Kevin Drum

Business and Healthcare

| Thu Jul. 23, 2009 10:14 AM EDT

Yesterday a reader emailed to ask whether the business community was supporting or opposing healthcare reform.  Well, as the Washington Post notes, the Chamber of Commerce recently came out against it while Wal-Mart has come out in favor:

Less noted has been the diversity of opinion among small and medium-size businesses. Many agree with the Chamber that a public insurance option would undermine the private insurance market and that requiring companies to provide coverage would impair job growth. Others say the current system is so broken that they are assessing whether to support the reform plans.

The wait-and-see approach that many businesses are taking — alternately skeptical and hopeful — is a further sign that the alliances that previously scuttled health-care reform may be scrambled this time around, not just in the health-care industry but also in the business world at large. President Obama and congressional Democrats face formidable obstacles to their reform efforts, but one factor in their favor is businesspeople who may not be as inclined as they were in the past to bring grass-roots pressure against reform.

This is probably about as good as we could have hoped for.  When the bullets finally start flying, it was always unlikely that either big or small businesses would be enthusiastically in favor of healthcare reform.  It's just not in their DNA, and the web of allies and lobbyists they're part of naturally works to keep them skeptical.  Still, the mere fact that they're divided, not rabidly opposed, demonstrates just how far things have come since 1994.  Whether that's enough to help deliver a few Republican and Blue Dog votes is hard to say, but at least it probably won't cost us any.

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Ka-Ching!

| Thu Jul. 23, 2009 12:55 AM EDT

I'm glad to see that things are back to normal:

Wall Street, helped by improving profits, is on track to pay employees as much as, or even more than, it did in the pre-crisis days. So far this year, the top six U.S. banks have set aside $74 billion to pay their employees, up from $60 billion in the corresponding period last year.

....Some analysts and investors had especially sharp words for Wall Street rival Morgan Stanley, which reported Wednesday that it had set aside $6 billion so far this year for compensation expenses even as it recorded its third straight quarterly loss. In reporting its second-quarter results, Morgan Stanley said it lost $1.26 billion, after accounting for one-time charges including an $850 million expense related to paying the government back after its bailout. Still, the company set aside $3.9 billion in compensation expenses, representing 72 percent of its revenue for the quarter.

As long as bankers are paid obscene salaries and bonuses, all is right with the world.  I'm sure we'll all rest easier tonight knowing this.

Press Conference Liveblogging

| Wed Jul. 22, 2009 7:30 PM EDT

Half an hour into tonight's press conference Barack Obama has answered a grand total of three questions.  This is not a good performance.  He really needs to pick up the pace and make his answers crisper and more comprehensible.

UPDATE: Aside from the rambling nature of his replies, I don't think Obama has been good on substance either.  His opening statement had a little bit of good stuff about healthcare security, but he's spent the vast bulk of his time on deficits and cost cutting.  That's just not a good sales job.

UPDATE 2: All done.  I'm curious to hear what other people thought, but this really struck me as nowhere near his usual performance.  Obama avoided giving direct answers, rambled a lot, kept interrupting himself with asides, and didn't explain things in terms that ordinary viewers were likely to understand.  He's supposed to be the communicator-in-chief, but I wouldn't be surprised if a lot of people came away more confused than they were when they tuned in.  Bottom line: There were bits and pieces that were fine, but overall I'd give it a C-.  Other comments?

Bending the Curve

| Wed Jul. 22, 2009 6:16 PM EDT

Brad DeLong tries to figure out why the Congressional Budget Office has been so pessimistic about the potential for healthcare reform to reduce long-term costs:

The problem, I think, is that the CBO has a category for cost control but no category for getting system incentives right. It is a budget office, after all, not a philosopher-king office. The problem, however, is that it is the only arbiter out there. And there appear to be a lot of members of congress who think controlling costs = getting system incentives right.

I don't think we should care much about costs: it might be in the future we want to spend a lot on health; it might be that in the future we develop magic treatments and so want to spend a lot less. If we get the system incentives right, then whatever we spend on health will turn out to be the right thing to do.

There are useful things we can do that will help control costs.  Better IT, for example.  Lower administrative overhead.  Comparative effectiveness research.  For the most part, though, these are one-shot deals.  They're worth doing, but you only get to do them once.  And once they're done, costs keep going up.  They go up from a lower base, but they still go up.

Then, as Brad says, there are things that help align incentives better and (maybe, possibly) bend the curve of rising healthcare costs downward.  Moderate copays, for example, can help reduce unnecessary doctor visits.  Cheap (or free) access to preventive medicine can keep chronic ailments from turning into expensive acute crises.  Paying doctors straight salaries probably promotes more efficient use of expensive services than either capitation or fee-for-service. Universal coverage can prevent overuse of expensive emergency room services.  A more sensible malpractice regime might reduce defensive medicine (and more fairly compensate victims of genuine malpractice in the bargain).

But in the end, both as individuals and as a society, we're going to spend as much on healthcare as we feel like spending.  And why not?  We should spend our incomes on whatever we value the most, and for a lot of us that's healthcare.  If that turns out to be 30% of GDP, then it's 30% of GDP.

And that's what will eventually bend the curve in healthcare costs: when we all finally decide that we're spending enough.  Whether we're doing it as individuals, as employees with healthcare insurance, or via tax dollars, we'll get serious about controlling costs when we decide that costs have gotten too high.  Until that happens, though, well-designed incentives may make things more efficient but won't appreciably reduce the rise in total spending.  I don't think politicians can afford to say that in public, but it's probably true.

Time to Leave the Island

| Wed Jul. 22, 2009 4:04 PM EDT

Rich Miller of Bloomberg reports:

Global investors give Federal Reserve Chairman Ben S. Bernanke top marks for combating the worst financial crisis since the Great Depression and overwhelmingly favor his reappointment amid optimism that the world economy is on the mend.

Well, I don't favor it — and this has nothing to do with whether Bernanke has done a good job or not.  Just look at a couple of the quotes Miller dug up.  "He's the best, maybe around the world," says one guy.  "If he weren't renominated, it could have potentially very serious and severe repercussions on the stock market and the economy," says another.  Spare me.

Look: Bernanke isn't indispensable, any more than Alan Greenspan or Paul Volcker or William McChesney Martin were.  But everyone thought they were indispensable at the time, and that's a dangerous way to think about these guys.  Putting Fed chairmen on a pedestal, as the financial community does routinely, breeds both complacency and insularity.  In the long run, it's bad for business.

Wall Street needs to calm down and learn that being Fed chairman for a few years doesn't make someone superhuman.  The world won't end if Bernanke is replaced by one of the other dozen or so highly qualified candidates available, and Obama should take the chance to demonstrate this when he chooses Bernanke's replacement.

How to Be a Very Serious Person

| Wed Jul. 22, 2009 1:23 PM EDT

If you want to be a Very Serious Person in the foreign policy wonk community, Stephen Walt lays out the rules of the road here.  I'm not sure he's correct about #5 and #6, but the others sound about right.  Via Dan Drezner.

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Righteous Anger

| Wed Jul. 22, 2009 12:38 PM EDT

It's true, as Josh Marshall said yesterday, that the political and institutional landscape is more receptive to healthcare reform this year than it was in 1994.  We have bigger majorities in Congress; the GOP is in tatters; the HMO revolution has failed; the AMA and the hospital industry are willing to play ball; unions are working with us; business opposition is far more muted; and Obama's legislative strategy is more sophisticated than Clinton's.

Oh, and the public mood is more favorable to healthcare reform too.  Right?  Bob Somerby doesn't think so:

In fact, the Democrats “went into this round” with a public which is massively clueless about health care reform — and massively lacking in righteous anger, in angry desire for change....Real progressives would work for years — for decades — to develop public understanding and anger about such complex affairs. It takes a long, aggressive struggle to develop progressive political frameworks. As Krugman explained, the other side has pimped its poll-tested narratives down through all those years. But our own denatured “liberal leaders” are too fat and happy to fight against that. When have you ever seen them fight to develop a winning politics about anything known to this earth?

I'm not quite that gloomy, but I think Bob is basically right.  Sure, if you take a survey and ask people if they "support healthcare reform," a large majority will say yes.  But while that may be better than a large majority saying no, it's mostly meaningless.  Most repondents haven't thought about it much, don't really know what healthcare "reform" is, and will switch views in a millisecond once they see a single TV attack ad.  What you need isn't people willing to murmur yes to a pollster, it's people pissed off enough to inundate their congressmen with phone calls.  But we don't have that.

Even though it's an even day and I'm supposed to be pessimistic about healthcare, I still think it's more likely than not that we'll get a fairly decent bill passed this year.  Call it 60-40, maybe a little better.  But the odds would be a lot shorter if liberals had done a better job over the past decade of getting middle class voters as angry about their healthcare as they get over, say, a pothole outside their front door.  Note to Dems: it's still not too late.

Lou Dobbs is a Crackpot

| Wed Jul. 22, 2009 11:37 AM EDT

I see that Lou Dobbs is continuing to take seriously the "birthers" — the clowns who claim that Barack Obama wasn't really born in Hawaii and is therefore president illegally.  I'm very pleased to hear this, since it means maybe — just maybe — it will finally make obvious to the broader world just how far off his rocker Dobbs has gone.  If it does, it will have been worth it.

POSTSCRIPT: And as long as we're on the subject, note that this guy is my congressman.  Dresses nice, doesn't he?

Iran Update

| Wed Jul. 22, 2009 11:14 AM EDT

After the public demonstrations against Iran's election debacle were put down a couple of weeks ago, the conflict switched to behind-the-scenes maneuvering among various powerful and well-connected factions.  Then, more recently, it switched again to a much more public fight between powerful and well-connected factions.  Borzou Daragahi has the latest:

Iran's president, under attack by reformists after his disputed election victory last month, on Tuesday openly defied his most powerful backer, refusing an order by supreme leader Ayatollah Ali Khamenei to dump a newly chosen vice president who is despised by hard-liners for insisting last year that Iranians had no quarrel with the Israeli people.

....Ahmadinejad surprised many observers by defending the vice president, Esfandiar Rahim Mashaei, an in-law, in the face of a torrent of criticism from his hard-line allies.

News agencies confirmed Tuesday that Khamenei sent a letter to Ahmadinejad on Monday asking for the removal of Mashaei.  "The president should announce the dismissal, or acceptance of the resignation of Rahim Mashaei right away," said Mohammad Hasan Abu- torabi, the deputy speaker of parliament, according to the semiofficial Iranian Students News Agency.

But Ahmadinejad insisted on state television that Mashaei "will continue his job," adding, "he is very loyal to the Islamic Revolution and a servant of people."

Juan Cole says there's something "fishy" about this story: "If Khamenei wanted Ahmadinejad to do something, why would he do it in a secret letter that only two MPs have seen?"  And this:

One possibility is that Khamenei is displeased but does not want to weaken Ahmadinejad by publicly overruling him, at this juncture when things are already unstable. That would make sense of his sending a private letter. Maybe it was circulated to other hard liners only when Ahmadinejad declined to heed it?

In the Iranian constitution, Supreme Leader Khamenei can overrule Ahmadinejad on virtually anything, and can dismiss him at will. So if Khamenei really wants Rahim-Masha'i gone, he'll be history.

Perhaps.  But this has gone so far beyond merely a conflict between Khamenei and Mir Hossein Mousavi that it's hard to say what's really happening behind the scenes.  Khamenei is obviously not the unquestioned authority he was before all this started, and the fact that he's now being challenged by Ahmadinejad, the very guy he attached his fortunes to in the first place, says something about his position.  Or about Ahmadinejad.  Or about something else none of us can even guess at.  Stay tuned.

A Penal Colony With a Nice Coastline

| Wed Jul. 22, 2009 10:20 AM EDT

As of yesterday, fees to attend a Cal State university have gone up by a third in the past year:

As several hundred students shouted "Vote no!" outside the chamber door, California State University trustees Tuesday approved a student fee hike of 20% and agreed to furlough most faculty and staff, including college presidents, for two days each month.

....Cal State also plans to cut its 450,000 enrollment by 40,000 students over the next two years, and $183 million more in budget cuts will be borne by individual campuses.

The 23-campus university system, the nation's largest, has almost tripled its basic fees over the last eight years, approving increases in every year but one. But Tuesday's was by far the steepest, and followed a 10% hike approved just in May.

When I went to school at Cal State Long Beach in 1978, I paid about $100 per semester, plus another $50 or so for books.  Call it $300 a year.  Basically, even the poorest could afford it without going into debt.  Now it's more like $5,000 per year.

I know there are some pretty good arguments for having higher public university fees.  After all, why should the taxpayers subsidize kids who are just going to use their degrees to earn a lot more money over the course of their lives anyway?  And yet.....I don't buy it.  Applied to Harvard, maybe.  But I really like the idea of having a public university system that isn't world class (that's what UC is for), but does provide a basic, good quality, no-frills education to anyone who wants it, and is designed to attract as many people as possible to give it a try — without having to worry that they're racking up a huge debt if it turns out they can't make it.  There's not only a meritocratic ideal in this that appeals to me greatly, but it says something about the priorities of the citizenry that's inspiring as well.

Maybe I'm living in the past.  Maybe community colleges provide that function these days.  A lot of people think so.  But I don't.  And if I had the choice of keeping Cal State universities accessible to everyone vs. shoveling another 10,000 petty crooks into prison, I know which I'd choose.  Over the past 30 years my fellow California residents have decided they'd rather become a penal colony with a nice coastline than a land of opportunity.  It's not a change for the better.