Ten Economic Pieces Worth Reading: December 28, 2009
1) Eric Alterman: Obama's Game-Changing Win:
The obvious answer to the question of how Obama managed it is that he gave away the Democratic store. The bill he passed has no public option, no expansion of Medicare to those under 65, and additional restrictions of abortion funding. It is littered with provisions showering holiday goodies on the insurance industry, the pharmaceutical industry, the citizens of Nebraska. To win, Obama and his advisers appeared to offer up one concession after another, coupled with gratuitous insults to the Democrats’ liberal base--as if they needed some outrage on the left to make the whole thing feel kosher.... Sen. John Barrasso (R-WY) told ABC News, "I think it's going to be a historic mistake for the country if this is what happens to health care," said Barrasso. "Now, as you know, the changes don't actually go into place until four years from now, so people aren't going to be able to see immediately what the problems are. But they are going to notice the cuts in Medicare and, specifically, the increased taxes which go into effect the day that this bill is signed into law."... How can you sell the benefits if all that people have experienced are the costs? You can argue, as American Prospect editor Mark Schmitt does, that it comes down to good government, an aspiration even the most cynical Democrats on occasion find unavoidable. “[T]he bill as it has passed provides the basic components needed to construct a workable system of near-universal health coverage, and all that is outstanding—implementation and legislative improvement—can be accomplished without anyone needing to beg at the feet of a gleefully sneering Joe Lieberman or Ben Nelson.” But why then, are (most) Democrats so happy and (all) Republicans so glum this Christmas? My guess is that Democrats are gambling.... They’ve redefined the playing field of American politics to ground that is inherently favorable to their team. When Americans complain about their health care in the future, are they going to look to the party that wants to do nothing to fix it? No, they’re going to go with the side of political activism and government involvement. The other side, after all, isn’t even in the game. Republicans had their chance and all they could say was “Bah Humbug.”
2) Andrew Samwick: Some Reactions to the Senate Health Care Bill:
[M]y ideal reform... included four elements: 1. Community Rating. 2. Guaranteed Issue. 3. Ex Post Risk Adjustment. 4. An Individual Mandate (with Medicaid for a fee as the backup option) I think the first two elements are well represented in the Senate bill, and, importantly, they apply to all health insurance plans. I have a personal preference for more latitude for insurers in charging different premiums to those of different ages, particularly in the individual market. I am just averse to any program that further takes from the young to give to the old, given how much we already do through existing old-age entitlement programs. The ex post risk adjustment and reinsurance in the Senate bill seems to be quite extensive, but I wish they went beyond the individual and small group markets and included all health insurance plans. On a related note, I am not a fan of the excise tax on so-called "Cadillac" health plans. I would need to be convinced that the reason why the premiums are so high is unrelated to the health characteristics of the insured group. What if the premiums are so high because the insured group is old or has large families? Simply including all plans in the ex post risk adjustment and reinsurance aspects of the bill is the right way to even out premium costs in the face of differences in the insured group. And if people want to spend more on their own health insurance, through high-quality services or (to my thinking) inefficiently low deductibles and co-pays, why stop them? The individual mandate in the bill, summarized here by The New York Times, seems a bit weak to me. If you were determined to avoid having coverage, you now do have to pay a penalty in most cases, but those penalties are still well below what others would be paying for coverage. I think the individual mandate ought to be combined with Medicaid-for-all. pecifically, I'd like to see everyone enrolled in Medicaid via the tax return as the default, unless they can prove that they had alternative coverage....
I don't miss the public option or Medicare-for-a-fee. There is no evidence that the federal government can operate a public option without borrowing large sums of money from future taxpayers. So I see no reason, given what I've outlined above, to expand that model of coverage...
3) Calculated Risk: Chinese Premier: No Change to Exchange Rate Policy:
From the Financial Times: Wen resolute on strength of currency. The Financial Times quotes Chinese Premier Wen Jiabao as saying: ”We will not yield to any pressure of any form forcing us to appreciate. ... The purpose [of these calls for appreciation] is to hold back China’s development." "In recent weeks the demands for China to appreciate its currency in order to help a rebalancing of the global economy have increased to include not only the US and the European Union but also developing nations such as Brazil and Russia..." This is one of the key global imbalances, and it looks like China will still not allow their currency to appreciate.
4) Dan Gross: Timothy Geithner on the financial crisis and the government's response:
GROSS: It's common to hear congresspeople complain that "We did the bailout, but this business in my district can't get a loan." Has there been a failure of communication? GEITHNER: I've got lots of weaknesses and failures of communication, but I always tried to say that the capacity to lend will be much stronger because of these [rescue] efforts. In recessions, loan demand falls, and in recessions that follow big financial booms it's going to fall more than usual. You can't view that as an indication of whether policy is working. Our strategy was to make sure that we didn't have a perverse contraction that would starve economically viable firms of credit. We haven't got it perfect yet. But it's been very successful relative to what happened in past crises, and the best measure of that is the sharp fall in the cost of credit.
GROSS: What about housing? There seems to be universal dissatisfaction with the process for helping people who are facing foreclosure. GEITHNER: We were very careful from the beginning—but the qualifications get lost—to say that we are going to focus the bulk of the financial force on bringing interest rates and mortgage rates down to cushion the fall in housing prices and help stabilize home values, which will feed into people's basic sense of financial stability. [We tried to make clear] that what we'd do to prevent foreclosure would be very targeted and limited. We wouldn't try to keep people in homes they couldn't fundamentally afford. While we thought we'd lowered expectations, we're still being hung for letting expectations get ahead of policy....
GROSS: So you don't think the bailouts were too friendly to Wall Street? GEITHNER: The idea that the strategy was unfair and has principally benefited a small number of institutions in New York is a mischaracterization of the design and result of the strategy. I thought people would have understood this after the failure of Lehman Bros. But when you do too little and you leave the system with real fear that everything is going to fall apart, like any financial crisis, it hurts the poorest most. A just and fair strategy, even if it is politically hardest to explain and justify, is to use well-designed but massive force to stabilize the system....
GROSS: Dial back to March: Which of the positive developments that have occurred would you have said would be most surprising? GEITHNER: The [GDP] growth is better and strong er than we expected, than anyone expected, and the dramatic improvement in the strength of the financial system at much lower cost—trillions of dollars of emergency guarantees done, finished, closed down. By adopting a strategy designed to [shore up financial institutions] with private capital, we achieved much better basic results at a much lower cost to the taxpayer. A lot of the insurance we provided came with explicit fees that are going to generate tens of billions of dollars in returns. The stress tests this spring forced people to raise capital and have a more realistic sense of losses going forward. We're going to have $175 billion of the $240 billion in TARP payments back by the end of next year....
GROSS: There's a perception that you regard your portfolio narrowly, as primarily focused on the health of Wall Street, with Main Street a distant second. GEITHNER: My first and essential responsibility was to fix and reform the financial system. That was necessarily going to be the principal part of what people saw. About half my time from the beginning has been spent on the design of the broader economic strategy. The idea that we did not do much for the broader challenges facing the country is completely unjustified. The Recovery Act itself was not just a sweeping, essential force for growth but included a bunch of targeted investments in education, energy, environment, health care that will have huge long-term benefits...
5) BEST NON-ECONOMICS THING I'VE READ TODAY: Naomi Patton: Passenger 'heard a pop and saw ...smoke and fire' | Detroit Free Press:
An Ohio man who witnessed the attempted destruction of a Northwest Airlines flight to Metro Airport said he's proud of how passengers reacted. Syed Jafry of Holland, Ohio, near Toledo, who had flown from the United Arab Emirates, said after emerging from the airport that people ran out of their seats to tackle the man. Jafry was sitting in the 16th row -- three rows behind the passenger -- when he heard "a pop and saw some smoke and fire." Then, he said, “a young man behind me jumped on him.” Jafry said there was a little bit of commotion for about 10 to 15 minutes. The incident occurred during the plane's descent, he said. He said the way passengers responded made him proud to be an American...
6) SECOND BEST NON-ECONOMICS THING I'VE READ TODAY: David Weigel: Why I Don’t Write About Sarah Palin’s Facebook Posts:
Palin has put the political press in a submissive position, one in which the only information it prints about her comes from prepared statements or from Q&As with friendly interviewers. This isn’t something most politicians get away with.... Palin has leveraged her celebrity... to win a truly unique relationship with the press. She is allowed to shape the public debate without actually engaging in it.... Andy Barr [of Politico] posted most of Palin’s response without any kind of fact-check about her claims.... While Gore submitted to an interview, on camera, Palin lent her name to a Facebook post. I say “lent her name” because there is really no way of telling if Palin wrote the post.... [W]hat Palin’s doing here is incredibly savvy. She knows that anything that goes out under her name will be accepted as fact by conservatives.... I think that the media’s indulgence of Palin’s strategy — which often results in pure stenography of press releases that may or may not have been written by her — is ridiculous, bordering on pathetic.
7) STUPIDEST THING I'VE SEEN TODAY: Matt Welch. Outsourced to Glenn Greenwald: Glenn Greenwald: Reason Editor Matt Welch suggests his own magazine is lying:
"The Congressional Budget Office now reports that this bill will reduce our deficit by $132 billion over the first decade, and by as much as $1.3 trillion in the decade after that" -- Barack Obama, Tuesday. "Obama's Latest Health Care Lie: There are actually multiple lies and deceptions in [Obama's] paragraph, beginning with the verb 'reports' to describe what the Congressional Budget Office does. The CBO, as Peter Suderman documented in his foundational Reason feature on the organization, does not 'report,' it 'projects,' in highly speculative fashion, what a proposed piece of legislation may cost" -- Matt Welch, Editor-in-Chief, Reason, yesterday, writing next to a photo of Obama with a Pinocchio nose. So according to Welch, Obama "lied" because he used the word "report" to describe what the CBO does and because he suggested the CBO's projections are reliable. What, then, does that say about numerous Reason editors and writers, who wrote the following back when Reason loved the CBO because it was reporting that Obama's health care proposal and other policies would increase the deficit? Using Welch's "reasoning," it must mean that Reason's staff is filled with outright liars.... Peter Suderman... Ronald Bailey... Veronique de Rugy...
8) SECOND STUPIDEST THING I'VE SEEN TODAY: Republican Senator Lamar Alexander: Medicaid Is Like A "Bus Line Where The Bus Only Runs About Every 5 Minutes":
9) THIRD STUPIDEST THING I'VE SEEN TODAY: Michael O'Brien of The Hill and Joe Lieberman of the Connecticut for Lieberman Party: Outsourced to:Matthew Yglesias: Joe Lieberman Does Unpopular Stuff, Unpopularity Ensues, The Hill is Confused:
As we all recall, it was just a short time ago that Joe Lieberman held the health reform process hostage to some idiosyncratic demands. Expanding coverage and curbing the deficit were important, said Lieberman, but not so important that he would vote to do those things. Unless, that is, some popular ideas like a public option or Medicare expansion were completely killed. He got his way, and now the health care train is moving. But you can see why these kind of actions would make you less popular. Unless, that is, you [are Michael O'Brien and you] write for The Hill in which case you see them as puzzling: "It is difficult to pinpoint when or why Lieberman has taken a hit: In the past two weeks, he not only crucial in helping remove the healthcare bill’s public option and Medicare buy-in provisions, but also subsequently announced that he would join with Democrats to support the bill after those provisions were removed." These seems like a nice encapsulation of the weird fetishization of “centrist” politics that we have in DC. In some trivial sense it’s politically savvy to be “in the center” in the sense of having most people agree with you. But not every instance of “centrist” dealmaking is going to hit that sweet spot. And the polling on this was pretty clear—people had a lot of doubts about health reform, but definitely liked the public programs idea.
10) HOISTED FROM THE ARCHIVES: Delong (June 16, 2002): Google as Humanity's First Anthology Intelligent System: Cory Doctorow Once Again Makes the Clouded Clear:
How is it that Google manages to do so very well at finding the things we want to find on the internet?... Cory Doctorow has a theory: Google is superior because it provides a way of tapping into the human intelligence already being used--in a decentralized way--to impose structure on the internet: "When I link to some arbitrary document, it's an indication that I think that it's in some way authoritative. When you link to a document I wrote, you're indicating that I'm in some way authoritative. The Internet is already structured in a meaningful way, but that structure is obscured. Google teases out the relationship between the URLs, examining the webs of authority: this person is linked to by 50,000 others, and he links to this other person over here, which indicates that person one is a pretty sharp individual, one who's inspired 50,000 human beings to take time out of their busy schedules to link to him; and person one thinks that person two is on the ball, which suggests that person two knows what she's on about.... The computers at Google are asked to tirelessly count and re-count the number and destination of links on every page that Scooter... can lay its user-agent on. Those links are made by human beings, doing what they do best, link by link, drip by drip, layering a film of order over the Internet."
