Kevin Drum

Paying for Prayer

| Tue Nov. 3, 2009 1:09 AM EST

From the Los Angeles Times, here's the latest on the healthcare front:

Backed by some of the most powerful members of the Senate, a little-noticed provision in the healthcare overhaul bill would require insurers to consider covering Christian Science prayer treatments as medical expenses.

The provision was inserted by Sen. Orrin G. Hatch (R- Utah) with the support of Democratic Sens. John F. Kerry and the late Edward M. Kennedy — both of Massachusetts, home to the headquarters of the Church of Christ, Scientist....The spiritual healing provision was introduced in the House by Rep. John Shimkus (R-Ill.), whose district includes a Christian Science school, Principia College.

I have a conflict of interest here since I come from a Christian Science background, but holy cow does this seem like a bad idea. Just a really, stupendously bad idea.  It's true that not everything that seems like a slippery slope really is one, but this really is one.  If it passes, can you imagine how this would play out among the Colorado Springs set within a few years?  The mind reels.

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The Next Bubble

| Tue Nov. 3, 2009 12:46 AM EST

A year ago, the implosion of the global economy prompted a huge flight to quality.  Nobody wanted risky assets anymore.  All they wanted was nice, safe, United States Treasury bonds.

The economy has stabilized since then, and that means that investors with access to lots of cheap money are once again becoming eager to invest in risky assets.  Pimco's Paul McCulley suggests that this makes perfect sense as long as everyone is convinced that the Fed will hold interest rates at zero for a long time, but then he admits that it's all a bit of a paradox.  After all, the Fed will only hold down interest rates if the economy continues to suck, in which case rising asset prices are just a big bubble.  But if the economy recovers, thus justifying the high current prices of risky assets, then the Fed will raise interest rates and the whole thing will come crashing down.  It's a quandary.  In the end, though, he advises a bit half-heartedly that "the time has come to begin paring exposure to risk assets, and if their prices continue to rise, paring at an accelerated pace."

And Nouriel Roubini?  Well, Roubini doesn't do anything half-heartedly.  He says in no uncertain terms that we are completely and irrevocably fucked:

The US dollar has become the major funding currency of carry trades as the Fed has kept interest rates on hold and is expected to do so for a long time. Investors who are shorting the US dollar to buy on a highly leveraged basis higher-yielding assets and other global assets are not just borrowing at zero interest rates in dollar terms; they are borrowing at very negative interest rates — as low as negative 10 or 20 per cent annualised — as the fall in the US dollar leads to massive capital gains on short dollar positions.

....Yet, at the same time, the perceived riskiness of individual asset classes is declining as volatility is diminished due to the Fed’s policy of buying everything in sight....So the combined effect of the Fed policy of a zero Fed funds rate, quantitative easing and massive purchase of long-term debt instruments is seemingly making the world safe — for now — for the mother of all carry trades and mother of all highly leveraged global asset bubbles.

....But one day this bubble will burst, leading to the biggest co-ordinated asset bust ever....A stampede will occur as closing long leveraged risky asset positions across all asset classes funded by dollar shorts triggers a co-ordinated collapse of all those risky assets — equities, commodities, emerging market asset classes and credit instruments.

....This unraveling may not occur for a while, as easy money and excessive global liquidity can push asset prices higher for a while. But the longer and bigger the carry trades and the larger the asset bubble, the bigger will be the ensuing asset bubble crash. The Fed and other policymakers seem unaware of the monster bubble they are creating. The longer they remain blind, the harder the markets will fall.

Now that's a cheery thought, isn't it?  Monstrous amounts of leverage are going to be employed bidding up assets of all kinds, and monstrous amounts of money are going to be made.  As usual, everyone will assume they'll be able to get out in time, and about 99% of those people will be wrong.  Then: kaboom.  The yen carry trade took down Iceland and a few hedge funds, but the dollar carry trade is going to take us down.

Well, maybe, maybe not.  Roubini does seem to have some pretty sizable financial mood swings.  But I have to admit that the stock market sure looks overvalued to me too.  Corporate profits may be up for the moment, but belt tightening will only work for just so long.  Eventually revenues need to rise, and it's a little hard to see where that's going to come from in the short term.

But I'm a pessimist.  Even in good times I'm a pessimist.  So who cares what I think?

The Danger of Purging

| Mon Nov. 2, 2009 5:16 PM EST

The Wall Street Journal editorial board is pretty happy that conservative activists have taught the "GOP's backroom boys" a lesson by forcing moderate Republican Dede Scozzafava out of the NY-23 congressional race in favor of right-wing darling Doug Hoffman.  No surprise there.  However, they also offer a warning:

But that lesson will be for naught if conservatives conclude that their victory is reason to challenge any candidate who doesn’t agree with them on every issue....Democrats did themselves no favors by driving Joe Lieberman out of their party, and conservatives will do their cause no good by forcing GOP candidates in Illinois, California and Connecticut to sound like Tom DeLay. If conservatives now revolt against every GOP candidate who disagrees with them on trade, immigration or abortion, Nancy Pelosi and Harry Reid will keep their majorities for a very long time.

I sort of hate to admit this, but they're right about Lieberman.  It would have been great to get rid of him — and it was worth a try in a liberal state like Connecticut — but in the end all it did was make him even more embittered and more estranged from the party than before. As a result, he's now loudly making the rounds of cable news shows promising to vote against cloture on any healthcare bill that includes a public option.  As near as I can tell, this isn't motivated by any ideological objection to the public option at all.  It's motivated mostly by fact that he's still pissed off about how he was treated in 2006.  If he'd been left alone and had won reelection as a Democrat, he'd probably be going along with the Democratic leadership on this with no real complaints.

You can't win 'em all, I guess.  And it was worth a try.  But there's also a price to pay when you don't judge the chances of success with quite enough of a gimlet eye.

(Via James Joyner.)

UPDATE: Sorry, I meant 2006, not 2008.  Time sure flies, doesn't it?  I've corrected the text.

Calculus Meets Khamenei

| Mon Nov. 2, 2009 4:36 PM EST

Via Andrew Sullivan, here's a story that got a lot of play among Iranophiles over the weekend:

In a stunning move, Mahmoud Vahidnia (pictured right), a student from the prestigious Sharif university and winner of the International Math Olympics, directly confronted Supreme Leader Ali Khamenei during the question-and-answer portion of a conference that was being held. When Khamenei asked if the audience had any questions, Vahidnia stood up and answered, "Yes, I have some words with you.”

....Khamenei dodged the questions and instead called Vahidnia dishonest. He claimed that he receives (and is receptive to) criticism every day, and that he always adjusts his behavior to account for errors. Soon thereafter, Khamenei departed behind a curtain before first receiving praise from a Basiji student in attendance. The prayer that Khamenei was scheduled to lead at the end of the ceremony did not occur amid his hasty departure.

Actually, Vahidnia doesn't even seem to have been on Iran's IMO team, let alone a winner, but whatever.  Apparently he really did deliver a 20-minute critique of Khamenei and his administration in front of a considerable audience.  Why Khamenei allowed something like this to happen is a little hard to fathom, but it goes to show that the shockwaves from this summer's demonstrations still haven't died away.

Rushing Things

| Mon Nov. 2, 2009 2:37 PM EST

The emerging favorite Republican tactic for killing reform measures without actually admitting that they want to kill reform is to complain that Democrats are "rushing things."  They're not against reform, they just want enough time to do it right.1

This was the pitch on healthcare reform from the GOP members of the Senate Finance committee, even after hundreds of hours of meeting.  It's the pitch from George Voinovich on climate legislation.  And now it's the pitch from Bob Corker on financial regulation.  Tim Fernholz shakes his head in dismay:

What in the world does he want to talk about? It's not like Corker is pushing some specific agenda or has offered any major ideas, at least publicly. These issues have been at the forefront of the policy debate for a year now, and certainly have been bubbling underneath for a long time. If he doesn't have any specific concerns, its hard to conceive of this as anything but a delaying tactic that simply substitutes vague delays for substantive engagement.

....There's a pretty big argument going on in the Democratic party between those who want to reshape the financial sector fundamentally and those who want to nudge it towards responsibility, which I talk about in my article today. Sometimes, though, it's easy to forget that there is also an opposition party out there that believes we should do virtually nothing.

Well, it's not really that easy to forget.  After all, Republicans remind us of it pretty much every day.  Which is OK!  They're Republicans.  They're the opposition.  They don't support things like providing healthcare for everyone, reducing greenhouse gas emissions, and regulating the financial industry.  The only question is why an opposition that controls 40% of the Senate and represents about a third of the population should be allowed to routinely stop all this stuff in its tracks.

1Unless, of course, the subject is Afghanistan.  In that case, taking the time to do things right is "dithering" and "playing Hamlet."

Quote of the Day

| Mon Nov. 2, 2009 1:38 PM EST

From Sen. Orrin Hatch (R–Utah), explaining why conservatives should worry about the Democratic goal of eventually implmenting a national healthcare system:

If they get there, of course, you're going to have a very rough time having a two-party system in this country, because almost everybody's going to say, 'All we ever were, all we ever are, all we ever hope to be depends on the Democratic Party.'  That's their goal. That's what keeps Democrats in power.

Weird.  I understand that conservatives don't like the idea of a national healthcare system, but guess what? Germany has one. Britain has one.  France has one.  Canada has one.  And the conservative parties in those countries have done just fine.  Republicans would do fine too if we had one.

Via Atrios.  And I promise to do some non-healthcare posts soon.

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The Cost of Technology Revisited

| Mon Nov. 2, 2009 1:03 PM EST

A few days ago Ezra Klein quoted the CEO of Kaiser Permanente, George Halvorson, telling us that CT scans cost "a few hundred dollars in Europe and over $15,000 here."  This didn't seem quite right to me, and today Ezra gets the goods straight from Halvorson in lovely chart form.  Turns out the "few hundred dollars in Europe" part is right, but there was some kind of mistake about the U.S. pricing.1  As you can see from the chart, a head CT scan costs about $950 in the U.S. vs. an average of $276 in six other countries.  That's a difference of about 3.5x.

Which is still a very big difference.  As I've mentioned before, here in the U.S. we pay higher fees to our doctors, we pay higher prices for drugs, we pay higher prices for diagnostic tests, and we pay higher administrative costs to our insurance companies.  If we want to reduce healthcare costs, we have to do something about all that, but both Obama and the Democratic leadership in Congress have (quite accurately) decided that doing so right now would earn the undying wrath of doctors, Big Pharma, insurance companies, hospitals, and device manufacturers, and together they could easily kill any chance of passing healthcare reform at all.  So instead we'll pass reform now without addressing prices and then hope that maybe we can do something about it later.

And maybe we can.  But don't bet on it: interest groups fight like crazed weasels to keep what they have, and they usually win.  We might be able to freeze cost increases a bit if we put some serious muscle into it, but that's probably about all we can reasonably hope for.  Or maybe technology will save us.  You never know.

More charts here.  I'm sure everyone will have their own favorite.

1Apparently it was a mistranscription.  Halvorson actually said $1,500, not $15,000.  Ezra has since corrected the original post.

A "Gang of Six" Tick-Tock, Please

| Mon Nov. 2, 2009 12:25 PM EST

In the New York Times today, Lamar Alexander claims that the White House was never really interested in a bipartisan healthcare bill.  Matt Yglesias isn't buying it:

Chuck Grassley is not just some guy, he’s the top Republican on health care issues. And the Grassley courtship process took a long time. And Grassley abandoned it in a blaze of hypocrisy, eventually slamming Democrats for embracing an individual mandate to purchase health insurance that he had long supported.

The larger context is that the president laid out some goals for health reform. He wants a bill that expands coverage in a way that’s deficit neutral in the medium-term, doesn’t disrupt people’s existing health insurance in the short-term, and bends the long-term cost curve. A lot of different ideas were put forward in Congress about how to do this. None of them were put forward by Republicans.

You know what this country needs — aside from strict rules limiting the volume of commercials on TV?  A really good tick-tock about the seemingly endless healthcare negotiations this summer among the "Gang of Six" on the Senate Finance Committee.  Did Republicans put forward any good ideas?  Were they truly trying to find a bipartisan compromise?  Was the president deeply involved in any of this?

There's no question that Republicans had some ideas about healthcare.  But that's not the correct measure of whether they were working in good faith to fashion a bipartisan bill.  Given that Democrats control both Congress and the presidency by wide margins, it was always going to be the case that the fundamental structure of healthcare reform would be a liberal one.  So the real measure of Republican good faith is whether they provided suggestions and compromises that worked within that structure but would have made it more acceptable to conservative sensibilities.

That was never my impression, at least in the more public arenas.  Republican contributions, such as they were, essentially boiled down to tossing out the liberal framework entirely and pretending that conservatives had won the 2008 election.  These ideas were transparently DOA, designed primarily to rally the base, not to produce a serious conversation on healthcare.

But is that what happened in the Finance Committee negotiations?  Or did Enzi, Snowe, and Grassley really, sincerely try to figure out a way to take a liberal superstructure and modify it in ways that might make it genuinely acceptable to at least some Republicans in the Senate?  Inquiring minds want to know.  Is there anyone out there with the sources to take a serious crack at writing this story?

The Frakt Curve

| Mon Nov. 2, 2009 11:24 AM EST

You've heard of the Laffer Curve?  Today we get the Frakt Curve, courtesy of Austin Frakt, who suggests that trying to increase competition in the healthcare insurance market might reduce costs, but it might not.  It all depends on where we are on the curve:

[When insurer concentration is high] premiums are above the minimum possible level. Insurers are charging above the competitive premium level because they have excessive market power. In this region, higher premiums stem from higher insurer profits and/or lack of administrative efficiency....

[When insurer concentration is low] premiums are again above the minimum because insurers can’t negotiate down to the lowest possible price with providers. Providers have too much power relative to insurers and are charging prices above the competitive minimum. Insurers pass those high prices onto consumers through higher premiums. In this case, higher premiums stem from higher medical costs.

Austin's point is that to a large extent the healthcare battle is waged between insurers and providers.  Since the American healthcare system relies primarily on both private providers and private insurers (and this will be true even if a public option passes), we don't necessarily get the lowest costs when one side or the other is weakened, but when the two sides are fairly equally matched.  Thus, removing antitrust protection for insurers might lower costs or it might not.  It all depends on where we are on the curve right now.

Alternatively, we can try to move the entire curve downward.  Or we could ditch the whole thing and ask the Swedes to please design us a new healthcare system.  But in the absence of either of those things, where you are on the curve dictates whether and how much you need to rein in one half of the healthcare market vs. the other.

UPDATE: Michael Hiltzik makes the case for more insurance industry competition here.

The Power of Couch Potato-ism

| Mon Nov. 2, 2009 12:28 AM EST

Guess what? Apparently DVRs aren't the commercial killers everyone was afraid they'd be.  Even though DVRs let you skip past ads, it turns out that lots of DVR users are too lazy to bother:

Against almost every expectation, nearly half of all people watching delayed shows are still slouching on their couches watching messages about movies, cars and beer. According to Nielsen, 46 percent of viewers 18 to 49 years old for all four networks taken together are watching the commercials during playback, up slightly from last year. Why would people pass on the opportunity to skip through to the next chunk of program content?

The most basic reason, according to Brad Adgate, the senior vice president for research at Horizon Media, a media buying firm, is that the behavior that has underpinned television since its invention still persists to a larger degree than expected.

“It’s still a passive activity,” he said.

Hard to believe.  Maybe lots of people actually like commercials?  I can't tolerate them, myself. Whenever a commercial break comes on, I start manically flipping through the channels looking for something else.  Maybe a few minutes of a ballgame.  A little bit of CNN.  Anything.  Having to sit through commercials is like having to eat breakfast without something to read in front of me: completely intolerable.

Which really means I should get a DVR and join the 54% of viewers who do skip ads.  Instead I watch shows at their regularly scheduled times and then immediately start channel surfing whenever commercials come on.  Sometimes I get back before the show starts back up, sometimes I don't.  Pretty dumb, I suppose.