Matt Yglesias

House Republicans Unanimously Vote “No” On Obama Budget

Needless to say, Barack Obama doesn’t need the votes of any House Republicans to get his budget passed, but the unanimity of the House GOP in rejecting his agenda remains striking. The vast majority of House Republicans, of course, represent conservative districts so it’s no real surprise to see them acting like this. But there still are quite a few House Republicans who represent districts Obama won. Some of them, like Joseph Cao and Mike Castle represent districts that Obama won handily. When you add into the mix the fact that John Boehner really has no inducements at his disposal to offer to members, it’s a real testament to the success of the Club for Growth and others at inspiring fear of primaries into every single Republican member.

As Ezra Klein says, this tends to make you doubt that many Republicans are actually going to cooperate on health care.

Rose DeLauro Says Budget Conference Won’t Tinker With Social Security

I noted late last week that there was some chance that the conference committee appointed for the 2010 budget was going to attempt some funny business with Social Security. After all, there are indications that Senate Budget Committee Chairman Kent Conrad extracted a promise to do something with Social Security in exchange for agreeing to reconciliation for health care. And as one of the House conferees they picked Rep. Allen Boyd (D-FL), who was the only Democrat to support Bush’s Social Security privatization plan back in 2005.

Amanda Terkel spoke to Rep. Rosa DeLauro, one of the other conferees, yesterday and she said in reply:

DELAURO: As far as my understanding is concerned, is that there is not going to be any reference to Social Security. Social Security will be a discussion that will come in our overall health care debate, but my understanding is that at the moment, it is not part of the budget conference.

That’s fairly reassuring, though I don’t really understand why Social Security is part of our “overall health care debate.” To look at it generously, if congress were to succeed in putting health care on some kind of sustainable trajectory, it would then be time to talk about how to do you pay for that sustainable trajectory, and perhaps Social Security should be part of that discussion. Thus far, though, I still think it’s far from clear whether or not we’re going to get a sufficiently serious health reform at all and I don’t think that dragging Social Security into the conversation improves those odds.

If You Want Health Reform, Reconciliation Must Be On the Table

The debate over the use of the “budget reconciliation” process has taken on a weirdly circular quality. On the one hand, folks say that going through reconciliation will wreck the chances of Republican cooperation. On the other hand, reconciliation proponents maintain that if Republicans would do more cooperating there’d be no need for talk of reconciliation. Meanwhile, the key moderate Democrats who hold the balance of power in the Senate have shown a tendency to twist in the wind on this.

But with the Senate GOP acting yesterday to block a vote on Kathleen Sebelius’ confirmation on the grounds that she’s pro-choice, it’s time for a little Real Talk. There’s no indication that Republicans have any serious desire to cooperate on a serious health care reform bill. Instead, they seem to be interested in using the carrot of cooperation as a way to get Democrats to unilaterally abjure procedural methods and revenue sources that would make reform possible.

Igor Volsky surveys the record:

Of course, if you don’t give, you’re not gonna get and Republicans have shown only limited willingness to cooperate with Democrats on health care reform. Key Republicans voted against the popular SCHIP legislation, eight Republican senators (including health care heavy weights Grassely and Hatch) voted against Gov. Kathleen Sebelius’ nomination to head the Department of Health and Human Service, Republicans misrepresented the intent of health information technology and comparative effectiveness research in the stimulus, encouraged smear groups to lie about CER and health IT, invited Easter special Sally Pipes to testify about health care reform, and have already taken the public option off the table.

Bipartisan outreach is, at times, a necessity. When the same party controls concurrent majorities in both houses of congress and the White House and is discussing an issue that’s eligible for reconciliation treatment, it is not a necessity. It’s a tactical option. But it’s just that—a tactical option, not a first-order concern of substantive policy.

What I worry is that there are a certain number of Democrats who, deep down, just join their Republican colleagues in not wanting to see health care reformed. But they don’t want to say that. So they may first block efforts to prevent the GOP from blocking reform, and then let the GOP block reform, all the while posing as reformers. Keep your eyes open.

What Do Federal Taxes Pay For?

A very nice chart from the Center on Budget and Policy Priorities:

A European made the point to me a few weeks ago that even though the political constituency for the enormous defense budget is huge, the Pentagon (and defense-related programs in the Department of Energy) doesn’t really provide a service people use. If we did something crazy like resolved to limited defense spending to twice the combined budget of Russia and China and reallocated the money to other priorities people would probably feel, on an intuitive level, that they were getting more “bang” for their tax “buck.”

The other related point is that a ton of tax money is going to health care, and a very large proportion of health care spending is waste—either medically useless or counterproductive—and this would look even bigger if we could see implicit tax subsidies.

Consumers and Health Care

Ramesh Ponnuru says that individuals shopping for their own insurance plans on the individual market isn’t as ridiculous as it sounds because “There would probably be various standard packages offered by insurers, resources such as Consumer Reports and word-of-mouth, etc.” Ezra Klein offers a good common sense reply to this, but I think the situation could stand to get a bit more theoretical, since I think what Ponnuru is doing is fundamentally missing what’s good about markets.

Markets produce great levels of consumer satisfaction. And when consumer satisfaction is all we can ask for, then markets are great. What should a necktie or an MP3 player do, other than make the consumer happy? The Soviet Union was a fashion disaster and horribly backwards in terms of entertainment. But with regard to some things, we can make objective measures. Soviet apartment buildings are incredibly ugly, but they stood up. Of course our apartment buildings stand up, too. But sometimes consumer satisfaction is significantly in tension with objective measures. As societies get rich, they seem to converge on a diet that’s incredibly unhealthy. And this is because we have first-order food desires that were highly functional under a radically different set of circumstances. Nowadays, sophisticated Americans spend a lot of time attempting to retrain our first-order desires so that we crave heirloom tomatoes and sensibly sized portions rather than a Monster Thickburger.

But of course when it comes to food, both the objective and the subjective are very important. It would suck to live in some public health dystopia where we have to eat lentils and quinoa every day and talk about how awesome it is.

And when it comes to health insurance, the subjective is really really really unimportant. Whether or not I “want” prostate cancer screening has just about nothing to do with anything. There are tables one could draw about age and other risk factors and the reasonableness of performing such-and-such a test. And this is integral to our understanding of what a medical interaction should be like. Visiting the doctor is not like visiting a car salesman, where he’s working on commission trying to upsell you and you’re trying to be on guard and strike a good bargain. That would be terrible. This is why we make doctors take oaths and so forth. And it’s true, of course, that the doctor-patient falls far short, in practice, of the ideal of a commerce-free trust between a healer and a patient. But this is a problem. As is the commercial nature of the interaction between a health insurance company and a person trying to get medical care. Someone really does need to tell you that certain procedures are unnecessary or unduly speculative. But should that person be a representative of the interests of a profit-maximizing firm? Not really. Which is why we wind up having all these regulations.

It’s true that deregulating the insurance market would make it more “efficient” according to one technical sense of efficiency. It’d be more like the market for cheeseburgers or sneakers. And everyone would, by definition, wind up with the insurance package they want. But it wouldn’t produce good health outcomes, or efficiently allocate dollars toward health-maximizing ends.

Dick Gephardt’s Flip-Flops on Universal Coverage

Dick Gephardt seems happy in his second career as a corporate lobbyist and is now a universal health care skeptic: “Now Mr. Gephardt says universal or near-universal coverage cannot pass this year — and he is urging the White House to defer that goal until it enacts cost-saving reforms in health care delivery.”

Igor Volsky at the Wonk Room has a nice roundup of Gerphardt’s contrary ideas from the 2004 campaign:

— “Howard Dean and the other candidates may think leaving tens of millions of Americans uninsured is acceptable….I think they’re wrong.” [NYT, 01/03/2004]

— Gephardt promised that if he reached the Oval Office he would immediately seek to repeal recent tax cuts. The money would be used to give tax credits to businesses, which would be required to provide health insurance to employees. Pension systems also should be simplified, he said, because too many Americans reach retirement without their finances secure. “Everyone who works will have health care,” Gephardt said.

— “It is immoral to have people without health insurance,” he said, speaking to about 70 people on the lawn of a Manchester home. “This issue is in my heart. It’s in my head. It’s in my soul. I will not rest until I get the people health insurance.” [Chicago Tribune, 07/22/2003]

— “Today in this country there is a great divide, a Grand Canyon between those who have health coverage and those who do not. And for too many, trying to cross from one side to the other is a hopeless pursuit.” [Atlanta Journal-Constitution, 04/24/2003]

— “We have proven our mettle at liberating oppressed peoples. Let us prove our worth at liberating millions of Americans from economic oppression and a life without health care.” [NY Daily News, 04/24/2003]

It’s one thing to say that ambitious, progressive health care reform is just a bad idea. But if it’s something you favor, I think it’s very difficult to make the case that there’s some better time to do it than in the wake of a big progressive electoral sweep. Naturally, a lot of people in the K Street community have suddenly developed an appreciation for incremental change that was lacking back when they wanted giant tax cuts and Social Security privatization, but there’s no reason policymakers should be guided by that kind of caution.

Making a Good Health Care Plan Great For Maine

Steve Benen linked over the weekend to a Bangor Daily News account of an Olympia Snowe health care forum in which the Senator sounded very open to potentially far-reaching reforms:

“We have a totally dysfunctional system now,” she said. While like most Republicans she would prefer to see the private sector collaborate on an effective change, a government-run health care system may be the only way to get the job done, she said.

Ezra Klein observes that Snowe is a little bit lacking in the coherence department:

Snowe’s position is a bit of an odd one: She holds that we may require a single-payer system but probably should have a public insurance option. The next step, she says, is to fix the market. And Snowe argues that it’s not clear that you can do that with a public insurance option. She’s raised the possibility that the public plan is actually too easy on private insurers. It’s a government plan, she says, and every lobby and advocacy group will exert pressure for it to cover every ill, ailment, and treatment. As such, the plan will quickly prove a better deal for the sick than the well, and it will end up being the equivalent of a “bad bank” for health risks. The private insurance market will simply skim off the healthy. In other words, the public plan wouldn’t compete with the private market so much as subtly subsidize it.

I would say that the main thing in this sort of situation is to stop thinking about the big issues, and start thinking about little ones. How can you structure a health care program so as to be very beneficial to the state of Maine? It’s not genuinely the case that inadequate levels of subsidies to sparsely populated rural states are an important failing of the current American health care system. But with the two “most likely to swing” Republicans coming from Maine, the Chairman of the Senate Finance Committee coming from Montana, and the head of the Senate Budget Committee coming from North Dakota this is probably the shortest route between the status quo and major reform. The major question becomes whether or not significant, broad changes like a meaningful public option can be structured in such a way as to be appealing to these constituencies. Maine’s a weird state, maybe it needs blueberry subsidies or provisions that take into account the special needs of states with large seasonal swings in population.

An Expanded Safety Net is More Important than Soaking the Rich

Clive Crook says it’s all well and good to pursue comprehensive health care reform, but Obama shouldn’t try to pay for it with higher taxes on the rich. Instead, he calls for a broader-based tax like a VAT. Jon Cohn kicks that around here and here.

Readers may recall that I’m somewhat sympathetic to Crook’s point. But rather than saying what he said, I’ll instead say this. Government spending on effective social welfare programs is very progressive. The main thing to do, from an egalitarian point of view, is to have a lot of it and to pay for it through whatever taxes are politically viable. Compared to Europe, the American tax code is toward the high end of progressivity, though not off the charts. The big difference, though, is that our overall tax revenues are lower, and a much larger share of our revenues goes to the military. Whatever you do to shift spending from defense to domestic priorities, and whatever you do to increase revenue, is a step in an egalitarian direction.

It may be that it’s easier to raise revenues through taxes on the rich, because they bite fewer people. Beyond that, there are concerns about growth. Certainly I think it’s clear that restoring Clinton-era taxation won’t kill the economy. But over the long run we’ll need even more revenue than that. So I think some consumption taxation may be necessary. And I think it’s smart to look at taxes that have some direct benefits—taxes on pollution or public health hazards in particular.

Either way, the key point is to get the programs in place and pay for them somehow or other. The exact mechanism is not especially important from an egalitarian point of view unless you were to really propose something hideously regressive like a poll tax, which I think nobody is doing.

The Rich Uncle Argument

Back at the beginning of the month, I recounted an odd incident from a Kaufman Foundation conference that I’d attended:

I heard someone say that the reason it’s important to cut taxes on rich people is that economic growth comes from people starting new businesses and most new businesses are financed by borrowing money from family—a rich uncle, for example. Therefore, the richer our rich uncles get, the better off the rest of us will be. After all, we can hit them up for loans!

Crazy. I didn’t think this would go anywhere. But today I read my Ed Kilgore:

Up until today, I figured that in the course of a pretty long career in politics and government, I had heard every conceivable conservative argument against progressive taxes, and for high-end tax cuts. But in the midst of a workmanlike article claiming (dubiously) that Americans are upset about government oppressing oppression of small businesses, we get this interesting twist from Carl Schramm and Doug Schoen at RealClearPolitics:

Hikes in marginal tax rates will discourage investment in new ventures. Those who dismiss concerns about “tax hikes on the rich” who can presumably afford to pay more should understand that among those “rich” people are well-to-do older relatives and friends of aspiring entrepreneurs, the first source of investment for most new businesses that would otherwise have trouble securing capital – especially in the midst of a credit crunch.

This suggestion comes immediately for before a rejection of a cap and trade system for carbon emissions, on grounds that it would unduly burden businesses.

As Ed says, the argument is that “we can’t have progressives taxes because somebody’s rich uncle might not have the wherewithal to subsidize somebody’s business start-up.”

I’m not going to dignify this with a response. I’ll just note that Schramm is president and CEO of the Kauffman Foundation and I believe he was in the room when I first heard the “rich uncle” argument, so I may have been present at the creation of this particular talking point. Meanwhile, the crippling long-term budget deficits that will result from refusing to raise new revenues are not going to be doing any wonders for entrepreneurs. And perhaps more directly to the point, the lack of a guarantee of affordable health coverage is a major impediment to entrepreneurship in the United States. The status quo systematically discourages talented, skilled people form leaving jobs at existing firms in order to strike out on their own, and this is one of the things the administration is trying to address in its budget proposals.

The Case for a Public Health Care Plan

Peter Harbage and Karen Davenport have a new report for CAPAF in which they make the case for a robust public option as a component of a systematic health care exchange, and spelling out some details:

The operational features of this public health insurance plan and exchange would include: health insurance plan and exchange would include:

* A health insurance exchange that offers private insurance plans and a public health insurance plan—all of them competing on a level playing field.
* A public insurance plan operated by public employees separate from existing public and private plans.
* Comprehensive and affordable coverage, with guaranteed access to health insurance and other consumer protections offered by all plans in the exchange.
* A service delivery model that provides choice among insurance providers, better care coordination, and fair and efficient payment processes for patients and physicians alike.
* A health care system that promotes innovation rather than risk segmentation.
* An option for individuals to keep the coverage they have today if they so choose.

The point that I think receives too little attention in the debate is the one about innovation rather than risk segmentation. At the moment, insurance companies primarily compete by getting better at risk segmentation—at avoiding the riskiest cases, and doing various kinds of price discrimination. We can and should regulate much of this away. But if that’s all we do, we’ll still have a situation in which the companies are trying to find new and more creative ways of doing risk segmentation. We’ll end up “overly dependent on government enforcement to achieve the goals of health reform,” playing an endless game of cat-and-mouse to see whether or not we’re actually achieving our policy objective of promoting health in a reasonably fair and cost-effective manner. Inserting a publicly managed enterprise into the framework lets us rely more on competition and less on regulatory mandates.

The way this works is that if the private plans can’t or won’t compete by offering innovation, value, and quality then the bureaucrats at the public plan should be able to beat them. That, in turn, creates incentives for the private sector to unleash its own imaginative powers on beating the bureaucrats. Otherwise, it’s just bureaucrats drawing up rules and then the private sector dully complying with the rules while working creatively to find loopholes.

The Geithner Plan and Congress

One aspect of the Geithner plan that I think people aren’t focusing enough attention on is that unlike the other main alternative approaches, it can be executed without further congressional approval. The reason is that there are federal agencies with a standing authority to make loans. And though the plan does have a potentially giveaway structure, technically what’s being offered aren’t subsidies but no recourse loans. Or to put it another way, the subsidies are in the form of no recourse loans rather than direct appropriations, so the government has the authority to move forward under existing TARP legislation and other laws. That, I think, clearly explains the somewhat byzantine structure of the plan’s operations and is also, if you’re sitting in the West Wing, a considerable advantage over a nationalization plan that would require large additional appropriations to cover the debts of nationalized institutions.

That’s all a bit on the underhanded side, and it certainly doesn’t count as a good economic reason to do things this way. But could it be a good reason, in general? Arguably, it is. In addition to a financial crisis, we have a crisis in our health care system and an ongoing climate/energy crisis. One thing you might want to consider as you read Paul Krugman’s columns is how you would feel about the idea of the administration burning political capital on the Hill to secure authorization for bank nationalization that could otherwise be used to secure support for the administration’s health care and energy policies.

I’m not even sure, personally, that I believe in the “political capital” metaphor. But people in Washington generally do. And if you’re Barack Obama and getting conflicting advice on the merits, I can easily see this kind of calculation tipping you toward conserving your chits on the Hill for the budget battle and related fights.

Chuck Grassley Advocates Lying About Comparative Effectiveness Research

Conservatives have spent a lot of time spreading misinformation about the Obama administration’s plans to conduct more so-called “comparative effectiveness research.” This is particularly interesting because it’s not really a hot-button ideological topic, and a fair number of conservative support it. The main idea, after all, is to save the government money. Senator Chuck Grassley, for example, is in favor of comparative effectiveness research. So what does he think about his fellow-travelers going around scaring people about it? Well, it seems he thinks the liars are doing the lord’s work because misleading the public about the issue is “the only way you’re going to get [the public's] attention.”

Very strange.

Why Capping the Health Benefits Tax Exclusion is Worth Considering

Getting some of the tax revenue necessary to pay for health care reform by taxing some employer-provided health benefits is under serious consideration on the Hill, and according to some reports the administration is open to it. John McCain proposed taxing health benefits and Barack Obama criticized him sharply for it on the campaign trail, so this is prompting some awkward moments for Obama advisers like Austan Goolsbee:

A more articulate defense is offered by Igor Volsky at the Wonk Room:

The problem was never the tax exclusion itself. Rather, progressives were concerned about what would happen to individuals who lost their employer-sponsored health coverage once the tax code changed. McCain proposed replacing the employee deduction with a one-size-fits-all tax credit without reforming the health insurance market or expanding access to group coverage. Under his plan, Americans who lost their employer coverage would have had to fend for themselves in an unregulated individual health insurance market; Americans with pre-existing conditions would have joined the ranks of the uninsured.

Obama is using the measure as a means to finance comprehensive reform. Should someone lose their employer-based coverage, they will be able to purchase affordable insurance through a regulated exchange that cannot deny coverage to Americans with pre-existing conditions.

Perhaps the right way to think about this is that limiting the tax-preferred status of employer-provided health care has long been on progressives’ radar as a possible way of financing health care reform. Part of the appeal to the McCain campaign of using this method to pay for their own proposals was almost certainly that they knew perfectly well that many progressives were on record as supporting something superficially similar. This, they hoped, would compel progressives to “go soft” on McCain’s proposed tax hike. But they were wrong. Still with any tax, you have to ask what you’re getting for the tax to really evaluate it. Comprehensive health care reform requires additional revenue, and that’s bound to make someone unhappy. But there are a variety of possible revenue sources that would be well-worth the cost in order to achieve the substantial benefits of health care reform.

Does Congress Want to Tackle America’s Problems?

Back during the campaign, and in darker moments since inauguration day, one worry you heard expressed about Barack Obama was that he might turn out to be another Jimmy Carter—well-meaning, reformy, but ultimately ineffectual. I thought those worries were always a bit unfair to Carter. There’s a tendency, when assessing presidents, to assume that anything is possible and that if Carter had just employed better tactics in 1977-78 or if Clinton had employed better tactics in 1993-94, then his administration might have accomplished dramatically more. And certainly there’s something to that point of view. But at the same time, it really does take two to tango. The legislative accomplishments of 1933-34 and 1965-66 were partially the result of tactical acumen in the wake of an electoral victory on the part of the White House.

But in part, they reflected a genuinely willing congress. There was a key block of legislators in the mid-1960s who really wanted to dramatically advance social justice in the United States. They wanted black kids and white kids to attend the same schools, and they wanted the schools to be better. They wanted equal voting rights and equal rights to public accommodations and a guarantee of health security for the poor and the elderly. They though it was obscene for extreme poverty to flourish in the wealthiest country on earth. Lyndon Johnson’s leadership was important to making that happen as was, obviously, the role of social movement leaders like Martin Luther King, Jr. But LBJ and MLK didn’t bewitch the congress into having those priorities. A critical mass of key members really wanted to solve these problems.

When I read stories about Democrats signing letters urging the leadership not to pass cap & trade through budget reconciliation, or whining that Clinton-era tax rates will wreck the economy, or preemptively caving on permit auction, then it’s hard to escape the conclusion that it’s not the administration doing something wrong is that the key members of congress just fundamentally agree with George W. Bush and Mitch McConnell that it doesn’t matter if people die of treatable illness or if the planet ceases to support human life. It’s not, after all, as if any great mystery over how you move legislation that you think is important. Fifty is a smaller number than 60, and it’s easier to get smaller numbers of votes that bigger ones. If these guys have some genius alternative plan of preventing atmospheric carbon from reaching deadly levels, I’m all ears—but if they’re convincing then, again, I would want that plan to pass with a minimum of procedural hurdles. But it seems to me they don’t have any such plan, they just want to keep letting our problems get worse and worse indefinitely, but they don’t have the guts to admit it.

Judd Gregg Thinks The Essence of America Is Wasteful Giveaways to Corporate Lenders

Judd Gregg (R-NH) hopes on the ignorant Francophobia bandwagon rather than dealing with the administration’s budget proposals on their merits:

The president’s budget also proposes to set us on a path to nationalize the health-care system at a huge cost, and, for good measure, it throws in nationalizing the ability of people to borrow to send their kids to college. It suggests that the best way to address climate change is to create a new national sales tax on everyone’s electric bills. And, at a time when millions of Americans are struggling to find jobs, it proposes taxing small businesses, our nation’s engine of job growth, at rate that could be seen as confiscatory.

In other words, the president’s proposal is a massive and breathtaking document, and it should not be called a budget. Rather, it should be called a blueprint for the France-ification of America, a notebook for nationalization, or a memo for massive debt creation. But a budget, by any sense of the word, it is not.

I’ve dealt with France comparisons in general elsewhere. On the specifics of student loans it should of course be noted that this isn’t really a policy concern in France since instead the universities receive more generous direct funding from the state and charge dramatically lower fees. And of course this is the typical system throughout the world, and hardly a unique aspect of the French social model. More broadly, Gregg’s being coy about his own policy preferences. Obama wants to have the government spend a certain amount of money doing direct loans to students. Gregg, by contrast, wants to preserve the status quo in which the same total amount of lending takes place, but the government spends more money because the government is spending it on subsidies to private lenders. I think it would be fine to have an honest debate between proponents of a truly free market approach to student loans, which would save the taxpayers money at the cost of worse-educated and more class-bound society, and between proponents of direct lending. It would even be fine to have an honest debate between proponents of direct lending and proponents of Gregg-style crony capitalism, in which costly subsidies are doled out to favored firms. But Gregg is trying to claim the mantle of the free market while also raking in the support from business that comes from a substantive position in favor of crony capitalism. It’s nonsense.

On the rest:

– What Obama thinks is that since carbon emissions are causing climate change, the best way to curb climate change is to charge the emitters for their emissions and use the funds to cut taxes on working- and middle-class people and on subsidies for clean energy. Does Gregg have a better idea?

– There’s no plan to “nationalize the health-care system at a huge cost” in Obama’s budget. There’s a plan to spend more money in the short-run on creating a more integrated, universally affordable system in which nobody will be forced out of private sector provision of either care or insurance, in order to better control costs in the long-run.

– Gregg is not enough of a liar to actually call Obama’s tax plans “confiscatory.” But he’s way too much of a liar to describe them honestly. There’s a plan to tax the richest Americans, including those very rich Americans who are very rich because of their small business income, but not including the overwhelming majority of small businessmen who aren’t rich, at the levels they were taxed at before George W. Bush came into office.

Long story short, he could have been a heck of a Commerce Secretary.

The Importance of a Public Option

To try to clear up something about yesterday’s post on a Swiss model of health care reform I don’t, personally, consider something like that adequate. I don’t think it’s the appropriate role of progressives in the United States to be pushing for subsidies and mandates for insurance companies in exchange for the right to regulate the companies more tightly. That might be an improvement over the status quo, or not, depending on how it played out over subsequent years’ worth of legislative battles. I think it’s important to fight for a public option which, as Igor Volsky notes, is a wildly popular idea as well as sound policy. As Howard Dean says, this is key to real health care reform:

That said, one scenario I can easily imagine is one in which insurance companies get spooked by the idea that this is going to pass and then deliver votes of “moderate” Democrats and various Republicans in favor of a Swiss-style (or perhaps Massachusetts-style is a better way to put it) system. In that case, I think you could hardly blame the White House for deciding to say “yes” to the opportunity to deliver universal health care. Substantively, that would wind up kicking the can on most of the important issues, but you can see the politics playing out that way. But in either case, I think the main point is that it’s maintaining the possibility of doing health reform through the budget reconciliation process and of including a robust public option that’s bringing people to the table. In other words, it’s essential to keep pushing for this idea.

Health Insurance Reform and the Labor Market

One of the most under-discussed aspects of health reform is the extent to which our current system creates labor market rigidities and may stifle entrepreneurship and job creation. As is well known, despite the lack of guarantee, most people actually have health insurance. But they don’t just have health insurance by accident, nor do they just have health insurance in virtue of having a job. Rather, people engage in a far amount of insurance-seeking behavior—refusing to allow themselves to go uninsured for even a brief period of time, lest they lose the protections the law grants to people who maintain a continuous record of coverage.

Can you really quantify this impact? Well, based on Ezra Klein’s post on the subject it seems you sort of can’t:

But it’s pretty well understood that inadequate access to health coverage among the working and middle class also harms job creation. Unable to risk losing their employer-sponsored health insurance, would-be entrepreneurs don’t start small businesses, they stay in jobs that don’t maximize their productivity, they remain in positions that another worker would be better suited to. The magnitude of this sort of thing is hard to measure: It’s tough to tell how workers who do have health insurance would act if they did not have health insurance. Harvard’s Brigitte Madrian and MIT’s Jon Gruber have taken a stab at it, but they basically concluded that the evidence conflicts, and the best you can say is that “health insurance plays an important role in job mobility decisions.” More anecdotally, surveys show that workers say their health benefits are the number one reason they fear losing their jobs. But though you can argue over the precise size of the effect — just as you can argue over the precise effect of slightly higher taxes on the rich — it’s pretty clearly there, and it’s not obvious to me at least that it doesn’t totally overwhelm the labor market impact of the tax changes.

Well, it’s too bad there’s not more definitive evidence on this score. But to think about it another way, there’s a theory that shows how higher taxes ought to stifle growth. There’s also an empirical finding that plenty of high-tax countries are rich. This bit about health insurance is, most likely, part of the reason. The US system reduces labor market flexibility and biases the economy toward incumbents and large firms.

Is Switzerland a Model of Health Care Compromise?

Ezra Klein writes that Republicans are drawing the lines of opposition to the progressive health care agenda in pretty narrow terms:

Does that matter? It’s hard to say. Rhetorically, the GOP has staked out a very narrow corner of opposition. Last week, Mitch McConnell, Chuck Grassley, Mike Enzi, Orrin Hatch, and Judd Gregg — essentially, all the Senate Republicans with jurisdiction over health reform, and McConnell — co-signed a letter to President Obama. I’ve obtained a copy, and it’s up for download here. They draw two lines in the sand. First, they warn against using the budget reconciliation process to pass heath care. Doing so would “make it difficult to gain broad bipartisan support” and “do a disservice to this important issue.” Substantively, they fear a public insurance option. “Forcing free market plans to compete with these government-run programs would create an unlevel playing field and inevitably doom true competition,” they say. “Ultimately, we would be left with a single government-run plan controlling the market.”

When I was in Switzerland, I learned a bit about their health care system. In essence, it looked like the plan Democrats were talking about on the campaign trail but without the public option. And that, it seems to me, would be compatible with what the Republicans are saying here. And just in time, Regina Herzlinger from the Manhattan Institute chimes in at the Corner in praise of Switzerland:

Republicans, full of complaints about the Obama plan, have not coalesced around a viable alternative. Mired in fantasies about a replay of 1992, they think they can face down universal coverage and that their impossibly wonky ideas, full of tax takeaways and mysterious high-risk pools, will defeat Obama’s brilliantly clear proposals. [...] There is only one viable Republican solution: A consumer-driven system that passes the employer tax exemption and funding onto consumers, so they, and not the government, control all health-care costs. Switzerland, which enables universal coverage without any governmental insurance through this system, benefits from costs 40 percent lower than the U.S. and, unlike the single-payer systems in the U.K. or Canada, excellent results for the sick.

Obama has formally committed himself to the idea of a Medicare-like public option, but the availability of such an option is not one of the administration’s eight principles for health reform. This suggests the possibility of a compromise if the GOP wants it. My strong guess is that if leading Republicans were really willing to offer a Swiss-style system as a compromise measure, that Democrats would leap at the chance to take a clean legislative victory and start haggling over funding mechanisms rather than fight to the death over a public plan.

At the same time, for that very reason until such an offer is made I think it’s vital to fight like crazy for a public plan since it’s the risk that such a plan would be rammed through the Senate via budget reconciliation that gives conservatives their incentive to come to the table and strike a deal over something more modest.

AHIP Proposes Health Care Commission

Time’s Karen Tumulty’s spoke to Igor Volsky about a break-out session she attended that featured America’s Health Insurance Plans CEO Karen Ignagni. As Tumulty explains, Ignagni proposed delegating the writing of a plan to some kind of outside commission:

The break-out session that I was just at, in fact, Karen Ignangi made one of the more radical specific proposals, which is to take most of this out of the hands of Congress, set up a commission sort of like the Base Closing Commission, to come up with a plan and present it to Congress on a sort-of take it or leave it basis.

Igor remarks:

Ignagni’s proposal is revealing. With Democrats running the major health reform committees — Sen. Max Baucus (D-MT) at Senate Finance, Henry Waxman (D-CA) at Committee on Energy and Commerce — the insurance industry probably believes that it can get a better deal out of (and have more influence over) some kind of commission.

I dunno about that. I mean, at the end of the day if you’re an insurance company why would you be afraid of Max Baucus? A commission seems to me like a perfectly reasonable idea; it’s just not going to happen. Members of congress are busy fighting each other for committee jurisdiction on health care, not fighting to give up jurisdiction and give it to an outside commission. That’s probably why should brought it up. Bringing up reasonable alternatives that have no chance of happening is a time-honored stalling tactic.

Why We’re Summitting About Health Care

Given that there’s no particular health care plan that’s yet got nearly the level of legislative momentum behind it for anyone to be worried about it passing or failing, it may not be immediately obvious to people why the White House is bothering to hold a health care summit today. The reason is that securing agreement on the meta-issue that “there should be large-scale health care reform in the near future” is more important than it might seem. Specifically, the prospects for any particular reform measure passing get much better if the budget resolution can pass with an adequate level of headroom for a plan to fit into. Consequently, there’s not only no need to discuss particular reforms but in many respects it would be counterproductive to do so. Instead, we’re talking about “reform” and the need for it.

Specifically, there’s something of a three-part philosophical divide. On the one hand, there are those who are looking to take action. On the other hand, there are those who just don’t believe it would be advisable to work toward a guarantee of affordable insurance for all. These people tend not to be too clear about what they’re saying, because it’s unpopular, but Cato’s Michael Cannon with his scornful talk of “the church of universal coverage” is an exemplar in forthright advocacy of this position. Some members of this faction are actually somewhat obsessed with the idea that we need to reduce the number of people with health insurance by fiddling with the tax code to try to unravel the large risk-pools that make the employer-backed system viable. I think you actually get a lot of interesting ideas about the details of the health care delivery system from this crowd, since they’re less invested in trying to come up with politically practical proposals and aren’t afraid to offer some real talk to the more-insidious-than-people-realize doctor’s lobby. But if you want to do big reform, there’s obviously not much you can say or do to persuade anyone who’s philosophically convinced that the government role in health care should be minimized and that loose talk of universality is a dangerous stalking-horse for Stalinism.

Then you have people working for major reform. The goal here is to create a system that guarantees access for everyone. You sometimes get into disputes that I regard as mostly semantic about whether you should count as “universal” a system in which a small number of non-sick people don’t necessarily have insurance but are in a position to take advantage of guaranteed issue and community assistance to get insurance should they decide they need it. But this is actually not a particularly gaping policy void, though you may sometimes hear otherwise during primary campaigns. There are a bunch of different goals here. By acclamation, we’re not supposed to talk about the goal of providing health care to the uninsured minority, because they’re a minority of the population and they have low SES, low proclivity to vote, and little political clout. But I’m about the justice, damnit, so I’ll offer this chart:

That number is almost certainly higher today because the economy has lost 3.6 million jobs since the start of 2008. A one percentage point rise in the national unemployment rate causes 2.4 million people to lose employer-sponsored health coverage, according to Urban Institute researchers. Of these people, 1 million rely on Medicaid or the Children’s Health Insurance Program and 1.1 million end up uninsured. [...] The number of newly uninsured would be much higher if it weren’t for people enrolling in Medicaid and CHIP. Rising unemployment rates since the last Census report imply that an additional 3.2 million Americans now rely on Medicaid or SCHIP. Congress recently provided more resources for Medicaid and CHIP, but if it had not, states would have been forced to cut eligibility for these programs. Without federal assistance, many people now on Medicaid or CHIP would likely become uninsured as well.

Then we have the people in the middle. These are people, and you find them in both parties, who happily concede the need to reform the health care system. But they think the time isn’t right. Maybe we should wait until we solve the economic crisis, end the war in Iraq, stabilize Pakistan, and balance the budget and then sometimes in the dim mists of the future we can reform the health care system. Maybe we “can’t afford it” right now.

The problem with this view is that we can’t afford not to do it. The problems in the health care sector are not the cause of the current recession, but they are both a drag on the economy’s long-term ability to grow and the primary driver of long-term budgetary challenges. It gets much easier to get ourselves out of the current economic hole if there’s a reason to believe that the foundations for more robust growth and a sustainable fiscal path are being laid at the same time. And those things can’t really be done without health reform. Meanwhile, as the chart on loss of insurance indicates, the recession doesn’t make the health care crisis more avoidable, it makes it more acute. The status quo is bad enough that there are a lot of ideas, including some ideas that aren’t very good, that would be a lot better than indefinite continuation of the status quo. The task of the day is to persuade people of that fact and get a budget in place that creates the possibility of putting something better in place.

Our Interrelated Crises

David Brooks seems to think that Barack Obama is trying to do too much at once. Steve Benen retorts that “The notion that multiple problems — healthcare, energy, education, infrastructure, economic growth — may be inter-connected seems to elude Brooks entirely.”

Obviously, people who want to do a lot of stuff like to make those kind of interconnection arguments. So it’s worth trying to think clearly and explicitly about the relationships. The starting point, I would say, is growth. There are a lot of factors behind growth including, of course, old fashioned human ingenuity at coming up with new products to offer and new ways to offer old products. But perhaps the most important things policy can do to impact the capacity for sustainable growth—i.e., growth that’s not based on asset price bubbles—is to increase the availability of high-quality human capital and the availability and quality of public sector physical capital. Which is to say education and infrastructure. Energy is related to this in two ways. First, the power grid on which our electricity flows is part of the infrastructure. And second, a lot of energy is used in transportation, and the quantity of energy used in this way is impacted by the nature of the available transportation infrastructure. The goal of curbing carbon emissions probably isn’t vital to our growth prospects except in the sense that over the long run an increasingly deadly and inhospitable environment will be disastrous for all human endeavors. But though avoiding ecological catastrophe is something of a freestanding goal, our growth prospects require new investments in infrastructure, so it makes sense to try to make sure this new infrastructure is suited to our environmental goals. Last, health care. These kind of investments we’re talking about will cost money. Some of that money can and should come from taxes. And some of that money can and should come from short-term borrowing. But to make the investments sustainable we need to put the budget on a sustainable basis. And that requires tackling the health care system in a systematic way.

And so—ta da—it’s all connected. I think there’s plenty of room for disagreement as to exactly what needs to be done on those fronts. But I really don’t think it’s credible to say that we ought to just slow-walk things. What it is fair to say is that it’s too bad the previous administration spent eight years doing nothing whatsoever on the infrastructure, health care, and energy pieces of the puzzle. They tackled education, the smallest of these segments, early on and made some progress but then didn’t seem very interested in following-through.

Michael Mandel: Recent Productivity Growth is a Myth

I recently heard Business Week economist Michael Mandal make a provocative point. Fortunately, it turns out that he’s put a related PowerPoint online so I can pull out some of his slides. But his basic thesis is that the current recession does not, in fact, represent a financial crisis that’s spilled over into the “real” economy; rather, he says the cause of the financial crisis is that growth in the recent past has actually been much less robust than people realized. That “looking back, the Internet Decade (1997-2007) was much weaker than we realized.” This starts with the observation that real wage growth during this period was terrible, even for college graduates:

This basic information is familiar to liberals, who spent much of this period being suspicious that capital was somehow sucking up all the gains. But then came the stock market crash:

But if the gains from Internet Decade productivity growth didn’t go to labor and didn’t go to capital, then where did they go? His thesis is that it largely didn’t exist at all. The extra money went into increased costs of health care (while wages have been flat, “total compensation” has gone up because employer-side health insurance premiums are higher) but health care isn’t actually dramatically better than it was ten years ago. Mandel doesn’t put it this way, but you can understand the situation as real, but modest, productivity gains being essentially offset by the decreasing productivity of the health care sector. Instead of really growing, we’ve just been borrowing from foreigners who were willing to invest on the theory that America was going to produce awesome innovations in the IT and biotech sectors that never really panned out:

Instead of the national balance sheet, you can look at the household balance sheet:

The good news, such as it is, about this interpretation of the crisis is that it implies that some fairly large proportion of the ongoing contraction is actually the vanishing of prosperity that to some extent was an illusion all along.

To be honest, I don’t know how plausible this really is. I’ve been alive for the past two years. It certainly looked at the time as if we were, first, facing a relatively minor recession. New housing starts were way down, due to housing having been overbuilt. This was leading to unemployment. At the same time, the dollar was falling and making US exports more competitive which was leading to a (gross) decrease in unemployment. The recession basically reflected the friction involved in this need for a shift in the real economy. But then it turned out that the same oversupply of housing that was leading to the collapse of the building trades as a source of employment was also going to cause a financial crisis. And then only after management of the financial crisis went wrong did the real economy start to get really bad.

School Lunch Or; How to Make Government Work

One of the craziest stories I heard while I was in Finland was the shocking tale of the 1999 school lunch reform. The way this worked is that in 1999, parliament passed some legislation guaranteeing a nutritionally balanced school lunch. So the National Nutrition Council wrote some guidelines dictating that a properly balanced lunch would feature fresh or cooked vegetables covering half the plate, a starch (potatoes, rice, or pasta) covering a quarter of the plate, and meat or fish or a vegetarian protein alternative covering the remaining quarter. A desert of berries or fruit is served “if the nutrient content of the main course is not adequately diverse or if it contains little energy” along with skimmed or semi-skimmed milk and bread.

It was a crazy story not because the nutritional guidelines are crazy. Nor because the nutritional guidelines are perfect. This still actually leaves a lot of variance depending on exactly what’s served. But what’s crazy about it is the way it happened. Parliament felt children should eat a well-balanced meal, and so guidelines were written by a government agency and then implemented. Like magic!

It’s very hard to imagine anything like that happening in the United States, where something as basic as the food pyramid winds up being a locus for interest-group politics. Michael Pollan talks to Mother Jones about the way of the world:

MJ: Does WIC still specify that you buy dairy?

MP: Yes. We had a huge fight to get a little more produce in the WIC basket, which is heavy on cheese and milk because the dairy lobby is very powerful. So they fought and they fought and they fought, and they got a bunch of carrots in there. [Laughs.]

MJ: Specifically? Who knew: the carrot lobby?

MP: Specifically carrots. The next big lobby. But there is also money in this farm bill for fresh produce in school lunch. The price of getting the subsidies was getting the California delegation on board, and their price was $2 billon for what are called specialty crops—fresh fruit and produce grown largely in California.

Or watch this video:

Democracy is democracy, politics is politics, and life is what it is. But still, it seems to me that Americans have a deplorable tendency to take pride in the dysfunctional nature of our political system, and actually revel in it. It makes, after all, for a fascinating game in a way that a simple outsourcing of nutritional guidelines to apolitical experts wouldn’t. But I think there’s a big challenge for progressives here. And not just with regard to school lunch, but with regard to the whole thing. There are certain ends that can only be accomplished by state action. But state action is only really tolerable if you can actually make the government work well and an awful lot of our basic institutions just don’t work very well. At the same time, the medium-term policy frontiers increasingly focus on questions of public health and environmental security that have a hefty technical element. A lot of the argument for universal health care hinges on the fact that, in principle, comprehensive reform could deliver a much more efficient system. But will it actually deliver such a system, or will it just deliver whatever happens to get lobbied for? Care that benefits patients, or care that benefits health care providers of various kinds? Those ultimately aren’t questions about the design of any particular plan; instead, they’re questions of whether or not progressive governance can manage to somehow deliver better overall governance.

UPDATE: On a related note, Ezra Klein observes:

CBO occupies a weird space in Washington. They decide what legislation costs. They may get it right or they may get it wrong, but the number they settle on is the number legislators agree to use. And so this morning’s hearings featured powerful senators begging a small, bearded budget geek for favorable judgments as if he were the Oracle at Delphi.

And the thing of it is that while the CBO’s methods aren’t perfect and its conclusions aren’t incontestable, it really does do a pretty good job—good enough that it can continue to be widely respected. And having an expert agency be widely respected and do a pretty good job, thus providing a convergence point for congressional consideration of legislation, is much better than having our legislative debates just proceed with everyone inventing their own cost estimates.

Obamacare: Now With Mandate

Ezra Klein reports that senior administration officials are telling him their budget will assume the existence of a “mandate” as part of a health care reform package. Since nobody except the voters ever agreed with Obama about this, it’s being greeted with all around cheer. But I still think Obama was right in the first place. It’s not that a mandate is such a terrible thing, but it’s primary purpose is to keep insurance companies in business once progressive stuff like community rating and guaranteed issue policies are put in place. If I were in congress, I’d write a bill that has community rating and guaranteed issue. Let the insurance companies fight for the mandate! Make them deliver some votes for a “compromise” featuring all three. But there’s no particular reason that this favor to insurance firms should be defined as constitutive of the progressive health care agenda.

But whatever; this debate was never especially important.

The Entitlement Crisis is a Health Care Crisis

Ben Smith’s article about Peter Orszag’s influence winds up getting a bit vague on the policy specifics, but does capture Orszag’s key idea about long-term budgetary problems:

Orszag’s long-running project — something that has made him the left’s favorite Cabinet member — has been replacing talk of an “entitlement crisis” with his argument that Social Security requires only modest tax hikes and benefit cuts, while Medicare and Medicaid have much more dramatic fiscal woes.

“Social Security faces an actuarial deficit over the next 75-100 years. In the past, I’ve resisted the term ‘crisis’ to describe that kind of situation,” he said. “This is not quantitatively as important as getting health care done.”

I’m not sure Orszag really is the left’s favorite cabinet member—he’s a pretty moderate dude. Ask about Steven Chu or Hilda Solis. But the left certainly agrees with Orszag about this issue. And it’s not just an “argument.” It’s also true. My Wonk Room colleagues have a bunch of charts about health care, and this one illustrates the point well:

Only structural reform of health care can avoid long-term budgetary apocalypse.