Friday, August 28, 2009

Health Care Friday: Economics 101 Edition

Apropos of, well, The Onion, and the national discussion generally.
Is Using A Minotaur To Gore Detainees A Form Of Torture?


Marshall (TPM):
Just Make It Simple

From TPM Reader BR ...

You're right that it makes no sense to not counter lies from Armey about the public option with "expanding Medicare access to those under 65" rhetoric.

What I don't understand is why nobody has talked about Kennedy's Medicare for All act, which is an elegant solution for just that - a public option in which folks can buy into Medicare.

http://www.govtrack.us/congress/bill.xpd?bill=s110-1218

http://www.govtrack.us/congress/bill.xpd?bill=s109-2229

The reasons this needs to be a big part of the public debate:

- This was Kennedy's last piece of unfinished life work. All those reporters who claim to know what Kennedy wanted are doing a disservice by not citing Kennedy's own legislation on the matter.

- Kennedy himself was personally pushing for a public option in the form of Medicare for All (this negates any claim that Kennedy would have not supported a public option).

- This is an example of what he would have wanted to pass (he reintroduced the bill, so it wasn't just some one-time idea of his).

- The bill was amazing in its simplicity, countering arguments that all health reform components are by nature arcane and indecipherable: every 5 years (every 2 years in another version) the eligibility for Medicare would be lowered by 10 years (and raised from below by 10 years), with those under 65 being asked to check a box on their taxes if they signed up for Medicare (to be charged for it). It's a simple model for the public option, and hard(er) to lie about.

- I believe David Waldman at Daily Kos was correct when he pointed out that it would make sense for the public option to be the "Kennedy plan"; irrespective of the politics, it would make sense because Kennedy's own bill was a public option bill, not a comprehensive reform package with 100 moving parts.

This is an idea whose time has come, and there ought to be robust public discussion about it.

  • From TPM Reader GM ..
    Dick Armey wants the public option to be optional? This gives me an idea. I think Obama should use all the fictional friction points as bargaining chips. You want us to give up the tyranny of compulsory coverage? You win, Dick Armey. Will you support the bill now? You disagree with death panels, Sarah Palin? What concession will you offer if we agree to give them up?
Yglesias: Grassley Claims Large Deficit Compels Him to Embrace Budget-Busting Status Quo

Senator Chuck Grassley continues to cast about for pretexts to spike health reform and please his party leadership so he’s hit upon an unusually nonsensical reason:

Senator Charles Grassley of Iowa, one of three Senate Republicans negotiating on health care, said the soaring federal budget deficit “puts a stake in the heart” of $1 trillion measures being debated in Congress.

Obviously, the scope of the budget deficit in 2009 and 2010 has nothing to do with how the health care system ought to look in 2013 when the bills under consideration phase in. If the bills are affordable in 2013, then they’re affordable in 2013 regardless of current deficits. And if they’re not affordable, then small current deficits wouldn’t change that either. But more to the point, as the administration was emphasizing before Grassley’s “death panel” demogoguery helped scare them off the point, health care reform is integral to getting the long-run budget deficit under control:

ek_entitlements_three-1

Whatever you think of the current budget predictions, nothing about sticking with the status quo makes things better.

Benen: PART D....

At a recent town-hall event, President Obama was asked about how to pay for health care reform without adding to the debt. "It's a great question," the presidents said. "First of all, I said I won't sign a bill that adds to the deficit or the national debt. Okay? So this will have to be paid for."

Obama then proceeded to take a stroll down memory lane. "That, by the way, is in contrast to the prescription drug bill that was passed that cost hundreds of billions of dollars, by the previous administration and previous Congress, that was not paid for at all, and that was a major contributor to our current national debt. That's why you will forgive me if sometimes I chuckle a little bit when I hear all these folks saying, 'oh, big-spending Obama' -- when I'm proposing something that will be paid for and they signed into law something that wasn't, and they had no problem with it. Same people, same folks. And they say with a straight face how we've got to be fiscally responsible."

It's a point that's gone largely overlooked of late. Just six years ago, Karl Rove thought he could lock up that "permanent Republican majority" by adding a prescription drug benefit to Medicare. Seniors -- at least the one who didn't get caught in the dreaded "donut hole" -- would be so impressed they'd vote GOP forever. All Republican policymakers had to do was approve a poorly-written bill that expanded government involvement in health care while adding trillions of dollars to long-term debt.

It has a certain relevance to the ongoing policy debate of the day.

Matt Yglesias does good service by reminding us of the 2003 Senate vote on Medicare Part D, the budget-busting prescription drugs for seniors bill that passed the Senate 54-44, even though it wasn't paid for (it adds trillions to the deficit over time). Here's the vote: it is interesting to note that the two Gang of Six members who are the most prominent naysayers and budget hawks on the Senate Finance Committee now, Chuck Grassley and Mike Enzi, voted for the bill. As did assorted other noisy conservatives like Sam Brownback, John Cornyn and John Kyl. What irresponsible spendthrifts!

Republicans who actually are deficit hawks -- John McCain (usually) and Lindsey Graham, for example -- voted against it. Many Democrats -- Ted Kennedy, Russ Feingold, Hillary Clinton -- also voted against it, mostly because they didn't think it provided sufficient coverage (and let the drug companies off the hook).

But the headline remain grousers like Grassley, who oppose the alleged expense of the Obama plan now (even though the President has vowed not to sign a bill that isn't, more or less, paid for). It should be noted that Max Baucus -- who has also made non-stop noises about fiscal responsibility -- voted for it, too.

The bill even included a provision on end-of-life counseling -- hey, look, GOP-approved "death panels" -- that the Tea Baggers of the day didn't seem to notice or care about. Indeed, at the time, conservative activists had nothing but good things to say about expanding an entitlement program by hundreds of billions of dollars, expanding the government's role in health care, and handing the tab to future generations. Where were the angry patriots comparing Bush to Hitler, and accusing Republican lawmakers of trying to turn the United States into Soviet Russia?

For that matter, somehow, Baucus and Grassley were on board with Bush's Medicare boondoggle, which included nothing to "bend the curve" and only added heavily to the debt. It's funny how standards change when there's a Democratic president.

Tom Tomorrow: American bankers: Fighting the good fight

This Modern World By Tom Tomorrow

Kurtz (TPM): Too Big To Fail -- And Growing

WaPo:

J.P. Morgan Chase, an amalgam of some of Wall Street's most storied institutions, now holds more than $1 of every $10 on deposit in this country. So does Bank of America, scarred by its acquisition of Merrill Lynch and partly government-owned as a result of the crisis, as does Wells Fargo, the biggest West Coast bank. Those three banks, plus government-rescued and -owned Citigroup, now issue one of every two mortgages and about two of every three credit cards, federal data show.

A year after the near-collapse of the financial system last September, the federal response has redefined how Americans get mortgages, student loans and other kinds of credit and has made a national spectacle of executive pay. But no consequence of the crisis alarms top regulators more than having banks that were already too big to fail grow even larger and more interconnected.

Krugman: Till Debt Does Its Part

So new budget projections show a cumulative deficit of $9 trillion over the next decade. According to many commentators, that’s a terrifying number, requiring drastic action — in particular, of course, canceling efforts to boost the economy and calling off health care reform.

The truth is more complicated and less frightening. Right now deficits are actually helping the economy. In fact, deficits here and in other major economies saved the world from a much deeper slump. The longer-term outlook is worrying, but it’s not catastrophic.

The only real reason for concern is political. The United States can deal with its debts if politicians of both parties are, in the end, willing to show at least a bit of maturity. Need I say more?

Let’s start with the effects of this year’s deficit.

There are two main reasons for the surge in red ink. First, the recession has led both to a sharp drop in tax receipts and to increased spending on unemployment insurance and other safety-net programs. Second, there have been large outlays on financial rescues. These are counted as part of the deficit, although the government is acquiring assets in the process and will eventually get at least part of its money back.

What this tells us is that right now it’s good to run a deficit. Consider what would have happened if the U.S. government and its counterparts around the world had tried to balance their budgets as they did in the early 1930s. It’s a scary thought. If governments had raised taxes or slashed spending in the face of the slump, if they had refused to rescue distressed financial institutions, we could all too easily have seen a full replay of the Great Depression.

As I said, deficits saved the world.

In fact, we would be better off if governments were willing to run even larger deficits over the next year or two. The official White House forecast shows a nation stuck in purgatory for a prolonged period, with high unemployment persisting for years. If that’s at all correct — and I fear that it will be — we should be doing more, not less, to support the economy.

But what about all that debt we’re incurring? That’s a bad thing, but it’s important to have some perspective. Economists normally assess the sustainability of debt by looking at the ratio of debt to G.D.P. And while $9 trillion is a huge sum, we also have a huge economy, which means that things aren’t as scary as you might think.

Here’s one way to look at it: We’re looking at a rise in the debt/G.D.P. ratio of about 40 percentage points. The real interest on that additional debt (you want to subtract off inflation) will probably be around 1 percent of G.D.P., or 5 percent of federal revenue. That doesn’t sound like an overwhelming burden.

Now, this assumes that the U.S. government’s credit will remain good so that it’s able to borrow at relatively low interest rates. So far, that’s still true. Despite the prospect of big deficits, the government is able to borrow money long term at an interest rate of less than 3.5 percent, which is low by historical standards. People making bets with real money don’t seem to be worried about U.S. solvency.

The numbers tell you why. According to the White House projections, by 2019, net federal debt will be around 70 percent of G.D.P. That’s not good, but it’s within a range that has historically proved manageable for advanced countries, even those with relatively weak governments. In the early 1990s, Belgium — which is deeply divided along linguistic lines — had a net debt of 118 percent of G.D.P., while Italy — which is, well, Italy — had a net debt of 114 percent of G.D.P. Neither faced a financial crisis.

So is there anything to worry about? Yes, but the dangers are political, not economic.

As I’ve said, those 10-year projections aren’t as bad as you may have heard. Over the really long term, however, the U.S. government will have big problems unless it makes some major changes. In particular, it has to rein in the growth of Medicare and Medicaid spending.

That shouldn’t be hard in the context of overall health care reform. After all, America spends far more on health care than other advanced countries, without better results, so we should be able to make our system more cost-efficient.

But that won’t happen, of course, if even the most modest attempts to improve the system are successfully demagogued — by conservatives! — as efforts to “pull the plug on grandma.”

So don’t fret about this year’s deficit; we actually need to run up federal debt right now and need to keep doing it until the economy is on a solid path to recovery. And the extra debt should be manageable. If we face a potential problem, it’s not because the economy can’t handle the extra debt. Instead, it’s the politics, stupid.
Think Progress: ‘Tenther’ Activists Add The Federal Highway System To List Of Programs To Kill
In a recent radio interview, Rep. Carol Shea-Porter (D-NH) made the seemingly-innocuous statement that the federal highway system, as well as federal laws ensuring safe drugs and safe airplanes, are constitutional. Nevertheless, Shea-Porter is now under attack by “tenther” activists who believe that virtually everything the federal government does is unconstitutional:

Author and historian David Barton, the president of WallBbuilders, [sic] says Shea-Porter’s comments reflect her view that Washington government should run everything. He notes that both the Ninth and Tenth Amendments say anything that is not explicitly covered in the Constitution belongs to the states and to the people.

“All of those issues belong to the states and the people. Healthcare is not a federal issue. It is a state and people issue — the same with transportation. The Constitution does say that the federal government can take care of what are called the post roads — those on which the mail travels — but outside of that, states are responsible for their own highways, their own roads, their own county, local, state roads,” he notes. “And her comment about, ‘Well, the Constitution doesn’t cover drug use and drug abuse’ — yes it does, and that is under the criminal justice issues that belong to the

As ThinkProgress previously reported, conservatives are increasingly enraptured with tentherism, which claims that landmark federal programs such as Medicare, Social Security, the VA health system and the G.I. Bill are violations of the 10th Amendment — and many leading conservative officials are determined to impose the tentherism on the country. Rep. Michelle Bachmann (R-MN) is a tenther, as are Texas Gov. Rick Perry (R) and Sen. Jim DeMint (R-SC). Supreme Court Justice Clarence Thomas embraces tenther claims that the federal minimum wage and the federal ban on whites-only lunch counters, among other things, are unconstitutional.

Indeed, even federal highways opponent Barton is no small figure in conservative politics; Barton is one of six “experts” tasked with rewriting Texas’ public school textbooks to teach a right-wing alternative history to Texan children. Apparently, Barton and his fellow tenthers also want to rewrite the Constitution.

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