Kevin Drum

Senate Healthcare Followup

| Wed Dec. 2, 2009 11:56 AM EST

I made this point briefly in comments on Monday, but after reading coverage yesterday of the CBO report on the Senate healthcare plan, it probably deserves a quick front page post of its own.

The CBO report says that the average cost of an individual policy will go up under the Senate plan.  (The cost of group coverage goes down slightly.)  However, this is because CBO expects that people will be attracted, on average, to policies that are more generous.  Roughly speaking, CBO expects the average policy to get 30 percent better but cost only about 10 more.  Subsidies will then lower this cost further for most families.

That's a pretty good deal, and it doesn't mean that the Senate bill raises the cost of individual health insurance.  It means that people are buying better insurance.  In fact, if you compare similar policies with similar coverage, they cost less under the Senate bill.  This is the comparison that Jonathan Gruber was trying to make in my original post.  He figures that costs will go down about 5%, while the CBO report itself figures 7-10%.

Bottom line: premium costs will go up for some people, but not for most.  And if you choose to buy a policy similar to the one you have today, your cost will almost certainly go down.

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A Technocratic Speech

| Wed Dec. 2, 2009 12:34 AM EST

I didn't hear Obama's Afghanistan speech in real time, but I did read the transcript and then catch a replay on CSPAN.  Overall, I was pretty underwhelmed.

Partly that was just the tone of the speech itself, which was much clunkier than his usual efforts.  Take this, for example:

I must weigh all of the challenges that our nation faces. I do not have the luxury of committing to just one. Indeed, I am mindful of the words of President Eisenhower, who — in discussing our national security — said, "Each proposal must be weighed in the light of a broader consideration: the need to maintain balance in and among national programs.”

If you've never heard this Eisenhower quote before, there's a reason for that.  Why would you have?  It's about the dryest, least memorable passage you could think of from any president anywhere.  It's positively soporific.  Why would you dig up something like this for use in an address designed to rally support for a troop surge?1

Two other problems leaped out as well.  First, there was really no discussion of new tactics at all.  I didn't expect much on this score, but at least there should have been something to help convince us that months and months of planning had produced something genuinely new and different.  Instead, all we got was this: "I have determined that it is in our vital national interest to send an additional 30,000 U.S. troops to Afghanistan."  That's pretty lame.  There were a few additional words about a civilian surge and a better partnership with Pakistan, but it was brief and pro forma and it's hard to imagine anyone being persuaded by any of this.  Obama really owed it to us to provide at least a sense of why the planning process took so long and how our new strategy will be more effective than the one that hasn't worked for the past eight years.

Second, most of the speech wasn't even devoted to the war at all.  By my count, only about a third of the address was really about his plan for the war, with the rest meandering around about the danger of al-Qaeda, a potted history of post-9/11 military efforts, and paeans to America's place in the world.  A little bit of that stuff is fine, but this was supposed to be a speech about Afghanistan.

On the substantive side, the good news was Obama's clear declaration that this would be limited effort and he plans to begin withdrawing the surge troops within 18 months.  Conservatives are outraged by this, of course, but look: we've been in Afghanistan for eight years.  If 100,000+ NATO troops can't start to turn the tide by 2011, then it's time to leave.  The alternative is to commit to staying forever, and that's insane.  Obama has now given the military everything it needs to succeed, and if they still can't do it, then they just can't do it.

Now, whether Obama has the spine to stick to his timeline when 2011 rolls around is a whole 'nother question.  But at least it's out there.  The details are deliberately vague, but it's out there.  The military knows what it has to do; Karzai knows what he has to do; and the country knows what we've signed up to do.  And the Taliban knows perfectly well that we're going to leave eventually, so this is hardly news to them.

Overall, I liked Adam Serwer's take:

It was perhaps his least inspiring speech ever — Obama has been at his most inspiring when he reconciles lofty American aspirations with the reality of American accomplishments and American failures. This speech was Bush-like in its embrace of platitudes and vagueries, it was often the least convincing where once it might have been the most inspiring. It was a speech that reflected the president deciding on what is maybe the least crappy of a number of crappy options — without convincingly explaining how it would work.

There are two possible reasons for the speech being so unconvincing: either Obama doesn't know how to deliver a good speech or else Obama isn't really convinced himself.  But we know the former isn't true, don't we?  You can fill in the rest yourself.

1On the other hand, it was apparently Dan Drezner's favorite part of the speech.  Go figure.

Moving the Troops

| Tue Dec. 1, 2009 9:10 PM EST

This is a small thing, but I'm glad that Obama made this point in his Afghanistan speech tonight:

Let me be clear: there has never been an option before me that called for troop deployments before 2010, so there has been no delay or denial of resources necessary for the conduct of the war. Instead, the review has allowed me ask the hard questions, and to explore all of the different options along with my national security team, our military and civilian leadership in Afghanistan, and with our key partners. Given the stakes involved, I owed the American people — and our troops — no less.

Yes, Obama took a long time to decide on a strategy.  Maybe a little too long.  But since additional troops couldn't be sent over sooner than 2010 anyway, it was never going to make any difference at all to events on the ground.  I'm pretty sure that most of the people who have spent the past couple of months baying about Obama's "dithering" knew this perfectly well — and if they didn't then they have no business even having an opinion in the first place — but they kept baying away regardless.  Pretty reprehensible stuff.

Quote of the Day: The GOP's Love Affair with Medicare

| Tue Dec. 1, 2009 1:46 PM EST

From John McCain, explaining his undying opposition to proposed reductions in the growth of Medicare spending:

All of these are cuts in the obligations that we have assumed and are the rightful benefits that people have earned... I will eagerly look forward to hearing from the authors of this legislation as to how they can possibly achieve half a trillion dollars in cuts without impacting existing Medicare programs negatively and eventually lead to rationing of health care in this country.

On the big list of political sins, I generally think hypocrisy is overrated.  It's great gotcha material for Sunday morning talk shows, but in the end it's usually pretty trivial stuff.

But the Republican switcheroo on Medicare is really in a league of its own.  Here's a party that opposed Medicare viciously in the first place, routinely spoke out against it in the years that followed, was dedicated to gutting it in the 1990s, voted for major cuts in 1997, and has been using it as a cudgel ever since to get its base riled up over the future bankruptcy of America.  McCain himself proposed over a trillion dollars in Medicare cuts just 12 months ago.  But now?  Well, now it's 2003 all over again and there are elections to think of.  So now they're righteously opposed to cutting so much of a nickel out of Medicare spending, even if the cuts are aimed at waste, fraud, inefficient programs, and bad incentives.  It's just jaw droppingly mendacious.  More at the link.

Credit Card Hell

| Tue Dec. 1, 2009 1:17 PM EST

Why are credit card companies so unwilling to transfer obviously distressed customers into programs that cancel their accounts and provide them a fixed period of time to pay off their balance?  Mike Konczal crunches the numbers and comes up with the answer: banks don't really care if you pay off your entire balance.  They can make more money by squeezing late fees and high interest rates out of you for even a short period than they can by having you pay off your whole balance at a moderate interest rate.  Details here.

A New WPA?

| Tue Dec. 1, 2009 12:40 PM EST

Megan McArdle writes about why a WPA-style jobs program would be unlikely to work in 21st century America:

My father was the head of a trade association for the heavy construction industry, and most of my closest relatives either work for the government, or have done so in the past.  As you can imagine, over my lifetime I've had a lot of conversations about government procedure and government projects.  Every so often I'll read some description of a project out of the olden days — the battle against malaria in Panama, the handling of the Great Mississippi Flood, or the creation of the WPA — and just marvel at how fast everything used to be.  The WPA was authorized in April of 1935.  By December, it was employing 3.5 million people.   The Hoover Dam took 16 years from the time it was first proposed, to completion; eight years, if you start counting from the time it passed Congress. 

Contrast this with a current, comparatively trivial project: it has been seventeen years since the Southeast High Speed Rail Corridor was established by USDOT, and we should have a Record of Decision on the Tier II environmental impact statement no later than 2010.  This for something that runs along existing rail rights of way, and in fact, uses currently operating track in many places.

....Many of the procedural hurdles involve court rulings, concerning law which Congress cannot overturn in some cases (due process), or isn't going to (civil rights legislation, civil service protections).  The obstacles arise out of things that individually, people, specifically Democrats, like: transparency, due process, environmental care, civil rights, unionism.  Cumulatively, they are devastating to federal productivity.  But it's hard to get much support for repealing or altering them individually — which is what you would have to do.

I think there's a lot of truth to this.  In fact, the last time I wrote on this subject, I got into an email exchange with a guy who thought I was wrong and explained in detail exactly how big infrastructure projects could be ramped up more quickly.  But it was one of those "assume a can opener" moments.  Sure, there are ways that projects could be speeded up, but first you'd have to pass a whole bunch of laws preempting current regulations and then win a bunch of court fights over them.  Even if you could do it, it would take years.

But anyway, here's a question: where can we find a reasonably trustworthy list of "shovel ready" infrastructure projects?  At a bare minimum this means projects that have been approved by local authorities and have already gone through the environmental impact process.  Is there such a thing?

Alternatively, how about non-construction jobs?  Building jobs are sort of a talisman in these kinds of programs, but there's no reason that has to be the case.  So what other areas can you think of that could absorb, say, a million unskilled and semiskilled workers quickly and without impossible political pushback from a hundred different interest groups?  Let's hear it.

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Playing Chicken With Republicans

| Tue Dec. 1, 2009 12:23 PM EST

I'm as intrigued by an unusual bit of contrarianism as the next guy, but Tyler Cowen seriously jumps the shark here:

Another example of misleading good vs. evil thinking stems from the budget.  Many people believe:

3. "If the Republicans win, they will irresponsibly cut taxes and do nothing real to control spending."  You may have even seen this view in the blogosphere.

One response to this is 4. "We should ensure that the Republicans do not win and criticize them every chance possible."

An alternative response is 5. "Sooner or later the Republicans will in fact win and I cannot prevent that.  Right now the Democrats should spend less money, given the truth of #3.  In this regard the Republicans, although evil, are in fact correct in asking the Democrats to spend less money, if only to counterbalance their own depravity."

I do not see many people entertaining #5.

No, I suppose not.  "I think we should rein in social spending in order to create some budget room for more tax cuts for the rich in 2017" really doesn't seem like a very politically savvy suggestion.

Anyway, this is hardly something that we liberals haven't thought about.  Just the opposite, actually: liberals are very keenly aware of Republican efforts to wreck the budget in order to prevent Democrats from ever spending money on their own priorities.  In fact, "keenly" understates things.  So this time around we've quite consciously decided not to let this stand in our way.  We'll do our best to keep things like healthcare reform deficit neutral, and we'll try to honor PAYGO rules, but beyond that we're at least going to try to enact some liberal social policies.  The days of scrimping on food because Dad is threatening to blow a wad in Vegas the first time we let him out of our sight are over.

And if America eventually elects Dad to the White House anyway even though he hasn't yet cleaned up his act?  Then America's in big trouble.  But at least America will have better healthcare.

Chart of the Day: Active Mutual Funds Still Suck

| Tue Dec. 1, 2009 11:20 AM EST

You probably already know this, but here's yet another paper that demonstrates the foolishness of putting money into actively managed mutual funds.  The authors used historical data and simulations to figure out if actively managed funds performed better than passive investments, and the chart on the right shows the answer: the blue line represents active funds and the red line represents the average distribution of passive investments.  The zero point on the x-axis represents average performance.

Along the entire curve, the authors found that a higher percentage of funds performed worse than passive investments.  For example, about 70% of active funds perform at zero or worse, compared to only 50% of passive invesetments.  90% perform under +1.0 compared to only 80% of passive investments.

If you drop out fees, active funds do slightly better: there are still more big losers than with passive investments but there are also a few more big winners.  When you add in fees, though, this small effect is completely swamped and active funds are lousy investments all the way around.  Don't waste your money.

Next up: could somebody please do with hedge funds?  I suspect the results would be about the same.  Via Felix Salmon.

The Inevitability of Afghanistan

| Mon Nov. 30, 2009 5:14 PM EST

Like me, Fred Kaplan is glad he's not president right now.  Why?  Because he can't figure out what he thinks we ought to do in Afghanistan:

As with confronting most messes in life, the initial impulse is to flee. But if we simply pulled out, it's a near-certain bet that the Taliban would march into Kabul, and most other Afghan towns they'd care to, in a matter of weeks....Another problem with withdrawing is that it would signal, correctly or not, a huge victory for anti-American forces generally. If we left Afghanistan to the Taliban (and, by extension, al-Qaida), especially after such a prolonged commitment (at least rhetorically), what other embattled people would trust the United States (or the other putative allies in this war) to come in and protect them from insurgents? None, and they could hardly be blamed.

....I am uncomfortable making this case for two reasons. First, it's reminiscent of the bankrupt rationales, involving "credibility" and the "domino theory," for staying in Vietnam long after that war was widely viewed as a horrible mistake. But Afghanistan is different. The Taliban are not the Viet Cong, and Osama Bin Laden is not Ho Chi Minh; there is no case, this time, that the enemy has a just claim to power. And the stakes are much higher: Communists ruling South Vietnam was never a serious threat to our security;1 al-Qaida controlling a huge swath of South Asia is.

The second reason I'm uncomfortable about even saying this is that the argument can, and almost certainly will, be used to justify staying in Afghanistan if it turns out that this war is futile, too. It's easy to hear the generals saying, a year from now, "Three more brigades should do the trick, Mr. President" and "If we pull out now, Mr. President, our credibility will be severely compromised."

It's pretty hard to see how this ends well.  But I think what it demonstrates most strongly is the fantastic political nightmare involved in ever pulling out of a war that hasn't been decisively won.  Vietnam is the big-ticket example here, of course, but there are better ones.  Take Somalia.  After the Black Hawk Down incident in 1993, conservatives demanded that Bill Clinton pull out immediately.  Not another American life was worth risking for a barren patch of dirt on the Horn of Africa.  Clinton refused, insisting that we "finish the work we set out to do," and kept troops in country for another six months before withdrawing in an orderly way.

And what happened?  Conservatives turned around and immediately started building up a mythology that Clinton had lacked spine and immediately ran for the exits at the first sign of trouble.  Just like a Democrat to be so weak-kneed!  What's more, it's now received wisdom on the right that it was this panicky withdrawal that first convinced Muslim fanatics that America was weak and could be attacked with impunity.  In the end, Clinton took a hit for withdrawal even though he was the one who insisted on not cutting and running.

If that's what happens to a Democratic president who played a hawkish role in a small, unimportant war, what would happen to a Democratic president who played a dovish role in a big, important war?  Nothing good.  Pulling out of Afghanistan would have all the actual effects Kaplan talks about, but it would also be a political disaster.

I still plan to wait for Obama's speech tomorrow before I decide if his Afghanistan strategy is smart or not.  But even if it is, it was probably sadly inevitable.  The institutional support for war among the American chattering classes is just too powerful.

1Hoo boy.  That's easy to say now, but at the time it sure seemed every bit as important as al-Qaeda controlling a big chunk of Afghanistan seems to us.

Protectionism

| Mon Nov. 30, 2009 2:49 PM EST

I think Matt Yglesias makes a pretty good political point here about trade policy:

If you convince people that it’s not possible for monetary authorities to boost employment, and that it’s unwise to use fiscal policy to boost employment, then it starts to look irresponsible for politicians not to use trade restrictions to protect the jobs of people in their state/district. When an economy is near full employment you can say trade makes the pie bigger and people who lose their jobs will get new jobs. But [if] we’re years away from full employment — which both the Fed and the White House seem to think — then getting laid-off is catastrophic.

The Fed is obviously more concerned about inflation than it is about unemployment right now, and Congress likewise seems unwilling to do very much more to help create jobs.  In an environment like that, public pressure for trade restrictions becomes hard to resist.  So if free traders really want to keep protectionist sentiment tamped down, they'd be well advised to start supporting domestic policies that create jobs, bring down unemployment, and reduce the kind of financial fear that drives protectonist sentiment in the first place.