Paul Krugman asks why favoring a second stimulus, like opposing the Iraq War, has been written out of the public argument. Now, I seem to remember a very robust and lengthy public argument about the war, which couldn't have persisted without opponents. But leaving that aside, what about the stimulus?
Well, it is starting to get some traction. But it probably won't get much, and here's why: Democrats aren't interested. They aren't interested because they are already facing political pressure over the debt. Doing another stimulus will--or so they think--make it much harder for them to do health care and climate change. Their initial thesis that a big, bold spending program would "prime the pump" for more big, bold spending programs has fallen flat. The stimulus is working too slowly, probably because little money has yet been dispensed, which has made further spending programs less, not more, popular.
A question for Paul Krugman and other stimulus proponents: would you rather have a second stimulus, or health care? I know that in an ideal universe you wouldn't have to choose, but assume that the worrywarts are right, and you do. Which should Obama get done?
That's a genuine question, and one that I think congressional democrats and Democratic wonks should probably be more conflicted about than they apparently are. Not to concern troll, but it's a genuinely tricky, and interesting, political question. If you think a second stimulus will work, and is needed, then you're risking the 2010 midterms and the 2012 election if you don't do it. On the other hand, what's the point of electing Democrats if they can't get a single major program passed?
Copyright © 2009 by The Atlantic Monthly Group. All rights reserved.
I think they should pass a second stimulus of immediate tax cuts, especially for businesses.
This would have the benefit of being seen as immediate action, not additional "spending, and would most likely yield fruit within 6 months which would then provide political cover for both sides of the aisle for 2010:
Democrats would claim the original stimulus worked, since the tax cut effects would take place around the time a substantial disbursement of Stimulus-1 funds would be accomplished.
Republicans would claim they helped battle for lower taxes resulting in increased employment
And let's face it, the only feasible bills to pass are those that allow a majority to cover for themselves in the next election.
Joe
P.s. Or is cutting taxes on businesses anathema to democrats?
a public option on health care which let businesses get out of the health care biz (particularly small business), would be as good at putting $ in biz pockets as a tax cut on businesses. And for many small companies, it would let them compete for better employees on a more level playing field.
No, that's simply a subsidy directly proportional to current spending on health care. It benefits companies with proportionally large health care costs (e.g. GM) at the expense of those with low health care costs (e.g. Google).
Do you really think it's good for the economy to subsidize GM at the expense of Google?
What if we want GM cars to be able to compete against VW, for instance?
But I'm thinking of Joe's Used Cars as well as GM. I happen to live in a state where more than 90% of workers are employed by small business -- companies with 50 or fewer employees. Some of the best are small bio-techs, competing in the EU market. Others are places like the body-shop down the street, created because the owner needed a job and had a skill, though not necessarily business skill. And then there are the non-profits, like the Jackson Lab, which specializes in the mouse genome for medical research purposes.
But my perspective is mostly that of a venture/angel investor, and I'm much more interested in small business than large. I don't hear many voices here with that perspective. A public option would take health-care out of the equation, and allow small start-ups to focus on their core business. I think it's essential to break the link between employment and health insurance for that reason. It creates a drag on our entrepreneurial economy -- the future of our "greatness" in the world, if you like.
If Germany wants to subsidize VW, that's not my problem. That's nothing more than Germany taking money from their citizens and giving it to anyone who buys a VW.
We can then focus our resources on areas where we have a comparative advantage.
Incidentally, if you want to break the link between employment and insurance, you don't need to tax Google and subsidize GM. Why not just end tax subsidies for it?
Another thing: health insurance is an issue for businesses which use low skill labor more than for small ones. It's a real problem for "99 Cent Power Plus", but not so much for "FunnyWord Technologies." Small businesses disproportionately use low skill labor, that's the main reason they are disproportionately affected.
So you're saying 'low skill' workers shouldn't get insurance?
The person who hands you your coffee, who plows your driveway, or cleans the bathroom at your favorite watering hole shouldn't be insured? The business they work for should be penalized for not hiring Ivy League college grads?
Talk about classism.
Zic, you confuse me. First you say this:
I then pointed out that health care isn't really much of an issue for venture/angel investor types, it's mainly an issue for low skill small business. (I work in that area, so I know what I'm talking about.)
Then you say this:
What does the guy who hands me coffee have to do with "our entrepreneurial economy -- the future of our "greatness"?
In response to your new position, why subsidize low skill labor at the expense of high skill labor? Is there some reason why we want to reward "Joe's Lawn Care" at the expense of "Joe's Low Latency Systems"?
Incidentally, I want to neither penalize nor subsidize anyone. I want to end all subsidies for health care (including the employer tax benefits) and treat it like any other good or service.
Ninja Zombie, Tree Joe said his employer claims a cost of $600/month for insurance, and since it's as good as any number, let's use that. Say I'm looking at $2m investment in start-up to pay for initial clinical trails for FDA approval; and the company needs about 30 people to conduct those trails. That's more than 10% of my investment. Yet without that insurance, the company I'm looking at has no hope of attracting the caliber of people it needs. So I'd say that's a terrific drag.
But high-tech/bio-tech aren't the only entrepreneurial fields; any start up is. I once interviewed a disabled vet who started a company to perform maintenance and logistics for facilities; much of it requiring low-skilled workers (or what you'd call unskilled, I think many blue-collar workers have more skills than we give them credit for having.) That drag on his company would be the potential difference of succeeding; and since he'd have his own risk pool, it would be dependent on the ongoing good health of his workers and their families.
You're the one who tried to turn both companies into apples and oranges; in my eyes, they're both entrepreneurs who are trying to build a thriving company with hopes of it providing a return for them and for an investor like me.
Zic, the point is that the subsidy is a fixed per-worker value. The cost of workers is not a fixed per-worker value. This means that some businesses subsidize others.
Going with Joe's numbers, say $600/month. For someone (presumably low skill) making $1000/month, that's a 60% subsidy. For someone making (presumably high skill) $12000/month, that's a 5% subsidy.
Suppose now that the cost of providing this subsidy is 10% of income (I'll ignore progressive tax rates, which only work in my favor). You are essentially levying a penalty of 5% on high skill workers while subsidizing low skill workers to the tune of 50%.
Why is this differential subsidy a good idea? How is this good for the economy?
Zic-
I can't tell what exactly you're thinking regarding a public option helping small businesses to "compete for better employees on a more level playing field". Who ultimately pays in your scenario? Right now businesses pay directly for employee healthcare, but if the employees paid out of their own pocket, wages on average would have to adjust to compensate workers for their added costs. If someone is choosing whether to work for a company that offers healthcare vs. another that doesn't, the packages have to roughly even out somehow. How does that help small businesses disproportionally?
Surely you're not claiming that, if the government pays for healthcare, then no one really pays. So perhaps, if healthcare is paid for or at least subsidized by taxpayers, you're claiming that the burden will be born disproportionally by taxpayers that work for large companies? I suppose, if people working for startups get delayed compensation through stock options, then they'll also be able to delay part of their taxes and thus will be relatively better off. Is that what you meant, or were you thinking about administration costs and the added distractions for small businesses having to choose between plans? That last wouldn't seem to make a huge difference, although there might be some effect.
We can't pretend that healthcare costs will just vanish if they're not paid directly by employers. So how is any change a "tax cut on businesses"?
Zic-
Why not really stimulate business and have the government pay all wages and benefits? If relieving businesses of a portion of their employment costs is so unambiguously good, what am I missing?
The point is that having employers pay for health insurance is a horribly broken system. It wastes business resources, destroys pricing signals, reduces job mobility, discourages entrepreneurship, and means that people who lose their jobs are doubly screwed. It makes no more sense for my employer to buy my insurance than it does for them to buy my car or pay my rent.The only reason it exists in the first place is because of government interference; it was created as a workaround to wage controls and persists because of favorable tax treatment.
McCain actually had a decent plan to start moving toward individual coverage; sadly Obama demagogued it as a tax increase on employer-provided benefits, ignoring the corresponding tax credit that would cancel it out unless your benefits were absurdly expensive.
They could lower health insurance costs for many companies by just allowing that insurance to be sold on a national market, rather than be controlled by special interests at the state level.
Why does similar coverage in New York cost 3 to 4 times what it does in someplace like Ohio or Oklahoma? It's because of mandated coverages and costs that are the direct result of special interest lobbying.
This could be implemented right now with exactly zero outlay of taxpayer dollars. Bush had proposed this but the Dems shot it down. I recently saw the CEO of Verizon complaining that this wide discrepancy in coverage costs was a nightmare for large companies such as his.
Actually, I agree with Zic. Except instead of a government public option, detach health care from employment and actually allow free market interactions to work.
Yes, this is the problem of state's rights, isn't it? I live in a state where insurers are mandated to cover people, regardless of pre-existing conditions. This, of course, drives the cost up, because healthy people subsidize people with severe chronic conditions.
So would actual reform for an open, national market require an across-the-board set of mandates? And would such a set of mandates be constitutional?
Zic that's a good point. I believe McCain wanted to both detach employment health care and make a national standard. From what I understand of most of the health care proposals in Congress now, excluding the state co-op compromise, is that there will be a national standard one way or another. It looks like states are going to be bypassed one way or another. I wonder if this would make it more or less difficult to achieve. Could large companies have different state policies to comply with different state policies, sort of like Blue Cross Blue Shield does now? I usually side with states' rights, but in this case it seems administrative costs would be much higher with little benefit. But I'm not constitutionally aware enough to know where this would fall legally.
My original post wasn't supposed to be a reply to ed, but I did want to comment on what you said about why cost coverage differs.
Agreed that mandated coverage and costs can account for some of the cost differences, but after reading the Atul Gawande article and reviewing the Dartmouth report, I think there is more to it. And I agree with Gawande that we can cut out a lot of the spending that goes toward unnecessary tests with little difference in outcome by studying the models or areas that work well and applying them to areas that don't. The government can spend a lot less money by subsidizing these studies and presenting the information to the hospitals, offices, etc. that are charging more, because as he notes in his article, it's not usually a case of conscious money grabbing and greed. If it is, then we can look at legislation to enforce better policies, but I think it begins with a move away from procedural compensation.
We already have health care and the first stimulus package was mostly non-stimulating spending so a second "stimulus" package would probably just be more debt with little or no actual stimulus and government health care will probably make things worse for the 80% or so who are satisfied with their health care. So here's hoping the Democrats fail to enact both...
I wish I knew the answer to your last question... the most likely answer is because various special interest groups believe they will benefit from having Democrats in office, either through direct action or through not having Republicans in office.
From a libertarian point of view, I'll take the second stimulus. At least that is a one time cost that theoretically can be paid of over time. Health care if a giant, long term, uncertain sized liability.
If only that were true. All government spending acquires a constituency, and the "stimulus" is no different. I will be shocked if most of it doesn't end up to be ongoing expenditure.
I think you're wrong and we will have a second stimulus; Obama's poll numbers are crashing, especially in the Rust Belt, with the first Ohio poll showing him under 50%. These are the states that have seen the biggest gains in unemployment this year. And Republicans are now leading in all the upcoming Virginia elections. It's not panic time yet, but it's getting there. And the media will help the Dems sell it. Just wait and see.
The real question for the Krugman types is how big a stimulus will make you happy? If $1T wasn't enough, how about three trillion? Five? Twenty trillion dollars? There's got to be a point where we spend enough, right?
If the multiplier is 1.53 or 1.57 or whatever ridiculously precise number (greater than 1) they claim it to be, I guess the answer is no.
Krugman's problem -- one of many he has -- is that he doesn't quite get that Washington does politics, not economics. Sometimes he notices that politics plays a role in economic decisions, and he gets very indignant, sometimes outraged, at this. So his proposals are all based on the notion that economists, rather than politicians, are making the relevant decisions.
Actually, Krugman's problem is not that he doesn't understand that politics influences all policy decisions, it's that he thinks he's smarter about both politics AND economic policy than the denizens of DC. He wants--no, make that he NEEDS--the Democrats to win, if the public programs he supports are going to be implemented. The Democrats can't win if the economy is in the toilet. So he fumes when the Democrats don't fall all over themselves to promulgate the initiatives he is certain will get the economy growing.
IMO, I know he's wrong about the politics--the public simply won't tolerate another special-interest pork-fest, and the Dems know it. But I suspect he's also wrong about the economics, too. He and many like him (the recession is almost over, promise!) seem to be mired in the belief that what's going on now is an ordinary inventory-based recession. It's not. Rather, it's a really nasty combination of an inventory recession and a credit (debt) recession. We don't need another stimulus package, which is designed to respond to an inventory recession. Instead, we need to clean out the financial sector, which is still holding onto more than $1 trillion in bad debt. The various bailouts and backstops haven't worked--they've just incentivized the banks to hold onto the debt, or sell it to the Fed (at taxpayer expense).
No true recovery can take place until this debt and the conditions that caused it are cleared out and allowed to correct. Until then, all the government is doing is prolonging the inevitable, because you can't extricate yourself from a debt recession by ADDING MORE DEBT!
That's not exactly true. You can get out of a debt recession with more debt if what you do is borrow at a lower interest rate to pay down existing debt. Unfortunately, what we're seeing instead is borrowing that drives up interest rates, preventing people from refi-ing and lowering their interest expense, which has become a ridiculously high portion of their income.
But it probably won't get much, and here's why: Democrats aren't interested. They aren't interested because they are already facing political pressure over the debt.
This seems like an accurate assesment of the mood in DC, but I was wondering: is there any evidence that there is any such thing as "political pressure over the debt"?
I had always assumed that debts and deficits were sort of like the enviroment: everybody thinks we should "do something" about it, but it never really affects anyone's vote one way or the other. Has that paradigm changed? And if not, why are Dems worrying about debts now? They never have before (neither have Republicans, fwiw).
Disregarding the consequences for a moment, Bush borrowed substantial amounts during his term. Very large numbers of people benefitted from the booming economy. Again disregard the stagnant growth of income and other things. The borrowing corresponded to a booming economy. Not caused, but corresponded.
Now Obama is borrowing even greater sums as compared to Bush. The economy is tanking. Unemployment is growing. Stagnant income growth seems like worrying about what flavor ice cream to order. More borrowing will produce negative effects, which we are already seeing, such as high interest rates. The Schiff and Taleb lines which people see on TV seem plausible because we are seeing what they predicted.
Not to argue who is right or wrong, but the discomfort of borrowing such enormous sums along with a tanking economy may have an effect in 2010.
Kinda like 'never waste a crisis' in reverse.
Derek
Politically, yes and no. Debt gets bandied about by the opposition, who when they become the majority promptly gorge themselves on it.
That said, the constituency that matters more, when they really push the limits on debt, is the bond market. If US debt is percieved as being riskier, since future tax revenues won't catch up without major changes/inflation, it will become very, very expensive to finance more deficits.
Politicians care about getting re-elected in the short term. Voters won't remember an issue from 2002 in 2010, but the bond markets will remember old debts, and if you blow it up so you can't pay the deficit back without vastly higher taxes, trouble comes.
The proposed spending will push the debt as a % of GDP into scary zones, which we haven't hit since WWII. Look at the 1945-1960 tax rates to see what that cost to pay off.
Nice dilemma.
I would personally choose health care.
The economy will take a longer time to recover without a stimulus (if you believe a stimulus works). But even Krugman, Stiglitz, Baker and the rest believe believe the recession will almost certainly be over in, say, 5 years.
OTOH, the majority of people in this country have been wanting universal health care for the last 40 years, and no presidency has managed to deliver. This fact, besides having some dispiriting implications about the state of our democracy, tells us that health care reform is really, really hard to do.
Democrats have an enormous majority in the House. The Senate is also not likely get any better than this. So, if health care reform can't pass now, who knows when the next opportunity will come along? Meanwhile, millions of people will continue to have their lives destroyed by our current health system.
Nimed -
Can you explain to me how the health care system you are advocating would somehow reduce the "millions of lives destroyed by our current health system"?
More people might receive routine care, absolutely. But those people aren't have their lives destroyed by lack of routine care (yes, there are rare exceptions to that). Life-threatening care is already guaranteed.
And for government to reduce the cost of health care, they must cut spending at the margins. So people with life-threatening conditions requiring a chronic medical routine may not receive the care they need (vs. those needing acute attention).
Unless you are talking about medical debt ruining lives? Even that is limited, and debt is not life-ruining....that's more a state of mind.
Joe
P.s. I currently have $250k in debt and about $20k in liquitable assets (and maybe $20k in illiquid assets). My life is not ruined yet.
Not yet; but you may be one illness or accident away from ruin.
Why? Because I'd suddenly take on an additional $100k in debt?
First, my current health insurance prevents that? For about $2-4k a year, I could get independent coverage that would also prevent that sort of catastrophy. Further, my life isn't ruined with that sort of debt. I know plenty of college students with $100-300k of student loan debt, and their lives aren't considered "ruined" (although it is considered a millstone on their backs).
A ruined life has nothing to do with money, by the way.
And how does the inevitable rationing of care under a universal government system change that?
One thing that proponents of government health care are missing.
Very simply the US government is going to be forced to cut costs in a deep and serious way in the coming years. The perversity of what they are doing is that the interest on the debt would pay for a decent medical system. But the interest on the debt comes first, and the necessary attempt to cut programs and spending, raising taxes in a diminishing economy will force cuts in health spending.
In the 90's when Canada hit the same wall as you have (Chretien tried the 'infrastructure spending' route on borrowed money to get things working. Didn't. The finance minister had people in his department who 'would cut his boss down with one word, "Horseshit!"'.
http://www.thestar.com/Business/article/207808
Paul Martin the then finance minister had the political clout to cut spending). Health care was cut seriously. Costs were downloaded onto the provinces, who administered the programs and lacked the capability to raise enough funds. Decisions were made in those years that almost caused a collapse of the health care system. It has taken a decade to begin to repair the damage.
So if Obama passes health care, the US will experience an intolerable decline in the quality of health care in the country. For the simple reason that bringing such a program on line right now, and immediately pushing to cut costs substantially, will knee cap the system. And cutting costs is what the US government will be forced to do. In every domain.
Derek
Yes, I was talking also about debt. Not all debt wrecks your life. That depends on your prospects of repaying it, and college students have nice prospects in general. Not so with many other people who are afflicted, or have a close relative afflicted, with an expensive illness, and can't afford the treatments either now or in the foreseeable future. These people are often be forced to sell their houses, withdraw their retirement plans or spend the money they had set aside to pay for their kids' college education.
Maybe destroyed is too strong a word. But these people know that, even if they survive the disease, in some sense their lives will be much worse. And their fondest hopes for the future have suddenly gone down the drain.
"an expensive illness, and can't afford the treatments either now or in the foreseeable future. These people are often be forced to sell their houses, withdraw their retirement plans or spend the money they had set aside to pay for their kids' college education."
But at least they have the option to make financial sacrifices to obtain that treatment. The goal of health care 'reform' seems to be to take that choice away from everyone, eventually, by stopping all that expensive research into new, expensive treatments (as well as taking away diagnostic tests that, in Obama's opinion, have too low a probability of helping people, even if the people themselves think that their lives are important enough to warrant the added testing). Obama doesn't think that we should be allowed to spend a high proportion of our incomes on ever-improving healthcare, even if we want it, so he's going to stop medical advancements by whatever means necessary.
When you say that people want public healthcare, you're basically saying that there are polls showing that people would like to get something for nothing. Next, we should ask them if they'd also like a free pony, as well.
Ann, in most if not all countries with government coverage there is the option to directly pay for the procedures that aren't covered. Furthermore, many countries have, in addition to a public plan, private insurers that provide greater coverage. Obama is trying to implement something similar to this.
So nobody is taking away any choices. If there's a particularly expensive experimental treatment that is not covered by the public plan, families may still choose to pay for them. The same applies to expensive diagnostic tests that are in the vast majority of cases useless (which, by the way, really are a problem, not a figment of Obama's imagination).
Nimed - I hope you're right about this, but Obama keeps talking about the proportion of GDP that gets spent on healthcare and how that needs to be lowered. How is that consistent with giving people the option to buy more care if they want?
Expensive diagnostic tests are a trade-off, unless you have evidence of tests that have literally zero chance of ever finding anything. What is your definition of "useless"?
Derek - Don't forget that prior to the that the PCs (Wilson?) introduced the GST, which Chretien promised to axe - laugh/snort, and de-indexed the personal income tax brackets. This provided a huge tax windfall for the Libs at the political cost of the PCs. The Libs then gutted the Dept of National Defence (my employer in the 1990s) and cut transfer payments to the Provinces, thereby delegating downward the budget squeeze.
Ok, so this is a simplified picture of the way I believe this is supposed to work:
Under the current system, people either can or cannot afford insurance. When they can, they have very little incentives to restrain their health care consumption. So they naturally go for the very best treatments and procedures, even if they are only marginally better and a lot more expensive. They are also likely to order diagnostic tests that, while not completely useless, have the unfortunate combination of being expensive and having a low probability and actually contributing to the diagnostic, "just to be sure". After all, patients are not paying extra for them. This is aggravated by doctors having strong incentives to avoid law suits. All this drives up the costs of care, and consequently of premiums, making insurance simply too expensive for a part of the U.S. population (and a severe burden to many more people).
The aim of a public plan is not to provide this degree of coverage. Health care would be rationed, in the sense that the less cost-effective diagnostic tests, procedures and drugs would not be available to the patients. The lower coverage, along with some other government advantages (greater bargaining power, lower administrative costs) would make the public plan cheaper. If the patient feels the need to perform some diagnostic test or procedure not covered by the public plan, they will have to pay for them out of pocket.
The goal the public plan is two-fold - to provide the currently uninsured and underinsured access to affordable (albeit lower quality) care, and to reduce overall health care costs, by disincentivizing low cost-effectiveness care and, again, reducing administrative costs and drug prices.
But consumers who both want greater coverage and can afford it are perfectly free to sign up to (or maintain) their current private insurers. This is how it works in Spain, France, Germany and Switzerland. I don't know the other systems well.
Savings in health care would be proportional to the share of the 85% of Americans who currently have private insurance that would switch to the public plan.
The unpopular part: sooner or later, Medicare will have to share the rationed model of the public plan. It's simply too expensive to maintain in it's current form. But I feel sorry for the president who makes this decision.
"OTOH, the majority of people in this country have been wanting universal health care for the last 40 years"
That one definitely needs a citation, and to the extent that it is correct, is it because people really want universal healthcare in the "we pay and then we get" sense, or is it because the past eighty years of US political history have taught them the truth of Tytler's snark about voting themselves largesse from the public treasury?
I have lost of the original source - the link is somewhere in the Asymmetrical Information archives.
Meanwhile, would you settle for a weak secondary source? This is an an article from the Stanford Medicine Magazine website. I call it weak because it doesn't provide any reference for the quote.
Quote:
But access is something people tend to agree on: polls over the last 50 years show that a majority of Americans consider medical care to be an entitlement.
Maybe you're right in pointing out that people want it, but are not fully considering the costs. Yet, in all countries where there is UHC, government health programs continues to benefit from a large popular support.
I'm voting for "play without pay", then. The countries that have UHC now generally have an understanding that benefits come with costs, and accept a higher tax burden in trade for healthcare access. In the US, a majority may feel entitled to healthcare -- really, who doesn't? -- but they have been divorced from the direct costs for a very long time and are likely to find the alternative (pay more, or ration) to be a rude awakening. The AARP crowd in particular.
Can we please not fall into the trap of interchanging health care reform with health care expansion? They are two separate issues that the administration has done an excellent job of combining. I think we need health care reform, particularly how we pay physicians and hospitals, as well as disbanding the employer-health care relationship. I think if we do this, it will help control costs to the extent that health care expansion will be largely unnecessary. In either case, I think we should address the reform part before the expansion, because otherwise it starts looking suspiciously like a Ponzi scheme.
"Nice dilemma"?
I'm completely stumped to figure out how a stimulus - generally defined as "finding something useful to spend money on to keep things going" conflicts with a health reform package designed to shift expenditure from private to public sources. As I recall, about $25 billion of the ARRA stimulus act was section 3001, the COBRA subsidy.
There's simply no economic way in which health reform & budgetary stimulus conflict.
Um, I think that's why the post is titled "The Politics of the Possible" and not the Economics of the Possible. The political way they interfere is that people see health care expansion and a second stimulus as spending even more money that we don't have. This is difficult politically.
Nope. No way. If there's going to be a big spending bill, of course it should be coordinated with health reform. Letting the opponents of both control the terms of debate to treat them as being somehow opposed is criminally stupid, almost Ben Nelson stupid.
Downpuppy, I agree with much of what you said. But Nola Dawg has a nice rebate. I was implicitly accepting the "political capital" assumption that you can only pass so much stuff in Congress.
We can discuss if this is a reasonable assumption or not. Under the assumption, I would prefer to pass health care reform to a second stimulus.
Never accept implicit assumptions, especially those with an agenda. Make them speak their name, and they lose their power.
Victory is habit forming.
But there is no equivalence or tradeoff. Right now, health reform is on the active track, additional stimulus not even under consideration. If anything, as the health bill emerges, the persistence of recession should be a reason to say So? to those who will whine about the price tag, even though the net cost, public & private, may be nothing.
July 8, 2009 11:59 AM
Do you think Democrats would be open to upping defensive spending? I hate saying this, but "I recall reading" that defensive spending is one of the best kind of stimuli, because it hits the economy faster due to the fact that it often spends money on things already being produced. With bridge building, for instance, this saves you the time of surveys, architecture planning, etc (from what I recall of "what I read"). I recall Democrats recently berating Republicans for hypocrisy (and not necessarily undeserved) for supporting increasing or continued defense spending after moaning about the deficit. If they are that worried about the economy, and I'm correct in asserting that defense spending is at least as potent if not more so regarding stimulating the economy as another stimulus, wouldn't that be a pretty hassle free way to help the economy?
Please correct me/add information if I'm wrong
Another question to Paul Krugman and stimulus proponents: what would constitute evidence that fiscal stimulus doesn't work? As far as I can tell, Paul has set up an intellectual framework under which, no matter how much GDP and employment deviate from your projections, the answer is that you haven't spent enough (at least if you are a Democratic administration).
These demands for a second stimulus epitomize one of the huge problems I have with the self-reinforcing logic of leftist government expansion:
1) They propose a government action to fix a problem.
2) The program is implemented as best as can be in our political system (which is to say, sub-optimally but everything in reality is sub-optimal compared to the brilliant theory living in our heads)
3) The problem is not solved or even gets worse
4) The same people then argue that this is good evidence that we need to expand the program and maybe even create a second, complimentary program to supplement it.
Anybody see the flaw here? It's a feedback cycle that only has positive feedback. Every outcome is just more evidence that we need more government action.
Program works: great, let's have more of it.
Program fails: just proves it wasn't enough, we need more of it.
In the defense of the left, the same could be said of tax cuts and less government interference.
Although truth be told, while we have cut taxes I don't think we've ever had less government interference.
what's the point of electing Democrats if they can't get a single major program passed?
This is only a question that doesn't answer itself, if one assumes that the point is not exactly to get Democrats elected, rather than to get major programs passed.
I'm not sure the Democratic Party stands for anything beyond "getting Democrats elected" - much as, these days, I'm not sure the Republicans stand for anything more than their equivalent.
Besides, too many of the Democratic policies upset one or more interest group if pushed too far. Why actually enact any of them, when you can blame Republicans, get more votes, get cushy sinecures, pensions, and more Democratic Party Apparatchiks in various places, without doing so?
So you're saying 'low skill' workers shouldn't get insurance?
I can't speak for anyone else, but it isn't reasonable or sustainable for anyone, at any skill level, to consume more than he produces. That's pretty crude accounting, not classism.
I agree with the spirit of this and would like to see it inform more of the base assumptions made by people like e.g. Freddy (did he leave for good this time?), BEFORE we go discussing change and its pitfalls.
But technically, very few people really live this way in the strictest sense when it comes to public goods, like e.g. roads. If healthcare is to be made a public good, then it is legitimate to discuss the value of healthcare as a public good. Of course, the liklihood and impact of rationing and price controls if aggregate demand would prefer to exceed net payment, is also a legitimate talking point.
I grew up on a farm; considered "low-skill" work. And I milked 100 cows before going to school every day, after school each evening. And weekends, too. Enough milk for approximately 500 families on a daily basis.
The notion that skill level is correlates to productivity is ludicrous from my perspective.
The guy who lives down the street from me that drives an excavator is highly productive; so isn't the selectman in my town who runs a septic-pumping truck, and I'd consider the guy who stocks the coolers at the grocery store pretty productive, too; particularly when you go in looking for that gallon of milk for your kids to drink.
I'm inclined to agree with zic here. Common doesn't mean little value, it means small margins due to little leverage and asymetrical information (they often don't realize the danger and physical demands of their jobs, nor actual level of job security).
The worker gets a smaller portion of the gains of trade often because they are far from the demand, not because what they do isn't valuable.
Of course, a trader gets a larger portion of the gains by discovering where the demand is, that creates value. But how much financial activity actually does that these days?
Rob,
but it isn't reasonable or sustainable for anyone, at any skill level, to consume more than he produces.
Have you ever been to a real third world country? India, Cambodia, Africa?
I say that because if you go there you will see some f*cked up s*it. It's worth it for me to pay so that someone with some horrible disease is taken care of and I don't have to be confronted with it on the way to work everday.
I get annoyed when people say it should be a right - it's not a right. That being said, I'm sure even you would agree whatever we pay to ensure that we don't see what you see outside any big Indian tourist attraction is money well spent.
Jmo3,
It's fair enough to treat some degree of health care as a public good. We could even call it "public health," and employ a bunch of people in Navy-style khakis running around DC calling each other things like "Lieutenant Commander" and "Admiral" to worry about it.
But we come back, again and again, to my basic point about the root of our health care problems: what people want isn't health insurance, it's for somebody else to pay for their health care. Zic's question about low-skill workers--and the accusation of classism--is merely one manifestation of that phenomenon.
what people want isn't health insurance, it's for somebody else to pay for their health care.
I'd agree. I don't have any issue at all with paying for the lifetime care of someone who was born with cerebral palsy or for some kid with leukemia who has idiot parents.
What I do have a problem with is paying for the healthcare of those who could have afforded it on their own (1/3 of the total uninsured) and for paying for those who have made deliberate life choices than preclude them from employment sufficient to warrant health benefits.
Given that having people die in the streets of untreated disease pretty much guarantees bad health for everyone, doesn't mandated universal coverage take as much of the moral hazard out of the equation as possible?
Oh? How many people do we have dying on the street?
Very few. Locally, maybe a dozen homeless people a year. Society has to pick up the bill to prevent it being more. That was, like, my point.
"What I do have a problem with is paying for the healthcare of those who could have afforded it on their own"
You also have to consider what else you might be subsidizing. How many people piss away a lot of money on things like boats, vacations, too big houses, expensive cars, etc and then complain about the cost of health insurance? Spending 3 grand a month on boat payments is ok, but 600 bucks for health insurance is "robbery". Paying the mortgage and taxes on an $800,000 house is ok but the health insurance companies are robber barons.
Right now, we have that with Medicare since there's no means test. I know any number of people in their 70s who own million dollar homes in the NY area, and another home in Florida. Of course, they have a nice car for both the husband and wife. I get to subsidize their health care, even though there's no way I can afford that million dollar home, not to mention that second Florida home.
Sure, but they paid in to Medicare when they were working. That's the way the system was set up - you pay in and then when you're old you have health care. It's not a welfare program, at least in theory.
Be careful what you ask for. If a means test is instituted for Medicare or Social Security the program will be gone in a generation.
If a means test is instituted for Medicare or Social Security the program will be gone in a generation.
I keep hearing this, and I really don't get it. I'm far more inclined to support a less expensive program that's targeted to the poor than a more expensive program that also cuts checks to the wealthy. Am I that unusual?
Maybe when they die you can get the house cheap ?
"What I do have a problem with is paying for the healthcare of those who could have afforded it on their own"
Not to mention other lifestyle choices. I have a problem subsidizing someones medical care who smokes, drinks, eats at McDonalds every day and never exercises.
The notion that skill level is correlates to productivity is ludicrous from my perspective.
I don't think you actually believe that. Your son is a tool and die maker, is he not? Would you say he was more or less productive in the years before he acquired his machining skills? Would you say that he is likely to have higher or lower productivity in a machine shop than I would have, given that I did some machining in the service of physics experiments years ago, and he has both formal education and substantial experience, and therefore more skill?
Maybe the definitions of "skilled" and "unskilled" are messed up, and maybe the definition of "productivity" is skewed (I'm on record in these very pages as saying that we shouldn't count lawyers' income in GDP, given that what they produce isn't terribly useful in an absolute sense, so it doesn't represent real wealth creation), but certainly more skill means more productivity using almost any definitions.
Downpuppy,
Of course! The issue is people like Nimed or zic is they refuse to sell "universal coverage" as forcing idiots who have the money to buy insurance. That's the way to get conservatives to hop on board.
Hey man, this is a comment section, and me and zic aren't politicians (at least I don't think she is). I'm not trying to figure out the best way to convince other commenters. I'm just giving my honest opinion.
For what is worth, I'm skeptical that, even if I wanted, I would be able to convince any of the commenters around these parts. These are people with, huh, strong convictions. I mainly come here to get exposed to good arguments against my mostly liberal positions, and to hear the objections to my own arguments.
Maybe one of the reasons you cannot convince them is that nobody can name any government program that has not turned into a black hole money pit.
Nobody can name gov't. programs that ever go away, even though they're no longer necessary. Instead, they grow - wasting more dollars. Do we honestly need the USDA grading ketchup? Do we still need the TVA?
The simple fact is that incentives for government, and the bureaucrats that live of it are opposite to the private sector. Failure is rewarded by allocating more money to the program. Bureaucrats are rewarded for being inefficient. More people and more money are always needed, never less. Government employee income is never based on productivity but simply on obscure formulas drawn up by other bureaucrats who benefit from any raises themselves. In the private sector failure means getting fired, or even the closing of a division or business. Efficiency is rewarded with a raise or trading your past success for a new job.
Ask yourself this: When have you ever heard of ANY government bureaucracy stating that they don't need more money? The answer is never.
National Institute of Health.
It helps generate a lot of wealth.
Krugman reminds me of a faith healer. He does his mumbo jumbo, and if you're not actually healed the problem is you, because your faith just isn't strong enough. What a fraud.
There is a VERY reasonable answer to the stimulus question, and the only reason nobody mentions it is that the Congress is too corrupt to consider it.
We are told the current stimulus isn't doing much because it hasn't kicked in yet. We knew this would be the case when it was rushed through Congress and loaded with pork to get it done. The very simplest thing in the world to do is to revisit the original stimulus, and re- appropriate every dime that isn't due to be spent in the next 6-12 months to something that is, or to tax cuts.
Obviously this would mean ruffling the feathers of the congress folk who got their pork in. But if President Obama were to actually push this himself- and better yet, actually WRITE the bill instead of letting Congress make a mockery of it, some actual good could be done using money that is already on the table.
For the Republicans, if they had a brain in their heads they would be making a stink that the Dems in Congress should not be allowed to forge another garbage stimulus bill that we have every reason to believe will repeat the past mistakes until Congress fixes the first one. If they had a brain, but I suppose I might as well wish for a golden goose to solve our problems.
You're assuming that Barry was actually against that pork - most of it going to favored Dem constituencies. Is there any evidence that he was? Has he ever done anything about pork to his favored constituencies? Has he ever voiced any concern about people like Murtha?
"Has he ever voiced any concern about people like Murtha?"
As a resident of Illinois, I can say that Obama has consistently refused to support any reformers here in one of the more corrupt political environments. Let's not forget that Michelle was working in Mayor Daley's office when she and Barack got engaged, or that Obama and Blagoyevich were often described as being "joined at the hip" (at least back in the days when that helped Obama personally; I'm not accusing him of loyalty, only of indifference to corruption).
You're also assuming that the government could actually borrow all that money at once and now. The "little" borrowing we've been doing now, compared to the overall porkulus size bill, is small. If not for the pain it would inflict on us all I'd actually like to see the chaos that would ensue if we tried to borrow everything all at once.
You don't have to treasuries or print dollars to cut taxes, at least not immediately.
Mark Buehner: We are told the current stimulus isn't doing much because it hasn't kicked in yet. We knew this would be the case when it was rushed through Congress and loaded with pork to get it done. The very simplest thing in the world to do is to revisit the original stimulus, and re- appropriate every dime that isn't due to be spent in the next 6-12 months to something that is, or to tax cuts.
I was thinking along these lines, so I'll just say 'me too'!
But if President Obama were to actually push this himself- and better yet, actually WRITE the bill instead of letting Congress make a mockery of it, some actual good could be done using money that is already on the table.
You touch on one of the things that gets me the angriest about the first stimulus package - the complete lack of leadership from Obama. I still cannot believe how he left the details completely up to the Dem leadership in congress. Watching the process that produced the first one, there is no way I would support a second stimulus package.
Nimed,
I'm skeptical that, even if I wanted, I would be able to convince any of the commenters around these parts.
I'm almost certain that you would find anyone objecting to an orphan with cerebral palsy being cared for by the state.
The issue comes when we talk about "the uninsured". If a 28yo bartender making 65k, chooses not to purchase insurance, and breaks his leg in a skiing accident, should his wages be garnished until the cost of his care is repaid? I say they should, you might argue that they shouldn't.
I'm almost certain that you would find anyone objecting to an orphan with cerebral palsy being cared for by the state.
Should read "I'm almost certain that you wouldn't find anyone objecting to an orphan with cerebral palsy being cared for by the state."
Nice point, but what if the problem isn't that the money isn't being spent fast enough but being spent at all? This article does a great job explaining what is wrong with the stimulus thinking.
http://www.thefreemanonline.org/departments/perspective-an-unstimulating-idea/
"If a 28yo bartender making 65k, chooses not to purchase insurance"
I probably mostly agree with you about people that choose not to buy insurance, but one problem in some states is that special interest groups convince legislators to add more and more mandatory coverage, which really drives up the cost. The politicians go from "wouldn't it be nice if everyone had free birth control/mental health counselling/massage therapy/whatever?" to "hey, I can give it to everyone, and it won't even cost me anything!"
There are competing interests here. Some people want everyone to have cadillac programs out of "fairness"; others want to force healthy young people to subsidize the sick and elderly, to bring down average costs; and others just want everyone to have at least catastrophic coverage. Personally, I think that we should allow (require?) the option of only catastrophic coverage with huge deductibles, and then require everyone to have at least that much, with subsidies for those who truly can't afford it.
I don't have a problem with "forcing" young people to pay for elderly care. I'm kind of Rousseauian on this - there is a base for a social contract. Besides some rare and tragic exceptions, all young people are going to be elderly some day, so they will eventually be "refunded" by the next generation. And active adults pay for public education and Medicaid. Also, it's not like the elderly willingly have more illnesses than the young.
But jmo3's point is that young people who can afford insurance but take their chances anyway already get emergency care without paying for it. Denying this care is pretty much impossible - very few people would agree to allow others to bleed to death after a car accident.
The catastrophic insurance would have some pretty perverse incentives built into them. It would encourage people to stay away from cheaper preventive care, and let illnesses deteriorate to the point when they become catastrophic. So catastrophic coverage would probably raise health care costs and hurt public health.
The problem with expecting young people to pay higher premiums, under the current system, is that they're not required to get coverage. They weigh the benefits against the costs to themselves - if the costs are extremely high because they're subsidizing someone else's care, then they're more likely to decide that they don't want to buy coverage. The same people might be perfectly willing to pay for their own expected needs, since that would cost quite a bit less.
jmo3's original post didn't say anything about emergency room care, only about choosing not to buy insurance. My point is that it's harder to expect them to rationally choose to buy coverage if the cost is inflated through subsidies to others. Politicians love this trick - giving a subsidy to a favored group but keeping it off the government's budget by simply shoving the cost onto another group (think of Barney Frank, Fannie/Freddie, and mortgage loans to those who couldn't qualify). In this case, the trick doesn't work as well because buying coverage is currently voluntary.
As for the incentives that come from catastrophic insurance only, yes there are trade-offs, but most healthy people in their 20s just don't need all that much preventive care. And I'm not convinced that, of the few that develop illnesses, most would deliberately allow their own health to deteriorate to catastrophic levels simply to avoid spending a relatively small amount of money on something that they clearly needed.
I think the data on preventive care in this country is more iffy than you think, at least among the young and healthy. One of the big problems we have with the current system is in fact the incentive to run every possible test in the book at the drop of the hat, no matter how unlikely. The patient doesn't pay for it, the doctor gets paid AND covers his rear from malpractice, the insurance company (decry them all you like) by and large end up going along. That drives up costs massively compared to more socialized system where waiting lists shave off a large number of borderline cases, or the government simple decides not to pay for certain tests or treatments without firmer diagnosis. This knife cuts both ways- Americans (many of us anyway) are used to pulling out all the stops if the doc says so, government run healthcare CANT work that way. But its massively expensive.
In other words- catastrophic coverage would certainly raise premiums for everyone else (the young and healthy overpaying for insurance is the entire scam), but it wouldn't likely do much to public health. The truth is the young and healthy generally ARE healthy. Its more expensive to spend money on testing all of them for everything in the book than to simply treat the wild cards that do get catastrophically sick or hurt.
This from Scott Sumner's blog:
http://blogsandwikis.bentley.edu/themoneyillusion/?p=1764
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Bullard also suggests (in his Powerpoint slides) that the Fed may be held back from monetary expansion by the inflation fears associated with big deficits. This is one reason I opposed fiscal stimulus, I expected if the Congress did less, the Fed would simply do more. I seem to recall Krugman or DeLong ridiculing that argument, but apparently it is taken seriously by the only people who matter, those in charge of monetary policy. Here’s Bullard again:
WHY WORRY NOW?
The problem is that if expectations of inflation feed into the longer-term yields, those yields will rise today.
That could hamper recovery prospects today.
Similarly we have large budget deficits today in the US, in part to counter the recession.
Appearances that the Fed might “monetize the debt” can cause inflation expectations to rise.
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So more 'stimulus' would create inflationary influences, or the appearance of them, raising interest rates which would counter any benefit that the stimulus or the Fed monetary boost could generate.
Just out of curiosity, has anyone studied the effects of the US health system compared to European or Canadian systems on the generation of wealth?
Derek
Why do we even expect health insurance to pay for every medical expense, especially for things like birth control which are entirely predictable aren't even preventative of diseases (unless you believe that life is a fatal STD)? I don't make a claim on my flood insurance to have my storm drains cleaned. My car insurance does not cover oil changes and tire rotations (nor does my warranty).
Megan, you had a review of Bruno here, but now it's gone from the front page. Wha'appen?
Was wondering the same thing. Maybe some Ron Paul fans raised hell in the comment section overnight?
I accidentally violated the embargo--it wasn't supposed to go up until tonight, but I forgot to save it as a draft. It will be up again this evening.
A question for Paul Krugman and other stimulus proponents: would you rather have a second stimulus, or health care?
I think you don't read Krugman enough, or you would know he doesn't view that as a either/or choice. He believes the more gov't spending we have the better things will be -- which will then fuel public desire for yet more spending, until we're all living in that elusive Marxist paradise leftists have been promising us since Marx first put pen to paper.
It sounds like Megan is predicting that Krugman will be pissed at Obama again, and pretty soon too.