Monday, September 12, 2011

Catch of the Day

Ah, this is one I was thinking of writing, but Matt Yglesias gets there first and better than I would have, I'd say. This is about Ross Douthat's column today, which argued that Barack Obama made three mistakes in 2009: the stimulus shouldn't have tried to achieve non-stimulus goals; Obama failed in setting expectations; and "instead of pivoting from the Recovery Act to deficits and entitlement reform, the Democratic majority spent all of its post-stimulus political capital trying to push both a costly new health care entitlement and a cap-and-trade bill through Congress."

The problem here is that ACA is entitlement reform.

As Yglesias points out, the main reason that Obama hasn't done more deficit-cutting is because the Republican Party is opposed to it:
The filibuster rule and the Democrats’ reluctance to push the health care bill through with reconciliation gave them a ton of leverage over the process. It was leverage that they, or any subset of them, could have used at any time to try to secure more robust deficit reduction measures. But they chose, individually and collectively, not to use that leverage in that way.
Read the whole post; it's very good. I suppose I should add to this three things. One is that deficit reduction is almost always popular in the abstract but very unpopular whenever it's attached to specific tax increases or spending cuts. The second is that not only did Republicans oppose deficit reduction within Congress, but while ACA was being debated virtually all of their attacks on ACA were precisely against the "entitlements reform" portions of it: the cuts to Medicare Advantage, and the establishment of new cost controls on Medicare. That was true of GOP 2010 campaigns as well, which highlighted "Medicare cuts."

And the third thing, the one that's very much reflected in Douthat's column, is that for whatever reason prominent deficit hawks have basically given Obama no credit at all for the deficit reduction in ACA. The truth is that by normal standards, the choice by Barack Obama to fight hard for deficit-reducing health care reform, when it was not apt to do him a bit of good, was actually one of the more "responsible" acts of presidential leadership I can think of. He almost certainly would have been far better off in terms of short-term politics fighting for irresponsible health care reform (assuming that it could have passed; it's hard to know if that was possible or not). He obviously won zero GOP votes in Congress by being "responsible" in terms of long-run deficits, and I'm confident that attacks on the basis of budget-busting would have been no more, and almost certainly less, effective than attacks over cutting Medicare and death panels. But none of that yielding the support from the (sincere) deficit idealists that it should have received.


  1. has the ACA done one thing on deficit reduction yet?

    Or is all in some CBO models?

    Get some credit when it actually works, Until then it is all paper savings.

  2. I don't understand. It's all paper savings and paper costs up until it does anything, right? By that standard, you couldn't say anything about the fiscal effects of any bill until long after it passes.

    It's very true that CBO estimates could be wrong, even very wrong. But surely there's a huge difference in putting together a program using neutral estimates that show it will cut the deficit substantially compared to putting together a program using neutral estimates that show it will increase the deficit substantially.

    And of course, it's possible the estimates could be wrong in either direction, and there's at least some reason to believe that CBO dramatically underestimates the effects of ACA. Of course, that might not work out. What should be impressive to deficit hawks is that Obama & the Dems put in additional savings/revenues to cover for that, instead of whining a lot about how CBO was biased against them and then just going with their own best-case scenarios.

  3. That's the biggest political problem for the Left right now. They champion and lead cheers for what the People simply despise: ObamaCare.

    ObamaCare was a suicide pill. It brought on a historic electoral blowout.

    You won't catch Obama leading those cheers, by the way. ObamaCare has gone down the memory hole. He has to try to get reelected, you know.

    The strongest action Obama could take towards his own reelection would be to call for an immediate repeal of ObamaCare. Do that, admit his mistake... and his reelection chances immediately improve.

    And if he then proceeds to throw down the gauntlet for health care reform that puts cost containment FIRST, LAST and ALWAYS on the agenda, and committed to removing it as one of the evil "uncertainties" currently killing off job creation, he might even have an outside chance at reelection. It'd give him back the issue as a positive, rather than as a pure negative as it currently is.

  4. @JB; with alll respect, you're in the rabbit hole now.

    Making up a plan, projecting 10 year savings out based on some CBO numbers, and then saying "I'm a deficit hawk" just isn't' credible. It is one reason why the Administration doesn't get respect.

    There are a lot of good reasons to do healthcare. There are some decent political arguments about why it was bad. But framing it as a deficit exercise was always pretty silly. We had two problems in heath care -- the cost issue and the coverage issue. Nothing in Obamacare does anything about the cost issue, despite those fancy CBO numbers. Look at Massachusetts.

    The two big health care puzzles to me are why they waited so long for the exchanges to kick in, and why they didn't frame it as a jobs issue. Health-care portability is going to do more for entrepreneurship than anything else the President can do. Why wait 3 years?*

    My answer is the President doesn't understand the issue -- just as he didn't under the solvency/liquidity issue, the jobs issue and a few others. It is tough, but the rhetoric shows an awful lot of imagination

    * for example, mandate heath care portability right now -- start a new job you can carry your existing insurance for 5 year.

  5. Charlie,

    I'm sorry, but you're wrong here. Cost control is actually the big difference between the MA plan and ACA; there are a number of cost-control items in the legislation. It's true that there's uncertainty -- a lot of it -- about how they'll work, but they exist.

    But the truth is that it doesn't matter; CBO couldn't "score" (for technical reasons) most of that stuff; what makes it a deficit reducer is straight-up tax increases and spending cuts.

    You may be correct that "framing it as a deficit exercise was always pretty silly." But nevertheless, the Dems *did* make sure they paid for what they were doing and more, and anyone who actually cares about deficits should, IMO, give an enormous amount of credit for that.

  6. A related point to Charlie's about why ACA as a deficit-reducing vehicle doesn't pass the sniff test:

    In the US today, there's a 2-tier health care system, with ~75% of Americans, those with large group insurance or Medicare, having access to world-class health care. The other 25% or so of the US has substandard care.

    Before we even crack a CBO binder, here's what we know will be different in the post-ACA world: the bottom 25% will consume a heck of a lot more healthcare. The top 75% will not tolerate the consumption of any less healthcare. As Charlie points out, there is nothing in Obamacare to address the structural cost inefficiencies of US health care, nothing about price transparency, transactional freedom, or all the other things economists point to as necessary criteria for functioning markets, all missing in the troublingly inflationary US health care environment.

    To sum up then: an inefficient good (health care) is going to be consumed at much higher rates in the post-ACA world, without any corresponding improvements to the fundamental market inefficiency. How in the world could that possibly be cheaper?

  7. I didn't see Jonathan's comment before I posted my own, but one additional thought here: I wouldn't give the Dems any credit for cost-cutting assumptions that run contrary to common sense; such assumptions are depressingly easy to make and depressingly meaningless in real life.

    Surely in the early days of health reform, it was widely understood that expanding health care delivery (without addressing inefficiencies) was going to be damn expensive. And if you were a grunt spreadsheet guy buried in a back office somewhere, you understood full well that the powers-that-be would prefer a deficit-friendly ACA.

    So...Mildred on Medicaid - well she'll consume more healthcare in ACA, but somehow not that much more. Miraculously, Mr. Big will consume less. Bury that stuff in a mountain of addenda and no one will be the wiser.

    Seriously, if someone could explain, in laymen's terms, "deficit-reduction for dummies", how expanding the delivery of an inefficient good will be less costly, I'll step right up and congratulate the Dems. But in a disagreement between some guy's spreadsheet somewhere and my lyin' eyes, I always go with my lyin' eyes.

  8. CSH,

    Two answers.

    One is that it's good for the deficit to combine spending more on health care with raising more taxes and cutting more spending than you're going to add in spending. Correct? That's all the CBO numbers really say, at the most basic level.

    The second part is that the basic story here on costs is that there are indeed tons of inefficiencies (since other nations get universal coverage, similar health care outcomes, and spend a lot less doing it). ACA has a variety of things to reduce all of that. Will they work? I have no idea (I'm an optimist on it, mainly because a fair number of health policy wonks are optimists, but other experts differ, and I'm certainly not qualified to judge). But there's no question (1) that those things are part of the law, and (2) there is at least plausible reason to believe that they'll work.

    But again, while that stuff is ultimately far more important to the economy IMO, as far as federal budget deficits it's a lot simpler, and doesn't rely on any of it. It's mostly just good old fashioned spending cuts and tax increases adding up to more than the new spending.

  9. As I understand it, and I could be very wrong on this, I think a lot of the cost savings come from the mandate and preventative care. Preventative care is fantastically cheaper than emergency room care. As it is now, health providers (both the states and private hospitals) are having to provide emergency room care to uninsured people. Decrease their numbers (oh, and they're paying for the insurance now, too), and it actually becomes cheaper to run a hospital, and to provide insurance. If it's cheaper to run a hospital, Medicare can pay them less, and government can provide insurance to their workers at a cheaper rate.

    Now, I'm not very familiar with the CBO numbers, so my logic could easily not have been a factor in the CBO's argument--I'm kinda just dropping in here.

    However, I would take issue with one of CSH's points, which I take to be more hyperbolic than he or she meant it to be. Deficit reduction can easily be achieved with policies that fly in the face of "common sense." Common sense can be wrong. Common sense said the world was flat, and that a boat made of dense, metal boats won't float, that a ball of lead will fast faster than a ball of ice, and that the Monty Hall problem is a 50/50 choice and not a 33/66 choice. Now, I am not an expert on health policy/costs, so I can't say what the ACA would actually do to the deficit, but I am sure that it's very possible for intuition to be wrong.

  10. Here's the thing: in the US today, 75% of us have access to health care that would receive an "A" grade by global developed world standards. 25% of us have health care receiving an "F" by global developed world standards.

    Post-ACA, virtually all of us will have health insurance receiving the same grade, even if we won't all technically have the same payer. AFAICT, no one really denies that the lucky 75% in the US receive better health care than the socialized countries; our overall national score is dragged down significantly by the lower 25%.

    So when we're all normalized post-ACA, we will, de facto, have some standard national health care grade between A and F inclusive. Will we all receive A-quality care? Or F? Or B-, as many commenters somewhat snidely characterize Britain's NHS? When the spreadsheets going into the CBO estimates are built, they can include a national, normalized delivery model anywhere from an A to F, and it would be very hard to verify what assumption was made.

    But just between us, here's two things on which I'd bet significant coin:

    1) The cost sensitivity in building the model erred on the side of B-, because of the net cost savings that would imply.

    2) In the real world, the national US answer is going to be A, for reasons that should be pretty obvious upon reflection.

    The difference between the "B-" baked into the CBO estimate and the A that will happen in real life is a giant spending black hole.

    Of course I have no proof of any of this, but its one of those either/or things: either the estimates were realistic about the national level of care post-ACA, or they weren't. For several reasons, it seems overwhelmingly likely to me that they weren't.

  11. Matt,

    Preventative care is part of it. There's also the Medicare IPAB, which should cut costs in Medicare directly, and indirectly for the rest of the system because insurers (I believe) adopt Medicare standards. There's also some technology stuff (IIRC some of that was in the stimulus, but some was also in ACA). There's also the effects of the tax on fancy health benefits. Hmmm...I'm missing some other stuff. But again, for the most part the CBO is conservative in estimating any of this.

  12. CSH,

    Remember, we're talking federal budget deficit here, not total health care spending. It is certainly possible for a program to increase total health care spending while reducing the federal budget deficit; indeed, it's not hard at all to imagine reforms that would do that. There are certainly new costs to the federal budget in ACA (expansion of Medicaid, subsidies for people in the exchanges), but again there's nothing particularly tricky or unreliable about covering those through new taxes and other spending cuts.

  13. In Michael Moore's documentary "Sicko", one of the iconic memes of BigHealth evil was their obsession with 'payout ratio', or the percentage of income paid out in health benefits. Take Moore completely at his word, and you should conclude from the payout ratio obsession that your current insurer would do everything in its money-grubbing, profit-loving power to get you to drop the chalupa and adopt a healthier lifestyle.

    So if a big part of the revolutionary change in ACA vs. the status quo is going to come from cost savings via preventive medicine, well, I think I'll pretty much rest my case right there.

  14. Jonathan@12:32, what you say is certainly true, and I'm sensitive to sounding a bit trollish on this thread, but hopefully the 64,000-foot concern here is understandable, even if you don't personally share it:

    We're going to raise some (always difficult) taxes, and make some (always difficult) spending cuts, in order to get to a nationalized standard of health care. We aren't sure what that standard will be, but we hope its good.

    If we think of ACA like a scale, with the pain from new spending on health care on one side, and the offsets in spending cuts and taxes on the other, we should recongize that filling up the spending cut/tax side is definitionally extremely challenging. As a result, we should expect that the assumed amount of spending on the new health care side - that makes the scale balance - will have erred on the side of too little vs. real life. always

  15. I have to admit I am slightly befuddled by the GOP position on the deficit. The Tea Party and other social/fiscal conservatives wish to see the deficit reduced, but they refuse to let the biggest costing projects be cut at all - social security and defense. Given Tax increases will always be unpopular, I don't see how they plan to realistically cut the deficit.

  16. The Left went to great pains to trick out ObamaCare so that it came in at less than $1T addition to the debt over 10 years.

    ObamaCare is only adding $1T to our debt, so they said, assuming taxes and fees rise immediately, any and all cost savings are pocketed immediately, and all expenditures are deferred to the end of the 10 year cycle studied. Do all that, and we add only $1T to the debt, so they said.

    But of course, we've since discovered that scenario did not properly describe the full fiscal impact of ObamaCare, and the story is much worse than that tricked out version, carefully crafted only to ram ObamaCare through.

    There are many reasons ObamaCare is despised in this country, and the "deficit fighting" charade is prime among them. The Left admits to adding that $1T of debt over 10 years, yet still witters on about the "debt fighting" of ObamaCare.

    Like everybody's stupid, and doesn't see this. And then, we find out that the debt add is far more than just $1T.

    Now you see why the Left got bombed last November and is on course for another bombing in 2012. You can't campaign on "I don't care what the numbers say, you're stupid if you don't agree with me".

  17. CSH,

    You don't sound at all trollish; good discussion.


    Wow, that's a lot of false stuff in one comment. Of course ACA doesn't add $1T to the debt over 10 years; it reduces the debt over 10 years, and reduces it by a lot going forward. GOP budget analysts do dispute some pieces of the long-term effects, but they certainly don't think ACA adds $1T of debt within ten years. There were, of course, no taxes that went up immediately. There definitely are new taxes, but they haven't kicked in yet. (Uh, if they have: where are they? Where?)

  18. The ACA, of course, isn't the last bill that will be passed regarding health care. We don't know exactly how the financing will turn out, but some day we will and adjustments will be made. In every country where they have universal health care, they began by extending health care to everyone and then reducing the costs once everyone was covered. In the end, they had more people covered than us and did it for less. Oh, and CSH, it's probably not a major point but I don't think everyone with insurance has the same level of health care and I suspect there will continue to be quality differences in the future as well, just not as severe as today.

  19. Mr. Bernstein,

    The gross costs of ObamaCare were first estimated at about $938B, for years 2010-2019. Today, those gross costs are estimated to be $1,390B.

    That's fresh new spending, whether you call it $0.9T or $1.4T... it's a lot of fresh new spending due to ObamaCare.

    That's spending on top of today's spending. We're currently at +/-25% of GDP, having skyrocketed from <18% in the last year of Clinton/Gingrich budgeting, most of that coming thanks to Pelosi and Obama. And Obama intends to stay on that same reckless spending course, which is why his budget got rejected 97-0 in the US Senate last Spring.

    It's the spending, stupid. ObamaCare slams down more spending.

    Now, you may be one to point to the "benefits" of ObamaCare raising taxes and fees (in an economic slump), in addition to slamming down mandates, and lining out programs which the Left don't want (and I'm amused how they backloaded those, for somebody else to execute in 2019 or so), as what they do want takes fruition.

    I'd rather see the Left bear full and discrete accountability for raising those taxes and fees, and taking away what it is they don't want, and adding what it is they do want.

    Parcel out ObamaCare... pick it apart... and it shows even worse than the public currently views it. And they view it harshly now.

    Obama's 10 year lookahead budgets show nothing below deficits of 5% of GDP. Fiscal conservatives wanted to hang W for running anything like that. Obama presents that as business as usual. ObamaCare amplifies that spending madness.

    That's the chasm that separates the Left from the mainstream... and why they got blown out last November and are lining up for another such. Is it really likely that a large expansion of public spending will reduce long-run deficit? If you strip out the gimmicks and tricks used to pass the thing, and score it based upon a full 10 years of ObamaCare warts and all, the answer would be "no". It's $1/2T pure debt add for first 10 years, and $1.5T pure add for the next 10... and that's if a 2010-2019 Congress actually manages to strip $500B from Medicare, which is a laugh.

    ObamaCare is an economy stifling, liberty stealing, budget busting nightmare, and that's why the public despises it. Obama needs to call for its repeal, immediately. He will, if he wants to save his own hide. Maybe the SC will save his bacon, and throw it out next year. I bet Obama's praying every day for that. It's the only home run he's got at his disposal.

  20. Slightly O/T, but a little while ago I stumbled on this excellent column from Bernie Sanders about poverty. Not easy for a conservative like me to praise Congress' resident socialist, but what makes the column effective may be an object lesson for liberals in general and Obama in particular.

    Sanders' column works because he frames poverty in the context of the very real personal and national crises it causes (with a bit of socialist moralizing sprinkled in). His points feel fleshed out, connecting the negative impacts in real individual lives to the negative impacts for the nation. That's the way to be liberal, IMH(Conservative)O.

    I was thinking about this interesting thread conversation today, and something struck me: I can detect no evidence from the Obama Adminstration, or its many supporters, of strategy for dealing with the unusual fact that America's journey to socialized medicine occurs with a noticeable majority of the country receiving very high quality health care, with many of those folks potentially sacrificing some health care quality when everyone gets standardized. Because the rest of the developed world got to universal health care much earlier, it would seem likely that none of them faced this significant, unique challenge, that is, a large population segment that was doing pretty good on health care, so thanks anyway.

    What has been Team Obama's strategic response to this challenge? Hard to know what's said behind closed doors, but at least publicly it seems: no response. Instead, they continue to pound ACA as ideology, trusting that the little people will share their big dreams, and those little people will never notice that there are bad things hiding in the weeds - the weeds that seem to concern Bernie Sanders, though perhaps he could use some company in that regard on the left.


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