This week’s National Journal poll of political bloggers asked “Which of these pieces of legislation, if enacted, would help the Democrats’ political prospects in the midterm elections?” Bloggers could choose more than one. The leading choice for both Left and Right bloggers was “job creation.” The only other items which got more than 50% from either group of voters was deficit reduction (from the Right), and health care and financial industry reform (from the Left). I thought that most of the available choices would be helpful for the Democrats, if done properly: ““Cap-and-trade would be a political disaster. Taxing banks in general (rather than dealing with the subset that helped cause the meltdown) would be of little benefit. Greatly reducing the deficit now (as opposed to promising to reduce it later) would be enormously helpful. The financial/health/immigration/job items could all be helpful, but only if they are done in a fiscally responsible way, do not reward illegal aliens, and are moderate enough to pick up some significant GOP support.”
The second question was “Given the outcome of the Massachusetts Senate race, what would be best politically for [Democrats/Republicans] on health care reform?” Pluralities on the Left (for Democrats) and the Right (for Republicans) thought that House passage of the Senate bill would be the best political outcome. My view: “Politically speaking, the worse the better — passage of the Senate bill would be great, and passage of the House bill even better. For the good of the nation, however, it’s better to start over — and for the starting points to be allowing the purchase of insurance across state lines, ending the tax code’s bias for employer-provided insurance, and moving to a true insurance system, in which customers pay up front for routine costs, with insurance in reserve for extraordinary costs.”
24AheadDotCom says:
No form of imm. “reform” would be “fiscally responsible”, since it would a) increase the legal labor pool (especially at the low end) at the same time as b) making millions available for benefits they weren’t previously entitled to. And, since giving the far-left and foreign governments even more power are costs, it wouldn’t be prudent in any way. And, of course, even “requiring” them to sign up (note: that’s a “tough” talking point they developed about a year ago to replace “offering”) and pay a fine would be seen as a reward, and it would be a reward for massive illegal activity and encourage more of the same. And, for those reasons and more, nothing about imm. “reform” will ever be “moderate”.
P.S. Even as millions of Americans are unemployed, the Obama admin is pulling out all the stops to add 200,000 new legal workers to the market. Not only will that hurt American workers, but it will also hurt the country it’s sold as helping by braindraining them and making them more dependent on the U.S. Have any of the listed r/w bloggers taken the Obama admin to task over that? Let me know.
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January 24, 2010, 7:45 pmrpt says:
David: It appears that your choices are all the things were so successful in the 2000’s or were not done at all during those years, i.e. any proposed health care/insurance reform. Let’s start over with nothing after all of the R objections have thus far been sustained. No preexisting condition bar, or anything other than eliminating state regulation. Terrific politically, but nothing at all for any of the affected.
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January 24, 2010, 7:46 pmSome dude says:
I don’t think anyone involved intended either the House version or the Senate version to actually become law.
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January 24, 2010, 7:59 pmBruce Hayden says:
I do find it quite humorous that both the right and the left think that Congress passing health care “reform” as currently in Congress right now would benefit them. I think that the Republicans have the better argument here, and that the Democrats who believe this are engaging in wishful thinking, esp. in view of Scott Brown’s recent victory in MA.
I frankly cannot fathom why the liberals would think that a panel or something akin to such starting after the next elections would help them at all in overcoming the emerging view that they are record spenders and borrowers. I would also ask about the viability of such a scheme, since there is a decent chance right now of one of the two Houses flipping in the next election. Any panel or commission that tried to work between election day and when the next Congress was sworn in would be the worst sort of Lame Duck, and any after that is likely to contain enough Republicans that any new spending plans would be dead — or is that the theory here in the first place?
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January 24, 2010, 8:18 pmBruce Hayden says:
The problem with job creation for those on the left is that the Democrats do not have a viable solution for doing such. They are hampered greatly by their last real attempt to do so, the so-called “stimulus” bill that did no such thing. It turns out to have been a vehicle for political payoffs for their major constituents, most notably the public sector employees unions. It doesn’t help that it didn’t really create any jobs (since any new jobs were more than offset by jobs it destroyed), and most of the jobs “saved” appear to have been raises to government workers at all levels, under the apparent assumption that all these notables would have left their high paying secure government jobs with great benefits if they hadn’t received raises in the midst of the worst recession in the last almost 70 years.
Compounding this, they just haven’t figured out yet that Keynesian economics just don’t work. Probably never did, even during the liquidity trap of the Great Depression, and clearly haven’t worked since then. They ignore that any jobs directly created through government action, or through the Keynesian multiplier are more than offset by the negative multiplier for the money being spent. Worse — since government employees any more are better paid and have better benefits than the private sector, and that union labor is almost always required for construction projects, multiple private sector jobs are likeley lost for every one created under Keynesian assumptions.
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January 24, 2010, 8:47 pmbyomtov says:
Bruce Hayden notwithstanding, job creation means stimulus. If conservative bloggers want “job creation,” but not more stimulus, they don’t know what they are talking about.
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January 24, 2010, 9:15 pmOrder of the coif says:
You suggested “moving to a true insurance system, in which customers pay up front for routine costs.” Why in the world would I ever agree to that? Just like, after I retire, why would I ever agree to reduce the benefits of Medicare Advantage?
I vote. The people the Dems “claim” to care about don’t. Not only do I vote, I contribute and I always get even with politicians who shaft me, no matter how long it takes. Don’t fuck with the intelligent portion of the middle class.
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January 24, 2010, 10:04 pmBruce Hayden says:
Well, no. You have fallen for the Keynesian fallacy that the government can create jobs. It doesn’t and really cannot. All that money that is used to “create” or “save” jobs has to come from somewhere, and that somewhere invariably means even more job destruction in the private sector.
Someone came up with the manna from heaven analogy. Keynesian economics would work if the money being spent were like that manna. In other words, the dollars just fell from heaven. But it doesn’t, unless it is somehow found buried in someone’s back yard or stuffed in their mattress. The money is either printed or borrowed. Printing money doesn’t increase actual wealth (just perceived wealth for the short run). Borrowing either crowds out private borrowing, or affects our balance of payments. In any case, if the money is borrowed, it is taken from a more productive use and applied to a less productive use.
But that doesn’t take into account tax rates either. The Democrats are cranking them up at precisely the wrong time. At worst, they should have extended the Bush tax cuts another couple of years until after the recession was over. Instead, they are scheduled to expire, which results in a tax rate increase. Add to that that so much of the Democratic legislation pending would raise tax rates also.
Let me suggest that people who have your understanding of the economy are precisely why the “stimulus” bill was able to raise the unemployment rate from 8% to 10%. (ok, I agree that there may not be direct causation, but it surely evidenced a profound lack of understanding of modern economics).
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January 24, 2010, 10:11 pmBruce Hayden says:
The answer to this is that the current Medicare model is unsustainable. It worked because the Baby Boomers were supporting it. It will soon fail for the same reason — the Baby Boomers will be dependent upon it. This is the Pig in the Python generation, with much smaller cohorts right before and after. Even without increasing medical costs, Medicare could not support the medical needs of that generation.
There are really two plausible solutions. Rationing and reinstituting price sensitivity. Rationing involves, of course, Sarah Palin’s Death Panels. And that is why bringing back pricing into the mix is of interest.
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January 24, 2010, 10:21 pmbyomtov says:
Bruce Hayden,
Government borrowing does not crowd out private borrowing when interest rates are extremely low. If it did, then rates would rise significantly. They have notdone so. Similarly, government spending does not crowd out private spending when there are idle resources — unsold inventories, factories operating way below capacity or not at all.
In any case, I don’t propose to debate economics with someone who believes it to be a “Keynesian fallacy” that the government can create jobs, or that the stimulus actually increased unemployment.
Let me suggest that people who have your understanding of the economy are precisely why the stimulus was not big enough.
What do you think the unemployment rate would be right now without a stimulus?
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January 24, 2010, 10:47 pmAllan Leedy says:
byomtov, here’s a hint: If you don’t want to debate economics with Bruce Hayden (and let me be clear that i am utterly sympathetic with your stance and the reasons for it), then stop asking him questions on the subject.
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January 24, 2010, 11:17 pmOrder of the coif says:
Bruce said “The answer to this is that the current Medicare model is unsustainable.”
So what. It IS sustainable during my lifetime. So it makes sound economic sense for me to try my best to kill every “reform” to maintain my benefit level and I will.
The future may be saved by “wonder” medicine which will eliminate disease, illness, and delay death. If the young are too stupid to fight back now, well, I guess they’ve made their choice.
P. S. If medicare is unsustainable, then EVERY entitlement program is as well. The voting population is beginning to see that either the oxen stay toghther (fighting “reform”) or they all get goared. As the farmer once said: “Once the milk is free, you can’t get ‘em to buy the cow.” Businesses never “reqrganize” until the eve of bankruptcy, why expect better of politicians?
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January 24, 2010, 11:22 pmBruce Hayden says:
Probably about the same. Maybe a bit lower.
Well, there isn’t much available to business in terms of money available for being borrowed. You would think so, with the artificially low interest rates. But it just ain’t happening. I know of businesses that had lines of credit for decades that had them canceled for no reason on the part of the businesses (they had always repaid them promptly), and they are still without the cash they need to operate.
Yes, there are idle factories, etc., and low interest rates, at least for buying houses and for banks. But it sure isn’t translating into lending to small businesses. And, maybe part of that is that the idle factories are not interchangable, and that theory comes from an era when they were. There is a lot of excess capacity, for example, right now in the auto industry. But it also looks like that excess capacity is world wide. Building a lot more cars with those idled factories and workforce isn’t going to get us out of the recession, since no one is going to buy them.
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January 24, 2010, 11:54 pmBruce Hayden says:
At one level, I agree about other entitlement programs. But most of them are not faced with the demographics that Medicare is. But the compounding problem there is that Medicare recipients have the highest voting percentage of any demographic, while that is not (yet) true for many others.
My problem with Medicare is that I will be eligible in the next six years or so to join it, and may end up depending on it for the rest of my life. And I am getting a bit scared. BUT, none of the proposed changes seem to me likely to help, and the health care “reform” bills would like hurt my potential coverage. A lot.
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January 25, 2010, 12:02 amyankee says:
Do you really think this would be “enormously helpful” for the Democrats’ political prospects? If so, you are suffering from a severe case of the pundit’s fallacy: assuming that whatever policy you favor on the merits is the route to political success.
A significant reduction in a $1.5 trillion deficit would require hundreds of billions of dollars in tax increases or spending cuts. If the Democrats try to raise hundreds of billions of dollars of revenue in new/higher taxes, they’ll be subjected to endless Republican attacks for raising taxes during a recession. Not good for the Democrats.
Spending cuts would be worse. Say the Democrats want to cut $500 billion from the federal budget. Trying to cut Social Security or Medicare would be disastrous. Cutting defense would be nearly as bad, or maybe even worse. So they’ll have to make serious cuts to lots and lots of programs that individually make up a trivial portion of the budget. Every one of those programs is there because it’s important to someone, and they’ll hate it when their favorite program gets cut. Environmentalists will hate EPA cuts, NPR listeners will hate cuts to public radio, tough-on-crime types will hate cuts to law enforcement, farmers will hate cuts to agricultural subsidies, college students will hate cuts to subsidized student loans, scientists will hate cuts to science research, teachers will hate Education Department cuts. Any attempt to “greatly reduce” the budget through spending cuts would anger an enormous number of people, who will then vote Republican or stay home. Result: bad for the Democrats.
On the other side of the coin, the number of people for whom the budget is a decisive voting issue is minuscule. People complain about the deficit, but it’s not determinative of their vote: the deficit is too remote and abstract to affect their lives in any noticeable way, people don’t know enough about exactly how big it is, and all numbers that end in –illion have a tendency to sound the same because they’re too large to wrap the mind around. Compared to the number of people angered by cuts to their favorite program, the number of people who would be induced to vote Democratic because the deficit was only $1 trillion rather than $1.5 trillion is infinitesimal.
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January 25, 2010, 3:02 amBruce Hayden says:
Worse, they would be raising tax rates in the midst of a recession, which is almost always counter-productive. The Republicans would oppose it for that reason alone, even if some of them might be happy with tax rate increases in other situations.
Plus, there is a decent chance that raising tax rates right now might not raise as much revenue as projected (utilizing static analysis).
In other words, Congress has designated much of the budget as non-discretionary, so that they (supposedly) cannot reduce expenditures there. And, it would be impossible to balance the budget with non-defense discretionary cuts, even if the entire non-defense discretionary spending were eliminated — even under the Bush deficits. The 1.5 or so trillion in deficit spending in 2009 would have been even more impossible.
I think that that might have been true in the past. Right now though, I think that it ignores the tea party movement.
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January 25, 2010, 3:29 amA. Zarkov says:
That is the standard Keynesian argument, but the stagflation of the 1970s dealt it a crippling blow. Then came the monetary theory of Friedman which replaced Keynes. Now that’s been dealt a blow so Keynes has been brought back to life. So far deficit spending has not worked. Of course some jobs have been saved but once the spending stops the jobs go away.
We can always drive unemployment down with government actions. For example, draft everyone, they they are magically become employed. Employment is not so much the issue as production because without real production being employed means little. The current problem we have seems best described by the theories of Hyman Minsky. The economy has been crushed by excessive debt. That’s total debt, not just government debt which is minor compared to private debt. More debt is not going to cure a problem created by debt in the first place so the failure of the administration’s stimulus spending was to be expected. Not only that, the stimulus spending has on the whole not been put into projects that will create future cash flows. It has mainly increased demand which is a jobs program for China.
The government has also been trying to re-inflate the housing market, and that’s a very bad policy which mainly benefits the banks and mortgage debt holders. Moreover it won’t work because the overhang in residential and commercial real estate is just too big. It will get even worse this year as the option-ARMs start to recast. Note that’s recast and not reset. Housing prices have to fall further, and resources diverted away from housing, which is consumption, to investment in productive resources. Look at what happened so far. Fannie and Freddie went insolvent, and have been handed a blank check by Treasury. The FHA has now stepped into the picture and lends money to unqualified buyers just like the banks used to do. Now the foreclosure rate is 14% for FHA loans. All this on borrowed and printed money.
Both Keynes and Friedman gave us neoclassical theories, which don’t apply all the time, and both fail for the kind of economic problem we have right now. Read this for an explanation of why Bernake and other neoclassical economists don’t understand what caused the Great Depression. Until the administration cleans house and gets rid of the neoclassical influence it’s going to continue doing things that will ultimately make the economy worse. BTW Keen did this thesis on Minsky and you can download it from his blog site. I might add that Minsky tends towards socialist view of the economy. The Keen critique has nothing to do with the left-right divide.
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January 25, 2010, 5:02 amCrisisMaven says:
About Health — a state that got the economy ailing will now fix health?
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January 25, 2010, 7:11 amsteve says:
Selling insurance across state lines is embraced by the exchanges in the Senate plan. This will actually make very little difference. I will not suddenly lower my fees just because some insurance comes from out of state. In fact, I will charge more since they wont have any negotiating clout.
What I think you really should mean by this is that you want states to allow different levels of care offered in their insurance plans. If you do not change this, any insurance company that comes to my state will be operating under the same rules and have to offer the same product. They will be starting out with fewer patients. I am not going to offer them the discounted rate I have to agree to with the big companies. Also, I am in a short supply specialty.
Insurance companies could offer products in other states right now if they wanted. Most dont for the reasons above, plus the incest that occurs in both red and blue states.
I am in strong agreement on the tax change. We should tax total compensation, not just wages. That has been impossible to accomplish in the past, just as the mortgage tax exemption has been a sacred cow. One should note that the Senate bill opens the door to taxing health benefits.
Linking illegal aliens to health care reform is total BS. I am disappointed that you would throw in something like that. Illegal aliens are specifically excluded.
You are aware of the literature showing that if people have to pay for routine screening, they skip it? The long term consequences of this are unclear.
Steve
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January 25, 2010, 8:54 amJ says:
With regard to the healthcare bill, on the road to slavery (to big government)we are arguing about which path (both leading to destruction of the USA)to take?
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January 25, 2010, 9:14 amyankee says:
I think the political problem with cutting Social Security and Medicare isn’t just that they’re “nondiscretionary,” but that they’re extremely popular. Strictly speaking Kopel was only calling for the deficit to be “greatly reduced,” not balanced, and you could (in theory) greatly reduce the budget by cutting nondefense discretionary spending. And as I said nondefense discretionary spending cuts of the size needed to greatly reduce the deficit would be extremely unpopular—though it sounds like you don’t disagree.
Kopel should feel free to argue that the Democrats should enact hundreds of billions of dollars in spending cuts and/or tax increases even though it would cost them in the elections, because it’s the right thing to do. That’s a legitimate argument, though I don’t share his view of good policy. But Kopel is confusing good policy with good politics.
I think very a very small number of tea partiers could be enticed to vote Democratic under any circumstances. I doubt those who could would be swayed by a reduction in the deficit from $1.5 trillion to $1 trillion. The most it might do is entice some of them to stay home. Not, I think, very many, because even tea partiers who care enough about the deficit for it to have an actual effect on their vote would be upset that the “wrong” programs were being cut.
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January 25, 2010, 10:44 amDilan Esper says:
Is there a phonier policy proposal out there than the GOP’s ‘selling insurance across state lines’? Insurance companies can already do this, and obamacare sets up a national market that facilitates this.
What the republicans are advocating is preempting state insurance regulations and making insurance like the credit card industry, where you just have to incorporate in some state like delaware or south dakota and fleece the residents of california because the consumer protections and regulations of that state cannot be enforced against an insurer based out of state.
This is NOT a policy that they are seriously trying to get enacted. It’s a pure talking point, designed to say ‘see? We’re for health reform too!’
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January 25, 2010, 11:38 ambyomtov says:
Allan Leedy,
Good point.
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January 25, 2010, 12:18 pmMark B. says:
Order of the Coif:
Why would the intelligent (but foul-mouthed) middle class support the kind of health care payment reform that Kopel suggests?
They would support it because it will end up costing them less.
You don’t think all those health “insurance” companies got rich by providing their so-called services for free, do you?
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January 25, 2010, 1:08 pmsteve says:
“They would support it because it will end up costing them less. ”
We have no working model that demonstrates that to be true. We have many models in Europe, Japan, Singapore, Taiwan and other places that have lower costs. If we impose that “free market” reform, who is it assumed that prices will drop? They might rise if providers are no longer constrained by insurers and coercive state regs.
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January 25, 2010, 4:01 pmBruce Hayden says:
If that were all that ObamaCare did, I don’t think that anyone would complain. So, you could maybe take this as the Republicans accepting this portion of ObamaCare.
However, there are problems here that national legislation may or may not alleviate. In particular, there are several things that factor into different health care costs for different states. One of these is the malpractice environment in the different states. Another is the list of mandated coverages for different states. And these differing levels of cost are the primary cause of different levels of premiums in different states.
So, it is important that policy holders in low cost states not have to pick up the costs of health care in high cost states through this selling across state lines. And, I suspect that this was one of those details swept under the rug, when it came to ObamaCare, that it is likely that just that would have happened, insured from low cost states helping bring down health care insurance rates for policy holders in high cost states (which, coincidentally, most often are also heavily Democratic).
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January 25, 2010, 8:29 pmBruce Hayden says:
In other words, let’s not experiment with free market reforms, since there is a possibility that costs may go up (though they will much more likely go down). Instead, let’s implement a massive new bureaucracy with huge powers through 2,000 or so pages of unintelligible legislation instead. That will surely bring down costs, apparently because President Obama has promised that it would.
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February 15, 2010, 1:01 am