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The CBO Cudgel

By Fester:

The CBO has scored the HELP committee's full healtcare bill. The bill is the complete vision of what Senators Kennedy and Dodd want to do and it includes a reasonably strong public option, Medicaid expansion, comparative effectiveness research and an employer mandate. The goal is to expand coverage by a significant margin and introduce significant and well backed competition in regional health insurance markets that are overwhelmingly quasi-monopolosistic or duopolistic.

The CBO previously scored a partial version of the HELP framework that did not have the public option or the employer mandate in it. That partial scoring produced estimated costs of about 1 trillion dollars but with a significant portion of the population still uncovered. The marginal increase in coverage per dollar over the next decade was not good.

The new scoring of the bill that takes into account the actual coverage expansion and cost control measures is pretty damn impressive. From the AP:

The plan carries a 10-year price tag of slightly over $600 billion, and would lead toward an estimated 97 percent of all Americans having coverage, according to the Congressional Budget Office

Not a bad deal at all if we can get 97% coverage in even if there is a reasonable argument that the CBO score is a bit low as made by Jonathan Cohn. The real value of this CBO score with the complete HELP framework including the public option and the employer mandate is that it is a cudgel against the 'centrist' Democrats who don't want the public option overtly because it is 'too expensive' and potentially because it is a threat to major local employers and campaign contributors of regionally dominant health insurance providers. The public option is the best means of cost control and doing without it means a weaker bill for significantly more cost.

Congress has few philospher kings

By Fester:

I like to live in the real world. It is messy, it is confusing, it often produces non-optimal outcomes (depending on the relevant constraints) but it is tangible. I can also live in a normative world where everything is neat, clean, organized and optimized towards the relevant constraints. However that world seldom exists. I often look for satisficing improvements instead of optimal solutions because the improvements are achievable.

I don't understand the critique of Waxman-Markley that Andrew Samwick and others are advancing in that it is a satisficaing improvement but non-optimal on several grounds:

Much as you may like the idea, this is another 1300 pages of complexity and loopholes. Buried in there, I'll wager, are more than enough ways for large organizations (the ones who hire lobbyists) to get all the exemption and evasion they'll need. Consider the alternative of a carbon tax calibrated to achieve the same emission reductions, and applied to all sectors including vehicle fuel consumption. I'm no expert on translating ideas into pages of a bill, but that can't be much. And given that it allows us to do away with the CAFE standards, I figure we've done a great service of dramatically simplifying the whole regulatory process for carbon emissions.

Economically, a clean carbon tax and a clean cap and trade bill will do the same thing. They will both internalize the currently externalize cost of carbon dioxide emissions. There are two big differences. The first is that a a carbon tax is a price certain option while the cap and trade system is a quantity certain feature.  Secondly, cap and trade is economically more efficient as it allows for market discovery of prices of a scarce good instead of hoping that Congress can hit the right number at any given time for optimal economic efficiency for a given amount of emissions.  

 

His argument is that a carbon tax would be neater and less messy.  Lobbyists would not be able to claw out special interest exemptions and transfers and the legislation would be only several pages long.  He is arguing a straw man here in my opinion.  A properly designed cap and trade system could also be written in a fairly short and concise manner as well.

 

He is bitching and moaning about basic political incentives here.  A complex bill with exemptions, curlicues and who knows what else in it for concentrated interests is far more profitable to the relevant players than a simple, clean sheet proposal with no exemptions.  Dr. Samwick is implicitly arguing that a carbon tax would be less susceptible to this type of manipulation than a cap and trade regime.  I have severe doubts about that.  We have plenty of evidence that tax bills, even comparatively simple tax bills that are mere modifications of existing tax laws can and will be massively abused with exemptions, exceptions, partially refundable credits, donut hole deductions and anything else that concentrated interests can muster to improve their interests against the counterfactual of a clean bill.  The classic example is the agricultural bill where there are significant subsidies for sugar, mohair, honey and other products because there is a strong lobby for those interests while the public purpose of food security, public health and reasonably low prices for a wide selection of goods is often ignored. 

 

I have yet to see a good political reason why the concessions that the Democrats on the Agricultural Committee wanted and received to weaken the bill and make the bill more complex for cap and trade would not also be granted in a carbon tax system.  I think it is very reasonable to assume that Agricultural Committee Democrats would want land use carbon emissions to be exempted from the carbon tax or at least counted under a friendly system.  Those are the concessions that they basically got in cap and trade, and those would be the concessions they would have wanted from a carbon tax regime.  Otherwise they most likely and there would be nothing. 

 

Now if Dr. Samwick wants to argue that doing nothing now is a superior option as the costs of action and inaction escalate the pressure to pass a much cleaner bill that is more to his liking at some uncertain point in the future, that is a defensible argument.  However that is not the argument he is making.  He is whining that Congress is acting like politicians engaged in politics with attendant incentives instead of philosopher king technocrats who will agree with his preferred solutions.  Me, I’m happy for an improvement with the hope that institutional inertia will lead to a good process and outcome over time. 

 

 

Deep Thoughts

Commentary By Ron Beasley

John Boehner had some choice words for the climate bill:

When asked why he read portions of the cap-and-trade bill on the floor Friday night, Boehner told The Hill, "Hey, people deserve to know what's in this pile of s--t."

Have you noticed that Boehner has spent so much time in the tanning booth that he's actually darker than Obama?  Maybe that explains his irrational behavior.

The Oligarchs Are Winning

Commentary By Ron Beasley

Health Care reform is threatened and if we don't see major health care reform the Obama presidency will be a failure.  Robert Reich has some advice:

Momentum for universal health care is slowing dramatically on Capitol Hill. Moderates are worried, Republicans are digging in, and the medical-industrial complex is firing up its lobbying and propaganda machine.

[.....]

If you want to save universal health care, you must do several things, and soon:

And what does he need to do?

1. Go to the nation

2. Be LBJ. So far, Lyndon Johnson has been the only president to defeat American Medical Association and the rest of the medical-industrial complex.

3.  Forget the Republicans. Forget bipartisanship.

4.  Insist on a real public option. It's the lynchpin of universal health care.

5. Demand that taxes be raised on the wealthy to ensure that all Americans get affordable health care.

6.  Put everything else on hold. As important as they are, your other agenda items -- financial reform, home mortgage mitigation, cap-and-trade legislation -- pale in significance relative to universal health care.

 

 And Ezra Klein also had some good advice - Listen to the polls.

 

The public option is considered important by 76% of Americans.  Without a public option any plan will be a failure and Obama and the Democrats will pay the price and the Oligarchs will win.

Lucy's Football

By Fester:

Ian Welsh has the outline of the Senate Finance Committee’s health insurance plan. The shorter version of the short version is that it sucks. Here is the short version of the plan:

1) Lower the medicaid coverage rate from 150% to 100% of the Federal poverty line, 133% for kids and pregnant women (once you have the baby, too bad for you)

2) Subsidies stop at 300% of the poverty line (was 400%)

3) No Public Option mentioned

4) Insurance exchanges at the State level

5) Must buy insurance unless it costs more than 15% of your income

6) A fine if you don’t buy insurance unless you’re below the Federal poverty line

For the most part, as Walker discusses, this is actually identical to or slightly worse than the plan put forward by America’s Health Insurance Plans (AHIP). Yes, worse than the insurance industry’s plan. Remarkable. Baucus is really earning his campaign donations these days…. Without a public option, the insurance companies will have no check on their prices, let alone pressure to actually reduce them. Because people will be forced to buy bad insurance, they’ll hate the plan, and because “reform” has been passed, we’ll have to wait another 10 or 12 years for another shot....

Tim at Balloon Juice is very curious why Obama is not actively selling a strong public option proposal.

Watching Democrats try to fix health care I see a photo negative of the Bush years. Here is an issue with obvious urgency. Setting aside our shameful infant mortality rate, uninsured rate and other statistics, medical bills are by far the leading cause of personal bankruptcies. Insurer misconducy wrecks lives every day in every city in America. The right options are obvious and relatively few in number. Huge majorities support doing the right thing.

Even self-interest is similarly one sided. Remember how much Republicans invested in realigning the destroying Social Security? Imagine if they had an issue that would realign the country in their favor and instead of huge majorities violently hating it, most Americans strongly supported what they wanted to do. Republican strategists would give two of their first three kids for a shot at an issue with this much going for it....

I hear that Obama supports the public option. That would mean more if it felt even a little more urgent than his idea that we should have a college football playoff series.

Belaboring the obvious, people who care about what they’re doing normally enter negotiations with some firm goal in mind. Most would agree that it is moronic to make negotiating itself the point.

Many others, including Steve have noted that if a major and effective health financing reform bill passed with either a pathway to de facto single payer for baseline care or at least a strong public option, major fundraising avenues will be closed off to some of the current veto points in the Senate and the House. I think that is part of the problem with the Democrats.

However, I would like to get a little more cynical for a moment. What if healthcare reform is to Democrats what abortion and anti-feminism is to Republicans in that both are seem by significant portions of their respective bases as high salience issues that are best served by never fully addressing? Gotta keep the activists in line and ready to donate and phone bank for two more incremental steps in the 'right' direction instead of attempting to systemically change the constraints of power and the political process.

Tim is right that an effective public plan option would be a system changer that would effectively tilt the political playing field to Democrats for at least a generation or two in much the same way that Social Security and Medicare are high salience, high effectiveness boundary conditions for Democrats to lean on. However the Democrats who would benefit from these changes are not neccessarily the Democrats who are currently in power or more importantly, currently occupying critical blocking positions. So reform that can shave off several points of GDP on health expenditures, improve coverage and re-align US politics is not a winning solution for the key set of stakeholders; instead their winning solution is to do just enough to avoid overwhelming political costs and pressure.

The Best Democracy Money Can Buy

Commentary By Ron Beasley

So how is it that 76% of the citizens of the US support a public health plan but it may not have the votes in congress?  It's simple really.  When we vote we elect people who take their orders from a few wealthy oligarchs who set policy and make the decisions. The people with the most money can but the most lawmakers.  Jim Hightower explains:

Pockets of Influence in Washington

What do shoplifters and members of Congress have in common? Tailor-made clothing.

Like a shoplifter's long coat, the suits of many lawmakers come with an astonishing array of inside pockets that hold surprising volumes of loot. We already know about various conduits that politicians have crafted to funnel cash into their election campaigns, but USA Today recently reported that our congressional stalwarts have also created a series of less-obvious pockets for stashing special-interest influence money.

[....]

Take the "foundation pocket." Rep. Joe Barton, a Texas Republican, has sewn one of these into his suit. His Barton Family Foundation has become a handy place for favor-seeking corporate interests to stash cash and earn Joe's gratitude. For example, Exelon, the giant nuclear-powered electric company, has deposited $75,000 in the foundation - money it could not legally give directly to Barton's campaign fund. Did I mention that Joe is the top Republican on the house energy committee and that he often carries legislative water for the nuclear industry?

Still, Barton sees no ethical lapse in such smelly transactions, cleverly claiming, "The money doesn't go to me." Too clever by half. The Exelon donation came only because the congressman personally wrote to the CEO to solicit it, the check is made out to a foundation bearing the congressman's very own name, and he controls the dispersal of the funds. Indeed, thanks to his corporate donors, Barton's foundation is able to give highly publicized grants to nonprofit groups in his district, thus scoring major political points for Joe.

Then there's the "institute pocket" stitched into the garments of a bipartisan collection of lawmakers.

One is Ted Kennedy, the Democratic icon who is presently setting up an Institute for the United States Senate in Boston. It will be named for - guess who? - him. Amgen, the huge drug corporation, was so moved by the civic nature of the institute that it ponied up $5 million to help fund it.

Please be assured, however, that Kennedy's prominent role in the current legislative fight to rein in drug company gouging had nothing whatsoever to do with the corporation's decision to donate so generously. As an Amgen spokeswoman explained, the $5 million merely reflects the drug maker's interest in helping "young people to become engaged in public service and public policy." 

That's why even though the political party in charge may change things don't change that much.  Without serious campaign reform the oligarchs will continue to rule and a government buy the people and for the people will remain a memory and a dream.

UPDATE

Ali Frick at Think Progress points out that the corporate media is in the attack mode:

Major Media Headlines Pretend That Latest Polls Show Obama’s Policies Are Unpopular

Today, two new national polls were released, one by the New York Times and CBS, the other by the Wall Street Journal and NBC. News headlines quickly settled on a theme: The polls showed that President Obama’s policies were suddenly unpopular:

“Sticker Shock — Obama still popular; his policies, not so much” [ABC's The Note]

“Polls find rising concern with Obama on key issues” [Reuters]

“Polls Show Declining Support For Obama Decisions” [U.S. News & World Report's Political Bulletin]

“Obama’s popularity: Problems testing it” [Chicago Tribune's The Swamp]

“Is ‘Smooth Sailing’ Over for Obama?” [Washington Post]

The headlines have little to no relation to the actual data in the polls, both of which found broad approval for Obama’s foreign policy and economic agendas.

Health Care Reform - No Bill is Better Than a Bad One

Commentary By Ron Beasley

I have thought all along that no health reform would be better than watered down reform that really doesn't fix anything.  The minimum requirement would be a strong public option.  It appears that the House Progressive Caucus agrees.  Representative Lynn Woolsey spells out what it will take to get the 80 votes of the Caucus in a post over at The Huffington Post - in short a "robust public option."

In an interview with Ezra Klein Woolsey explains where the caucus has drawn the line.

The Progressive Caucus would prefer a single-payer system -- 99.9 percent of the 80 members have said they would vote for a single-payer system before anything else. Therefore you have to know what we're looking for, bottom line, is a robust public option that could get us to single payer in the future.

What that means is a public option that's equal to anything anyone else is offering and gets the same level of support as the insurance options and that allows every American to choose that public option if they prefer it.

So what we have shaping up is a battle between the blue dogs and the progressives.

The theory in health-care reform has been, thus far, that Democrats need to worry about votes on their right flank. But California Rep. Lynn Woolsey, chair of the 80-member House Progressive Caucus, has been arguing the opposite: that Democrats need to worry about their left flank. The majority of her caucus, she says, will vote against a bill that doesn't include a robust public option. That's not been their approach to legislation in the past. But as ardent single-payer supporters, they feel they've compromised enough.

A majority of Americans want major reform.  The horror stories about socialized medicine are not sticking this time in part because those horrors are what many are experiencing with the private plans.  The pressure to do something will be even greater before the 2010 elections so there is no need to accept bad reform this year.  The blue dogs and even the Republicans will be feeling the heat next year.

Let them know you support them and appreciate their efforts.

 

Unwinding the leverage age

Commentary By Ron Beasley

David Brooks has an unlikely column today.  It's unlikely because he actually gets a lot of stuff right but when it comes to solutions he becomes the David Brooks we all know and love and gets it wrong. But first where he gets it right:

For about a generation, the U.S. surfed on a growing wave of debt. The ratio of debt-to-personal-disposable income was 55 percent in 1960. Since then, it has more than doubled, reaching 133 percent in 2007. Total credit market debt — throwing in corporate, financial and other borrowing — has risen apace, surging from 143 percent of G.D.P. in 1951 to 350 percent of G.D.P. last year.

Charts that mark these trends are truly horrifying. There is a steady level of debt through most of the 20th century, until the mid-1980s. Then there is a steep accelerating rise to today’s epic levels.

This rise in debt fueled a consumption binge. Consumption as a share of G.D.P. stood at around 62 percent in the mid-1960s, and rose to about 73 percent by 2008. The baby boomers enjoyed an incredible spending binge. Meanwhile the Chinese, Japanese and European economies became reliant on the overextended U.S. consumer. It couldn't’t last.

The leverage wave crashed last fall. Facing the possibility of systemic collapse, the government stepped in and replaced private borrowing with public borrowing. The Federal Reserve printed money at incredible rates, and federal spending ballooned. In 2007, the federal deficit was 1.2 percent of G.D.P. Two years later, it’s at 13 percent.

Of course what he fails to mention is that generation of debt began with the administration of St. Ronnie of Reagan and his destruction of the middle class.  The consumer dependent economy still required that people buy stuff but the middle class had less money.  The solution - lots of easy credit.  We had economic downturns  followed by smoke and mirrors recoveries fueled by debt.  The straw that broke the camels back was the Greenspan/Bush credit binge prior to the 2004 election that made it look like there was a recovery when there wasn't any.  It worked and Bush was reelected in 2004.

Brooks still on target here:

Americans aren’t borrowing the way they used to, but the accumulated debt is still there. Over the next many years, Americans will have to save more and borrow less. The American economy will have to transition from an economy based on consumption and imports to an economy with a greater balance of business investment and production. A country that has become accustomed to reasonably fast growth and frothy affluence will probably have to adjust to slower growth and less retail fizz.

The economic challenges will be hard. Reuven Glick and Kevin J. Lansing of the San Francisco Fed estimate that Americans will have to increase their household savings rate from 4 percent to 10 percent by 2018 to restore balance. That, they write, will produce “a near-term drag on overall economic activity.” Meanwhile, capital and labor will have to flow from sectors that depend on discretionary consumption to sectors based on research and investment.

But it’s the political challenges that will be most hellacious. Basically, everything that a politician might do to make voters happier in the near term will have horrible long-term consequences. Stimulate the economy too much now and you wind up with ruinous inflation down the road. Preserve failing companies and you wind up with Japanese stagnation. Cushion the decline in living standards with easy money now and you just move from a housing bubble to a commodities bubble.

The politicians will indeed be the problem.  How many politicians really think that a message of less is better will get them reelected.  There really aren't enough of us old hippies who know that things don't make you happier to elect anyone.  Of course telling really rich people they need to pay more taxes will be a problem as well.  That will require the admission that supply side economics was a fraud.

Here is where I think Brooks is wrong.

Third, they will have to refrain from doing anything that might further damage America’s fiscal position, which is extremely fragile. That means not passing a health care reform package unless it is really and truly paid for. That means forming a Social Security commission next year to tackle that entitlement problem.

Fourth, the political class is going to attempt the politically unthinkable. The U.S. is going to have to move toward a consumption tax, to discourage spending and encourage savings. There’s also a crying need for tax reform. As economist Douglas Holtz-Eakin points out, the tax code is rife with provisions that encourage leverage and discourage investment. The government will have to spend less on transfer payments and more on investments in science and infrastructure.

We don't need a consumption tax. If people don't have the disposable income and can't borrow they won't consume.  The main problem with Social Security for several years will be can the government pay back the money it has borrowed from the trust fund. Transfer payments to the states will continue to be necessary because the Grover Norquist Yacht Club Republicans have passed draconian state laws that make it impossible for the states to fund necessary services.  So the tax code should return to pre-Reagan percentages.  The little piggies will scream from their yachts and threaten to leave the country.  Don't let the door hit you in the ass on the way out.   

Contractor Failings Left U.S. Kabul Embassy Safety Gap

By Steve Hynd

There's a hearing of the Senate Subcommittee on Contracting Oversight today, the subject of which is a $189 million contract to provide security services at the U.S. Embassy in Kabul awarded by the State Dept to ArmorGroup North America, Inc. (“AGNA”), a subsidiary of the British-owned ArmorGroup International in 2007. AGNA were supposed to provide a highly trained security force for the embassy.

But that's not how it turned out, according to the documents lodged with the hearing. The subcommittee staff summary says:

The Kabul embassy contract can be viewed as a case study of how mismanagement and lack of oversight can result in poor performance. The record before the Subcommittee shows that AGNA’s performance on the Kabul embassy contract has been deficient since the start of the contract in July 2007. The result is that, at times, the security of the U.S. Embassy in Kabul may have been placed at risk.

The State Department denies that the embassy was ever in actual danger, but does say security was poor enough to have "negatively impacted...performance of guard services in a high-threat environment" - a distinction that sounds like no distinction at all. State doesn't deny that there were serious security staff shortages, with up to 18 security guards absent from their posts at a time due to what AGNA admits was “supervisory personnel negligence.” Nor does it deny lack of profficiency in English or poor traing among the guards. But it says matters have improved after 2 years of the contract:

In recent months, AGNA has made significant improvements to its performance. With respect to some of the deficiencies, however, the contractor is now in compliance only because the State Department changed the contract’s requirements. According to the State Department, the contractor has only three remaining deficiencies: the lack of a secondary armorer; inadequate English language proficieny among the guard force; and the lack of one variet of traing weapon for the guard force.

But that's not all the story. The documents also reveal that in January, 2008, AGNI informed the State Dept that it was conducting an internal investigation into:

allegations that the company improperly procured counterfeit goods for the embassy guard force. Documents received by the Subcommittee indicate that boot, swinter jackets,and gloves purchased by AGNA at a cost of more than $130,000 were in fact counterfeit.

AGNA’s investigation also revealed that the AGNA logistics manager had acquired the counterfeit goods from a company owned and managed by his wife. In total, the logistics manager purchased a total of $380,000 worth of equipment from his wife’s company. According to the AGNA program manager in Kabul, the State Department was aware of this arrangement.

On January 24, 2008, the State Department requested that the logistics manager be removed from the contract. In early February 2008, AGNA informed the State Department that the logistics manager had resigned. On February 27, 2008, however, based on information received from State Department officials in Kabul, the State Department learned that the logistics manager was in fact still working on the contract in Kabul. One week later, AGNA told the State Department that the logistics manager was no longer working for AGNA.

The hearing began a short time ago and transcripts should be available soon. But it beggars belief that AGNA has kept its contract so long under such circumstances, the only penalty being a deduction of $2.4 million from the contract value. And of course no story of contractor incompetence in servicing America's occupations would be complete without a measure of sordid crime or corruption. I'm reminded forcibly of McClatchy's Jonathan Landy, who stated unequivocally back in January that he believes U.S. officials -- not U.S. contractors, but officials -- are complicit and involved in the corruption.

More on this later.

The Dreaded Canadian Option

By BJ Bjornson

The discussion over healthcare is continuing to heat up, with another editorial from the Wall Street Journal making the rounds today declaring how horrifying the Canadian system is. A system they then accuse Obama of pursuing for Americans. As with most such, it mixes a few facts with a great deal of spin and misinformation. Ron already posted on some of the myths the insurance industry and its allies are trying to spread regarding the Canadian system, though to some degree the whole issue is academic, as it seems clear that whatever comes from the manoeuvring on Capitol Hill won’t be the single-payer system Canada has.

In any case, I thought it would be a good opportunity to post this article written almost a month ago by a CBC journalist living in the US. As MacDonald says, we do rather like our system, and enjoy lording it over you Yanks when we get the chance. As such, it is difficult not to leap to its defence when we see it twisted for propaganda purposes, but as he also notes, we should be willing to note that the twisting comes from both sides.

There is rationing and long wait times for elective surgeries. Granted, it is the health care professionals who make those decisions rather than the government, but the decision over who gets faster treatment is still being made, and there is no way for you to buy your way into the front of the line outside of leaving the country and getting the service elsewhere. For those facing a pain-filled wait for operations on their joints, Canadian healthcare is clearly no picnic.

To balance that, there are a few things you don’t have to deal with north of the border.

You won't have your health insurance cancelled on an insurer's whim, which happens here all the time, or have it denied if you or some relative was once sick. "Pre-existing conditions" don't matter at all in Canada.

You won't have some bean-counting weasel in your health group or your insurance plan conspiring to deprive you of the treatment to which you are entitled.

You won't lose your health care if you lose your job. You won't have ever-rising "co-pays" and deductibles and fees; and you won't wind up hounded by a collection agent who calls at all hours to inform you that your credit could be wrecked for life if you continue to dispute a charge on your medical bill.

Also, if you spend some time in hospital, you won't end up with months of incomprehensible invoices from everyone who provided any service, from the guy who operated the EKG machine to the guy who read the test results to the woman who administered the anaesthetic to the lab that did the blood work.

The difference between our systems is pretty simple really.

If you have money or gold-plated coverage, you're probably better off here the way things are now.

If you can't afford insurance or you're a working stiff struggling to pay your premiums, you're probably better off in Canada.

“If you have money or gold-plated coverage”, both of which I assume describes pretty much everybody who happens to be debating the health care initiatives put forward in Congress. Little wonder things have a hard time getting anywhere.