Matt Yglesias is basically right about the overall shape of the river when it comes to healthcare spending:

I think there’s a lot of waste in our health care sector. That said, I think discussion of health care costs sometimes ignore the fact that something has to go up as a share of GDP. Americans are getting richer, agriculture is becoming more efficient, apparel is increasingly made by Bangladeshis or robots, etc. At the same time, computers and other electronic gadgets are getting cheaper in real terms. And if some things shrink as a share of our income, other things need to grow. The biggest of those things has been health care. And that makes perfect sense.

As GDP goes up, and we have more collective income to spend on things other than the basics, we're going to spend that extra income on whatever we most value. And for a lot of us, that something is healthcare. Put simply, as GDP per capita goes up, we'd expect healthcare spending not just to go up, but to go up even as a percentage of GDP.

However, there's evidence that the U.S. is an outlier even when you take this into account. You'd expect America to spend a higher percentage of GDP of healthcare than most countries because America is richer than most countries. But if McKinsey Consulting is to be believed, that number probably ought to be about $5,000 per person, not the $7,000 per person we actually spend. Put another way, you'd expect a country as rich as the U.S. to spend 13-14% of GDP on healthcare, but in reality we spend more like 17-18%. You can read the McKinsey conclusions here, or you can read Aaron Carroll's multipart blog series explaining it here. (Note that these are 2006 numbers. They've gone up a bit since then.)

Why do we spend so much? Some is pure waste, some is because our system is so inefficient, and some is because the healthcare industry is far more profitable in the U.S. than in most other countries. Somebody has to pay for those country club memberships, after all.

But keep in mind that this is actually good news if you look at things from a certain point of view. If our healthcare sector were super efficient, there wouldn't be much scope for reducing its size. But if there's lots of fat in it, there is. It won't be easy, since one man's fat is another man's dividend check, but at least there's fat to cut.

Here's the latest from those well-known socialists at 85 Broad Street:

Spending cuts approved by House Republicans would act as a drag on the U.S. economy, according to a Wall Street analysis that put new pressure on the political debate in Washington. The report by the investment firm Goldman Sachs said the cuts would reduce the growth in gross domestic product by up to 2 percentage points this year, essentially cutting in half the nation's projected economic growth for 2011.

....A spokesman for House Speaker John A. Boehner of Ohio said the Goldman Sachs report represented "the same outdated Washington mind-set," comparing it to the thinking behind the 2009 Recovery Act that released federal funds to counter the effects of the recession.

I don't know about Goldman, but Boehner sure seems to have the traditional GOP mindset down pat: if inconvenient evidence is at hand, pretend it doesn't exist.

In fairness, I have to say that two percentage points seems pretty high to me for $100 billion in budget cuts. Still, even Douglas Holtz-Eakin, who sold his soul for the cause years ago, agrees that the tea party-inspired cuts in the House bill would cut 0.2 percentage points off of GDP growth. That's probably too low, but it almost doesn't matter: if even Republican house economists agree that the cuts would slow economic growth at all, tell me again why Republicans are insisting on them?
 

From Jamelle Bouie, writing about the possibility of a tea party-inspired government shutdown next month:

Compared to 1995, today's GOP is far more anti-government and far more ideological than it was under Gingrich.

For anyone who live through that era, this is hard to believe. But it's true. It's also true, as Jamelle says, that a shutdown would pretty quickly lead to real consequences for real people: "This was damaging enough in 1995, when the economy was in the middle of an unprecedented expansion. Today, with slow growth and double-digit unemployment, it would be catastrophic." Yes it would. See David Leonhardt about the austerity programs in Germany and Britain for more about that.

My magazine piece on the decline of labor was all about labor's role as a countervailing power against the corporate community. The concept of countervailing powers is, of course, the brainchild of John Kenneth Galbraith, and today Ezra Klein talks to his son, James Galbraith, about how this applies to the world today:

What if labor never gets off the mat, and initiatives like the one in Wisconsin succeed? Are there any other actors in the economy who can play the countervailing role that labor has traditionally played?

There are certainly other organizations in the system. Voluntary associations and churches and so forth. But there’s nothing able to play the role as effectively on economic issues as an organization based on economic roles. Everything else is divided up into particular concerns — many of which are very important, like civil rights and environmental issues. But what has faded out is an organization with a clear and coherent focus on the economic position on the working population. And not the working population composed of manufacturing workers, but the mass of service sector jobs and others who are not organized.

This is a very good way of putting it, and it's similar to a few paragraphs I wrote for an early draft of my article. The left still has plenty of interest groups, and they play important roles. But most of the best funded groups don't really focus strongly on economic issues, and most of the groups that focus on economic issues aren't well funded. As I put it in the article, we lack a countervailing power "as big, crude, and uncompromising as organized labor used to be." Somehow we need to figure out how to get that back.

The Obama administration has decided to stop defending Section 3 of the Defense of Marriage Act, which defines marriage for federal purposes as only between a man and a woman. This is from the Dept. of Justice statement:

After careful consideration, including a review of my recommendation, the President has concluded that [...] classifications based on sexual orientation should be subject to a more heightened standard of scrutiny. The President has also concluded that Section 3 of DOMA, as applied to legally married same-sex couples, fails to meet that standard and is therefore unconstitutional. Given that conclusion, the President has instructed the Department not to defend the statute in such cases. I fully concur with the President’s determination.

Consequently, the Department will not defend the constitutionality of Section 3 of DOMA as applied to same-sex married couples in the two cases filed in the Second Circuit.

This, by the way, is a good example why I've never joined in the general condemnation of conservatives for "reigniting the culture wars" whenever they introduce an abortion bill or somesuch. I'm on the opposite side of these conservative efforts, of course, but the fact is that liberals started the culture wars in the 60s and it's something we should be proud of. So while I oppose the conservative side of the culture wars, I approve of the culture wars in general, and I applaud Obama and Holder for reigniting it last year when Congress repealed Don't Ask Don't Tell and for reigniting it in the case of DOMA today. Blacks, Hispanics, gays, women, the disabled and millions of others have benefited tremendously from the culture wars, and I'm happy to see it continue until there's no more war to fight.

What's the endgame in Wisconsin? Andy Kroll rounds up the possibilities today, and outcome #1 is that eventually the union busting bill passes. This has seemed the most likely outcome to me from the start. Gov. Scott Walker has run a very disciplined operation so far, he has a lot of leverage and doesn't seem afraid to use it, he's taking on an unpopular target, and Democrats can't hide out in Illinois forever.

But I've been a little surprised at how things have turned out so far. Democrats might not be able to hide forever, but it turns out they can hide for a good long time. Even more important, it turns out that Walker's position may not be as popular as I thought. A national Gallup poll yesterday showed that 61% of Americans don't favor taking away collective bargaining rights from public sector unions. This doesn't mean teachers unions are suddenly everyone's heroes, but it does mean that a sizeable number of people think that busting unions entirely is a step too far.

And then there are Walker's fellow Republicans. One of the big questions swirling around the situation in Wisconsin is the notion that it's a bellwether: if Walker wins, will other Republican governors follow suit? There's still no telling, but just yesterday both Indiana's Mitch Daniels and Florida's Rick Scott have spoken out against the idea of eliminating collective bargaining rights. Their statements were mild, but they still take a bit of momentum out of Walker's anti-union crusade.

Even if unions lose the battle in Wisconsin, one benefit of their protest is to show other Republican governors that they're in for a pretty serious war if they try to do the same thing. That's worth a lot all by itself.

Buying Justice

Paul Waldman notes that New York state's chief justice recently announced that judges have to recuse themselves if a lawyer arguing a case before the court has contributed more than $2,500 to one of the judge's campaigns. You'd think that should have been obvious all along, wouldn't you? But not to everyone:

It's true that the ability to buy a judge is not completely without limits, as we found in a case called Caperton v. Massey, involving the notorious mining company Massey Energy. Massey had recently been hit with a $50 million verdict in a lawsuit heading for West Virginia's Supreme Court of Appeals, so the company's chief, Don Blankenship, poured $3 million into the campaign of Brent Benjamin, a private attorney running for the first time, for chief justice in 2004. That amount was more than both campaigns spent combined. Benjamin ousted the sitting justice, and when the case reached the high court, Benjamin refused to recuse himself and cast the deciding vote in Massey's favor, tossing out the $50 million award.

When the appeal reached the Supreme Court of the United States, the Court ruled that Benjamin should have recused himself. But what was so remarkable about the decision is that it wasn't 9-0 or 8-1 but 5-4. Justices John Roberts, Antonin Scalia, Clarence Thomas, and Samuel Alito — the Court's conservative bloc — actually thought it was OK for a judge to get $3 million from a defendant, then rule on that defendant's lawsuit.

This, of course, is the case that inspired John Grisham's The Appeal, which I highly recommend. Sure, it's Grisham, and I know he's not everyone's cup of tea, but The Appeal is great liberal porn and it only takes a few hours to power through. You'll enjoy it.

Jon Chait imagines a Democratic governor proposing a deficit reduction plan in a Bizarro-world version of Wisconsin:

Imagine a Democratic governor proposed a plan to close a budget crisis. First he jacked up the Earned Income Tax Credit. Then he proposed a tax hike on the rich and on corporations to close the deficit. And then he packaged it with a stringent campaign finance law, a law to require corporations to obtain permission from shareholders before engaging in any kind of political activism, and other laws designed to crush the political power of corporate America. (Pro-Democratic businesses would be exempted.) It's budget-related, because, after all, you can't maintain higher taxes on the rich if the rich are able to bend the political system to protect their interests. Oh, and Republicans accepted the tax hikes on the rich but opposed the other provisions, but Democrats refused to negotiate them.

I suspect conservatives would interpret this not as a genuine effort to close the deficit but as an exercise in class warfare and raw politics. They'd be correct.

It's all about power, baby, power. Scott Walker knows exactly what he's doing. For more on what the rich have to gain or lose in this battle, take a look at the great set of charts from Dave Gilson and Carolyn Perot that accompany my union piece today. It's called "Eight charts that explain everything that's wrong with America," which might be stretching things a bit. I can think of a few other things wrong with America too. But they're a pretty good start.

Free Oil!

When the price of oil goes above a certain benchmark level, companies drilling on American territory in the Gulf of Mexico are supposed to pay royalties to the United States government. Which is to say, royalties to you, the taxpayer. Unfortunately, a bureaucratic snafu accidentally gave away some leases for free a few years ago, and ever since we, the taxpayers, have been receiving no royalties on those wells. But that's no problem, right? Our elected representatives in the United States Congress will just fix the error. Matt Steinglass explains the facts of life:

As of 2008, the bill came to $1.3 billion; this year, the losses will be $1.5 billion. Over the decades-long lifetime of the wells it'll add up to a lot more. According to the Government Accountability Office it'll come to $53 billion over the next 25 years. Last week, representative Ed Markey and a few other Democrats on the House Natural Resources Committee offered an amendment to the Republican budget bill to make those oil producers pay the standard amount in the future on the royalty-free leases they mistakenly received due to bureaucratic error. The amendment was voted down, 251-174.

Life is good when you own one of America's two political parties, isn't it?

Unions and the Rich

Here's another take on why even public sector unions matter in the fight against the corporatization of the political economy. The chart on the right, from John Sides, shows the overall union density for each state on the X-axis, and this is probably a fairly decent proxy for the level of public sector union density too. He concludes that unionization has essentially no effect on state budget deficits, but Matt Yglesias makes a different and equally salient point:

Looking at this chart, what I think you would see is that unionization levels have a strong relationship to progressive taxation. New York, Hawaii, and Washington are all high-tax states, especially on rich people, while the non-union south has generally low levels of taxation and regressive tax structures. The conservative movement is financed by rich people whose primary interest in life is lower taxes. And on an intellectual level, the main wellspring of conservative economic policy ideas comes from people who believe that progressive income taxes are very economically damaging. A secondary intellectual inspiration is people like Greg Mankiw who believe that such taxes are an immoral imposition on a genetic elite. A key problem with this agenda is that higher taxes on rich people are a politically popular way to solve budget deficits. The solution is to create a dynamic in which political parties are entirely reliant on rich businessmen for their financing. Reducing labor unions to a state of political impotence will get the job done.

Italics mine. Needless to say, for more on this you should read my piece about the role of unions in the American political economy, which went online today. It's good! I promise.