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As published for The Roosevelt Room and CNBC.com:
If you’ve been confused by year-long wrangling over health care reform, and the fierce differences between the parties, let me try to make it simple.
The fundamental difference between Republicans on one side, and President Bush and Democrats on the other side, comes down to the question of universal coverage for health insurance. Every other issue — every law change and spending increase derives from how each party answers the coverage issue.
Democrats believe every American must be covered with a comprehensive health insurance plan. And since some Americans won’t buy insurance or can’t afford health insurance, then government will ensure coverage — with an individual mandate, an employer mandate, with government-run health care (Medicare, Medicaid, children’s health coverage), and with taxpayer subsidies.
Republicans believe every American must have ACCESS to health insurance — choices that meet the needs of individuals, families and businesses — including the choice to NOT be covered by insurance. Republicans prefer prices based on value and determined in robust, competitive markets for insurance. And government-run programs should only be provided for the elderly, the disabled, military veterans, the poor, and children of the working poor.
How the two parties answer the basic coverage question exposes the two major secondary differences between the parties: for Democrats, cost; for Republicans, how to create that robust market.
Mandating coverage is expensive: it requires a huge expansion of those government programs, higher taxes to pay for them, and new imposed costs for either individuals and businesses. A mandate, Democrats believe, requires either a progressive system of subsidies and/or a government-run program.
If you believe the benefits of mandated universal coverage are greater than the costs, then you’re comfortable with the trade-off. (Arguments that universal coverage would lower costs are spurious: analysis shows that increases in health insurance coverage lead to greater use of the health delivery system.)
President Obama and Democrats believe Americans either (a) want universal coverage and are willing to pay for it; or (b) will want it and will be willing to pay for it once they begin to receive the benefits of coverage.
Republicans have tried to focus their efforts on reforming the market for health care in ways they believe would increase choices at affordable prices, thereby increasing access. The proposals are not designed to achieve the Democrats’ goal of universal coverage, but would also not further expand government-run programs and increase the associated costs.
This fundamental difference — access to coverage vs. mandating coverage is not trivial and should not be trivialized. It explains the legislative ambitions and stances of both parties in this debate.
But even after years of wrenching health care debate, that basic question — with all its implications for costs and the design of our health delivery system — has never really been put to the American people, leaving policy makers in Washington guessing as to what Americans really want, and talking at cross purposes.
The past year has largely been wasted by President Obama and Democrats trying to impose on Americans an answer to the fundamental question. It would be far better today to start over and focus the national debate on educating Americans about the implications of each option, and then put the question to them. Only then will follow sound legislation giving Americans what they really want
As published for The Roosevelt Room and CNBC.com:
The snowstorm that slammed Washington, DC a couple of weeks ago brought work in the nation’s capitol to screeching halt, including postponing Federal Reserve Chairman Ben Bernanke’s anticipated congressional testimony.
Chairman Bernanke gets an opportunity to deliver that testimony today, focusing both on the Fed’s plans for monetary policy, and the outlook for withdrawing the extraordinary programs put in place during the financial crisis.
One unintended consequence of delaying the hearing was that Bernanke was denied the opportunity to further signal his plans to begin to normalize the spread between the target federal funds rate and the discount rate. The Fed’s announcement a week later that it would raise the discount rate last surprised some market participants.
At least, it surprised those who weren’t paying attention. Markets won’t make the same mistake today — every word by the Chairman will be duly parsed.
Bernanke’s challenge today will be to convince skeptical members of Congress that he has a plan to manage his commitment to growth now and in the near term, while also being able to withdraw liquidity quickly enough to prevent inflation expectations from taking hold. Bernanke will also explain how the Fed will reduce a balance sheet that necessarily exploded during the financial crisis. No question – he has a complicated eighteen months ahead of him.
Fortunately, Bernanke has some new tools in his toolbox to better fine tune monetary policy beyond the policy rate.
Whereas the federal funds rate is a blunt instrument, the Fed’s ability to pay interest on reserves is more surgical.
Bernanke will also soon test special deposit accounts, another potentially powerful tool to drain excess liquidity.
The Fed’s ability to better target reserves will help, but at the end of the day it will still come down to judgment calls by Bernanke and members of the Federal Open Market Committee on the outlook for demand in the economy, the magnitude and timing of tightening decisions, and — equally important — how those decisions are communicated.
Let’s hope another snow storm doesn’t get in Bernanke’s way this time.
As published for The Roosevelt Room and CNBC.com:
I suppose it’s possible President Obama could have come up with a more anti-market reform to deal with its concerns over higher health insurance rates, but short of creating a single-payer health system, creating a seven-member panel to dictate the prices of health insurance is pretty close.
The proposal, as reported in the New York Times this morning, would give a small panel appointed by the president the power to block what it sees as “excessive” rates for health insurance policies sold to individuals – basically, a price-setting panel.
The White House, flailing to find traction for the huge health care spending plans developed by congressional Democrats, hopes that outrage over a planned rate increase by one California insurer will help to turn public opinion around. The White House will say that anyone who opposes the President’s idea to fix prices must support increases in health insurance premiums.
That’s a false choice, of course, but it won’t stop them from trying to make the case.
What is “excessive”?
What are legitimate costs to factor into rate increases?
Is there differentiation in markets?
Is one firm an outlier?
Are there other options?
Is a firm offering a different type of coverage?
Are rate increases keeping up with costs, including wages for health providers?
Is there any such thing as a rate increase that would be acceptable to a small, powerful, politically sensitive panel appointed by the President of the United States? If a 39% rate increase is deemed “excessive”, what about a 29% increase? How about a 19% increase? Is even a 9% increase politically acceptable.
Regardless of any external factors that would lead to pricing differentiation, for a presidential panel there would be no “politically acceptable” rate increase above the overall rate of inflation. The White House will be answerable for the price and the quality of service provided to every health insurance consumer.
Make no mistake: having a White House-appointed panel set prices in health insurance is – effectively – government-run health insurance, and far more onerous than the so-called “public option” rejected by Congress and the American people over the past year.
There was an opportunity to for President Obama to start over on health insurance reform this week, scrap the monstrosity created by congressional Democrats, and work for a truly bipartisan, market-oriented effort. Rejecting this opportunity, the White House is instead planning to use the failed blueprint created by Democrats on the hill, and adding this decidedly anti-market plan to the mix.
As published for CNBC.com on February 18th, 2010:
President Obama and Administration officials have rolled up with the Magical Stimulus Tour Wednesday, touting the benefits of his $860 billion spending bill, signed into law a year ago.
The President’s message is simple: “You got everything you need, satisfaction guaranteed.”
Yes, well, that’s what makes this trip so magical.
I have no complaints about the White House sending out it’s people to highlight what it sees as an important achievement, whatever Americans think about it. After the ambitious agenda the President put forward a year ago — changing the politics of Washington, health care reform, closing the detention facility at Guantanamo, cap and trade legislation, financial regulatory reform, reversing the tide of foreclosures — it looks like the stimulus bill is about all they’ve got right now.
So let’s step right up!
The Magical Stimulus Tour actually only continues today. It really began more than a year ago — leaving us an uninterrupted trail of magical promises and predictions along the way.
The incoming Administration made early and rosy predictions about what the fiscal stimulus would accomplish. The President’s economic advisors, ignoring evidence of the depth of the economic downturn and the history of tepid job creation in the U.S. following recent recessions, nonetheless predicted the unemployment rate would peak in the summer of 2009.
A year later, all evidence points to an unemployment rate, while declining slightly recently, has probably yet to reach its peak.
The tour continued, picking up a whiff of comedy, devolving to farce, as the White House attempted to demonstrate the magic of numerology in conjuring the number of jobs “saved or created”. The magic of numbers resulted in an ever-changing blizzard of confounding and contradictory estimates of job creation, frequently debunked upon further checking by the media — not to mention the creation of imaginary congressional districts.
If the White House accomplished anything magical with this year-long exercise, it was to inject some much needed suspense into the heretofor banal and predictable discipline of counting.
Next on the Magical Tour are demonstrations of the stimulus bill’s powers of transmogrification, or shape changing. Whenever needed, the stimulus can be big and quick enough to immediately stave off a great depression, and yet its impact, and most of its spending, was “wisely” timed for 2010.
A twist on alchemy is in the stimulus bill, too. Instead of turning ordinary metals into gold, the stimulus also promises to turn sun and wind into high-paying jobs.
So step up and buy your ticket — the Magical Stimulus Tour is waiting to take you away…
