Archive for the ‘healthcare’ Category

It’s Not the Stimulus It’s the Regulation

Saturday, August 13th, 2011

Marco economics is an observational science. It is difficult to construct controlled experiments. There always seems to be enough differences from situation to situation to introduce doubt. Nonetheless, sometimes unfair, or at least unsupported, conclusions can enter the conventional wisdom. The concept of a Keynesian stimulus may suffer this fate.

The Keynesian approach suggests that during a recession the government can stimulate the economy via spending to replace economic demand from private markets. An alternative approach championed by Milton Friedman suggests that monetary policy is more important than fiscal policy.

Democrats have traditionally favored a Keynesian approach, in no small part because it provides an additional excuse for the government to initiate spending programs to address Democratic priorities.

When President Barack Obama came into office, it was natural for the progressive to institute a massive, nearly trillion-dollar stimulus. So confident were Democrats in the efficacy of the stimulus that they promised that unemployment would not exceed 8%. We were warned that if no stimulus were instituted, unemployment would reach 9%. We now know that following the stimulus, unemployment blasted past 10%. Moreover, growth remains anemic and unemployment two-and-half years after the stimulus still exceeds 9%. More disappointing is that the officialunemployment value would be far higher if so many people had not given up hope of finding a job. The lack of growth and employment has reduced revenues exacerbating the deficit.

It is rhetorically convenient to declare in the face of these facts that Keynesism is dead, believe by only those immune to the evidence. I lend far more weight to the Friedman approach and would love to offer our current situation as definitive proof.

However, let me offer a slightly heretical view. While the current situation lends no support to the Keynesian idea of stimulus, the regulatory anchor on growth makes it impossible to tell whether the stimulus has indeed failed. Perhaps It is economic uncertainty that is restraining the economy irrespective of the stimulus.

Companies are uncertain because of a massive influx of regulations. Obamacare has passed, and mountains of rules based on the legislation are still being written. Companies, particularly small ones, are reluctant to hire uncertain of what Obamacare would require of them. The Dodd-Frank bill to regulate financial markets has introduced new banking regulations. Until these are finalized and better understood, there will be a backward tug restraining lending. This is not to mention the new regulatory aggressiveness of the the EPA anxious to implement policies bureaucratically that could never be passed legislatively. The EPA has more regulatory actions pending that the Department of Human Services which is responsible for implementing Obamacare.

Imagine the metaphor of the stimulus package being a foot on the accelerator of the economic car, with a chain of regulations strapped to the bumper. The stimulus accelerator may or may not work, but the regulatory chains make it impossible to diagnose whether the accelerator is functioning properly. The Keynesian approach may deserve death, but the current situation cannot be said to have inflicted the true final blow.

Keep Your Hands Off My Social Security

Sunday, January 2nd, 2011

He who permits himself to tell a lie once, finds it much easier to do it a second and third time, till at length it becomes habitual; he tells lies without attending to it, and truths without the world’s believing him. This falsehood of the tongue leads to that of the heart, and in time depraves all its good dispositions. — Thomas Jefferson, 1785.

Last year during the protests by the Tea Party, some on the Left smugly mocked the protesters who wanted the government to keep their hands off their social security. At face value, this appeared to be hypocrisy or stupidity. On one hand, one of the key themes of the Tea Party is limited government. On the other hand, some Tea Party followers wanted to make sure that the government program they benefited from was unaffected by any new government action.

However, the confusion of some of these protesters can be traced to the fact that they have bought into the government’s myth of Social Security. It is not portrayed as an income transfer program paid for by taxes, but rather as a social insurance program into which people invest, much like any retirement program. Many social security recipients are convinced they are just getting out what they put in. Hence, they believe they own the same proprietary interest another person might have in their 401(k) investment. The Roosevelt Administration and successive administrations have deliberately cultivated this view of Social Security so that people would not feel that it was an income redistribution program which might loose popularity. The government wanted Social Security recipients to feel an entitlement to the payments rather than the an embarrassment about being beneficiary of welfare program.

While the Franklin Roosevelt Administration described Social Security one way in public, they were forced to argue something else entirely in court. The Federal Government does not have the Constitutional authority to institute a mandatory social insurance program, so they argued that payments into the social security system were really taxes. Even so, it was not clear that the Federal Government had the authority for this tax. In Helvering v. Davis an intimidated Supreme Court acquiesced to this large increase in Federal power.

At present, there is a similar misrepresentation about the nature of the medical reform package passed last year. During the 2008, presidential campaign, then Senator Barack Obama made a “firm pledge” to not raise taxes on those making less than $250,000 per year.

The final medical reform legislation included an “individual mandate’’ compelling people to pay for some form of health insurance. In an seminal interview George Stephanopoulos challenged President Obama on whether this mandate constituted, in effect, a tax increase on those at all income levels, including those making less than $250,000. Here is the exchange:

STEPHANOPOULOS: That may be, but it’s still a tax increase.

OBAMA: No. That’s not true, George. The — for us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase…

Recently, there have been a number of suits challenging the constitutionality of the individual mandate. The Administration has now argued in court that the mandate is essentially an exercise of Congress’s power to tax.

If a policy requires one public face and a contradictory legal argument to buttress it in court, even if wise, such a policy serves to undermine trust in government and weaken the moral authority important for the implementation of that policy.

Public Sentiment is Everything

Saturday, March 6th, 2010

“In this and like communities, public sentiment is everything. With public sentiment, nothing can fail; without it nothing can succeed. Consequently he who moulds public sentiment, goes deeper than he who enacts statutes or pronounces decisions. He makes statutes and decisions possible or impossible to be executed.”Abraham Lincoln.

Abraham Lincoln and Stephen Douglas engaged a series of debates in pursuit of the Senate seat from Illinois in 1858. The campaign was indirect in that state legislatures appointed Senators at the time. Hence, Lincoln and Douglas were entrusted with the banners of their respective parties (Republican and Democrat) to wrestle control of the Illinois legislature.

The key Lincoln argument was that the Federal Government can and ought to control whether or not slavery was permitted in the territories as they became states. That had been the conventional wisdom since the adoption of the US Constitution. Moreover, Lincoln was concerned that the logical extension of the infamous Dred Scott decision — a radical departure from Constitutional precedent asserting that local state law against slavery was superseded by Constitutional protections of property — was that states would be prohibited from banning slavery. Douglas argued for local popular sovereignty as to the question of the extension of slavery. Douglas refused to concede that the logic of the Court in Dred Scott would be used to compel slavery to by recognized in all states.

Lincoln was subject to the criticism of hypocrisy. He personally objected to slavery, but it was not his position to abolish slavery in those states in which it had already been established. The key [1] he used to free himself cage of hypocrisy was the observation that “Public sentiment is everything.” In the South, public sentiment would make the abolition of slavery impossible. Perhaps with time, public sentiment would change, but it was imprudent to impose a policy against which there was strong public antipathy. Lincoln was right. Ultimately, it would take a bloody Civil War to eliminate slavery.

We do not argue here that opposition to the particular health care reform offered by the Democrats is morally equivalent to the abolition of slavery  in 1858, or opposition to the current bill is as blind to the real moral issues as Stephen Douglas was. Indeed, there is a strong argument that individual freedom and liberty, at the very core of the anti-slavery position, animates opposition to the current health care bill. However, independent of the correctness of one policy or another, it is clear that a majority of Americans oppose the health care reform as the Democrats have cobbled it together. Most people want to start over with a clean slate to construct a more reasonable, less radical, and more transparent approach to change. Public sentiment is strongly against the President and Congress.

President Barack Obama fancies himself in the mold of Abraham Lincoln, a tall well-spoken person from Illinois, elected President despite modest beginnings. If the comparison is to be more than superficial, Obama ought to adopt the profound wisdom of his erstwhile political model. Leadership in this case requires making a successful public case for Obama’s brand of health care reform before compelling its implementation against the clear public sentiment. Obama has the opportunity to be one who is “deeper than he who enacts statutes or pronounces decisions.”

[1] David Zarefsky, “‘Public Sentiment Is Everything’: Lincoln’s View of Political Persuasion,” Journal of the Abraham Lincoln Association, Summer 1994.

Edward Kennedy’s Gifts

Sunday, January 24th, 2010

All politicians make political calculations, weighing different options in the messy process of legislation and forming political arrangements. Political compromise and adjustment is a necessary and important skill for free societies governed by a combination of chief executives and legislatures, often of different political parties. However, is it wrong to admit a guilty pleasure – schadenfreude – when Machiavellian manipulations, outside the scope of political good faith and respect for free institutions, backfire?  For at least a couple of these pleasures, we can turn to the late Senator Edward Kennedy.

Perhaps Edward Kennedy’s greatest unintentional gift to Conservatives came during the 1980 presidential campaign. High inflation, high unemployment, and high interest rates had severely eroded the political popularity of President Jimmy Carter. The political positions of  Kennedy and Carter did not differ much substantively, but a weak incumbent gave Kennedy an opportunity for a primary challenge and ti serve personal ambition. Although Kennedy won only ten primaries to Carter’s twenty-four, Kennedy ate away at Carter’s support by continuing his challenge to the convention, hoping for rules changes there that might give Kennedy the nomination. The number of Carter delegates was too overwhelming and they defeated Kennedy’s procedural challenges at the convention. Out of respect, Kennedy was given the opportunity to address the convention. In a rousing conclusion, Kennedy acknowledged defeat but despite his loss “the work goes on, the cause continues, the hope still lives, and the dream shall never die.”   The speech made Carter’s later performance seem mediocre. Although Carter survived the Kennedy challenge, he emerged from the Democratic National Convention weaker, leading a demoralized and divided Democratic Party, helping in part to usher the Reagan era. Thank you.

In 2004, the other Senator from Massachusetts, John Kerry, was running against President George W. Bush. If Kerry managed to defeat the incumbent president, under state law, Republican Governor Mitt Romney would appoint a Senator to fill out the term. A Republican Senator from Massachusetts was too much for Democrats to stomach. With the encouragement of Kennedy, the Democratically-dominated state legislature gamed the system. They changed the law to establish a special election to fill vacancies.  Reasonable and well-intentioned people can disagree about  the appropriate procedure  for filling a senatorial vacancy. However, this change was not based on principle, but was intentionally designed to gane the system for immediate political advantage. This decision would ultimately come back to haunt Kennedy and Democrats in Massachusetts.

Kennedy’s signature issue was health care. He has always advocated a government managed and financed health care system. When he unfortunately took ill in 2009 with what proved to be terminal cancer he knew that he might not survive to usher through health care reform. His last votes in the Senate were in early April 2009. If Kennedy had resigned under these circumstances, he could have provided ample opportunity for a hand-picked successor to win election as Senator with his direct endorsement. However, political vanity was more important and Kennedy hung on to his office until his death in August, 2009. The cause of health care reform would have been better served if he resigned, but a personal desire to keep his office-for-life overwhelmed this calculation. Kennedy did not know with certainty that  clinging to office would undermine the cause of his life, but he did know that he was no longer capable of leading or even participating in the fight in the Senate. Kennedy clutched to his office until the end. Is it too mean-spirited to exploit the metaphor that while health care legislation was drowning, Kennedy was swimming to the shore of personal political indulgence?

If the Massachusetts senatorial succession procedure had not been altered in unashamedly political manipulation in 2004,  Democratic Governor Deval Patrick would have appointed a Democrat to fill out Edward Kennedy’s term. There would have been no opportunity for Republican Scott Brown to ride a wave a political dissatisfaction with conspicuous manipulations and payoffs to arrive at medicare legislation, and  to  upset the Democratic candidate Martha Coakley. Scott’s election killed health care legislation in its current form and wounded the Democratic Party. For this we, we can in no small measure thank Edward Kennedy and recognize the justice that self-aggrandizement and political corruption was not in this case rewarded.

Cool and Sedate Reflection

Sunday, January 17th, 2010

There are two traditional models for political representation: that of  a “delegate” or a  “trustee.”

A delegate is sent to a representative body to vote the way he believes his constituents would want him to. Such a delegate aligns his views directly with the collective views of the people he represents. He embodies his constituency. The delegate theory of representation is favored by populists and some early founders.  In the extreme limit, the delegate theory reduces to a more efficient way to implement a plebiscite democracy — the kind of democracy that through referenda has made California almost ungovernable.

The trustee model of representation holds that a constituency votes for a representative whose judgment they trust and rely upon. A trustee has the time to consider legislation in detail, and pursues legislation that would balance the benefits of the whole polity and the local constituency – even if the constituency disagrees with a particular position. In the extreme limit, a trustee model of the representation can degenerate to rule by the elite.

Some Congressional and Senatorial representatives subscribe to a hybrid of the above models. They believe they are sent to Washington to vote a certain way on one or two conspicuous issues  (e.g., gun control, abortion, farm legislation), while they are free to exercise their judgment in most other areas.

Conservatives, at least those who have not surrendered to populist temptations, subscribe to the trustee theory of representation, as advocated by William Burke and articulated by Alexander Hamilton in Federalist 71:

“The republican principle demands that the deliberate sense of the community should govern the conduct of those to whom they entrust the management of their affairs; but it does not require an unqualified complaisance to every sudden breeze of passion, or to every transient impulse… When occasions present themselves, in which the interests of the people are at variance with their inclinations, it is the duty of the persons whom they have appointed to be the guardians of those interests, to withstand the temporary delusion, in order to give them time and opportunity for more cool and sedate reflection.”

How should the trustee model of representation apply to the current debate about health care “reform?” A clear majority of Americans are doubtful of and opposed to the current version(s) of health care reform as they understand it (them) . Nonetheless, if in its  best deliberative judgment, Congress believes the reform is in the best interests of the country, then  the trustee model of representation would suggest that they vote in accordance with their best judgment.

There remain, however, several mitigating factors. The current health care reform proposal represents very radical adjustments of present arrangements,  and prudence suggests that we can expect comparably large unintended consequences. The results of truly “cool and sedate” deliberation rarely result in abrupt or radical changes.  Moreover, the ultimate success of such a complicated enterprise depends in part on its acceptance by the polity. Even if one believes that health care reform could theoretically produce better results, if the country does not subscribe to the same conclusion, it may reduce the probability of success. Strong public animosity to legislation is not an irrelevant consideration to someone entrusted as a representative.

It would be disingenuous for Democrats to argue that they are modulating the passing whims of the people with “cool and sedate  reflection,” while negotiating behind closed doors and buying  off special interests with targeted deals for Louisiana, Nebraska, and the unions. Rather than reducing volatility, Congress seems to be rushing headlong to pass a bill before popular sentiment makes it more difficult for representatives concerned about re-election to support the bill.

Liberal Democrats would be understandably disappointed if they cannot manage health care reform. However, the compromises  being agreed to (and supported by large pharmaceutical and  insurance companies) will likely create a system far different from the one they originally envisioned. Indeed, if presented with the current proposal a year ago, they would likely be embarrassed by it. The drive to get something — anything — rather than calm consideration is the driving ethos. Part of the discipline of a democracy is to maintain the good judgment not to push the polity too far from the direction they can be persuaded to travel. This political discipline and respect for the governed has been trampled in the stampede to health care. It is time for Congress to step back, pause, and reflect coolly and sedately about appropriate changes to current health insurance arrangements.

Obama Transfer of Money to the Wealthy

Sunday, October 18th, 2009

There have been devastating effects of the current recession on many millions of Americans. Unemployment hoovers around 10% and 300,000 homes a month are being foreclosed upon. The amount of real suffering should not be underestimated. However, one small economic metric has modulated. Inflation has been near zero and indeed for some months prices have decreased. As a consequence, social security payments, which are indexed to inflation, are not scheduled to increase this year. The Obama Administration has decided to give seniors a $250 check in addition to the $250 sent out to seniors in February at a cost of $13 billion dollars.

The irony is that these payments represent a transfer of money from the least wealthy to the wealthiest portion of society. The median wealth of those in the 60-69 age range is the highest in society. There are certainly seniors who are not wealthy, but the $250 payment is given to all social security recipients regardless of wealth or income. The transfer payment is regressive. Perhaps, wealth seniors ought to be encouraged to send their $250 check to their grandchildren who will be ultimately responsible for the repayment of the increase debt necessitated by the payment.

Why would the Obama Administration who talks about reducing economic inequality countenance a transfer of wealth to the flush elderly? Is it because the elderly have turned against Obama’s health care proposals and this payment might increase the popularity of Obama among seniors? As Obama asked, “Do we participate in a politics of cynicism or a politics of hope?”

Obama Undermines His Own Credibility

Saturday, October 3rd, 2009

Scott Rasmussen is at the peak of the polling industry having been one of, if not the most, accurate predictor of the last presidential election. It is pretty straightforward for anyone to conduct a poll, but to adjust polls properly for how many Democrats and Republicans or how many likely voters there are in the sample, is either a very sophisticated science or an art. Rasmussen has been tracking the standing of President Barack Obama with likely voters since the inauguration.

Obama came into office with a 65% approval rating among likely voters, with 44% percent strongly approving. Rasmussen has been trying to estimate the passion behind approval or disapproval by also tracking the difference between those who “strongly approve” and those who “strongly disapprove.” When Obama became president, this index was at +28%. Clearly Obama came into office as a very popular figure, even for a freshly minted president.

Since then, his approval rating has steadily dwindled. Among likely voters, the total approval or disapproval rating is about 50-50, just as many people approve of Obama’s job performance as disapprove. However, the passion has definitely shifted toward those who disapprove. The difference between those who strongly approve shifted negative somewhere in June 2009, now hovers at about -10% though it fluctuates daily in the Rasmussen poll.

A general decline is to be expected. Some of this has been due to a worsening unemployment rate, now far higher than Obama promised when arguing for his stimulus package. As always, to govern is to decide. To decide is to make some people angry with your policies. Obama has been able to pass or at least propose very consequential legislation, from the stimulus package, to cap-and-trade, to medical care (now insurance) reform. There will be winners and losers as a result. This would explain a drop in Obama’s approval rating and an increase in those who strongly disapprove. However, there has been no parallel increase in those who strongly approve.

Allow me to respectfully suggest that this may be due in part to the fact Obama’s early mountain of credibility has been continuously eroded by the flow of his own words. A case a point is his argument that there is no intention for the “public option” for health insureance to be used as a wedge to create a single-payer system for health care. In this prime-time speech on health insurance reform, he said: “Now, my health care proposal has also been attacked by some who oppose reform as a `government takeover’ of the entire health care system… So let me set the record straight here. My guiding principle is, and always has been, that consumers do better when there is choice and competition. That’s how the market works.”

However, neither supporters of the President or others believe this. Congressman Barney Frank and others have spoken candidly about using the public option as a wedge for a single-payer system. The only thing that seems to unite those who support the President’s health insurance reform  and those who oppose it, is the conviction that a public option will inevitably lead to a single-payer system roughly analogous to Canada’s or England’s. Most realize that if the President was focused solely on more competition, he could simply urge the removal of  cross-state barriers to health insurance competition. The government could mandate the publication of doctors and hospital prices and institute health care savings accounts to increase competition in the health care and health insurance market. Very few people believe the public option is really about competition.

Obama supporters are forced to quickly glide by the president’s words and rationalize them as a way to get the health insurance reform bills passed in the current political environment. Supporters are left with a disappointment that Obama does not make the open case for the type of reform they want. Others are provided further evidence of duplicity. The president cannot  maintain his credibility if neither his supporters or opponents believe his words. If Obama and the Democrats cannot  make the open case for the reform they want — a single payer system —by being honest about it then in a society ruled by the assent of the governed, it should not pass.



Projection by the Left

Sunday, August 16th, 2009

It is hard to be too critical of the Left for the natural tendency to interpret events in the context of their own experience. Since the 1960’s in the United States, and even earlier elsewhere, the Left has made an fine art of organizing political protests. They have developed the organizations institutional and cultural frame works for protests and disruptions. Indeed, disruptions of public events are an honored tradition on the Left.

The Left favors the current structure and direction of the proposed healthcare reform. Hence, when Democratic (and some Republican) politicians conducted town hall meetings on health care legislation, most expected them to be rather perfunctory. The Right does not do protests, at least not well.  Moreover, town hall meetings, conducted in the heat of summer during the Congressional hiatus, are not usually well attended, and rarely controversial. This summer, the meetings have become raucous and passionate as many, particularly elderly Americans, complained about various features of healthcare reform. This is a particularly grave achievement, since there is no definitive bill yet.

The instinctive reaction on the Left is to project angrily their own tactics on to the protesters,  and to assume that the crowds were “manufactured” by Republicans and others. The people who opposed the proposed healthcare plan were called “un-American” by the House Speaker Nancy Pelosi and Majority leader Steny Hoyer. Democratic Senator Dick Durban suggested that protesters at town halls are pawns of health insurance companies. There was even the ugly suggestion that opposition to the Obama health care plan in rooted in racism against the president.

Democrats have argued that people at town hall meetings were inhibiting debate by shouting. It is always better to have calm discussions, but the purpose of town hall meetings is not only information exchange but also making clear to politicians the fervor of feeling. The argument of Democrats for deliberate informed debate would appear less disingenuous, if they had not try to rush through a complex, 1000-page bill. If Democratic plans had not unexpectedly crashed into a wave of popular discontent, a healthcare bill would have passed with little debate before the Congressional hiatus.

Almost certainly there were some activist Republicans  at these town hall meetings, but  Republicans only wish that they could organize well enough to fill town hall meetings with passionate partisans. Many Conservatives, particularly those of a Libertarian bent, are not the most hospitable to top-down organizations. No, the feelings at the meetings were generally authentic. Speaker Pelosi could not even acknowledge that the emotions at the meetings represented a “grass roots” movement and disparagingly referred to the movement as “astroturf.”

The tactic of the Left to impugn the intelligence or motives of Conservatives is sometimes effective. Ask former Vice-Presidential candidate Sarah Palin. Some are hesitant to defend such politicians lest they too be considered uncool or stupid. However, with regard to the town hall meetings, Democrats and the Left were not insulting politicians. This time, they insulted regular Americans, people who looked much like family or neighbors. The public felt that those in power where not only not listening, but disputing motives and even the right to challenge their Congressional representatives. That is one reason why the chant “You work for us!” secured quick popularity. Indeed, average people are more sympathetic with the protesters, since the protests began. Even more importantly support for Congressional healthcare plans has plummeted. If Democrats wish to revive the chances of passage of their healthcare proposals, the supposed party of the low and middle class must learn to respect their charges — at least in public.