Kevin Drum

The Left and Healthcare

| Fri Mar. 12, 2010 12:13 PM EST

Matt Yglesias made a good and underappreciated point about the Democratic healthcare bill yesterday. There's a core group of lefties that oppose it for idiosyncratic reasons, "But the point I want to emphasize is that theirs is a pretty marginal point of view. 'The left,' in both its traditional institutional forms (unions, civil rights groups) and its online grassroots forms (MoveOn) is very firmly behind this bill." Greg Sargent amplifies:

Americans United for Change is set to announce a $500,000 ad campaign in the districts of multiple House Dems across the country, a source familiar with the plans says. The labor federation AFSCME is preparing a "significant push in the weeks ahead," according to an AFSCME official, who adds that ads could air before and after the House votes on the Senate bill, providing cover for Dems who find themselves under assault after voting Yes. Americans for Stable Quality Care, a pro-reform coalition which is working with the labor powerhouse SEIU, is finalizing plans for a major buy in multiple districts, an official familiar with the plans says.

So unions are spending heavily in support of the bill, MoveOn's members support it 83%-17%, Nancy Pelosi is putting the screws on her caucus members, Harry Reid is doing the same in the Senate, and President Obama is finally pulling out all the stops too — both in front of the cameras and behind the scenes. Among the netroots, Markos Moulitsas says it's time to stop screwing around and pass the bill, and virtually every liberal member of the wonkosphere favors it as well. Ditto for church groups and civil rights groups. That's an enormous amount of firepower, and that's why, despite all the last-minute posturing and kvetching and preening, I think this bill is going to pass. In the end, that's just too much pressure to bear. Nancy Pelosi is going to get her 218 votes.

But it'll be close! If you haven't called your member of Congress, do it today. For a full list of congressional names and phone numbers, go to Congress.org. Type in your representative's name and it will pop up an information page that includes a phone contact. Don't know who your representative is? Enter your zip code and it will tell you.

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The Problem With CDS, Cont'd

| Fri Mar. 12, 2010 1:21 AM EST

Yesterday I suggested that credit default swaps might make financial markets inherently less stable. If a bond issuer defaults on, say, a $10 million bond, the buyer of the bond is out $10 million. However, if a hundred people buy CDS protection on that bond, then when the bond defaults the sellers of CDS are out $1 billion. A $10 million event has turned into a $1 billion event. During an economic contraction, when there are lots of defaults, this has the potential to spark a full scale panic.

But is this a real problem? It's obviously not a problem for the buyers of CDS, who all make a bunch of money in the event of a default. But the sellers are a different story. During the financial bust of 2008, AIG, which had sold billions of dollars worth of CDS protection that it couldn't pay off, went kablooey and had to be bailed out by taxpayers. That's a problem.

Felix Salmon, responding to yesterday's post, notes that following the meltdown of 2008, "there isn’t a company in the world — not even Berkshire Hathaway — which can write CDS protection without having to put up collateral." And if new regulations put CDS on open, tradable exchanges, that will make collateral requirements even more standard. That's all good. Then he says this:

But the most important thing to note is that the true villain here is not CDS so much as it is leverage. If I buy a bond and it goes to zero, I lose money, but there are few systemic consequences. If I’m a leveraged institution, however, and I bought that bond with borrowed money, then the consequences can be dire. Writing CDS protection is essentially the same as buying a bond, and writing CDS protection while putting no money down — as AIG did — is just as dangerous as buying a bond on zero margin.

....Sensible CDS regulation can and should, then, put tight limits on how much leverage a net seller of credit protection can be allowed to have. And by all means, if you want to keep things symmetrical, apply the same limits on how much leverage a bond investor can be allowed to have. But the CDS market is more dangerous, just because it’s so much bigger.

Felix, you had me at "leverage"! But now I have two more questions. First, how likely is it that tight leverage limits will be placed on sellers of CDS? Right now, market discipline is taking care of things, but as memories of 2008 fade that won't be enough. And I don't think leverage limits on CDS sellers are part of either the House or Senate reform bill, are they?

Second, one of the benefits of the CDS market is that it provides liquidity and price discovery. As Felix says, "The CDS market worked, during the crisis, even as the market in corporate bonds failed: bonds weren’t pricing, and CDS were....People will invest in bonds if they believe they can exit their positions when they want. And the existence of CDS makes exiting a bond position much easier than it ever used to be — which in turn makes the bond market much more efficient. If you banned CDS, the price of credit would surely rise."

But to a large extent, the superior liquidity and price discovery of the CDS market is attributable to its greater size, which in turn is attributable to leverage. If you tightly limit leverage, don't you also constrain the size of the CDS market? And if you do that, will it still provide any noticeable liquidity benefits compared to the market in the underlying securities themselves?

So I'm still on the fence about this. However, for a more full-throated takedown of the CDS market, see the full-throated Dean Baker here. He doesn't believe it's likely that the CDS market will ever be properly regulated, and even if it is he doubts that the benefits of CDS outweigh their risks. And that's not even to mention the role of CDS in the great synthetic CDO debacle. What kind of regulation would it take to put a permanent end to that?

Grammar Police

| Thu Mar. 11, 2010 6:39 PM EST

Ezra Klein:

Like most bloggers, I'm not too fond of e-mails correcting my grammar.

Really? I like getting emails about grammar and spelling. I mean, don't be a dick or anything, but if there's a mistake to be corrected or a usage issue to be debated, bring it on. We strive for linguistic greatness around here.

Losing the Forest for the Weeds

| Thu Mar. 11, 2010 6:01 PM EST

Let's recap: If the current plan is for the House to pass the Senate healthcare bill followed by a small "sidecar" of amendments, exactly how is this going to be done procedurally? House Democrats, who don't trust the Senate to follow through on the sidecar, have been proposing ever more baroque methods for passing everything at one time, culminating yesterday with.....oh, forget it. You don't want to know. (But click here if you're masochistic.) And anyway, it doesn't matter, because the Senate parliamentarian has apparently ruled that their latest fanciful scheme violates Senate rules.

Frankly, it violates common sense, too, and probably the U.S. constitution, for that matter. Plus, it's just plain dumb. At some point, you have to trust that your co-partisans aren't going to shaft you completely. Steve Benen:

Sure, there are tensions between the chambers — a common phenomenon over the last 200+ years — but there is absolutely no reason whatsoever to think the Senate would promise to pass a budget fix, and then decide not to. Indeed, the leadership is not only putting this in writing, but let's also not forget that senators want to pass the budget fix — it makes changes the senators themselves want to see — and have no incentive to pull a fast one on the [House].

We know the upper chamber can obviously be dysfunctional, but Senate Dems aren't insane — why on earth would they want a budget fix, ask the House to pass a budget fix, declare their support for a budget fix, promise to pass a budget fix, and then decide not to vote for it? Knowing that it would make all future negotiations between the chambers completely impossible?

I get that the House is nervous, but this fear doesn't make sense.

I wouldn't go as far as Steve. There are some senators who probably like the Senate bill just the way it is and don't want to pass the sidecar. There are others in the centrist caucus who'd like to vote against it for other reasons. And even if 51 senators are on board, there's always the chance that Republicans can successfully gum up the works or that the parliamentarian will make some weird ruling that kills some provision of the sidecar. Who knows?

So House Dems do have some reason to be suspicious. Hell, I'd be suspicious. But I wouldn't be paranoid. At some point, if Harry Reid and the appropriate committee chairmen all sign on, and Barack Obama signs on, and the House leadership feels comfortable, then you pull the trigger. The odds of getting screwed aren't zero, but they're pretty damn small.

We've been at this for over a year, and at long last the time for posturing and gameplaying is over. The holdouts need to dig into their consciences and do the right thing. Let's get on with it.

This War is Different

| Thu Mar. 11, 2010 3:14 PM EST

Andy McCarthy thinks that lawyers who represent detainees who have been designated enemy combatants are guilty of "coming to the enemy’s aid during wartime." Orin Kerr counters that McCarthy "strangely overlooks the basic fact that much of the litigation for the Guantanamo detainees concerns whether they are in fact the enemy." (Italics mine.) To make things more concrete, Conor Friedersdorf recounts the story of Fouad al-Rabiah, a relief worker who was hauled into the American net in Afghanistan in 2001, eventually deemed innocent by interrogators, but kept in custody anyway:

Thus Mr. al-Rabiah. It isn’t just that he was an innocent man thrown into Gitmo, or that he was held even after a CIA analyst concluded that he was innocent, or that National Security Council Staffers were aware of his innocence and actively trying to bring about a review of his detention — Mr. al-Rabiah’s case is apt because after the CIA’s 2002 determination of his innocence, he spent another seven years wrongly imprisoned, regaining his freedom and seeing his children only after retaining the help of American attorneys.

Ms. Cheney, Mr. Kristol, Mr. Thiessen and Mr. McCarthy assert that American lawyers who represent Guantanamo Bay detainees are helping the enemy in a time of war. Here is a case, however, where the Guantanamo Bay detainee was innocent, languished for years in custody without a lawyer despite official knowledge of his innocence, and ultimately achieved his freedom with legal help. Ms. Cheney, Mr. Kristol, Mr. Thiessen and Mr. McCarthy have no answer for people like Mr. al Rabiah and his attorneys — their poorly reasoned McCarthyite rhetoric is bankrupt because they are unable or unwilling to acknowledge the distinction between being accused of being an enemy of America in war time, and actually being an enemy of America.

The Andy McCarthys of the world endlessly lecture us about how this war is different because it's fought on one side by non-uniformed terrorists. And there's some truth to that. It is different. But one of the ways it's different is that it's not always simple to know who's a real enemy combatant and who's not. And if that decision is left entirely up to the executive branch, you're practically begging for the same kinds of abuses that you get if you let the executive branch operate without oversight in any other area. Thus, lawyers and judges have a role to play. They aren't aiding the enemy during wartime, they're trying to figure out who the enemy really is. Even Andy McCarthy ought to be interested in that.

Overtreatment

| Thu Mar. 11, 2010 2:43 PM EST

Matt Yglesias comments on an op-ed about the misuse of PSA screening for prostate cancer:

A kind of odd piece of conventional wisdom has hardened that it’s dishonest of Barack Obama or Matt Yglesias or anyone else to suggest that there are some free lunches to be had in the realm of health reform....[But] in the health care domain, in particular, a mix of weak science, bad economic incentives, and poor mathematical understanding leads to a fair amount of over-treatment. And over-treatment for cancer isn’t just an issue of spending money that didn’t need to be spent — treatment for prostate cancer normally has very unpleasant side effects and it’s really cruel to inflict it on men who don’t actually need the treatment. And as far as cancers go, that’s totally typical. Reducing over-screening and over-treatment would probably save money (though it’s always hard to know what the long-term impact will be since everyone eventually gets sick and dies) and will definitely spare patients a lot of pain and suffering.

True enough. The problem is that it's not just doctors and pharmaceutical companies pushing these tests, though that's part of it. It's also patients who demand this stuff, and if you withhold it because "researchers" or "bureaucrats" say it's not cost effective, they go nuts. And they'll be goaded along in their hollering by whichever political party thinks it might gain them a momentary advantage.

I'm not sure what the answer is. Better patient education? I guess I'm not very hopeful about that. Economic incentives? Maybe, but when it comes to cancer that probably won't do the trick either. More rigorous approval procedures for this stuff? Perhaps, though there's an obvious tightrope to walk in order to get this right.

In any case, this is one of those topics that I have a hard time figuring out because my own temperament is so obviously different from most people's. I don't really like seeing doctors, I prefer the lightest treatment possible, and I dislike trying anything that hasn't been around for at least a decade or two. But most people just aren't wired this way. They see their doctor at the first sign of trouble, demand as much attention as they can get, and insist on whatever the latest and greatest treatments are. I just don't get this. But it's the reality, and the cure — pardon the pun — is hard to figure out.

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Yes, the Healthcare Bill Really Does Pay for Itself

| Thu Mar. 11, 2010 2:11 PM EST

The CBO has a new score of the final Senate healthcare bill, with all its amendments included, and it hasn't changed much. Over the next decade they estimate that it would lower the federal deficit by $118 billion.

But isn't this just smoke and mirrors because the bill raises taxes for ten years but only spends money for six? Nope. It also reduces the federal deficit in the full decade after 2019:

In subsequent years [] the effects of the proposal that would tend to decrease the federal budgetary commitment to health care would grow faster than those that would increase it. As a result, CBO expects that the proposal would generate a reduction in the federal budgetary commitment to health care during the decade following 2019; that judgment is unchanged from CBO’s previous assessment.

Now, obviously you can choose to simply not believe this. Or you can insist that Congress will never let it happen. Or you can object to spending more money on healthcare even if it is fully funded. But for better or worse, the CBO is the official scorekeeper, it's one that both sides accept, and they say the bill cuts the deficit. Special pleading aside, that's most likely exactly what it will do.

Oh — and it insures 31 million people who would otherwise go without coverage. That gets us to 94% of all legal residents. Not bad.

John Ensign Soldiers On

| Thu Mar. 11, 2010 1:43 PM EST

Democrats have suffered through their share of bad behavior lately, but honestly, none of it compares to the travails of Republican Sen. John Ensign. I mean, the guy had an affair with his top aide's wife, paid out hush money in a way plainly intended to skirt IRS reporting rules, and then worked illegally to get his ex-aide some consulting income doing congressional lobbying. “Senator Ensign has stated clearly, he has not violated any law or Senate ethics rule,” says Ensign's flack, but Ensign can say it as clearly as he wants. The evidence says otherwise.

Today, the New York Times got hold of some emails suggesting pretty clearly that Ensign, who was "a bit rattled" according to one of the messages, intervened with a guy named Bob Andrews, who was trying to get help with some energy projects in Nevada:

According to the documents, Mr. Ensign forwarded the note about the company’s business plans to Mr. Hampton with a message of his own saying: “I think you have played golf with him. This is who I met with.”

That led to a series of meetings between Mr. Hampton and Mr. Andrews about consulting work. “It was my understanding he was in the lobbying business,” Mr. Andrews said of Mr. Hampton. “Being able to lobby our Congressional and senatorial lawmakers was certainly something we were exploring.”

A typical excerpt from one of Hampton's emails to Ensign is below. How this guy manages to stay in office mystifies me. I guess he must have taken lessons from David Vitter and Mark Sanford.

Climate Change's PR Disaster

| Thu Mar. 11, 2010 1:12 PM EST

The chart below, from Gallup, shows that public recognition of the seriousness of global warming has taken a steep hit over the past two years. This comes via Aaron Wiener, who believes the most obvious explanation for the shift is the growing politicization of climate change. "What was once a broad moral and scientific issue is now a centerpiece of the Democrats’ legislative agenda. The percentage of Americans expressing a belief in man-made climate change now correlates loosely with the level of support for the president, while the percentage expressing skepticism is in line with opposition to Democrats in Washington."

True enough, though I'd say that the recent failure of Copenhagen and the concerted disinformation campaign surrounding "Climategate" probably played a role in the latest numbers. Whatever the reason, though, the effects have been devastating. It's one thing to acknowledge climate change but to argue over its likely impact. That would lead politicians to accept cheap, small-bore measure to address warming but to reject bigger, more expensive ones.

But that's not what's happened. The Republican Party has largely decided that climate change simply doesn't exist. It's a hoax. And that leads them to oppose everything, even programs that have light footprints, don't cost a lot of money, and don't require massive regulation. After all, why should they support them if the problem they address literally doesn't exist?

This is why so many environmentalists have switched gears recently, suggesting that climate change action should be disguised as energy research, national security programs, or competition with China for market share in windmills and solar panels. And maybe that will work for a while. But just saying something doesn't exist doesn't make it so. Eventually even the GOP is going to have to acknowledge this.

Healthcare Looking Up

| Wed Mar. 10, 2010 9:23 PM EST

Guess what? Healthcare reform is getting more popular. Just a little more popular, mind you, but every little bit counts when it comes to wavering congress critters.

What's really important here, though, isn't the magnitude of the change, but just the fact that the tide is shifting. This might have something to do with the recent summit and some of Obama's more aggressive speechmaking recently, but my guess is that it mostly has to do with the fact that there's an actual bill on the table now; Democrats have something concrete to sell; Republican obstructionism has been a little too screechy for a lot of independents lately; and, most important, it looks like we're actually in the home stretch.

That, I think, concentrates the mind wonderfully. The long, dreary dog days of the legislative process are over, and now we're in the final few seconds of the game. It's exciting! And it makes some of the concrete measures in the bill just a little more.....well, concrete. It's still gonna be a close one, though.