Kevin Drum

The Limits of Transparency

| Wed Jul. 29, 2009 6:27 PM EDT

Should Barack Obama respond to the "birther" lunatics by asking the Hawaii Department of Health to produce his original birth certificate?  Should Sarah Palin be required to produce original medical records proving she's really Trig Palin's mother?  Conor Friedersdorf says no.  Elected officials may have less right to privacy than ordinary citizens, but there are limits:

As evident is that public officials are under no “transparency” obligation to address all questions. Were the right fringe to allege that Barack Obama is in fact a woman, and demand a photograph of his penis to definitively prove otherwise, and the left fringe retaliated by alleging that Sarah Palin is a man, and requested the same sort of photographic proof, Andrew [Sullivan] would surely join me in concluding that both politicians have some right to privacy. Right?

Right.  There's a level of craziness beyond which no politician is obligated to respond.  All it does is spur yet more craziness.  If you believe that the state of Hawaii has conspired to hack its computer system and produce a phony certificate of live birth, then what good would the original document do?  You'd just figure it had been forged.

If someone produces actual evidence of scandal or wrongdoing, then you have to respond.  But if mere conspiracy theorizing is all that's required, then the sky's the limit.  Bill Clinton has to prove he wasn't transporting bales of coke through Mena airfield.  Barack Obama has to prove his mother wasn't in Kenya in August 1961.  Sarah Palin has to prove she wasn't faking a pregnancy in 2008.  John McCain has to prove he didn't collaborate with the enemy while he was in a Vietnamese prison camp.

Conspiracy theorists will always be with us.  But the adult community doesn't have to humor them.  All that does is make things worse.

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Cats and Dogs Sleeping Together

| Wed Jul. 29, 2009 3:44 PM EDT

Andrew Sullivan responds to my post last night suggesting that in the long run community rating is more important than having a public option in the healthcare reform bill:

But how do you contain costs after you have mandated coverage? The health care industry will make more money if everyone is covered. If you don't make them commit to serious concessions, such as the public plan, this time around, how are you going to do that in the future? The answer, I'm afraid, is: you won't. Onto receivership for the US! But more people will be healthy as the dollar collapses and the economy implodes.

Let me get this straight.  Andrew Sullivan is arguing for greater federal intervention in the healthcare market?  Because that's the only way to hold down costs?

I feel like I'm living in Bizarro world.  But hey — I'm all for a public option.  I suspect it would have only a modest effect on long-term healthcare costs — which is pretty much the way I feel about every other proposal to rein in spending too — but modest is still better than nothing.  In any case, I guess this means Andrew, Mickey, and I are all in agreement on something.  Weird.

Quote of the Day

| Wed Jul. 29, 2009 1:54 PM EDT

From Dan Drezner, who's currently teaching a summer course along the banks of the Rhine in lovely Basel:

If you think the bank bailouts are unpopular in the United States, try the Swiss reaction to the Swiss federal government's bailout of UBS.  It's to the Voldermortian point where they asked me not to say "UBS" because it's so embarrassing.  We have compromised — I can now say "UBS," but must then spit three times over my right shoulder to ward off evil spirits.

Basel, of course, is the home of the famous Basel Capital Accords, which did approximately nothing to stop our late financial meltdown.  In fact, Basel II probably made things worse.  So Swiss students have every right to be embarrassed, even if they were only renting their city out to the world's central bankers, so to speak.

OTOH, Basel is also the birthplace of Roger Federer.  So they've got something to cheer for too.

Good News on Healthcare

| Wed Jul. 29, 2009 1:36 PM EDT

Today we get good news from the House:

House leaders, the White House and four Blue Dogs on the Energy and Commerce Committee reached a deal Wednesday on a health care overhaul....Rep. Mike Ross (D-Ark.), head of the Blue Dog health care task force, said the deal would cut more than $100 billion from the Democratic health bill, increase exemptions for small businesses and prevent the public insurance option from basing reimbursements on Medicare rates.

And we get good news from the Senate:

The chairman of the Senate Finance Committee, Max Baucus, Democrat of Montana, who is leading efforts to develop a compromise health care bill announced Wednesday that negotiators had pared the price-tag to under $900 billion over 10 years and that lawmakers had agreed on ways to cover the cost....Late Tuesday, Mr. Baucus had hinted that his group had mostly finished their work on how to pay for the bill. “The costs, I think, are pretty well nailed down,” he said.

Perhaps Tyler Cowen is right: a lot of the day-to-day chatter along the way to healthcare reform "is simply noise."  We won't know that for sure until we have actual bills, an actual conference report, and an actual vote, but hey — it's an odd-numbered day and I'll take whatever good news I can get.  And agreement of any kind, even without knowing the details yet, is forward progress.  That's good news.

Blowing Bubbles

| Wed Jul. 29, 2009 12:46 PM EDT

How do we pop financial bubbles before they get out of hand?  Alex Tabarrok surveys the literature and comes away pessimistic that it can be done:

Bubbles occur even as uncertainty about the fundamental value diminishes.  We also know that once a bubble starts it's difficult to stop.  Circuit breakers and brokerage fees (transaction taxes), for example, don't do much to stop bubbles....Investor education doesn't help (for example telling participants about previous bubbles doesn't help). Even increasing interest rates doesn't do much to stop a bubble already in progress and may increase volatility on net.

So what's the answer?  Once a bubble gets going, maybe there isn't one.  However, some lab experiments suggest that having lots of cash sloshing around is instrumental in getting bubbles going in the first place:

[These] experiments are consistent with the Fed having a significant role in bubble inflation (a theory I have not pushed).  In other words, rather than identifying and popping bubbles already on the rise, not blowing bubbles in the first place may be easier and more productive.

That would be a start, anyway.  More research, please.

Financing Solar

| Wed Jul. 29, 2009 12:12 PM EDT

My homeowners association would go ballistic if I tried to install solar panels on my roof, but if you live in a less benighted area it's an attractive option.  The problem is that the upfront cost is too high for some people, and if you take out a conventional loan you run the risk having to keep making payments even if you sell your house.  One option is an outfit like SolarCity, which leases the installation for a set monthly cost.  If you sell the house, the lease goes with it, so your risk is minimal.  Brad Plumer passes along news of another alternative:

Two years ago, however, the city of Berkeley figured out an easy financing trick to get around this problem — the city itself just issues a bond to pay for the upfront costs of installing the panels, and the homeowner then repays the government over the course of 20 years via a small line item on the property-tax bill. (This way, if the home is sold, the costs of the panels get passed on to the new owner getting the benefits.)

It's a small policy tweak, but quite sensible. No mandates, no regulations, just offering homeowners an extra option if they choose. So it's not surprising to hear that, as Kate Galbraith reports today, the idea's been proliferating like crazy: This year alone, eight states have followed California's lead by giving their municipalities permission for this sort of financing, including Colorado, New Mexico, Ohio, Oklahoma, Texas, Vermont, Virginia, Wisconsin. (Apparently, a lot of cities need permission from the states before they can mess with property-tax bills.)

Another benefit of this is that cities can generally borrow at lower rates than private homeowners, so the economics of the panels work out better.  It makes a lot of sense, especially in sunny areas like California and the southwest.

UPDATE:

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Getting Out of Iraq

| Wed Jul. 29, 2009 11:51 AM EDT

Things are going so swimmingly in Iraq that we might speed up our exit plans:

Defense Secretary Robert M. Gates said Wednesday that the relatively low levels of violence in Iraq and improved cooperation of late between U.S. and Iraqi forces have raised the possibility that commanders might be able to "modestly accelerate" the reduction of U.S. forces this year.

....Gates said if trends throughout Iraq remain generally positive, the United States could withdraw three combat brigades, each consisting of about 5,000 soldiers, from Iraq this year. The existing plans call for two brigades to be withdrawn.

The expedited schedule might also have something to do with the tensions Ernesto Londoño reported a few days ago following the American response to an insurgent attack in Baghdad:

When the shooting subsided, another confrontation began. A senior Iraqi army commander who arrived at the scene concluded that the Americans had fired indiscriminately at civilians and ordered his men to take the U.S. soldiers into custody. The U.S. military said the soldiers had acted in self-defense and had sought to avoid civilian casualties; U.S. commanders at the scene persuaded the Iraqis to back down.

....Word of the incident quickly spread among U.S. soldiers in Baghdad. Several said it heightened concerns that the split-second decisions they make now have the potential to draw a sharp rebuke from Iraq's increasingly assertive security forces. And reaction from Iraqi military officials seemed to confirm those fears.

These things might be entirely unrelated.  Gates himself implicitly dismissed the incident by saying, "There clearly will be the occasional hiccup by someone who doesn't get the word."  Still, if violence is generally under control and Iraqi commanders are starting to harass American troops, that might make quick withdrawal into a more welcome option than it would be otherwise.  Just a thought.

Who Loves Medicare?

| Wed Jul. 29, 2009 11:15 AM EDT

Matt Yglesias points out today that socialistic single-payer healthcare is actually quite popular in the United States.  It's called Medicare.  The chart below, from a Mark Blumenthal column last month, shows that Medicare users are far more satisfied with their healthcare than users of private insurance.  So why is it so hard to persuade Americans to simply expand the program?  Blumenthal explains:

The higher scores for Medicare are based on perceptions of better access to care. More than two thirds (70 percent) of traditional Medicare enrollees say they "always" get access to needed care (appointments with specialists or other necessary tests and treatment), compared with 63 percent in Medicare managed care plans and only 51 percent of those with private insurance.

....If the Medicare experience is so positive, why are people so easily talked out of expanding on it? First, younger Americans not enrolled in Medicare do not share the enthusiasm of seniors for the program. Six years ago, the Kaiser Foundation asked a national sample of adults to rate the Medicare program. Medicare was hugely popular among those aged 65 or greater....Those under 65, however, had very different views. Only 45 percent rated Medicare favorably. Only 36 percent considered it well run, as compared to 47 percent who said the same about private health plans. While 73 percent of those over 65 said Medicare allowed patients to choose any doctor, only 28 percent of those under 65 agreed.

There's a pretty obvious political dynamic that's responsible for this.  Seniors, who actually use Medicare, know perfectly well that it's a good program.  They can see any doctor they want, they get care when they need it, and the quality of service is high.  So why do younger Americans have such a negative attitude toward Medicare?

Answer: because conservative politicians have been bellowing for years about what a terrible program it is.  And since younger workers don't actually use it themselves, the bellowing works.  They figure it must suck.

In reality, Medicare works fine.  Not perfectly, but fine.  It offers service at least as good as private insurance despite serving the highest-risk population there is, and it does at least as good a job of reining in costs — slightly better, in fact.  Sure, it could be improved, but it's already probably better than the employer insurance that you have right now.  I'd switch in a second if I could.

But I can't, and neither can you.  And nothing like it will be offered to you anytime soon.  After all, if you actually used it, you'd probably like it.  Which is exactly what conservative politicians are afraid of.

Cui Bono?

| Wed Jul. 29, 2009 10:27 AM EDT

Mike Konczal has a nice primer over at the Atlantic about high frequency trading.  You're likely to hear a lot more about this subject in days to come, so it's worth a few minutes to head on over and read it.

There are two aspects of HFT that are drawing attention.  The first is just the basic effect of ultra-fast, high-volume trading on equity markets in the first place.  The second is "front running," the allegation that big players are able to gain access to stock prices a few milliseconds before the rest of us via flash orders, thus allowing them to enter orders early and make guaranteed profits.  Konczal's conclusion:

As the debate unfolds, remember to ask yourself, (1) whose information is being exploited by whom and how, (2) does this make financial markets stronger and more efficient — say by providing liquidity — during a downturn when markets need them the most, and (3) what is this doing to the price mechanism — is it helping prices converge to fundamental values or driving them further away? The evidence currently looks like HFT is doing bad things on all three accounts.

As Konczal points out, if you ask the HFT community what benefit HFT provides, the answer is usually "liquidity."  But this is an answer that should be treated very skeptically indeed.  Major stock exchanges are not notably illiquid except under very specific, limited circumstances, and HFT traders aren't obligated to provide liquidity under these circumstances anyway.  And they won't.  They'll just flee, like everyone else.

So: cui bono?  As near as I can tell, HFT is just a pure, artificial money spinning machine with no value at all to the wider financial community.  In fact, as Konczal points out, it's quite likely to make markets weaker and less driven by fundamentals.  This is worth keeping your eyes on.

Community Rating

| Tue Jul. 28, 2009 7:35 PM EDT

Scott Lemieux isn't happy with the compromise healthcare bill being put together in the Senate:

The normal justification for passing a compromise bill is that once a new system is entrenched it can be tweaked later. But I don't think it applies in this case. The public option is the core of the reform; a Blue Dog bill isn't so much half a loaf as a few meaningless crumbs. And far from making a public option more viable in the future, if anything, passing something that could be called health-care reform will reduce the impetus to pass actual reform. And, worse, a bill with no public option will further entrench the insurance industry and make it easier for them to block actual reform in the future.

Ezra Klein disagrees.  Partly this is because a public option would cover only a small fraction of the currently uninsured ("That's not a gamechanger, it's a tweak"), but mostly because he thinks what really matters isn't how they're covered, but merely that they're covered:

What has kept health-care reform at the forefront of liberal politics for decades is moral outrage that 47 million of our friends and neighbors are uninsured. That medical costs are one of the leading causes of bankruptcy in the United States. That an unemployed machinist gets screwed by fly-by-night insurance schemes while a comfortably employed banker need never worry. That the working class ends up in emergency rooms with crushing chest pains because they didn't have health insurance and didn't get prescribed cheap blood pressure medications five years before.

One of these days I need to think this through more rigorously, but I have a slightly more idiosyncratic view that's closer to Ezra's than Scott's.  Both coverage and a public option are important, but I think what's more important than either one is a simple change that — to my surprise — hasn't attracted any real opposition: community rating on a national scale.  Basically, this means that insurance companies have to take all comers at the same price.  They're allowed to adjust premiums for things like age and gender, but they can't refuse you due to preexisting conditions.  If your blood pressure is high or you have a family history of breast cancer, they still have to accept your business.

This hardly solves every problem.  In particular, it doesn't do much to rein in costs.  But if you combine (a) Medicare, (b) our current employer-based insurance regime, and (c) community rating along with subsidies for low-income families, you've essentially institutionalized universal healthcare insurance.  Not everyone will take advantage of it — there will always be a few people who go without coverage even if it's affordable — and you still a need a few other things like out-of-pocket caps.  Still, it's basically a statement that everyone in the country can and should be covered.  And once that becomes a cultural norm, it will never go away.

It will also, I suspect, eventually turn the private healthcare insurance industry on its head.  But maybe not.  That's the part I haven't thought through completely.  But if there's any single thing that's critical, it's moving public opinion in the direction of viewing healthcare as a universal prerogative.  Community rating plus low-income subsidies doesn't get us 100% there, but it gets us pretty far along.