Kevin Drum

The AMA Takes a Shocking Stand

| Thu Jun. 11, 2009 2:20 AM EDT

The AMA has announced that it will oppose the creation of a public option in any kind of healthcare reform.  This is not exactly a shocker, since the AMA has opposed pretty much every step toward national healthcare ever proposed — including Medicare.  Remember Operation Coffee Cup?

Still, they really ought to have better reasons than this:

In comments submitted to the Senate Finance Committee, the American Medical Association said: “The A.M.A. does not believe that creating a public health insurance option for non-disabled individuals under age 65 is the best way to expand health insurance coverage and lower costs. The introduction of a new public plan threatens to restrict patient choice by driving out private insurers, which currently provide coverage for nearly 70 percent of Americans.”

If private insurers are pushed out of the market, the group said, “the corresponding surge in public plan participation would likely lead to an explosion of costs that would need to be absorbed by taxpayers.”

The AMA's love affair with private insurance companies is truly a thing of wonder.  It's like these guys have collective Stockholm Syndrome.  Or collective battered wife syndrome.  Or something.  Given how much misery private insurers cause for most doctors, I sometimes wonder what they'd have to do to finally cause the AMA to turn on them. Start paying all claims in zlotys?  Demand that doctors have bar codes tattooed on their foreheads?  Insist that all waiting rooms show nothing but reruns of House?

Probably not even that.  Doctors must figure that the more pain private insurers cause them, the more it shows they really love them.  So back to the arguments, such as they are.  (1) A public plan wouldn't drive out private insurers unless it turns out that private insurers are actually less efficient than the post office.  In which case they'd deserve it.  (2) Nor would a public plan restrict choice — unless the AMA's members deliberately tried to sabotage it by refusing to participate.  (3) And there would only be a surge in signups if the public plan turned out to be a better deal, which would likely mean lower overall costs even if a greater percentage of those costs was paid for out of taxes.

But who cares?  Honestly, if the graybeards of the AMA didn't oppose a public plan it would probably make me rethink my support for it.  The fact that they are opposing it just means that all is right with the world.

UPDATE: Apparently the AMA is backing off slightly on its opposition to a public plan. They now say they're willing to consider "a federally chartered co-op health plan or a level playing field option for all plans" — whatever that means.  Sounds like pretty weak tea to me.  I think we can still safely say they're opposed to anything that would have a serious chance of being effective.

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The Un-Bailout

| Wed Jun. 10, 2009 9:48 PM EDT

Banks that want to exit the TARP program have to do more than just pay back the money they received from the government.  They also have to buy back the warrants they issued as part of the initial deal.  But some bank CEOs are unhappy about this, and Jamie Dimon, CEO of JPMorgan Chase says that the Treasury should cancel half the warrants it holds "out of fairness." Tim Fernholz isn't amused:

Are you kidding me? The taxpayers went on the line to bail the banks out during a financial crisis produced by the banks' own excess, and now they think that debt should be canceled "out of fairness." Yikes. Luckily, the Treasury seems to be growing into a tougher negotiator after some initial criticism from Congress, and may be thinking about auctioning the warrants to third parties to drive up prices further. Or, if the banks don't want to buy them back right now, they can remain under stricter regulatory supervision until the entire financial regulation apparatus is overhauled this summer.

Unfortunately, Dimon has a point, thanks to the way that Henry Paulson decided to handle the bailout in the first place.  Instead of pumping money only into troubled banks, he insisted on pumping money into all the big banks, whether they wanted it or not.  Ever since, this has given some of the banks a pretty justified excuse for complaining about the restrictions they were placed under, and this is just more of the same.  Why should Dimon have to buy back a bunch of warrants when he was an unwilling participant and only surrendered them in the first place because Paulson insisted on it for the good of the country?

Now, as it happens, there are some pretty good reasons for going ahead and making JPMorgan pay up.  They may not have wanted the TARP money, but they made (and continue to make) eager use of zillions of dollars in other Fed and Treasury programs.  So shed no tears for them.  That said, we wouldn't even be having this discussion if Paulson had handled the bailout better.  His excuse at the time for the scattershot approach was that he didn't want to single out any particular bank for TARP funds since that would advertise to the whole world that they were insolvent and might lead to a market panic.  But no one was fooled.  The market knew perfectly well who was in bad shape and who wasn't.  And when Citigroup and Bank of America went back to the well a second time — an obvious sign of distress — the markets just yawned.  There was no panic, no selloff, no nothing.  Ditto for all the smaller banks that have accepted TARP money.

What's more, a more targeted approach would have cost less.  Instead of $125 billion, the first-round tab probably would have run to something like $60-70 billion or so.  It would have been a better deal all around.

But that's not what happened, so now Jamie Dimon and his pals get to mouth off about how unfair life is.  Thanks, Henry.

Chart of the Day

| Wed Jun. 10, 2009 6:00 PM EDT

Pew's recent polling report, "Trends in Political Values and Core Attitudes: 1987-2009," is chock full of fascinating nuggets, not least of which is its surprisingly robust finding of substantially increased political polarization over the past 20 years.  Also: the continuing demise of the GOP and the continuing triumph of more liberal social values among all age cohorts.  On the downside: environmentalism is looking pretty ragged.  Bloggers looking for inspiration should have no trouble finding plenty of good stuff here.

At the moment, however, I guess I'm in the mood for some idle chitchat.  Namely, how do we explain this particular chart?  Take a look at just the last two data points, which show the effect of the current recession.  Rich people feel lousy: their financial satisfaction has plummeted 20 percentage points.  But the recession has had only a minor effect on the financial satisfaction of the upper middle class and it's had no effect at all on the lower middle class and the poor.

Why?  One possible explanation is that the bottom three classes had already gotten most of their dissatisfaction out of the way: compared to the start of the Bush era, they were already at least ten points more dissatisfied by 2007.  They just didn't have much further to fall.  The rich, by contrast, had been getting richer and more satisfied all along, so when the recession hit, it hit hard.

I'm not sure I buy that, though.  It's intuitively reasonable that when people get into a long-term funk over their stagnant (or worsening) finances, a new shock to the system just gets added to the pile and shrugged off.  But there are shocks and there are shocks, and this particular recession has produced rising gasoline prices, substantially higher levels of unemployment and underemployment, millions of home foreclosures, and a huge loss of housing wealth even for those who have kept their homes.  Those are the kinds of shocks people don't just shrug off.

The rich becoming less financially satisfied is easy to understand.  But why is it that the non-rich seem to be mostly taking things in stride?  Some kind of weird Obama optimism effect?  A sudden realization that plasma TVs aren't all they're cracked up to be?  I'm a little stumped here.

(Via Ramesh Ponnuru.)

Squeaky Clean

| Wed Jun. 10, 2009 2:39 PM EDT

In the Washington Post today, Al Kamen compares Barack Obama's habit of doling out plum ambassadorships to big campaign donors with Bill Clinton's squeaky clean record of ignoring the money and instead choosing people "with experience in public policy."  Bob Somerby is amused by this sudden rejuvenation of Clinton's reputation:

For years, Kamen’s coven kept insisting that Clinton’s fund-raising was corrupt — that virtually everything was up for sale, given the president’s corrupt love of cash. In the case of the Lincoln Bedroom, the coven faked especially hard — and no one embarrassed itself more than Kamen’s own newspaper. In one especially sad example, the Post belatedly added Chelsea’s Clinton’s slumber party guests to the list of Lincoln Bedroom overnight guests, thereby driving up the numbers and heightening the sense that the Clintons had been misbehaving. It’s hard to get much sicker than that, but Kamen’s coven was up to the task. A few years later, Kamen himself reviewed a Christmas card — on Christmas Eve! He thought he saw character problems.

Without going into obsessive detail, more than a decade has passed since we heard — and heard, and heard, then heard some more — about Bill Clinton’s vile corruption when it came to campaign fund-raising. (We also heard the coven’s gong-show tales about that Buddhist temple.) More than a decade has passed—and have you seen anyone do any work on all the corruption this coven alleged? By now, the coven has had plenty of time to detail and document its big loud-mouthed charges. Have you see anyone produce the book — or even the magazine piece — which documents the way Bill Clinton actually sold off the White House?

And what happened to our most recent president emeritus in all this, anyway?  Who did he send to Britain and Japan?  Click the link for the answer.

Hypocrisy Watch

| Wed Jun. 10, 2009 2:10 PM EDT

From USA Today:

Utah Republican Sen. Bob Bennett voted against the $787 billion economic stimulus package in February, declaring the day it passed that "the only thing this bill will stimulate is the national debt."

Two days earlier, however, Bennett had written to the Environmental Protection Agency and the Agriculture Department seeking stimulus money for Utah, according to copies of the letters released under the Freedom of Information Act. Using 16 identical cover letters, Bennett passed along stimulus funding requests from 14 Utah cities and counties totaling $182.5 million.

....USA Today's review of congressional correspondence with 10 federal departments or agencies found 13 Republicans who voted against the bill and sought funding for their states or districts.

This is presented as sort of a vague act of hypocrisy, but that's unfair.  If money is being doled out (or about to be doled out) despite your opposition, that doesn't mean your state shouldn't get its share.  Likewise, even if I oppose, say, the mortgage interest deduction, there's nothing wrong with me continuing to take advantage of it as long as it's still around.  There are ways in which stuff like this might rise to the level of mockable hypocrisy, but this really isn't one of them.

Who Speaks for the GOP?

| Wed Jun. 10, 2009 1:42 PM EDT

Conor Friedersdorf takes a look at a recent USA Today/Gallup poll and comes away discouraged:

Like it or not, Americans regard Rush Limbaugh as the face of the Republican Party, he is able to drive the agenda of the conservative movement, and a lot of people on the right don’t find that problematic....Should this be the last time that a talk radio host breaks the 10 percent barrier in a poll like this, the GOP and the conservative movement will be a lot better off, and so will our country.

Obviously I agree, but in a way this news isn't quite as grim for conservatives as Conor suggests.  The full poll results are below, and among Republicans themselves Limbaugh is basically tied with Dick Cheney and Newt Gingrich.  But even that's not the biggest takeaway.  What the poll really shows is simply that Republicans have no leaders at all.  This is probably fairly normal for a party that's suffered the kinds of setbacks the GOP has lately, but the good news is that even given the obviously enormous vacuum on the right, Limbaugh still can't break 10% among self-identified Republicans as the voice of the GOP.

Granted, this is grasping at straws at bit.  Still, it's better to have a vacuum from which a new leader can emerge, with folks like Limbaugh, Cheney, and Gingrich yipping around in the mud, than to have one of those guys already a clear top dog.  Plus there's this: Sarah Palin didn't make the list at all.  That shows a disturbing amount of common sense from the loyal opposition.

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A Clean Break?

| Wed Jun. 10, 2009 1:07 PM EDT

Apparently one of the ministers in Binyamin Netanyahu's government is tired of pussyfooting around with the United States.  If we insist on a halt to settlements in the West Bank, he says, Israel should fight back.  Eric Martin passes along the following report from the Jerusalem Post:

The minister suggests reconsidering military and civilian purchases from the US, selling sensitive equipment that the Washington opposes distributing internationally, and allowing other countries that compete with the US to get involved with the peace process and be given a foothold for their military forces and intelligence agencies.

[Yossi] Peled said that shifting military acquisition to America's competition would make Israel less dependent on the US. For instance, he suggested buying planes from the France-based Airbus firm instead of the American Boeing.

Italics mine. This ought to go over real well. If relations between Obama and Netanyahu were a little chilly before, this ought to send them into clearly polar territory.

Whose Deficit?

| Wed Jun. 10, 2009 12:49 PM EDT

Who's really responsible for the massive budget deficits we're currently running?  David Leonhardt crunches the numbers and produces a nice chart that tells the story: IWPBS.

That is: It Was President Bush, Stupid.  That's just a thumbnail on the right, but you can click on it to see the full-size version.  Here's Leonhardt on how an $800 billion surplus turned into a $1.2 trillion deficit over the past eight years:

You can think of that roughly $2 trillion swing as coming from four broad categories: the business cycle, President George W. Bush’s policies, policies from the Bush years that are scheduled to expire but that Mr. Obama has chosen to extend, and new policies proposed by Mr. Obama.

The first category — the business cycle — accounts for 37 percent of the $2 trillion swing. It’s a reflection of the fact that both the 2001 recession and the current one reduced tax revenue, required more spending on safety-net programs and changed economists’ assumptions about how much in taxes the government would collect in future years.

About 33 percent of the swing stems from new legislation signed by Mr. Bush. That legislation, like his tax cuts and the Medicare prescription drug benefit, not only continue to cost the government but have also increased interest payments on the national debt.

Mr. Obama’s main contribution to the deficit is his extension of several Bush policies, like the Iraq war and tax cuts for households making less than $250,000. Such policies — together with the Wall Street bailout, which was signed by Mr. Bush and supported by Mr. Obama — account for 20 percent of the swing.

About 7 percent comes from the stimulus bill that Mr. Obama signed in February. And only 3 percent comes from Mr. Obama’s agenda on health care, education, energy and other areas.

Everybody except the blowhards on TV seem to understand this already.  It's pretty simple stuff.

Now, Leonhardt also points out that inherited or not, Obama hasn't yet provided any credible plan for reducing federal deficits in the long term.  This is true, and eventually he's going to have to.  But since the inescapable answer includes higher taxes, he first has to turn around at least a few of the diehard tax jihadists in both the Republican Party and the conservative precincts of his own party.  That might take a while.

Balancing the Imbalances

| Wed Jun. 10, 2009 12:21 PM EDT

Via Dan Drezner, here is Martin Wolf summarizing a recently released research report from Goldman Sachs:

The paper points to four salient features of the world economy during this decade: a huge increase in global current account imbalances (with, in particular, the emergence of huge surpluses in emerging economies); a global decline in nominal and real yields on all forms of debt; an increase in global returns on physical capital; and an increase in the “equity risk premium” — the gap between the earnings yield on equities and the real yield on bonds. I would add to this list the strong downward pressure on the dollar prices of many manufactured goods.

The paper argues that the standard “global savings glut” hypothesis helps explain the first two facts. Indeed, it notes that a popular alternative — a too loose monetary policy — fails to explain persistently low long-term real rates. But, it adds, this fails to explain the third and fourth (or my fifth) features.

The paper argues that a massive increase in the effective global labour supply and the extreme risk aversion of the emerging world’s new creditors explains the third and fourth feature....The authors conclude that the low bond yields caused by newly emerging savings gluts drove the crazy lending whose results we now see. With better regulation, the mess would have been smaller, as the International Monetary Fund rightly argues in its recent World Economic Outlook. But someone had to borrow this money. If it had not been households, who would have done so — governments, so running larger fiscal deficits, or corporations already flush with profits? This is as much a macroeconomic story as one of folly, greed and mis-regulation.

I just finished reading Barry Ritholtz's Bailout Nation, and it was great.  It's a polemic, mainly about domestic policy and regulatory idiocy, but it's a good polemic.  Well worth reading.

But there was a big part missing from it: as Wolf says, better regulation would have reduced the size of the credit bubble and the ensuing crash, but in the end, all the cheap money generated by our persistent trade deficit had to go somewhere.  You can't hold back the tide forever, after all.

I guess I've been haunted for months by John Hempton's simple formulation: banks intermediate the trade deficit.  If China is sending us huge bales of cash every month, it's going to end up in the banking system and the banking system is going to end up lending it out.  Sure, Alan Greenspan made things worse, George Bush made things worse, and the giddy free market ideology of the Republican Party made things worse.  Bill Clinton, Robert Rubin, and the Wall Street wing of the Democratic Party made things worse too.  But the underlying cause is, and always has been, our persistent trade imbalances.  That was as much a weapon of financial mass destruction as the rocket science derivatives that Warren Buffett so famously criticized.

Things have improved on this score recently.  Our trade deficit is half what it was at its peak.  The problem is that this isn't nearly enough: eventually, we need to pay down all these loans.  That means we need to start running a trade surplus, not merely a smaller deficit.  And we have to do this even though oil prices are almost certain to rise in the long term and our dependence on foreign oil is going to continue to grow.  I still haven't figured out how this is going to happen, and as near as I can tell, neither has anyone else.  All the options seem pretty grim, though.

From the Annals of Corporate Idiocy

| Wed Jun. 10, 2009 11:48 AM EDT

I love stories like this:

[Mark] Elliot's cellphone nightmare began last week when he received a notice from Bank of America saying a payment had bounced on his online bill-pay service. He looked into it and discovered that Verizon was trying to charge him $9,993.88 for his April bill.

....According to the bill, Elliot used his cellphone to upload, download or otherwise access more than 44,000 megabytes worth of data in a single month.  That's the equivalent of downloading about 11,000 songs from iTunes or 60 full-length movies.

[Blah blah....some idiocy from Verizon about how this was all perfectly normal....blah blah]

Elliot woke up Tuesday morning to another notice from BofA saying something was amiss with his account. Turns out Verizon had once again billed his account for the entire $9,993.88 — and this time BofA paid the bill.  This resulted in Elliot losing the $781 he had in his checking account and then owing more than $9,200 to the bank.

So I contacted BofA. Tara Burke, a bank spokeswoman, said the way the online bill-pay system works is that if insufficient funds exist in an account, the first two attempts by a business to withdraw funds will be rejected.  But if the business tries a third time, the transaction will be processed.

Verizon and BofA eventually fixed this stuff, but only after learning that it was going to be publicized in the LA Times.  Without that, this might have gone on forever.  And who knows if it's really over anyway?  I wonder if Elliot has checked his credit report yet to see if anyone has put a big fat black mark on it that will take the next five years to clear up?

Anyway, this is why I don't use electronic bill pay.  You have been warned.