Less than two days after being released publicly, it appears that Senate Majority Leader Mitch McConnell's health insurance bill, the Better Care Reconciliation Act, is d.o.a. Five senators have already announced their opposition to the bill as presently drafted. A half-dozen or more have expressed concerns. Since the doubters include both Tea Party types and moderates, McConnell is in a bind. If he offers compromises to win over the Tea Partiers, he will likely lose some moderates. If he offers compromises to satisfy the moderates, he will likely lose some Tea Partiers. It looks virtually impossible for him to get at least 50 votes.
The Senate will vote soon on this bill--which is basically tax legislation that cuts taxes for the rich and funds those cuts by taking away health insurance coverage for a lot of mostly poor people--and it will either pass (unlikely) or fail (likely). If it fails, what then? Obamacare is struggling, with insurers pulling out of exchanges and premiums rising sometimes dramatically. The Trump Administration and the Republican Congress have created so much uncertainty that health insurers apparently feel compelled to raise rates sharply. Whether or not any replacement for Obamacare is passed, this uncertainty will remain, and rising premiums may force many people to drop insurance coverage. Thus, the number of people losing health insurance will rise under the Trump Administration even if Obamacare survives.
Forcing people to go uninsured is political anathema in America today. Whether or not the Republicans like it, Obamacare established the baseline principle that all Americans are entitled to comprehensive health insurance coverage at an affordable cost. Both Republican and Democratic voters subscribe to this principle, and legislators who violate the principle do so at the peril of their re-election. But with Republican machinations making Obamacare increasingly unworkable, a replacement will have to be found.
Realistically, the only option left is a single payer system, with private insurance available as an optional supplement. Private health insurance doesn't work well, especially when it comes to covering the poor, the sick (i.e., those with prior medical conditions) and the elderly. That's why Obamacare is unwieldy and the Republican alternatives are worse. We've already figured out that single payer is needed for the elderly, and established Medicare. It works well. Medicare can be supplemented by private insurance coverage and often is. Sure, Medicare has long term funding issues. But have you noticed how premiums demanded by private health insurers are going through the roof? It's hard to believe that a government funded program would be more expensive.
Essentially all other advanced industrialized nations have single payer health insurance systems (or national health care, like the UK system), with per capita costs that are far lower than America's and better health outcomes overall. No other advanced industrial nation has the extremely expensive and increasingly dysfunctional mish-mash of private coverage that America has. Single payer systems are imperfect, and the availability of optional private supplements can ameliorate many of the imperfections. The current Republican White House and Congress won't adopt a single payer system. But their failure to do anything intelligent with health insurance coverage will push America toward the only realistic health insurance option remaining.
Showing posts with label health insurance reform. Show all posts
Showing posts with label health insurance reform. Show all posts
Saturday, June 24, 2017
Friday, April 26, 2013
Will the Affordable Care Act Lower Health Insurance Costs?
In 2014, two of the most important provisions of the Affordable Care Act take effect. These require health insurers to accept all applicants without regard to prior medical conditions, and to provide unlimited coverage. Although some recent news stories indicate that health insurers are raising premiums in 2014 to compensate for these provisions, it's possible to foresee a time when these same provisions will constrain the growth of health insurance costs.
These requirements--no exclusion for prior medical conditions and unlimited coverage--provide powerful incentives for insurers to manage health care rationally. Currently, many health insurers endeavor to limit their exposure to the costliest patients (i.e., those with existing medical conditions and those needing very expensive care). In other words, insurers attempt to avoid covering those most in need of coverage. It's no surprise that the most common reason for individuals to file bankruptcy is unmanageable medical bills. It is perhaps surprising that most of these individuals have some health insurance coverage--but not enough.
By forbidding insurers to squeeze out those in the greatest need of coverage, the Affordable Care Act now steers insurers' attention toward managing care rationally and providing the best quality, most effective care. Preventive care, such as regular physicals, screenings, immunizations, wellness programs, and so on will take priority. People will hopefully fall ill and injure themselves less often and perhaps less severely. In the long run, this fundamental change in approach may lower the growth of premiums, as improvements in health from better preventive care hopefully reduce the need for medical treatment. Premiums will rise next year for many--but only because they're getting better coverage. And that improved coverage may pay off in the long run.
These requirements--no exclusion for prior medical conditions and unlimited coverage--provide powerful incentives for insurers to manage health care rationally. Currently, many health insurers endeavor to limit their exposure to the costliest patients (i.e., those with existing medical conditions and those needing very expensive care). In other words, insurers attempt to avoid covering those most in need of coverage. It's no surprise that the most common reason for individuals to file bankruptcy is unmanageable medical bills. It is perhaps surprising that most of these individuals have some health insurance coverage--but not enough.
By forbidding insurers to squeeze out those in the greatest need of coverage, the Affordable Care Act now steers insurers' attention toward managing care rationally and providing the best quality, most effective care. Preventive care, such as regular physicals, screenings, immunizations, wellness programs, and so on will take priority. People will hopefully fall ill and injure themselves less often and perhaps less severely. In the long run, this fundamental change in approach may lower the growth of premiums, as improvements in health from better preventive care hopefully reduce the need for medical treatment. Premiums will rise next year for many--but only because they're getting better coverage. And that improved coverage may pay off in the long run.
Tuesday, March 22, 2011
Health Insurance for Pre-existing Conditions
[Updated Feb. 19, 2013]
If you're healthy, health insurance is an expensive annoyance. You know you should have it, but it seems like a waste of money. And millions of Americans go without health insurance, because they don't want to be expensively annoyed. But if they get sick or are injured while uninsured, they learn the hard way that, even more than a loan, health insurance is hard to get when you really need it. That's why you should always have health insurance, especially if you're in good health (when it's much easier to get).
Once you become sick or are injured, you have a pre-existing condition. From the perspective of a health insurer, that very possibly makes you a losing proposition. No one likes losing propositions, and certainly not insurance companies, whose business is, in essence, to bet on the health of their customers. Very few people today contract leprosy, but a lot of people who have a pre-existing condition and are uninsured learn what it feels like to be a leper.
So how can you protect yourself?
Get health insurance while you're healthy. The best way to cover pre-existing conditions is to be insured at the time they first occur. It's now illegal for insurance companies to drop coverage for customers who get sick or are injured. Axing customers who might actually make claims is prohibited by the federal health insurance reform enacted last year (derisively called Obamacare, but it really does help those who are sick or injured).
Keep your current health insurance. If you are covered by health insurance, keep it. That would mean exercising your COBRA rights if your employment is terminated. As your COBRA coverage expires (usually after 18 months), buy an individual policy to continue coverage. Avoid time gaps in coverage--continuous coverage one way or another makes it essentially impossible for insurers to stiff you on pre-existing conditions.
Be young. Last year's health insurance reform law now makes it illegal for insurers to decline coverage for children under the age of 19 due to pre-existing conditions. In addition, young adults up to age 26 may be covered under their parents' health insurance (if their parents have family coverage).
Be old. If you're 65 or older, make sure you're enrolled in Medicare (at least Parts A and B, and also Part D if you don't otherwise have prescription medication insurance). Pre-existing conditions are covered by Medicare.
State pools. Many states have insurance pools that offer coverage for their residents with pre-existing conditions. These pools can be expensive. But being uninsured with a pre-existing condition can be more expensive.
Federal High Risk Pool. A federal program created by last year's health insurance reform provides coverage to those who are uninsured with pre-existing conditions. This program isn't cheap, but is less expensive than many state pools. (A problem for those in state pools who want to switch to the lower cost federal program is that you have to be uninsured for something like six months before you can get into the federal program; that's because the federal program is meant to help the uninsured, not the expensively insured.) The federal high risk pool expires in 2014, when a permanent program for comprehensive nationwide health insurance coverage is supposed to begin. The website for the federal high risk program is at www.pcip.gov. Feb. 19, 2013 update: the federal high risk pool is closing on Feb. 22, 2013 because of funding problems. If you want to participate, get your application in by Feb. 22, 2013. If you miss this deadline, look for any available state insurance pool, find out if you're eligible for Medicaid (see below), try a community health center, and wait until 2014, when comprehensive insurance coverage under the Affordable Care Act will become available.
2014. If you live until 2014, a comprehensive nationwide program for health insurance coverage will begin, which will prohibit health insurers from excluding pre-existing conditions. Insurance for those who otherwise aren't covered can be purchased through so-called health insurance exchanges. Your home state may offer an exchange (possibly in conjunction with other states), and a federal exchange will be available if your state does not offer one.
And if you're broke? If your financial condition is sufficient modest, you may qualify for Medicaid (it's primarily for people with dependent children or a disability). You might also be able to get care at a community health center (which generally serve the low income). And there's always the hospital emergency room, which provides care to the indigent (although it may not be as comprehensive as the care provided to the insured).
For more information, see http://blogger.uncleleosden.com/2010/04/benefits-of-federal-health-insurance.html, and http://blogger.uncleleosden.com/2007/06/how-to-find-health-insurance.html. The U.S. Department of Health & Human Services provides a website where you can research health insurance options: http://www.healthcare.gov/.
Tuesday, February 1, 2011
Will the Federal Courts Pave the Way for Single-Payer National Health Insurance?
The score over the constitutionality of last year's federal health insurance reform is 2 - 2. Two federal courts have ruled it's constitutional and two more have decided that at least part of it isn't. The feature on which disapproving judges focused is the requirement beginning in 2014 that the uninsured buy individual coverage. The government contends that this requirement is permitted by the Constitution's Commerce Clause (which allows Congress to regulate matters affecting interstate commerce). Opponents assert that the law purports to regulate inaction--being uninsured--and that inaction isn't commerce.
Proponents respond that life is more complicated than that. As a society, we don't toss the uninsured in the gutter, to die slow, painful, lingering deaths. Instead, they are treated, and if they can't pay cash (which is very often the case), the cost of their care is borne by the rest of us in the forms of higher hospital charges, larger co-pays and deductibles, and steeper health insurance premiums. This imposition of costs on paying patients has interstate impact, and consequently allows federal health insurance reform under the Commerce Clause, proponents contend.
The final word on constitutionality rests with the U.S. Supreme Court. Given the split among lower courts, the Supremes will almost surely take the issue. Predicting the weather is easier than figuring out how the Supremes will rule.
It's interesting to consider that, if the Big Court gives the new law a thumbs down, it may well pave the way for a single-payer national health insurance system. Even if a federal requirement for an individual to buy health insurance goes beyond Congress' constitutional authority, a taxpayer funded single-payer, comprehensive national health insurance program would surely be constitutional. We already have such a system for Americans 65 and older (it's called Medicare), and another such system for many with low incomes (called Medicaid).
Today's Republican controlled House would strenuously resist a single-payer system. But the naysayers have no serious alternative. The baseline problem for Republicans (and those Democrats who voted against last year's health insurance reform) is that no one, not conservatives, moderates or liberals, want the system we had before last year's reform. That "system," with its hodge-podge, hit-or-miss, luck of the draw "coverage," left tens of millions uninsured, tens of millions more underinsured, and numerous Americans going without treatment until their problems became severe enough for an emergency room visit, where others (i.e., the insured) would pick up the high costs of the uninsureds' care. If last year's reform is tossed out by the courts, there will be enormous political pressure for an alternative. The Republicans, who have been singularly feckless in improving the health insurance system, will find themselves losing favor with an electorate struggling for coverage. This is one issue where the party of No will have to rethink its message. Reality is that we'll have health insurance reform one way or another, if not now, then pretty soon.
Last year's health insurance reform was a rather complex political compromise designed to make Americans face a simple fact of health insurance: it's fairest and most sensible when everyone contributes to the cost. (That's why state laws require all motor vehicles to be insured.) If last year's reform doesn't survive judicial review, a single-payer national health insurance system may be the one alternative sure to withstand constitutional challenge. Other alternatives would be much more complex, and therefore exposed to legal challenge (when it comes to the law, complexity begats litigation and simplicity tends to avoid it).
Many taxpayers may not like a comprehensive, single-payer system because of fears of rising costs. But those rising costs are already smacking those of us who are insured, through our premiums, co-pays and deductibles. The rising costs are less a function of the insurance system we have than of expensive advances in medical technology and the extensive care sometimes given the very elderly. Dealing with these issues involves difficult ethical questions, but leaving people uninsured won't solve these problems.
A ruling against last year's reform will likely limit Congress' options for the structure of a replacement program. It won't persuade voters to accept a return to the Dickensian grimness of the status quo ante. If last year's reform is struck down, the single-payer national program may well rise up from last year's ashes. This probably wouldn't be what the federal judges ruling against the reform intend, but we often get what we don't intend.
Proponents respond that life is more complicated than that. As a society, we don't toss the uninsured in the gutter, to die slow, painful, lingering deaths. Instead, they are treated, and if they can't pay cash (which is very often the case), the cost of their care is borne by the rest of us in the forms of higher hospital charges, larger co-pays and deductibles, and steeper health insurance premiums. This imposition of costs on paying patients has interstate impact, and consequently allows federal health insurance reform under the Commerce Clause, proponents contend.
The final word on constitutionality rests with the U.S. Supreme Court. Given the split among lower courts, the Supremes will almost surely take the issue. Predicting the weather is easier than figuring out how the Supremes will rule.
It's interesting to consider that, if the Big Court gives the new law a thumbs down, it may well pave the way for a single-payer national health insurance system. Even if a federal requirement for an individual to buy health insurance goes beyond Congress' constitutional authority, a taxpayer funded single-payer, comprehensive national health insurance program would surely be constitutional. We already have such a system for Americans 65 and older (it's called Medicare), and another such system for many with low incomes (called Medicaid).
Today's Republican controlled House would strenuously resist a single-payer system. But the naysayers have no serious alternative. The baseline problem for Republicans (and those Democrats who voted against last year's health insurance reform) is that no one, not conservatives, moderates or liberals, want the system we had before last year's reform. That "system," with its hodge-podge, hit-or-miss, luck of the draw "coverage," left tens of millions uninsured, tens of millions more underinsured, and numerous Americans going without treatment until their problems became severe enough for an emergency room visit, where others (i.e., the insured) would pick up the high costs of the uninsureds' care. If last year's reform is tossed out by the courts, there will be enormous political pressure for an alternative. The Republicans, who have been singularly feckless in improving the health insurance system, will find themselves losing favor with an electorate struggling for coverage. This is one issue where the party of No will have to rethink its message. Reality is that we'll have health insurance reform one way or another, if not now, then pretty soon.
Last year's health insurance reform was a rather complex political compromise designed to make Americans face a simple fact of health insurance: it's fairest and most sensible when everyone contributes to the cost. (That's why state laws require all motor vehicles to be insured.) If last year's reform doesn't survive judicial review, a single-payer national health insurance system may be the one alternative sure to withstand constitutional challenge. Other alternatives would be much more complex, and therefore exposed to legal challenge (when it comes to the law, complexity begats litigation and simplicity tends to avoid it).
Many taxpayers may not like a comprehensive, single-payer system because of fears of rising costs. But those rising costs are already smacking those of us who are insured, through our premiums, co-pays and deductibles. The rising costs are less a function of the insurance system we have than of expensive advances in medical technology and the extensive care sometimes given the very elderly. Dealing with these issues involves difficult ethical questions, but leaving people uninsured won't solve these problems.
A ruling against last year's reform will likely limit Congress' options for the structure of a replacement program. It won't persuade voters to accept a return to the Dickensian grimness of the status quo ante. If last year's reform is struck down, the single-payer national program may well rise up from last year's ashes. This probably wouldn't be what the federal judges ruling against the reform intend, but we often get what we don't intend.
Monday, January 3, 2011
A Tale of Two Recoveries
Near unanimity reigns on Wall Street that the economy will keep expanding and the stock market will rise further this year. Corporate profits are growing as worker productivity improves. Commodities prices are levitating. Retail sales have moderately increased. Even junk bond yields are relatively benign. Stock market investors, even if still shell shocked from two years ago, are doing better. In the tonier parts of Standard Metropolitan Statistical Areas, things are looking up.
Evidence of recovery is harder to find elsewhere. Food banks remain heavily patronized. Unemployment levels cling tenaciously near the 10% level. The long term unemployed are becoming entrenched in joblessness. Wages are stagnant. Many unemployed who find jobs have to accept lower incomes. Real estate prices are dropping again, after a brief and shallow upswing. Mortgage rates have risen off record lows, dampening refinancings and home purchases.
There has never been a lasting economic recovery without a restoration of full employment and a strong housing market. Neither seems to be in the offing, not for years. America is dividing into two camps. There are the relatively few well-off, who own most of the assets and are the least likely to be laid off. They have more resources to ride out the bad times and greater opportunities to profit from a rebound. Then, there is everyone else, for whom the Great Recession continues.
Today's politics only exacerbate the divide. Many moderate and middle income taxpayers, frustrated by the disparate impact of the recovery, became Tea Partiers and voted Republican. But the resurgent Republicans made sure that the wealthy were protected in the tax deal they cut with President Obama this past fall. The same tax deal also gave everyone a 2% cut in Social Security taxes, while the more progressive $400 Making Work Pay tax credit wasn't renewed. The first legislative maneuver by the new Republican majority in the House is to schedule a vote to repeal last year's health insurance reform law. This symbolic digital salute will do nothing to improve the economy or help the unemployed.
Deficit reduction is on every politician's list of resolutions for this year. But you know how it goes with New Year's resolutions. There's more water to be found in the Sahara than spending cuts in Washington. Last fall's tax deal, the first major product of the new bipartisanship, widened the deficit. The only way to truly reduce the deficit is to cut Social Security and Medicare spending, and/or raise taxes. Recent polls show that a large majority of Americans, from Millenials to the World War II generation, oppose cuts in either program. Yet there is no way today's Republican-controlled House would sign off on tax increases (even though a recent poll shows most Americans favor increasing taxes on the well-to-do in order to balance the budget). So the new bipartisanship will produce, at best, nominal deficit reductions in highly visible ways (a la the two-year pay freeze for federal employees, which hardly affects the deficit but sounds good in press releases). Given that today's recovery is largely due to deficit spending and the slackest monetary policy ever adopted by the Fed, there is little incentive in Washington to control deficits. No politician wants to be the grinch that stole the recovery.
But for most Americans (i.e., the majority trapped in stagnation), there hasn't been much of a recovery to steal. Current projections are for high unemployment and depressed real estate prices to linger for years after 2012. America may be morphing into a society where a small group of elites enjoy prosperity while everyone else just gets by (or not). That's not a good development for a nation dedicated to the pursuit of happiness. America was founded by immigrants aspiring for better lives. If hope dies, the essence of the nation is lost. The damage from the Great Recession will be great, indeed, if the nation loses its heart.
Evidence of recovery is harder to find elsewhere. Food banks remain heavily patronized. Unemployment levels cling tenaciously near the 10% level. The long term unemployed are becoming entrenched in joblessness. Wages are stagnant. Many unemployed who find jobs have to accept lower incomes. Real estate prices are dropping again, after a brief and shallow upswing. Mortgage rates have risen off record lows, dampening refinancings and home purchases.
There has never been a lasting economic recovery without a restoration of full employment and a strong housing market. Neither seems to be in the offing, not for years. America is dividing into two camps. There are the relatively few well-off, who own most of the assets and are the least likely to be laid off. They have more resources to ride out the bad times and greater opportunities to profit from a rebound. Then, there is everyone else, for whom the Great Recession continues.
Today's politics only exacerbate the divide. Many moderate and middle income taxpayers, frustrated by the disparate impact of the recovery, became Tea Partiers and voted Republican. But the resurgent Republicans made sure that the wealthy were protected in the tax deal they cut with President Obama this past fall. The same tax deal also gave everyone a 2% cut in Social Security taxes, while the more progressive $400 Making Work Pay tax credit wasn't renewed. The first legislative maneuver by the new Republican majority in the House is to schedule a vote to repeal last year's health insurance reform law. This symbolic digital salute will do nothing to improve the economy or help the unemployed.
Deficit reduction is on every politician's list of resolutions for this year. But you know how it goes with New Year's resolutions. There's more water to be found in the Sahara than spending cuts in Washington. Last fall's tax deal, the first major product of the new bipartisanship, widened the deficit. The only way to truly reduce the deficit is to cut Social Security and Medicare spending, and/or raise taxes. Recent polls show that a large majority of Americans, from Millenials to the World War II generation, oppose cuts in either program. Yet there is no way today's Republican-controlled House would sign off on tax increases (even though a recent poll shows most Americans favor increasing taxes on the well-to-do in order to balance the budget). So the new bipartisanship will produce, at best, nominal deficit reductions in highly visible ways (a la the two-year pay freeze for federal employees, which hardly affects the deficit but sounds good in press releases). Given that today's recovery is largely due to deficit spending and the slackest monetary policy ever adopted by the Fed, there is little incentive in Washington to control deficits. No politician wants to be the grinch that stole the recovery.
But for most Americans (i.e., the majority trapped in stagnation), there hasn't been much of a recovery to steal. Current projections are for high unemployment and depressed real estate prices to linger for years after 2012. America may be morphing into a society where a small group of elites enjoy prosperity while everyone else just gets by (or not). That's not a good development for a nation dedicated to the pursuit of happiness. America was founded by immigrants aspiring for better lives. If hope dies, the essence of the nation is lost. The damage from the Great Recession will be great, indeed, if the nation loses its heart.
Thursday, October 21, 2010
What If Federal Health Insurance Reform is Unconstitutional?
The constitutionality of the 2010 health insurance reform is now being actively litigated in several federal district courts. So far, the law has stood. The provision with the greatest chance of being struck down by the courts is the provision requiring most uninsured individuals to buy insurance coverage in 2014 or pay a tax.
This requirement makes sense from an insurance standpoint, since it helps spread the cost of coverage among a broader, rather than narrower, group of people. A similar requirement was included in recent health insurance reform in Massachusetts.
The basic claim of unconstitutionality of the federal requirement is that it is beyond the constitutional authority of the federal government. The federal government, as we all learned in high school, has only the powers conferred on it by the Constitution. Opponents of the health insurance reform argue that the new law amounts to an exercise of general governmental police powers, something that a state government could do but which is outside the limited grants of federal authority set forth in the Constitution.
First things first. It's highly unlikely that, if the courts find the 2014 mandatory insurance purchase requirement unconstitutional, they would strike down the entire health reform legislation. The Supreme Court has instructed that if one part of an act of Congress is unconstitutional, the offending part is to be severed and, normally, the rest of the act is to be upheld. This principal of limiting the impact of findings of unconstitutionality was recently applied in a case called Free Enterprise Fund v. PCAOB, handed down in June 2010. In that case, the Supreme Court found that one aspect of the law creating the PCAOB (an organization regulating accountants) was unconstitutional (in that the SEC could remove governing board members of the PCAOB only for good cause). But the court decided that, by tossing this one provision, the SEC would be able to remove governing board members at will and that such an interpretation of the law would make the PCAOB constitutional. So the Court excised the one bad provision of the law and upheld the rest.
Such an approach is likely to be applied to the health insurance reform. If the 2014 mandatory insurance purchase requirement is deemed unconstitutional, the rest of the law will probably stand.
Moreover, there is a pretty straightforward fix if the courts strike down the mandatory purchase requirement. That would be to make it voluntary for individuals to buy health insurance but charge them higher premiums the older they are when they buy in. This is the approach taken with Medicare Part B: it's voluntary but charges higher premiums the older a person is at the time he or she first enrolls.
The problem presented by voluntary enrollment is that people could wait until they are sick or injured before buying insurance. Because the new health insurance legislation requires insurance companies to accept all applicants and to cover pre-existing conditions (thus tremendously improving health insurance over today's morass), an individual could game the system and start paying premiums only when he or she needs expensive health care. By charging late enrollees higher premiums, Medicare Part B makes them pay for the risks and potential expenses they represent. The same could be done for younger folks.
Financial advisers generally advise older folks to sign up for Medicare Part B at the earliest opportunity (age 65) to avoid the higher premiums imposed for waiting. A comparable premium structure for younger folks could create the same incentive. The larger the pool of insured people, the more rational and fair health insurance in America will be. If the 2014 mandatory purchase requirement is struck down, a ready fix is available.
This requirement makes sense from an insurance standpoint, since it helps spread the cost of coverage among a broader, rather than narrower, group of people. A similar requirement was included in recent health insurance reform in Massachusetts.
The basic claim of unconstitutionality of the federal requirement is that it is beyond the constitutional authority of the federal government. The federal government, as we all learned in high school, has only the powers conferred on it by the Constitution. Opponents of the health insurance reform argue that the new law amounts to an exercise of general governmental police powers, something that a state government could do but which is outside the limited grants of federal authority set forth in the Constitution.
First things first. It's highly unlikely that, if the courts find the 2014 mandatory insurance purchase requirement unconstitutional, they would strike down the entire health reform legislation. The Supreme Court has instructed that if one part of an act of Congress is unconstitutional, the offending part is to be severed and, normally, the rest of the act is to be upheld. This principal of limiting the impact of findings of unconstitutionality was recently applied in a case called Free Enterprise Fund v. PCAOB, handed down in June 2010. In that case, the Supreme Court found that one aspect of the law creating the PCAOB (an organization regulating accountants) was unconstitutional (in that the SEC could remove governing board members of the PCAOB only for good cause). But the court decided that, by tossing this one provision, the SEC would be able to remove governing board members at will and that such an interpretation of the law would make the PCAOB constitutional. So the Court excised the one bad provision of the law and upheld the rest.
Such an approach is likely to be applied to the health insurance reform. If the 2014 mandatory insurance purchase requirement is deemed unconstitutional, the rest of the law will probably stand.
Moreover, there is a pretty straightforward fix if the courts strike down the mandatory purchase requirement. That would be to make it voluntary for individuals to buy health insurance but charge them higher premiums the older they are when they buy in. This is the approach taken with Medicare Part B: it's voluntary but charges higher premiums the older a person is at the time he or she first enrolls.
The problem presented by voluntary enrollment is that people could wait until they are sick or injured before buying insurance. Because the new health insurance legislation requires insurance companies to accept all applicants and to cover pre-existing conditions (thus tremendously improving health insurance over today's morass), an individual could game the system and start paying premiums only when he or she needs expensive health care. By charging late enrollees higher premiums, Medicare Part B makes them pay for the risks and potential expenses they represent. The same could be done for younger folks.
Financial advisers generally advise older folks to sign up for Medicare Part B at the earliest opportunity (age 65) to avoid the higher premiums imposed for waiting. A comparable premium structure for younger folks could create the same incentive. The larger the pool of insured people, the more rational and fair health insurance in America will be. If the 2014 mandatory purchase requirement is struck down, a ready fix is available.
Thursday, April 1, 2010
Benefits of Federal Health Insurance Reform
2010's federal health insurance reform includes a wide-ranging panoply of programs, credits and other measures. Folks currently covered by employer sponsored health insurance plans won't experience much immediate change. But over the next year and later, they'll see improvements.
Those having trouble getting coverage will find the new law a big improvement. The recent legislation isn't Internet-friendly--it can't be summarized to two paragraphs or less. But there are a number of provisions that could soon change things for millions of Americans. Here they are, with those taking effect sooner listed first.
Small Business Tax Credit. Small businesses may get a tax credit of as much as 35% of their employee health insurance premiums, depending on how large they are, starting immediately and running through 2013. Small, in this case, means small (as in no more than the equivalent of 25 full-time employees). These companies, which may number as many as 4 million, are perhaps the most likely not to offer health insurance to employees, so the credit could bring more people under the umbrella of employer-sponsored coverage. The credit will increase to 50% of premiums beginning in 2014 and is available for any two consecutive years at the 50% level.
Closing the Medicare D Doughnut Hole. Those covered by Medicare D policies who in 2010 hit the gap in coverage called the "doughnut hole" will be eligible for a $250 rebate. Beginning in 2011, a 50% discount (instead of the rebate) will be available for prescriptions filled in the doughnut hole. The doughnut hole will be closed in 2020.
Federal High Risk Pool. By the end of June, 2010, a federal high risk insurance pool will become available for persons with pre-existing conditions who are having trouble getting coverage otherwise. This pool is temporary, and will operate until federally established health insurance exchanges provide a permanent source of coverage beginning in 2014. At that point, persons with pre-existing conditions can purchase health insurance through the exchanges or some other way, such as individually acquiring coverage. You can more information and application options at https://www.pcip.gov/.
Federal Assistance for Employers Covering Early Retirees. By the end of June 2010, a temporary federal program will begin offering reinsurance to employers providing early retirees (i.e., those between the ages of 55 and 64) with health insurance during retirement. Reinsurance is an indirect way of subsidizing retiree health insurance coverage, and should make it easier for employers to maintain coverage for early retirees. (Retirees 65 and older are eligible for Medicare coverage, so the reinsurance program doesn't extend to them.) The reinsurance program will be superseded in 2014 by the health insurance exchanges.
No More Punishing the Sick. Just as banks are notorious for denying credit to those who need it the most, sometimes insurance companies drop customers because they fall ill. Beginning at the end of September 2010, insurance companies will be prohibited from engaging in this practice. Some Tiny Tims will enjoy Christmas early this year when their Scrooge-like health insurers can no longer ax them.
Children Under 19 Cannot Be Turned Down for Pre-existing Conditions. By the end of September 2010, insurers won't be able to turn down children under 19 because of pre-existing conditions. (By 2014, insurers won't be allowed to turn anyone down for pre-existing conditions.) The high risk pool mentioned above could cover children who aren't protected by this provision.
Young Adult Dependents Up to Age 26 Can Be Covered by Parents. By the end of September 2010, young adults up to age 26 who are dependents of their parents will be eligible for coverage under their parents' policies (unless they live in a state that mandates coverage to an older age, such as 28 or 29).
No Lifetime Caps on Coverage. By the end of September 2010, insurers won't be allowed to impose lifetime limits on coverage.
Phaseout of Annual Limits on Coverage. By the end of September 2010, insurers will face greater restrictions on their ability to place annual limits on coverage. By 2014, annual limits will be eliminated.
Free Preventive Care. By the end of September 201o, new private insurance plans will have to cover preventive care without co-pays or deductibles. Beginning in 2011, Medicare will provide the same free preventive care coverage.
Increased Funding for Community Health Centers. Beginning in October 2010, community health centers--clinics that provide primary care to mostly low income patients--will receive increased federal funding in order to almost double over the next five years the number of patients they treat. This should help alleviate the shortage of primary care throughout much of America.
Independent Appeals Process. By the end of September 2010, new health plans will be required to have independent appeals processes for customers denied claims or coverage. This could be very important if you or a family member have a major health issue.
This year's health insurance reform affects many other aspects of the health care system, and will be implemented over the next decade or so. A more permanent system with health insurance exchanges should be in place by 2014. The number of primary care practitioners should increase. The patchwork health insurance system of the past will gradually be phased down, and near universal coverage should result from the federal programs. In the meantime, if you want information about current health insurance resources, take a look at http://blogger.uncleleosden.com/2007/06/how-to-find-health-insurance.html. Illegal immigrants cannot participate in the federally sponsored system, and may have to fall back on the remnants of the old health care system. This limitation is understandable from a political standpoint. However, if an illegal immigrant has, for example, tuberculosis, meningitis or some other transmissible illness, we all benefit if that person gets good health care.
Those having trouble getting coverage will find the new law a big improvement. The recent legislation isn't Internet-friendly--it can't be summarized to two paragraphs or less. But there are a number of provisions that could soon change things for millions of Americans. Here they are, with those taking effect sooner listed first.
Small Business Tax Credit. Small businesses may get a tax credit of as much as 35% of their employee health insurance premiums, depending on how large they are, starting immediately and running through 2013. Small, in this case, means small (as in no more than the equivalent of 25 full-time employees). These companies, which may number as many as 4 million, are perhaps the most likely not to offer health insurance to employees, so the credit could bring more people under the umbrella of employer-sponsored coverage. The credit will increase to 50% of premiums beginning in 2014 and is available for any two consecutive years at the 50% level.
Closing the Medicare D Doughnut Hole. Those covered by Medicare D policies who in 2010 hit the gap in coverage called the "doughnut hole" will be eligible for a $250 rebate. Beginning in 2011, a 50% discount (instead of the rebate) will be available for prescriptions filled in the doughnut hole. The doughnut hole will be closed in 2020.
Federal High Risk Pool. By the end of June, 2010, a federal high risk insurance pool will become available for persons with pre-existing conditions who are having trouble getting coverage otherwise. This pool is temporary, and will operate until federally established health insurance exchanges provide a permanent source of coverage beginning in 2014. At that point, persons with pre-existing conditions can purchase health insurance through the exchanges or some other way, such as individually acquiring coverage. You can more information and application options at https://www.pcip.gov/.
Federal Assistance for Employers Covering Early Retirees. By the end of June 2010, a temporary federal program will begin offering reinsurance to employers providing early retirees (i.e., those between the ages of 55 and 64) with health insurance during retirement. Reinsurance is an indirect way of subsidizing retiree health insurance coverage, and should make it easier for employers to maintain coverage for early retirees. (Retirees 65 and older are eligible for Medicare coverage, so the reinsurance program doesn't extend to them.) The reinsurance program will be superseded in 2014 by the health insurance exchanges.
No More Punishing the Sick. Just as banks are notorious for denying credit to those who need it the most, sometimes insurance companies drop customers because they fall ill. Beginning at the end of September 2010, insurance companies will be prohibited from engaging in this practice. Some Tiny Tims will enjoy Christmas early this year when their Scrooge-like health insurers can no longer ax them.
Children Under 19 Cannot Be Turned Down for Pre-existing Conditions. By the end of September 2010, insurers won't be able to turn down children under 19 because of pre-existing conditions. (By 2014, insurers won't be allowed to turn anyone down for pre-existing conditions.) The high risk pool mentioned above could cover children who aren't protected by this provision.
Young Adult Dependents Up to Age 26 Can Be Covered by Parents. By the end of September 2010, young adults up to age 26 who are dependents of their parents will be eligible for coverage under their parents' policies (unless they live in a state that mandates coverage to an older age, such as 28 or 29).
No Lifetime Caps on Coverage. By the end of September 2010, insurers won't be allowed to impose lifetime limits on coverage.
Phaseout of Annual Limits on Coverage. By the end of September 2010, insurers will face greater restrictions on their ability to place annual limits on coverage. By 2014, annual limits will be eliminated.
Free Preventive Care. By the end of September 201o, new private insurance plans will have to cover preventive care without co-pays or deductibles. Beginning in 2011, Medicare will provide the same free preventive care coverage.
Increased Funding for Community Health Centers. Beginning in October 2010, community health centers--clinics that provide primary care to mostly low income patients--will receive increased federal funding in order to almost double over the next five years the number of patients they treat. This should help alleviate the shortage of primary care throughout much of America.
Independent Appeals Process. By the end of September 2010, new health plans will be required to have independent appeals processes for customers denied claims or coverage. This could be very important if you or a family member have a major health issue.
This year's health insurance reform affects many other aspects of the health care system, and will be implemented over the next decade or so. A more permanent system with health insurance exchanges should be in place by 2014. The number of primary care practitioners should increase. The patchwork health insurance system of the past will gradually be phased down, and near universal coverage should result from the federal programs. In the meantime, if you want information about current health insurance resources, take a look at http://blogger.uncleleosden.com/2007/06/how-to-find-health-insurance.html. Illegal immigrants cannot participate in the federally sponsored system, and may have to fall back on the remnants of the old health care system. This limitation is understandable from a political standpoint. However, if an illegal immigrant has, for example, tuberculosis, meningitis or some other transmissible illness, we all benefit if that person gets good health care.
Sunday, March 21, 2010
Political Stereotyping: Why Health Insurance Reform Was So Difficult
Just about everyone agrees that America's health insurance system is broken and needs to be fixed. Why, then, has change been so difficult to achieve? There are many reasons. One very important but rarely mentioned one is political stereotyping.
Political stereotyping, as we use the phrase, means attacking a politician for fitting the stereotype of his or her party and background. For example, President Obama has been typecast by the tea parties and the right as a big spending, big government politician. Being a Democrat who espouses mostly moderate and liberal ideas, he is vulnerable to such stereotyping.
It's very difficult for any politician to achieve change when the change is susceptible to political stereotyping. President George W. Bush's "ownership society" proposal to change the Social Security system by cutting back on guaranteed benefits and introducing government-funded investment accounts was easily be typecast as Republican parsimony toward moderate and low income Americans. It was DOA.
But Medicare Part D, an expensive prescription drug benefit that looked suspiciously Democratic, was enacted during the Bush 43 administration. This program, although weirdly structured with a "doughnut hole" in benefits, contravened the political stereotype of George W. Bush and was adopted with considerable Democratic support. (Postscript: the Obama health insurance reform will close the doughnut hole, good news for the many retirees having high prescription medication expenses.)
Presidents are often successful when contravening their political stereotypes. President Obama encountered relatively light opposition to escalating the war in Afghanistan. President Clinton famously failed to reform health insurance, but was singularly successful in closing the federal deficit and producing a surplus (putatively a Republican aspiration if there ever was one). Clinton deregulated the financial sector, another seemingly contra-stereotypical policy that would unfortunately contribute to the 2007-08 financial crisis. He also reformed welfare to reduce opportunities for recipients to stay on the dole for long periods of time.
Farther back in time, Richard Nixon attained rapprochement with China, a step that a Democratic President would have been vilified for taking. President Eisenhower's expensive program to build the interstate highway system was an easier sell coming from a Republican President.
Programs that fit political stereotypes are usually adopted when the party in the White House has a large majority in Congress and the urgency of a crisis to invoke. Franklin Delano Roosevelt's New Deal wouldn't have been possible except for the Great Depression and the large Democratic majority in Congress. Lyndon Johnson's civil rights program followed from his landslide victory in 1964 and the increasing stridency over civil rights. The last great political battle over health insurance--the Medicare program adopted in 1965--also followed from the Democratic landslide of 1964.
Barack Obama's health insurance reform, approved by the thinnest of margins, was achieved only because of the sweeping Democratic victory in 2008 and the virtual breakdown of the status quo in health insurance. Nevertheless, with the Democrats having demonstrated the ability to deliver on a major program, they have overcome the disadvantages of fitting the stereotype. The yin and yang of Washington have shifted again.
Political stereotyping, as we use the phrase, means attacking a politician for fitting the stereotype of his or her party and background. For example, President Obama has been typecast by the tea parties and the right as a big spending, big government politician. Being a Democrat who espouses mostly moderate and liberal ideas, he is vulnerable to such stereotyping.
It's very difficult for any politician to achieve change when the change is susceptible to political stereotyping. President George W. Bush's "ownership society" proposal to change the Social Security system by cutting back on guaranteed benefits and introducing government-funded investment accounts was easily be typecast as Republican parsimony toward moderate and low income Americans. It was DOA.
But Medicare Part D, an expensive prescription drug benefit that looked suspiciously Democratic, was enacted during the Bush 43 administration. This program, although weirdly structured with a "doughnut hole" in benefits, contravened the political stereotype of George W. Bush and was adopted with considerable Democratic support. (Postscript: the Obama health insurance reform will close the doughnut hole, good news for the many retirees having high prescription medication expenses.)
Presidents are often successful when contravening their political stereotypes. President Obama encountered relatively light opposition to escalating the war in Afghanistan. President Clinton famously failed to reform health insurance, but was singularly successful in closing the federal deficit and producing a surplus (putatively a Republican aspiration if there ever was one). Clinton deregulated the financial sector, another seemingly contra-stereotypical policy that would unfortunately contribute to the 2007-08 financial crisis. He also reformed welfare to reduce opportunities for recipients to stay on the dole for long periods of time.
Farther back in time, Richard Nixon attained rapprochement with China, a step that a Democratic President would have been vilified for taking. President Eisenhower's expensive program to build the interstate highway system was an easier sell coming from a Republican President.
Programs that fit political stereotypes are usually adopted when the party in the White House has a large majority in Congress and the urgency of a crisis to invoke. Franklin Delano Roosevelt's New Deal wouldn't have been possible except for the Great Depression and the large Democratic majority in Congress. Lyndon Johnson's civil rights program followed from his landslide victory in 1964 and the increasing stridency over civil rights. The last great political battle over health insurance--the Medicare program adopted in 1965--also followed from the Democratic landslide of 1964.
Barack Obama's health insurance reform, approved by the thinnest of margins, was achieved only because of the sweeping Democratic victory in 2008 and the virtual breakdown of the status quo in health insurance. Nevertheless, with the Democrats having demonstrated the ability to deliver on a major program, they have overcome the disadvantages of fitting the stereotype. The yin and yang of Washington have shifted again.
Wednesday, January 20, 2010
The Ten Biggest Losers in the Massachusetts Special Senatorial Election
There was more than one loser when Scott Brown won yesterday's special election in Massachusetts to replace Ted Kennedy.
Barack Obama. His already complex job just became a lot more complicated.
Sarah Palin. She's been upstaged almost as badly as Barack Obama. The Republicans desperately need new, younger candidates. Scott Brown, although not entirely without baggage himself, doesn't need a battalion of bellhops the way Palin does, with McCain's former campaign staff carefully calibrating their telescopic sights to snipe at her, the issues from her family, the issues from her almost inlaws, those interesting reimbursements from the State of Alaska while she was governor, the photo of her with a dead, bloody caribou, and quitting the governorship promptly after attaining national stature and cashing in with a book contract, the Fox commentator deal, etc. Today, Brown didn't exactly deny harboring Presidential ambitions, so watch for Palin to sneak up on the rug he's standing on and give it a hard yank.
Mitt Romney, Mike Huckabee, Newt Gingrinch, et al. The old, white guys in the Republican Party are finished. The party's way back to the White House will be through a younger, fresher insurgent candidate who appeals to the ever fickle independents that are now the key to victory. Republican power brokers will be looking for ways to quietly offload those same old, same old guys.
White House staff. It is the way of Washington that someone take the fall for a disaster like Brown's successful guerilla campaign. The vicious flood of leaks over who's to blame and who was asleep at the switch indicate a fierce internecine battle among Team Obama. Sooner or later, someone will have to resign to spend more time with their family or pursue other interests.
Levi Johnston. Another guy who posed nude has suddenly gained the limelight. As Sarah Palin's public aura fades, so does Levi Johnston's. He's said he'd be content as an electrician. He'd better stay on track to get licensed.
The uninsured. Those without health insurance had better reach down for their bootstraps and pull hard, because they may be getting no other options.
The insured. Reality is that the insured and paying patients pay for the emergency room and pro bono care that the uninsured often rely on. Maybe your taxes won't be raised now, but your health care costs and insurance premiums will remain high and probably go higher.
Health care providers. With today's crazy quilt health care insurance/no insurance system likely to stay largely in place, and with taxpayers less likely to contribute to covering health care costs, the only remaining pool of cash to be tapped as health care costs inexorably rise is the dollar flow to health care providers. Reimbursement rates are likely to be squeezed. The plastic surgeons and neurosurgeons forced to trade down from Maseratis to Mercedeses won't get any sympathy. But pediatricians already sometimes vaccinate kids at cost, or even at a loss. And they and general practitioners scarcely make what executive assistants on Wall Street make. Cutting their reimbursements rates isn't likely to produce a good outcome.
Scott Brown's truck. Driving on the small town roads of Wrentham, Mass. doesn't put a lot of wear and tear on a motor vehicle, especially something as sturdy as a pickup truck. But D.C.'s potholes interspersed with short stretches of macadam are a very different story. When you idle a truck for eons in rush hour congestion and then drive it off a cliff every 50 feet, the tires, suspension, undercarriage, frame, and engine earn their keep. One D.C. mile is the same as 20 Wrentham miles. Senator Brown won't be able to add 200,000 D.C. miles to the truck.
And, oh yeah, Martha Coakley. It's hard to exclude the losing candidate from this list, but, all things considered, she's far from the biggest loser.
Barack Obama. His already complex job just became a lot more complicated.
Sarah Palin. She's been upstaged almost as badly as Barack Obama. The Republicans desperately need new, younger candidates. Scott Brown, although not entirely without baggage himself, doesn't need a battalion of bellhops the way Palin does, with McCain's former campaign staff carefully calibrating their telescopic sights to snipe at her, the issues from her family, the issues from her almost inlaws, those interesting reimbursements from the State of Alaska while she was governor, the photo of her with a dead, bloody caribou, and quitting the governorship promptly after attaining national stature and cashing in with a book contract, the Fox commentator deal, etc. Today, Brown didn't exactly deny harboring Presidential ambitions, so watch for Palin to sneak up on the rug he's standing on and give it a hard yank.
Mitt Romney, Mike Huckabee, Newt Gingrinch, et al. The old, white guys in the Republican Party are finished. The party's way back to the White House will be through a younger, fresher insurgent candidate who appeals to the ever fickle independents that are now the key to victory. Republican power brokers will be looking for ways to quietly offload those same old, same old guys.
White House staff. It is the way of Washington that someone take the fall for a disaster like Brown's successful guerilla campaign. The vicious flood of leaks over who's to blame and who was asleep at the switch indicate a fierce internecine battle among Team Obama. Sooner or later, someone will have to resign to spend more time with their family or pursue other interests.
Levi Johnston. Another guy who posed nude has suddenly gained the limelight. As Sarah Palin's public aura fades, so does Levi Johnston's. He's said he'd be content as an electrician. He'd better stay on track to get licensed.
The uninsured. Those without health insurance had better reach down for their bootstraps and pull hard, because they may be getting no other options.
The insured. Reality is that the insured and paying patients pay for the emergency room and pro bono care that the uninsured often rely on. Maybe your taxes won't be raised now, but your health care costs and insurance premiums will remain high and probably go higher.
Health care providers. With today's crazy quilt health care insurance/no insurance system likely to stay largely in place, and with taxpayers less likely to contribute to covering health care costs, the only remaining pool of cash to be tapped as health care costs inexorably rise is the dollar flow to health care providers. Reimbursement rates are likely to be squeezed. The plastic surgeons and neurosurgeons forced to trade down from Maseratis to Mercedeses won't get any sympathy. But pediatricians already sometimes vaccinate kids at cost, or even at a loss. And they and general practitioners scarcely make what executive assistants on Wall Street make. Cutting their reimbursements rates isn't likely to produce a good outcome.
Scott Brown's truck. Driving on the small town roads of Wrentham, Mass. doesn't put a lot of wear and tear on a motor vehicle, especially something as sturdy as a pickup truck. But D.C.'s potholes interspersed with short stretches of macadam are a very different story. When you idle a truck for eons in rush hour congestion and then drive it off a cliff every 50 feet, the tires, suspension, undercarriage, frame, and engine earn their keep. One D.C. mile is the same as 20 Wrentham miles. Senator Brown won't be able to add 200,000 D.C. miles to the truck.
And, oh yeah, Martha Coakley. It's hard to exclude the losing candidate from this list, but, all things considered, she's far from the biggest loser.
Tuesday, January 19, 2010
Team Obama: No Longer the Smartest Guys in the Room
With the election of Republican Scott Brown as Ted Kennedy's replacement from Massachusetts, it's clear that Team Obama needs to rethink things. Forget the close analysis of who's responsible for what remark or who made the wrong call with which policy position. This election was as much a referendum on the administration as it was about the merits of the candidates.
Brown won by adopting Obama's strategy of tapping into voter discontent. Martha Coakley, the Democrat, was a legacy candidate, trying to ride into office on Ted Kennedy's legacy. But legacy candidates don't do well these days. Both Hillary Clinton and John McCain invoked the past during their 2008 campaigns and it didn't serve them well. Creigh Deeds, a Democratic candidate for governor of Virginia last year, had a similarly bad experience running as a legacy candidate. Scott Brown is a heretofore minor politician, a Massachusetts state senator with nothing to lose. In a campaign involving such a candidate, the size of the fight in the dog is what counts the most. With the agility of a judo master, he characterized himself as the outraged underdog, and won over outraged voters.
It's unclear that there is much logic to his or their outrage. The Obama administration's health care reform effort seems to have drawn the most populist ire. That defies logic, as this is the one program in Obama's agenda that might offer the broadest benefit to the electorate. But as much as people were tired of George W. Bush's failures, they're also scared of changes in their insurance coverage (if they have any), and they're scared of higher premiums and higher taxes.
Voters are also angry with economic policies. The Bush II administration, in providing hundreds of billions of bailout dollars to banks and having the government assume myriad liabilities that would otherwise have pushed the banking system into bankruptcy, practically socialized the financial system and left taxpayers at risk for untold losses. The Obama administration bought into the Bush administration's bank-loving policies lock, stock and barrel, and added its own economic stimulus package. Bankers rejoiced as their earnings and bonuses rebounded, but taxpayers bemoaned the bonuses and shivered at the thought of their burdens. Even though President Obama has promised to recover the costs of the bailouts, Scott Brown caught him at a moment when he hadn't yet acted on the promise.
Team Obama needs to stop politicking and take a hard look in the mirror. In 2008, they were the smartest guys in the room, propelling a former state senator from Illinois into the White House in 6 years. Then, the Republicans, with footprints all over their butts, did the thing Americans do so well. They thought about what had just happened, how painful it had been, the ways in which they needed to change, and adapted. Some of their changes are weird--it remains possible that the party could melt down in an Inquisitional drive for ideological purity. But other Republicans realized that Barack Obama had won by working from the ground level up, and that they could do the same thing.
Team Obama, by contrast, seems to have become remote, elite. They've appointed a lot of very well-credentialed Washington insiders into high level positions, who've given them a lot of conventional advice that won't ruffle the feathers of too many powerful people. Their policies of bailout and stimulus have mostly helped those that are well-off and influential, but scare the hell out of the middle class. They try to influence bellwether Democratic campaigns, like the recent Virginia governor's election and Martha Coakley's campaign in Massachusetts, but are quick to dodge any hint of responsibility for failure, pre-emptively pointing fingers at the losing candidates. In short, they've taken on a distinct inside-the-Beltway aura, and within less than a year. That's exactly what pisses voters off.
They have to take stock of themselves. Whether or not they can see it, they aren't so smart any more. They didn't anticipate how quickly and completely the Republicans would learn from the 2008 Obama campaign. They don't seem to understand how fickle uncertainty and frustration have made the electorate. They seem more indwelling and hesitant. Why hasn't the President publicly taken the lead on health insurance reform? News stories report that he has been quietly negotiating potential compromises between the House and the Senate. But getting something as big and as controversial as health insurance reform done requires leadership from him more than it requires negotiation. The Democrats haven't wrapped up health insurance reform after a year, and now their lack of alacrity traps them in a situation they failed to anticipate from a special senatorial election.
The Obama team are consummate politicians. But running a campaign and running a Presidency are two different things. In the first, you have to make sure you say the right thing at the right time. The second requires executive ability--the skills needed to get things done. Bill Clinton, whose cup runneth over with charisma, was and still is a superb politician. But his lack of executive ability resulted in an eight-year Presidency that was one of the least productive in the 20th Century. His legacy as a President will be modest.
Barack Obama still has time for achievement. Health care reform can yet be passed by Congress. The result won't be as pretty as many would like, and the Senate's leadership would have to commit to work to change the objectionable features. But President Obama now needs to step out front and center and take the lead. He is no doubt stinging from the fact that he campaigned for the losing candidate in Massachusetts this past weekend, after first saying he wouldn't. That hesitant participation in the Coakley campaign is precisely the sort of stutter step that makes the President look weak. But Obama is now in for a dime; he might as well go in for a dollar. If he flinches, the Republicans will know they've got him, not just for health insurance reform, but for the rest of his Presidency. Lyndon Johnson kicked every reluctant Congressional butt necessary to get the great civil rights laws of the mid-1960s adopted, putting his standing at risk. His success made him a great domestic President, second in the 20th Century only to FDR.
By all indications, Barack Obama has an introspective side to his personality, and he's probably thinking things over furiously. No doubt he realizes that his honeymoon with voters is now over. But some of the people around him need to consider carefully that Barack Obama's election in 2008 wasn't as much about him as it was about voter discontent. That discontent is hydralike--it goes in many directions, is difficult to channel, and if seemingly suppressed can sprout back up with greater force than before. Team Obama doesn't have everything figured out, and they have less figured out now than they did three or six months ago. Once they understand this, and embrace it, they'll do better.
Brown won by adopting Obama's strategy of tapping into voter discontent. Martha Coakley, the Democrat, was a legacy candidate, trying to ride into office on Ted Kennedy's legacy. But legacy candidates don't do well these days. Both Hillary Clinton and John McCain invoked the past during their 2008 campaigns and it didn't serve them well. Creigh Deeds, a Democratic candidate for governor of Virginia last year, had a similarly bad experience running as a legacy candidate. Scott Brown is a heretofore minor politician, a Massachusetts state senator with nothing to lose. In a campaign involving such a candidate, the size of the fight in the dog is what counts the most. With the agility of a judo master, he characterized himself as the outraged underdog, and won over outraged voters.
It's unclear that there is much logic to his or their outrage. The Obama administration's health care reform effort seems to have drawn the most populist ire. That defies logic, as this is the one program in Obama's agenda that might offer the broadest benefit to the electorate. But as much as people were tired of George W. Bush's failures, they're also scared of changes in their insurance coverage (if they have any), and they're scared of higher premiums and higher taxes.
Voters are also angry with economic policies. The Bush II administration, in providing hundreds of billions of bailout dollars to banks and having the government assume myriad liabilities that would otherwise have pushed the banking system into bankruptcy, practically socialized the financial system and left taxpayers at risk for untold losses. The Obama administration bought into the Bush administration's bank-loving policies lock, stock and barrel, and added its own economic stimulus package. Bankers rejoiced as their earnings and bonuses rebounded, but taxpayers bemoaned the bonuses and shivered at the thought of their burdens. Even though President Obama has promised to recover the costs of the bailouts, Scott Brown caught him at a moment when he hadn't yet acted on the promise.
Team Obama needs to stop politicking and take a hard look in the mirror. In 2008, they were the smartest guys in the room, propelling a former state senator from Illinois into the White House in 6 years. Then, the Republicans, with footprints all over their butts, did the thing Americans do so well. They thought about what had just happened, how painful it had been, the ways in which they needed to change, and adapted. Some of their changes are weird--it remains possible that the party could melt down in an Inquisitional drive for ideological purity. But other Republicans realized that Barack Obama had won by working from the ground level up, and that they could do the same thing.
Team Obama, by contrast, seems to have become remote, elite. They've appointed a lot of very well-credentialed Washington insiders into high level positions, who've given them a lot of conventional advice that won't ruffle the feathers of too many powerful people. Their policies of bailout and stimulus have mostly helped those that are well-off and influential, but scare the hell out of the middle class. They try to influence bellwether Democratic campaigns, like the recent Virginia governor's election and Martha Coakley's campaign in Massachusetts, but are quick to dodge any hint of responsibility for failure, pre-emptively pointing fingers at the losing candidates. In short, they've taken on a distinct inside-the-Beltway aura, and within less than a year. That's exactly what pisses voters off.
They have to take stock of themselves. Whether or not they can see it, they aren't so smart any more. They didn't anticipate how quickly and completely the Republicans would learn from the 2008 Obama campaign. They don't seem to understand how fickle uncertainty and frustration have made the electorate. They seem more indwelling and hesitant. Why hasn't the President publicly taken the lead on health insurance reform? News stories report that he has been quietly negotiating potential compromises between the House and the Senate. But getting something as big and as controversial as health insurance reform done requires leadership from him more than it requires negotiation. The Democrats haven't wrapped up health insurance reform after a year, and now their lack of alacrity traps them in a situation they failed to anticipate from a special senatorial election.
The Obama team are consummate politicians. But running a campaign and running a Presidency are two different things. In the first, you have to make sure you say the right thing at the right time. The second requires executive ability--the skills needed to get things done. Bill Clinton, whose cup runneth over with charisma, was and still is a superb politician. But his lack of executive ability resulted in an eight-year Presidency that was one of the least productive in the 20th Century. His legacy as a President will be modest.
Barack Obama still has time for achievement. Health care reform can yet be passed by Congress. The result won't be as pretty as many would like, and the Senate's leadership would have to commit to work to change the objectionable features. But President Obama now needs to step out front and center and take the lead. He is no doubt stinging from the fact that he campaigned for the losing candidate in Massachusetts this past weekend, after first saying he wouldn't. That hesitant participation in the Coakley campaign is precisely the sort of stutter step that makes the President look weak. But Obama is now in for a dime; he might as well go in for a dollar. If he flinches, the Republicans will know they've got him, not just for health insurance reform, but for the rest of his Presidency. Lyndon Johnson kicked every reluctant Congressional butt necessary to get the great civil rights laws of the mid-1960s adopted, putting his standing at risk. His success made him a great domestic President, second in the 20th Century only to FDR.
By all indications, Barack Obama has an introspective side to his personality, and he's probably thinking things over furiously. No doubt he realizes that his honeymoon with voters is now over. But some of the people around him need to consider carefully that Barack Obama's election in 2008 wasn't as much about him as it was about voter discontent. That discontent is hydralike--it goes in many directions, is difficult to channel, and if seemingly suppressed can sprout back up with greater force than before. Team Obama doesn't have everything figured out, and they have less figured out now than they did three or six months ago. Once they understand this, and embrace it, they'll do better.
Tuesday, November 24, 2009
Let's Be Thankful
That:
Congress is looking closely at the Fed. In the last few years, the Fed has done a terrible job, and then a good (but risky) job dealing with the consequences of its terrible job. Some close scrutiny and double guessing would be healthy for the Fed. Congress may moderate the Fed's responsibilities and power, which could turn out for the better. Making the Fed into an uber-regulator, as proposed by the administration, would be a very risky move. Virtually all of the government's power to deal with a financial crisis would be vested in a single agency that too vigorously resists oversight. The potential for narrow focus, an oversupply of certitude in its own wisdom, and increased traffic through the revolving door make such a concentration of regulatory power a bad idea. Even though Congress is proceeding with a maximum of soundbite histrionics that obscure the substantive importance of the issues, it's making the Fed take a hard and careful look at itself. That's Congress' role in the Constitutional structure of the government, and the Fed will be a better agency after enduring the cacophony of democracy.
Retail investors have sat out the stock market rally. An objective look at the evidence strongly suggests that, for the next year or so, the market has quite a bit more downside risk than upside. Maybe stocks will drift a bit higher. But only those that believe assets only rise in value and never fall would think that 2010 will be a banner year for stocks. The good thing about retail investors sidelining themselves is that if and when the market falls, the impact on consumption will probably be less than 2008's nosedive. If your portfolio hasn't been hammered, you'll have less gut level fear of $4 lattes.
Health insurance reform is progressing. It seems like just about every alternative is criticized for involving increased costs. But the question is compared to what? Health care costs have risen faster than inflation for decades. Health care now absorbs about 16% of GDP and is expected to rise to about 20% in ten years. If a reformed health insurance system provides more comprehensive and fairer coverage, isn't that a worthwhile result? Costs are going to rise anyway if we leave our current incomplete and unfair system in place. Costs are a very important issue, but not reforming health insurance coverage isn't going to keep costs under control. We should work to achieve comprehensive and fair coverage now. Costs will be debated and dealt with as far as one can see into the future, because they'll always be an issue.
U.S. troop levels in Iraq are falling. Iraq wasn't and isn't of strategic consequence to the United States. That's why W and Dick, with their juvenile, tunnel-vision machismo, recklessly weakened the U.S. military by fighting an unnecessary war at a time of rising worldwide commitments for America. The real problems--the growing quagmire in Afghanistan, a soon-to-be nuclear armed Iran, the security of Pakistan's nuclear arsenal, safe havens for terrorists in Pakistan, Yemen and elsewhere, and the twilight zone quality of North Korea's bipolar Kabuki theatrics over missiles and nuclear weapons--will absorb all the resources the U.S. can muster.
Jon and Kate are going off the air. We like the 8. But, toward the end, Jon and Kate were mostly enriching TLC and the tabloids while sounding, shall we say, a bit tiresome.
We're reading less about Lindsay, Paris and Britney. After you've read 100 train wreck stories, the 101st really isn't all that interesting. But fear not for the tabloids. They've always got Brad, Angie and Jennifer.
Congress is looking closely at the Fed. In the last few years, the Fed has done a terrible job, and then a good (but risky) job dealing with the consequences of its terrible job. Some close scrutiny and double guessing would be healthy for the Fed. Congress may moderate the Fed's responsibilities and power, which could turn out for the better. Making the Fed into an uber-regulator, as proposed by the administration, would be a very risky move. Virtually all of the government's power to deal with a financial crisis would be vested in a single agency that too vigorously resists oversight. The potential for narrow focus, an oversupply of certitude in its own wisdom, and increased traffic through the revolving door make such a concentration of regulatory power a bad idea. Even though Congress is proceeding with a maximum of soundbite histrionics that obscure the substantive importance of the issues, it's making the Fed take a hard and careful look at itself. That's Congress' role in the Constitutional structure of the government, and the Fed will be a better agency after enduring the cacophony of democracy.
Retail investors have sat out the stock market rally. An objective look at the evidence strongly suggests that, for the next year or so, the market has quite a bit more downside risk than upside. Maybe stocks will drift a bit higher. But only those that believe assets only rise in value and never fall would think that 2010 will be a banner year for stocks. The good thing about retail investors sidelining themselves is that if and when the market falls, the impact on consumption will probably be less than 2008's nosedive. If your portfolio hasn't been hammered, you'll have less gut level fear of $4 lattes.
Health insurance reform is progressing. It seems like just about every alternative is criticized for involving increased costs. But the question is compared to what? Health care costs have risen faster than inflation for decades. Health care now absorbs about 16% of GDP and is expected to rise to about 20% in ten years. If a reformed health insurance system provides more comprehensive and fairer coverage, isn't that a worthwhile result? Costs are going to rise anyway if we leave our current incomplete and unfair system in place. Costs are a very important issue, but not reforming health insurance coverage isn't going to keep costs under control. We should work to achieve comprehensive and fair coverage now. Costs will be debated and dealt with as far as one can see into the future, because they'll always be an issue.
U.S. troop levels in Iraq are falling. Iraq wasn't and isn't of strategic consequence to the United States. That's why W and Dick, with their juvenile, tunnel-vision machismo, recklessly weakened the U.S. military by fighting an unnecessary war at a time of rising worldwide commitments for America. The real problems--the growing quagmire in Afghanistan, a soon-to-be nuclear armed Iran, the security of Pakistan's nuclear arsenal, safe havens for terrorists in Pakistan, Yemen and elsewhere, and the twilight zone quality of North Korea's bipolar Kabuki theatrics over missiles and nuclear weapons--will absorb all the resources the U.S. can muster.
Jon and Kate are going off the air. We like the 8. But, toward the end, Jon and Kate were mostly enriching TLC and the tabloids while sounding, shall we say, a bit tiresome.
We're reading less about Lindsay, Paris and Britney. After you've read 100 train wreck stories, the 101st really isn't all that interesting. But fear not for the tabloids. They've always got Brad, Angie and Jennifer.
Sunday, August 30, 2009
The Obama Administration's Best Bet: Take the Common Sense Approach
The unifying theme in President George W. Bush's two terms was his wealth of self-assurance. He was certain he knew the answers. He stuck hard to the principles in which he believed. He had too much faith in the amen chorus with which he surrounded himself, and gave them too much free rein.
The cost was enormous. Year after year, casualties in Iraq grew while the war continued with no end in sight. Even as military expenditures rose sharply, taxes were dramatically cut with little thought seemingly given to the long term consequences. The federal deficit ballooned, but we were told to take comfort from the beneficial effects that would come from making the wealthy wealthier. The financial markets were provided with vast amounts of cheap credit, and given a deregulatory atmosphere in which to mainline it. Real estate was favored because, in defiance of economic reality, it supposedly would be the golden goose of legend, the asset that would never fall in value. Derivatives were given the Mother of all legal loopholes, which led to the stealth creation of a vast, multi-trillion dollar unregulated banking system that went unnoticed by regulators until it collapsed.
Absent from the picture was a decent measure of proportion, moderation, and common sense. Adherence to the administration's received truths took precedence over contact with reality. Apostates were banished and true believers drew closer together in the firmness of their beliefs.
The Bush Adminstration's rigidity was one of the main advantages Barack Obama had going into last fall's general election. The electorate had had its fill of closed-minded, inflexible wackiness that threw away lives and money. The voters wanted change.
They've gotten less than they might have hoped for. The Obama administration has generally followed the same approach in dealing with the financial and economic crises as their predecessors. There is momentary calm, but really big deficits loom and the real estate market's problems have been swept under the carpet instead of being resolved. Its health insurance reform proposal is being shouted down, with volume substituting for reason. The American war in Iraq is winding down (although the Iraqi war isn't). However, the American war in Afghanistan is ramping up, as is the American proxy war in Pakistan.
It's important for the Obama administration to take some big steps back from the extremes of the Bush administration's policies. That's what Barack Obama was elected to do. At the same time, it's important for him not to become caught up in new extremes. We need some common sense.
For health insurance reform, let's institute the Great American Compromise. Like all industrialized nations, America spent much of the 20th Century coming to grips with the harshness of capitalism. While the free enterprise system is wonderful for innovation and economic growth, it spawns great inequality of wealth that triggers social unrest. Not all of the 20th Century solutions for this problem worked well (see history of Nazi Germany and the Soviet Union for illustrative examples). However, the American solution was to establish safety nets: unemployment compensation for wage earners innocently caught in economic downdrafts, Social Security to alleviate the poverty of the elderly and those unable to work, Medicare and Medicaid, and various welfare programs. The free enterprise system was largely left unchanged. People kept their private property, pursued their personally chosen careers, and in many cases vigorously exercised their Constitutional right to cuss out the government.
It's clear that those with good health insurance coverage don't want to give it up for the sake of health insurance reform. Nor should they have to. The biggest need is for a safety net--basic health insurance for those who can't find a private insurer. We already have such a system--it's called Medicare in some manifestations and Medicaid in others. These programs were created to provide health insurance for the elderly and poor, who would generally be uninsured anyway. Allowing other uninsured people to participate wouldn't be a terribly difficult modification. Their premiums could be adjusted for their ability to pay--a laid-off Wall Street millionaire would pay fair market rates while a laid-off furniture worker in North Carolina would get a break. Sidestep all the mouth-frothing about a National Health Service or single payer system. Just extend the safety net.
In Afghanistan and Pakistan, the U.S. and its allies are largely fighting members of just one ethic group, the Pashtun. The membership of the Taliban consists primarily of Pashtuns. They have successfully partitioned off part of Pakistan for their own country within a country, and give sanctuary to Al Queda in keeping with longstanding Pashtun traditions of hospitality and refuge for visitors in need. The United States has no strong interest in fighting the Taliban or other Pashtuns. They did not attack the World Trade Center or the Pentagon (the mostly Arab Al Queda did that). The U.S. should open channels of communication with the Taliban and other Pashtun groups, making it clear that harboring Al Queda will result in robust U.S. military action, but that peace is attainable if the house guests take a hike. It may seem implausible that the Taliban would make a deal with America. But the Shiites in Iraq did just that during the recent surge, and gave Al Queda the boot from their country. We should focus on destroying Al Queda, not fighting people who have not sought to fight with us.
The really big looming deficits stem from both the Bush administration's unwavering belief that they could get a free lunch--finance a tremendously expensive war in Iraq while sharply cutting taxes while increasing Medicare benefits (with Medicare D, the prescription drug program)--and the Obama administration's stimulus package. Since some 80% of government spending consists of entitlements like Social Security and Medicare, the government can't cut its way out of the fiscal mess. It will have to increase tax collections. That's just common sense. Letting the Bush tax cuts lapse would be a simple way of doing that--they're built into the Bush legislation anyway so nothing needs to be pushed through an increasingly rancorous Congress. But not fixing the alternative minimum tax would be a mistake. The alternative minimum tax is the stupidest tax in the Internal Revenue Code, taking back what the regular tax structure allows and hitting the middle class whom Barack Obama promised to protect against tax increases. The AMT has long ceased to serve its intended purpose and should be repealed or permanently adjusted way upward to hit only the wealthy (and kept upward with an automatic annual inflation adjustment, like the regular tax structure). Maybe more taxes will ultimately be needed. But let's start with the simple thing and let the Bush tax laws take their prescribed course.
In terms of financial and economic policy, the government has thus far dodged the difficult problems (like toxic bank assets, the festering illness that remains in the housing market and the spreading illness in commercial real estate) and softened their impact with the Federal Reserve's printing presses and stimulus legislation. But those problems haven't gone away, and with the real estate market likely to stagnate for years, they won't go away by themselves. These losses--cleverly pushed by Bush administration policies into President Obama's stewardship--will have to be booked eventually. That process is happening already, with each Friday afternoon's announcements of the past week's tally of failed banks. We're up to 84 failed banks for this year already, and many more collapses are expected. Real estate losses and losses from toxic assets will be booked one way or another. The only question is how and when. The banking system won't resume large scale lending while these zombie assets remain on its books. And the Federal Reserve can't keep printing money; indeed, it's trying to figure out how to get all those printed dollars back. Resolving these problems won't be simple. But common sense tells us that we can't avoid them indefinitely, and allowing them to fester may well make things worse in the long run. Green shoots can be overcome by noxious weeds.
One final common sense point. It's time for the administration to ignore the stock market. There is a fin de siecle quality to the market. Upwards of 40% of last week's trading on the New York Stock Exchange was in 4 financial stocks: Citigroup, Bank of America, Fannie Mae and Freddie Mac. There's nothing publicly known about these four companies that justifies this much attention. AIG stock is up some 250% for the month of August to date. That's even weirder, considering that there's no news about AIG, except that the new CEO has reportedly had some conversations with a former CEO, Hank Greenberg. Some rumors have it that Greenberg might be thinking of buying AIG back. But let's recall that the U.S. government, through the SEC, just settled an enforcement lawsuit against Greenberg, charging him with responsibility for improper accounting. He agreed (without admitting or denying wrongdoing) to pay $15 million. Do we really think that the U.S. government, which effectively owns AIG, would sell the company back to a guy it just punished? And then there's GM stock, which has traded all summer at a positive price. That's looney. The publicly traded GM stock is for ownership in the residual company that's going to be liquidated. The U.S. government bailed out, Fiat affiliated company that is making the Chevy Volt isn't traded publicly at all right now. The common stock of the residual company is worthless. But apparently not to numerous buyers in the stock market.
The market rally has become increasingly concentrated in a few large cap stocks. This brings to mind the halcyon days of late 1999 and early 2000, just before the big tech stock collapse. The market rally of those days also became increasingly concentrated in a few big stocks. If that handful of stocks stumbled, then the house would be revealed to be made of collapsing cards. They did, and it was.
Day trading is becoming fashionable again. That's always a bad sign, because the least knowledgeable and most inexperienced traders tend to jump in just before indexes nose dive. The fact that corporate insiders are now selling about 30 times as much of their own companies' stock as they buy (as opposed to an average of 7 times sales to buys) is another hint that the salad days will be short-lived. If the smartest money is selling heavily, what's the logic to buying?
Of course, all presidential administrations deny that their policies are affected by the stock market. But there hasn't been one yet that doesn't scrutinize market indexes. If the Obama administration fixates on stock market movements, it will find itself straitened into dysfunction or adopting policies that exacerbate problems instead of cure them. At some point, common sense dictates that governments can't stop lunacy snd shouldn't try.
The cost was enormous. Year after year, casualties in Iraq grew while the war continued with no end in sight. Even as military expenditures rose sharply, taxes were dramatically cut with little thought seemingly given to the long term consequences. The federal deficit ballooned, but we were told to take comfort from the beneficial effects that would come from making the wealthy wealthier. The financial markets were provided with vast amounts of cheap credit, and given a deregulatory atmosphere in which to mainline it. Real estate was favored because, in defiance of economic reality, it supposedly would be the golden goose of legend, the asset that would never fall in value. Derivatives were given the Mother of all legal loopholes, which led to the stealth creation of a vast, multi-trillion dollar unregulated banking system that went unnoticed by regulators until it collapsed.
Absent from the picture was a decent measure of proportion, moderation, and common sense. Adherence to the administration's received truths took precedence over contact with reality. Apostates were banished and true believers drew closer together in the firmness of their beliefs.
The Bush Adminstration's rigidity was one of the main advantages Barack Obama had going into last fall's general election. The electorate had had its fill of closed-minded, inflexible wackiness that threw away lives and money. The voters wanted change.
They've gotten less than they might have hoped for. The Obama administration has generally followed the same approach in dealing with the financial and economic crises as their predecessors. There is momentary calm, but really big deficits loom and the real estate market's problems have been swept under the carpet instead of being resolved. Its health insurance reform proposal is being shouted down, with volume substituting for reason. The American war in Iraq is winding down (although the Iraqi war isn't). However, the American war in Afghanistan is ramping up, as is the American proxy war in Pakistan.
It's important for the Obama administration to take some big steps back from the extremes of the Bush administration's policies. That's what Barack Obama was elected to do. At the same time, it's important for him not to become caught up in new extremes. We need some common sense.
For health insurance reform, let's institute the Great American Compromise. Like all industrialized nations, America spent much of the 20th Century coming to grips with the harshness of capitalism. While the free enterprise system is wonderful for innovation and economic growth, it spawns great inequality of wealth that triggers social unrest. Not all of the 20th Century solutions for this problem worked well (see history of Nazi Germany and the Soviet Union for illustrative examples). However, the American solution was to establish safety nets: unemployment compensation for wage earners innocently caught in economic downdrafts, Social Security to alleviate the poverty of the elderly and those unable to work, Medicare and Medicaid, and various welfare programs. The free enterprise system was largely left unchanged. People kept their private property, pursued their personally chosen careers, and in many cases vigorously exercised their Constitutional right to cuss out the government.
It's clear that those with good health insurance coverage don't want to give it up for the sake of health insurance reform. Nor should they have to. The biggest need is for a safety net--basic health insurance for those who can't find a private insurer. We already have such a system--it's called Medicare in some manifestations and Medicaid in others. These programs were created to provide health insurance for the elderly and poor, who would generally be uninsured anyway. Allowing other uninsured people to participate wouldn't be a terribly difficult modification. Their premiums could be adjusted for their ability to pay--a laid-off Wall Street millionaire would pay fair market rates while a laid-off furniture worker in North Carolina would get a break. Sidestep all the mouth-frothing about a National Health Service or single payer system. Just extend the safety net.
In Afghanistan and Pakistan, the U.S. and its allies are largely fighting members of just one ethic group, the Pashtun. The membership of the Taliban consists primarily of Pashtuns. They have successfully partitioned off part of Pakistan for their own country within a country, and give sanctuary to Al Queda in keeping with longstanding Pashtun traditions of hospitality and refuge for visitors in need. The United States has no strong interest in fighting the Taliban or other Pashtuns. They did not attack the World Trade Center or the Pentagon (the mostly Arab Al Queda did that). The U.S. should open channels of communication with the Taliban and other Pashtun groups, making it clear that harboring Al Queda will result in robust U.S. military action, but that peace is attainable if the house guests take a hike. It may seem implausible that the Taliban would make a deal with America. But the Shiites in Iraq did just that during the recent surge, and gave Al Queda the boot from their country. We should focus on destroying Al Queda, not fighting people who have not sought to fight with us.
The really big looming deficits stem from both the Bush administration's unwavering belief that they could get a free lunch--finance a tremendously expensive war in Iraq while sharply cutting taxes while increasing Medicare benefits (with Medicare D, the prescription drug program)--and the Obama administration's stimulus package. Since some 80% of government spending consists of entitlements like Social Security and Medicare, the government can't cut its way out of the fiscal mess. It will have to increase tax collections. That's just common sense. Letting the Bush tax cuts lapse would be a simple way of doing that--they're built into the Bush legislation anyway so nothing needs to be pushed through an increasingly rancorous Congress. But not fixing the alternative minimum tax would be a mistake. The alternative minimum tax is the stupidest tax in the Internal Revenue Code, taking back what the regular tax structure allows and hitting the middle class whom Barack Obama promised to protect against tax increases. The AMT has long ceased to serve its intended purpose and should be repealed or permanently adjusted way upward to hit only the wealthy (and kept upward with an automatic annual inflation adjustment, like the regular tax structure). Maybe more taxes will ultimately be needed. But let's start with the simple thing and let the Bush tax laws take their prescribed course.
In terms of financial and economic policy, the government has thus far dodged the difficult problems (like toxic bank assets, the festering illness that remains in the housing market and the spreading illness in commercial real estate) and softened their impact with the Federal Reserve's printing presses and stimulus legislation. But those problems haven't gone away, and with the real estate market likely to stagnate for years, they won't go away by themselves. These losses--cleverly pushed by Bush administration policies into President Obama's stewardship--will have to be booked eventually. That process is happening already, with each Friday afternoon's announcements of the past week's tally of failed banks. We're up to 84 failed banks for this year already, and many more collapses are expected. Real estate losses and losses from toxic assets will be booked one way or another. The only question is how and when. The banking system won't resume large scale lending while these zombie assets remain on its books. And the Federal Reserve can't keep printing money; indeed, it's trying to figure out how to get all those printed dollars back. Resolving these problems won't be simple. But common sense tells us that we can't avoid them indefinitely, and allowing them to fester may well make things worse in the long run. Green shoots can be overcome by noxious weeds.
One final common sense point. It's time for the administration to ignore the stock market. There is a fin de siecle quality to the market. Upwards of 40% of last week's trading on the New York Stock Exchange was in 4 financial stocks: Citigroup, Bank of America, Fannie Mae and Freddie Mac. There's nothing publicly known about these four companies that justifies this much attention. AIG stock is up some 250% for the month of August to date. That's even weirder, considering that there's no news about AIG, except that the new CEO has reportedly had some conversations with a former CEO, Hank Greenberg. Some rumors have it that Greenberg might be thinking of buying AIG back. But let's recall that the U.S. government, through the SEC, just settled an enforcement lawsuit against Greenberg, charging him with responsibility for improper accounting. He agreed (without admitting or denying wrongdoing) to pay $15 million. Do we really think that the U.S. government, which effectively owns AIG, would sell the company back to a guy it just punished? And then there's GM stock, which has traded all summer at a positive price. That's looney. The publicly traded GM stock is for ownership in the residual company that's going to be liquidated. The U.S. government bailed out, Fiat affiliated company that is making the Chevy Volt isn't traded publicly at all right now. The common stock of the residual company is worthless. But apparently not to numerous buyers in the stock market.
The market rally has become increasingly concentrated in a few large cap stocks. This brings to mind the halcyon days of late 1999 and early 2000, just before the big tech stock collapse. The market rally of those days also became increasingly concentrated in a few big stocks. If that handful of stocks stumbled, then the house would be revealed to be made of collapsing cards. They did, and it was.
Day trading is becoming fashionable again. That's always a bad sign, because the least knowledgeable and most inexperienced traders tend to jump in just before indexes nose dive. The fact that corporate insiders are now selling about 30 times as much of their own companies' stock as they buy (as opposed to an average of 7 times sales to buys) is another hint that the salad days will be short-lived. If the smartest money is selling heavily, what's the logic to buying?
Of course, all presidential administrations deny that their policies are affected by the stock market. But there hasn't been one yet that doesn't scrutinize market indexes. If the Obama administration fixates on stock market movements, it will find itself straitened into dysfunction or adopting policies that exacerbate problems instead of cure them. At some point, common sense dictates that governments can't stop lunacy snd shouldn't try.
Wednesday, August 26, 2009
How About a Few Fireside Chats from President Obama?
The temperature's rising in the Oval Office, with health insurance reform, increasing federal deficits and the war in Afghanistan swirling in controversy. Critics on the right and left are emerging from the woodwork to get their 17 seconds of coverage on the evening news. The President's approval levels are dropping, although they remain strong overall.
To a large degree, these problems are not of President Obama's making. He didn't mismanage the war in Afghanistan for 7 and 1/2 years. He didn't blow up the financial system and throw the economy into a severe recession through weak regulation poisonously accompanied by a recklessly accommodative Federal Reserve monetary policy. He didn't create the tortuous labyrinth that is our health insurance "system," where Minotaurs lurk at every turn.
But he has allowed himself to be pushed into playing defense. His health insurance reform proposal consists of general ideas that shift with the tides; in particular, the public insurance option does the hokey pokey in and out every other day. The amorphousness of his health insurance proposal allows his critics to claim he's taking something away from the public while imposing undue taxes to cover other people. As for the government's projected deficits, his detractors make Godzillas of their size. Missing from the picture is what we get from health insurance reform and from spending all this money.
As for Afghanistan, it's clear the President is concerned about appearing soft on terrorism. He's been pushed hard by Dick Cheney, the right wing's Prince of Darkness, and has drifted noticeably closer to the Bush II administration's antiterrorism policies. The Democratic Party's liberals are starting to shuffle their feet nervously. The President hasn't articulated an end game or an exit strategy. When it came to combating terrorism, the Bush II administration ultimately had nothing to offer except fear itself, a fear that apparently was used to justify a costly war in Iraq, official torture, overlooking CIA transgressions of the administration's torture policy, overly broad domestic electronic surveillance, nondisclosure to Congress of the proposed use of mercenaries to assassinate Al Queda leaders, and the legal cancer that grew at Guantanamo Bay. The problem with fear is that it is a raw emotion, not a reasoned principle, and therefore cannot serve as a foundation for democracy.
The great Presidents--the ones historians write about and people remember--are the ones who got things done. Smart, talented, but unproductive ones like Bill Clinton and Jimmy Carter barely get footnote treatment. Barack Obama's proposed programs will die the death of a thousand cuts if he plays defense against the barrage of political trash talking that has come his way. He can't please all the people all the time, and his promises of bipartisanship are being twisted around behind his back to shackle his agenda.
Franklin Delano Roosevelt was famous for his fireside chats--radio addresses aimed directly at the electorate--to explain how he intended to make things better for America. Barack Obama--not his spokesperson, not his aides, but he himself--should take the lead. He needs to more specifically define his health insurance reform and then explain why it will improve things. He cannot deny that the costs of universal coverage won't be large. He needs to describe the benefits of universal coverage and explain why they justify the costs. The American people didn't support Social Security because it would increase their taxes. They supported it because it would alleviate poverty in old age and they considered that goal worth the extra taxes.
President Obama must explain why the federal deficit is so large and why the extra expenditures will make America better off. We had comparable deficits during World War II, but the people understood why and were willing to pay the price.
He must develop an end game and exit strategy for the war in Afghanistan. In this regard, he should not exclude a non-victorious conclusion. President Reagan's withdrawal from Lebanon and President Clinton's withdrawal from Somalia arguably took some pressure off terrorists. President George W. Bush's wind-down of the war in Iraq acknowledged a humiliating failure of American policy that can only encourage terrorists. But the American people were willing to live with these consequences because continuing to fight in those locations became too costly. The United States has the naval and aerial resources to hit Al Queda training camps without needing American infantry on the ground. American diplomacy can exploit potential differences between Al Queda and the Taliban to undermine support for the terrorists. Maybe that sounds far fetched right now, but so did the notion of Richard Nixon attaining a pragmatic alliance with the Communist Chinese (against whom America fought a bitter war in Korea) in order to weaken the Soviet Union.
Taking the lead publicly would place Barack Obama at considerable political risk. But he's there already. He has charisma, and could do well. It's not enough to do a couple of town hall meetings and then take a vacation on Martha's Vineyard. President Obama should become his own principal spokesperson. Franklin Roosevelt personally gave his fireside chats. He also became the greatest President of the 20th Century.
To a large degree, these problems are not of President Obama's making. He didn't mismanage the war in Afghanistan for 7 and 1/2 years. He didn't blow up the financial system and throw the economy into a severe recession through weak regulation poisonously accompanied by a recklessly accommodative Federal Reserve monetary policy. He didn't create the tortuous labyrinth that is our health insurance "system," where Minotaurs lurk at every turn.
But he has allowed himself to be pushed into playing defense. His health insurance reform proposal consists of general ideas that shift with the tides; in particular, the public insurance option does the hokey pokey in and out every other day. The amorphousness of his health insurance proposal allows his critics to claim he's taking something away from the public while imposing undue taxes to cover other people. As for the government's projected deficits, his detractors make Godzillas of their size. Missing from the picture is what we get from health insurance reform and from spending all this money.
As for Afghanistan, it's clear the President is concerned about appearing soft on terrorism. He's been pushed hard by Dick Cheney, the right wing's Prince of Darkness, and has drifted noticeably closer to the Bush II administration's antiterrorism policies. The Democratic Party's liberals are starting to shuffle their feet nervously. The President hasn't articulated an end game or an exit strategy. When it came to combating terrorism, the Bush II administration ultimately had nothing to offer except fear itself, a fear that apparently was used to justify a costly war in Iraq, official torture, overlooking CIA transgressions of the administration's torture policy, overly broad domestic electronic surveillance, nondisclosure to Congress of the proposed use of mercenaries to assassinate Al Queda leaders, and the legal cancer that grew at Guantanamo Bay. The problem with fear is that it is a raw emotion, not a reasoned principle, and therefore cannot serve as a foundation for democracy.
The great Presidents--the ones historians write about and people remember--are the ones who got things done. Smart, talented, but unproductive ones like Bill Clinton and Jimmy Carter barely get footnote treatment. Barack Obama's proposed programs will die the death of a thousand cuts if he plays defense against the barrage of political trash talking that has come his way. He can't please all the people all the time, and his promises of bipartisanship are being twisted around behind his back to shackle his agenda.
Franklin Delano Roosevelt was famous for his fireside chats--radio addresses aimed directly at the electorate--to explain how he intended to make things better for America. Barack Obama--not his spokesperson, not his aides, but he himself--should take the lead. He needs to more specifically define his health insurance reform and then explain why it will improve things. He cannot deny that the costs of universal coverage won't be large. He needs to describe the benefits of universal coverage and explain why they justify the costs. The American people didn't support Social Security because it would increase their taxes. They supported it because it would alleviate poverty in old age and they considered that goal worth the extra taxes.
President Obama must explain why the federal deficit is so large and why the extra expenditures will make America better off. We had comparable deficits during World War II, but the people understood why and were willing to pay the price.
He must develop an end game and exit strategy for the war in Afghanistan. In this regard, he should not exclude a non-victorious conclusion. President Reagan's withdrawal from Lebanon and President Clinton's withdrawal from Somalia arguably took some pressure off terrorists. President George W. Bush's wind-down of the war in Iraq acknowledged a humiliating failure of American policy that can only encourage terrorists. But the American people were willing to live with these consequences because continuing to fight in those locations became too costly. The United States has the naval and aerial resources to hit Al Queda training camps without needing American infantry on the ground. American diplomacy can exploit potential differences between Al Queda and the Taliban to undermine support for the terrorists. Maybe that sounds far fetched right now, but so did the notion of Richard Nixon attaining a pragmatic alliance with the Communist Chinese (against whom America fought a bitter war in Korea) in order to weaken the Soviet Union.
Taking the lead publicly would place Barack Obama at considerable political risk. But he's there already. He has charisma, and could do well. It's not enough to do a couple of town hall meetings and then take a vacation on Martha's Vineyard. President Obama should become his own principal spokesperson. Franklin Roosevelt personally gave his fireside chats. He also became the greatest President of the 20th Century.
Tuesday, August 18, 2009
Health Insurance Reform: Barack Obama's Leadership Test
All the posturing, yelling, screaming and even firearms displaying in the Democrats' health insurance reform road show highlight a crucial weakness in President Obama's tactical approach to the reform process. He's playing politics. By that, we mean he's trying in a politician's way to work with all the important constituencies to formulate a compromise that has bi-partisan support. Earlier this year, he enunciated broad principles for reform, but let Congress put together a detailed package. Since then, he's let the most vocal of his critics shape the contours of changes to the package. Only belatedly has he seemed to realize that he could be at risk of losing the entire initiative, at least for 2009, and has taken to the road himself.
Barack Obama is the most skilled politician of our times. He is cool, subtle, clever and smart. During the 2007-08 primaries and the 2008 general election, he danced like a butterfly and stung like a bee. His opponents, weighed down by outdated conventional wisdom, fought earlier elections and lost this one.
But like so many Presidents in the last 30 years, he has bogged down since his inauguration. Candidates from outside the Beltway have almost always been the winners of Presidential elections in recent decades. That's understandable, but it means we get rookies in the White House. Washington is a tough town on outsider Presidents. Jimmy Carter, Ronald Reagan, Bill (and Hillary) Clinton and George W. Bush all found that out the hard way.
Barack Obama may have Chicago grittiness when it comes to dealing with snow. But nowhere in his political experience has he been in a mosh pit like Washington. Chicago and Springfield, Illinois have their political rivalries and battles. But party discipline still means something in those towns. In Washington, members of Congress quickly learn that the squeaky wheel gets the most attention--to get re-elected, you have to negotiate with your own party's leadership for goodies to take back to your home district or state, so there isn't a big payoff from being quietly loyal. The Democratic Party, in particular, remains a collection of not-Republicans that resembles the coalition governments in countries with Parliamentary systems, where fringe members of the coalition have the greatest voice over policy.
Moreover, the Republicans now get to play their stronger role, that of the opposition party. They're lousy at governing--foreign policy failures in Iraq and Afghanistan, domestic disaster in the financial markets and the economy. But they're really good at the obstructive defeatism that can undermine major policy initiatives like health insurance reform. It's easy to criticize, and the Republicans always take the easy way out when they're the opposition party.
President Obama surely understands that the Voting Rights Act of 1965 was one of the principal reasons why he was elected President. Without this landmark legislation to secure for minorities the right to vote, he wouldn't be sitting in the White House. He should reflect on the President who pushed--no, bulldozed--that law through Congress.
Lyndon Johnson was dramatic, melodramatic, overbearing, ingratiating, idealistic, principled, and hyper-determined to get his way. When crucially important legislation was on the line, he'd sermonize, badger, harangue, and arm-twist. To bring around the last few reluctant legislators whose votes were needed, he'd pigeon-hole them and in his uniquely domineering way, subject them to character-building experiences that made them see the wisdom of guaranteeing fundamental rights for all Americans. He was the greatest domestic President of the 20th Century after Franklin Roosevelt, and he got there by exercising leadership. With a black President in the White House and a much larger role in society for nonwhites, today's America is in many ways Johnson's Great Society. But for the tragedy of the Vietnam War, Lyndon Johnson would be lionized by Presidential historians.
Even though the decibel level has been high, and histrionics have received almost all the press coverage, the contours of an acceptable health insurance reform have emerged. Americans want choice, and do not want to lose what they already have. But they'd also like a safety net. A national health service that forces all medical personnel onto the government's payroll and eliminates all private insurers wouldn't be acceptable. But neither is the status quo, and Republicans, wittingly or unwittingly, will end up protecting the status quo, warts and all, if they succeed. That would be a Pyrrhic victory for them, because Americans don't want the status quo any more. Just about everyone, including the well insured, has a sibling, parent, child, good friend, or neighbor who is uninsured. There isn't one of us who doesn't realize that we or someone dear to us could be uninsured sooner or later. The federal government has for decades provided health insurance to the vulnerable through Medicare, Medicaid and SCHIP. A safety net program, perhaps like enrolling the uninsured in Medicare, or a newly formed sister program, would follow in the same tradition.
Health insurance reform is today's greatest domestic challenge. It's understandable why Barack Obama started the reform process by playing politics. He's a tremendously skilled politician and we naturally fall back on our strengths in difficult situations. But politics won't get the job done this time. This isn't an election. This is a legislative process, with a difficult problem that the legislative process normally would be incapable of addressing effectively. President Obama doesn't have the compliant Congress President Franklin Roosevelt had in his first year. He should take a page from Lyndon Johnson's playbook and lead legislators to places that they may not until later realize they wanted to go. Perhaps he'll need to be more forceful than would come naturally. Perhaps he'll feel like he's at greater political risk if he steps out front and center. But Washington's natural inertia will overwhelm him unless he fights it with all his strength and all his willpower.
Barack Obama is the most skilled politician of our times. He is cool, subtle, clever and smart. During the 2007-08 primaries and the 2008 general election, he danced like a butterfly and stung like a bee. His opponents, weighed down by outdated conventional wisdom, fought earlier elections and lost this one.
But like so many Presidents in the last 30 years, he has bogged down since his inauguration. Candidates from outside the Beltway have almost always been the winners of Presidential elections in recent decades. That's understandable, but it means we get rookies in the White House. Washington is a tough town on outsider Presidents. Jimmy Carter, Ronald Reagan, Bill (and Hillary) Clinton and George W. Bush all found that out the hard way.
Barack Obama may have Chicago grittiness when it comes to dealing with snow. But nowhere in his political experience has he been in a mosh pit like Washington. Chicago and Springfield, Illinois have their political rivalries and battles. But party discipline still means something in those towns. In Washington, members of Congress quickly learn that the squeaky wheel gets the most attention--to get re-elected, you have to negotiate with your own party's leadership for goodies to take back to your home district or state, so there isn't a big payoff from being quietly loyal. The Democratic Party, in particular, remains a collection of not-Republicans that resembles the coalition governments in countries with Parliamentary systems, where fringe members of the coalition have the greatest voice over policy.
Moreover, the Republicans now get to play their stronger role, that of the opposition party. They're lousy at governing--foreign policy failures in Iraq and Afghanistan, domestic disaster in the financial markets and the economy. But they're really good at the obstructive defeatism that can undermine major policy initiatives like health insurance reform. It's easy to criticize, and the Republicans always take the easy way out when they're the opposition party.
President Obama surely understands that the Voting Rights Act of 1965 was one of the principal reasons why he was elected President. Without this landmark legislation to secure for minorities the right to vote, he wouldn't be sitting in the White House. He should reflect on the President who pushed--no, bulldozed--that law through Congress.
Lyndon Johnson was dramatic, melodramatic, overbearing, ingratiating, idealistic, principled, and hyper-determined to get his way. When crucially important legislation was on the line, he'd sermonize, badger, harangue, and arm-twist. To bring around the last few reluctant legislators whose votes were needed, he'd pigeon-hole them and in his uniquely domineering way, subject them to character-building experiences that made them see the wisdom of guaranteeing fundamental rights for all Americans. He was the greatest domestic President of the 20th Century after Franklin Roosevelt, and he got there by exercising leadership. With a black President in the White House and a much larger role in society for nonwhites, today's America is in many ways Johnson's Great Society. But for the tragedy of the Vietnam War, Lyndon Johnson would be lionized by Presidential historians.
Even though the decibel level has been high, and histrionics have received almost all the press coverage, the contours of an acceptable health insurance reform have emerged. Americans want choice, and do not want to lose what they already have. But they'd also like a safety net. A national health service that forces all medical personnel onto the government's payroll and eliminates all private insurers wouldn't be acceptable. But neither is the status quo, and Republicans, wittingly or unwittingly, will end up protecting the status quo, warts and all, if they succeed. That would be a Pyrrhic victory for them, because Americans don't want the status quo any more. Just about everyone, including the well insured, has a sibling, parent, child, good friend, or neighbor who is uninsured. There isn't one of us who doesn't realize that we or someone dear to us could be uninsured sooner or later. The federal government has for decades provided health insurance to the vulnerable through Medicare, Medicaid and SCHIP. A safety net program, perhaps like enrolling the uninsured in Medicare, or a newly formed sister program, would follow in the same tradition.
Health insurance reform is today's greatest domestic challenge. It's understandable why Barack Obama started the reform process by playing politics. He's a tremendously skilled politician and we naturally fall back on our strengths in difficult situations. But politics won't get the job done this time. This isn't an election. This is a legislative process, with a difficult problem that the legislative process normally would be incapable of addressing effectively. President Obama doesn't have the compliant Congress President Franklin Roosevelt had in his first year. He should take a page from Lyndon Johnson's playbook and lead legislators to places that they may not until later realize they wanted to go. Perhaps he'll need to be more forceful than would come naturally. Perhaps he'll feel like he's at greater political risk if he steps out front and center. But Washington's natural inertia will overwhelm him unless he fights it with all his strength and all his willpower.
Thursday, July 23, 2009
Wall Street Bails Out Obama
Just when he was falling onto the ropes over health insurance reform, President Obama got a bailout from Wall Street. We learned today that bonus pools at the biggest banks rose to $74 billion this year, up from $60 billion last year. The political news was starting its summertime slowdown. Now, prominent members of Congress and the administration can recoil in faux Kabuki style and present carefully crafted soundbites denouncing the spectacle of taxpayers making wealthy financiers more prosperous. An electorate worried about the cost of health insurance reform can be diverted by populist outrage over greater inequality of wealth in a time of rising unemployment. Goldman Sachs individually assisted the President with its grumpiness over the amount it would pay to redeem the government's TARP warrants even as it aimed to award employees record levels of compensation. For the tabloids, a supposedly sterling investment bank that turns out to have feet of clay is a better story than a President who is trying to help people, even if the help involves a lot of money.
The stock market has also given the President a boost. Beginning with optimism over less bad economic data in March, the market has shot almost straight up on the basis of a few green shoots and a lot of hopeful thinking. Most recently, a number of federally subsidized banks have reported better than expected earnings. It's astonishing what you can do with trillions of dollars of subsidies and government-guaranteed survival.
Additionally, some business corporations have reported better than expected financial performance, much of it attributable to frantic cost-cutting. In the arithmetic sense, cost cutting improves earnings. But no seasoned executive will tell you that a corporation can attain lasting prosperity from cost cutting (GM, Ford and Chrysler serve as Exhibits A, B and C in this regard). Nevertheless, the stock market is so desperate for any good news that less negative has become the new fabulous.
Momentum traders, who feed off upwards stampedes like today's market, may feel good. Rational investors will remember than in the last ten years, every up-market frenzy, beginning with the Great Illusory Surge of late 1999 and early 2000, has ended badly. It's unclear if the market will test its early March lows. But we should remember the lesson so recently taught by the real estate markets: no asset class continually rises in value.
Still, the financial markets have short term memories. Probably more than a few bottles of champagne are being bought tonight in Manhattan and other places where investors lurk. That's good for President Obama, who doesn't have to fight a fearful stock market even as he struggles for traction with health insurance reform.
Everyone, including the medical profession and the private health insurance industry, agrees that reform is needed. But current efforts are bogging down in the quagmire of the debate over who will pay for it. That's a necessary debate, but its NIMBY-like obsessiveness overlooks the morass we already have. The insured are paying something like $1,000 each to cover the cost of care for the uninsured. Since the the insured tend to be better off than the uninsured, the well-off already pay. The principal question is how that payment will be made--in insurance premiums or federal income taxes.
Let's also remember that we all benefit from universal health coverage. If you're well-off and allergic to tax increases, consider this: the nice restaurant meals you enjoy might be prepared by uninsured workers who can't afford to see a doctor and might pass swine flu onto you or your family. The uninsured folks who clean your office and its bathrooms at night could leave bacteria or viruses to infect you the next day. The uninsured passengers on the subway, bus or airplane might be a health threat to dozens at a time. That annoying cough behind you at the theater could do much more than interrupt your enjoyment of the movie.
Also consider that health insurance isn't guaranteed for most people. Once your child graduates from college, he or she probably will be dropped by your policy. Many young people don't have jobs with employer-sponsored health insurance. Will your child take the initiative to buy an individual policy? Also, a lot of people of all ages who operate or work at small businesses are uninsured. If an uninsured close relative of yours--an adult child, parent or sibling-- gets sick or is injured, who might have to chip in to cover the costs? You probably wouldn't simply let a family member slide into the gutter, so it would be your net worth that would shrink. We all have a stake in health insurance reform. It's not just a matter of costs. It's also a matter of benefits.
The stock market has also given the President a boost. Beginning with optimism over less bad economic data in March, the market has shot almost straight up on the basis of a few green shoots and a lot of hopeful thinking. Most recently, a number of federally subsidized banks have reported better than expected earnings. It's astonishing what you can do with trillions of dollars of subsidies and government-guaranteed survival.
Additionally, some business corporations have reported better than expected financial performance, much of it attributable to frantic cost-cutting. In the arithmetic sense, cost cutting improves earnings. But no seasoned executive will tell you that a corporation can attain lasting prosperity from cost cutting (GM, Ford and Chrysler serve as Exhibits A, B and C in this regard). Nevertheless, the stock market is so desperate for any good news that less negative has become the new fabulous.
Momentum traders, who feed off upwards stampedes like today's market, may feel good. Rational investors will remember than in the last ten years, every up-market frenzy, beginning with the Great Illusory Surge of late 1999 and early 2000, has ended badly. It's unclear if the market will test its early March lows. But we should remember the lesson so recently taught by the real estate markets: no asset class continually rises in value.
Still, the financial markets have short term memories. Probably more than a few bottles of champagne are being bought tonight in Manhattan and other places where investors lurk. That's good for President Obama, who doesn't have to fight a fearful stock market even as he struggles for traction with health insurance reform.
Everyone, including the medical profession and the private health insurance industry, agrees that reform is needed. But current efforts are bogging down in the quagmire of the debate over who will pay for it. That's a necessary debate, but its NIMBY-like obsessiveness overlooks the morass we already have. The insured are paying something like $1,000 each to cover the cost of care for the uninsured. Since the the insured tend to be better off than the uninsured, the well-off already pay. The principal question is how that payment will be made--in insurance premiums or federal income taxes.
Let's also remember that we all benefit from universal health coverage. If you're well-off and allergic to tax increases, consider this: the nice restaurant meals you enjoy might be prepared by uninsured workers who can't afford to see a doctor and might pass swine flu onto you or your family. The uninsured folks who clean your office and its bathrooms at night could leave bacteria or viruses to infect you the next day. The uninsured passengers on the subway, bus or airplane might be a health threat to dozens at a time. That annoying cough behind you at the theater could do much more than interrupt your enjoyment of the movie.
Also consider that health insurance isn't guaranteed for most people. Once your child graduates from college, he or she probably will be dropped by your policy. Many young people don't have jobs with employer-sponsored health insurance. Will your child take the initiative to buy an individual policy? Also, a lot of people of all ages who operate or work at small businesses are uninsured. If an uninsured close relative of yours--an adult child, parent or sibling-- gets sick or is injured, who might have to chip in to cover the costs? You probably wouldn't simply let a family member slide into the gutter, so it would be your net worth that would shrink. We all have a stake in health insurance reform. It's not just a matter of costs. It's also a matter of benefits.
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