Wednesday, December 3, 2014

Did the Dems Blow it with ACA?

Thomas Edsall has a thoughtful piece in today’s New York Times, essentially defending Chuck Schumer’s claim that the pivot to health care after the 2008 election has been a millstone around the Democratic Party ever since.  Polling evidence indicates most of the public, and supermajorities of Whites, see Obamacare as good for the poor and bad for just about everyone else.  Edsall reproduces a provocative chart from a Brookings study:

I can’t vouch for the methodology, but if this is true, Schumer is right.

Of course, programs that address the urgent needs of the poorest people should be a top priority, but context matters.  Incomes for all but the top quintile have stagnated or declined in recent decades, and the ravages of the financial crisis have still not been repaired.  It makes no sense, either as policy or politics, to focus almost entirely on a health care program (inefficient and kludgy by design) that imposes still more burdens on middle income groups and put off indefinitely actions that can make the country as a whole more egalitarian and prosperous.

So, wise guy, what would you have done?  I would have led with policies that could positively frame the overall agenda and build a majoritarian base for the midterms.  Then, with more political clout, I would put forward the harder proposals: health care and especially climate change.

As I see it, there were three big economic tasks facing Obama in 2009.  The first was the aftermath of the crisis itself.  This called for a much, much larger and better targeted fiscal response.  One piece of this would have been a structural commitment over a long time frame to provide transfers to the states if their revenue base remained below the pre-crisis trend.

The second was trade deficit, which, as Dean Baker likes to point out, is an ongoing drag on employment and incomes and saps the benefit of whatever fiscal stimulus the government provides.  The standard economic recipe is a lower dollar, and this is, in the end, a diplomatic issue, since it’s not possible for the US to devalue unilaterally.  But the US is, in the sense of international political economy (and in my macro textbook), a structural deficit country, along with most of the rest of the English-speaking world.  That calls for structural solutions, but these take time and a lot of trial-and-error.  That’s not something you can do between January 2009 and November 2010.

The third is the onrush of inequality, especially as it grinds away at the working class—by which I mean people who work for a paycheck or salary and do not have scarce skills.  There are dozens of specific reforms that could turn the tide, but the common denominator is power.  Private sectors unions are virtually past tense in America, and employment has become virtually informalized everywhere: no rights and no expectations.  This means labor law reform should have been a top priority.  There are two components to this.  One is making it easier for workers to form unions or to promote other kinds of collective organizations, like works councils.  There has been a lot of academic work on what the labor institutions of the future might look like, but no meaningful political commitment.  The other is to introduce a standard labor contract for all workers which would spell out the protections employees can rely on when they agree to work for someone else.  This would do away with employment-at-will and uphold essential human rights, like freedom of speech and association.  We have standard contracts for renting an apartment, but not for renting a human being.

This may sound absurdly optimistic.  Maybe so, but 2009 was a moment when a progressive Shock Doctrine might have been feasible.  The question on the table is, what would a new New Deal have looked like if we had had, like picture suggested, a new FDR?


media said...

As a member of civic culture in good standing (though i bowl alone and dance with myself) I feel impelled to contribute to the social discourse, as described by H Braverman in Libor and Monopoly capitalism. He points that under Taylorism everyone wants the same thing, which is the common good---they produce things for wages, and buy them. Due to division of labor (see for the related concept of dividing by zero also at some workers produce widgets, while others contribute monkeywrenches, a la Edward Abbey, which are inputs into The media; most recently Fergusons are also popular (Niall, Brian (anthropology Rutgers, on violent aborigines, etc. (if you block the streets, u can lose your teeth---i helped block a street recently which I do as a tourist---follow local custom, and do as the natives do. I voted this time for the same reason; second time in my life. ).

(I think Braverman plagiarized me, even if i may have not been born or literate yet, but the recent movie 'interstellar' (Kip Thorne) shows why this is plausible, if countertuitive ).

So I flip an n-dimensional coin, look which side I'm on, reach in my dictionary to select the corresponding entry, and construct my statement.

1. Its hard to know what the brookings study measures (perhaps this is like the bayesian/frequentist debate, which also applies to 'entropy'. Are the gains/losses for various income groups from o'bamacares 'real' or what people 'perceive'. I did see one study saying people are going to experience sticker shock if they don't do their research on plans.

(I'm on free health care but because of my schedule, i may lose it due to 'benign neglect' (i'm busy doing nothing). I'm on it because i got pneumonia at 'occupy ' things, and ended up in the hospital ---they said i'd be out in 5 days but it turned out to be 6 weeks (maybe they were using the metric system, or 'gauge theory of economics' (eric weinstein---see orderstatistics blog), and then i had to carry around an oxygen tank---it was only 3500$/day and included food (i.e. coffee) and cable tv; but they dont serve morphine so i asked for euthanasia, but they didn't serve it either. The disease of health care costs might be cured with euthansia, but u can get it at CVS or on the street. I only payed 10G--- they had a sale. My first day everyone said 'happy birthday'. ).
There is so much noise out there its almost impossible to know if you are on the right frequency on the public airways, or instead are just listening to static. (The protest i walked into was about Net Neutrality---only one person got arrested, some commuter who ran into a protestor).

2. The democrats fiddled around Obama's first term---every nitwit has to repeat what the last nitwit said in congress to get their 15 minutes. (if viewed as a play, its somewhat sophisticated entertainment, maybe they take acting lessons from Dick Morris. Better to have a computer algorithm replace all that. Put everything on the menu (eg Amartya Sen on social choice) and fit it with regressions, wavelets, etc, find the point of consensus via calculus of variations in 3 seconds. But the great US education system prepares people to be citizen poseurs, and people are worried that computers will make them irrelevant. . People need to look at 'long term dynamics' (eg Piketty's growth model doesn't, or see 'lure of capital taxation', or discussions of ergodicity in the FPU (fermi-pasta-ulam )model).

my hypercube just ran out of sides so my contribution to discourse, converges ( like 1+2+3+4+...+infinity converges to -1/12.).(showing again that Chomsky was wrong, people don't generate an infinite number of strings using a finite alphabet, and cats only get 9 lies).

kevin quinn said...

Peter: This Edsall chart doesn't tell us much. The benefits of Obamacare to the middle-class are not just any subsidies they get, from which we subtract taxes to get a negative number. The benefits include being able to keep your kids insured through age 26, and being able to quit a lousy job you were clinging to only because it gave you health insurance- and you wouldn't be able to get insurance on your own at other than prohibitive rates due to pre-existing conditions. These are not nothing, and they are ignored in a chart like Edsall's. He may be right about perceptions, and thus about politics, but perceptions here are notoriously bad at tracking reality.

john c. halasz said...

I'm really surprised that you failed to mention disciplining the mega-banks/financial sector, forcing them to take losses and admit insolvency, breaking them up and re-regulating them, partly by raising capital requirements and putting them into public receivership, and investigating financial frauds and enforcing basic norms through perp walks, all the while instituting a process of orderly write-downs of household debts, rather than "foaming the runway" to keep an insolvent financial sector afloat and reflating a lot of fictitious financial "asset" values. It seems that otherwise you're just aligning with "tea party" hype and resentments.

Bill H aka run75441 said...

Hi Peter:

Having written on the PPACA any number of times, I find this take interesting. I guess I would have to deep dive the Brooking report to find exactly upon what they are basing their findings.

- Kevin (above) points out the middle and upper income brackets already pay their ESI using pre-tax dollars. I do not see many people whining about these subsidies not the company tax break at 50%.

- Under the PPACA, it is possible for a family of 4 making $94,000 to be subsidized even if it results in a cap on premiums at 9.56%. The more children the higher the household income to which a subsidy may be applied.

- I would also ask what is the cost of not subsidizing insurance for people who not have it, not providing insurance to those with pre-existing conditions, not providing insurance to the elderly, not allowing children on a parent's policy till 26, etc. The elderly were priced out of the insurance market at 8 to 15 times the cost of the healthiest youngster and today insurance companies can charge 3 times the cost of the lowest cost individual. Preexisting conditions often times made a person uninsurable. Today insurance companies must take on a person who has had a heart attack or bypass operation. Children not working after graduating could not afford insurance and today mom/dad pay for it.

- State costs for the uninsured at hospitals were reduced by ~$10.6 billion. State costs for treating the mentally impaired were reduced by ~$14.6 billion. We have not even touched upon how much insurance goes up in treating the uninsured.

Schumer is an ass (pardon my snark). The biggest problem with the Democrats (and I am one who lives in the heart of Michigan making Republicans sweat) is they do not hang together. Some are Democrats in name only or are when it is convenient. Republicans lockstep it down Pennsylvania Avenue and this is not the first time they have stonewalled the Democrats.

Bill H aka run75441 said...

Mr. Dorman:

Just a couple of more facts:

- "Federal income tax subsidies, which allow individuals to deduct
health benefit contributions and health care expenses exceeding 7.5% of their adjusted gross income, totaled ~ $188.5 billion in 2004, more than was spent on the Medicare program that year. Over one-fourth of these tax benefits inured to families with annual incomes of $100,000 or more, who account for about 14% of the population. Page 187

- In 2004, the federal government paid for roughly 85%, or $34.6 billion, of uncompensated care provided by hospitals. Page 189. Add this to what I stated for state governments.

There is more; but, I am cluttering up your site now. It was 20 years since Hillarycare was proposed to Congress. The healthcare industry did nothing since then while its costs kept increasing at faster rates than anything else in the nation with the exception of a college education. Single payer is not the answer and a two tier system is what most every country uses today. What is wrong with today's PPACA is Congress blocking the way for Medicare (which is two tier also) from negotiating with the healthcare industry directly. Get Congress and its business interests out of the way and the scenario changes. Thank you for your time and patience.

Thornton Hall said...

A very good demonstration of how even well crafted counterfactuals obscure the reality of real time decision. By the end of this year, 10 million people will have health insurance. Tell them they should care more about the trade deficit.

Any political plan the involved more than two steps is utter fantasy. Step three, in the entire history of political machinations, has never, ever happened. Never. House of Cards is fiction.

You get the important stuff when you can. Disease caused bankruptcy and attendant misery = pretty important, no matter what you're accounting math says.

PS Edsall is almost always confused and Schumer is a self-serving, needy little boy.

Thomas L. Hutcheson said...

I'm not sure we economists have a particularly good insights into the problems of allocating political capital. I don't see why a bigger and better structured stimulus (plus rhetorical pressure on the Fed for more activist monetary policy such as targeting NGDP) needed to be an alternative to ACA. But maybe there was.