Monthly Archives: March 2010

Are the defenders of the Democratic party’s approach to healthcare reform irrepressible optimists, or self-deluding fantasists? I declare a personal stake in the issue, as one such defender myself. In that capacity, I only wish I could be more confident of the answer.

Read the rest of the column and leave comments on it here.

Flights from London to DC via Frankfurt (don’t ask why, just learn from my mistake and never do it) put the recent Atlantic and New Yorker profiles of Tim Geithner in a good light. Longer than they needed to be, you say? I was wishing they were longer.

Josh Green was better on Geithner’s character, I thought, and John Cassidy more at home with the economics. Both pieces are well worth reading, regardless of your itinerary. But I have to say that neither really dispelled for me the big mystery about Geithner, which is the nature of his professional and intellectual relationship with Larry Summers.

When the appointments were first made, I foresaw trouble. Like many others, I assumed that Obama would have wished to make Summers Treasury Secretary, but recoiled at the difficulty of getting him confirmed. So Summers became chief economic adviser while his former subordinate Geithner (whose confirmation turned out to be no stroll in the park either) got Treasury.

A hazardous arrangement, I thought, though possibly workable, if Geithner was sufficiently self-effacing to accept the  de facto number two position. Summers, I reasoned, never would. But if Geithner decided he was going to be in charge, there would be a fight for influence, the economic message would be muddled, and the loser would have to go. Adding to the danger was the milling profusion of other top economic talent-Volcker, Orszag, Goolsbee, to name just three-in or around the White House.

In a recent post, I argued that Obama has been at fault for standing aside too long on healthcare reform. Andrew Sullivan takes me to task, saying it is Congress’s job to legislate, and praising Obama’s speech on the subject in September, which Andrew regards as proof that Obama has been closely engaged throughout.

Yes, it is Congress’s job to legislate. Obama was right not to draft a law and then present it to Congress saying, pass this. But there was a middle way between a Hillary-like fait accompli and failing to exercise any meaningful guidance and supervision. The public’s low opinion of Congress made it essential for Obama to act as a chief sponsor of the legislation. It was not enough for him to say, just give me something to sign. Voters wanted more from him than that.

Andrew asks if I was alive back in September: if I was, how could I have failed to notice that excellent speech? Andrew has so many opinions to ventilate, and so little time to think about them, I do not rebuke him for failing to see whether I had said anything at the time. This would have taken a full two minutes. In fact I said I thought it was an excellent speech. I praised it effusively. But I also said this:

All in all, I think he made the case for reform about as well as it could be made.

But what difference is it going to make? I wrote down three questions before the speech. Did he take charge of the process? Did he explain what “the plan” actually is? Did he settle the row over the public option? He should have done all these things already. Tonight I thought he made some progress in each case, but without answering any of the questions definitively.

He talked about “the plan I’m announcing tonight”–seeming to assert his ownership, and at the same time declaring a new start for the process. Good. But there is still no detailed White House proposal, and the action now moves back to Congress. Obama’s “plan”, as he described it, was a recapitulation of bullet points from the proposals already in play. On substance, in other words, little was new.

One speech, however eloquent, is still just one speech. I hoped it would mark the start of real engagement in the design and advocacy of a particular reform strategy. Instead, he disappeared for another five months.

Sooner or later the country will have to start discussing how to raise taxes–not by a little, but by a lot. Spending cuts will be needed too, of course, in Medicare, and in Social Security. But these cannot close the long-term fiscal gap by themselves. In this new column for National Journal, I spell out what it is going to take: some combination of a carbon tax, a broadening of the income-tax base, and a VAT. Yes, it’s unthinkable. Nonetheless, it’s coming.

Barack Obama’s administration faces a torrid time between now and November’s mid-term elections. Mr Obama finds himself at a disadvantage, his political capital running low. One reason is the public’s verdict on last year’s fiscal stimulus.

Continue reading “Good for America, as far as it went”

Obama finally keeps his word, says Jonathan Cohn in this piece praising the president’s decision to go “all in” on healthcare reform.

Americans always say they want politicians who lead rather than follow–who do what they think is right rather than what they think is popular. And liberals, in particular, say they want politicians who will think big and pursue far-reaching reforms, rather than triangulate their way with incremental measures.

Say what you will about Obama and his plan. Both, surely, are flawed. But, particularly with this latest statement, he’s living up to those ideals.

Well, what liberals want and what Americans who aren’t liberals want are two very different things. Non-liberals might want to be led, but not towards big, far-reaching liberal reforms. They would rather be led nowhere than in that direction. I agree with Cohn that Obama is right to start championing a Democratic blueprint–if that is what he does. (So far he is still only promising to campaign for it.) But Cohn’s notion that Obama is paying the price for naively trying bipartisan outreach, only to be let down by cynical scheming Republicans, is wrong. Obama did not try bipartisan outreach. He outsourced this reform to Democrats in Congress, and the last thing you can accuse Democrats in Congress of being is naive about Republicans.

The critical failure in all this was the failure to win public support. Cohn sort of acknowledges this. (“Public support would obviously help–a lot.” Yes, it would.) But that failure is not mainly the Republicans’ fault. I don’t think their criticisms carry much weight: Republicans are no more trusted by the public than Democrats. It is Obama’s fault, first for putting Congress in charge, and then for standing aside for more than a year. Also, as Jonathan Chait says, it is the fault of progressives, for working so hard to mobilise Democratic resistance to a reform they believed was insufficiently “robust”.

All in all, the liberal strategy of focusing on the public option and constantly harping on the bill’s shortcomings has won few identifiable concessions and has significantly increased the chance that no bill at all will pass.

Agreed. Unlike the president, liberal opponents of the Senate bill did a good job.

I hope it is not too late for Obama to do what he should have been doing all along: making the case not for reform in the abstract, but for a specific proposal capable of commanding wide support.

The fable of Emanuel the Great. David Broder, Washington Post. Broder quarrels with Dana Milbank’s view–”a remarkable fiction”, he calls it–that Rahm Emanuel is the only voice of reason in the White House.

It’s Emanuel who’s dangerous to the presidency. Katrina vanden Heuvel, Washington Post. She goes further in repudiating Milbank, reviving the previous line that Emanuel is the problem. Interesting to see that the Post now has all bases covered. Her reasoning, though, is hard to follow. She blames Emanuel for masterminding the elections of 2006 and turning so many seats Democratic. That sapped the party’s progressive resolve. Maintaining that resolve, even if it means losing elections, is apparently the main thing. Republicans endorse this analysis. I think I know what Emanuel would call it. (I could never endorse such incivility.)

Ed Luce interviews Richard Holbrooke. FT. Holbrooke’s assessment of prospects in Afghanistan is not exactly upbeat.

I am in Paris at the moment, attending a conference on innovative finance in development, put together by the World Bank, AFD (the French development agency), and the Gates Foundation. It is an interesting event. As well as panels and workshops, there is a competition for promising financial innovations. The World Bank has a very good pamphlet, Innovative Finance for Development Solutions, if you want some background reading.

The competition’s 20 finalists include all manner of ingenious schemes designed by small NGOs, not-so-small development agencies, and everything in between. “Mobile Authentication for Indo-Nepal Remittance” (by Ekgaon Technologies and Nirdhan Utthan Bank), for instance; “Natural Catastrophe Protection for the Rural Poor” (Caribbean Risk Managers and Development Bank of Jamaica); “Proving the Value of Mobile Money for Microfinance” (by the Grameen Foundation); and so on.

Robert Barro is unimpressed with the fiscal stimulus. He says an extra $600 billion of public spending at the cost of $900 billion in private spending was not a good deal.

The path of incremental government outlays over the five years in billions of dollars is +300, +300, 0, 0, 0, which adds up to +600. The path for GDP is +120, +180, +60, minus 330, minus 330, adding up to minus 300. GDP falls overall because the famous “balanced-budget multiplier”—the response of GDP when government spending and taxes rise together—is negative. This result accords with the familiar pattern whereby countries with larger public sectors tend to grow slower over the long term.

The projected effect on other parts of GDP (consumer expenditure, private investment, net exports) is minus 180, minus 120, +60, minus 330, minus 330, which adds up to minus 900. Thus, viewed over five years, the fiscal stimulus package is a way to get an extra $600 billion of public spending at the cost of $900 billion in private expenditure. This is a bad deal.

See Gary Burtless’s response on National Journal’s economic experts blog.

I am puzzled by his Wall Street Journal analysis, which seems to treat the stimulus package as though it consists solely of an increase in government spending. In fact, at least 45% of the stimulus in 2009 and 2010 consists of tax reductions rather than spending increases. Moreover, as I have argued elsewhere, the part of the stimulus package that has provided fiscal relief to state governments has resulted in reductions in state taxes below where they would have been without the stimulus Thus, more than half of the stimulus package consists of tax reductions rather than government spending increases. It is very hard for me to believe that these tax reductions have failed to spur an increase in household consumption, contrary to Barro’s apparent view that personal consumption has declined as a result of the stimulus.

Rahm Emanuel is the voice of reason. Jason Horowitz, Washington Post. Dana Milbank, revisited.

Don Kohn to retire. James Politi, FT. Creating another challenge for the White House.

Warren Buffett says scrap healthcare reform. Andy Barr, Politico. A surprising  intervention from an Obama ally.

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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