Monthly Archives: July 2009

Bromley

The stakes for the US in the struggle to pass health reform could not be higher. If this project goes down to defeat, Barack Obama’s presidency will be irreparably damaged. More important, the country will be stuck with a ruinously expensive and ethically indefensible healthcare system. Who knows how long it will be before another administration summons the courage to try again?

It ought to be unthinkable that a popular Democratic president, elected on a promise of comprehensive health reform, supported by big Democratic majorities in Congress – now with a filibuster-proof contingent in the Senate – should fail to get this done. Moreover, unlike in the early 1990s, when the Clinton administration took on the challenge, resistance from organised interests is weak. In 2009, the usual suspects as good as surrendered in advance. Yet failure is anything but unthinkable. Many commentators are now betting on defeat. What went wrong?

Recent setbacks are real, but it must be emphasised, first of all, that some kind of health reform is still likely to pass. For the Democratic party to come up with nothing under these circumstances would be an act of self-harm remarkable even by its own standards. The Democrats would be seen as incapable of governing. Essays describing the long-term leftward realignment of US politics in 2008 would have to be trashed, less than a year after that supposed electoral earthquake.

The remainder of the article can be read here. Please post comments below.

The incident reminds me of a case near my home in Georgetown a while back. After a robbery and murder, a senior police officer advised residents to be alert to black men in the area–his point being that very few live there, so their mere presence should arouse suspicion. The comments attracted wide attention and caused an outcry.

For the police (or anybody else) to be suspicious of somebody on grounds of race alone is unjust and unacceptable, and it is surely plain bad policing too. I don’t doubt that it happens all the time, and the anger of many black Americans over this seems entirely justified. I do find myself wondering, though, whether the Gates case really fits the same pattern, and whether Obama was right to react as he did.

Certainly the outcome was absurd. To cart Gates off in handcuffs for disorderly conduct after he was confronted in error in his own home is preposterous. But everybody, including Gates, is just taking it for granted that this could only have happened to a black man. Based on my admittedly limited encounters with the police, I find it easy to imagine them doing exactly the same thing to a white man.

Conforming to the pattern of learned brainlessness which seems pervasive through many US bureaucracies, public and private, the police seem obsessively preoccupied with “following procedure”. If a person, black or white, becomes angry and unruly when being interviewed by an officer, I can well believe that the procedures call for handcuffs and detention. Whether the procedures cause crazy outcomes is no concern of the officer on the spot. The training seems to induce limitless tolerance for absurdity. These are the procedures. The officer has no discretion. It is all by the book.

This is the same mindset that has TSA officers dismantling the wheelchairs of sweet old ladies to check for explosives. It is also the mindset, by the way, that has prisoners like Bernie Madoff, an old man who poses no physical threat, cuffed and shackled as he is moved to and fro. I don’t know what the rules called for in the Gates case, or what actually happened. But if you ask me whether the same thing could have happened to a white man, my instinctive answer would be, “Sure, why not?”.

In any event, it was unwise of Obama to say the police acted stupidly–and to affirm that race was a key factor–without knowing all the facts. You’d think a lawyer would know better. On the other hand, of course, he and Gates are friends, and Obama may have found it impossible to believe that Gates could in any way have been in the wrong. Nonetheless, a milder comment, deploring the outcome–which was bad on any analysis–but not assigning blame so confidently, and not simply assuming that race was a key factor in this instance, would have been more presidential.

Anyway, so much for post-racial America.

The Fed chairman told Congress how the central bank would unwind its interventions once the recovery picks up (testimony; Monetary Policy Report, see pages 34-37).

The FOMC is confident that it has the necessary tools to withdraw policy accommodation, when such action becomes appropriate, in a smooth and timely manner.

Bernanke describes the techniques. They include paying higher interest on bank reserves to keep the funds locked in, or reducing the volume of reserves by selling debt (in co-operation with the Treasury, in the case of Treasury bills). One way or another, the Fed does have the tools. The key questions are timing and politics. The timing is bound to be difficult, as unemployment stays high even as the economy starts to rebound. Keeping monetary policy too loose for too long is at least part of the reason we got into this mess in the first place. And not many voices were raised in protest against that policy at the time.

Politics worsens that dilemma of course. Will the Fed be allowed to make its own judgement about monetary policy? It doesn’t help that Bernanke’s term is nearly up: that gives Congress and the administration extra leverage. Congress is unhappy with the way the Fed has conducted itself lately, and is in the mood to change the rules. Wider oversight powers by the Government Accountability Office are being discussed. Bernanke touched on this in his testimony.

The Congress, however, purposefully–and for good reason–excluded from the scope of potential GAO reviews some highly sensitive areas, notably monetary policy deliberations and operations, including open market and discount window operations. In doing so, the Congress carefully balanced the need for public accountability with the strong public policy benefits that flow from maintaining an appropriate degree of independence for the central bank in the making and execution of monetary policy. Financial markets, in particular, likely would see a grant of review authority in these areas to the GAO as a serious weakening of monetary policy independence. Because GAO reviews may be initiated at the request of members of Congress, reviews or the threat of reviews in these areas could be seen as efforts to try to influence monetary policy decisions.

Indeed they could. Having the tools is not enough. Knowing when to use them, and being allowed to, also count. Watch this space.

Not a very inspiring performance, I thought. He seemed subdued. Also, this steady emphasis on cost control as the rationale for action on health reform just does not work, I think, since the bills which Obama is ready to support largely fail to address that issue–a point which the CBO and others have driven home to the public. The substance and the presentation seem persistently at cross purposes to me. I did think it was good to underline the benefits of guaranteed coverage to those who already have insurance, though. Better late than never. I think this has been a seriously neglected theme in the drive to sell reform. That guarantee is worth a great deal to everyone, not just the uninsured.

This reference pointed to something new and significant:

We also want to create an independent group of doctors and medical experts who are empowered to eliminate waste and inefficiency in Medicare on an annual basis, a proposal that could save even more money and ensure long-term financial health for Medicare.

That idea isn’t in the bills at the moment, but the administration is right to try and insert it. It might not be easy. The WSJ reports on House Democrats’ response: many object.

Why is this idea significant? Because what “cost control” is going to boil down to under any of this family of proposals is the way Medicare (and the public option, if that happens) is managed. Under these structurally timid plans, the system as a whole won’t move away from fee-for-service until Medicare does.

The problem is, Medicare is popular precisely because it wastes so much money. The harder Congress and/or the administration press down on Medicare outlays, the better the prospects for cost control across the whole system, and the louder Medicare’s existing beneficiaries and their advocates will complain. This is the political challenge that will kick in as soon as any reform to widen coverage–any “health insurance reform”, as Obama called it last night, in an interesting choice of words–is on the books.

I don’t know if I would call it a “leftward surge” or a “suicide march”–a little hyperventilating for my taste–but David Brooks is essentially right in this column. Those, including me, who predicted that Obama’s most difficult challenge would be his confrontation with Democratic party liberals have been proven wrong. Obama is falling out not with them but with the party’s moderates. As Brooks says, he did it on the stimulus, he did it on the budget, and he is doing it on health care. Obama remains well-liked overall, but his support among independents is slipping, and his policies are less popular than he is. A rot appears to be setting in. Can the White House really be surprised?

For a moment put the merits of the policies to one side. (Just to remind, I was for a big fiscal stimulus, but wanted to see more front-loaded tax cuts; I was dismayed by the long-term fiscal implications of the budget; I am for comprehensive health reform with a guarantee of universal coverage but favour broad-based taxes to pay for it, including limits to the tax deductibility of employer-provided insurance.) Let us suppose Obama thinks that Nancy Pelosi and the unions are right on all these topics, and Max Baucus is wrong. Even then, shouldn’t somebody be advising him on political strategy? This is the aspect I find completely perplexing.

Brooks says:

The party is led by insular liberals from big cities and the coasts, who neither understand nor sympathize with moderates. They have their own cherry-picking pollsters, their own media and activist cocoon, their own plans to lavishly spend borrowed money to buy votes.

No doubt, but surely even from within the cocoon you can see what a losing approach this is. Why did Obama win in the first place, for heaven’s sake? Because he campaigned as a centrist. Admittedly, what he really believed was often in doubt, and some of the policy specifics made one wonder. But look at health care. He positioned himself to the right–toward the cautious centre–of Hillary Clinton. And it worked pretty well, didn’t it?

If Obama offends the left, what are they going to do apart from whine? Let them whine. If he offends the centre, he loses votes and is deeply wounded electorally. And so is the party in Congress, since the swing seats are almost by definition the ones where moderates and independents drive the outcome. When Max Baucus declared that the president wasn’t helping him, sirens should have gone off in the White House–and some advisers should have been fired on the spot.

Obama could fix this problem so easily. I say that because I don’t think he has strayed as far left as Brooks does. It’s as much about messaging as policy. But he has to start disappointing the party’s liberals. He has to pick a fight or two, and takes sides with the centrists. In choosing the party’s liberals over the party’s moderates, he is repudiating one of the most brilliant campaigns ever seen. I simply don’t understand it.

illustration

Unemployment has already risen further in the US than President Barack Obama’s economics team expected, and forecasters agree it will rise for quite a while yet. In fact, it has risen further than in the White House projections early this year of what would happen if Congress failed to pass the fiscal stimulus. A huge stimulus was enacted. Now Republicans point to the weakness of the economy and say the policy failed.

Supposing it did, was this because the fiscal remedy was misconceived in the first place? Or was it because the stimulus was too timid, as some Democrats believe, implying the need for a second round of tax cuts and spending increases?

Respectable economists can be found to defend each of these positions, and no doubt others as well. Unsurprisingly, the administration’s view, as set out by Lawrence Summers, head of the National Economic Council and Mr Obama’s principal economic adviser, is that the stimulus was about right, and that it is working.

The remainder of the article can be read here. Please post comments below.

This week’s story in US politics was the faltering momentum of health reform, tending to contradict the argument I advanced on Monday. Despite the ongoing Congressional tussles, which are exactly what one should expect, I stand by my prediction that health reform will pass this year. There might not be a measure by the August recess–a phony deadline if ever I saw one–but there will be by the end of the year. I have three main reasons for thinking this. 1. So far as substance goes, the differences between the various bills are pretty small, and the financing gaps are bridgeable. A House-Senate deadlock is easily avoidable. 2. Obama has come close to staking his presidency on this. On Friday, reacting to a couple of perceived setbacks, of which more in a moment, he doubled down on that commitment in an unscheduled press conference. 3. Most important, Obama has said he is willing to sign more or less anything and declare victory. If a Democratic Congress cannot oblige him even to the extent of giving him some bill, any bill, to sign, when failing to might sink his presidency, I will be astonished.

Whether it’s a good bill is of course an entirely different question, and I would say the odds on that are now  slim. We will get a substantial increase in coverage, which is good, but without meaningful action on cost control, and the necessary revenue will be raised, if at all, in stupid ways.

One thing that surprised me about Obama’s statement today was that he continues to emphasise cost control, as opposed to wider access, as the principal driver of reform. It is obvious by now that Congress has no stomach at all for cost control, and is arguing mainly over how to raise the taxes necessary to pay for wider coverage. Obama’s selling proposition, so to speak, is therefore beside the point; moreover this rhetorical defect is obvious, which is not like him at all.

Douglas Elmendorf’s statement in Congressional testimony on Thursday only underlined the point. The CBO director said the bills barely even try to address costs in a meaningful way–”In the legislation that has been reported, we do not see the sort of fundamental changes that would be necessary to reduce the trajectory of federal health spending by a significant amount”–and on the whole push in the opposite direction. This should have surprised nobody: the CBO has been saying the same for weeks in its various efforts to score the bills. Be that as it may, Elmendorf’s testimony was widely called “devastating” and was greeted as a crucial new development.

This was the setting for Obama’s remarks on Friday. With the CBO critique fresh in people’s minds, what did the president say? That we must have health reform to control costs! With the best will in the world, you have to call this strategy puzzling.

What would be so wrong with saying we must have health reform to address economic insecurity–note this is not just about the 40m uninsured; people with insurance are worried about losing it–and that the price in higher taxes is worth paying. It happens to be true, after all. That should count for something. Is it really so hopeless a platform?

Max Baucus, chairman of the Senate Finance Committee seems to get it. He is keen on rolling back the tax deduction for employer-provided insurance, a move that, outside union circles, is universally regarded as a great idea. So far, the White House has said no. Noting that Obama is apparently willing to say yes to everything else, his objection to the most straightforward financing solution is difficult to understand. (Well, he promised not to raise taxes for non-rich Americans, you say. That’s true. So he did. But he knows that he will have to break that promise regardless. The payroll tax component in the bills breaks it. The tax penalty on individuals defying the mandate breaks it. Why not start work right now on explaining, um, what the pledge really meant?) The second thing that surprised me this week was Baucus’s open criticism of the president. “He is not helping us,” Baucus said. My word. Three cheers for Baucus. Obama should listen to him. Three cheers for CBO as well. Where would fiscal policy be without it?

My column for NJ this week looks at France’s wonderful healthcare system, and says why it may not be much use as a model for US reformers [link expires in two weeks]. A mandatory read if you follow this subject at all is the piece by the invariably excellent Marilyn Werber Serafini, also in this week’s NJ. The real model for what the US is going to do this year is the Massachusetts health reform. “Not an unqualified success,” says Marilyn. Do yourself a favour and read her article.

Watching the two days of quasi-questions and pseudo-answers I formed conflicting impressions of the Sotomayor confirmation hearing. First of course is the falsity of the process, in the sense that the outcome is more or less pre-ordained. The Democratic senators luxuriate in that; the Republicans try vainly to pretend that their votes matter. At the same time, one thinks, how admirable. How American. British readers, I ask you: can you imagine Britain’s Law Lords put through a similar grinder? Despite the bloviating self-importance of the senators (most of them anyway) and the elaborate evasions of the nominee, the process is more than mere theatre. It’s a chance for the public to see the people who rule them tested, and put in danger of making fools of themselves. That’s good.

The nominee was composed and impressive. She gave a convincing show of welcoming the opportunity to explain her thinking. She was more likeable than I had expected as well, for what that is worth. But she got off easy, don’t you think? It seemed to me she did not so much clarify the liberal-sounding speeches and remarks (“wise Latina woman” and so on) that have so preoccupied her critics as simply retract them. And both sides let her do it. In my mind, these serial disavowals kept raising the question: well, what does she actually believe?

Again and again when substantive issues were posed, her answer was the same: “Congress makes the laws. The job of a judge is to apply the law.” Oh please. “The law”, as she repeatedly observed, embodies precedent. So when the court laid down those precedents, it was making law on her own definition, was it not? This is not a conservative v liberal thing. Supreme Court justices, conservatives and liberals alike, make law. The worrying thing is that they increasingly strive to make different politically-freighted laws, and have settled into a pattern of closely split decisions along predictable ideological lines. If she was asked about that, I missed it.

Moreover, there are only nine Supreme Court justices and they sit for decades. If confirmed, the unelected and unaccountable Sonia Sotomayor will be a more powerful lawmaker than any of the senators who questioned her. We think we know from her speeches what she thinks about various policies she will be asked to rule on, but this week she wasn’t telling, and out of a misguided sense of judicial propriety the senators failed to insist.

On points of substance, almost her entire testimony could have been delivered by John Roberts or Samuel Alito. With names and personal reminiscences redacted, who could tell the difference? It will be interesting to see how often Sotomayor is on the other side of a 5-4 decision from them, despite their purportedly identical “judicial philosophies”.

illustration

After a frazzled week, the politics of US health reform looks messier than ever. Yet the odds on a bill passing in the end are improving. It will be an untidy thing, but if it moves the country close to universal health insurance the administration will call it a success. And on the whole, despite the avoidable mistakes this legislation seems bound to embody, that will be a fair assessment.

At the moment this view may seem unduly optimistic. The Democratic leadership in the House of Representatives had hoped to produce a finished bill last Friday. That plan came to nothing when the party’s fiscal conservatives demanded further savings. House Democrats are also divided on revenue-raising measures. Proposals ranging from a fat tax on sugary drinks to a fat-cat surtax on households earning more than $350,000 a year are still being debated.

The Senate is struggling with the same issues: how to contain the cost of expanded insurance coverage, and how to pay for what remains, so that the reform adds nothing to the budget deficit over 10 years. Like the House, the Senate aims to broaden coverage with a mixture of mandates, regulation and subsidies. Those basic elements are decided. But at the end of last week the chairman of the Senate budget committee said that the bill’s drafters would have to start all over on key aspects of the proposal.

The remainder of the article can be read here. Please post comments below.

Bromley illustration

Before the Iranian election, US opinion on Barack Obama’s foreign policy divided on predictably partisan lines. Now the picture is more complicated.

Mr Obama’s supporters admired his desire to restore US standing in the world and his willingness to talk “without preconditions” to governments his predecessor despised. This would make all the difference, they believed. The new president’s conservative and neoconservative critics rolled their eyes. They attacked Mr Obama’s naive overtures to dictators, and his unwarranted apologies for supposed US sins.

Those critics see Iran as one more proof they were right. The administration spoke respectfully to Mahmoud Ahmadi-Nejad, seeking not to humiliate but to reach an accommodation. Mr Obama’s speech in Cairo on US-Islamic relations was welcomed in much of the Muslim world and had most US liberals swooning in admiration. And see what happened. The Iranian government has hardened its stance on nuclear materials, persisted with its support for Iraqi insurgents, and stamped on its own people when they challenged a rigged election.

The remainder of the article can be read here. please post comments below.

Clive Crook’s blog

This blog is no longer updated but it remains open as an archive.

I have been the FT's Washington columnist since April 2007. I moved from Britain to the US in 2005 to write for the Atlantic Monthly and the National Journal after 20 years working at the Economist, most recently as deputy editor. I write mainly about the intersection of politics and economics.

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