Author: Megan McArdle

As one of the few people I know who has attended both a four year college, and a trade school, I’m particularly interested in stories like these, which would challenge all but the most doctrinaire libertarian’s love of free markets:

Jeffrey West was working at a pet store near Philadelphia, earning about $8 an hour, when he saw advertisements for training programs offered by WyoTech, a chain of trade schools owned by Corinthian Colleges Inc., a publicly traded company that last year reported revenue of $1.3 billion. 

 After Mr. West called the school, an admissions representative drove to his house to sell him on classes in auto body refinishing and upholstering technology, a nine-month program that cost about $30,000. 

Mr. West blanched at the tuition, he recalled, but the representative assured him the program amounted to an antidote to hard economic times.

“They said they had a very high placement rate, somewhere around 90 percent,” he said. “That was one of the key factors that caused me to go there. They said I would be earning $50,000 to $70,000 a year.” 

Some 14 months after he completed the program, Mr. West, 21, has failed to find an automotive job. He is working for $12 an hour weatherizing foreclosed houses.

With loan payments reaching $600 a month, he is working six and seven days a week to keep up. 

“I’ve got $30,000 in student loans, and I really don’t have much to show for it,” he said. “It’s really frustrating when you’re trying to better yourself and you wind up back at Square One.”

Sadly, this is not at all atypical.  Many, many trade schools take a ton of money from both the government and their students, drive those students deep into debt, and then leave them stranded on the job market, no better off than they were before.  In my class on network administration, two people ended up with jobs in the business:  me, and a guy who’d already been doing it as an office manager.  And I only found one because I happened upon an office that needed someone who could play with the computers a little bit, but more importantly, type 90 wpm.

Ezra Klein writes:

For some time, I’ve been trying to find good polling from the passage of Medicare. According to Greg Sargent, though, the Democrats beat me to it:

In a last-minute effort to stiffen Dem spines, senior Dem leadership aides are circulating among House Dems some polling numbers from the 1960s that underscore how controversial Medicare was in the months leading up to its historic passage.

Dem leadership staff is highlighting a series of numbers from 1962 on President John F. Kennedy’s proposal. In July of that year, a Gallup poll found 28% in favor, 24% viewing it unfavorably, and a sizable 33% with no opinion on it — showing an evenly divided public.

A month later, after JFK’s proposal went down, an Opinion Research Corporation poll found 44 percent said it should have been passed, while 37% supported its defeat — also showing an evenly divided public.

After Lyndon Johnson was elected, a Harris poll found only a minority, 46%, supported a Federal plan to extend health care to the aged. Today, of course, Medicare is overwhelmingly popular.

For most people, deficit reduction is a side issue.  Oh, they say they care–especially when The Other Guys are in charge of the public purse.  But when it comes down to a choice between deficit reduction, and all the other stuff they want to do, deficit reduction almost never wins.

Yet the delay in releasing the bill and CBO score (which was initially supposed to come out as early as last week) has suggested something else – that early estimates from the CBO were bad, and they’re making changes to get the score that they want.

It now appears that this is precisely the case . . . 

There are several things that Democrats are up against when it comes to the CBO score. The most important is that, based on reconciliation instructions, the “fix” bill must be shown to reduce the deficit by at least $1 billion. The challenge is, that’s after assuming that the Senate bill is law. In other words, the reconciliation bill can’t claim any of the deficit reduction from the Senate bill, but rather it must reduce the deficit relative to the Senate bill. Yet the changes that are being talked about will cost a lot of money. This includes eliminating the “Cornhusker kickback” and offering enhanced Medicaid subsidies to all states, increasing subsidies for the purchase of insurance, eliminating the so-called “donut hole” on Medicare prescription drug benefits, and whatever else they put in the bill. At the same time, delaying until 2018 the enactment of the “Cadillac tax” would be scored as a reduction in revenue, and thus add further to the deficit. They’d have to make up the gap through tax increases as well as try to siphon “savings” away from the student loan bill. (More on that here.) But evidently it seems like they’re running into trouble on this front. 

Another issue to keep in mind is President Obama’s pledge that the health care bill would cost “around $900 billion” The changes he’s proposed to the Senate bill would bring the total cost of health care legislation to $950 billion, according to the White House. Every dollar exceeding that will make it easier for Republicans to argue he broke his pledge, and at some threshold even the media will have to call him out on it. That isn’t a fight that Democrats are going to want to get into. 

Also, Democrats need a CBO score that’s positive enough to help give Blue Dogs who claim to be fiscal conservatives an excuse to vote for the bill. 

So this is why it’s Tuesday afternoon and we still haven’t seen a final bill or CBO score.

Ezra Klein has posted a graphic from the Commonwealth fund showing that if we just assume that prior health care plans had reduced costs by exactly as much as they claimed they were going to, costs would be lower. The post is titled . . . 

If only we’d listened to Nixon, Carter or Clinton

Over the course of the health-care reform discussion, we’ve gotten pretty good at talking about the insufficient benefits of reform. It doesn’t cut costs as much as we’d like, and it doesn’t cover all of the uninsured, and it doesn’t have a public option, and so on. But one of the hardest things to convey is the terrible cost of inaction, which is much higher, both in human and economic terms, than many realize. 

The big player on the cost side is that even small benefits compound over the years. Slowing the system’s spending growth by 1.5 percentage points — so the rate of spending inflation will be six percent, rather than 7.5 percent, in a year — doesn’t seem like a terribly impressive outcome. That still has the system growing faster than GDP, or inflation, or Europe’s health-care systems. 

But over time, the benefits would be enormous.

The Commonwealth Fund, in a very smart piece, tries to show this by tallying the savings if we’d instituted the Nixon, Carter and Clinton reforms and they’d worked to slow spending by the aforementioned 1.5 percentage points.

Okay, it’s not exactly earth-shaking news that if you assume that things would have fallen, then you can produce a graph showing that they would have fallen.  This tells us absolutely nothing about what would have actually happened.  If the growth projections of various plans had been wrong–if they’d acted more like Medicare–I can get a very different graph (smoothed because I don’t have proper time to find the data and type it in):

That’s just a tiny increase in the rate of health care cost inflation–just 50 basis points a year.  

Boy, it sure looks like we dodged a bullet, doesn’t it?  Every year you delay is more money saved!

But this is trivial:  we can assume whatever we want!  Health care proponents will point to other countries.  Opponents will point to the history of programs like Medicare.  Who’s right?  Obviously, I have my opinions, but I can’t prove the counterfactual.  Neither can anyone else.

All these sorts of graphs are is a pretty way to prove that if you were right, you’d be right!  Which is true, but  not interesting. 

I can’t make heads or tails of the various whip counts floating around. Friends who report on politics assure me that Nancy Pelosi still has plenty of leverage to twist arms . . . but what? It doesn’t seem all that likely that Ms. Pelosi is going to be in charge after November, so what exactly does she have to hand out to wavering members? And if this thing passes on some controversial procedural maneuver, the Republicans in the Senate will go into full meltdown mode, meaning that there isn’t going to be any more legislation to take home to your constituents anyway. (How much pork can you cram into one financial reform bill?)

Democratic Congressional Campaign Committee money for their campaigns, of course . . . but if you’re in a district that hates the health care bill this hardly seems likely to save you.

Meanwhile, Pelosi and the leadership have to sound 100% absolutely sure of themselves . . . because if there’s any question of this thing not passing, their members will stampede for the exits. So their confidence isn’t really a sign of anything. On the other hand, the conservatives claiming it’s nearly impossible have equal and opposite motives. My sense is that it’s at a tipping point–at this point, many of the waverers are simply holding out for more goodies, but if she loses a couple more members, the thing becomes effectively impossible.

But I have nothing in particular to back that up . . . and as far as I can tell, neither does anyone else.

So now I’m thinking about another political problem. Assume this passes; what happens afterward? I don’t think that many people believe that the answer is “Nothing: the bill becomes law, and we sing happy smurf songs all the way to the longest life expectancy in the Western world!” Even the bill’s proponents expect it will need some follow-up work. But what will that follow-up work look like?

 Worst case scenario for Democrats: a wave of public outrage like the one that followed Cat Care, aka The Medicare Catastrophic Coverage Act of 1988 (and its step-child, the Medicare Catastrophic Coverage Repeal Act of 1989). This strikes me as quite likely, actually. If this passes, yes, you will have AARP support and a wave of positive coverage from 90% liberal media. These things did not save Cat Care from a wave of angry public protest. I mean, really angry. Who knew senior citizens could be that spry?

Now see: The White House’s last-minute healthcare talking points >

Join the conversation about this story »

See Also:

• Democrats Still 10 Votes Short On Healthcare, And Now Votes Are Starting To Peel Away
• With Healthcare On The Ropes, Obama Goes Back To Using Special Deals To Buy Votes
• The Last Desperate Push: Here Are The Health Care Talking Points The White House Just Released To Left Wing Think Tanks

I am in receipt of an email from my gym, urging me to vote for it in the City Paper’s annual Best of DC contest.  I like my gym.  But unfortunately, this is not my only consideration.  After all, if my gym gets ranked “Best in DC”, presumably more people will join.  Then it will be more crowded.  That will make me worse off.

I can’t make heads or tails of the various whip counts floating around. Friends who report on politics assure me that Nancy Pelosi still has plenty of leverage to twist arms . . . but what? It doesn’t seem all that likely that Ms. Pelosi is going to be in charge after November, so what exactly does she have to hand out to wavering members? And if this thing passes on some controversial procedural maneuver, the Republicans in the Senate will go into full meltdown mode, meaning that there isn’t going to be any more legislation to take home to your constituents anyway. (How much pork can you cram into one financial reform bill?) 

That’s Representative Dan Rostenkowski being attacked at a town-hall
meeting with his constituents. Afterwards, he plaintively asked his
press officer how long it would be before the media foofaraw  blew over.
“Let me put it this way,” the flack is said to have replied. “When you
die, they will play that clip.”

As you can imagine, congress
hastened to repeal the thing. But they didn’t repeal it all the way;
some of the provisions remained.

My nightmare is that they repeal
everything except the really popular thing, which is to say the ban on rescission and exclusions for pre-existing conditions. These are
basically free, and they’re by far the most popular part of the
legislation, as far as I can tell.

I’m not exactly a fan of rescission, and to the extent that it is being abused by insurance
companies, they deserve whatever regulatory penalties they get. But
without rescission, the natural thing to do is to wait until you get
sick, and then lie on your insurance application. Like bans on
pre-existing conditions, this leads to the classic “insurance death
spiral” where the only people who want to buy the insurance are the
people who expect to need more care than the cost of the premiums,
causing the pool to shrink and the prices to rise.

That’s why
RomneyCare actually improved premiums briefly, before they resumed their
upward march: Massachusetts already had guaranteed issue and
community rating, which was pushing premiums sky high. Now that they
have RomneyCare . . . well, individual premiums have dropped
to only the second most expensive in the country, behind New York,
which still has community rating/guaranteed issue, but no mandate.

In
other words, while the proponents of ObamaCare are wrong that an
individual mandate actually solves all the problems with guaranteed
issue and community rating, it does seem to slightly mitigate the
disaster.

That seems like the not-unlikely follow up, either from
terrified Dems or a brand-spanking new Republican Congress. Would
Obama dare veto it? When there’s no longer an unpopular Democratic Congress to hide behind? One hopes, for the good of the country. But
while so far the president has been enthusiastically urging members to
lean into the strike zone and take one for the team, I’ve seen little
indication that he’s willing to risk his own job.

Thumbnail credit: Tim Sloan/Getty Images

One of the great mysteries of the Toyota debacle is why Toyota ignored the complaints for so long.  Or at least it’s a mystery to reporters on cable news, abetted by consumer advocates who were all too happy to imply that Toyota didn’t care how many people it killed as long as they made a profit.

Maybe so, but I doubt it; you don’t usually make a profit by killing your customers.  It’s too risky, in this age of nosy regulators and angry consumer activists.

Their behavior becomes a bit more explicable when you consider this argument from Ted Frank:

The Los Angeles Times recently did a story detailing all of the NHTSA reports of Toyota “sudden acceleration” fatalities, and, though the Times did not mention it, the ages of the drivers involved were striking.

In the 24 cases where driver age was reported or readily inferred, the drivers included those of the ages 60, 61, 63, 66, 68, 71, 72, 72, 77, 79, 83, 85, 89–and I’m leaving out the son whose age wasn’t identified, but whose 94-year-old father died as a passenger. 

These “electronic defects” apparently discriminate against the elderly, just as the sudden acceleration of Audis and GM autos did before them. (If computers are going to discriminate against anyone, they should be picking on the young, who are more likely to take up arms against the rise of the machines and future Terminators).

In the original Sudden Acceleration Incident craze that afflicted America in the late eighties, the National Highway Safety Transportation Administration eventually ruled that the problem was “pedal misapplication”, aka stepping on the gas when you meant to step on the brake.  These incidents were highly correlated with three things:  being elderly, being short, and parking (or leaving a parking space).    The elderly are more prone to the sort of neuronal misfiring described in yesterday’s New York Times.  Shorter people have to hunt more for the pedals.  And starting up from a complete stop is the most likely time to press the wrong pedal.I was interested in Frank’s argument, so I took a look at the LA Times article, which is really admirably thorough.  Here are the results, categorized into a nifty, though not necessarily particularly useful, spreadsheet. I went one further than Frank, tracking down the ages of all but a couple of the named drivers. If y’all wondered why I wasn’t blogging today, well, there’s your answer.  I’ve excluded three cases where the information was just too sparse to have any idea what happened, but otherwise, that’s the complete list.

Several things are striking.  First, the age distribution really is extremely skewed.  The overwhelming majority are over 55.

Here’s what else you notice:  a slight majority of the incidents involved someone either parking, pulling out of a parking space, in stop and go traffic, at a light or stop sign . . . in other words, probably starting up from a complete stop.

In many of the other cases, we don’t really know what happened, because there were no witnesses of exactly when the car started to run away. 

In fact, it’s a little hard to be sure that some of the cases were sudden acceleration incidents, because the witnesses to what happened in the car were all killed; the family is trying to reconstruct what happened from their knowledge of the deceased.  Obviously, most people are going to err on the side of believing that the car was at fault, rather than a beloved relative.

Further complicating matters, most of the cases involve either a lawsuit against Toyota, a complainant facing possible criminal charges, or both. 

In some of the cases, the police or doctors have an alternate theory of what happened:  one of the SAIs was bipolar, which puts you at extraordinarily high risk of suicide, and no one knows what actually happened in the car.  At least two others involve young men who were driving at very high speed, which is something that young men tend to do with or without a sticky accelerator.  Several more of the drivers seem to have had a medical situation, like a stroke, to which doctors and/or police attribute the acceleration.

The oddest “striking” fact is that a disproportionate number seem to be immigrants–something like a third, by my count, which is about double the number of immigrants in the general population.  I have no idea what to make of that; are they more likely to file complaints with the NHTSA?  Maybe they’re shorter, on average, or learned to drive later in life?  Or perhaps it’s just a statistical fluke.

At any rate, when you look at these incidents all together, it’s pretty clear why Toyota didn’t investigate this “overwhelming evidence” of a problem:  they look a lot like typical cases of driver error.  I don’t know that all of them are.  But I do know that however advanced Toyota’s electronics are, they’re not yet clever enough to be able to pick on senior citizens.

Unfortunately, that won’t help Toyota much.  It will still face a wave of lawsuits, and all the negative publicity means that it may be hard for the company to get a fair trial.  Even if it does, the verdict in the court of public opinion will still hurt their sales for some time to come.

Join the conversation about this story »

See Also:

• The Stunning Fact That Connects Every Single Toyota Case
• Toyota Blasts ABC For Rigged TV Shot
• The FBI Raids Three Toyota Suppliers In Michigan

One of the great mysteries of the Toyota debacle is why Toyota ignored the complaints for so long.  Or at least it’s a mystery to reporters on cable news, abetted by consumer advocates who were all too happy to imply that Toyota didn’t care how many people it killed as long as they made a profit.

Here’s what else you notice:  a slight majority of the incidents involved someone either parking, pulling out of a parking space, in stop and go traffic, at a light or stop sign . . . in other words, probably starting up from a complete stop.

 

In many of the other cases, we don’t really know what happened, because there were no witnesses of exactly when the car started to run away.  

In fact, it’s a little hard to be sure that some of the cases were sudden acceleration incidents, because the witnesses to what happened in the car were all killed; the family is trying to reconstruct what happened from their knowledge of the deceased.  Obviously, most people are going to err on the side of believing that the car was at fault, rather than a beloved relative.

Further complicating matters, most of the cases involve either a lawsuit against Toyota, a complainant facing possible criminal charges, or both.  

In some of the cases, the police or doctors have an alternate theory of what happened:  one of the SAIs was bipolar, which puts you at extraordinarily high risk of suicide, and no one knows what actually happened in the car.  At least two others involve young men who were driving at very high speed, which is something that young men tend to do with or without a sticky accelerator.  Several more of the drivers seem to have had a medical situation, like a stroke, to which doctors and/or police attribute the acceleration.

The oddest “striking” fact is that a disproportionate number seem to be immigrants–something like a third, by my count, which is about double the number of immigrants in the general population.  I have no idea what to make of that; are they more likely to file complaints with the NHTSA?  Maybe they’re shorter, on average, or learned to drive later in life?  Or perhaps it’s just a statistical fluke.

At any rate, when you look at these incidents all together, it’s pretty clear why Toyota didn’t investigate this “overwhelming evidence” of a problem:  they look a lot like typical cases of driver error.  I don’t know that all of them are.  But I do know that however advanced Toyota’s electronics are, they’re not yet clever enough to be able to pick on senior citizens.

Unfortunately, that won’t help Toyota much.  It will still face a wave of lawsuits, and all the negative publicity means that it may be hard for the company to get a fair trial.  Even if it does, the verdict in the court of public opinion will still hurt their sales for some time to come.

One of the repeated cri-de-coeurs about the various changes banks have been making in their credit cards is that they have a negative impact on credit scores.  Slashing limits means that your balances are now a higher percentage of your overall credit, which hurts your score.  So does closing one of your older accounts.

In other words, if closing one card means that you’re much closer to maxing out your remaining cards, then your score might lose some points — but it’s very unlikely to go down by a quantum as huge as 100 points. Your credit utilization ratio is part of your FICO score, yes, but it’s not that big a part.

One of the notable moments from the meeting with the Greek prime minister yesterday was when someone asked him how he was planning to get the economy back on its feet, and he answered with . . . green jobs, of course!  He correctly pointed out that Greece, having all those islands, has a great opportunity to install windmills.  But aside from early modern Holland, I’m not sure where windmills have proven a useful antidote to massive economic and political problems.  (Today’s exhibit: protesters clash with police in Athens). 

But green jobs have become the ginseng of progressive politics: a sort of broad-spectrum snake oil that cures whatever happens to ail you.  They are the antidote to economic malaise, an underskilled labor force, the inherent unwillingness of the public to suffer any significant economic and personal dislocation in order to save the environment.  They enhance nationalistic vigor. (If we don’t act now, the Chinese will steal all of our green jobs!)  They stave off aging of stale political platforms.  And I’m pretty sure they’re good for bunions, too.

Obviously it is true that if we subsidize various environmental activities, this will create jobs for some people.  Unfortunately, it will also destroy jobs for other people–people who make the things that would otherwise have been purchased with tax dollars.  They may partially offset the economic losses of switching off a very efficient, cheap, high density energy source.  They will also, hopefully, give us cleaner, cooler air to breathe.  But they do not represent a net improvement in either GDP or the unemployment rate.  They represent a loss.

But they’re green!  And green is such a pretty color.  Also, everyone loves frogs.  So who could possibly be against my green jobs except some cranky libertarian?  And even this crazy libertarian isn’t really against the green jobs, as such . . . only the ridiculous way politicians use green jobs to shield them from hard questions.

Join the conversation about this story »

See Also:

• Big Solar Vs. Big Labor Shows Emptiness Of "Green Jobs" Dreams
• The Green Jobs Czar Van Jones Resigns
• Apple’s Jobs: Dell And HP Are Way Less Green Than They Want You To Think

One of the notable moments from the meeting with the Greek prime minister yesterday was when someone asked him how he was planning to get the economy back on its feet, and he answered with . . . green jobs, of course!  He correctly pointed out that Greece, having all those islands, has a great opportunity to install windmills.  But aside from early modern Holland, I’m not sure where windmills have proven a useful antidote to massive economic and political problems.  (Today’s exhibit: protesters clash with police in Athens).  

I have at best a passing interest in the “legitimacy” of the reconciliation process, but James Joyner pretty much dismantles the current liberal talking point that Republicans use reconciliation to pass controversial bills all the time:

Almost every act passed under reconciliation (8/15) has in fact been a budget bill.  And most of those that weren’t (5/7) were tax bills.  The two outliers:  The 1996 welfare reform act and the 2007 student aid package.  Why those were passed under reconciliation isn’t made clear.

What’s also interesting is that the vast majority of these bills were absolute slam dunks.  Most (8/15) were passed by filibuster-proof  supermajorities, meaning that reconciliation wasn’t used as an end-around to avoid a cloture vote.

The argument that Republicans were more likely to use the process than Democrats is meaningless, simply reflecting the fact that Republicans have dominated the Senate over the period in question.   Reconciliation was used six times during the Reagan administration but only once on a bill that didn’t have supermajority support.  The Republicans controlled the Senate for all but the last of those votes.   The Democrats then used it for two borderline votes.  The Republicans used it for two slam dunks, one vote that didn’t quite have a filibuster-proof margin, and one 51-50 vote in which VP Cheney had to break the tie.

The bottom line is that using reconciliation as an end-around to avoid filibusters is exceedingly rare, having happened at most 7 times since 1980.  Of those 7 cases, all were budget or tax measures.  So, using reconciliation to avoid a supermajority on health care reform would simply be unprecedented.

David Leonhardt has a column today entitled “Health Care’s Obstacle: No Will to Cut”.  Unlike many headlines, this accurately sums up the thrust of the piece.  Leonhardt complains, with justification, that alternative plans also have big holes–Paul Ryan’s plan is all well and good, but it would never get through congress intact.

But I don’t think, as Leonhardt seems to, that this particularly weakens the case of reform’s opponents; after all, proponents have the same problem.  Proponents of reform have been acting as if the fact that various Democrat plans have been scored by the Congressional Budget Office as “deficit neutral” somehow means that they couldn’t possibly be worse than the status quo.  This is extraordinarily wishful thinking.  For one thing, as Greg Mankiw points out today (and I have previously argued), even a success will leave us worse off in one key respect:  we’ll have used up the easiest, most obvious cuts that otherwise would have been used to deal with our rapidly growing Medicare problem. 

The best answer that proponents have to this is that we are dealing with our Medicare problem by “bending the cost curve”.  But such “bending” through the excise tax on high cost plans is highly speculative:  it’s not all that likely to ever happen (notice how many times it has already been amended and pushed back just to pass the bill?); if it does happen, it might not much alter private healthcare spending; and even if it did push down the rate of health care inflation in the private sector, that doesn’t necessarily mean that this would translate into lower government spending.

But that’s not the only reason to worry.  If the cost controls fail, we aren’t just right back where we started; we’re much, much worse off.  As you may have noticed, broad-based entitlements are nearly impossible to cut, much less repeal, which is why so many progressives are willing to sacrifice the current majority on the pyre of national health care.  So there’s a not-insignificant chance that we’ll end up with a broad-based entitlement that we can’t cut and can’t pay for.  Hello, budget crisis.

Of course, if we can’t cut Medicare, we’ll end up there anyway.  But with a budget crisis, “getting it over with as quickly as possible” is not the best strategy.  Moreover, the new entitlement probably makes it harder to reform either medicare, or health care spending as a whole.  It adds new interest groups to the mix, which always makes reform harder.  Especially in this case, where seniors will resist any cuts that aren’t matched in the under-65 program, and vice versa.

Leonhardt closes his column thusly:

Beyond these last-minute improvements, I see only two good options for anyone who wants to be fiscally conservative.

The first is to say we cannot afford to cover the uninsured. Our health care efforts should instead start with building support for specific measures that can be shown to save costs. Who are the members of Congress who will support these measures, and how soon can they be passed?

The second option is to say that expanding insurance would bring enormous benefits. It would allow people to get treatments — diabetes care, dialysis, chemotherapy, you name it — that they are now skipping. According to one conservative estimate, universal coverage would save “probably thousands if not tens of thousands” of lives a year.

Yet we can’t afford simply to expand insurance. We also need to pay for the expansion — and to pay for the health system we already have. Some attempts at cost control will make us uncomfortable, because we can’t be sure that they will cut back only on wasteful care. All attempts will involve uncertainty.

I’m interested to know who’s skipping dialysis because they can’t afford it, given that this is the one piece of medical care that is guaranteed by the united states government.  But this is quibbling.  Why can’t fiscal conservatives say that if we want to have the entitlement, we should first make sure the cuts we’re proposing work?  Why can’t they say that we can’t afford this particular expansion, and that it’s time to go back to the drawing board?  “The fierce urgency of now” is obviously totally compelling to those who think nothing can go wrong, but for the rest of us, it’s not a good reason to commit ourselves to a very risky course of action.

Join the conversation about this story »

See Also:

• Ignore The Rhetoric, Here’s How Healthcare Reform Really Will Lower Costs For Workers
• Are Washington DC Insiders Manipulating InTrade To Manufacture Momentum For Healthcare Reform?
• The White House’s Blog Post On Healthcare Treats The American People As Idiots

David Leonhardt has a column today entitled “Health Care’s Obstacle: No Will to Cut.”  Unlike many headlines, this accurately sums up the thrust of the piece.  Leonhardt complains, with justification, that alternative plans also have big holes: Paul Ryan’s plan is all well and good, but it would never get through Congress intact.

Leonhardt closes his column thusly: 

Beyond these last-minute improvements, I see only two good options for anyone who wants to be fiscally conservative. 

The first is to say we cannot afford to cover the uninsured. Our health care efforts should instead start with building support for specific measures that can be shown to save costs. Who are the members of Congress who will support these measures, and how soon can they be passed? 

The second option is to say that expanding insurance would bring enormous benefits. It would allow people to get treatments — diabetes care, dialysis, chemotherapy, you name it — that they are now skipping. According to one conservative estimate, universal coverage would save “probably thousands if not tens of thousands” of lives a year. 

Yet we can’t afford simply to expand insurance. We also need to pay for the expansion — and to pay for the health system we already have. Some attempts at cost control will make us uncomfortable, because we can’t be sure that they will cut back only on wasteful care. All attempts will involve uncertainty.

I went to a Center for American Progress press event showcasing the Greek prime minister this morning, and one of the slightly improbable ways he showcased to deal with his country’s crisis was . . . American financial regulation. I mean, our debt problem is bad, as discussed yesterday. But I don’t think it’s actually infectious.

So I went to the Treasury Department with a bunch of other bloggers yesterday, and spoke with “senior administration officials” about all manner of exciting topics.  Though not all of the topics were exciting for me.  Because I missed the last blogger sit-down, I was rolled in with the progressive bloggers, who were often more concerned about messaging and political strategy than in figuring out what Treasury really thinks about various issues. 

Practically, they may well have had the more relevant questions–who cares what Treasury thinks if they can’t pass their legislation?  But with the exception of Gene Sperling, Treasury is not filled with people who are experts in political messaging.  So the responses we got were about what you’d expect, which is to say that in a financial crisis, the secretary of the Treasury has to do a number of things that he knows will be unpopular, and many of those tasks are made harder by the fact that about five hundred other adults all get to weigh in.  The progressive bloggers were clearly frustrated with the inability to sell various policies, or go bigger and badder with various reforms.  But I assume that the nice folks at Treasury are frustrated too, so I’m not sure how much I learned from those questions.

So what did I learn?  First, that Tim Geithner is growing into his role; this was a much more relaxed and confident team than I saw a year ago, when I first met many of them in person.  And while Kevin Drum is right that these things don’t really offer earth-shattering revelations, I think they are useful for figuring out how administration officials are thinking about a problem. 

For example, I asked about a topic that is on many peoples’ minds right now: sovereign debt problems.  The near-term deficit is basically not a problem; amortized over 15 or 20 years, the U.S. economy can afford this level of debt.  But the long term deficit is a big problem, and I asked one of our “senior treasury officials” whether he was worried that we would cross some threshold where either the debt becomes a major drag on growth, or markets start demanding significantly higher yields to lend us money.

His answer was smart, if not totally reassuring.  Ultimately, this is not about some numeric figure, like Ken Rogoff’s 80% of GDP; it’s about what the market believes.  If the market believes that we are going to get our budget in order (at least sort of), then the deficits we’re running over the next five or ten years can be sustained.  If the market questions this, then we’re in big trouble. The reason U.S. debt is the “risk free” rate is that in the past, we’ve always gotten it together in the end.

This is not perfectly satisfying, of course.  Ken Rogoff is not worried about interest rates so much as the absolute level of debt, because eventually debt service consumes too much of your economy–a very large debt with a very low interest rate is still a very big problem.  Moreover, it’s not entirely clear that we’re going to pull ourselves together this time around, because the problems we’re facing are much less tractable:  growing entitlements and a shrinking workforce.

But still, there are a lot of answers they could have given to this question; the one they chose tells me how they’re thinking about the problem.  I’m still worried about potential sovereign debt problems, of course.  But at least we’ve got some smart guys at Treasury when the crisis comes.

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See Also:

• Deficit Alarmism Has Made Investors Too Freaked Out To Buy Stocks
• Deficit Hawks Who Don’t Understand Economics Are About To Ruin The Recovery
• Niall Ferguson’s Deficit Warnings For The US Are Nothing But Excessive Hysteria

So I went to the Treasury Department with a bunch of other bloggers yesterday, and spoke with “senior administration officials” about all manner of exciting topics.  Though not all of the topics were exciting for me.  Because I missed the last blogger sit-down, I was rolled in with the progressive bloggers, who were often more concerned about messaging and political strategy than in figuring out what Treasury really thinks about various issues.  

Jonathan Bernstein says that healthcare can’t fail:

At this point, the main basis I have for believing the health care reform bill will pass (here’s my latest while I was at the Dish…for perspective, here’s Jonathan clubber Chait’s view, and here’s Nate Silver’s take) is that I would be shocked if Barack Obama, Rahm Emanuel, Nancy Pelosi, and Henry Waxman moved things to this stage without knowing they could get the votes. We’re talking about some very skilled pols, here.

I can’t think of any historical precedent for a failure this large in a House vote — a major policy with the full support of the president and the majority party leadership that got this close without winning. The two most notable floor defeats that I remember are the first vote on TARP in fall 2008, and the vote (if I recall correctly) on the rule on the Bush deficit reduction package in 1990. In both cases, radical Republicans defected from a bipartisan agreement, in both cases between majority Democrats and a Republican president. And in both cases the policy eventually passed.

“The public mood is generally sour,” Bowman said. “I can’t think of any other big piece of legislation that had so much opposition” and later passed, she said.

Felix Salmon savages the New York Times, and Gretchen Morgenstern in particular, for the claim that credit default swaps have somehow been pivotal in the financial crises that have rocked the US and Europe.

In order to believe that CDS are “shaking Europe”, you have to believe that when one market player buys sovereign credit protection off another market player, in a transaction both sides think they’re going to make money on, finance ministries across the continent start to tremble. It’s silly. Sovereign credit spreads have moved up and down in sometimes-dramatic fashion for decades, long before CDS were even invented. And they will continue to do so even if CDS are banned. And there’s no indication whatsoever that volatility in European credit spreads is any higher now than it would have been absent the CDS market. Indeed, there’s a colorable case that the opposite is true, and that the ability to hedge one’s exposure in the CDS market has made the European sovereign bond market less volatile. 

As for the NYT’s idea of the “purpose” of a CDS, all I can say is that I have no idea whatsoever where they got that one from. At least on the CDS/Greece connection, you can see how various European politicians love to be able to blame Goldman Sachs rather than themselves for their woes. But this just makes no sense at all. What “complex debt securities”, exactly, can banks issue more easily if CDS reduce the risk to purchasers? Presumably we’re not talking about simple bonds and loans here, since they’re not complex at all. Is the idea that banks somehow help companies issue debt bundled with CDS insurance? I’ve seen a few monoline wraps in my time, but nothing like that

You see this sort of folk mythology among market watchers very frequently.  They note that there are financial instruments which convey negative information about the soundness of the underlying institution.  Furthermore, they quickly realize that just before institutions fail, there is often quite a lot of activity in those sorts of financial instruments.  Therefore, if you could only eliminate the instruments, you could also eliminate the failures!