Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Month: November 2009 Page 3 of 4

Oh hey, look at that: Republicans ahead on Generic ballot

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On November 12, 2009

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When I wrote that Rasmussen found Republicans more trusted than Dems, the immediate response was “you can’t trust Rasmussen”, ignoring the fact that even Rasmussen hadn’t found such results for years.  In other words, they were a leading indicator.

Now this:

Republicans have moved ahead of Democrats by 48% to 44% among registered voters in the latest update on Gallup’s generic congressional ballot for the 2010 House elections, after trailing by six points in July and two points last month.

The Nov. 5-8 update comes just after Republican victories in the New Jersey and Virginia gubernatorial elections, which saw Republicans replace Democrats as governors of those states.

As was the case in last Tuesday’s gubernatorial elections, independents are helping the Republicans’ cause. In the latest poll, independent registered voters favor the Republican candidate by 52% to 30%

What a surprise.

Not.

Meanwhile, we have further stupidity from the “centrists”:

Seven members of the Senate Budget Committee threatened during a Tuesday hearing to withhold their support for critical legislation to raise the debt ceiling if the bill calling for the creation of a bipartisan fiscal reform commission were not attached. Six others had previously made such threats, bringing the total to 13 senators drawing a hard line on the  committee legislation.

The panel, which has been championed by Conrad and ranking member Judd Gregg (R-N.H), would be tasked with stemming the unsustainable rise in debt.

Among its chief responsibilities would be closing the gap between tax revenue coming in and the larger cost of paying for Social Security, Medicare and Medicaid benefits. The Government Accountability Office recently reported the gap is on pace to reach an “unsustainable” $63 trillion in 2083.

The panel would also have the power to craft legislation that would change the tax code and set limits on government spending.

The legislation would then be subject to an up-or-down vote; it could not be amended.

Brilliant.  Now, the purpose of this committee would be to provide cover to slash Medicare and Social Security.  Imagine the reaction if, under a Democratic President, with a Democratic majority Congress, Medicare and Social Security got slashed.  Who do you think would get the blame?

A number of Democratic Senators are strongly backing this.  The hypothesis that Democrats want to be back in the minority is proving to have great predictive power.

A bill stripping abortion rights from women couldn’t pass in the Republican Congress.  It may well in a Democratic Congress.  Likewise a bill allowing Social Security and Medicare to be gutted couldn’t pass under Bush.  Will it pass under Obama?

In Flanders Fields

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On November 11, 2009

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In Flanders fields the poppies blow
Between the crosses, row on row,
That mark our place; and in the sky
The larks, still bravely singing, fly
Scarce heard amid the guns below.

We are the dead. Short days ago
We lived, felt dawn, saw sunset glow,
Loved, and were loved, and now we lie
In Flanders fields.

Take up our quarrel with the foe:
To you from failing hands we throw
The torch; be yours to hold it high.
If ye break faith with us who die
We shall not sleep, though poppies grow
In Flanders fields.

Lt.-Col. John McCrae

Dodd Fumbles Reform

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On November 10, 2009

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Dodd’s proposal for financial sector reform is out. It amounts to increasing discolosure, making banks pay for a bailout fund, adding another regulator, and giving more power to existing regulators.

For example:

Creates an Office of Credit Ratings at the SEC, which will be tasked with enforcing higher levels of disclosure, and will maintain a right to deregister an agency.

Disclosure is not the problem with credit agencies, and higher levels of disclosure will not solve the problem.  As long as the model is that credit agencies get paid by those whose debt they rate, they will not be fixed.

Disclosure in general is not the issue.  And anyone who thinks that either

a) new regulatory agencies will solve anything

or

b) that the old regulatory agencies, if given more power, will use it sensibly

is insane, or on the payroll.  The old regulators had enough power (especially the Fed).  The Fed could have stopped the credit bubble any time it wanted.  The FDIC could have shut down any bank it wanted.  Etc…

What is needed is to reinstate Glass-Steagall, or something close to it. Keep insurance, retail banking, investment banking and brokerage businesses separated from each other. Any company which is too big to fail should be broke up the second it gets that big.  A proposal to do anything else is a joke.

Next.

(Sean-Paul Kelley’s thoughts on the subject)

Health Care Reform Update: Who’s Selling Out and Why

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On November 9, 2009

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It’s time to evaluate where health care reform stands at this point.

Guaranteed Issue: The best thing about the bill is unquestionably the fact that insurers have to issue policies to anyone who can pay.  No one can be denied coverage, no matter what pre-existing conditions they have.  This is a big deal. While it can help people of any age, it is most important to older people, who are more likely to have pre-existing conditions.  This also helps people who are stuck with very expensive insurance because they have pre-existing conditions and if they cancel their insurance wouldn’t be able to get new insurance.

Individual Mandates and cost sharing: An individual mandate forces people to buy insurance whether they want to or not. Insurance works better when everyone is covered and in the same risk pool.  It also shares costs throughout the population.  Individual mandates seem unfair, but they are generally instituted as part of changes to the system which reduce overall costs significantly. For example, relatively speaking, Canadian GDP/capita costs were reduced by one third  compared to what they would have risen to otherwise during the ten years after changing from a US style system to single payer.

If there is no cost reduction due to systematic changes in the system, however, all that an individual mandate does is share costs through the entire population and direct profits to private insurers and medical providers of various kinds by giving them a captive consumer based, forced by government mandate to buy their services.

People who don’t have insurance right now are primarily younger people or those who feel they can’t afford it.  What individual mandates will do, then, is subsidize older people’s insurance costs and the price of guaranteed issue, which is very costly since it forces insurers to cover people who are very likely to get sick.  The people who subsidize this are, generally speaking younger and poorer.

If subsidies were adequate, then in fact, it would be the government subsidizing the costs, through progressive income tax and corporate taxes.  However, since the subsidies in the various bills do not cover the full cost, poorer and younger people will subsidize older people.  Since many of those people didn’t buy insurance because they are right on the edge financially already it means that some of them will go without food, not be able to pay tuition, or lose their homes as a result.  Many people are already on the edge already, this is one more burden for them.

No Robust Public Option: A robust public option is one that is large enough and with enough pricing power  to force down costs, and one which is available to everyone.  At this point, the public option will likely have between 5 to 9 million enrollees (the CBO says 6 million, but we’ll be generous).  As such it will be smaller than most private insurers and will not have pricing power.  If it were linked to Medicare and could use Medicare’s clout, it could reduce costs, but the Medicare +5 amendment, which would have had it paying providers at Medicare rates +5% was defeated.

The Congressional Budget Office has stated that the public option insurance plan premiums will be higher than equicalent private plans. This is likely because of denial of care issues, insurer cherry-picking and lack of clout mean it won’t be able keep reimbursement rates low relative to private insurers who have more customers and thus more pricing clout with doctors, hospitals and other providers.  If the public option costs more than equivalent private plans, it goes without saying that it will not reduce costs.

Reduces Practical Access to Abortion: The Stupak amendment, passed Saturday evening, makes it illegal for any plan offered on the exchanges to finance abortions.  Any woman who wants abortion access, after being forced to buy insurance that doesn’t include it, will have to buy it elsewhere.  The practical result of this is a reduction in access to abortions. This, of course, primarily affects young, childbearing age women though their family members, boyfriends and so on will likewise be effected.

The Bottom Line: Who’s Getting What, and Who’s Paying

This bill does not contain a robust public option which will contain costs.  It will give guaranteed issue and force cost sharing through an individual mandate.  Older people will disproportionately benefit, and the people who will disproportionately pay are younger poorer people, and especially younger women, the poorer ones of whom will lose practical access to abortions.

For a long time I’ve read that the bright red line for many progressives was a robust public option.   None of the bills, including the House bill, have a robust public option.  In addition, the Stupak amendment removes practical access to abortions for many women.

It appears that the bright red line was not a robust public option.  The bright red line was, and is, guaranteed issue.  As long as a bill has guaranteed issue (in exchange for which insurance companies insist on an indvidual mandate, aka, cost sharing and forced customers) any other sacrifice is acceptable.

This health care “reform”, if passed in this form or worse, which it will be if it is passed at all, will blow apart eventually, because it will not contain costs or ‘bend the cost curve” and the US economy simply cannot indefinitely afford health care costs wich rise faster than inflation or wages.  But for as long as it lasts, it will help some people at the cost of other, generally younger and poorer people.

If progressives really meant that a robust public option was their minimum requirement, when Medicare +5 failed they would have gone into opposition.  They didn’t, therefore it wasn’t their minimum requirement.  It remains to be seen if enough progressives really will vote against a final bill which still contains the Stupak amendment.  Given progressives failure to live up to their threats to pull support if no robust public option was in the bill, I am forced to suspect that if Stupak is in the final bill, the final bill will pass.

The last couple weeks have been very revealing as to what various people, including politicians, progressive bloggers and activists, are really willing to fight for, and what their bottom line really is.

I would suggest that if progressives ever want their threats to be taken seriously by anyone again they go into opposition against this bill until such a time as it both has a robust public option and the Stupak amendment is out.  Failure to do so will show that their threats were always hollow, that they are willing to sell out child-bearing age women, and that they prioritize the interests of older people over younger and poorer people.

In negotiation against a good negotiator, you get the minimum you are willing to settle for. Progressives have shown that their minimum is not a robust public option. It may not even be practical abortion access.  They will not get a robust public option if they will not oppose the bill over it, and if they won’t oppose the final bill over the Stupak amendment, that too will most likely remain.

Obama and the Democratic leadership’s bottom line is they must pass some bill called “health care reform”.  Unless you threaten to take away their bottom line, they will take away anything that isn’t progressives bottom line – and that includes practical abortion access, and a robust public option.

DCBlogger Needs Help

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On November 7, 2009

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DCBlogger had her laptop stolen.  She’s been a good friend to this blog, and needs some help to replace it.  If you can afford it and it’s something you’d like to do, I know she’d appreciate the help.

Destroying the Democratic Majority

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On November 7, 2009

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By now you’ve probably heard about the Stupack amendment, which would make it illegal for any insurance offered on the exchanges set up by the health care reform bill to cover abortion services.  It is being allowed to the floor by the leadership, and indications are that there may be enough votes for it to pass.  If it were to remain in the final bill, it would strip practical access to abortion from millions of women, a number which would increase when the exchanges open to businesses.

Recently we have also seen the proposal to tie prices for procedures to Medicare +5% fail.  The Congressional Budget Office (CBO) has reported that the public option will likely only get 6 million enrollees and will cost more than private offerings because it will get more sick people than private plans since it won’t anti-select, has no auto-enrollment, and won’t have any scale advantages for bargaining since it will have so few people and not be linked to Medicare.

Meanwhile the bill itself will force people to buy insurance, provides inadequate subsidies, and falls hardest on the middle class and young people—forcing them to spend a huge chunk of their discretionary income on average, and doubtless pushing many families into bankruptcy (plenty are on the verge, it is impossible to imagine that this won’t push them over the edge).

And yet it is still supported by the same people who supported it all along.  Apparently nothing can happen which would cause them not to support it.

This is the sort of “deal at any cost” thinking which bloggers used to decry.  I find it amazing.  Absolutely amazing.  For any provision which is called “public option”, no matter how weak, folks are apparently willing to swallow hard and get over any number of deficiencies.

At this point, I’m wondering if the Democrats will even maintain control of the House in 2010.  It’s looking like a close run thing.  The jobs recovery will probably start in Spring, but it’s going to be slow, and most people who lost jobs are not going to find new ones (the recovery will probably not even keep up with population gains).  The legislative record of Congress and Obama will stink.  And they’re willing to pass a bill which falls hardest on the young (who can’t afford the cost of buying insurance) and on child-bearing age women, two extremely strong Democratic voting cohorts.  This behavior seems designed to depress turnout in 2010 and 2012.

I can only conclude that both Democratic politicians and many progressive bloggers want to be back in the opposition, since they keep being willing to swallow bad policy.  Policy so bad, in fact, that it seems designed to hurt Democratic electoral prospects.  Forget doing the right thing morally, I don’t expect that of Democratic politicians.  But apparently they are also incapable of acting in a way designed to make sure they keep their majority.

Remarkable.

Reality is Liberal And Rewards Liberal Policy

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On November 4, 2009

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In comments, tjxfh wrote (about Obama failing to do what is necessary to save America):

“I think it is likely more complex than that and involves his (Obama’s) overall strategy, which has to balance governing with keeping Democrats in power in the coming elections in 201o and 2012. A recent Gallup poll on ideological preference has 40% of Americans identifying as conservative, 20% as liberal, and 36% as moderate.”

Americans may self identify however they want, but on more key issues than not, whatever their delusional self identification may be, they agree with progressive policy positions more than they do with conservative ones.

More to the point, if Obama does not do effective policy, which is to say liberal policy, because reality is much closer to how liberals describe it than how “conservatives” describe it, his policies will be ineffective. No one is going to care whether he followed moderate, conservative or liberal policies if they’re unemployed or poorer than they were when he took office.

Conversely, if he followed actual liberal policies, and they worked, and everyone was prosperous, he’d get reelected. Especially since no matter what he does, he’s going to be smeared as the biggest liberal since Carter (who, of course, was not very liberal.)

I simply don’t agree with the stance that in order to be reelected one has to engage in policy that won’t work. Quite the contrary, the only reason Obama is likely to be reelected in the face of his massive incompetence (and he is massively incompetent, he has underperformed on every significant major policy he has introduced) is because the Republicans are in complete disarray.  It’s a race to the bottom, and the Republicans are even more incompetent than Obama and the Democrats.

Oh yay.

And, as noted earlier, this sort of thing, when even liberals like tjxfh think that doing the right thing is politically impossible, is why the US is going to take a big dirt nap.

Reality is liberal. “Conservative” policies do not work. If tjxfh is right (I don’t think he is, but if he is) then the US is screwed, blued and tattooed, because what Obama is doing will not work (yes, there will be a short term bounce, as I predicted last year, but so what, Bush had bounces too). Obama’s policies lead directly to the next crisis.  They cause it.

So real leadership would be do the right things, which Americans agree with (a majority for single payer, even), turn the economy around, and find out whether if the economy is good  and everyone has health care and there isn’t a bleeding ulcer war in Afghanistan, you get reelected. And if you don’t, well, at least you did the right thing. But I think it’s a better bet to do what actually works (ie. liberalism) and expect reelection, than to deliberately engage in policies that your own policy advisers think won’t work (read the Stimulus report put out by Romer and co. Right there, in black and white, they said that the stimulus wouldn’t lead to Americans having as many jobs after this cycle as before. Right in their own, overly optimistic scenario. They know their crap won’t work, just as the CBO just told them that their junky “public option” won’t control costs worth a damn.)

The best lack all conviction, while the worst are full of passionate intensity.

– Yeats

Or, rather, the best believe it’s all pointless and nothing can be done.  America, where even liberals believe that liberalism isn’t practical.

An argument I take more seriously than “Americans are conservatives, and a majority of them believe in single payer and a supermajority want a robust public option” is this:

Finally, he is constrained by the realities of campaign finance. If he doesn’t throw some juicy bones to the people that fund campaigns, as well as protect them from regulation to a great degree, they will take their money elsewhere. They know that it is impossible to win elections in the US without them, and the Dems do too.

Now, this, I think, has a lot of truth to it.  But not totally.  It is entirely possible to break the financial industry, without any help from Congress.  The necessary powers are entirely within the puview of the president and the Federal Reserve.  Bernanke may be theoretically independent, but practically speaking he is under Obama’s thumb.  (If Obama changes his mind and asks for him to be replaced, Congress is not going to say no.)  Withdraw the special funding facilities, do real audits, instruct the Justice department to go after fraud no holds barred (it was all fraud, it won’t be hard to find) and you can break them.  Yes, it will be hard, not it is not impossible.  And no, it will not destroy the economy, not if you engage in real liberal policies.  The banks aren’t lending anyway.  Take them over, and then use them to lend, or just have the Federal Reserve lend.

Of course, all of this is fantasy-land stuff.  It won’t happen, because Obama is not a progressive, is not a liberal and does not have the balls necessary to take on monied interests in this fashion.

But, more to the point, if you agree with tjxfh (and I encourage readers to follow the link and read the entire comment) then you should leave the US.  Because what tjxfh has said is that the US can’t be saved.  Political realities make it impossible for the US government to do what needs to be done.

And while I disagree with tjxfh on the US population as a whole (I think what ideology they self identify with matters less than the specific policies they agree or disagree with), I do agree with him that the monied elites will do everything they can to stop any real reform.  While they certainly could be broken, Obama either does not believe he has the ability to do so, or if he does, is not willing to accept the consequences, most likely because, as a conservative democrat, he does not understand how to manage the consequences, because doing so requires liberal policy measures he simply neither believes in, nor understands.

So, if the US, for whatever reason, politically can’t do what it takes, then the US will go down.  There will be another, worse crisis, and that one will lead to a USSR style collapse.

But, and this is the most important thing.  Who the elites are at any given point is not static. It can change.  And if there is a collapse, there’s a good chance it will change.

Doing a Stimulus Right and Wrong

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On November 2, 2009

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Jobs lost and gained in construction over the last year

Jobs lost and gained in construction over the last year

Chris over at Construction Software Adice dug into the stimulus numbers to figure out how many construction jobs it has created or saved. The graph to the left shows jobs lost vs. jobs saved and gained, from Sept of last year to this September.

Less than overwhelming.

Meanwhile, the news about last week’s GDP numbers was that a big chunk of the 3.5% gain came from “motor vehicles”, which most economists are reading as meaning that the cash for clunkers program, in which the government gave credits for purchasing a new relatively fuel efficient car if you turned in an older car, was wildly succesful.

The Wall Street Journal bewails that the real cost is more than the 3 billion sticker price, which is odd.  I mean, the government has spent trillions during the financial crisis, and the stimulus bill itself was 787 billion dollars.  In that context, 3 billion is peanuts.

Think about that for a moment.  3 billion for the cash for clunkers produced a huge chunk of GDP growth.  It probably wasn’t the full 1.7%, but it was significant.  So far, about 160 billion dollars of the stimulus bill has been spent (bear in mind, about 37% of the bill was tax cuts and not spending).

What this should twig you to is that most of the stimulus was done in incredibly inefficient fashion.  If 3 billion could be responsible for that much GDP growth, it means the the remaining 157 billion wasn’t pulling its weight.

A proper stimulus should do a few things:

  • It should increase spending in the economy or stop a spending decline.
  • It should fix fundamental economic problems at the same time.
  • It should be something which businesses can plan on going forward.

Cash for clunkers met two of the three criteria.  It increased spending in the economy and even pried loose money that wouldn’t have been spent otherwise.  Consumers received a credit, sure, but they also had to pony up some of their own money.

It also worked on a fundamental economic problem in the economy: it increased fuel efficiency and decreased pollution from cars.

What it didn’t do is create any sort of long term demand which business could count on going forward.  It happened, it’s done.  Auto companies can’t ramp up production expecting that demand to continue, auto dealers can’t order more cars expecting that demand to continue, and auto suppliers can’t rehire employees expecting this demand to continue.

But for 3 billion for so much effect, why not extend it, and gaurantee funding for, say, 3 years?  36 billion for a proven effective stimulus is a good deal.

Let’s step back to the construction workers we started this piece with.  What should the government have done to really help them?  To really help the construction industry?  The current real help, forget direct spending, is a tax credit for those buying new houses.   That may seem like it meets the criteria of being ongoing and creating new spending, but in fact it is only ongoing.

In fact, high housing prices are a problem in the US economy.  They need to be lower, because right now they reduce job mobility (if you can’t sell your house, you can’t move), they lock younger people out of the housing market (houses are still too expensive even with the credit), they make the US internationally uncompetitive because Americans have to be paid wages capable of supporting inflated housing prices, and they depress general demand because high mortgage payments are money not being spent on goods other than housing.  Trying to make housing prices artificially high is as stupid now as  it was Greenspan was doing it.

Instead, why not give credits for refitting buildings for energy efficiency, active and passive solar?  Say 10K for a single family 3 bedroom home with scaling credits for larger and smaller homes, and credits for office buildings, factories and so on?  Immediately you have a ton of work for construction workers, if the credits are expected to go on for years businesses can plan for them, and that means manufacturing all the necessary materials including solar panels, and they reduce the amount of energy the US needs, which means it’s solving a fundamental problem in the economy rather than making it worse.

The scandal of the stimulus bill isn’t how much it cost.  It’s how relatively inefficient it was, and how little it looked forward and attempted to fix fundamental problems in the US economy.  Contra the WSJ, cash for clunkers was a good and efficient program.  Not perfect, but as stimulus goes, effective.  Let’s learn from it, and do even better.

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