Today, unemployment threatens the hopes and lives of millions of Americans. Recent graduates can’t find jobs. Families that need two paychecks are living on one. Households that depended on one paycheck have none. More than nine million Americans who need a full time job are working part-time. Many who have jobs are “working scared.” They haven’t had a raise for years, and don’t dare ask for one. They live with the constant fear that, without warning, they will join the ranks of the unemployed. The economy remains sluggish; there is little hope that the private sector will begin to generate the jobs this country needs.
Over the past two years, many of us pinned our hopes on healthcare reform. If we could just manage that, it would be a sign that we, as a nation, were ready for the “transformative” change that President Obama promised. And, to the amazement of the chattering classes (a.k.a. “the pundits”), Congress did, in fact, pass the Patient Protection and Affordable Care Act (ACA)
Nevertheless, many remain wary. Reform’s opponents claim that the legislation will lead to a loss of benefits for seniors, combined with sky-high premiums for everyone else. Deficit hawks argue that the pilot projects will never work, and that Medicare will push the nation into bankruptcy. And even those who embraced the legislation fear that as conservatives take over the House, a new Congress will dismantle the ACA by refusing to fund it.
None of this is true.
- It is unclear just how much of the reform legislation’s financing turns on Congressional approval. Reportedly, only about $100 million of the funding needed for the $1 trillion bill is subject to the Congressional appropriations process. (See below) Moreover, as John Gever points out on MedPage Today: “The items in the ACA that require significant appropriations are either popular — like bringing insurance to the uninsured –or don't matter much to the electorate, like electronic health records. Killing these won't score points with the voters Republicans will need in 2012 to defeat Obama, and could actually hurt them.”
- Medicare is not going to bankrupt the country. To the contrary, Medicare’s trustees have told us that the ACA puts Medicare on the road to financial health, giving it an extra twelve years before the hospital fund even begins to fall short. As a result, Medicare has plenty of time to turn successful pilot projects into Medicare policy nationwide, changing how we pay for care, and how care is delivered. Contrary to what you may have read elsewhere, in the past, many pilots succeeded in reducing costs while lifting the quality of care, but were blocked by lobbyists representing those who feed at the trough filled with Medicare waste. The ACA changes the rules of the game by giving the Secretary of Health and Human Services the power to roll out a pilot project nationwide, without needing Congressional approval.
- Under reform, the amount that any family pays out of pocket will be capped; insurers will not be able to hike premiums without justifying their increases to government regulators, and generous subsidies will make insurance affordable for the middle-class.
- If private insurers are not able to offer care that meets the law’s standards at a price that individuals and employers can afford, insurance companies realize that in 2013 or 2014, Congress is likely to reconsider the public option. History suggests that over time, health care reform legislation, like other controversial social legislation (Social Security, for example, or the Civil Rights Act of 1964) is more likely to expand than to contract. (Originally, Social Security did not include farm workers and domestic workers, excluding many African-Americans. After the Civil Rights Act was passed in 1964, subsequent legislation expanded the role of the Equal Employment Opportunity Commission. )
- Reform already is underway: Insurers are no longer denying coverage to children suffering from pre-existing conditions. In 2011 Medicare Advantage premiums will be lower, and the sky-high co-pays that some Advantage insurers have asked seniors to pay for expensive prescriptions will disappear. In just a few months, seniors who reach the “donut hole” will enjoy a 50 percent discount on prescription drugs; primary care doctors providing preventive care to Medicare patients will receive a 10% bonus, and both Medicare and new private sector insurance plans will no longer charge co-pays for preventive care. Meanwhile, the Wall Street Journal reports that small employer eligible for tax credits already are beginning to purchase insurance for their employees. In the months ahead, as more and more of the public becomes acquainted with the benefits of reform, conservatives won’t be able to stop a moving train.
Looking back on the election, it is essential to realize that this was not a vote against health care reform. As an exit poll conducted by Edison Research for the AP revealed, nearly two-thirds of voters identified the economy as the most important issue weighing on their minds; less than one-fifth named health care as their top concern.
Don’t Be Dismayed: A Big Win for Conservatives Was Inevitable
Scan a history of U.S. elections and you will find one thing that you can count on: In a recession, Americans vote their pocketbooks
History also tells us that two years after the election of a new president, the mid-term election tends to be a disaster for his party. Even Ronald Reagan took a beating; in 1982, House Democrats picked up 27 seats.
The story-line is familiar. The vanguard who originally supported the winning candidate feels betrayed that he has not delivered on their most euphoric expectations. In Obama’s case, some of his youngest and most enthusiastic supporters saw him as a Super-Hero. (I recall wincing when one young pundit described Obama as “The Black Spiderman.”)
New to politics, 20-somethings did not understand that, under our system of government, change requires blood, sweat, tears– and many years. We live in a democracy, which means that, as reform pioneer Marshall Ganz puts it, a movement that aspires to change, must “move minds from where they are to where they could be.” This takes time. Youthful supporters expected that Obama would be able to undo two decades of conservative government in less than 24 months– despite the fact that he would be working with a Congress dominated by moderate Democrats and conservative Republicans.
Typically, in a mid-term election, many of those early supporters stay home. Meanwhile, those who opposed the winning candidate from the very beginning flock to the polls to deliver a message: “We told you so!”
Conservatives will continue to claim that the election was a referendum on reform. This is yet another Big Lie. If the administration had failed to pass reform legislation, the president’s party still would have been trounced at the polls, and the administration branded “impotent.” If the Obama administration had managed to push a stronger health care bill through Congress –let’s imagine that a handful of progressives defied all odds, and passed a single-payer bill– the majority of Americans who now are wary of reform would be totally terrified. (The fear-mongers would have made sure of that.) Progressives might have lost even more seats.
The bottom line is this: we are in the midst of the deepest recession since the Great Depression. True unemployment (including those who have given up looking for work, and those who are working part-time because they couldn’t find a full-time job) is higher than it has been at any time since the Great Depression.. That fact trumps every other issue.
If jobless Americans weren’t so depressed, they would march on Washington, as they did in the ‘Thirties. But over the past three decades, poor Americans have been taught to feel ashamed of being poor. They don’t march; they don’t riot; they self-medicate. (Needless to say, I am not advocating riots. But it is worth remarking that even as the rate of poverty in the U.S. grows–particularly among children–the poor have become more passive. Hopelessness blankets poor communities where unemployment runs as high as 30%. (By contrast, among households with joint income over $150,000, only about 3% of those who want jobs cannot find employment.)
Given the state of the economy, it was inevitable that Democrats would be trounced. Unemployment is not the only problem that has turned voters against the current administration. Wealthier Americans are frustrated by a stock market that moves in just one direction: sideways. Just as in the 1970s, they are being sandpapered to death.)
Despite Congressional Gridlock, HHS, and CMS Will Move Forward
Over the next two years, reformers may well face a stalemate in Congress. Nevertheless, there is much that the Centers for Medicare and Medicaid, (CMS) and the Secretary of Health and Human Services (HHS) can do–without needing Congressional votes. What most liberal critics of reform legislation don’t seem to realize is that the ACA gives the administration unprecedented new power to do what needs to be done, without having to go through Congress–and without running a gauntlet of lobbyists.
As noted above, under the ACA, CMS can roll out successful pilot projects nationwide, without needing approval from Congress. In the past legislators have refused to let Medicare expand such projects. For example, in the 1990s, a Medicare demonstration project that “bundled” hospital and physician payments for Coronary Artery Bypass Grafting (CABG surgery) saved 10 percent of the cost for these procedures over a five-year study period. On a risk-adjusted basis, participating hospitals had a significantly lower rate of inpatient deaths compared with Medicare’s national averages. This is just one example of a pilot project that Congress blocked.
The ACA also gives the Secretary of Health and Human Services the power to reduce Medicare payments for over-valued services, and raise reimbursements for under-valued services.
In addition, hundreds of sentences in the ACA legislation begin “The Secretary may . . .” giving her wide latitude to begin to transform the system from within. Private sector insurers have said that they will follow Medicare’s lead.
A Small Slice of the ACA Depends Upon Congressional Appropriations
Even conservatives realize that they won’t be able to repeal the Patient Protection and Affordable Care Act. The Senate will block all attempts to kill the bill, and in the worst-case scenario (if moderate Democrats cave), President Obama will veto legislation that attempts to overturn the legislation, or even remove a major plank from the ACA. Yesterday, he made that clear.
Still, many fret that Congress will refuse to approve appropriations needed to implement reform. But, according to Geoff Manville of Mercer, a human resources and financial consulting firm, “That tactic will have its limits. Only about $115 million of the approximately $1 trillion law is subject to the congressional appropriations process.”
In an interview published on Kaiser Health News (KHN) Agnes Carey, senior correspondent for KHN, agrees that legislators would have a tough time trying to ‘defund” reform: “A lot of the funding for the health care law is mandatory spending, so they would have to be able to successfully change the law. And, as you know, while Republicans may be able to move some of these things through the House, they are going to be stopped in the Senate and if for any reason they survive, the president would veto it and the Republicans don't have enough votes to override a veto. So, they will likely be unsuccessful.”
Manville adds: “Revisiting the bill is kind of like opening Pandora’s box.” In a phone interview this afternoon, he told me what he meant: “You never know what’s going to happen when you revisit a bill. You never know what the end-product will look like after it wends its way through Congress. For all the best intentions of bill-drafters, often what emerges at the end of the line bears little resemblance to what they intended– especially when the passions run so high. It will be a challenge for the Republican Party to manage the tea party legislators’ expectations,” he added.
“There could be some minor tweaks to the law,” Manville continues “Democrats themselves have indicated that the law is a work in progress. Earlier today, President Obama said, ‘I think there are going to be examples where we can make improvements, but we would have to make them with a scalpel rather than a machete.’ I don’t expect any major changes in the next two years.”
I agree. The president has indicated that he will accept changes in a provision that requires businesses to file 1099 tax forms identifying anyone to whom they had paid $600 or more for goods or services in a year. The goal was to help pay for health reform by identifying businesses that are cheating on their taxes by underreporting their revenues, but this part of the legislation is not in any essential to achieving the goals of universal coverage.
I foresee trouble in just one important area: Congress may well refuse to appropriate the money needed to set up the Exchanges. But the Exchanges are not scheduled to open until 2014. Ideally, the states would begin planning now. But if necessary, they could wait until 2013–after the fall 2012 election–and still have more than a year to set up the markets where individuals and small businesses will be able to buy insurance at group rates
If Conservatives Don’t Put Americans Back to Work by Nov. 2012 . . .
Now that conservatives have taken control of the House, they have assumed responsibility for solving the worst economic crisis we have faced in nearly 80 years. They must create jobs.
Unfortunately, the politicians who won at the polls Tuesday believe that those jobs should come from the private sector. I say “unfortunately,” because companies are not going to hire more workers unless they know that the investment will pay off in the form of higher profits. And today, the customers just aren’t there to buy their goods and services.
After decades of shopping until they drop, Americans have begun saving. Families struggling to pay off credit card debt will not spend. Workers worried about job security are not going to the mall. Nor are they eating at expensive restaurants. And because the cost of U.S. labor is so much higher than in many other countries, most of our products are too pricey to find large markets abroad. (There is no way that we can reduce wages. After adjusting for inflation, America’s middle-class is now earning less than it did twenty years ago. )
Congress may trim taxes for corporations and small businesses, hoping to fuel hiring, but companies will sit on the money. Corporations may pay out dividends to shareholders. Smaller businesses may use the tax breaks, plus tax credits, to offer health benefits to the employees they want to keep. But companies won’t hire new workers unless they know that they can sell the goods and services those employees produce.
More than 25 years of spending and borrowing have brought the economy to this point. We cannot expect a sudden turnaround. As Paul Krugman noted today (quoting the New York Times’ David Leonhardt): “recoveries from financial crises tended to be weak because consumers and businesses [are] slow to resume spending. Around the world over the last century, the typical crisis caused the jobless rate to rise for almost five years, according to research by the economists Carmen Reinhart and Kenneth Rogoff. By that timetable, the unemployment rate would rise for a year and a half more.”
In some ways, Democrats were lucky that they took a drubbing this year. They won’t be held responsible for what happens, or doesn’t happen, next year–or the year after. Conservatives face an enormous challenge.
The only way that the government can put Americans to work is if it follows FDR’s example, and creates public-sector jobs. Certainly, there is much work to be done. Bridges and roads need repair. There is some money left in the first fiscal stimulus package, but much more is needed if we are going to tend to infrastructure that has been neglected for so long. Public schools need teaching assistants, gyms and gym teachers. In some cases, decaying schools should be torn down and rebuilt. Inner cities need safe, clean parks and playgrounds. Demand for well-trained home health care workers is growing; seniors are living longer than ever before, and will need long-term care at home and in community centers. Government should be hiring people to explore alternative sources of energy. And that’s just a short list.
But this new Congress wants to make the Bush tax cuts for the very wealthy permanent, at a cost of $3.3 trillion over ten years– more than three times the price of health care reform. And conservatives are totally opposed to deficit spending. Where then, would they find the funding needed to create jobs? They won’t.
One thing is certain: the November 2012 election will be yet another referendum on jobs and the economy. If conservatives fail to bring unemployment down to 6 percent –and to be fair, I really don’t see how they can– voters will be even angrier than they are today. (It’s worth noting that the Congressional Budget Office doesn’t expect unemployment to fall below 7 percent until 2013. Not so long ago, 5 percent was considered "full" employment, and the CBO doesn’t expect to see that number until 2015. And as U.S. News & World Report’s Rick Newman points out, “Other economists think unemployment will go even higher, and take longer to come down.”
Reform Has Begun
In the meantime, healthcare reform already is underway, and will continue, no matter how conservatives rant and rave. Legislators can call CMS director Don Berwick and HHS Secretary Kathleen Sebelius in and “grill” them. But neither Berwick nor Sebelius are likely to be flustered– or intimidated. They know their subject well, much better than most Congressmen, who have never read the legislation. Insofar as Berwick and Sebelius are given a chance to talk, they may even be able to deliver some good news to the American public.
For instance, HHS Secretary Kathleen Sebelius might bring up the fact that she already has used the new powers granted to her under the ACA to negotiate lower premiums and lower co-pays for many Medicare Advantage seniors, beginning next year. Using Section 3209 of the Affordable Care Act, Sebelius identified 300 Advantage plans that were gouging customers, and successfully negotiated more reasonable cost-sharing and premium increases with 298 of them. The average Medicare Advantage premium will fall by 1 percent next year, and despite fear-mongering that the ACA would destroy the Advantage program the health insurance industry itself predicts a five percent growth in the Medicare Advantage market.
Or, the Secretary might mention that, according to the Wall Street Journal, the tax credit that now helps small businesses purchase insurance for employees is expected to boost the percentage of small businesses with 3 – 9 employees that offer health benefits from 46 percent last year to 59 percent this year.
As for Berwick, he might describe how, on the ground, health care providers are gearing up to meet the goals of reform legislation. Far-sighted hospitals administrators have begun to launch new programs that focus on patient safety and greater efficiency. They recognize that, under the ACA they will face financial penalties and bad publicity when hospital infection rates are made public. But that is not the whole story. The debate over reform also has made many health care providers more aware that they need to rein in the cost of care –and that overtreatment can be dangerous for patients.
Physicians are pausing to consider whether all of those diagnostic tests really are necessary. See this HealthBeat guest-post by a hospitalist who sent a brave memo to his residents earlier this year, cautioning them about over-testing. He is not alone.
As Paul Levy, President and CEO of Beth Israel Deaconess Medical Center in Boston, pointed out on The Health Care Blog not long ago: “Recent trends in radiology imaging portend a dramatic and rapid reduction in this segment of a hospital's business plan. Even before capitated (or global) payments [that the ACA calls for] have come into full play there has been a large reduction in the number of some types of imaging studies in hospitals.
“Our Chief of Radiology summarizes our experience — common to other hospitals as well — and provides some of the reasons: ‘The biggest hit has been in CT, the modality we are most dependent on for revenue. We are about 10% down in CT cases from last year, due to a combination of patient and physician fears about radiation exposure, more prudent ordering of studies by physicians, leakage out of the medical center, and the introduction of physician incentive programs (to minimize the amount of imaging) by some insurers.’
“’Also, and very surprising, we have not seen an upswing in ultrasound or MRI to match the CT volume drop. We have, however, seen an increase in the number of patients arriving with their scans on CD ROMS having been imaged at other lower priced vendors. We don't bill for these interpretations even though we are frequently asked to reinterpret the studies for our clinicians, and BIDMC is paying to store these images on our PACS systems.’”
The drop in CTs is not due to the recession, Levy adds: “this occurred while our overall patient volume increased during the same period.”
As I have said in the past, reform is a process, not an event. It has begun to take hold, not only in Washington, but in the minds and imaginations of hospital executives and doctors across the nation. Physicians are talking about “Accountable Care Organizations.” Young doctors in the National Physician’s Alliance have embraced reform; in the spring, they joined more than 200 other health-related organizations to push for the Affordable Care Act. They grassroots reformers will not give up.
My guess is that it will take ten years to achieve the goals of reform. I would compare the Affordable Care Act it to the Civil Rights Act of 1964. Like those who fought Civil Rights legislation, those who oppose the ACA will not lie down like lambs. They will fight. They command great wealth, and the battle will be bloody. But, in the end, new legislation that insists on greater equality has become the law of the land. And it will prevail. Unless we want to see healthcare become unaffordable for most Americans, we have no choice.
Good Lord Maggie give it a rest already. Soon defunding will begin.
An excellent repertoire Maggie! Thanks!
Two points Maggie:
If the Repubs did manage to bring down the unemployment rate to 6% but did it all with minimal wage, no benefit jobs, would that make things any better and would we even know the caliber of such created jobs?
Related to this unemployment idea/crisis, would a better Dem strategy in 2008 have been to purposely try to lose the election with very poor candidates and very little effort so that the Repubs could wallow in the crap they created for another 4 years. If that had happened, I think the country might be really ready for a clearly identified change in 2012.
What happened on Tuesday was a worst case scenario for Obama. From reading your article, you would think Republicans won the Senate. Sorry, the Democrats are still in charge of this ship and Obama and the Senate Democrats are going to have to worry if unemployment is above 6% and will still get the Lion’s share of credit or blame for the next two years. You can minimize what happened yesterday if you like, but Tuesday hurt and you know it. Republicans are going to be in charge of redistricting at over a 4 to 1 margin, that alone may have set progressives back 10 years.
Great job listing many of the specific positives about the reform bill, espl’y the opportunities for cost-saving/quality improvement Medicare Pilot Programs to move ahead without getting stuck in the muck of Congress.
I’m still furious and deeply disappointed about the public option being gutted out of the bill; that was the “Choice of coverage” that I and many other long-time reformers have been fighting for for decades. What are the merits of trying to bring the PO or even calling it “Medicare Part E” (for Everyone) back into the public discourse in a serious way, esp’ly after the Nov. 2 election results? I suppose we’re forced to focus on protecting what’s good in this imperfect bill without voicing what could make it better…
Interpretation on the politics of it all as things move forward is up for grabs, but I disagree with Jenga that the Dems will take all the heat for everything. Time will tell.
I was glad that I happened to hear my Congressman Mike Capuano being interviewed on the radio Nov 3. He expressed frustration that the Dems gave away a lot in the final reform bill (I assume he was referring to the public option, among other items) without getting much in return for making that huge compromise–except for passage of the final bill, I suppose!.
Congressman Capuano also stated that it’s “bad government” to not be able to report to the American people specifically how many jobs were saved in and/or created in every major city and region with the stimulus spending. He has a point there.
I don’t think they (R’s) won’t take heat. I just think it’s complete spin to say that conservatives will take all the blame if unemployment is over 6% when Dems are still in control of the Senate and Presdency. Parts of the article seem to hope for a continued bad economy so conservatives get the blame. I can tell you, if the economy is still as bad as it is now, Maggie is not going to like having 1/3 of the Senate and the Presidency on the ballot.
Unfortunately, I agree with Jenga. It really becomes very simple. In 2012, if the economy is better, Obama will win re-election.
If it is worse, he will lose.
In the meantime I agree with Maggie that attempts to “defund” the ACA will be symbolic at best. Republicans can’t cut enough from the ACAto make any real difference in the deficit or to dismantle reform.
They can make life unpleasant for the officials who have to carry out reform. That does not equal stopping reform.
The voters made it very clear their priority is jobs and the economy. If Republicans ignore those problems to go after health care reform, then they will have badly misread the public mood. That could cost them in 2012.
Obama might do down with them, but that’s not much consolation.
What Republicans really need to do is move on past both the ACA and the financial reforms already enacted, and focus on the jobs situation. And since I agree with Maggie that they won’t try to fix our enormous infrastructure problems through public works projects, I fully expect them to spend the next two years continuing to demonize Obama, but not to actually do anything.
An article on Fortune’s website today spells out the disaster if that happens. The time to deal with our economic problems is now. If Democrats and Republicans can’t figure out how to work with one another, and quick, the moment will pass and it will cost far more in two years to fix the economy than it will now.
As it stands now, according to Fortune, we have to either cut spending by 5% of the GDP or raise taxes by 5%, NOW, to get the problems under control. But the effects are painful either way. It translates to spending cuts of over 21% or tax increases of 80%.
It makes the case for a VAT, and Republicans in Congress won’t touch a VAT.
I really don’t know what Republicans can really do to fix the deficit. I don’t think they can cut 21% of the Federal Budget, and they certainly aren’t going to raise income taxes, and they won’t consider a VAT. And since they consider government the problem not the solution, they won’t buy in on public works projects.
Businesses will continue to sit on cash because they can see the downward spiral.
The next two years are going to be painful to watch.
if economy’s better– probable — incumbents will benefit in 2012. that said, interesting to note that victory here basically involved old people with health coverage (medicare) who were largely unhappy with health reforms. a cynic could read that as suggesting that folks with good coverage are more interested in holding onto what they’ve got than extending coverage to others
One senior Washington expert told a small group that I was part of recently that based on the history of legislation similar in size and complexity to the PPACA, it will likely take 100,000 pages of regulations to flesh out and implement the health reform bill over the next several years. Most of that responsibility at the federal level will be with CMS and the IRS. If the funding appropriated for the necessary incremental staff to do this job is inadequate, it could slow down the implementation process considerably. Money to set up the exchanges, which you mentioned, is another issue. Regarding the exchanges, however, there are at least seven more Republican governors and hundreds more Republicans in state legislatures which will probably result in state level exchanges with more market friendly rules to encourage as much competition as possible. That’s a good thing, in my opinion.
Separately, extending the Bush tax cuts for couples making more than $250K per year ($200K for single taxpayers) would impact the deficit by $700 billion over 10 years according to the CBO, not $3.3 trillion as you wrote. To make the tax cuts permanent for all taxpayers would have a 10 year budget impact of $4 trillion of which $3.3 trillion is attributable to the middle income taxpayers that President Obama wants to preserve them for.
Regarding the potential for economic recovery, business and consumer confidence is an important concept but it’s impossible to quantify. Businessmen are in the business of taking risks. They don’t refrain from hiring people or buying equipment until they are absolutely certain that their investment will pay off. That said, it makes a difference if business people think the Administration is on their side or not. It’s helpful if they know what their tax burden is likely to be over the next several years. It’s helpful if they know what the regulatory rules of the road are. If they think their taxes are likely to rise in the near term or more burdensome regulations that will raise their costs are just around the corner, the uncertainty alone is enough to make them defer decision making at the very least.
Finally, President Obama is still the President. Democrats still control the Senate and Harry Reid will be returning as Majority Leader. Republicans won control of the House. That hardly makes them solely responsible for growing the economy. They will have more responsibility than they had during the last two years but if the economy is no better in November, 2012 than it was last Tuesday, it will likely hurt the Democrats more, especially since a disproportionate number of Senate seats up in 2012 are held by Democrats.
I expect that the healthcare industry forces will start to counter any potential cost savings by increasing service requirements or cost basis. For instance, while screening CT scans for smokers aren’t covered now, how long until they are?
See http://www.usatoday.com/yourlife/health/medical/cancer/2010-11-05-lungqa05_ST_N.htm
So in some ways I see whatever the government does as less important than what the industry does to feed itself.
Those industry executives and their Army of analysts, lawyers, PR folks, and lobbiests are pretty savvy and awfully capable at getting what they want.
This is aside and in addition to the manipulation industry will do during the regulatory drafting process.
A government regulator is like having a pop-gun in a gunfight. Its like the polish forces vs the german blitzkrieg, the aztecs vs. the spanish …
Now, the FBI/Justice Dept. vs. the Industry forces, that is perhaps a fairer fight.
Democrats lost the message war in 2010. They passed the ACA and then ran away from it. If they don’t tell the public what the ACA means to them, they will lose in 2012. They need an all-out campaign to teach seniors and younger people what the ACA will do.
I work mostly with Medicare and I’ve been signing up soon-to-be 65 year olds for their Medicare coverage. Many of these people are self-employed or work for small businesses and I tell them “now you’ll have decent insurance!”
I have recently been working with people who work for small, family businesses that are dropping their group insurance because the older workers and one sickly dependent have made premiums too high for everybody. They think they will do better on their own – except that at least one person, 63 years old, has been “declined” insurance by BCBS. He can get guaranteed issue for $850 per month for a plan with a $10,000 deductible!
This is outrageous and criminal in my opinion. I hate individual health insurance! The federal program should be open to people like this man – but because he has had insurance he can’t move to the federal high risk plan – so he can get ripped off by insurance companies, or risk losing his life savings if he goes without health insurance.
I have plenty of other stories like this to tell. These stories should be told so the public will understand how bad our current system is. These are people who have played by the rules, saved some money for retirement, but lost group insurance and now face financial ruin. If they were bums on the street they would get Medicaid. I think the American public might feel for these people – if they knew how many of them are out there. And there are many people in this situation.
gregory, NG, Jenga, Anne, Jenga(your second comment)
Gregory–Thank you
NG– low-paying, no benefit jobs wouldn’t do much good—they wouldn’t create much spending.
And if the Dems had lost in 2008, we would now be in the early stages of a Great Depression worse than the Great Depression of the 1930s.
The fiscal stimulus did some good–it just wasn’t enough. And we had to have health care reform now, including the cuts to Medicare Advantage and the 1% in in Medicare’s annual increases to hospitals, nursing homes, and home health agencies.
As Orszag explained, Medicare is a major factor driving the deficit. We had to begin breaking that curve.
Conservatives would not have cut Medicare Advantage–probably they would have increased payments.
Jegna– If you look at history, you will find that new presidents who
lose badly in the mid-term election still tend to win the second term.
Mitch McConell is so fixated on the idea of getting Obama out of the White House that I predict he will create gridlock that shuts down the government.
When Newt Gingrich did that, the public wasn’t happy with the conservatives. They won’t be happy this time either.
The Democrats in the Senate simply need to put together a good public-works job package and pass it. (With Reid back in the leadership role, I think they can.) Then Obama needs to go on TV and talk about the importance of this jobs package, and all of the wonderful things it can accomplish.
The House, of course, will vote against it.
The President and liberals need to make it as clear as possible that they want to use governmetn funds to create jobs Where do they get the funds? End the Bush tax cuts for the wealthy. That’s $3 trillion over 10 years.
The other thing that will hurt the conservatives is that fact that when people like McConnelll are angry, they look ugly on TV.
Obama possesses great impulse control, and will maintain his cool, whatever happens. He will seem reasonable while the conservatives will seem unreasonable.
Meanwhile, tea-party folks will cause problems for conservative leadership . .
Finally, it is essential that liberals spend the next two years making Latinos and African Americans feel that they are part of the party. Latino voters saved Democrats (including Reid)in several Southwest states.
African Americans, Latinos and Asians put Obama over the top in 2008. And their share of the population, is growing.
In 2008, they showed how much their vctes matter. In 2012, liberals need to make sure that even more of them come to out to vote. Conservatives still haven’t picked up on the fact that the demographics of the country are changing. (Or they don’t want to). So they will continue to alienate minoritites with their anti-immigration policies.
Finally, you’re right; the redistriciting will be a problem, though in many places the liberals will be able to fight it.
Ann– Good to hear from you again! I’ve wondered if you were still out there, reading the blog.
I agree– the Democrats will not be blamed for everything that happens over the next two years. The media has made it very, very clear that they took a “shellacking” and that while they maintained a narrow majority in the Senate, they are no longer in a position to get their legislation through Congress.
On the public option: As I keep saying, I think that Congress will revisit that issue.
First, there will be a shake-out in the insurance industry. Many insurers (esp. smaller insurers) won’t be able to make money under the new rules. They will disappear (or go into the supplemental insurance business)
The insurers who are left will consolidate. (This is actually a good thing because it will give them more clout with the large brand-name hospitals that have been gouging everyone. At this point, when it comes to healthcare inflation, hospitals and some specialists’ groups are a biggger problem than insurers.
Government regulators will keep a lid on insurers’ premiums. Someone needs to put a lid on hospital prices. This is where big insurers have an opportunity to become part of the solution.
But there may not be enough private-sector insurers left to provide the options that Affordable Care Act calls for in every state. And insurers may not be able to bring premiums down enough to make insurance affordable for the upper-middle class and the taxpapyers footing the subsidies.
At that point, someone in Congress is going to introduce a public option bill. (In 2013–maybe not until 2014, depending on how the 2012 election goes. If I am right, and conservatives take a beating in 2012, then liberals might have the votes for a public option in 2013.
I don’t blame them for not getting the public option this year. Lieberman made sure that it couldn’t be passed. Even when Democrats appear to have a majority, there is a huge difference between moderate Democrats and liberal Democrats. Throughout the Bush administration, moderate Democrats voted with Bush (or at least didn’t stop him).
Liberal Demomcrats pulled off a major miracle by managing to pass reform. If you counted votes in 2009, it was clear that legislators opposed to reform were in the majority. It really doesn’t matter what the majority of the public thinks. Most of the time, the majority of the public doesn’t even vote.
Big $$$ was against reform, and here I am referring not only to the health care industry (Pharma etc.) but many wealthy Americans who have pretty good healthcare and fear that if we have universal coverage, they will have to give something up– “share” their doctor with others (longer wait times for an appointment); pay higher taxes; not get every test they might think they want when they want it.
Of course not all wealthy Americans think that way.But some do. And in this country, Money equals power.
Finally, a few more bright spots: Rick Scott lost! (I was seriously worried which is why I kept writing about him.) And Jerry Brown won! California is a huge state, and it’s in big trouble. This a good time for “less is more” (Brown’s old slogan)thinking. He’s essentially an intelligent, decent man, and this time around, he’s grown up. I look forward to seeing what he does.
Finally, we didn’t just get “a bill.” We got a bill that says “The Secretary may” (at her discretion) roughly 1,000 times. Most people just don’t realize how much latitude the legislation gives her. But recently I appeared on a panel with Bill Hoagland from Cigna– a long-time staffer in the Senate, he understands the legislation very well, and reocgnizes the power that Sebelius has and how RADICAL the bill is. He expects “more regulation.”
Too many llibeals were focused on a couple of big ideas (single payer, public option) without realizing that everythign depends on the details. The “good” is in the details that shift power from Congress to HHS and Medicare. Smart people within the health care world like Paul Levy at Deaconess, Bob Wachter at UCSF, the folks at DArtmouth all recognize the implications of the bill. We won. It opens the door to virtually everything that we need. Higher quality, cost control, universal coverage.
Finally, It would be very hard to pin down how many jobs fiscal stimulus created—too many indirect effects of stimulus plus jobs not lost that woudl have been. Very difficult to “count” what didn’t happen. An attempt to do so would just have led to more squabbling and accusations of lying.
Jegna– re your second comment. Read history.
Seriously. Go back to the 1920s, and take a look at economic history and the history of presidential elections; read forward to
2010.
In 2008, I would have predicted that the Democrats would lose, big, in 2010. I can’t understand why anyone was surprised as voters turned against the administratoin. .(I also predicted that the War in Iraq would be another Vietnam–as did many other people I know.) History repeats–always with a difference, but it repeats.
I’m not “hoping” that the economy will continue to be bad. I KNOW that unemployment will remain high. I also know that it’s just a matter of time before the other shoe drops in the stock market, and people begin to head for the exits.
Read Krugman in the NYT.
Read my book “Bull! The History of the Boom. . ”
At the end of that book (published in 2003), I predict what has happepned to the economy over the past decade. (Real estate collapse; debt catching up with us) and advised readers to invest in gold, other commodities and Asia.
If anyone followed the davice, it worked out very well–unfortunately. I say “unfortunately” because that advice was based on my predictoin that we were heading into a recession/depression that would remind us of the Great Depression.
Now, history tells us that this will not end easily. Long periods of excess (the 1920s, the go-go years of the ‘Sixties and our recent boom 1982-2000)
lead to long, deep recessions.
Gold is still rising– a sign that the world is very worried about economic conditions, and that it doesn’t trust the dollar.
Finally, Jenga, please read my first reply to you. It will be fairly easy for liberals and Obama to make it clear to the public that they want to create public-works jobs and that Republicans are blocking them.
Joe SAys–
I read about the CT lung scans in the Times. Despite the headline, it was clear that this was hype.
If one actually reads the story you find that one of the lead investigators says “we actually don’t know whether this does any good.”
Medicare won’t be paying for this. And I very much doubt insurers will. (They are cutting way back on paying for diagnostic tests.)
See Gary Schwitzer on the hype here: http://www.healthnewsreview.org/blog/
Expect to see more press about how this is hype.
Government regulators– including Sebelius– have alrady shown their power. (If you actually read this post, you will see what she has done to bring down the cost of Medicare Advantage.)
As Pat S. has tried to explain to you, we have a long history of regulation working.
Maggie – Rick Scott is the Governor Elect of Florida. It was a narrow win but he won.
One other factor that could slow implementation of health reform down that I didn’t mention in my earlier comment is that each of the 15 members of the Independent Payment Advisory Board (IPAB) must be confirmed by the Senate. That leaves room for mischief unless Obama wants to fill the Board with recess appointments.
Regarding people who are already sick and considered uninsurable, the republican answer for them has long been expansion of high risk insurance pools. Interestingly though, according to today’s NYT, the take up of high risk insurance policies created under the reform legislation is running far below expectations so far.
The proposed repeal of the 1099 provision is a good idea. The relatively modest revenue enhancement that CBO attributed to this provision is far more burdensome, especially for small business than it’s worth. Whatever merits it may have for improving tax compliance, it’s just not worth pursuing in the current economic environment when we don’t need any more impediments to job creation. Credit card receipts don’t provide vendors’ addresses and tax identification numbers which the 1099 provision requires business owners to provide for each vendor from whom they purchased more than $600 per year of goods or services.
Rick Scott lost? I think you need to correct your statement.
Barry–
If we extend tax cuts for the wealthy, we will also extend tax cuts for hte middle-class. . As Merrill Goozner has reported:
“If you thought extending the Bush tax cuts for another ten years had a hefty price tag ($3.3 trillion, according to the Congressional Budget Office), check out this little-noticed Congressional Research Service report issued last week. Their tax wonk adjusted the CBO numbers for two factors – the increase in debt service and alternative minimum tax fix – and came up with a staggering $5 trillion price tag.
CBO chief Doug Elmendorf had harsh words for making the tax cuts permanent when he testified before the Senate Budget Committee last month . . .”
I went with $3.3 trillion–the lower number.
Tony & Barry, Panacea, Barry (your most recent comment.)
Tony & Barry: You are of course absolutely right about Scott.
I’m very sorry–my mistake.
Wednesday morning, when I looked at election returns, I saw a list of gubernatorial elections that Republicans had won, and Florida wasn’t on it. So I assumed Scott had lost (I also was suprised. The amount that he spent gave him a real edge, and Florida is a pretty conservative state where (as Jim Jaffe suggested earlier on this thread) many seniors are worried that they’ll lose something if everyone gets insurance. )
Panacea–
As I explained in early comments (replying to Jenga) there is every reason to expect that unemployment will remain high for the next two years. (Here, I am simply repeating with the CBO has said, what Krugman says, and what one knows from history.)
The only thing that would help is if the government creates jobs, and the Republicans will refuse to do that.
The Republicans will not “learn to co-operate” with the Democrats. In the past couple of days, they have made it very clear: they will work with the Democrats only if the Democrats adopt their policies.
The economy and unemployment will hurt Republicans in 2012.
I very much doubt that Obama will go down with them.
Both he and Senate Democrats can make it very clear to the public that they want to create public workos jobs to repair infrastucture, etc.
Conservatives will vote against this.
Conservatives will, as you suggest, continue to demonize Obama.
The more they do this, displaying their venom and hatred, the more they will turn off a sizable portion of the American public that is tired of hate ads, and and tried of bitter fighting in D.C.
Voters want politicians to do somethign constructive. Instead, conservative leaders are saying: “We have one goal–Destroy Obama.”
I agree that the next two years are going to be painful to watch–with one exception– health care reform will continue to go forward.
More people will be insured.
Medicare Advantage will be strengthened.
Many state regulators will fight insurers trying to raise premiums.
Some of Berwick’s pilot projects will flourish.
Sebelius will begin to roll them out nationwide.
Barry–
Anyone in the Senate who tries to stop the INdependent Payment ADvisory Board is saying: “I don’t care about the deficit.”
As Orszag has made clear,Medicare inflation is driving the deficit. The IPAB is charged with coming up with ways to reduce Medicare spending in any year that Medicare inflation is higher than CPI plus 1%.
The IPBA recommendations cannot cut benefits, raise cost-sharing, increase taxes, ration care, or cut subsidies for low-income Americans.
Luckily, IPAB members don’t have to be confirmed by the House, just by the Senate.
IPAB doesn’t begin making recommendations until 2015, so it isn’t necessary to confirm them immediately.
On the other hand, if the Senate turns this into a fight, I imagine the president would go around them, just as he did with Berwick’s and Warren’s appointments.
High risk insurance pools don’t work because the insurance is too expensive.
The American public is strongly behind providing insurance for everyone–including those suffering from preconditions–at the same price.
This (and the subsidies) are among the most popular parts of the bill.
I doubt that the SEnate would go along with any attempt to change them. If it did, President Obama would veto.
Of course conservatives and the U.S. Chamber of Commerce are against the 1099 fililngs: a great many businesses cheat on their taxes by under-reporting their income.
This has nothing to do with job creation. Unless you think that business owners who still from the rest of us (who pay our taxes) will use the stolen money to create jobs.
They won’t– not unless there are new customers for their goods and services. And as I have explained, in this economy, Americans are not shopping –they are saving.
And they will continue saving as they struggle to pay off credit card debt, and to keep up with mortgages that they can’t afford.
But the amount of money that the govt hoped to save by cracking down on tax cheats won’t make or break the heatlh care legislation, so Obama is wise to let conservatives win on this won.
It strengthens Obama’s position: he appears reasonable while Mitch McConell, his face contorted with anger and hatred, appears totally crazed.
Finally, that Fortune story is based on the theories of David Walker,
–who someone has described as Pete Peterson’s trained pet.
I have watched Peterson for over 20 years. He is, and always has been, obsessed with the deficit because he is fixated on getting rid of “entitlements” such as Social Security and Medicare.
Even in the midst of a deep recession, Peterson thinks we should be cutting Medicare benefits, raising co-pays, or maybe privatize it through vouchers, while also cutting SS, raising the retirement age etc.
The way to address the deficit at this point in time is to end the Bush tax cuts for the wealthy, proceed to reduce Medicare spending (which we are already doing, freezing Advantage over-paymetns next year, then cutting them the following year,
while beginning to address waste in Medicare spending.
CMS is already doing this, as are some doctors and hospitals who have begun reform on the ground.
Although I disagree with much of what is written here, you make well-informed and well-reasoned arguments regarding ACA. However, when you stray into economics, your arguments fall apart. In particular, this statement could not be more wrong: “The only way that the government can put Americans to work is if it follows FDR’s example, and creates public-sector jobs.” The idea that the Great Depression ended due to FDR’s public works programs is a myth that has been thoroughly debunked by the likes of Amity Shlaes and others. Remember that the government (federal, state, local, etc.) cannot pay an employee $1 without first extracting that $1 from the economy through taxation. Thus, in order to believe in the Keynesian fantasy of job creation through “stimulus”, you must assume that the government can spend that $1 more efficiently than the private sector. Is this really the argument you want to be making?
JimJ,Denise, Barry (your Nov. 5 11:59 am comment)
Jim J– Yes, seniors turned out at the polls. And, as you suggest, I’m afraid some of them are not happy about other people getting insurance. They are afraid that they will lose something.
Of course, this isn’t true. Under reform, Medicare will be stronger–and it will be on much more solid financial footing.
But most seniors don’t realize how close Medicare was to beginning to run out of money.
Equally important: young voters did not turn out.
They are disillusioned because Obama didn’t turn the country around in two years. And, according to a story in the NYT, they feel that Obama is “no longer talking to them.” They find all of this talk about Medicare boring, boring, boring.
They preferred the hip, casual Obama, smiling, walking back and forth on a stage with a microphone in his hand–before he became president. The Times article said that young, hip voters can’t understand why he didn’t appear on the Jon Stewart show more often.
Maybe he was tied up being president?
Maybe some of his advisors realized that it’s not really presidential to be called “Dude” on television.
Denise–
Your story of the 63-year-old is poignant.You are of course entirely right.
But I’m afraid that many younger Americans wouldn’t identify or empathize.
And many conservatives would say that he should have saved more (ignoring the fact that middle-class people don’t have that much discretionary income), or that if he took good care of himself, he shouldn’t have to worry about major medical bills at 63.
The lack of solidarity in this country means that we are divided: young against old; wealthy against the poor, etc.
That doesn’t mean that you and I should stop telling such stories. Just that this won’t persuade everyone that we need reform.
Also, I wouldn’t say the Democrats ran away from the ACA.
Though it’s true, very few tried to campaign on it.
Much of the public is wary of reform.
One could blame Obama and his party for not explaining it better.
But the truth is that the law is complicated, and the important provisions are in the details.
To be perfectly candid, most Americans don’t have the time or the interest. They would rather watch a football game then read even 1,000 words explaining the legislation.
As I have said in the past, the truth is usually far more complicated than a lie. Conservatives can wrap their fear-mongering lies in one-liners. That doesn’t work if you are trying to explain the legislation.
Also, in this country,we don’t place a high value on education. A startling percentage of Americans cannot find their own home on a map. (I can’t remember the number.)
As a result, many people wouldn’t be able to follow a 1,000 word well-written explanation of the legislation.
Barry–
Congress won’t be able to stop HHS from doing its job. This is a conservative think-tank fantasy.
If Congress really tries to block the funding needed to keep HHS and the IRS going, Obama will refuse to sign other funding bills.
Under the legislation, if state regulators aren’t doing the job, federal regulators will step in.
And the public wants regulators to crack down on insurers–even in states where they elected a Republican governor.
American businesses take risks???
Sure, in the 1990s, Silicon Valley entreprenuers took risks.
But U.S. Corporations do not take take risks. They know that if quarterly earnings drop even slightly–or don’t meet Wall Street’s expectations–they will be punished. Share prices will plunge.
And since executive compensation is all tied up with share prices . . .
Risk-taking means taking the long view. U.S. coporations take the short view. Ask Warren Buffet about this.
If U.S. companies took risks, U.S. auto companies would have developed cars that ran on something other than gasoline long ago.
If U.S. corporations took risks, banks would have focused on lending money to creative small businesses–rather than peddling no-interest balloon mortages to people who couldn’t afford them. They wouldn’t have then repackaged bad mortagages in new bottles and selling them to investors.
If American pharmaceutical companies took risks, they would have plowed money into developing drugs that we actually need–rather than spending their R&D dollars on “me-too” drugs–
more allergy medications, etc.
You suggest that we need more corporate welfare (tax cuts for business) and less regulation (more Enrons?)
Then maybe, maybe, corporations would hire some workers–and pay them less than they made 20 years ago (after adjusting for inflation.)
Probably not. Because they don’t have customers.
Finally, as I explained to Jenga, it will be relatively easy for Democrats to make it clear to the American public that they are concerned about jobs.
The Senate can pass a public-works jobs bill. (If it doesn’t actually pass such a bill, it can draft one and progressive Democrats can give it strong support.)
President Obama can go on televisoin to support it.
The House will vote against it.
It won’t be hard for people to figure out who cares about their concerns.
Especially if Mitch McConnell keeps saying: “We have just one goal–to get that man out of the White House.”
Meanwhile, I predict that in 2012 liberals will bring out the Latino, African-American and Asian vote. In this election, Latino’s saved a number of Democrats in the Soutwest (including Reid).
Liberals couldn’t help but notice.
African-Americans in the South will come out for Obama in 2012. Minorities don’t usually vote in large numbers in Congressoinal elections, but there is every reason to believe that they will come out in the next presidential election.
Pipster–
Thank you for compliment on my arguments about the ACA.
On the notion that when I “stray” into economics, I don’t seem to know what I’m talking about:
I was senior editor at Barron’s for more than a decade–writing about the economy, Wall Street, corporations, int’l economics, etc.
. I then wrote a column for Bloomberg about Int’l finance and economics. Some of those pieces were reprinted in places like the Financial Times.
I also wrote a book about the Bull Market of the 1980s and 1990s that Warren Buffet recommended in Berkshire Hathaway’s annual report.
I say all of this simply to establish my credentials as knowing quite a bit about economics.
I also know Amity slightly. She was on the editorial board of the WSJ and when I was at Barron’s she once asked me to write for the WSJ editorial page–to represent the other end of the political spectrum.
Like most involved with the WSJ editorial page, she is a right-right conservative.
Much has been written about her work “debunking” FDR’s jobs program.
I won’t go into that here–a long argument.
But let me just say that when it comes to Keynesian economics and what we need to do to stimulate the economy, I agree with Paul Krugman.
I imagine you would disagree with Krugman. But I doubt you would say that he doesn’t know much about economics –though you would, no doubt, disagree with his conclusions.
Fair enough.
Maggie – Nobody is talking about trying to stop funding to keep HHS and the IRS going. The issue is whether or not to vote to pay for the INCREASE in the number of employees both agencies will need to implement the legislation. As I understand it, HHS currently has about 4,500 career employees plus another one hundred or so political appointees. They could easily need hundreds more to implement the PPACA. The IRS required employment increase will probably not be as big an issue if the 1099 provision is repealed.
My comment related to impediments to assume risk referred to small business, which is the primary job engine in the U.S. these days. Large publicly owned companies are capable of fending for themselves. Indeed, they often prefer more regulation and complexity rather than less because it puts them at a competitive advantage vs. their much smaller usually privately owned competitors who may not be able to afford to hire the people to comply with all the regulations and navigate the system. The other issue is how many potential small businesses never get off the ground because entrepreneurs are too overwhelmed and intimidated by all the hoops they need to jump through from getting local and state permits and licenses to complying with federal mandates. At least a lot of states and localities are attempting to streamline the licensing and permitting process by creating one stop shops within their government structure to make it easier for those who want to start a business and hire people.
Maggie
A ton of topics here. First of all the Senate can’t draw up a public works bill. That would have to originate in the House. I don’t know how likely that is. I believe that our economic problems are bigger than the President and who controls Congress. They are structural and they are deep. This is the “new normal”. Maggie I know you have economic chops which is why I wondered why you pulled 6% unemployment out of the air, other than to make a strawman fallacy. I think if you are honest with yourself you don’t believe we could get to 6% unemployment even if your fellow Democrats hadn’t lost a seat Tuesday. Our problems are too deep and possibly irrepairable to obtain such a goal. I was a history major, history never repeats itself, it can be similar, but it’s never the same. You can use history to make any argument you like. Some military historians would laugh at the comparison from Iraq to Vietnam based on combat deaths and military accomplishments. Sociologists may think it’s a perfect comparison. We could go on and on, but there are plenty of topics here. As far as Obama’s future and midterms. That’s why we play the games. That’s why we have elections. We shall see what happens. Lastly about the Democrats and messaging, I don’t know why you have so much faith in their ability to control and generate a winning message. All we have heard from the left for two years now is about how poor it has been. “If only we could explain it better they would love us” has been a common crutch. At the current rate I expect Obama to be on Man vs. Wild with Bear Grylls. No doubt the next two years will be interesting.
Jenga:
Either chamber of Congress can introduce legislation. Only bills that raise revenue (ie taxation or tariffs) must be raised in the House.
Since a public works project would not raise revenue, the Senate can pass such a bill.
They just can’t include the provisions to pay for it . . . not on Constitutional grounds, but customary ones. The House customarily rejects such bills because they claim only they can appropriate money.
But if Obama wants to make a symbolic gesture, he can certainly encourage the Senate to do this.
So complex one could make a career of talking about it. Needn’t be. It’s simple. Medicare for All. Which does, quoting you, contain the “details that shift power from Congress to…Medicare.”
Barry, Jenga, Panacea–
Barry All politicians like to say that small businesses create jobs. (Obama has said it.)
Conservatives, in particular, love this all-American story.
Unfortunately, it’s a myth, according to the chief economist for the Small Business Administration’s Office of Advocacy.
“It’s not true,” replied Zoltan Acs when asked about whether small business is, in fact, the engine of job creation. “It’s half the story.”
“Small businesses are job creators; they are also job destroyers, as firms fail. Most start-ups do: About 40 percent of jobs created by start-ups are eliminated in the first five years. Meanwhile, established small businesses — your neighborhood dry cleaners — don’t generate many new jobs.
“The chief source of small-business job creation comes from a mere handful of firms — the “gazelles,” in the evocative term of economist David Birch — that start small and prosper. The difficulty is that the gazelles among the herd can been seen only in the rearview mirror. . .
“This conventional wisdom about small business was once revolutionary. About 30 years ago, Birch reported that small businesses were responsible for two-thirds to four-fifths of net new jobs (jobs created minus jobs lost).”
Why do most small businesses fail? Not because of government regulation–but because of LACK OF SALES. Not enough customers.
Check out the retail stores and restaurants that appear and disappear in your neighborhood. They’re empty.
In a recession this is a huge problem for small businesses because they don’t have the deep pockets needed to stay open for 2 years until they attract customers.
Money is now available at very low rates. Now one is borrowing it.
President Obama recenntly signed a bill to provide help for small businesses.
But without customers, it won’t revive small busineeses..
ON HHS needing more employees. First,
conservative think tanks tend to exaggerate how many new employoees will be needed to roll out regulations. It’s a way of suggesting that HC is being turned over to a huge bureaucracy,
Secondly, HHS is already issuing detailed reponses to questions about implementation: http://www.hhs.gov/ociio/regulations/implementation_faq.html
Third, yes, they will probably need additional employees–though if you search the word “appropriations” throuoghout the bill, you will find that it includes appropirations to oversee a great many programs.
Insofar as they need more approrpirations from Congress, if Congress refuses to appropirate the needed money, President Obama will simpliy refuse to sign other appropriations bills for things conservatives do want to fund. (Ezra Klein recently made this point in the WaPo.) At that point, “government shuts down. As Klein notes “this would be a disaster for both parties” and most likely conservatives would be blamed .(They will be the ones screaming and ranting while Obama continues to look and sound reasonable.)
Jenga–
I agree with you that it’s unlikely that the administration could bring unemployment down below 6% in two years, even if they had won the House.
In theory, if they spent enough money to create enough public service jobs it might be possible, but I doubt it–it would take time. .
Most importantly, given the deficit, moderate Democrats and Republicans would never vote to spend that much money on jobs created by the govt’
On the other hand, a good public works project that put many people to work–doing things that most of us think are useful and needed–could lift morale nationwide.
We need to see movement in unemployment– let’s say the official figure went down to 7 1/2% or 8% in two years.
In addition, let’s say that jobs programs in inner cities put millions of young people (17-25) who have graduated from high school to work, even part-time, in relatively un-skilled jobs in their own neighborhoods: (cleaning parks,cleaning up playgrounds, etc.) as well as more skilled jobs (roof-top farming, serving as teacher’s assistants, working in subsidized day care ceners
assisting home health workers, doing some of the “heavy lifting” in hospitals (learning how to “turn patients” so that they don’t develop bedsores.
This is a skill, and very important. The single most expensive and preventable hospital error is letting patients develop bedsores. They lengthen hospital stays and once started, are very hard to cure. If they go deep enough, they can kill.
They can be prevented if patients are “turned” regularly (or reminded ot turn themselves.) But many nurses have a hard time “turning” heavy patients–and most nurses just don’t have the time to do it as often as necessary.
Many more students would finish high school if they felt fairly certain that they could get one of these jobs.
Making it through h.s. and finding that there are no jobs out there is terribly depressing-leads to drug use, alchohol, a zillion problem.
But you are right, we are looking at deep structural problems. By and large, we are not going to bring manufacturing jobs back.
We need to focus on service jobs that actually add to the wealth of the nation by making the U.S. a better, cleaner place to live where our kids get a much better education–preparing them to add to the wealth of the nation themselves.
Green jobs. Smaller classes in our schools. Better pay for beginning teachers to attract college graduates who are graduating in the top 20% of their classes–as well as some of the newly minted Ph.D.s who have experienced teaching and are good teachers for high school English, political science, history, int’l economics courses.
I’d pay less attention to standardized testing (there is much gaming of the tests and having to “teach to the test” does not attract the most intelligent, creative teachers.
I’d pay far more more attention to reading proficiency from 1st grade through 12th grade. If people can read easily–and have a large vocabulary–they can learn anything. If they can write well they will find their skills are needed throughout society.
On the importance of understanding history: the parallel between Vietnam and Iraq may not be clear to some military historians, but it was all too clear to the West Pointers who have been serving with one of my relatives ever since Bush began to plan the invasion.
Usually, the “West Pointers” are enthusiastic about whatever the army is doing, it’s part of helping morale. But in this case “they knew, from the beginning, that it was a mistake. They know history. They hated Rumsfeld–hated him. They knew once we got into Iraq, we’d never get out.
Some had relatives in Vietnam.”
So in the run-up to the war, “the West Pointers said very little. They knew.
“This would be guerilla warfare, but instead of fighting in the jungle, we would be fighting door to door. The people wouldn’t want us there. . . . We would be there forever.”
Thanks to speedier medical care, more soldiers are makign it back to the U.S., but as in the aftermath of Vietnam, many are suffering from serious mental health problems, drug problems, drinking problems. Spousal abuse, child abuse. . . .
My relative,who has been in the army for 20 years, stationed in the Middle East, Korea’s DMZ, Germany–all over the world– has watched the number of suicides climb.
On who can introduce a WPA bill– see Panacea.
By the way, this is an idea that has been proposed, repeatedly by people ranging from former CEO Leo Hindery (a very bright man) to economist Robert Shiller (author of Irrational Exuberance, Shiller understands the deep structural problems as well as anyone.)
Panacea– thanks for exmplaning how the Senate could introduce a bill.
I just hope they will. I’m afraid this falls into the “Americans always do the right thing, but only after they have tried everything else first” category. Wish Ted Kennedy was still around.
My hearing Speaker-Elect John Boehner utter the worn out, completely uninformed Republican refrain, that we heard during the last presidential campaign and during the long health care reform debate that “the US has the best health care system in the world” made me feel that we had lost many of the hard fought gains of health care reformists and the provisions of the ACA.
Thanks Maggie for providing intelligent evidence and opinion to the contrary.
Dr. Rick Lippin
Southampton,Pa
You decry anecdotes yet use them as your own proof.
Maggie,
Thanks for the response. Yes, I definitely disagree with Prof. Krugman. In fact, I wasn’t sure he even agreed with himself anymore! He described the Bush deficits as a “fiscal train wreck”, back when they were running about $300-400 billion. But when the 2009 deficit passed $1.4 trillion, he said that they were not problematic and called for further stimulus spending. I used to read him to get an idea of what the left is thinking, but there’s no reason to even pay attention to him any more.
pipster–
Krugman’s position on the deficit hasn’t changed– what has changed is his position on what we should do about it.
He didn’t think that President Bush should cut taxes for the wealthy and add to the deficit.
By the time the Obama administration came in, the deficit had, indeed, grown, but, in Krugman’s view, it was no longer the top priority.
Unemployment was running 10% (reported) to 17% (real including those who had given up looking for work, those working part-time who needed a full-time job, etc.)
At that point, Krugman argued that we needed a larger fiscal stimuls package to help create jobs.
He wasn’t saying that the deficit wasn’t important, but that in context, it wasn’t the top priority.
We needed to (and still need to) stimulate the economy.
This is much like the old debate over inflation vs. unemployment.
Traditionally, Republicans considered inflation a bigger threat; Democrats viewed high unemployment as a greater problem, which should be addresssed first..
No doubt you believe that if we maintain the Bush tax cuts for the wealthy, that will lead to spending–and ultimately to jobs.
Krugman, by contrast, doesn’t thing the wealthy will spend much of the money: “Additional stimulus could come from tax cuts, but not tax cuts for the wealthy or for corporations.” According to Krugman, neither are likely to spend enough of the tax cut to make a difference:
See
http://www.cnbc.com/id/38922732/Economy_Needs_Another_Big_Stimulus_Push_Krugman
In August he argued that “If you give a temporary
tax cut to wealthy people who are likely to be highly liquid, they are not going to spend very much of it at all,. . Give a temporary tax cut to corporations, who are sitting on piles of cash, they are not going to spend any of it.”
But if, instead of extending tax cuts for the wealthy, gov’t keeps the money, GOV’T WILL (or at least SHOULD) spend it on infrastructure projects, and even borrorw (adding to the deficit) to invest in infrastructure.
Here Krugman points out that the bond market is willing to lend the government money at very, very low rates.
Krugman explains: “The bond market is telling us it’s terrified of deflation, of a weak economy for a very long time.”
In other words, the bond market views deflation as a greater threat than the deficit.
I tend to agree that a Japanese-style deflationary recession is the worst-case scenario.
Normally (in the past) I have been concerned about deficits. Becuase of our growing deficit, the rest of the world no longer views the dollar as a safe haven. The price of gold reflects the lack of confidence in the dollar.
This could become a serious problem if int’l investors begin selling the dollar (Trasuries) forcing the Fed to raise interest rates.
But at the moment deflation, very low growth and high unemployment seem to me the greater threat. .
Hence govt should spend–even if that means deficit spending–As Long As Govt is Spending on Something That Will Add To the Wealth of the Nation.
Spending on infrastucture, education, the enviroment will add to the wealth of the nation.
Bush-style spending– on war and tax cuts for the wealthy didn’t add to the wealth of the nation.
I’m sure you know the argument, though no dobut you disagree.
Dr. Rick–
Nothing really has changed. Boehner thought we had the best health care system in the world two years ago, and still does.
We will never convince conservatives that wealthy Americans aren’t getting the best care in the world–by and large, wealthy conservatives don’t think they are being overtreated. Though they do think that we’re spepnding too much on the poor (by expanding Medicaid). The poor should show more individual responsiblity!
So if we can’t persaude conservatives, who do we need to persuade? Liberals.
Too many liberals still think that the big problem is private insurers.
They dont’ want to realize that insurance is expensive because the underlying cost of care is way too expensive –thanks to too many unncessary tests, treatments, hospitalizations and meds.
In addition, we pay too much for most health care products and services.
Many liberals don’t want to believe that this is the core problem because they, too, fear that care will be “rationed”–i.e. that they won’t get something that they think they need.
In fact, reform won’t ration care; it will just make it rational.
With time, people will adapt, but it’s going to take time.
I think you have it Maggie! So let the rich folk pay for their own overtreatment and the rest of us will have cheaper rational care. Why won’t that work?
.
Maggie had written:
“Despite Congressional Gridlock, HHS, and CMS Will Move Forward”
It’s already moving forward in the bluest of all blue states, California.
From the Monday LA Times Nov 8, 2010:
“Last month, California joined the ranks of states that have created a federally funded health plan for people who are medically uninsurable. All states either have a plan or will have one soon.”
“California’s Pre-Existing Condition Insurance Plan was mandated by the Affordable Care Act, the federal healthcare reform passed this year by Congress. It is designed to provide coverage to people who cannot get private insurance due to preexisting conditions. The plan will be in place through 2014, when private insurers will be required by law to provide insurance to everyone, regardless of their prior health issues.”
“Two types of people can qualify for the federal plan. The first is those who have preexisting conditions that prohibit them from getting private insurance. (A person can prove this with a rejection letter from an insurance provider dated within the last year.) The second is people accepted for private insurance but who face premiums higher than those offered by the state insurance programs.”
“Both the state and federal plans are overseen by the Managed Risk Medical Insurance Board.”
“The federal insurance is a PPO (preferred provider) plan. The state offers three options run through Anthem Blue Cross PPO, Contra Costa Health Plan or Kaiser Permanente.”
“The state has already received about 500 applications for the federal plan. And there is plenty of funding for the program — an actuarial assessment in May found that the federal allocation of $761 million through 2013, coupled with premiums, would accommodate 17,000 to 23,000 subscribers at any given time, Esajian says.”
http://www.latimes.com/health/la-he-high-risk-pool-20101108,0,7199647.story
California will be moving FORWARD while unfortunately the majority of the country will be falling over each other trying to placate the right and move more and more to the center.
All we in California can do is LEAD by example.
~OGD~
Maggie,
First, it’s a pleasure to have a reasoned debate with someone from the other side. Man, I got sick of the campaign ads in the last month.
Second, I think you attribute more nuance to Krugman than is deserved. He is pretty plainly an ideologue to me, and I have yet to see the discussion of priorities that you describe.
Third, I’m not going to wade in too deep on the unemployment vs. inflation, supply-side vs. demand-side debate. Many, many books have been written on this topic, obviously. I know where you stand, and you know where I stand.
Fourth and finally, however, there is one point where you mischaracterize the position of folks like myself. You say: “No doubt you believe that if we maintain the Bush tax cuts for the wealthy, that will lead to spending–and ultimately to jobs,” and you also go on to quote Krugman on the same point. Actually, that’s not what I believe. I agree with you that tinkering with marginal rates for the top 1% +/- is unlikely to have any measurable impact on their spending. BUT, you (and Krugman) assume that the wealthy only do two things with their money: spend it or bury it in a coffee can in the backyard. In fact, the wealthy invest far, far more of their income than they spend. And it’s this investment in business that (I believe) our economy needs every bit as much as spending growth. Even if the wealthy only park their money in a basic checking/savings account, that money is used by the bank to lend–often to businesses. So I go back to the other fallacy that I pointed out in my original post: when you (or Krugman) call for more stimulus spending, you assume that the government can spend that money more efficiently than the wealthy, or the banks/investments where they park their wealth. That assumption is not and has never been true, and that’s why additional stimulus spending has not improved the economy.
The problem is the savings from tax cuts for the rich goes toward investments in business overseas, which creates jobs over there, not here. If we’ve learned anything from the eight years of the previous administration is that this has failed to spur US business investment and failed to provide US jobs. Insanity: doing the same thing over and over and over again and expecting different results.
pipster,
I understand what you are saying about how the wealthy invest their money rather than save it in a savings account or stuffing it into a mattress.
But investment in the markets is not the same thing as corporate spending. It doesn’t matter how much money the wealthy park into hedge funds, mutual funds, or bonds/bond funds. Corporations and banks are sitting on piles of cash. THEY are not spending.
They won’t until the economy signals the general population is in a mood to buy. The general population won’t spend more than they have to because they CAN’T. Real income is stagnating and even declining. People are afraid of losing their jobs. There is no consumer confidence.
We are in a vicious cycle, and we need an outside intervention to break the stalemate and get the economy moving again.
That intervention has to come from government because Wall Street will NOT do it.
Panacea,
I think you put your finger on something important: banks (and corporations, to a lesser degree) are sitting on lots of cash right now that they are afraid to lend. That’s because (1) the regulatory and tax environment has too much uncertainty; and (2) they still have a ton of bad real estate debt on the books that has not yet been written down to current levels. I don’t think the economy is going to improve until item #2 is solved. And it’s not something that a blip in consumer spending is capable of fixing either. I really hope I’m wrong, because I think we’re in for a very slow and prolonged recovery.
Investment industry giant John Bogle estimates that the financial sector takes $560 billion a year out of society. Banks, money managers, insurance companies and annuity providers. They’re all subtracting value from the economy.
Olden Golden, Pipster
Olden Golden: Good for California! And I am glad Jerry Brown was elected.
Pipster–I’m enjoying the debate too.
You are right that the wealthy will invest the money.
But the question is whether that investment actually adds to the wealth of the nation.
Right now, a great deal of wealth is flowing into gold. (cracked $1400 today)
Gold doesn’t create many jobs.
Gold has been in a bull market for a long time-and I expect it will continue to go up, for some time.
Wealthy Americans also are making money by investing in Asia– China, India, etc. Stocks as well as well-run foreign bond funds have been doing very well. (Pimco, etc.)
All of this investment abroad is helping to create a middle-class in these countries–and that is a good thing.
But it’s not helping our economy, or creating jobs for our workers.
In the U.S., I’m hard-pressed to think of many corporations that provide a good investment opportunity and are producing something of real value . . .
Some of the most successful companies are making acquisitions, and I think they’re overpaying.
Once again, too much money chasing too few things creates bubbles.
If Comcast takes over NBC, we’re told that Comcast will have the market clout to push the price of cable television even higher. I fail to see how this will help anyone–except those who own the stock.
You write:
“when you (or Krugman) call for more stimulus spending, you assume that the government can spend that money more efficiently than the wealthy, or the banks/investments where they park their wealth. That assumption is not and has never been true, and that’s why additional stimulus spending has not improved the economy.”
Here, everything turns on what you mean by spending money “efficiently.”
To me, efficient spending means investing in something that adds long-term value to the economy and the society.
When government invests in public education, public health, parks, the environment, and human capital (by providing college scholarships) it adds to the wealth of the nation.
As I’m sure you know, for-profit shcools and for-profit prisons have not worked out very well.
And from my experience teaching at Yale, I have to say that the nation’s most expensive private schools are not doing a better job of educating that the country’s best public schools (which often can be found in the upper mid-west and NorthWest as well as Northern New England and cities like NYC where our best public schools are outstanding. (My children went to NYC public schools, K-12.)
Another example of fruitful public investment: in Manhattan, the city has been investing in refurbishing parks in recent years; it also has been making investments in the subway system. On the West Side, where I live, Riverside Park has been transformed and a major subway stop totally renovated.
Central Park remains beautiful; given its size, it is well-kept.
Much private sector investment goes into producing gadgets and services that we don’t need– and that, in many cases, harm us: junk food,
cigarettes, unsafe gas-guzzling automobiles, drugs that leave many Americans over-medicated, produced by drug companies that hide what they know about risks; unsafe for-profit hospitals that over-charge; medical device-makers that bribe doctors to use over-priced, sometimes dangerous devices . . .
Companies like WalMart sell pretty good products at low prices– but they underpay their workers, and benefits at WalMart are a joke. This means that parents can’t send their children to college.
This is one reason why social mobility in the U.S. has all but collapsed. One’s chance of moving out of the working class and into the middle class is now greater in most of Western Europe than in the U.S
I read that UPS is doing well–but I’ve had more packages go astray when I send them via UPS. . .I’ve never lost a package sent through the U.S. postal service.
(Fed Ex is very good, but pricey when compared to the U.S. postal service’s overnight delivery)
And while the postal service is the butt of many jokes, it is, in fact, both affordable and very reliable.
Gregory, Panacea,Pipster (replying to your most recent comment)
Gregory–responding to your two comments:
On investment overseas. Exactly. You’re absolutely right.
I should add that I think it’s fine that wealthy investors are investing oversaeas. People in Asia need jobs too. And some who were desperately poor (in countires like India and China) are now moving into the lower middle-class/middle class.
This is good for everyone on the globe. We’re all part of the human race, and a huge economic divide between “the West and the Rest” only adds to global tensions.
That said, you are right when you point out that if wealthy pepole enjoy tax cuts and invest abroad, that is not helping the U.S. economy. If the top 2% were paying more in taxes, that money could be used to create jobs in the U.S. (See my reply to Pipster)
You also write that ” Investment industry giant John Bogle estimates that the financial sector takes $560 billion a year out of society. Banks, money managers, insurance companies and annuity providers. They’re all subtracting value from the economy.”
I know Bogle. He is one of the most honest people on Wall Sreet– and he is right.
Banks, mutual funds, etc. over-charge–too often, fees are way too high. (But high fees are needed to fund sky-high bonuses and profits on Wall Street.)
Panacea–
Yes. It doesn’t matter if the wealthy invest in corporations if corporations are going to sit on the money.
Companies (both large and small) will not create jobs unless they have customers.
And for the reasons you cite, Americans are not spending.
This is, as you say, a “vicious circle” that only gov’t can break.
Note that Pipster basically agrees with you.
Pipster–
(replying to your most recent comment)
You write that “banks (and corporations, to a lesser degree) are sitting on lots of cash right now that they are afraid to lend. That’s because (1) the regulatory and tax environment has too much uncertainty; and (2) they still have a ton of bad real estate debt on the books that has not yet been written down to current levels.”
I don’t agree with your first reason. Banks were not lending during the final years of the Bush adminstration– and they certainly didn’t have to worry about regulation. Nor were coprorate taxes a great threat. They didn’t lend because there were few really good opportunities for leindg.
Number 2 is certainly true, but you have left out the most important reason,( #3:)
They are afraid that if they lend, businesses won’t be able to make a sufficient profit on the money, and thus will have a hard time repaying the loans.
Everything comes back to the lack of customers and sales.
But I totally agree when you write: “I don’t think the economy is going to improve until item #2 is solved. And it’s not something that a blip in consumer spending is capable of fixing either. I really hope I’m wrong, because I think we’re in for a very slow and prolonged recovery.”
Real estate cycles move slowly. It will take a long time to work our way out of this very deep hole. And, as you say, a slight improvement in consumer spending won’t cure the problem.
There is really nothing that the Fed can do.
This brings us back to the administration creating WPA-style jobs . . . Or hunkering down for what could turn out to be a Japanese style recession.
I’m going to let the main argument rest now, but there are a few tangential points here that should be addressed:
* Re: the definition of “efficiency”. I generally accept your definition. And by your own definition, the stimulus is a colossal failure. The single largest category of stimulus spending to date is transfer payments to states, used primarily to prop up underfunded pensions and pay bills that were already past due. Add to that the unfortunate (but hilarious) cocaine monkey study, signs promoting the stimulus program, etc. Not much long term value added to the economy or our society. I’d rather leave the dollars in the hands of the taxpayers, even if they are a bunch of greedy Wall Street bankers.
* Re: for-profit schools. Not sure if I follow here. I don’t know of many true for-profit educational institutions. University of Phoenix comes to mind, and they seem to have found a pretty successful model.
* Who are you to say that consumers don’t need the gadgets and services you describe? If somebody buys them, they obviously see the value, even if you don’t.
* Your Wal-Mart comment is a non sequitur.
* The USPS is going to run a deficit of $200+ billion this year. I’m guessing that UPS could compete on price if they were subsidized like the USPS.
* Re: regulation and taxes. Note that I didn’t say that regulations and taxes were too onerous (although I happen to believe this too, it’s not the biggest problem right now). It’s that nobody knows what the heck the business climate is going to look like in 1, 5, 10, 20 years. Do you know what your income tax rate is going to be in 2011? I don’t. Card check and cap & trade are dead after last week’s election, but they were very much alive until then. PPACA calls for dozens of new regulatory boards and thousands of pages of new regulations. And it’s now apparent that, if you are well connected, you might get exemptions from certain portions of the law (cf. McDonald’s). Then again, you might not. This stuff is killing businesses and investment right now.
* You say that, during the Bush administration, “[banks] certainly didn’t have to worry about regulation.” I saved this canard for last, because it makes us small government types really crazy. Under Bush, regulatory spending increased by over 30%, and regulatory staff increased by over 40%. Bush was a hyper-zealous regulator by any objective standard. This is a liberal talking point that, in my opinion, has been manufactured in order to justify further regulation and government intrusion into the private sector. I have heard this repeated for over two years now, but I have yet to hear of a single agency that Bush closed, a single regulation that Bush relaxed, or a single investigation that Bush quashed. Government regulation has been an ever-tightening ratchet for many, many years, and Bush was one of the worst offenders.
I’m calling it quits here, as the returns are definitely diminishing. The last word is yours if you want it.
pipster:
University of Phoenix might be a successful for the shareholders of the Apollo group, but it is not a success for its students.
I did my MSN through UoP. It was not a rigorous program, not like the graduate courses I have taken at a brick and mortar school. I got ripped off: paid way too much for a substandard education.
I did my Master’s there because there was no brick and mortar MSN program within a 3 hour drive of where I lived at the time. I did not realize the program was not meeting my needs until I was too far in to quit. I had to make a hard choice: finish and at least get the degree, or quit and be stuck for the student loans with nothing to show for it. I stuck it out.
I have heard since (anecdotal I’ll admit)that some employers will not consider UoP grads from some fields, such as business. Fortunately, it has not hurt me as far as my employment goes.
Re the cocaine monkey study. It is really unfortunately the pundits got a hold of that. The purpose of the study is to determine how cocaine addiction works on a particular neurotransmitter. That knowledge is promising in developing new treatments for cocaine addiction. Just one more example of those who don’t understand science attacking it.
The USPS is not subsidized. They are self sustaining, and always have been by law.
Few agencies may have been closed under Bush, but he greatly weakened what regulation we have. This is why the FDA can’t do its job of keeping us safe from bad medicine.
pipster–
I’m glad we agree on what counts as efficient spending. Ideally, it should add long-term value.
The biggest components of Obama’s fiscal stimulus package went to alleviate some of the suffering caused by the recesssion: the money was used te extend unemployment benefits, increase spending on Medicaid, put more money into food stamps while easing the tax burden for moderate-income households by lifting the Alternative Minimum Tax floor and giving out payroll tax credits.
None of this would create jobs. Households tended to use tax breaks to try to pay down debt.
But the extension of unemployoment compensation kept people going in an environment where there just weren’t many jobs.
(Of course ultra-conservativs would say that extending unemployment encourages people not to work. But the fact is that if hte jobs aren’t there, they can’t work. And anyone who thinks that being on unemployment is some kind of paid vacation has never been unemployed for any extended period.)
Another chunk of the stimulus package went to try to increase energy efficiency–tax credits for investments in renewalbe energy, etc. It’s too soon to tell whether this will produce long term value.
Another piece of the fiscal stimulus package was earmarked for infrasturcutre. This takes time and planning. Too soon to tell how that will work out.
A chunk of the money went to public schools, to reduce teacher layoffs. This worked to a fair degree. In NYC we have had relatively few layoffs–though my daughter did have 28 studnets in her first grade last year. But she also had a para in the class with her, which helped enormously. This year she has 23 students,–including one autistic child– plus the para, which is manageable (though if you’re teachign six-year-olds how to read, they need quite a bit of incidual attention. 18-20 students and a para would be ideal.)
As in the case of extending unemployment payments, the money was not used to produce something new of lasting value, but to fill holes caused by the recession. It was ncessary spending, but you can’t point to a repaired bridge.
Probably it shouldn’t have been called “fiscal stimulus” and certainly the administration was overly-optimistic about how it would create jobs.
This is why we need the second fiscal stimulus package that President Obama is calling for, that woudl focus on infrastructure with an emphasis on transportation, and would create construction jobs.
This seems like a good idea–the work needs to be done. But we have to watch out for moeny being wasted– pay offs, local corruption and politics, etc.
OF course states wasted some of the money on foolish projects. But the bulk of the stimulus addressed suffering caused by the recession.That money wasn’t wasted.
Seondly, you’re right that no one knows what the business and tax climate is going to look like in 1, 5, 10 years.
But this administration did not create that uncertainty, nor can it eliminate the uncertainty.
The global economy is in flux. Unemployment is high in many parts of the developed world. The U.S. is in a much weaker position (economically) than it was 15 years ago.
The value of the dollar (and other paper currencies) is in question. China is constantly in danger of over-heating. In the U.S.,
our (statistical) middle class has been disappearing.
Even if Obama were Paul Volcker (and he isn’t), he couldn’t give us any guarantees about what the eocnomic climate will be in 5 years. I imagine that you would agree that the president and the administration have much, much less control over the economy than many people assume.
For-profit schools– I was referring to the experiment, some years ago, that tried to create for-profit schools k-12. It failed.
You write: “Who are you to say that consumers don’t need the gadgets and services you describe? If somebody buys them, they obviously see the value, even if you don’t.”
Imagine taking a tour of the nation’s closets. Most households have heaps of: clothing and shoes worn only a few times; kitchen gadgets stored away (no room in kitchen, and no one has thee time to use them) tools of various kinds that are never used; cosmetics, skin renewal products; toys that cost $10-$40–and held the attention of a two-year-old for 15 minutes; electronic devices of many kinds. . . I could go on.
Consumers are not rational and often buy things that they don’t really want or need. (Of all social scientists only economists think that man is a rational creature who usually acts in his own self-interest. Psychologists, sociologists and anthropologists know better.
You’re right, how Wal-Mart treats its employees is a separate argument.
Finally on Bush and regulation.
Two points: First, he didn’t start deregulation. Clinton signed the repeal of Glass-Steagall.
But there was a widespread failure to regulate on his watch.
Yes, Bush spent money on regulation (he spent money on everything.)
But he didn’t regulate. Here is a pretty good summary of the failiure during his administration:
“On his watch, the US authorities did little to prevent the sale of millions of mortgages to people who could never afford them.
“They failed to police the market in mortgage-backed securities which has now collapsed with such devastating consequences.
“And credit default swaps, those multi-billion-dollar bets on other people going bust, went virtually unregulated.
Congress would later hold hearings to determine how the regulators at the Securities and Exchange Commission (SEC) missed numerous warning signs – “Red Flags” – about Bernard Madoff, the man accused of running a gigantic Ponzi scheme which has defrauded investors of at least $50bn.”
The SEC hasn’t been doing its job for years, but Bush “starved the beast.” Even if the SEC wanted to do its job, it didn’t have the staff.
The same is true of the FDA– terriblly understaffed.
Note the number of dangerous drugs and devices that had to be withdrawn from the market during hte Bush years–after a great many patients died. Drug makers and device-makers hid what they knew about risks. . .
I’ve enjoyed the conversation.
Very good point Maggie! Bush spent money on regulation, but he didn’t regulate. I remember in regards to the nursing home industry, according to government documents back in 2001, the Bush administration, through Thomas A. Scully, then administrator of CMS, wanted to ease regulatory requirements on nursing homes, reducing the frequency of inspections and lessening or eliminating some penalties (meaning deregulation). The administration wanted to move away from adversarial enforcement toward a more collaborative one, in which regulators would work with nursing homes to improve care. You can see where that got us in our market meltdown and economic crisis, not to mention, the nursing home debacle.
A study by Mark Zandi, chief economist for moodyseconomy.com found that Wall Street reform, free trade, the oil war, terrorism, a misguided Federal Reserve policy, pork spending and other reasons comprised 43 percent of our $13 trillion debt. The other 57 percent was from one item, deficit spending. The 2001 to 2003 Bush tax cuts were a massive redistribution of wealth from the poor and middle class to the wealthy.
Apparently no one noticed that these drains of revenue were causing major deficits because no actions were taken to compensate for the loss. This was exacerbated by the fact that the wealthy did not need the tax cuts, so for every dollar saved through reduced taxes, only 74 cents was pumped back into the economy. The rest was saved. If the tax cuts had been to the lower classes, they would have stimulated the economy: For every dollar saved through the reduction, $1.20 would have been pumped back into the economy.
Gregory–
Yes–
We began this century with a surplus. And then, from 2000 to 2008, the deficit ballooned.
Fiscal conservatives were paying attention. Many were Republicans and they were very concerned about the Bush administration’s open-handed spending.
But they were a distinct minority.