Kevin Drum

Chart of the Day: Healthcare Spending

| Sat Dec. 12, 2009 2:43 PM EST

Yesterday the Office of the Actuary for Medicare released its estimate of national healthcare costs if the Senate healthcare plan is adopted.  Unsurprisingly, it shows that total spending will rise: the bill, after all, would cover about 30 million more people, so you'd expect spending to go up at first.

But there's more to the story — although you won't learn this by listening to Fox News.  The bill also reduces the growth in expenditures over time, and this means that within a few years we're covering a lot of additional people for no net increase in spending.  Jon Cohn explains:

The underlying trend is in the right direction. As more time passes, it's more likely we'll save money. Why do I say that? It has to do with two competing trends that explain how the Medicare Actuary arrives at its bottom line [i.e., more people being covered drives spending up, but increased efficiencies drive spending down –ed.]

....According to the projection, under reform the government will reduce its spending on Medicare significantly. Establishing a commission on the cost of Medicare will reduce it further, although not by much in the early years. And a tax on the most expensive health insurance plans will curb spending in the private sector.

Over time, the cumulative effect of these changes will grow, so that the gap between what we'd spend on health care without reform and what we'd spend with it will shrink. In 2019, the last year of the projection, the difference — that is, the amount of extra money our society devotes to health care — is a measly $23 billion out of more than $4.5 trillion total.

....But the actual price may be even lower, at least as time goes forward. The Medicare Actuary does not project beyond the 2019 window. But it's reasonable to assume that if the trend holds until 2019, it will hold for a few years beyond, to the point where medical care spending really would come down.

The Medicare Actuary might not go beyond 2019, and Jon might not go beyond 2019, but I'm happy to.  The chart above starts in 2014, when the spending provisions of the bill kick in, and then extends the trend line out to 2026.  It's based on nothing but a simple extrapolation, but it shows graphically what Jon and the Medicare Actuary talk about in words: a decade after the reforms kick in, we'd be providing healthcare to at least 30 million more people and spending no more than we would if we did nothing.  Unless you're a Republican, that's a pretty good deal.

Advertise on MotherJones.com

Friday Cat Blogging - 11 December 2009

| Fri Dec. 11, 2009 3:04 PM EST

I've been fighting off my cats this week.  Domino has taken to jumping up on my desk and making a nuisance of herself because she wants me to vacate my chair so she can sleep in it.  I finally got tired of this, so I decided to put her pod on the desk and see if she'd be satisfied with that instead.  As you can see, it worked.  So then I put a pillow on the floor next to my desk, put the pod on the pillow, and drew her attention to that.  She seems very happy, and now mostly leaves me alone.

Unfortunately, as you can also see, nature abhors a vacuum and cats abhor an empty spot from which to annoy their humans.  Domino may be happy with her pod, but now Inkblot is the one jumping up on my desk trying to get me out of the chair.  He's never been attracted to pods, so I'm not sure what the solution is going to be if he keeps this up.  Suggestions?

China's Problems

| Fri Dec. 11, 2009 2:52 PM EST

Dan Drezner points to a piece in the New York Times about growing discontent with China in the developing world:

China has long claimed to be just another developing nation, even as its economic power far outstripped that of any other emerging country. Now, it is finding it harder to cast itself as a friendly alternative to an imperious American superpower. For many in Asia, it is the new colossus.

“China 10 years ago is totally different with China now,” said Ansari Bukhari, who oversees metals, machinery and other crucial sectors for Indonesia’s Ministry of Industry. “They are stronger and bigger than other countries. Why do we have to give them preference?”

To varying degrees, others are voicing the same complaint. Take the 10 Southeast Asian nations in the Association of Southeast Asian Nations, known as Asean, a regional economic bloc representing about 600 million people. After a decade of trade surpluses with Asean nations that ran as high as $20 billion, the surplus through October totaled a bare $535 million, according to Chinese customs figures, and appears headed toward a 10-year low. That is prompting some rethinking of the conventional wisdom that China’s rise is a windfall for the whole neighborhood.

Vietnam just devalued its currency by 5 percent, to keep it competitive with China. In Thailand, manufacturers are grousing openly about their inability to match Chinese prices. India has filed a sheaf of unfair-trade complaints against China this year covering everything from I-beams to coated paper.

I don't have any lengthy comment about this, other than the obvious: China looks scary to some people today because they project its current growth rates into the far future and then assume that everything else in the world will stay the same.  But as China becomes more highly developed, it's going to encounter the same problems maintaining growth that everyone else does.  What's more, it's going to start developing a lot more rivals, both overseas and nearby.  That's going to make its foreign policy way trickier than it is today.  They're already getting a taste of that in Copenhagen, where American representatives are getting occasional breathing spells from the usual attacks as climate activists bash China instead.  It's only going to get worse for them in the future.

The Problem From Hell

| Fri Dec. 11, 2009 1:45 PM EST

Over at Democracy in America, one of the Economist's teeming masses of anonymous bloggers1 takes a deeper look at Willis Eschenbach's claim that climate data was cooked in Darwin and concludes:

So, after hours of research, I can dismiss Mr Eschenbach. But what am I supposed to do the next time I wake up and someone whose name I don't know has produced another plausible-seeming account of bias in the climate-change science? Am I supposed to invest another couple of hours in it? Do I have to waste the time of the readers of this blog with yet another long post on the subject? Why? Why do these people keep bugging us like this? Does the spirit of scientific scepticism really require that I remain forever open-minded to denialist humbug until it's shown to be wrong? At what point am I allowed to simply say, look, I've seen these kind of claims before, they always turns out to be wrong, and it's not worth my time to look into it?

Well, here's my solution to this problem: this is why we have peer review. Average guys with websites can do a lot of amazing things. One thing they cannot do is reveal statistical manipulation in climate-change studies that require a PhD in a related field to understand. So for the time being, my response to any and all further "smoking gun" claims begins with: show me the peer-reviewed journal article demonstrating the error here. Otherwise, you're a crank and this is not a story.

This, of course, gets to the nub of the problem: climate deniers claim that the scientific community is engaged in a wide-ranging conspiracy (or, more subtly, "groupthink") designed specifically to keep them out of the literature.  The fact that their stuff isn't peer-reviewed has nothing to do with its quality, only with the fact that they aren't part of the community.

Now, I don't really know what the answer to this is.  It's a feature of every conspiracy theory that the very fact that experts don't take you seriously is evidence that the conspiracy exists.  So this isn't going to stop.  But what to do?  From a scientific point of view, you don't want to shut out legitimate dissent, but you also don't have the time to deal with every one of the hundreds of cranks who claim to have found an anomaly in your data.  From a public opinion point of view, you don't want to be so dismissive that even reasonable people think you're being a jerk, but you also don't want to give this stuff enough oxygen that you're implicitly saying it's legitimate criticism.  This tightrope is especially difficult to navigate since everyone's self interest (including mine) leads them in the direction of desperately preferring to believe that climate change isn't real.2  So you have to deal with that.

Climate change: it's the public policy problem from hell.  It's the scientific problem from hell.  It's the PR problem from hell.  If you had a classroom assignment to dream up a problem what would be almost impossible to solve given the realities of human nature and global institutions, climate change would be it.  It makes healthcare reform look like a walk in the park.

1And look: if you won't allow these guys to blog under their own names, shouldn't you also ban them from using the words "I" or "me," or from directly arguing with other anonymous Economist bloggers?  This really makes no sense.

2I can't tell you how many times I've wished the deniers were right.  I read their stuff with a combination of contempt for their crankery leavened with a teensy bit of hope that maybe they're onto something this time and the globe really isn't warming.  Because it would make a whole bunch of liberal projects a lot easier if greenhouse gases weren't a problem.

Obama's Economy

| Fri Dec. 11, 2009 1:10 PM EST

Brad DeLong continues to be puzzled by the Obama administration's unwillingness to aggressively pursue more expansionist fiscal policies:

Yes, uncertainty is enormous. And any one policy might not work. But that any one individul policy initiative might not work is not an argument for not trying anything — unless you are happy if things develop according to the current-policy forecast and we see an unemployment rate between 9% and 11% for the next year and a half at least.

Thus if I were in the administration I would be trying everything:

He follows this with a list of suggestions, including several Fed actions, a bunch of spending actions, and some regulatory stuff.  So given the weak state of the economy, and the fact that unemployment promises to stay high for 4-5 years, why isn't Obama's team pushing for any of these things?

It's a good question, but I think the answer is pretty simple.  However, it requires you to ignore what people are actually saying.  I imagine that no one in the administration will ever admit this, even off the record, but the main reason for inaction is almost certainly because they believe there's zero chance of getting any of this stuff done.  Politically, then, there's nothing but downside here: yet another long, bruising battle with both Congress and the Fed, ending in total defeat.  If everyone in the administration were utterly convinced that the economy was completely sunk otherwise, they might risk that.  But no one in his right mind will risk it for anything less.

The key thing to remember here is simple: the original stimulus bill passed the Senate 60-38.  That was for a bill passed a month after inauguration, while the economy was still in deep recession, and that was supported by virtually every economist with an IQ higher than Donald Luskin.  Given that, what are the odds of passing anything significant now?  The only thing that prevents the answer from being negative is the laws of probability.

So we'll get a little playing around the edges, maybe with the remnants of TARP, and maybe the Fed will do a bit of tinkering too.  But unless there's another crisis that sends the world into a tailspin, a little bit of uncertainty combined with the same Republican intransigence that's marked the entire previous year will prevent any serious new action.  Welcome to America.

Quote of the Day: You Talkin' To Me?

| Fri Dec. 11, 2009 12:24 PM EST

From Olympia Snowe, on the idea of allowing 55-64 year-olds to buy into Medicare:

I can’t see it. I am talking to a lot of my providers this afternoon and I know they are mighty unhappy.

Maybe she should try talking to some of her constituents instead?

Advertise on MotherJones.com

Are Democrats Sunk?

| Fri Dec. 11, 2009 1:31 AM EST

A friend of mine from Virginia forwarded an email to me today from the NRCC.  It started like this:

After the spending spree the Democrats have gone on in 2009, you better believe there will be a backlash in 2010. As all Americans are tightening their belts to weather the Pelosi Recession, her Democrat puppets just voted to extend their credit limit. What they don't realize is that their bills are past due and next fall, we'll have the opportunity to collect by sending them home. Etc. etc.

I laughed it off, but he wasn't having any:

Not to be too presumptuous, but you might want to share the fundraiser (or parts of it) with your readers because Democrats better get off their butts soon and start pushing back and getting a lot more energized or we are going to get our clocks cleaned in 2010.

The main reason Bob McDonnell won in Virginia last month was Democratic exhaustion. After the 2008 election, most Virginia Democrats were emotionally and financially exhausted. We were in such a stupor we foolishly (and quite lazily) allowed Creigh to get the nomination. I can't tell you the number of usually-politically-plugged-in friends who were calling me a month before the election asking me who were the Democratic nominees for Lt. Governor and Attorney General.

We can't afford for that to be the prevailing national mood among Democrats in 2010. There is way too much at stake and it's time to rally the Democratic troops, left, right and moderate. We really cannot afford to allow the Republicans to seize control of either the House or the Senate but if we behave like Virginia Democrats just did, that will almost surely be the case.

Comments?  Is lefty obsession with the public option going to torpedo Dems in 2010?  Or will everyone manage to get energized in time for the midterms?  I live in California, where elections are almost all preordained, so it's hard for me to judge.  What's it like in the rest of the country?

Razzle Dazzle From Goldman

| Thu Dec. 10, 2009 8:13 PM EST

Goldman Sachs plans to restructure its bonus payouts this year:

With a resurgent Goldman set to award billions of dollars in bonuses — a trove that could rival the record payouts of the bubble years — the bank said that its 30 most-senior executives would be paid in the form of a special stock, rather than in cash.....This year, [CEO Lloyd Blankfein] and other top executives will receive bonuses in the form of what Goldman called “shares at risk,” or stock that cannot be sold for five years and can be retracted if the executive does something reckless or risky that hurts the firm.

Can I just take this opportunity to say how underwhelmed I am with this?  Let me count the ways.  (1) The amount of the bonuses hasn't changed a whit, only their form. (2) The whole point of changing a compensation plan is to change incentives.  Announcing a new bonus plan at the end of the year does nothing to change incentives unless Blankfein invents a time machine too. (3) It's only for the top 30 executives.  What about the traders? (4) It's apparently only for this year. See #2.  (5) The official definition of reckless ("materially improper risk analysis") is so stringent that there's really no chance it will ever apply to anyone.

So what's the real point of this little kabuki play?  Dennis Berman translates here.

El Niño and the Deniers

| Thu Dec. 10, 2009 3:47 PM EST

The last major El Niño event occurred in 1997-98 and it produced a big temporary spike in global temperatures.  This has given climate deniers like George Will a field day: if 1998 was hotter than 2008, global warming must be a hoax!  This is ridiculous, of course: El Niño events happen every five years or so (the 2004 El Niño was a smallish one) and choosing one of those years as your baseline for temperature activity is like choosing 2000 as a baseline for dotcom activity.

Well, El Niño is back, and this year's version looks like it's going to be at least a moderate strength occurrence lasting through next summer.  This means that temperatures are likely to spike over the next 12-18 months, and that in turn means that even with the sun in a deep solar minimum, next year might set a new warming record:

The current El Nino is forecast to get stronger, probably pushing global temperatures even higher next year, scientists say. NASA climate scientist Gavin Schmidt predicts 2010 may break a record, so a cooling trend "will be never talked about again."

Unfortunately, this is wishful thinking.  If 2010 really is hotter than 1998, I suspect that deniers will suddenly discover the virtue of not relying on a single year that's strongly affected by decadal oscillations.  They're clever that way.

Getting to Yes

| Thu Dec. 10, 2009 1:30 PM EST

David Frum, who has been estranged from the hard-right wing of the Republican Party for a while, explains what their "Party of No" strategy has produced:

1) Instead of a healthcare reform to slow cost increases, Democrats in the Senate seem to be converging upon an expansion of Medicare to include age 55-64 year-olds....Republicans could have been architects of improvement, instead we made ourselves impotent spectators as things get radically worse. Plus — the bad new Democratic proposal will likely be less unpopular with voters than their more promising earlier proposal. Nice work everybody.

2) House and Senate conferees last night rejected a proposal to deny EPA funds to enforce its new powers over greenhouse gasses. So instead of an economically rational approach to carbon abatement — a carbon tax or even a cap-and-trade system stripped of the abuses and boondoggles attached to it by House Democrats — we’re going to have the least rational approach: bureaucratic enforcement.

The furious rejectionist frenzy of the past 12 months is exacting a terrible price upon Republicans. We’re getting worse and less conservative results out of Washington than we could have negotiated, if we had negotiated.

Roughly speaking, I think Frum is right.  The Republican strategy is high-risk/high-reward.  If it works, then no legislation is passed and they get everything they wanted.  But if it doesn't, they get a far worse deal than they could have gotten if they'd bargained.

But I'd a few caveats to Frum's specifics.  First, the healthcare bill could have been improved only if Republicans had proposed serious cost-control ideas within the basic Democratic framework.  After all, Democrats won the election, and the very least they expect is to be able to dictate the basic framework.  But it's not clear to me that Republicans even have any ideas along those lines.  It's possible that they could have bargained for, say, some tort reform concessions, but how else would they have cut costs?  There's no one in the GOP seriously in favor of sticking it even harder to doctors, insurance companies, Big Pharma, or the elderly.  So what would they have proposed?  Their pet ideas (HSAs, gutting state regulations, etc.) don't really fit within the Democratic framework, and to be honest, their support for these ideas has always been so ephemeral and opportunistic that I'm not sure they care about them very much anyway.  It's hard to believe that they genuinely believe in any of this stuff enough to bargain their votes away for it.

The EPA endangerment ruling is a different kettle of fish.  My sense is that the Obama administration has no real desire to use the Clean Air Act to regulate greenhouse gases.  The reason they've moved ahead quickly on the endangerment finding isn't because they really want to implement it, but precisely because they think it's a good stick to get some Republican support.  The message is: you might not like cap-and-trade, but if you scuttle it you're going to get something worse.  So why not work with us?

So far, then, conservatives haven't really lost anything on this front.  They're just being confronted with some hardball politics.  As with healthcare reform, though, I wonder what Republicans have to offer.  It's true that cap-and-trade was originally a conservative idea that was largely adopted by liberals after it proved itself in the case of acid rain, which means that theoretically Republicans ought to be able to support it.  But the "boondoggles" that have been attached to it haven't really been ideological.  They've been cave-ins to corporate and regional interest groups.  What are the odds that Republicans would help resist that kind of pressure?

Still, Frum does have a point: Democrats are genuinely anxious to have a few more votes for both the healthcare bill and the climate bill, and I'm pretty sure they'd be willing to bargain away a fair amount in exchange for a vote.  So I'm curious: within the basic Democratic framework of these two bills, what kind of deals does Frum think Republicans could plausibly make that would be worth trading their vote for?  This is a real, not a rhetorical or snarky, question.  Given the current state of the conservatism,1 it's hard to see what they'd be.

1Which, admittedly, is Frum's whole point.  There are no deals to be made until conservatives start getting serious about governance again.