The Fate of Obamacare

The Supreme Court agreed yesterday to decide if Obamacare is constitutional, and in particular, whether the individual mandate is constitutional. One senator thinks it's all a big nothingburger:

Sen. Sheldon Whitehouse (D-R.I.), a former state attorney general who sits on the Judiciary Committee, said that the individual mandate might very well fall, but that the law’s defenders have gotten “overexcited” about it.

....“So the mandate falls? Big deal,” Whitehouse said. “I think a family able to keep their sick kids on insurance even though they have pre-existing conditions, kids out of college able to stay on their parents’ policies while they look for that first job with healthcare — things like that are what will stick. Irrespective of what the Supreme Court says, that’s the things people really care about and are counting on.”

In a way, he's right. If the mandate falls but the rest of the law remains intact, what happens? Here's Scenario #1: In the 2012 election, Republicans win the presidency and big majorities in both houses of Congress, which gives them the power to repeal the whole thing. But if that's the case, then who cares what the Supreme Court does? The whole thing is going to get repealed anyway.

But Scenario #2 is more likely: Republicans don't win such a sweeping victory, which means that Democrats will be able to prevent them from repealing the rest of the bill, either by veto or by filibuster. Then what? Democrats will want to replace the mandate with something else that requires everyone to buy health insurance — maybe something tax based — but Republicans will kill it. So both sides will be stymied.

So then what happens? Answer: insurance companies go ballistic. If they're required to insure all comers at the same price but healthy people aren't required to buy insurance, then prices spiral as sick people sign up for coverage and healthy people drop out. Eventually this death spiral will lead — as the name implies — to death for insurance companies, and at that point it becomes a staredown. Something has to be done, and either Democrats or Republicans will blink first. It may seem like a no-brainer that Democrats will be the ones to cave if this happens, but that's not clear. All it takes is 41 holdouts to filibuster the GOP, and as the insurance industry gets ever more desperate they'll start pushing hard on their Republican pals.

Obviously the outcome is unclear. But depending on where public opinion falls — and requiring insurance companies to insure everyone is pretty popular — Congress might end up reinstating the mandate in some form or another. It's genuinely a crapshoot.

But will it come to that? I just emailed a friend that I'm too much of a coward to publicly predict what I think the Supreme Court will do, but admitting that privately has galvanized me into action. So here it is: I think they'll uphold the individual mandate 7-2, with Scalia and Roberts joining the majority. Does that sound crazy? Yes it does! But I've never thought this was a Commerce Clause case. There's no question that, in general, Congress has the power to regulate healthcare under the Commerce Clause. The real question is whether the Necessary and Proper Clause allows them to legislate an individual mandate as a reasonable way of implementing their regulatory goals. In the end, I think the government will be able to persuade both Scalia and Roberts that the individual mandate falls well within the scope of McCullough v. Maryland: "Let the end be legitimate, let it be within the scope of the constitution, and all means which are appropriate, which are plainly adapted to that end, which are not prohibited, but consist with the letter and spirit of the constitution, are constitutional." The individual mandate may not be the only way to accomplish Congress's goals, but I think the facts of the case provide an extremely strong basis for concluding that it's appropriate and "plainly adapted" to those goals.

So there you have it. I'm now on record with my first Supreme Court prediction, one with a strong chance of turning out to be idiotic. But I'm sticking with it for now. Believe it or not, I think that the case for constitutionality is clear enough that, in the end, both Roberts and Scalia will do the right thing even though it's not ideologically what they'd prefer. Feel free to mock me in comments.

On the cosmic scale of political malfeasance, this still doesn't exactly peg the meter or anything, but it looks like the Solyndra affair finally has its first whiff of genuine scandal. From the Washington Post:

The Obama administration urged officers of the struggling solar company Solyndra to postpone announcing planned layoffs until after the November 2010 midterm elections, newly released e-mails show.

....On Oct. 25, 2010, Solyndra chief executive officer Brian Harrison e-mailed the energy department’s loan staff to explain that Solyndra “has received some press inquiries about rumors of problems”....Harrison’s e-mail was forwarded to program director, Jonathan Silver, who then alerted White House climate change czar Carol Browner and Vice President Biden’s point person on stimulus, Ron Klain.

October 25 was a week before the November midterms. After the White House folks were notified, apparently word was sent back that a delay of a few days would be appreciated:

In an Oct. 30, 2010 e-mail, advisers to Solyndra’s primary investor, Argonaut Equity, explain that the Energy Department had strongly urged the company to put off the layoff announcement until Nov. 3....“DOE continues to be cooperative and have indicated that they will fund the November draw on our loan (app. $40 million) but have not committed to December yet,” a Solyndra investor adviser wrote Oct. 30. “They did push very hard for us to hold our announcement of the consolidation to employees and vendors to Nov. 3rd — oddly they didn‘t give a reason for that date.”

How odd! I'm sure there's an explanation for this. I just doubt that it's going to be a very good one.

Well, that was quick:

In Italy, the honeymoon for Mario Monti, an economist who became the country’s premier designate on Sunday, was quickly ending. Monti was holding intense meetings with Italy’s notoriously divided political parties on Tuesday to win backing for a new cabinet. But after an initial recovery in Italian bonds, investors again drove Italy’s borrowing rates above the unsustainable 7 percent mark.

The eurozone economy is flat; Germany's central banker announced in no uncertain terms yesterday that the ECB had better not provide liquidity to markets in any way, shape, or form; Angela Merkel told her own party that the answer to Europe's woes was more fiscal integration, something that obviously isn't going to happen anytime soon; and the fundamentals of the eurozone's problems haven't really changed a bit. Put all that together, and everything is unsurprisingly sliding right back into chaos. Tick tick tick.

It's late and there aren't many details yet, but apparently Mayor Bloomberg has decided it's time to end the Occupy Wall Street protest. This is from the New York Post:

From the Post story:

The NYPD has begun evicting the hundreds of Occupy Wall Street demonstrators that have been encamped in Zuccotti Park for almost two months....Hours before the massive operation commenced at around 1 a.m., Mayor Bloomberg, Police Commissioner Ray Kelly, Fire Commissioner Sal Cassano and other officials convened in secret at City Hall to greenlight the campaign to clear the park, sources said.

....Cops handed out flyers early this morning declaring that, "The city has determined that the continued occupation of Zuccotti Park poses an increasing health and fire safety hazard," to protesters as well as first responders, and ordered personal property removed.

The real motivation for Bloomberg's action appears to be OWS's announced plan to "Shut Down Wall Street" and "Occupy the Subways" on Tuesday. Check your Twitter feed for the latest. MoJo's @JoshHarkinson and @jameswest2010 are both tweeting live from Zuccotti Park.

From Herman Cain, after an excruciating 60 seconds in which he wracked his brain to figure out what he thought about Libya:

Here's what I would have done. I would have done a better job of determining who the opposition is — and I'm sure that our intelligence people have some of that information. Based on who made up that opposition might have caused me to make some different decisions about how we participated.

So what's the best interpretation of this? That the intelligence community knew who the Libyan opposition was but withheld some of that information from President Obama, causing him to make a poor decision? Really, Herman?

Anyway, the official excuse for this is lack of sleep: "He was tired," said J.D. Gordon, Cain's spokesman and national security adviser. No doubt. During the same interview he also changed his position on collective bargaining rights, and that came right on the heels of GQ publishing an interview in which he revealed that a secret source has informed him that a majority of American Muslims are extremists.

But he's still up in the polls, so we have to continue to pretend to take him seriously. Sigh.

Newt Gingrich is the latest anti-Romney, so I guess that means we all have to pretend to take him seriously for the next few weeks. Fine. Here is Aaron Blake telling us that Gingrich has nothing but contempt for the debt reduction supercommittee:

Gingrich also discussed his own competing debt-reduction plan. Included in the plan is expanded energy exploration, giving states the authority to determine welfare eligibility, expanding research to search for cures to diseases such as Alzheimer’s, and instituting the “Lean Six Sigma” management program in the federal government.

I estimate that all of these things put together would reduce the federal deficit by.....hardly anything. Hell, even Motorola, which invented the Six Sigma program, only estimates that it's saved about $1 billion a year on $30 billion in revenues. That's about 3%, which sounds almost worthwhile, but it could only conceivably apply to about two-thirds of government, which makes it about 2%. And it's almost certainly wildly inflated even at that, so figure 1%. The rest of his stuff might add another 1% if we were really lucky.

So what else would he do? I headed over to his website to find out, but it turns out that Newt is such a cosmic thinker that he doesn't bother his gray matter with petty details. Instead, he wants you to bother your gray matter with the petty details:

The 21st Century Contract with America is so large and covers so many changes necessary to get America back on the right track that it can't possibly be developed by a small group. Instead, it will be developed with the help and support of the American people. 

So there you have it. Newt has provided the yeasty ideas to get you started, and now it's up to you to come up with a few trillion in savings. Just be sure none of your ideas are stupid, because Newt really, really hates stupid ideas. What's more, Blake informs us that Gingrich "has demonstrated a skilled grasp of policy minutiae," and since Blake is an objective hard news reporter, I guess it must be true. So please offer Newt only your very finest ideas so he can cut-and-paste a plan of his own that will blow everyone's mind. I can't wait.

This chart comes via Felix Salmon from an Exane report on Europe's banking system. Basically, what it shows is that wholesale funding between European banks has dried up. This is, needless to say, a big problem: "The way the banking sector works," he explains, "banks have to be constantly lending to each other: in nearly every country in Europe, the amount of bank debt coming due every day is higher than the total amount of bank capital in the system."

The whole thing is a bit mysterious, though, as bank runs so often are. In the United States in 2008, the same thing happened both to specific banks that were in trouble (Bear Stearns, Lehman Brothers) and to the banking system in general. But the reason was fairly obvious: American banks held huge portfolios of subprime toxic waste, but no one knew exactly who held what or how much it might be worth. This made the entire banking sector suspect, and wholesale funding dried up systemwide.

Europe's case is different. Their problem right now is sovereign debt, and that's much more quantifiable. The value of some sovereign debt (Greece, Italy, etc.) is indeed in doubt, but at least we have a pretty good idea of which banks hold how much debt. So even if you assume a substantial markdown of sovereign debt, you can still have a pretty good idea of which banks are in trouble and which ones are basically fine. So why has wholesale funding plummeted throughout the entire banking system?

This is something I haven't quite sussed out yet. But in one sense it doesn't matter: panic is panic, and if banks are in the middle of a run — which is essentially what a wholesale funding cutoff is — then somebody has to step in and act as lender of last resort. Unfortunately, Europe no longer has anybody to take up this role:

This is a serious structural issue with the way that the European monetary system was constructed: the ECB is tasked only with guarding inflation, and not with ensuring the health of the banking system. Individual national central banks are meant to do that. But they can’t print money — only the ECB can. So when there’s a liquidity crisis, no one’s able to step in and solve it.

....But it’s liquidity crises which are the most violent, and which can kill a financial system — indeed, an entire economy — more or less overnight. Someone in Europe needs to come up with a plan for how to address the current crisis — now. Because if it gets any worse, it could well be too late.

Tick tick tick.

Matt Yglesias:

I have this sense that when history looks back on 2009-2010 in American political history, it’s going to come away with the conclusion that a larger-than-currently-understood share of the problems had to do with poor handling of routine managerial issues. You had a new president who didn’t have a strong management background. You had a new chief of staff who, likewise, had a lot of DC experience but not a ton of management experience. [Etc. etc.]

OK, but what routine management problems are we talking about? I've read plenty of stories about arguments among Obama's top staffers (Geithner vs. Romer, Summers vs. everybody), but that all sounds pretty normal for a presidential administration and Obama seems to have had a pretty good reputation for listening to the arguments and resolving them fairly crisply. I've heard lots of criticism of the decisions Obama has made (public option, lack of housing policy), but that's also par for the course. I've read about occasional specific screwups (poor handling of cap-and-trade, slow response to the Deep Horizon blowout), but not lots of them. And I've read some criticisms of his strategic direction (focusing on deficit reduction too soon, retaining Bush national security policies). But these are all different from day-to-day management issues.

In any case, none of this strikes me as anything more than extremely normal. Overall, my sense is that when it comes to routine management, the Obama White House is clearly better than either the Carter or Clinton administrations in their first couple of years, and probably better than the Bush Jr. administration too. I guess Ron Suskind disagrees, but is it a widespread belief among DC insiders that the Obama White House has been an especially chaotic scene? That doesn't really gibe with my sense.

FWIW, my guess is that when history looks back on 2009-10, it's going to come away with two quite different conclusions. First, that Obama was more productive than his contemporaries gave him credit for. Second, the global financial meltdown was way worse than initially thought, and the response of leaders throughout the world was woefully inadequate. I'm willing to be persuaded otherwise, but I suspect that Oval Office managerial prowess won't even be a footnote.

Mike Konczal points out today that youth unemployment in the United States is nearly as high as it is in all those Middle Eastern countries where it's considered a "time bomb" of sorts. "Given this," he asks, "how could we ever say youth unemployment in the United States’ Lesser Depression isn’t a 'time-bomb'?" He then posts a chart of the employment-population ratio of 16-24 year olds that "floored" him. As well it should: it's been on a steep downward trend ever since 1990.

But it's not just young people, though they've done worse than older cohorts. Here's the employment-population ratio for everyone over the past 30 years. The trend for men stayed pretty steady through the 80s and 90s, while women joined the labor force in increasing numbers. Then the bottom fell out. The employment ratio for both sexes fell during the 2001 recession, never recovered during the Bush era, and then plummeted again in 2008. The Great Recession has made all of this far more visible, but the problem didn't really start in 2008. It started in 2000. The U.S labor market has been stagnant for over a decade now.

There's been much talk recently about the record-shattering $4.3 million paid on Thursday for Andreas Gursky’s photograph Rhein II. Via Ezra Klein, Florence Waters takes a crack at explaining why it was worth it:

It could be a long time before a photograph comes along that will top Gursky’s print. This image is a vibrant, beautiful and memorable — I should say unforgettable — contemporary twist on Germany’s famed genre and favourite theme: the romantic landscape, and man’s relationship with nature.

But it is more than that. For all its apparent simplicity, the photograph is a statement of dedication to its craft. The late 1980s, when Gursky shot to attention, was a time when photography was first entering gallery spaces, and photographs were taking their place alongside paintings. Photography “as art”, at the time, was still brave and new, and the simplicity of this image shows a great deal of confidence in its effectiveness and potential for creating atmospheric, hyper-real scenarios that in turn teach us to see — and read — the world around us anew. The scale, attention to colour and form of his photography can be read as a deliberate challenge to painting's status as a higher art form. On top of that, Gursky’s images are extraordinary technical accomplishments, which take months to set up in advance, and require a lot of digital doctoring to get just right.

Well, OK. This is the kind of art-speak that drives me crazy, but I simply don't have an eye for art or enough background to allow me to make a judgment. So I'll just keep my trap shut on the merits of the thing.

But I do have another question. If this photograph was bought purely because the buyer thinks it will rise in value, then fine. Maybe it will. But if it was purchased because, as Waters says, it was groundbreaking enough to be worth $4.3 million, I have to wonder if any piece of artwork so contemporary can legitimately be considered so groundbreaking. Rhein II was created in 1999, which makes it barely a decade old. Plenty of other artwork that new or newer has sold for as much or more. But should it? Isn't there still some merit in allowing a bit of time to pass before we declare pieces of art so exceptional?

I guess that's antediluvian thinking. After all, if Gursky is today's Jackson Pollock, then there's no time to waste. Waiting even 20 or 30 years would mean missing out on the next Jackson Pollock. Hell, waiting two or three years might be long enough. And yet, something about this still seems out of kilter. Any comments from art lovers?