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March 21, 2010





I figured I'd check in to see what Nathan had to say, and I can't say I was surprised at all. One item: "But given that polls are clearly on the Republicans' side..." is a mistake. Most of the opposition to Obama's health care plan comes from the right, of course, but a significant amount comes from the left (viewing it as a corporate giveaway because there's no public option, much less is it single-payer like they want). It would appear that no more than half the country is on the Republicans' side of this one according to current polls.

Nevertheless, passing something large like this with only a small majority is still a bit worrisome. I'm also a bit mystified why more tort reform wasn't in there, though I agree with those who project fairly small savings from it. Savings is savings, big or small, and I don't really see a moral objection.

Some predictions: If the Dems lose control of the house, then the bill really hurt them. If they lose much fewer than 30, I think it probably helped them. I personally expect they'll lose about 28 (i.e. net 56) because it's mainly hurt them amongst those who weren't going to vote for them anyway. This was a winning strategy for the GOP until 2006, and it will probably help the Dems almost as much to energize their base.

But that's just political horserace malarky. I can't really figure out what the probable effects of the bill will be in the long term. I sort of like that it'll take so long for most of its provisions to go into effect because it a) gives the industry some time to look at what's coming and possibly offer an alternative that achieves some of the same goals and b) allows time for legislative edits that are more likely to be truly bipartisan. The GOP had no political incentive to play ball with Obama et al, and they didn't. Paul Ryan's plan struggled to get signatories from his own party (because many of its provisions are deeply unpopular and would play to Dem. talking points) and really there wasn't much of any grounds for mutually-satisfactory compromise. Now, though, there's incumbent legislation, so to speak, and Republican congresspeople can get credit for changing it without running afoul of party discipline or getting threatened with primary challenges. I think this thing may yet end up looking a lot better, and I also think it's good we finally nudged a status quo that was in my opinion so inefficient and full of perverse incentives that I can't imagine the bill making it worse.


Oh, and employers have been holding off on hiring for something like the last decade:

Nathan Smith

Nato, do you think the country can afford another trillion-dollar or multi-trillion-dollar entitlement? And what do you think of Obama saying he wouldn't raise taxes to get elected and then, if he signs this bill, raising taxes? Is lying OK in politics.

Nato's comment on the graph he links to is... how shall I put it?... very non-astute. Yes, job growth for the first few years of the decade was slower than in most other decades, but considering that employment was at a super-high peak in 2000 this mostly reflects the fact that it was growing from a very high base. The fact that unemployment was low in the Bush years definitely has to be taken into account in interpreting this number. But there's a very definite turning point that occurs at essentially exactly the moment that Obama was elected. You can't look at the graph and say "Oh, there wasn't a change when Obama came into office, it's just a continuation of a decade-long trend." Correlation must be distinguished from causation but given that Obama's policies-- favoring unions, trade protectionism, huge deficits that soak up available credit, minimum wage hikes, indefinite extensions of unemployment benefits, vague promises of big reforms creating gratuitous political risk, bailouts that politicize the business climate-- are all anti-employment, the case that Obama caused some of that extra unemployment is pretty compelling. I would say that at this point most of the extra unemployment is doing.

Recall that when the IMF imposed fiscal austerity on the East Asian countries in the 1997-8 crisis, they were in deep recession for a year and then zoomed back up and boomed for another decade.

But what is Nato's point, anyway? That it was really under Bush that things started getting worse? Well, that's true in a way. Bush started spending more and running deficits, and the employment situation deteriorated. Obama is spending more and running much bigger deficits, and the employment situation got a lot worse again. But that just underscores how this health bill is the very opposite of what the country needs.

Nathan Smith

I guess the most charitable way to read Nato's comments is that he half agrees with me but thinks I went a little too far and is just trying to balance me out, not that he really thinks saddling the country with massive new government spending will help the country. I remember at one time he considered himself some sort of libertarian. It would be an ominous sign if he's defected completely.


I should clarify my actual optimism.

Right now I think we pay a lot of money for "government health care" in the sense that the requirement to admit everyone to the ER essentially mandates that the rest of us pick up the tab. Further, the new bill promises the balance the political heft of Medicare-age voters against the rest of us in a way that may reduce costs for everyone. I've actually been thinking a lot about what Nathan has said about consumption of healthcare in the US, and while I don't think the bill is the answer, I think it starts down the path toward an answer once the GOP starts to have its say.

So I think we were basically all already "on the hook" for the trillions projected, but the existence of this health care bill brings the costs onto the books. I don't think health care is a very efficient industry, and I don't think the bill will magically make it so, but I'm hoping that the back-and-forth of the next few years starts to get us there before fiscal collapse forces things.

As for the employment graph, Nathan is actually misreading the graph. Year "1" is 2000, so that year "10" is 2009. Thus the peak in employment was near the end of 2007, with a sharp negative bend starting in summer 2008 and reaching its severest slope by about September. As the note says, the final data represented in Q3 2009, when job losses flattened out 6-9 months after Obama took office.

All of which doesn't necessarily say much about Obama or Bush; it just means that Nathan's pat political interpretation doesn't work. Nor do I wish to substitute my own. Rather, I would say that the graph represents a serious challenge to the idea that what we are experiencing is a simple cyclical downturn or even a reaction to a specific recent event. A lot of the hump in the middle of the 2000s was bloom of construction employment, which evaporated and seems unlikely to never return. Workforce participation has been declining for a decade or so after about a half century of growth as women and (to a lesser extent) minorities entered the workforce.

I can't really say what's happening, though I have a vague hunch it's related to the continuing bifurcation between the knowledge economy and low-tech manufacturing/low-skilled service industry. What real growth remains in the economy is due almost entirely to the increasing productivity of a relatively narrow class of workers. For everyone else, it makes less and less sense to a)work at the wages offered and b)hire at the costs mandated.

There are various ways in which the above analysis (speculation, really) intersect with the bill, and sometimes in ways that aren't good at all. But, as I say above, the system was already pretty much fubar, so I'm hoping the next few years of wrangling leaves us with much higher employment. Even if it costs marginally more to employ someone than they produce, it can be worth it if it prevents the unemployment-related malaise that destroys families and communities.*

*It would take a lot to unpack and defend what I really mean by this, so I'll just take a different tack and note that I already think many people work at uneconomical jobs, but we don't notice because the costs show up elsewhere.

Nathan Smith

So Nato thinks the health care bill isn't so bad because we'd have to pay for that health care anyway. Yes, we do sometimes have to pay ER bills for the uninsured, but ER bills aren't all of health care. If Obamacare improves access to health care for the uninsured, they will presumably consume more of it, and that will raise costs. And this comes at a time when the government's long-term liabilities already far exceed its long-term assets.

Nato "hopes that the back-and-forth of the next few years starts to get us there [makes health care more efficient] before fiscal collapse forces things... [and] once the GOP has its say." Well, I hope so too, but the important thing to notice right now is that the bill increases government spending on health care and further insulates consumers from cost. Whereas what we need to do is make consumers internalize health care costs, and reduce government spending. Yes, some things in the bill are good, e.g., taxing employer health insurance plans, but I don't see how you can argue that these offset the bad effects of new subsidies and micromanagement of the insurance industry that amounts almost to a government takeover.

Where there might be some ground for agreement is that there are some relatively small and simple ways the GOP could modify Obamacare-- without a full repeal-- that would make the net effect good. Let the bill wreak havoc on employer-based health insurance for a while, then offer people an out: catastrophic coverage with HSAs. Keep the tax hikes and the Medicare cuts but cancel the subsidies.

But for Nato to support a huge new entitlement at a time of huge deficits and huge excess long-term liabilities, even in this back-handed way, is too fast and loose. We'd have been better off if this bill were defeated and "the GOP could have its say" before the Democrats made things worse. It would also have been better for Obama's honor, since this bill makes him a liar. Here in Virginia, all his advertisements seemed to have the slogan "We can't afford John McCain," supporting this with the argument that he'll tax employer health benefits.

Somebody should run an add with Obama's nose growing.

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