, Politics, The Opinionsphere | 62 Comments »

Health Care Lie #492*: A Government Takeover of 16% of the Economy

Wednesday, August 19th, 2009

*I’ve stopped counting, so that number is made up.

[digg-reddit-me]We’ve all heard this claim – that Obama’s health care reform – specifically the public option – is really a stealth attempt to socialize America and have the government take over a significant portion of our economy.

This claim isn’t true. However, unlike the fearmongering that is the invocation of “death panels,” there is a bit more substance to this accusation. But like so much of this debate, it has little to do with the bills currently under consideration which have rather weak public options. What this claim is based on are the hopes of progressives that the public option could prove to the country how great and effective government health care is and thus lead to a single-payer, Medicare For All type system.

According to Mark Schmitt of The American Prospect, the public option was latched onto by progressives early on as a potential “stealth” tool to gradually move America into a Medicare-for-all type system – as they assumed that given the choice, most citizens would prefer government-run health care. As Ezra Klein summarized Schmitt’s piece:

The reason the idea managed to catch the liberal establishment’s imagination was that it was sold as a way of achieving single-payer, or something close to it, within the current constraints of the political system.

Those on the right wing saw the fervor that accompanied discussions of the public option and soon identified it as a potential target. But the public option wasn’t designed to work as a stealth tool. Its main designer and earliest promoter, Jacob Hacker saw his policy “as an alternative to single payer” and “as a competitive alternative to private insurance” – in other words, as a way to maintain some of the advantages of the system a large number of Americans currently have while offering a different model of competition to keep insurance companies honest. The initial design of the public option – which remains intact today – would create a self-sustaining, non-profit agency that competes with private plans on a Health Insurance Exchange. Perhaps the best explanation of why this would work comes from Michael F. Cannon of the Cato Institute who – while trying to attack the possibility of a public option – made this observation:

Any payment system creates perverse incentives…which is why we need competition between different payment systems to temper the excesses of each. So if Kaiser Permanente is skimping on care, which is the perverse incentive its payment system creates, there are fee-for-service insurers on a level playing field that can lure patients away from Kaiser. That tempers the rate at which Kaiser succumbs to those perverse incentives…

This understanding of how markets work – and how a competing payment system could improve health care for all – is exactly the reason so many people were in favor of a choice between a public option and private ones before the current fear-mongering campaign.

Hacker’s policy is what President Obama has decided he wants in a public option, as he explained Time‘s Karen Tumulty:

It shouldn’t be something that’s simply a taxpayer-subsidized system that wasn’t accountable, but rather had to be self-sustaining through premiums and that had to compete with private insurers.

Tumulty later described Obama’s position on the public option:

Obama has never presented the public option as anything other than a means to an end — one that he would be perfectly willing to achieve through other avenues if necessary. His goal is twofold: to provide a low-cost alternative to the private system that already exists and to assure competition in a health-care market where it is generally lacking.

Further demonstrating that the goal of Obama’s health care reform is not to stealthily push America into a Medicare For All program, he has signalled he would be willing to accept a co-op in place of the public option. However, while Republicans had promoted the idea of co-ops as an alternative to the public option, they now are quickly moving away from this position. Ezra Klein explains:

This is a dynamic we saw in 1994. A compromise is offered, and after great anguish and infighting, Democrats grudgingly move toward it. Then the compromise is yanked away. The famous example of this is Bob Dole voting against two bills that had the name “Dole” in the title.

Someone here is acting in bad faith and has a secret agenda. It doesn’t seem to be the Democrats.

Conclusion: The public option could become a stealth path to single-payer. Just like Medicare could. Or Medicaid. Or S-Chip. Or any other legislation that has ever dealt with the serious problems in our market for health insurance. But what we’re seeing now isn’t a stealth option – as much as both progressives and right wingers may want to pretend it is. If our nation is moving towards a single-payer Medicare-for-all-system, this legislation isn’t what will get us there. That fight will come later.

And for what it’s worth: the public option isn’t the most important part of health care reform. The Health Insurance Exchange (on which the co-op or public option would sit along with private companies) is more important – as are the various reforms of the health insurance industry.

(Some other resources on the public option are this Slate magazine piece from 2006 and this report by Jacob Hacker on the advantages of allowing the public to choose a public option.)

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Posted in Barack Obama, Health care, Politics | 48 Comments »

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