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All Rights Reserved webmaster@nationalreview.com (NRO Webmaster) Sun, 22 Nov 2009 12:36:47 -0500 Sun, 22 Nov 2009 12:36:47 -0500 NRO RSS Generator v1.0 http://blogs.law.harvard.edu/tech/rss 5 http://www2.nationalreview.com/images/nro_rsslogo.jpg The Agenda on National Review Online http://agenda.nationalreview.com 144 80 National Review Online Obama's Opposite-ism -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=Y2YyMTdhYmRkYjQ4OGJjOWNhMDI2MmJjODE2YTFmMDU= Rajiv Chandrasekaran of The Washington Post has a well-deserved reputation as one of the most well-sourced reporters covering national security, and his <a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/11/19/AR2009111903992_pf.html">front page story</a> in today's paper on the new U.S. approach to Hamid Karzai's Afghan government reveals a great deal about how the Obama White House works. As President Obama nears a decision on how many more troops he will dispatch to Afghanistan, his top diplomats and generals are abandoning for now their get-tough tactics with Karzai and attempting to forge a far warmer relationship. They recognize that their initial strategy may have done more harm than good, fueling stress and anger in a beleaguered, conspiracy-minded leader whom the U.S. government needs as a partner. Note that President Bush was well aware of the need to reassure Karzai. As Chandrasekaran <a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/05/06/AR2009050601325.html?wprss=rss_world&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+wp-dyn%2Frss%2Fworld%2Findex_xml+%28washingtonpost.com+-+World%29&nav=emailpage">reported in May</a>, the new administration had an extremely dismissive attitude regarding Bush's decision to maintain a close working relationship with the Afghan president. Incredibly, the new vice president essentially insulted Karzai to his face. If you're looking for good Afghanistan coverage, I strongly recommend Peter Feaver's <a href="http://shadow.foreignpolicy.com/posts/2009/11/17/its_time_for_obama_to_face_facts_afghanistan_is_his_war_now">posts</a> at Shadow Government and, for a left-leaning perspective, Spencer Ackerman's <a href="http://washingtonindependent.com/author/spencer_ackerman/">reporting</a> at The Washington Independent. Feaver, political scientist at Duke, served in the Bush White House, and he offers impressively dispassionate, objective assessments. And though I find plenty to disagree with in Ackerman's take on foreign and defense policy, he has a keen understanding of evolving debates within the Obama administration and the wider Democratic foreign policy community. Ten days before Obama's inauguration, Karzai told Vice President-elect Joseph R. Biden Jr. during a private meeting in Kabul that he looked forward to building with Obama the same sort of chummy relationship he had with Bush, which included frequent videoconferences and personal visits. "Well, it's going to be different," Biden replied, according to a person with direct knowledge of the conversation. "You'll probably talk to him or see him a couple of times a year. You're not going to be talking to him every week." Furthermore, Karzai's request for a bilateral summit was rebuffed in favor of a meeting that also included the newly elected Pakistani president. This is despite the fact that Obama's advisors recognized that Karzai was the likely victor in the coming presidential elections. Interestingly, the Obama strategy was to work through governors and other officials based outside of Kabul deemed more pliable. One can imagine how President Obama would feel if, say, right-of-center European leaders like Angela Merkel and Nicolas Sarkozy negotiated directly with the governors of Utah and Texas over matters of shared concern. Granted, the situations are far from directly analagous. But if you believe that strengthening Afghanistan's civilian government is worth doing, and if you believe that warlordism is a bad thing, propping up our own "progressive" warlords isn't terribly constructive. The consequences of this behavior were entirely predictable, but the Obama administration is only coming to terms with this now, after a paranoid and defensive Karzai engaged in ballot-stuffing and other short-sighted decision that have badly undermined the legitimacy of his government. Although there is broad agreement among Obama's national security team that Karzai has been an ineffective leader, a growing number of top officials have begun to question in recent months whether those actions wound up goading him into doing exactly what the White House did not want: forging alliances with former warlords, letting drug traffickers out of prison and threatening to sack competent ministers. Those U.S. officials now think that Karzai, a tactically shrewd tribal chieftain who is under enormous stress as he seeks to placate and balance rival factions in his government, may operate best when he does not feel besieged. This would be funny if it weren't so depressing. The decision to maintain an arm's-length relationship with Karzai was totally coherent and almost plausible, if you didn't think about it for very long. But one wonders why Obama's advisors didn't lend more credence to the counterfactual: though there were undoubtedly discomfiting aspects to the Bush approach, what if it were nevertheless vastly preferable to the alternative? We now have our answer. When then-Senator Obama was asked about his decision to oppose the Bush administration's surge strategy, he noted, reasonably in my view, that his strategy of withdrawal plus aggressive regional diplomacy hadn't been tried, and that it was entirely possible that this strategy would have yielded even better results. Many critics felt that Obama's refusal to seriously contemplate the possibility that he was in error was a discouraging sign. My worry is that at least some of Obama's advisors are driven by a crude opposite-ism: if the Bush White House did it, surely it must be wrong. I think this also applies to the frankly bizarre decision to try KSM in a civilian court in New York city -- as though we've treated him as a common criminal thus far. Ross Douthat has written <a href="http://douthat.blogs.nytimes.com/2009/11/19/ksms-day-in-court/">an excellent post</a> on this subject at his new blog. I'll also note that during the early days of the Bush administration, relations with Clinton staffers weren't exactly cordial, and there was a similar retreat from everything the previous administration had done. I wasn't a huge fan of the Clinton foreign policy, but there's something to the idea that politics should end at the water's edge. Republican policymakers have been at fault as well. But the Bush years were akin to the Truman administration, when we confronted a new threat, or rather an old threat that had become far more potent. The 9/11 terror attacks forced a broad rethinking of the national security environment. It stands to reason that the transition should have involved close cooperation, including extensive conversations regarding the logic behind efforts to reassure and strengthen Karzai. The problem, of course, is that Obama had run against a caricature of the Bush foreign policy, and having demonized his predecessor he was, it seems, incapable of acknowledging his accomplishments. The Obama administration seems to have come around to see the wisdom of Bush's decision to maintain a close working relationship with Karzai. The trouble is that it might be too late; a great deal of damage has already been done. I'm struck by the fact that Chandrasekaran published this story now, with the president's Asia trip still fresh in mind. American relations with the great powers of East and South Asia improved dramatically, and even protectionist gestures over the last few months haven't been enough to undo that. Perhaps this has led to a new humility on the part of the president. We can hope. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=Y2YyMTdhYmRkYjQ4OGJjOWNhMDI2MmJjODE2YTFmMDU= Fri, 20 Nov 2009 16:34:56 -0400 Walking the Walk on Bottom-Up Conservatism -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=NTU3YmUyMmNjMjE1YWY1NGQyYTIzMDRlZTAxNjIzMGQ= As regular readers, I'm a huge fan of Tim Lee and his concept of a <a href="http://timothyblee.com/?p=1557">bottom-up approach</a> to understanding and improving society. And so I was struck by the final paragraph of Republican consultant Alex Castellanos's New York Times <a href="http://www.nytimes.com/2009/11/05/opinion/05castellanos.html?_r=1">op-ed</a> on the Republican revival. Mr. McDonnell offered suburban voters, working women and independents a better way to increase jobs and expand the economy, from the bottom up. It was a stark contrast to what Americans are seeing in Washington, where elitist Democratic politicians, in bed with the Wall Street establishment, are taking Americans’ tax dollars away to invest in arrogant, top-down public-sector schemes. This helped Mr. McDonnell forge a powerful coalition involving not just independents but also young voters; he won the under-30 vote by 10 percent. Thanks for the opportunity, President Obama. On Tuesday, Nov. 4, in Virginia a New Republican Party was born. See you in 2010. My concern is that Republicans haven't yet lived up to Castellanos's description. There is still an urgent need to make our financial sector more resilient and to end the string of bailouts that began in the mid-1980s and that gets bigger and more toxic every time. Yet congressional Republicans seem strongly inclined to defend the interests of the too-big-to-fail financial institutions rather than the interests of the entrepreneurs who depend on a financial system that works. I'm oversimplifying matters here, I realize, but I think that Castellanos is right to suggest that the alliance of the Democrats and Wall Street needs to be opposed -- and right now, the Republican establishment isn't doing the opposing. In a similar vein, we need a bottom-up approach to health reform that facilitates business model innovation. This could be something along the lines of the Ryan-Coburn proposal, that precious few congressional Republicans actually backed, or, better still, something like Martin Feldstein's call for universal catastrophic coverage. We've only seen tentative movement on this front, and health reform might be where Republicans are furthest along. Bernard Avishai has an <a href="http://www.inc.com/magazine/20091101/the-connected-car_Printer_Friendly.html">outstanding piece</a> in Inc. on the economic ecosystem that is emerging around electric automobiles. I hope to write more about it. Avishai ends on an interesting note. After noting that the Obama administration has invested in R & D and pilot projects and direct grants to firms, he writes: The point is, there are far too many living things in the emerging ecosystem to be anticipated by any government or major OEM. It will take an implicit partnership of hundreds, perhaps thousands, of suppliers to fill out the technology. The key is to bring them into alignment. "If governments act to consolidate standards," Posawatz says, "they can really make a difference in catalyzing competition among suppliers." He would not want to impose standards prematurely and cut off promising avenues for innovation. (Presumably, OnStar's ambitions are also on his mind.) But when the catalyzers of the new auto industry are so entrepreneurial and distributed, technical standards hardened by government become virtual roads and bridges. They are more vital to electric cars than actual ones. The faster we get to standards, the better. This principle, of catalyzing competition, is an endless subject I cannot do justice to here. To build out the grid Posawatz envisions, the government must help reduce other obvious barriers to entrepreneurial teams converging on a problem. The administration might look at an outdated patent office, which has been swamped by software developers in recent years -- filings mainly from big companies, whose fat patent portfolios needlessly block or intimidate entrepreneurs. It might look at facilitating the exchange, categorization, and monetizing of intellectual property, which cannot flow unless governments engender mutual trust. I'm more skeptical than Avishai about the need for direct government spending on firms. I do think, however, that you need pro-market government activism designed to reduce those "obvious barriers to entrepreneurial teams converging on a problem." This is easier said than done. But this project would be at the heart of a bottom-up conservatism. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NTU3YmUyMmNjMjE1YWY1NGQyYTIzMDRlZTAxNjIzMGQ= Fri, 06 Nov 2009 23:10:59 -0400 Upscale vs. Downscale and the 2009 Election -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=YzhjOTQ4YmJkNTJmNDZiYTY1NDRjNzg2YjNkNTYyM2M= Ramesh has written <a href="http://www.time.com/time/politics/article/0,8599,1934805,00.html">the definitive take</a> on the implication of this week's election for the Republican future for Time. What these races suggest is that Republicans' principal problem in recent elections has not been that they are too far right, or — as a lot of conservatives like to think — not far right enough. After all, voters turned on both moderate and conservative Republicans in the late Bush years. The problem has instead been that voters have not thought Republicans of any stripe had answers to their most pressing concerns. Addressing those concerns, rather than repositioning itself along the ideological spectrum, is the party's main challenge. Patrick Ruffini has followed up with <a href="http://www.thenextright.com/patrick-ruffini/gop-revival-theres-an-app-for-that">a post on how conservative candidates should frame public policy solutions</a>. Because very few independents care about ideological name-checks, they won't be swayed by scare tactics trying to persuade them that Candidate X is the ideological second-coming of Attila the Hun. We saw this with the thesis attacks. Candidates have wide latitude to run as who they actually are, so long as they can persuade voters they'll deal with the bread and butter issues (which was McDonnell's calling card). In a purple state like Virginia, you can win by running as a liberal and a problem-solver (Kaine), as a moderate and a problem-solver (Warner), and as a strong conservative and a problem-solver (McDonnell). The goal is not to bang on about the liberalism of your opponent, but rather to construct a narrative that connects your policy agenda to concrete outcomes. Republicans can be specific, detailed, and confident in putting forward solutions relevant to the middle class, while also being more conservative than we have been in recent years (especially with the Bush era spending binge). There's not an either/or tradeoff between conservatism and a policy focus, something the McDonnell campaign proved in Virginia this year. Earlier this year, Ramesh and I wrote an article for NR on the notion, championed by a number of conservatives, that the GOP needs to move upscale, to increase its appeal among affluent, college-educated voters by moving to the left on social issues. We argued that many of these affluent voters who've turned to the Democrats are just as left-of-center on economic issues as they are on social issues, and that a shrewder strategy involved shifting towards a problem-solving mode. An alternative strategy would largely maintain the Republican party’s social conservatism while moving to the center on economic issues. That shift on economic issues need not take the form of supporting higher taxes. It would, rather, mean placing less emphasis on tax cuts for high earners and more on tax cuts for people in the middle of the income spectrum. It would mean working harder to get the public to associate Republicans with free-market policies to make health care more affordable and secure for the middle class. This strategy, in turn, would help Republicans shed some of the cultural baggage accumulated during the Bush years. A Republican party that advanced downscale cultural conservatives’ economic interests, meanwhile, would not need to lean so heavily on their cultural resentments to win their votes. Republicans’ caricaturing of Democrats as effete and unpatriotic latte-sippers has reinforced the GOP’s own reputation as anti-intellectual and philistine, and this reputation has harmed it in upscale precincts. An economic agenda more attractive to the country would reduce the party’s reliance on cultural polarization. My sense is that Republicans are moving in this direction. Rather than chase after social liberals who are allergic to the conservative base for a variety of reasons, including but not limited to aesthetic distaste, a growing number of candidates are running "common-sense" campaigns premised on the need for sustainable fiscal policies and the central importance of private sector job growth. This appeals to middle and working class voters who are keenly aware of the danger of their tax dollars being wasted, and who have grown increasingly skeptical of massive government undertakings. Incidentally, my guess is that this doesn't just apply to big new domestic programs: the public also has far less appetite for expensive military interventions, which complicates matters for those of us who believe the U.S. should maintain or even increase its commitment to a stable Afghanistan. Democrats focus on the Tea Party movement because it represents a kind of wish fulfillment. Conservatives delighted in the ideological exuberance of Howard Dean's progressive youth, and they were unprepared for Barack Obama's slickly post-ideological campaign that drew on the left's energy while running a disciplined centrist campaign. We'll see if history repeats itself. Like a lot of people, my gut tells me that Sarah Palin or perhaps Mike Huckabee will be the Howard Dean of 2012. Of course, that would suggest that the Republican nominee in 2012 will be the right's answer to John Kerry, which is a prospect too disturbing to contemplate for very long. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=YzhjOTQ4YmJkNTJmNDZiYTY1NDRjNzg2YjNkNTYyM2M= Fri, 06 Nov 2009 22:52:47 -0400 More Wisdom from Katherine Swartz -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MWIwMmExZWQwMjJmYjYxY2JhZWYyMjJhZjNjMjY5Yjk= Also from <a href="http://www.tnr.com/blog/the-treatment/curbside-consult-the-pools?page=0,1">the TNR interview</a>: I also think the other lesson that has come out, chiefly from Massachusetts and from Vermont… thinking through what is a minimal benefits package everybody should have. We’re trying to balance out the fact that if you add more required services to it, it's going to cost a lot more. What is it that we are really trying to insure? I think we are working our way towards coverage against catastrophe, where catastrophe is defined relative to somebody's disposable income, along with some cost-effective primary care services basically. This sounds a lot like Martin Feldstein's <a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/10/07/AR2009100703048.html">concept for health reform</a>. It does not sound like the reform plan that will likely come to pass. So unfortunately, I don't think we are working our way towards this goal; rather, I think we're moving headlong in the opposite direction. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MWIwMmExZWQwMjJmYjYxY2JhZWYyMjJhZjNjMjY5Yjk= Wed, 04 Nov 2009 10:58:22 -0400 Mankiw's Column on Implicit Marginal Tax Rates -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MzkwOTIzOTQ3MDAyZTg2MWRhMGJjMWJjMGVlMzc2NDk= This might be <a href="http://www.nytimes.com/2009/11/01/business/economy/01view.html">one of the best newspaper columns I've ever read</a> -- I hope high school social studies teachers are assigning it to their students. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MzkwOTIzOTQ3MDAyZTg2MWRhMGJjMWJjMGVlMzc2NDk= Wed, 04 Nov 2009 10:52:34 -0400 Klein on Brooks, and How We Think About Policy -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=NDJhMzliNzRlYjRkN2FmZGY5YWVmY2RhYzdlNTI2YTk= Ezra Klein <a href="http://voices.washingtonpost.com/ezra-klein/2009/11/will_the_iphone_kill_love.html">takes David Brooks to task</a> for arguing that new technologies have helped change the romantic landscape for young people. Columns like Brooks's irk me because they demean not only my lived experiences, but those of everyone I know. To offer a slightly more modern rebuttal, Sunday was my one-year anniversary with my girlfriend. A bit more than a year ago, we first met, the sort of short encounter that could easily have slipped by without follow-up. A year and a week ago, she sent me a friend request on Facebook, which makes it easy to reach out after chance meetings. A year and five days ago, we were sending tentative jokes back-and-forth. A year and four days ago, I was steeling myself to step things up to instant messages. A year and three days ago, we were both watching the “Iron Chef” offal episode, and IMing offal puns back-and-forth, which led to our first date. A year ago today, I was anxiously waiting to leave the office for our second date. It is not for David Brooks to tell me those IMs lack poetry, or romance. I treasure them. Electronic mediums may look limited to him, but that is only because he has never seen his life change within them. Texting, he says, is naturally corrosive to imagination. But the failure of imagination here is on Brooks's part. I wonder if the Pauline Kael problem is at work here. One could write a similarly compelling narrative about how a slightly higher income greatly contributed to one's happiness and well-being, and allowed one to spend money on a beloved grandmother or a worth cause. Yet a hike in the marginal tax rate ruined everything. And so a person with high-earning potential could feel very irked by writers and thinkers who advocate higher taxes, as they are demeaning her lived experience and the lived experience of everyone she knows, i.e., other high-earners who went to the same schools, etc. For progressives, the case for higher marginal taxes isn't ultimately about demeaning these people -- rather, it is about financing a high level of public provision, and perhaps about "rescuing" the affluent for bidding wars over positional goods. There is no doubt that the new romantic landscape has been very beneficial for some. I tend to agree with Klein: it has been a boon to my social life and that of my friends. But the real argument is whether or not these new technologies have been of net benefit. Isn't it possible that these new technologies have had an uneven impact on the romantic marketplace, and that this is worthy of some consideration? I'm not sure about the impact. I'm more sanguine than Brooks, if only because I think the olden days were actually not that great. All the same, I'm certainly not irked by efforts to understand how technology shapes our lives in good and bad ways. One small example: in the past, it was relatively easy to lose touch with former flames. Now, by virtue of the pervasive use of social technologies, it is perhaps a little harder. Defriending an ex-girlfriend on Facebook is a big step. But not doing so means she remains "present," and thus potentially harder to get over. This obviously doesn't mean we should ban Facebook. It does suggest that good things and bad things sometimes go together. I'm struck by the way different people approach public policy questions. Paul Krugman will sometimes argue that Casey Mulligan is wrong because his conclusions sound funny, i.e., when Mulligan talks about the power of work disincentives to raise unemployment, Krugman will say that Mulligan thinks the unemployed are "taking a vacation." But in fact Mulligan is well aware that people's stated motivations don't always map onto their actual motivations. In a similar vein, many political arguments are made on the basis of gut-level convictions regarding what it means to be a decent person, e.g., decent people want everyone to have health insurance coverage. Indecent people only care about themselves, etc. Or critics of my generation's sensibilities are critics of my personal life, etc. But of course some people are concerned about invisible impacts. I'd say that people who fret about the corrosion of competitive markets fall into that category. Yes, we can highlight the plight of people who don't receive a transfer payment. We have a far harder time highlighting the plight of people who can't find work because an economy is burdened by heavy regulation. And it's possible that people who criticize, say, the rise of single-parent families do so because they really care about the hardships faced by single-parent families. Rant over! <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NDJhMzliNzRlYjRkN2FmZGY5YWVmY2RhYzdlNTI2YTk= Wed, 04 Nov 2009 10:45:20 -0400 Peter Feaver on the Obama Foreign Policy -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MWU5YThkYWFmNDI2MzM2NWIyYTUxNjFlYWQ0NjdiYTk= Feaver, one of my favorite foreign and defense policy analysts, <a href="http://shadow.foreignpolicy.com/posts/2009/11/02/why_the_no_drama_obama_mantra_cant_last">offers a prediction</a> at his Shadow Government blog: It could be that the decision to continue the bulk of President Bush's war council (and thus its policies) reflected a decision to delay taking ownership responsibilities for the war. To my reading, that is the connective thread that stitches together various problematic aspects of Obama's foreign policy thus far: peddling stale campaign rhetoric long after its sell-by date; repudiating his own comprehensive Afghan Strategy Review and launching a new one; developing a tin ear for civil-military relations and wartime alliance relations; spending so little time explaining his national security policies to the American people; giving his political team such a prominent role in national security; etc. I think it is highly unlikely that the national security team that is in place today will be in place one year from now. I would not want to bet which principal will leave, but the betting money is someone will leave. Personnel transitions tend to be associated with friction and other mischief, and the causal arrow can go in both ways: intra-team friction leads to early departures and new arrivals disrupt established modus vivendi. So my prediction is that the "no drama Obama" mantra will have proven unsustainable by November 2010. This is not something to celebrate nor is it something to dread. Every administration has to deal with shake-ups and I wouldn't be surprised if President Obama proves he can deal with it better than most. My guess is that the national security team that emerges from this transition will be more attuned to the exigencies of the political calendar. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MWU5YThkYWFmNDI2MzM2NWIyYTUxNjFlYWQ0NjdiYTk= Wed, 04 Nov 2009 10:27:22 -0400 Understanding High Risk Pools -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MjIyMGRjYmQwZGUxNWVkNTdiZTg1NTE1OTZkMjE0N2M= In "<a href="http://www.aei.org/article/101189">The Insurance Fix</a>," in the latest National Review, Thomas Miller and James Capretta offer a roadmap for health reform that addresses the anxieties of the insured and uninsured without sharply increasing regulation and centralization. They call for the creation of larger, better-funded high risk pools. A better alternative, and one much less disruptive to current policyholders, would be to provide adequate and sustainable funding of high-risk pools. Today, most--but not all--states have subsidized high-risk pools that are intended to reduce premiums in the individual marketplace for people with expensive preexisting conditions. They are the most common way for states to comply with HIPAA's requirement that workers leaving group plans have access to the individual market. Unfortunately, these pools haven't worked well, largely because they have invited a mismatch between funding and demand. State and federal subsidies for high-risk pools have been meager relative to the size of the problem they are intended to address, and insurers have been able to steer applicants toward the pools with impunity. Politicians tend to prefer rate restrictions and hidden subsidies to more transparent and straightforward funding for high-risk pools, because the former measures are off-budget and seemingly costless to taxpayers. In truth, that approach backfires, imposing heavy burdens on a very narrow base of private purchasers in the individual market. There should be substantial new federal funding for these high-risk pools--but also new operating rules. Note that Miller and Capretta note the inadequacy of existing HRPs, and call for their expansion. Ezra Klein <a href="http://voices.washingtonpost.com/ezra-klein/2009/11/high-risk_pools.html">objects </a>to high-risk pools, and he offers a helpful link. A high-risk pool is where a state creates a special insurance pool for people with preexisting conditions and then subsidizes their coverage. About 200,000 Americans are currently in these pools, the costs are high, the coverage varies wildly in quality and the service is often quite poor, as a couple thousand low-income sick people aren't much of a political constituency. To put it simply, if you eventually developed a preexisting condition -- asthma, say -- would you rather a world in which insurers couldn't discriminate against you or a world in which you could send in a form to the state of Missouri and ask if they had any room in their Big Pool o' Sick people? Thought so. For more on high-risk pools, see Harold Pollack's <a href="http://www.tnr.com/blog/the-treatment/curbside-consult-the-pools">interview</a> with HRP expert Katherine Swartz. But of course not everyone believes that banning discrimination, i.e., banning underwriting, will actually end adverse selection. If the incentives to engage in adverse selection remain strong, it will continue to happen, albeit in harder-to-detect and possibly more corrosive ways. This is why health policy experts have advocated HRPs and reinsurance, areas that have been neglected in the Democratic reform proposals. There is a small reinsurance component that is not adequate to the task. I was, however, delighted to see Ezra link to a TNR <a href="http://www.tnr.com/blog/the-treatment/curbside-consult-the-pools?page=0,1">interview </a>with Katherine Swartz, who wrote the excellent book <a href="http://www.russellsage.org/publications/books/060109.315008">Reinsuring Health</a>, which I've cited at The Agenda <a href="http://agenda.nationalreview.com/post/?q=MTRiNmVlNzY0ZmIxNjFlYjlhMmY1OWZmNDQ0NmYzOTY=">in the past</a>. Pollack: How about specific lessons of state risk pools? Swartz: Minnesota and Oregon are the only two that have large enough numbers of people that have been covered, but again, I don't think that the current structure of the risk pools is what we should be looking at if we are going to greatly expand them. They weren't set up for this. They were set up, really, to take very small numbers of people out of the insurance market. They weren't meant to be a substitute for public or private insurance. Pollack: How about the reinsurance provisions in the various leading bills? I take it you believe that reinsurance would be useful in a state insurance exchange to address the really extreme cases that are going to come up. Swartz: I think reinsurance is a way of more fairly and widely spreading the burdens of people who have extraordinarily high costs. It’s pretty random who lands in that top one or two percent in the population in terms of healthcare costs in any given year. So, having a broadbased population paying most of their costs makes a lot more sense to me than placing the burden on others who happen to be covered by that person's particular insurer or insurance policy. Swartz didn't address the question directly -- that is, she didn't make note of the paltry reinsurance provisions in the main proposals. Interestingly, Swartz has in the past advocated a public reinsurance plan aimed at the small-group and individual markets as an effective way of reducing premiums and thus increasing access to affordable insurance coverage. While I'm sure Swartz would be happy with a more comprehensive approach, the virtue of her proposal in Reinsuring Health is that it would cost far less than the reform model championed by the president and his allies. Granted, it would do very little to contain costs, yet that is true of the dominant reform model as well. Swartz's public reinsurance plan does have the added virtue of not stifling business model innovation. Ultimately, I think we need to create the conditions for integrated fixed-free providers to flourish. The health reform debate we're having is a sideshow that would be funny if it weren't so powerfully counterproductive. Pretty serious misunderstandings and misrepresentations are being deployed to dramatically increase the role of the federal government in the health sector, and this will make the kind of business model innovation we need less likely. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MjIyMGRjYmQwZGUxNWVkNTdiZTg1NTE1OTZkMjE0N2M= Wed, 04 Nov 2009 10:17:47 -0400 The Perfect Outcome? -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=ZDUwZTliMWFiZjY4NzkzOGE5MzgzYWQ3MTc3MDVlYmQ= At the risk of sounding Pollyannaish, I wonder if last night's result might represent the perfect outcome for conservative reformers who want to revive the Republican Party. Doug Hoffman's defeat comes as a serious blow to the activists who fought against Scozzafava, a candidate well to the left of Arlen Specter. I was particularly impressed by <a href="http://www.swingstateproject.com/diary/5828/ny23-scozzafava-backs-owens">the words of Scozzafava's husband</a>, Ron McDougall. "This has been a difficult day for my family. But the needs and concerns of the men and women of the 23rd Congressional District remain paramount," McDougall said. "As such, I wholeheartedly and without reservation endorse the candidacy of Bill Owens." "As a life-long labor activist, I know that Bill Owens understands the issues important to working people. On the other hand, Doug Hoffman has little regard for the interests of workers." "Hoffman's opposition to the Employee Free Choice Act, coupled with his support for the failed policies of the Bush Administration make him a poor choice to serve the citizens of the 23rd Congressional District." I have to assume that when McDougall is referring to the failed policies of the Bush Administration, he's not referring to the lack of spending restraint or the failure to adopt an effective counterinsurgency strategy in Iraq before 2006. Rather, McDougall's believes that congressional Republicans would be best served by embracing the agenda of the hard labor left. This is an interesting view. While Scozzafava shouldn't be held accountable for the views of her husband, one gets the impression that McDougall and Scozzafava are broadly in agreement. Which makes the insistence on the part of E.J. Dionne and Frank Rich and other left-of-center observers that conservative critics of Scozzafava were attempting to purge a Republican moderate from the party seem more than a little peculiar. You'd almost think that the most politically useful narrative, rather than the most accurate narrative, was being advanced. But that's not fair. In truth, Dionne and Rich and others believe that U.S. political discourse would be best served if conservatives embraced Scozzafava's views, thus giving Democrats the freedom to move further to the left. This is an interesting view. Hoffman, however, was not a flawless candidate. His lack of interest in key issues facing the 23rd congressional district was a serious liability, and the 2010 Republican nominee, whether it is Hoffman or Matthew Doheny or someone else, will have to have a stronger command of these issues. Had Hoffman won, it might have led to overconfidence and a raft of primary challengers who'd burn money conservatives could use more effectively elsewhere. Meanwhile, the candidate who was most strikingly successful, Bob McDonnell, was a staunch conservative who focused on creating the right conditions for job growth. That sounds about right to me. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=ZDUwZTliMWFiZjY4NzkzOGE5MzgzYWQ3MTc3MDVlYmQ= Wed, 04 Nov 2009 09:49:32 -0400 Thinking About Revenue Sources and Conservatism -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=OTAyNGJhYzRhMjhkNTRhMDllMjJlODMwOWU2OWM1YWM= In late September, Michael Boskin and John Cogan of Hoover touted a <a href="http://online.wsj.com/article/SB10001424052748704471504574443112002063586.html?mod=loomia&loomia_si=t0:a16:g2:r4:c0.224201:b27996984">very smart state tax reform</a> for California that should be a model for reform efforts nationwide. The commission's majority report recommendations were made public yesterday. They include a sweeping overhaul of the personal income tax code that reduces tax brackets to two from six; eliminates all deductions and credits other than for charity, mortgage interest and property taxes; and cuts the top statutory income tax rate to 6.5% from 9.3%. Most taxpayers would receive a 25%-30% tax cut and all would pay less. The commission also recommends abolition of the state's corporate income tax and the elimination of most of the state sales tax that finances the state's general revenue fund (as opposed to special funds for transportation, etc.). Finally, to replace the lost revenue, the commission recommends a broad-based, low-rate state value-added tax (VAT), collected on business net receipts (revenues less purchases from other businesses, including immediate expensing of capital), that is capped at 4%. These reforms will reduce the volatility of state revenues by 40% (using commonly accepted measures) mostly by reducing the reliance on personal and corporate income taxes, and moderate the current tax code's extreme progressivity. They also will result in a $7 billion net tax cut per year for Californians without raising taxes on any income group, as some of the new VAT would be borne outside the state and more of Californians' taxes would be deducted against federal taxes. Boskin and Cogan recognize the danger of creating a new revenue source, and they address it by proposing the abolition of the corporate income tax and also a hard spending cap. Bruce Bartlett advocates a federal VAT. So do I, only I think it should fund a dramatic decrease in the personal and corporate income taxes. But I worry that Bartlett has stopped engaging center-right thinkers who disagree with him. Rather, he is increasingly harsh in taking on supply-siders. In a recent blog post, Bartlett <a href="http://www.capitalgainsandgames.com/blog/bruce-bartlett/1177/wall-street-journal-publishes-erroneous-and-dubious-anti-vat-arguments">wrote</a>: The other day the Wall Street Journal editorial page ran an <a href="http://online.wsj.com/article/SB10001424052748704107204574469123940666200.html">article</a> by Ernest S. Christian and Gary A. Robbins attacking the idea of a value-added tax for the United States. This is the second anti-VAT op-ed the Journal has run this year on top of two highly negative editorials. Only one piece has appeared favorable to the VAT and that was written by former Clinton administration Treasury official Roger Altman. Apparently, it's okay for Democrats to get space in the Journal to promote the VAT because it allows the editorial page to maintain the fiction that only liberals favor such a tax as part of their nefarious plan to eventually tax 100% of everything. When I've queried the Journal about an article on why conservatives ought to support a VAT I did not get a reply. This post appeared two weeks after the comment by Boskin and Cogan. I understand where Bartlett is coming from. As you can guess, I don't agree with every "Review & Outlook." Because I think we need to cut spending (by a lot) and raise taxes (by not a lot) if we're going to avoid fiscal disaster, plenty of conservatives -- including many readers, I'm guessing -- are inclined to think I'm not a real conservative. That's frustrating. It doesn't mean, however, that I want the conversation to end. On the central issue -- whether the U.S. will once again become an entrepreneurial and dynamic economy that can lift families out of poverty and increase the standard of living for the middle class -- I'm with the supply-siders, though I disagree on important details. My hope is that I can win some supply-siders over by arguing that tax cuts aren't always the surest route to the kind of economy we all want; rather, we want the lowest sustainable tax levels to provide revenue and also the stability that entrepreneurs depend on. Of course, I'm also open to persuasion. Now I sound kind of smug. I'll add that I'm also totally crazy. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=OTAyNGJhYzRhMjhkNTRhMDllMjJlODMwOWU2OWM1YWM= Tue, 03 Nov 2009 16:47:53 -0400 On Trita Parsi and 'Iran's AIPAC' -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=YWQ1NmRiMzIyYzM4NGFkNTNlYmZkNDg1MTBlYmZlNWI= Daniel Larison, one of the most astute observers of the American political scene, has returned from a too-long hiatus. Citing a post by Andrew Sullivan, he attacks Jeffrey Goldberg for characterizing Trita Parsi, an expert on Iranian affairs who champions an engagement policy while condemning the Iranian regime's human rights abuses, as an objective ally of the regime. The <a href="http://jeffreygoldberg.theatlantic.com/archives/2009/11/yes_on_goldblog.php">attack</a> to which he is responding is fundamentally dishonest. Parsi has <a href="http://www.nytimes.com/2009/08/15/opinion/15iht-edaksari.html">argued</a> against additional sanctions on Iran on the reasonable grounds that additional sanctions would not force Tehran to make any concessions, would not undermine the regime and would not advance the cause of reformers. I don’t believe Parsi has argued for an end to all sanctions currently imposed on Iran, but even if he were to make that argument he would have legitimate reasons for thinking that sanctions have helped to <a href="http://www.niacouncil.org/index.php?option=com_content&task=view&id=1363&Itemid=59">weaken Iranian opposition forces and consolidate the regime’s hold on the country</a>. If Goldberg had any interest in being fair to Parsi, he would have to acknowledge that Parsi has also argued for a <a href="http://www.huffingtonpost.com/trita-parsi/with-iran-a-tactical-paus_b_255505.html">pause</a> in pursuing any engagement with Tehran in the wake of the June crackdown. That means that Parsi has changed his position on engaging Tehran to take a somewhat harder line than he once held. Whether or not this is the right move, this put him among those opposed to engaging the Iranian government under its current leadership at the present time. As far as I know, this remains Parsi’s position today. Obviously, he is nothing like “the AIPAC of Iran,” and referring to him as a lobbyist for Tehran is false and reprehensible. Reprehensible strikes me as a wildly inappropriate characterization. In fairness to Goldberg, who has thought deeply and carefully about these issues, serving as "the AIPAC of Iran" is more complex than AIPAC critics think. I'm sorry to see that Goldberg retreated from this characterization. Obviously, as I told Mother Jones, I wasn't meaning to imply that Trita Parsi is a paid agent of the Iranian regime, or somesuch. I was implying that he has made himself the AIPAC of Iran in Washington. My bad. On the larger question of whether Trita Parsi functions as a lobbyist for the Iranian regime, based on what I know, I'd have to say yes: He has argued consistently against any sanctions against Iran, and an end to sanctions is obviously what the Iranian regime wants. So he is working on behalf of a stated interest of the Iranian government. Yes, he also criticizes Iran's human rights abuses, but it's been suggested recently <a href="http://www.jstreet.org/">that it is possible to lobby for a country while criticizing it at the same time</a>. Goldberg's last link is to J Street, an avowedly pro-Israel group that has been strongly critical of settlement-building in the West Bank and Israel's controversial efforts to contain the violence in Gaza. But he could just as easily have cited AIPAC itself, which aggressively lobbied the Israeli government in the 1980s to change its policies towards apartheid-era South Africa. At the time, the Israeli defense establishment maintained ties with the South Africans, a relationship criticized by elements within the Israeli foreign ministry as well as pro-Israel activists in Jewish communities throughout the West. This questioning of Israeli policy didn't mean that AIPAC ceased to be a pro-Israel lobby. And while Parsi is undoubtedly a believer in democratic liberalism who wants to see Iran radically reform its institutions, he objectively serves Iranian interests insofar as he discourages Western efforts to exert pressure on the regime. This doesn't make Parsi a bad person. Plenty of Iranian dissidents believe that a democratic Iran should have a nuclear deterrent. Plenty want a denuclearized Iran, yet believe that Western pressure amounts to a kind of imperialism that should be actively resisted. This isn't that complicated. Iran doesn't have an actual AIPAC. Instead, there is a loose network of policy scholars, activists, think tanks, civil servants, etc., who strongly oppose a forward-leaning U.S. policy in the Persian Gulf for a wide, sometimes overlapping variety of reasons. Some of these people have a real financial interest in a better relationship between Washington and Qom, but most don't. On some issues, members of this loose network get important things right. A lot of realists have raised important questions about the efficacy of sanctions, and they are right to do so. But it's also true that these voices help today's Iran. The Iranians among them have added credibility. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=YWQ1NmRiMzIyYzM4NGFkNTNlYmZkNDg1MTBlYmZlNWI= Tue, 03 Nov 2009 16:21:55 -0400 The Theory of Natural Buyers -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=OTc1YTNhOGQ1MDBiMGNhZGM3ZmIyMjE3YWQ0NTJkYTE= Marginal Revolution points me to Mark Whitehouse's excellent Wall Street Journal article on Yale economist John Geanakoplos. Apart from Whitehouse's problematic oversimplification of rational expectations, it is well worth your time. In a 2000 academic paper, Mr. Geanakoplos offered a theory. He said that when banks set margins very low, lending more against a given amount of collateral, they have a powerful effect on a specific group of investors. These are buyers, whether hedge funds or aspiring homeowners, who for various reasons place a higher value on a given type of collateral. He called them "natural buyers." Using large amounts of borrowed money, or leverage, these buyers push up prices to extreme levels. Because those prices are far above what would make sense for investors using less borrowed money, they violate the idea of efficient markets. But if a jolt of bad news makes lenders uncertain about the immediate future, they raise margins, forcing the leveraged optimists to sell. That triggers a downward spiral as falling prices and rising margins reinforce one another. Banks can stifle the economy as they become wary of lending under any circumstances. The policy upshot dovetails with calls by Nicole Gelinas in her excellent After the Fall for demanding uniform capital requirements. This idea had big implications for policy makers. For decades, they thought of interest rates as the most important indicator of supply and demand in credit markets, and the only variable they needed to adjust to achieve a desired economic result. Now, Mr. Geanakoplos was saying that something else -- lenders' collateral or margin demands -- could be even more important. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=OTc1YTNhOGQ1MDBiMGNhZGM3ZmIyMjE3YWQ0NTJkYTE= Tue, 03 Nov 2009 15:58:52 -0400 Krugman vs. Phelps -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MzU1MzgwZjZlMGVkYTNhNzBlMDJhZTdmNTFjODI0ODU= Edmund Phelps is, along with Robert Fogel, is one of my intellectual heroes. In Rewarding Work and Designing Inclusion, Phelps pioneered an innovative approach to fighting poverty by encouraging greater work effort through the use of graduated employment subsidies. And he's also brilliantly described how the virtues of entrepreneurial or dynamic capitalism as opposed to the state-directed alternatives that scar lives by actually reducing economic inclusion. So when Paul Krugman writes a <a href="http://krugman.blogs.nytimes.com/2009/11/03/on-not-listening/">derisive blog post</a> about Phelps, one that acknowledges that he stopped reading a characteristically smart and incisive Phelps <a href="http://www.ft.com/cms/s/0/f71cfc6a-c7e6-11de-8ba8-00144feab49a.html?nclick_check=1">column in the FT</a> because he didn't like the first few sentences, you can guess what I make of it. Krugman's rhetorical strategy increasingly relies on bullying. He is a brilliant thinker with a legion of decidedly less-brilliant epigones who has turned a large swathe of the economics blogosphere into a "slagosphere" not unlike the lit blogs that punish and torment fiction writers and essayists who dare to say anything provocative or interesting. Interestingly, Krugman sees himself as a voice of reason braying against a conservative movement he sees as full of racists, reactionaries, and economic Luddites. This from a writer and thinker who proudly writes a lacerating post about a column he refuses to read. I still think that Krugman has made many valuable contributions not only to economics as a discipline -- that is obvious -- but also to our public discourse: he brings a valuable, informed perspective to bear on vitally important debates. I welcome that. But his intolerance and his near-constant mischaracterizations of his interlocutors are having a coarsening effect. Moreover, Krugman has enabled the rise of an unthinking, reflexive interventionism that is, in my view, doing real damage to our economy and our democracy by creating unreasonable expectations of what bright, well-intentioned planners can realistically accomplish. What's even more embarrassing is that the rest of Phelps's column offers a nuanced, troubling account of our medium-term economic future, one that is actually less optimistic about the self-correcting marketplace than Krugman. Rather than attacking the Keynesians, Phelps is making the case for profound uncertainty. The gravest error of the phony debate between two non-starters is that their superficial and mechanical character - the clockwork of the neoclassical system and the hydraulics of the Keynesian one - operate to distract policymakers from asking basic questions about the dynamism of the US and UK economies. Economics has paid a terrible price for its dalliances with the Keynesian and neoclassical theories. Now policymakers are being misled by the siren call of these same, hopelessly inadequate views. For all Krugman's insistence that he is the rigorous empiricist and his opponents are rigid ideologues, one doesn't get a lot of epistemic humility in his scathing polemics. I should add, by the way, that Krugman's caricature of Phelps is worse than it looks: describing Phelps as a crude stimulus opponent, Krugman seems to miss the fact that Phelps has long advocated the aforementioned subsidies designed to increase work effort, and he's championed stimulus efforts in France and Singapore modeled on those lines. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MzU1MzgwZjZlMGVkYTNhNzBlMDJhZTdmNTFjODI0ODU= Tue, 03 Nov 2009 15:52:44 -0400 Greetings from China -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=ZDQ5ZGNhZWQ0M2RkMzEwYWFhNmJiNzQwYjIwYjBlNDQ= I'm here as a tourist, so I won't be blogging about my trip. I do, however, plan on sharing some thoughts and observations once I return home. For now, I'll fire off some policy missives. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=ZDQ5ZGNhZWQ0M2RkMzEwYWFhNmJiNzQwYjIwYjBlNDQ= Tue, 03 Nov 2009 15:21:50 -0400 The Case Against the Case Against Microgovernments -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=YTIzMjQ3ZWYxMWZiODQ1MWQ1OGRhMThkZTZkOTMwYjk= I recently wrote a post suggesting that some of New Jersey's structural fiscal problems could be solved by Corzine's proposed consolidation plan. I tend to like smaller local governments, however, and I'm very glad to report that Jim Manzi has suggested that consolidation is <a href="http://theamericanscene.com/2008/06/02/corzine-to-mayberry-drop-dead">being oversold</a>. If one were to make the heroic assumptions that these costs differences are caused entirely by town size, and that every town below about 6,000 people could find a nearby town or towns to merge with to get to about 10,000 people (but not more than 15,000, at which point costs would start to rise), and that therefore all small towns could get to the same per capita local government costs as the lowest-cost towns, then you could get some costs out of the system. How much? Under the unrealistic assumptions provided above, about $0.3 billion per year. In comparison, New Jersey’s 2008 state level <a href="http://enlightennj.blogspot.com/2007/02/new-jersey-state-budget-2008.html">budget</a> is about $33.3 billion. This is up about $2.2 billion over 2007. So, this - again, totally unrealistic - benefit could be achieved simply by increasing spending from $31.1 billion last year to $33.0 billion this year instead of increasing it to $33.3 billion. Of course when you add in local spending, <a href="http://www.taxfoundation.org/files/statelocalspendingpc-20070627.pdf">total state plus local spending</a> is much higher than this in New Jersey. New Jersey’s 2005 total state and local spending was the eight-highest in America, at about $8,900 per capita. Nearby Connecticut had the tenth-highest level of state and local spending, at about $8,550 per person. Simply spending at Connecticut’s level (which isn’t exactly like saying “become Alabama”) would reduce total state and local spending by about $3 billion per year. Finally, under the same set of assumptions that lead us to think we can get $0.3 billion by forcing the consolidation of hundreds of towns, we would presumably want to break up the large towns into smaller towns of 6,000 - 15,000 people each, since this is the lowest-cost town size. That would, under the same assumptions, save more like $1.5 billion per year. Don’t hold your breath. One way of looking at this is that Corzine chose to pursue a near-impossible strategy that would yield modest gains at best to reduce the burden of state and local taxes rather than take the more straightforward step of reducing spending to Connecticut levels. While Jim isn't exactly advocating this idea of consolidation microtowns and breaking up macrotowns, I rather like the idea, particularly the breaking up macrotowns part. This is one reason why I was very disappointed when the San Fernando Valley secession movement failed. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=YTIzMjQ3ZWYxMWZiODQ1MWQ1OGRhMThkZTZkOTMwYjk= Thu, 29 Oct 2009 22:34:42 -0400 The End of Cap-and-Trade -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=YzBjNGEzOGI0NWZhNGYwNmNhMDRkYTI3NjM5NTc4ZWI= The current issue of NR features an editorial <a href="http://article.nationalreview.com/?q=NWM0MDkxODQzNmZkODY4OWU2OTAzMjRiYTJlMDcwMGU=">opposing cap-and-trade</a>, and I agree with it. Public support for cap-and-trade is <a href="http://blogs.wsj.com/environmentalcapital/2009/10/28/poll-position-cap-and-trade-losing-support-nbcwsj-survey-finds/">dwindling</a> as voters learn more about the costs involved. I am somewhat more sympathetic to Lindsey Graham than the editors, in part because I think Graham is right to back policies that would encourage the expansion of nuclear power. But it's not clear to me that cap-and-trade legislation larded with subsidies is the right way to achieve this goal. One of the strongest objections to creating a carbon market is that it would not make a dent in global temperatures thanks to the massive expansion of coal electric facilities in East and South Asia that is already underway. I wonder, however, if there might nevertheless be a case for a very small carbon tax designed to reduce the mercury, particulates, and other conventional pollution emitted by coal plants, which have a negative -- and expensive -- impact on public health. Keith Johnson of the Wall Street Journal <a href="http://blogs.wsj.com/environmentalcapital/2009/10/20/the-hidden-120-billion-cost-of-americas-energy-mix/">recently discussed</a> a report from the National Research Council on "Hidden Costs of Energy: Unpriced Consequences of Energy Production and Use." The upshot? America’s current energy mix carries a “hidden cost” of about $120 billion a year, the report found. And that number doesn’t include any tally for the cost of greenhouse-gas emissions or climate change—estimates for climate costs range from $1 to $100 a ton of carbon dioxide emissions, but are so variable the report didn’t quantify them. The figure also doesn’t include other hidden costs, such as the portion of the U.S. military expenditure needed to protect global oil production and transport. The $120 billion figure boils down to coal and cars. Transport costs the country $56 billion. Coal-fired electricity costs the country $62 billion per year, largely in health impacts from particulate matter. Natural gas for power generation, in contrast, adds about $740 million a year in hidden costs. Looked at another way, coal’s hidden pricetag adds up to 3.2 cents per kilowatt hour. Compare that to the 2 cents-per-kilowatt hour that wind power gets from the government—that’s less a subsidy than a partial attempt to level the playing field. This kind of analysis is far from flawless, and it should be obvious that no central planner will be able to determine an "appropriate" price that reflects all of the imaginable externalities, negative and positive. Yet I'm struck by the idea, <a href="http://www.futurepundit.com/archives/004763.html">advanced by Randall Parker</a> among others, that a modest carbon tax could make nuclear power far more competitive with coal electric -- so much so that, Parker suggests, we'd immediately stop building coal electric plants. Again, I believe that climate change is a serious problem, a stance that not all conservatives accept. But if burning coal is also causing serious health problems, that strikes me as a decent argument for slapping the equivalent of a sin tax on its use. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=YzBjNGEzOGI0NWZhNGYwNmNhMDRkYTI3NjM5NTc4ZWI= Wed, 28 Oct 2009 15:46:04 -0400 The Right and Financial Regulation -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MTk3NTU4NWJlOGIxNDcwMTQ1NWE1MWI0MmMwNDZkNTg= Last week, Nate Silver <a href="http://www.fivethirtyeight.com/2009/10/issue-that-could-fracture-both-right.html">argued</a> that financial sector reform will be the domestic policy issue that dominates the first half of 2010. After making the case for why this issue will take precedence over cap-and-trade or immigration reform or gay rights, Silver suggests that the debate will be between those advocating structural reform and those advocating incremental reform. From a 30,000-foot view, the debate will be between the <a href="http://www.nytimes.com/2009/10/21/business/21volcker.html?partner=rss&emc=rss">Volckerists and the Summersists</a>, with the Volckerists arguing that large financial institutions need to be broken up -- probably through something resembling a modern <a href="http://en.wikipedia.org/wiki/Glass-Steagall_Act">Glass-Steagall Act</a> -- and the Summersists arguing instead for more extensive regulations. The 'hard', online left will almost certainly take the Volckerist position. In fact, I expect this to be the "public option" of 2010, the badge of pride that "movement progressives" will use to distinguish themselves from "kleptocrats". Like the public option, the Volckerist position ("break up the banks") is easy and intuitive to understand. Also as in the case of the public option, I suspect the Volckerists will ultimately have the preponderance of polling evidence to show in their favor (although no polling has yet been conducted on the issue). In contrast to the public option, opinion among policy wonks is likely to be a little bit more evenly divided -- see for example the difference of opinion between <a href="http://www.nakedcapitalism.com/2009/10/volcker-glass-steagall-and-the-real-tbtf-problem.html">Yves Smith</a> and <a href="http://baselinescenario.com/2009/10/21/the-consensus-on-big-banks-begins-to-move/">Simon Johnson</a>, neither of whom have any inherent sympathy whatsoever for the banks. And Silver offers an astute diagnosis of the dilemma facing the right. How the right will respond is less predictable, but this may become the issue that tests whether the "tea party" movement is ultimately more libertarian or populist in character. While on the one hand, the zeitgeist within the movement is to bemoan any government intervention in the economy, on the other hand, much of the impetus for the movement was the bailout bill and the deference that both the Obama and Bush administrations have shown toward Wall Street. I really don't know how they'll come down on this issue (initially, perhaps, they'll take whatever position that the White House doesn't), but it could be a defining one for the movement. Ultimately, I think there is more political upside than downside for the White House here, although there is plenty of both. I don't think the Republican Party as a whole can afford to take an anti-regulation stance. When the House Financial Services Committee voted on a proposal to regulate derivatives trading, only one Republican, Walter Jones of North Carolina, joined with the Democrats. According to the Wall Street Journal, Republicans on the panel said the agency would amount to a new government bureaucracy intruding on the financial decisions made by Americans. The banking industry has lobbied aggressively to kill or weaken the agency, and Democrats have agreed to curtail some of its powers. This, however, doesn't seem like an entirely sound characterization of what this regulation is designed to achieve. One could argue that a ban on insider trading involves intruding on the financial decision made by Americans, yet there is a broad consensus that this regulation helps preserve the integrity of financial markets. Similarly, efforts to shift most derivatives trading to exchanges and clearinghouses is designed to encourage transparency and to establish clear, non-discretionary limits on risk-taking. Nicole Gelinas of the Manhattan Institute has been <a href="http://www.city-journal.org/2009/eon0619ng.html">writing very persuasively</a> on the need for financial regulation to strengthen free markets. She has made a conservative case for going beyond the Obama administration's flawed approach. The Obama administration has taken some positive steps here, with Treasury Secretary Tim Geithner’s reasonable, if imperfect, proposal to set borrowing limits on currently unregulated derivatives. The plan also urges regulators to “reduce their use of credit ratings in regulations and supervisory practices, wherever possible.” But the White House has delayed taking action on the most obvious way to limit borrowing—new, consistent capital requirements for financial firms and all their investments—directing the Treasury to issue a report by the end of the year. The creation of a systemic-risk regulator in the absence of clear boundaries on risk-taking at financial firms could encourage yet more hubris and complacency in financial markets. A regulatory council that the government thinks smart enough to manage any and all risk might encourage market participants and their lenders to continue to act recklessly, confident that someone is looking out for them. Clear and simple regulations that apply to all players will help curb the political favoritism that the American public rightly resents. Gelinas's central view is that we need to revamp our financial system so that even the largest banks can safely fail, thus bringing an end to the cycle of hubris and bailouts that began in the mid-1980s. Ironically, what looks like a laissez-faire approach is actually one that guarantees a steady government takeover of the financial system. I strongly recommend Gelinas's forthcoming book <a href="http://www.amazon.com/After-Fall-Saving-Capitalism-Washington/dp/1594032610">After the Fall</a> to get a sense of why this is so pernicious. City Journal also published a <a href="http://www.city-journal.org/2009/19_4_gop-economic-agenda.html">wonderful essay</a> by Luigi Zingales on why Republicans need to channel populist anger to what he calls a pro-market politics. A pro-market strategy aims to encourage the best conditions for doing business, for everyone. Large banks, for instance, benefit from trading derivatives (such as credit default swaps) over the counter, rather than in an organized exchange: they can charge wider spreads that way, and they can afford to post less collateral by using their credit ratings. For this reason, they oppose moving such trades to organized exchanges, where transactions would be conducted with greater transparency, liquidity, and collateralization—and so with greater financial stability. This is where a pro-market party needs the courage to take on the financial industry on behalf of everyone else. A pro-market strategy rejects subsidies not only because they’re a waste of taxpayers’ money but also because they prop up inefficient firms, delaying the entry of new and more efficient competitors. For every “zombie” firm that survives because of government assistance, several innovative start-ups don’t get the chance to be born. Subsidies, then, hurt taxpayers twice. A genuinely pro-market party would have resisted more vigorously the Wall Street bailouts, in line with popular sentiment. Zingales is one of the good guys. He is one of those Chicago economists that Paul Krugman condemns. And in this case he is directly at odds with congressional Republicans, who are surrendering the playing field to the Democrats on the pretty darn important question of whether or not we're going to be a market economy or a government-dominated economy. This is insane. Politics and principle are pushing in the same direction. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MTk3NTU4NWJlOGIxNDcwMTQ1NWE1MWI0MmMwNDZkNTg= Wed, 28 Oct 2009 15:23:11 -0400 On Crist -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=NDcwMmM2Y2NiYTY5ZjQzNmFkYTU2OWZjZGQzZjY3NTc= I'm not a fan of Charlie Crist, and I'm on record as <a href="http://theamericanscene.com/2008/12/02/marco-rubio-for-senate">an admirer of Marco Rubio</a>. One thing that has frustrated me about the coverage of Florida's Republican Senate primary is that observers insist on characterizing Crist as a "moderate." In a column for Forbes.com, I argue that he's more accurately seen as the candidate of <a href="http://www.forbes.com/2009/10/25/governor-charlie-crist-florida-opinions-columnists-politics-reihan-salam.html">free-lunchism</a>. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NDcwMmM2Y2NiYTY5ZjQzNmFkYTU2OWZjZGQzZjY3NTc= Mon, 26 Oct 2009 15:38:24 -0400 Thinking About 'White Cities' -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MTIwZmQ1Y2RhMTQyZjhjNmI3NWVhODRiYzNjZDVhNjc= Ta-Nehisi Coates <a href="http://ta-nehisicoates.theatlantic.com/archives/2009/10/how_does_it_feel_to_be_a_problem.php">does not like</a> Aaron Renn's New Geography essay on "The White City." There's a <a href="http://ta-nehisicoates.theatlantic.com/archives/2009/10/open_thread_at_noon_103.php#comment-295271">thorough discussion</a> of <a href="http://www.newgeography.com/content/001110-the-white-city">this piece</a> claiming to expose the lack of "diversity" (read: Negroes) in progressive cities in the Open Thread. I find the piece to be pretty ill-considered, and insulting to Latinos and Asians, in particular. But more than that it repeats an unfortunate trope among writers tackling race--it treats African-Americans as agency-less automatons, awaiting the right programming from white policy-makers. After quoting from Renn's piece, Coates continues: There is so much wrong here. But leaving aside the fact that the author starts out by disqualifying New York, L.A., and Chicago, leaving aside the blinding whiteness of dubbing Atlanta "un-progressive," leaving aside that most of these "progressive" cities have more black people than their surrounding states, I think the implicit argument that these cities should be "doing more" to assure that their black population meets the national average is odious. This strikes me as a valuable argument. But of course it represents a powerful case against virtually all race-conscious public policy. Some argue that the fact that African American are less inclined to accumulate housing wealth than other Americans reflects a legitimate preference and should not be cause for alarm. Europeans tend to accumulate less housing wealth than Americans, and we tend not to consider this a disparity that reflects poorly on the European way of life. Indeed, there is a reasonable case to be made that Americans have overinvested in housing relative to other goods. To what extent are different consumption patterns an issue of public concern? Part of the issue with the African American housing wealth disparity, which contributes to a broader wealth disparity, is that it is arguably a reflection of discriminatory patterns that emerged in the distant past. In When Affirmative Action Was White, political scientist Ira Katznelson argues that a number of New Deal-Fair Deal policies designed to encourage homeownership were implemented in a manner that exacerbated the relative economic disadvantage of African Americans, and this effect has, for obvious reasons of integenerational wealth transmission, compounded over time. So yes, we could say that legitimate preferences are at work; we could also say that we are dealing with a legacy of injustice. What does this have to do with patterns of internal migration? Attorney General Eric Holder gave a speech to Justice Department employees in which he argued that Americans are "a nation of cowards" when it comes to race, and he referenced enduring patterns of self-segregation. There has been a marked tendency of native-born non-Hispanic whites to "flee diversity," i.e., to leave so-called immigrant magnet states in favor of states with higher proportions of native-born non-Hispanic whites. There has been a parallel tendency of college-educated African Americans to cluster with other college-educated African Americans, and also to migrate from northern cities to Sunbelt cities with large African American populations. One can imagine many reasons for "fleeing diversity." Parents of young children might want to settle in neighborhoods defined by a high level of cultural consensus. Lower levels of diversity, whether racial or class diversity, might serve as proxies for low levels of crime or high-quality schools. Or the individuals in question might simply dislike living near people who are different from themselves. It's by no means obvious that this is a pressing problem, and it is clearly based on private, voluntary choices. So why highlight the issue at all? Well, one anxiety is that we're seeing a split between "the beige and the black," to use Michael Lind's phrase -- while non-Hispanic whites, Latinos, and East Asians are intermarrying at high and rising rates, the number of marriages between blacks and nonblacks is also increasing but remains very low in absolute number. The cities Renn cites are heavily nonblack and some, like Austin, Texas, are becoming increasingly nonblack. Could this reflect choices that are perfectly symmetrical? Coates doesn't like the idea that African Americans are "agency-less automatons," which is very fair. But I think we can agree that the relatively poor and the relatively rich face a different context. Both have agency, yet those with more wealth have a far wider set of choices. So when one hears that "smart growth" policies are making housing so expensive that members of aspirational working and middle class are being driven out of some metropolitan areas, I think that ought to be a source of concern -- at least as great a source of concern as the environmental impact of low-density living. Coates writes: Man listen--Negroes like Atlanta. Negroes like Chicago. Negroes like Houston. Negroes like Raleigh-Durham (another area that doesn't make the cut, for some reason.) Negroes like Oakland. Negroes have the right to like where they live, independent of Massa, for their own particular, native, independent reasons (family? great barbecue? housing stock?) Just like Jewish-Americans have the right to like New York--or not. Just like Japanese-Americans have the right to like Cali--or not. And while this is no doubt true, some Bangladeshi Americans don't like living in regions defined by high concentrations of crime and poverty. Yet for those who are not affluent, moving to "smart growth" regions is less of an option than moving to "sprawling" regions. For Bangladeshi Americans who arrived in the United States without college educations or considerable savings, options are more constrained than for Bangladeshi Americans who have both. Because there is no sense in which the fate of Bangladeshi Americans, an immigrant community that has mushroomed in size only since the mid-1980s, it is absurd to consider this a matter of historical injustice. But if it is also absurd -- and indeed insulting -- to consider the same set of concerns applied to African Americans to be a matter of historical injustice, and that could be right, then I think our entire conversation on race will be very different. Daniel Patrick Moynihan memorably and controversially recommended a policy of "benign neglect" of race, sensing that contentious discussion of the issue in a time of economic and social turmoil was not the most constructive way of promoting the interests of the poorest and most vulnerable citizens, a disproportionately large number of whom were African Americans. If one believes that different patterns of earnings, wealth accumulation, settlement, assortative mating, and incarceration all reflect legitimate differences in preferences, or that even if they don't reflect legitimate differences we won't do much good by talking about them, then perhaps "benign neglect" is the right way to go. I'd argue that some of these patterns are more problematic than others, and that the racial lens is a very useful way of seeing some issues. I get the impression, however, that some people think it is only appropriate to use the racial lens when this advances left-of-center policy goals, like redistribution, rather than right-of-center policy goals, like deregulation. (I don't think that this is true of Coates, incidentally.) To be honest, I found Renn's essay most interesting not because it focuses on race but rather because it draws attention to the uneven class impact of "smart growth" policies and "high-road" strategies for economic development. Regions that embrace tough land-use regulations and high taxes are praised for their "progressivism," and they are cited as models for other cities, like Atlanta and Houston. But by noting these racial disparities, Renn is suggesting that there are serious downsides to this model, namely that they stifle economic opportunities for the less well-off. Renn's use of the racial lens is a way of complicating the moralistic language that tends to define this debate. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MTIwZmQ1Y2RhMTQyZjhjNmI3NWVhODRiYzNjZDVhNjc= Sat, 24 Oct 2009 14:39:52 -0400 Missing the Forest for Some Shrubs -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=M2RkZDdjOWQxZjM3ZGRkZjgxNWMxYzMyY2I5M2ZhYmU= Dave Weigel of The Washington Independent <a href="http://washingtonindependent.com/64732/pawlenty-knocks-glenn-beck-oh-so-gently">suggests</a> that Republicans are undermining the effectiveness of their case against the Obama White House and congressional Democrats by focusing on the controversial views of staffers and left-wing pressure groups rather than massive job losses and lingering outrage over the Wall Street bailouts. This isn’t to say Republicans have been distracted or unsuccessful in Congress. They’ve certainly scored victories during this period. And by paying attention to these conservative witch hunts, they’ve definitely kept their base revved up. But in the current political context, it seems like they’re missing the forest for some shrubs. It’s as if Democrats tried to press their advantages in 2005 not by going after the Iraq War or the mishandling of Hurricane Katrina, but by spending weeks attacking mid-ranking members of his administration and claiming that President George W. Bush was driving the nation toward fascism. And remember, one of the huge political mistakes of 2005 was the Republican decision to do a full-court press on an issue that had come from conservative activists and pundits:<a title="http://abcnews.go.com/GMA/Schiavo/story?id=595905&page=1&page=1" href="http://abcnews.go.com/GMA/Schiavo/story?id=595905&page=1&page=1" target="_blank"> the fate of Terri Schiavo</a>. Because Weigel is a reporter for The Independent, a left-of-center media outlet, my guess is that many conservatives will be inclined to dismiss Weigel's analysis. That's a shame. It parallels David Brooks's argument that conservative news anchors and radio hosts don't always reflect the concerns of Republicans and right-leaning independents, and it makes a great deal of sense. This isn't to say that Glenn Beck doesn't have the right to speak his mind, or that he doesn't raise very important philosophical questions about the progressive legacy and much else. But it's not obvious that voters are more interested in these questions than job creation. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=M2RkZDdjOWQxZjM3ZGRkZjgxNWMxYzMyY2I5M2ZhYmU= Sat, 24 Oct 2009 13:59:02 -0400 Politicians as Civics Teachers -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=YjdlODBhMmZlYjNiYzc5NmFjYmNjNmIzZGM4Y2FlOTQ= In this week's New York Times Magazine, Matt Bai has a <a href="http://www.nytimes.com/2009/10/25/magazine/25corzine-t.html?ref=magazine&pagewanted=all">very sympathetic profile</a> of Jon Corzine. Bai makes a number of very good points, including the following: To bring about reform now, politicians need to be not just good campaigners and public stewards but civics teachers too, able communicators who can reassert a connection in the public mind between costs and services, between the policies that Congress and state governments pursue and the money you end up paying your town for garbage collection and the local library. Corzine and Daggett are both trying to do this, in their own ways, though neither is the ideal vehicle; Corzine is a cautious reformer with little talent for explanation, and Daggett’s campaign is too hard up for cash to communicate much of anything. Christie’s campaign, on the other hand, seems lifted from the days before last year’s economic collapse, when it seemed possible to have everything, and all at once. Those fellow governors who sympathize with Corzine are watching his campaign play out, hoping to find out whether the case for painful choices, as they see it, is any easier to make in this era than it was in the last. “If Jon wins, and I believe he deserves to, I think a lot of other governors will say, It’s O.K. to tell people the truth; it’s O.K. to give out some tough medicine,” Ed Rendell, the Democratic governor in neighboring Pennsylvania, told me. “And I think more governors will be inspired to do that. If he loses, I think it will have a chilling effect.” But I have to say, I find Rendell's remarks extremely self-serving. And I'm struck by the fact that Bai never mentions Mitch Daniels of Indiana, a governor who has done an excellent job of being frank with the public about the tradeoffs involved in tax and spending decisions. I'll add that Republican gubernatorial candidates, particularly those running in liberal states, often suffer from free-lunchism, i.e., an ideology based on tax cuts and spending hikes in boom years. That certainly seems to be true of Christie. Consider the following from Bai's article: This history probably explains why Christie has avoided offering details of a plan to bring down property taxes or reform the state’s dire finances, instead running a campaign that is almost a caricature of the modern, tax-slashing conservative pitch. He says he would repeal all the sales taxes, toll hikes and surcharges imposed by Corzine and cut income taxes as well, while at the same time somehow offering more property-tax rebates — a feat that would seem to defy the laws of economics, if not physics. Christie has also said he would decline any federal money that imposed restrictions on the state. To replace all of this revenue, Christie says he will rein in wasteful spending. Only about a fifth of New Jersey’s budget, however, goes to pay for the actual bureaucracy of government; all the rest pays for sacrosanct programs like <a title="Recent and archival health news about Medicaid." href="http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/medicaid/index.html?inline=nyt-classifier">Medicaid</a> and school aid. As his opponents never tire of pointing out, Christie could fire every single one of the 66,000 employees in state government, and still he wouldn’t make up for the revenue he says he wants to eliminate. When asked how he intended to pull this off, Christie offered a bizarre reply. New Jersey has had a string of politicians, Jon Corzine the latest, who made all types of specific promises that they knew they couldn’t keep,” Christie told me. “New Jerseyans want to know what direction are you going to take the state in, what philosophy are you going to pursue. They’re not looking for specific promises that can’t be kept.” Hai-yah! Christie was turning the traditional notion of political accountability on its head: not only was it not unprincipled to make a bunch of vague campaign promises that had almost no chance of becoming reality, but in fact it was also the only truly principled thing to do, because politicians never followed through on the details of their proposals, anyway. When he gets to Trenton, Christie assured me, “We’ll get in there and make it work.” It is easy to see why conservatives oppose Corzine. Bai offers a persuasive narrative of how New Jersey fell into a death-spiral of excessive government spending, rooted in the extreme fragmentation of local government. I tend to think that there's a real risk of local governments becoming too large, as diseconomies of scale emerge in large, anonymous cities governed by an unresponsive political class. Yet it's clear that many of New Jersey's microgovernments aren't delivering real value or meaningful Tiebout choice; rather, they are entities solely devoted to rent-extraction. To his credit, Corzine has proposed local government consolidation, an idea New Jersey voters have resoundingly rejected. Though Corzine has tried to restrain spending and address the state's revenue shortfall, this failure to solve the structural problem begs the question of why he's running for reelection at all. Given that Corzine lacks the political acumen to tackle New Jersey's problems and Christie is offering wildly unrealistic promises, does Daggett represent an alternative for conservative voters in the state? I can't say. I do get the impression that his fiscal proposal, essentially to use a wider revenue base for the sales tax to fund property tax relief, is better that what the other candidates are offering. Yet it's not clear that Daggett is willing to make the deep cuts in spending that New Jersey needs. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=YjdlODBhMmZlYjNiYzc5NmFjYmNjNmIzZGM4Y2FlOTQ= Sat, 24 Oct 2009 13:35:59 -0400 311 -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MjdjZDJlZDgxYzFmM2QxMTRjMTIzNWMwNjM2YmI1ZTI= I like Michael Bloomberg. Conservatives in New York and across the country tend not to like Bloomberg because he is, despite his brief stint as a Republican, a liberal. But he is also a liberal who created a large and successful business, and that's framed the way he approaches local government. Phil Koesterer very kindly emailed me a link to a New York Times <a href="http://www.nytimes.com/2009/10/11/business/11unboxed.html?_r=2">article</a> by Steve Lohr on a recent meeting that focused on local government innovation. Under Bloomberg, New York city has been a leader. In 2002, the city began its “311” telephone number for answering questions about government services and to report problems down to missing manhole covers. The service receives 50,000 calls a day, and earlier this year began operating on the Web as well. Complaints, response times and resolved problems are tracked and measured to improve performance. In 2006, the city began an online service, NYC Business Express, to make it easier and faster to start a business. The average time to obtain a building permit, for example, has been cut to 7 days from 40. Such seemingly mundane improvements can add up to big gains in the efficiency of government service systems, experts say, nurturing productivity and growth in local economies. The process, they say, is similar to “lean manufacturing,” a system first mastered by <a title="More information about TOYOTA MOTOR Corporation" href="http://topics.nytimes.com/top/news/business/companies/toyota_motor_corporation/index.html?inline=nyt-org">Toyota</a> in which step-by-step changes on the factory floor, made repeatedly, translate into major advances in quality and productivity. It actually gets even better: New York is starting to use sophisticated data analysis to improve firefighting efforts, among many other things. And innovations that have taken off in New York city are spreading throughout the country. I'm a great believer in federalism, which is one reason why I'm comfortable with local governments embracing policies that I'd fight tooth and nail were they to be embraced by the federal government. One big problem in America's biggest cities is that partisan elections give Democrats an effective political monopoly. Because voters rely on partisan affiliation to determine their votes, they tend to vote for Democrats in both national and local elections, despite the fact that the mix of issues at the local level is very different by definition. That's a shame. Cities like New York and Los Angeles would be far better off if you had a coalition of public-sector unions and liberal activists competing against a coalition of led by small business owners and homeowners, with both coalitions consisting primarily of voters who backed Barack Obama in 2008. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MjdjZDJlZDgxYzFmM2QxMTRjMTIzNWMwNjM2YmI1ZTI= Tue, 13 Oct 2009 18:04:40 -0400 No New Taxes for Under $250K? -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=Y2VmNTdjYmNiMDRhMDlmYzg5ODYxNTBkMzBiYjI2YTk= I'm in a small minority among conservatives in that I think President George H.W. Bush was right to raise taxes when he was in office. It was a tremendously difficult decision, but I think he recognized that the fiscal picture was in danger of deteriorating to such an extent that it would damage America's long-term economic prospects. Yet Bush also pledged not to raise taxes during his 1988 presidential campaign, and many voters, particularly conservative voters, felt betrayed. This contributed directly to President Bush's 1992 defeat. During the 2008 presidential campaign, Barack Obama pledged to not raise taxes on families earning less than $250,000. And now, as Kevin Hassett <a href="http://www.aei.org/article/101152">explains</a>, it seems very likely that he will support a health reform proposal that will do exactly that. The [Joint Committee on Taxation] report projected that the excise tax would raise about $52 billion in 2019. Of that, about $8.9 billion would come from taxpayers with incomes of less than $50,000; about $19.4 billion from taxpayers with incomes between $50,000 and $100,000; and about $17.4 billion from taxpayers with incomes between $100,000 and $200,000. Add those up, and you see that about 87 percent of the revenue in the original Baucus proposal to finance Obamacare would come from individuals with incomes of less than $200,000. Baucus and the Senate committee have since upped the proposed tax to 40 percent, and the trigger thresholds to $9,850 and $26,000, tweaks that shouldn't change the basic thrust of the story. The Democrats' plan is a moving target--and given who will pay the tab, that is probably on purpose. The remarkable thing is that this revenue comes from low- and middle-income people who already have insurance. Many members of organized labor have these "gold-plated" plans. And they would be worse off, not better, because of Obamacare. During the campaign, I was convinced that the Democratic candidate would break his pledge rather than abandon his various spending proposals. I also believed, and still believe, that we need to reform the tax code in a way that might raise taxes on some families earning less than $250,000, including families with so-called gold-plated coverage. So does this mean it's right to let President Obama and the Democrats off the hook? I think the difference -- and I'm sure supporters of the health reform proposal would disagree with me -- is that the first President Bush raised taxes to improve the long-term fiscal position of the United States government, whereas this health reform proposal, even when you factor in the new revenue, will create new work disincentives while in all likelihood exacerbating cost growth. Note that a more expensive and centralized health reform might not have these deficiencies, just as a more laissez-faire reform, the kind of reform I'd much prefer, might also not have these deficiencies. Among Democrats and liberals, there is a belief that Republican opposition to the various Democratic proposals represents a kind of "nihilism," and that because Baucuscare resembles proposals offered by liberal and moderate Republicans in the 1990s, today's opposition is obviously unprincipled if not insane. My sense is that we've learned a great deal about health reform over the intervening period, and that, as Christensen, Grossman, and Hwang have argued, it is disruptive competition that promises substantial improvement in the cost and quality of medical services over time. I'm increasingly convinced that the only way to move in this direction is to create a system of universal catastrophic coverage and universal health savings accounts, as proposed by <a href="http://www.aei.org/article/101137">Martin Feldstein</a> and a number of others. The emerging consensus among congressional Democrats moves us in a very different direction, towards a highly centralized, highly regulated system that will give entrepreneurs very little room to dramatically improve care. With that in mind, I don't think opposition is "nihlistic"; rather, I think it's responsible. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=Y2VmNTdjYmNiMDRhMDlmYzg5ODYxNTBkMzBiYjI2YTk= Tue, 13 Oct 2009 17:18:02 -0400 The Innovator's Prescription -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MjJjZTVlMTJmNmMwOWEyMjdjYzE0YTIwZDliZjYxODE= If you'd like to understand the pathologies of America's health system, you need to read <a href="http://www.amazon.com/Innovators-Prescription-Disruptive-Solution-Health/dp/0071592083/ref=ntt_at_ep_dpt_2">The Innovator's Prescription</a>, a brilliant book by Clayton Christensen, Jerome Grossman, and Jason Hwang. I'll be referencing the book very frequently in future posts. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MjJjZTVlMTJmNmMwOWEyMjdjYzE0YTIwZDliZjYxODE= Tue, 13 Oct 2009 16:28:33 -0400 What AHIP's Critics Are Missing -- By: NRO Staff webmaster@nationalreview.com (NRO Staff) http://agenda.nationalreview.com/post/?q=NTY5N2RhOTBkODkxYzUzMDQ5NThmM2UyMjNkMmExN2I= AHIP, the lobbyist for the biggest private health insurers in the United States, has received withering criticism from many sources, including <a href="http://prescriptions.blogs.nytimes.com/2009/10/13/mit-economist-finds-flaws-in-insurance-industry-report/">MIT economist Jonathan Gruber</a>, one of the architects of the Massachusetts health reform, and Harvard's David Cutler, among <a href="http://yglesias.thinkprogress.org/archives/2009/10/health-care-experts-release-statement-on-misleading-ahip-report.php">many other economist</a>s who've worked closely with the Obama administration and congressional Democrats. Keith Hennessey, a staunch critic of the Democrats' mandate-driven approach, has <a href="http://keithhennessey.com/2009/10/12/pwc-study/">also criticized</a> AHIP's methodology, and for good reason. I have no interest in defending the AHIP report. I do think, however, that some of the critics of the report are overlooking something very important. For example, Ezra Klein writes, In a long <a href="http://meganmcardle.theatlantic.com/archives/2009/10/projecting_premiums_under_the.php">defense</a> of the PWC/AHIP report, Megan McArdle goes to bat for the most indefensible element of the analysis: the decision to avoid estimating the response to the tax on high-cost insurance plans (which is, in fact, the whole point of the tax), and simply pretend that everything will remain unchanged except that a lot of people will pay a large new tax that they don't have to pay. Moreover, she conscripts the Congressional Budget Office to help with the argument: "You might think that everyone is going to structure their benefits to get around this tax," McArdle writes. "But the CBO expects us to collect quite a bit of money from this tax." Not quite. The Congressional Budget Office projections (which are, in this case, the Joint Committee on Taxation's projections, as the CBO doesn't estimate tax revenues) actually suggest that the bulk of the tax's revenues will come from the response to the tax, not the payment of the tax. As the New York Times <a href="http://www.nytimes.com/2009/10/13/health/policy/13plans.html?_r=1&hp">reports</a>, the JCT believes that "about $142 billion of the 10-year total of $201 billion to be raised by the [excise tax] would come from increased income and payroll taxes." In other words, the vast majority of the revenues would come because employers would "structure their benefits to get around this tax." Workers would receive more of their compensation in wages and less in health-care benefits, and because wages are taxable and health benefits aren't, tax revenues would go up. That is an excellent point. Let's pay attention to the dynamic effects of the legislation. The trouble is that the CBO didn't adequately account for the response to the implicit marginal tax created by the sliding scale of subsidies, as Greg Mankiw <a href="http://gregmankiw.blogspot.com/2009/10/marginal-tax-rates-from-health-reform.html">has noted</a>. I should note that CBO does not fully incorporate the effects of these higher marginal tax rates in their cost estimates. If taxpayers respond to these new incentives by, say, working less, GDP and tax revenue from income and payroll taxes will decline. By the conventions of budget scoring, CBO ignores these macroeconomic changes. By contrast, households facing increases in marginal tax rates of 20 percentage points will not ignore them. This means that the healthcare reform bill will likely have a more adverse budgetary impact than CBO estimates. This strikes me as a pretty big oversight. The limitations of the AHIP report reflects very poorly on AHIP. The fact that so many analysts have ignored the oversights of the CBO estimates will prove far more consequential. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NTY5N2RhOTBkODkxYzUzMDQ5NThmM2UyMjNkMmExN2I= Tue, 13 Oct 2009 16:15:11 -0400 On Obama's Nobel Peace Prize -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=ZWI1NTA5NzJjYzc3ZjBhYzM1NjNiY2JlOWU4ZTM1YjM= Shirin Ebadi, the Iranian human rights activist who won the Nobel Peace Prize in 2003, was a staunch critic of the Bush White House. Yet she has also spent decades working tirelessly on behalf of women and vulnerable minorities, all while leading a pretty modest life as a working mother. Though I can't say I see eye to eye with the Nobel Peace Prize Committee on much, I do think she was an excellent choice. Now, of course, the Committee has chosen President Barack Obama. One thing I find extraordinary about this decision is that the president was chosen ahead of two Chinese dissidents, a Congolese doctor who has dedicated his life to aiding victims of sexual assault, an Afghan activist who, like Ebadi, has fought to defend the rights of women, and many other worthy nominees. More remarkably still, the president recently decided against meeting the Dalai Lama in deference to Chinese sensibilities. Then there is the president's outreach to the State Peace and Development Council. Anwar Ibrahim, Malaysia's fearless opposition leader, who has faced down political thuggery of the worst kind from racial chauvinists devoted to his destruction, said the following in an <a href="http://online.wsj.com/article/SB125375647720536353.html">interview</a> with Christopher Rhoads of The Wall Street Journal. "With constructive engagement...what you find is countries going for construction projects and no engagement," said Malaysian opposition leader Anwar Ibrahim, in an interview in New York on Thursday. Mr. Anwar said "constructive intervention" was required. Mr. Anwar said the U.S. is still the only country that can stand up to many countries on issues such as the fate of Aung San Suu Kyi, the Myanmar opposition leader and Nobel laureate who has been under house arrest for much of the past two decades. There is an upside to all of this: perhaps the president will decide that he is obligated to defend the interests of fellow Nobel Peace Laureates, given that they belong to the same club. That will mean defending the rights of Aung San Suu Kyi and the Dalai Lama and Shirin Ebadi. Seen through that lens, perhaps the president will decide that the Prize is more trouble than it's worth ... P.S. Roger Bate has identified a <a href="http://blog.american.com/?p=5905">very worthy candidate</a> for the Prize. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=ZWI1NTA5NzJjYzc3ZjBhYzM1NjNiY2JlOWU4ZTM1YjM= Fri, 09 Oct 2009 17:58:50 -0400 Martin Feldstein's Brilliant Reform Proposal -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=YmU0NzBmYjIwMmQ5MzUwYWIwM2UyZWVhZjQ3ODg0MzQ= In today's Washington Post, Martin Feldstein offers <a href="http://www.aei.org/article/101137">a way out of the health reform impasse</a>. Let's scrap the $220 billion annual health insurance tax subsidy, which is often used to buy the wrong kind of insurance, and use those budget dollars to provide insurance that protects American families from health costs that exceed 15 percent of their income. Remarkably, Feldstein's proposal would dramatically expand access to health insurance, eliminate a distortion in the tax code that exacerbates cost growth, and there would be money to spare. My calculations, based on the government's Medical Expenditure Panel Survey, indicate that the budget cost of providing these insurance vouchers could be more than fully financed by ending the exclusion of employer health insurance payments from income and payroll taxes. The net budget savings could be used to subsidize critical types of preventive care. And unlike the proposals before Congress, this approach could leave Medicare and Medicaid as they are today. Feldstein identifies two potential flaws and he identifies solutions for them. First, how would families find the cash to pay for large medical and hospital bills that fall under the 15 percent limit? While it would be reasonable for a family that earns $50,000 a year to save to be prepared to pay a health bill of, say, $5,000, what if a family without savings is suddenly hit with such a large hospital bill? Second, how would doctors and hospitals be confident that patients with the new high deductibles will pay their bills? The simplest solution would be for the government to issue a health-care credit card to every family along with the insurance voucher. The credit card would allow the family to charge any medical expenses below the deductible limit, or 15 percent of adjusted gross income. (With its information on card holders, the government is in a good position to be repaid or garnish wages if necessary.) No one would be required to use such a credit card. Individuals could pay cash at the time of care, could use a personal credit card or could arrange credit directly from the provider. But the government-issued credit card would be a back-up to reassure patients and providers that they would always be able to pay. One potential pitfall of this approach is that household income is volatile. Just as the various Democratic reform proposals recall new enforcement resources for the IRS, this approach will pose a serious challenge to tax collectors. Moreover, the 15 percent threshold creates an implicit marginal tax, though the effect is less egregious than with sliding scale subsidies. Overall, I like this idea, though there are many questions that remain. Feldstein makes no mention of a mandate or coverage for pre-existing conditions or purchasing pools. What happens if a family doesn't actually purchase health insurance coverage with the voucher? We could imagine a Nudge-like decision to default all households into a high-deductible plan. And cost control is still an issue. While the deductible would provide some spending discipline, it doesn't have much effect on big-ticket expenditures. I'd like to see Feldstein's approach combined with <a href="http://healthaffairs.org/blog/2009/05/20/beyond-the-public-plan-debate-a-pathway-to-transform-the-delivery-system/">a publicly-chartered reinsurance program</a> designed to foster delivery-system reform. I can imagine that some will consider Feldstein's proposal insufficiently generous. But what it does it distribute the $220 billion annual health insurance tax subsidy more equitably. It's certainly true that some families will continue face high costs, but no families will face bankruptcy over medical expenditures. I'd love it if we could get some actual elected officials behind this. Scrapping the tax subsidy is, I realize, a political non-starter, and the transition would be difficult. But this is the kind of reform we need. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=YmU0NzBmYjIwMmQ5MzUwYWIwM2UyZWVhZjQ3ODg0MzQ= Thu, 08 Oct 2009 16:19:58 -0400 How Much Will the Baucus Bill Cost? -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=YWJlNTdmYWMwNzcyYTU2ZDQ3OWFhMGY0MTNkZTEzN2U= Donald Marron offers a <a href="http://dmarron.com/2009/10/07/the-real-cost-of-the-baucus-bill/">useful reminder</a>: So let me once again implore everyone commenting on the health debate: There is a difference between the cost of the Baucus bill ($904 billion) and the cost of its provisions to expand coverage ($829 billion). It is understandable that most commentary focuses on the health insurance provisions. But we should not forget the other $75 billion in spending on other initiatives. Dollar-for-dollar they deserve as much scrutiny as the coverage expansions. This is not a trivial difference. Yet I think the more open question is whether this spending will deliver a better health system overall. Keith Hennessey offers <a href="http://keithhennessey.com/2009/10/08/numbers-matter/">a number of reasons</a> to believe that it won't. In 2016 a family with a worker worth about $48,000 in total annual compensation would get about $9,000 of subsidies for the purchase of health insurance, if their employer does not offer them coverage. If your employer offers you coverage, you are not eligible for these subsidies. The bills create a firewall intended to prevent employers from “dumping” their employees onto the subsidized system. This firewall creates an enormous inequity. Imagine two families in the year 2016, each with an identical worker whose total compensation is worth about $48,000. Both families are required to buy health insurance. Family A is offered health insurance through an employer. A “silver plan” will cost about $14,000 in 2016, squeezing out $14,000 of family A’s income and leaving $34,000 in wages. Family B is not offered health insurance through an employer, and therefore qualifies for about $9,000 in subsidies to buy health insurance. Family B thus has $48,000 in wages plus $9,000 in subsidies, minus $14,000 in health insurance and roughly $4,000 in higher taxes, leaving about $39,000 in wages after buying the same silver plan. Family B ends up roughly $5,000 better off than Family A, even though the workers are worth the same in total compensation. The family that does not get health insurance through employment is better off because it gets a big subsidy. So while the legislation ostensibly "bans" the shifting families from one side of the firewall to the other, the incentives will be very large. Hennessey suggests that Congress will be under intense pressure to extend the subsidies from Family B to Family A, which would dramatically increase costs. Congressional Republicans have been accused of trying to derail health reform through constant delays, and that is an understandable charge. It's natural for opponents to want to slow down the process. But there are solid, substantive reasons for wanting to slow the process down, namely that there is still a great deal that we don't understand -- and further study could give us a better, more accurate picture of the choices we're facing. The breakneck pace is all about the political cycle. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=YWJlNTdmYWMwNzcyYTU2ZDQ3OWFhMGY0MTNkZTEzN2U= Thu, 08 Oct 2009 15:56:10 -0400 Anti-Environmental Regulation -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=ZGMyOWI1N2RkZTlmODdjN2NjOTNjNjgyMDA0MzZjZTA= Brad Plumer of The New Republic has written a <a href="http://www.tnr.com/article/drunk-power?page=0,0">shocking report</a> on how federal and state regulations lead to perverse environmental outcomes. Casten’s original plan was to sell one-third of the recycled power to Cabot’s plant, and the rest to an industrial facility just down the road for around $45 per megawatt-hour--cheaper than the $55/MWh that electricity cost in the area, yet still high enough for the project to be profitable. But, in Louisiana, as in most of the United States, state law forbids anyone from stringing up private wires across a public street. Casten couldn’t market his power directly--he could only sell it to the local electric utility. And, because the utility, due to state rules, chiefly earned a profit from the power plants it built and ran itself, it refused to offer anything more than rock-bottom prices for Casten’s recycled power--prices too stingy for the project to work. After many months of bitter wrangling, Cabot gave up entirely. As a final insult, the utility later won approval from regulators to build a brand new fossil-fuel plant, a pricier way to generate electricity that would also add more carbon to the air. The Louisiana utility wasn’t doing anything evil--it was just responding rationally to the rules laid down--but the end result was perverse. "It’s like we’re forcing citizens to pay extra to heat the planet," Casten bristles. And similar roadblocks stand in the way of recycling across the country, with jaw-dropping consequences: One study for the EPA found that harnessing industrial waste energy had the potential to meet 19 percent of the country’s electricity needs--equal to 95 nuclear plants--while slashing fossil-fuel use in the power sector by one-quarter. Plumer offers a number of recommendations, including the elimination of barriers to local generation. One wonders how far we could get in promoting energy efficiency and curbing carbon emissions by simply eliminating counterproductive regulations rather than creating new regulations. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=ZGMyOWI1N2RkZTlmODdjN2NjOTNjNjgyMDA0MzZjZTA= Thu, 08 Oct 2009 15:43:20 -0400 Why the Danes Love High Taxes -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=NjQwYzdmNmVmY2JjZDQ5YWFlNDA5MjE4NDM4OGUyNmU= Matt Yglesias has been blogging from northern Europe, and he's <a href="http://yglesias.thinkprogress.org/archives/2009/10/taxes-taxes-everywhere.php">written a post</a> that captures the differences between the social democratic left and the free market right unusually well. After describing Denmark's high-quality public services and extremely heavy tax burden, he writes the following: There’s no way to have a progressive renaissance in the United States unless progressives find some politically feasible way of directly making the case that higher taxes for better services can be a good trade. And it’s worth trying to be honest about this. The other American journalists I’m traveling with, all lefty environmentalist types, can’t stop complaining about how expensive basic consumer goods are here. And it’s true, stuff’s expensive! But college and preschool and doctors and hospitals are all free, and the carbon emissions are low. This is, I think, a good trade but it really is a trade. Low taxes plus cheap dirty energy and large numbers of poor people will give you cheaper restaurants. My sense is that Matt is overestimating the average material standard of living in Denmark. Moreover, the differences in poverty between northern Europe and the United States can be traced in no small part to family structure. It is true, however, that tax-and-transfer policies make an enormous difference. Via <a href="http://www.willwilkinson.net/flybottle/wp-content/uploads/2007/10/smeeding-inequality.png">Will Wilkinson</a>, this chart shows that pre-tax inequality in Denmark is not that far from pre-tax inequality in the United States -- but the Danes do far more to redistribute wealth. One has to assume that regional diversity of the United States contributes to our decision to redistribute less, e.g., the cost of living varies dramatically from New York city to Houston to Marfa, whereas the band is far narrower in Denmark. I'd say that my main objection to what you might call the Danish settlement is that the sacrifices made in terms of disposable income are also sacrifices in terms of choice: the Danes live in what Keith Joseph, one of the architects of the Thatcher Revolution, called a "pocket-money society," in which the state makes the big decisions -- about housing and education and health -- while individuals were left with "pocket-money" from their wages. And as citizens cede control over these larger life decisions, there is the twin danger of dependence and a stultifying lack of innovation. It helps, however, that center-right governments in Denmark and Sweden have helped revive the Scandinavian social model by introducing market competition into education and other public services, as well as notional accounts in public pensions and a variety of other ideas that many U.S. Democrats would consider dangerously right-wing. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NjQwYzdmNmVmY2JjZDQ5YWFlNDA5MjE4NDM4OGUyNmU= Thu, 08 Oct 2009 15:25:05 -0400 Tastes Great and Less Filling? -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=ZWVjNzkxOTcwMTUwZDY2ZTBiMzg0NzE1MTQwYTZmYzk= Ezra Klein <a href="http://voices.washingtonpost.com/ezra-klein/2009/10/bad_public_plan_arguments.html">writes</a>: This morning, I was on MSNBC with Sen. John Barrasso (R-Wyo.), who argued against the public plan by asserting that Medicare was too expensive and bankrupting the country. When I pointed out that CBO projected $110 billion in savings for a public plan attached to Medicare rates, he didn't miss a beat: That's because Medicare underpays, he explained, and is subsidized by private insurance. Only one of those two arguments can be true. As compared with private insurance, Medicare can either be unaffordably expensive, or it can be underpaying for services and saving money. It can't be both. I'm not so sure it can't be both. For example, if Medicare were designed to encourage the creation of efficient provider networks, it would facilitate rather than undermine efforts on the part of private insurers to move away from highly inefficient fee-for-service medicine. Because Medicare represents so large a share of overall medical spending, it's reliance on fee-for-service shapes the entire landscape. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=ZWVjNzkxOTcwMTUwZDY2ZTBiMzg0NzE1MTQwYTZmYzk= Thu, 08 Oct 2009 15:08:45 -0400 Taxing the Poor -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MGYzMzRhNjkwMWU1ODc0MmJiMTU3Zjc2NWZjZGQwMzM= At The New Atlantis, James Capretta has identified a <a href="http://www.thenewatlantis.com/blog/diagnosis/a-70-percent-tax-on-work">crucial flaw</a> in the Baucus bill. A family with an income at twice the poverty line, or $48,000 in 2016, would get $9,072 in federal assistance for coverage — still a substantial sum. But it’s $7,400 less than the family would get if they earned half as much. The Baucus plan thus imposes an implicit marginal tax rate of about 30 percent ($7,400/$24,000) on wages earned by families in this income range. And that would come on top of the high implicit taxes already built into current law. Low-wage families with children also get the Earned Income Tax Credit (EITC). The EITC boosts incomes for those with the very lowest wages, but it is also phased-out as incomes rise. Past a certain threshold (about $21,400 in 2016), the EITC is reduced by $0.21 for every additional $1 earned. Throw in the individual income tax rate (15 percent) and payroll taxes (7.65 percent), and the effective, implicit tax rate for workers between 100 and 200 percent of the federal poverty line would quickly approach 70 percent — not even counting food stamps and housing vouchers. Greg Mankiw followed up, suggesting that Capretta was underestimating the implicit marginal tax rate. Indeed, Jim seems to understate matters, as he includes only the employee half of the payroll tax. Including both the employee and employer halves, as economic theory says is appropriate, appears to give a marginal tax rate closer to 80 percent. And, of course, many states impose income and sales taxes as well, and these would further raise the overall marginal tax rate. If we pursued Mankiw's proposed stimulus and <a href="http://gregmankiw.blogspot.com/2009/02/my-preferred-fiscal-stimulus.html">halved the payroll tax and paid for it with an increase in the gas tax</a>, we'd ease the burden on less affluent workers, who are far less likely to commute by automobile. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MGYzMzRhNjkwMWU1ODc0MmJiMTU3Zjc2NWZjZGQwMzM= Thu, 08 Oct 2009 15:04:23 -0400 Dan Drezner on Why America Needs Crossfire -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MzAyYjJmYmJjMDMxNzE4NDQ4ZTRhZTU4Njg3OTZlNzg= Dan Drezner has written a <a href="http://drezner.foreignpolicy.com/posts/2009/10/01/did_jon_stewart_hurt_america">persuasive post</a> on why Jon Stewart was wrong to condemn Crossfire, the late and mostly unlamented TV debate series. As inane as the crosstalk shows might have been, one of their strengths was that they had people with different ideological and political perspectives talking to (and sometimes past) each other. You could argue that the level of discourse was pretty simplistic and crude -- but at least it was an attempt at cross-ideological debate. People from different ideological stripes watched the same show and heard the same arguments. Nowadays, if you're looking for that kind of exchange, you either have to fast all week until the Sunday morning talk shows, or go visit <a href="http://drezner.foreignpolicy.com/bloggingheads.tv">bloggingheads</a>. Instead of Crossfire-style shows on cable news, you now have content like Hannity, <a href="http://en.wikipedia.org/wiki/Glenn_Beck_%28TV_program%29" target="_blank">Glenn Beck</a>, <a href="http://en.wikipedia.org/wiki/Countdown_with_Keith_Olbermann" target="_blank">Countdown with Keith Olbermann</a>, etc. These programs have no cross-ideological debate. Instead, you have hosts on both the left and the right outbidding each other to see who can be the most batsh**t insane ideologically pure. These shows attract audiences sympathetic to the host's political beliefs, and the content of these shows help viewers to fortify their own ideological bunkers to the point where no amount of truth is going to penetrate their worldviews. At the time, I was mainly bothered by Jon Stewart's self-righteousness. While the writers and producers of The Daily Show are clearly tremendously talented, it has long been clear that Stewart's gift mainly lies in connecting with the prejudices of his audience. (Stephen Colbert, in contrast, strikes me as a brilliant performer, as evidenced by the manic intensity of The Colbert Report and his supporting role in Strangers with Candy, not a series I'd describe as family-friendly.) To that end, he veers between lecturing the public and, when it suits, retreating into the role of a jokester who is immune to criticism. The irony of his "hurting America" remarks is that, as Drezner suggests, Stewart helped accelerate the death of cross-ideological debate and the rise of contempt-driven mono-ideological programming. That said, I have faith in the marketplace. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MzAyYjJmYmJjMDMxNzE4NDQ4ZTRhZTU4Njg3OTZlNzg= Thu, 08 Oct 2009 14:49:50 -0400 Jeff Anderson's Small Bill -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MmI1ZTM4ODA2ZGE5NDAxMWQzYjBkOGQ2YjRmODQ0MDk= At the Weekly Standard, Jeffrey Anderson calls for a "small-bill" alternative to Baucuscare. But Republicans cannot lead merely by stating abstract principles. They must advance specific proposals--ones that are easily understandable and can be expressed in plain language to the American people. The Republican bill should be as short and simple as possible. It should be targeted to address Americans' specific and pressing concerns. And it should make health insurance more accessible, affordable, and portable--without breaking the bank, threatening the quality of care, or jeopardizing the preexisting insurance of millions. It should look something like <a href="http://www.weeklystandard.com/weblogs/TWSFP/Small-bill%20proposal%20TWS%283%29.pdf">this</a>. I don't think Anderson's proposal goes far enough, but it includes a number of smart ideas. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MmI1ZTM4ODA2ZGE5NDAxMWQzYjBkOGQ2YjRmODQ0MDk= Wed, 07 Oct 2009 15:28:12 -0400 A Tax Credit for Job Creation -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=ODM4NDJlYWNmNWU0Mzg5ZDZmMjFiNDdiODY3MmQxYWI= Who said bipartisanship is dead? Catherine Rampell <a href="http://www.nytimes.com/2009/10/07/business/07tax.html?_r=1&hp">report</a>s that Republicans and Democrats are getting behind a solid -- not perfect, but solid -- proposal for fighting unemployment. The idea of a tax credit for companies that create new jobs, something the federal government has not tried since the 1970s, is gaining support among economists and Washington officials grappling with the highest unemployment in a generation. There are, of course, a variety of ways to structure the credit, some better than others. An <a title="A paper on the package in the 1970s." href="http://www.jstor.org/pss/1801638">American Economic Review study</a> has suggested that the 1970s policy was responsible for adding about 700,000 of the 2.1 million jobs that were awarded the credit. This may sound modest, but if accurate, economists say it would make this proposal a successful and relatively cheap way of creating jobs. Advocates argue that such incentives would be more effective this time around not only because of design, but also because of timing. In 1977, hiring was already on the upswing, whereas economists expect today’s job market to decline a bit more and then stagnate for months. “Now is a better time than ’77 was because we’re closer to the bottom of a recession,” said Daniel S. Hamermesh, an economics professor at the <a title="More articles about the University of Texas" href="http://topics.nytimes.com/top/reference/timestopics/organizations/u/university_of_texas/index.html?inline=nyt-org">University of Texas</a>, Austin, who helped create the 1970s plan. “This could help an uptick proceed more rapidly.” There is legitimate concern that employers might game the system, and this approach won't be cheap. But it seems vastly superior to the way the White House has approached the question of economic stimulus so far. P.S. Greg Mankiw has written <a href="http://gregmankiw.blogspot.com/2009/10/tax-credit-for-new-hiring.html">a more critical take</a> on the idea, and he endorses a <a href="http://gregmankiw.blogspot.com/2009/02/my-preferred-fiscal-stimulus.html">more straightforward proposal</a>. I would institute an immediate and permanent reduction in the payroll tax, financed by a gradual, permanent, and substantial increase in the gasoline tax. I would make the two tax changes equal in present value, so while the package results in a short-run budget deficit, there is no long-term budget impact. Call it the create-jobs, save-the-environment, reduce-traffic-congestion, budget-neutral tax shift. I recognize that some state governments are now struggling in light of the macroeconomic crisis. For the next two years, I would let each state governor have the authority to divert a portion of the payroll tax cut in his or her state and take the funds instead as state aid. This provision would essentially be giving governors the temporary authority to impose a payroll tax on his or her citizens, collected via the federal tax system. Those governors who think they have valuable infrastructure projects ready to go would take the money. When designing a fiscal stimulus, there is no compelling reason for one size fits all. Let each governor make a choice and answer to his or her state voters. It is called federalism. This is an extremely appealing idea. My guess, however, is that the job creation tax credit might be the best we can get. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=ODM4NDJlYWNmNWU0Mzg5ZDZmMjFiNDdiODY3MmQxYWI= Wed, 07 Oct 2009 15:17:03 -0400 Let's Debate -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MmExMDVhZmI1OGFlZGU0NzAwYzM4NmNlMDNjZWY3YjU= One of the great pleasures of writing this blog has been receiving emails from readers, many of which offer trenchant criticisms of my sense of where conservative policymakers should be going on a wide variety of issues. In a recent Slate <a href="http://www.slate.com/id/2231128/entry/2231132/">dialogue</a> with Sam Tanenhaus, I laid out my broad view. The historical reality I have in mind is that we're living in straitened economic circumstances, that we face an unemployment crisis that might last a decade or more, and that American workers don't have the skills they need to flourish. Over the past decade, spending by state governments has increased at a rate of 6 percent a year, far outstripping economic growth. This is not sustainable. What I want most from the political right is a commitment to truth-telling: In the next few years, we will have to cut spending and raise taxes across all levels of government. In normal times, this isn't a winning political formula, but it might be in a crisis. And a crisis is exactly where the retreat from responsibility, which I see as a phenomenon of the right but also of the left and center, is leading us. I imagine a lot of you disagree with this, and I'd love to discuss this and other issues at greater length. So <a href="http://www.washingtonpost.com/wp-dyn/content/discussion/2009/10/05/DI2009100502509.html">please join me</a> today at noon Eastern Standard Time at the Washington Post. Hostile and friendly questions are equally welcome. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MmExMDVhZmI1OGFlZGU0NzAwYzM4NmNlMDNjZWY3YjU= Wed, 07 Oct 2009 10:28:44 -0400 The Swap -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=ZWIyNDZiNjcwZmU5MTBiZjcxMTMzNzJmYzc3MzZmYTE= This summer, I wrote a post on <a href="http://agenda.nationalreview.com/post/?q=NTM5ZDRlNWE4Yzc5N2Q1YTNmY2JiMmIzYmM5YTI0MzY=">the case for federalizing Medicaid</a>, one that drew on Ronald Reagan's proposal for a swap between state and federal governments. Ezra Klein offers another argument for doing so: Medicaid is a counter-cyclical program. When the economy gets bad, the program gets more expensive. That's obvious enough: People lose their jobs and suddenly need help affording health-care coverage. Medicaid exists to help them. The problem is, that's the exact moment when state revenues go down, because people who lose their jobs pay less in taxes. And 49 of 50 states are required to balance their budgets, so they can't deficit spend. The precise moment when Medicaid costs more and is most needed, in other words, is also the precise moment when states are least capable of increasing their contribution. The federal government, conversely, is able to deficit-spend during recessions, and often does. The federal spending pattern makes sense for Medicaid. The state spending pattern doesn't. Give it to the feds. Now, Reagan's idea for a swap posited that income-maintenance programs would be shifted to the states, and these are counter-cyclical programs as well. I think we need to do a far broader rethinking of state and federal responsibilities. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=ZWIyNDZiNjcwZmU5MTBiZjcxMTMzNzJmYzc3MzZmYTE= Mon, 05 Oct 2009 18:10:14 -0400 Michael Heller and Economic Gridlock -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MTUyNGFlNmE5ZTdkM2YwY2VkNDU0ZTE3YWFlNDU0MmI= Last year, I had the great pleasure of reading Michael Heller's excellent and very accessible The Gridlock Economy, and Tim Lee has a very useful post <a href="http://timothyblee.com/?p=1171">summarizing</a> Heller's recent Mercatus debate with Richard Epstein, a libertarian law professor I'm guessing many of you have read. I'm a fan of Heller and Epstein, so this was a particularly interesting exchange for me. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MTUyNGFlNmE5ZTdkM2YwY2VkNDU0ZTE3YWFlNDU0MmI= Mon, 05 Oct 2009 17:50:32 -0400 Ron Brownstein on 2010 vs. 2012 -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=ZjQzZWFhYzBlOWI3NjhmN2YxYWE2NWFhMzY4ZDliMGM= Will 2010 be a false dawn for Republicans? Brownstein makes a strong case: In midterm elections, the electorate tends to be whiter and older than in presidential elections. ABC polling director Gary Langer has calculated that since 1992 seniors have cast 19 percent of the vote in midterm elections, compared with just 15 percent in presidential years. That difference contributed to the 1994 landslide that swept the GOP into control of both the House and Senate. Seniors had cast just 13 percent of the vote in Bill Clinton's 1992 victory, but that figure spiked to nearly 19 percent two years later, with voting by the young people who had bolstered Clinton falling off sharply. If 2010 is the year of the "<a href="http://www.cookpolitical.com/node/4806">angry white senior</a>," as The Cook Political Report has argued, it's easy to see a strong anti-Obama backlash leading to significant Republican gains in the House. But the composition of the electorate will change in 2012. But that dynamic also means that Republicans could do very well in 2010 without solving their fundamental demographic challenges. In the 2012 presidential election, the young and minority voters central to Obama's coalition are likely to return in large numbers. The risk to the GOP is that a strong 2010 showing based on a conservative appeal to apprehensive older whites will discourage it from reconsidering whether its message is too narrow to attract those rapidly growing groups. "It can't be the same formula in 2012," Ayres warns. One wonders how many young voters will return. It's possible that 2008 saw an unusually high level of youth turnout that won't be replicated any time soon. If unemployment surpasses 10 percent and stays there for a prolonged period, youth unemployment will presumably be somewhat higher. These voters might not be inclined to actively and energetically support the party in power at that point. To be sure, it's not clear that Republicans will be able to win them over. A<a href="http://www.forbes.com/2009/07/26/right-conservatives-bush-obama-opinions-columnists-unemployment-jobs.html"> jobs-focused agenda</a> would help. John Harwood suggests that Republicans will <a href="http://www.nytimes.com/2009/10/05/us/politics/05caucus.html?_r=1&adxnnl=1&adxnnlx=1254769565-UkNel4F8zvGcSL7VMHaEdQ">emphasize jobs on the campaign trail</a>. Moreover, even Mr. Obama’s economic team now concedes that unemployment, which they once hoped to keep from exceeding 8 percent, will get worse through the end of the year. One outside economist, Mark Zandi, predicts the economy will shed 750,000 more jobs over the next six months, with unemployment peaking at 10.5 percent in June. Republicans say the trends will only magnify voters’ doubts about the effectiveness of the administration’s anti-<a title="More articles about the recession." href="http://topics.nytimes.com/top/reference/timestopics/subjects/r/recession_and_depression/index.html?inline=nyt-classifier">recession</a> policies. “For a lot of people, the ‘whether it’s working or not’ is filtered through jobs,” said a Republican pollster, Bill McInturff. But what exactly will the G.O.P. do to revitalize the economy? <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=ZjQzZWFhYzBlOWI3NjhmN2YxYWE2NWFhMzY4ZDliMGM= Mon, 05 Oct 2009 17:39:22 -0400 Caldwell on The Phantom Fix -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MTNhZTNkNDE0NmUyYzM4MGYzNTEwZDc1NmMwYjVmNWE= This is one of the <a href="http://www.time.com/time/printout/0,8816,1927270,00.html">best takes on health reform</a> I've read come across. Health reform is beginning to look like a run-of-the-mill "fix" of the sort Washington applies whenever a big-spending program spins out of control. When people get attached to benefits they haven't paid for, the solution is seldom to cut the benefits. It is to rope in a set of dupes (in this case, young, healthy people) to pay for benefits they won't receive. Far from breaking with the me-first ethos that brought us to the brink of economic ruin, the individual mandate fits squarely within the time-honored Capitol Hill tradition of identifying resources that can be dislodged from future generations, and transferring them to the generation in power. As Charles Murray has <a href="http://blog.american.com/?p=5432">eloquently observed</a>, we've lost a number remarkable conservative thinkers over the last decade. Fortunately, we have Caldwell, as well as some of my distinguished colleagues at National Review, to at least start filling the vacuum. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MTNhZTNkNDE0NmUyYzM4MGYzNTEwZDc1NmMwYjVmNWE= Mon, 05 Oct 2009 17:11:30 -0400 The Olympics Imbroglio -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=Nzk3ZmI0NDNkNDYxYzg4ODE0ZmNmYzdkYzBmOTIzMjM= I'm a little late on this one, but I'd like to point you to Annie Lowrey's report on <a href="http://www.foreignpolicy.com/articles/2009/09/30/an_olympic_sized_mess?page=full">London's struggles with the 2012 Olympics</a> as a sign that Chicago should be grateful for losing to Rio. The budget for the games has quadrupledto a truly Olympic size: £9.3 billion ($15 billion), and rising. Jack Lemley, the ousted chair of the Olympic Delivery Authority, <a href="http://www.dailymail.co.uk/news/article-558211/London-2012-cost-20billion--TEN-times-original-budget-ex-Olympics-chief-predicts.html" target="_blank">forecast</a> the games might at the end of the day cost Britain as much as the 2008 Beijing games cost China, in the region of $40 billion -- more than Britain's stimulus package, a mayday measure designed to save the country from economic ruin last November. That was a cost China -- an expanding economy with very low labor costs and the need for infrastructure anyway -- could bear. It's less clear that Britain can. For one, London hardly needs the facilities it's building, and they are of questionable legacy value. More importantly, such exorbitant costs are coming at the same time that the British economy is struggling beneath the weight of the credit crunch and recession. The sad truth is that the hosting the Olympics should be the province of developing countries with something to prove. Conservatives have been accused of gloating over Chicago's loss, and that may or may not be true. This accusation does strike me as an effective way to deflect legitimate criticism of the president for going to Copenhagen when he evidently didn't have enough time to regularly consult with and reassure an increasingly erratic Hamid Karzai before Afghanistan's rigged national elections. The job of any president is almost impossibly hard, and it's important to recognize that. But if President Bush had fought hard for Dallas or Houston to win the games, I promise that there'd be howling from the opposition. On a lighter note, Brad Flora wrote the <a href="http://www.slate.com/id/2231173/pagenum/all/">definitive take</a> on the cultural politics surrounding Chicago's bid for the Olympics for Slate. Why the grumbling? The bid's most visible opponents have spent years howling that the Olympics will breed graft and political corruption and bleed an already cash-strapped city dry. Chicago 2016's supporters, by contrast, have argued that the Olympics will improve the city's standing, create jobs, and boost local morale. The debate here wasn't best understood as an honest disagreement over what's best for Chicago. Rather, the rhetoric was indicative of a more fundamental clash: the eternal battle of jocks vs. nerds. In Flora's view, Obama was well-placed to bridge the jock vs. nerd divide. Who in America has the power and the bona fides to end this perpetual jock-nerd standoff? If anyone can do it, it's President Obama. With his professed <a href="http://www.politico.com/blogs/bensmith/1108/Barack_Obama_fanboy.html" target="_blank">fondness for comic books</a> and his <a href="http://www.youtube.com/watch?v=y3EZjW2yics" target="_blank">prowess on the basketball court</a>, he speaks both nerd and jock. And having <a href="http://www2.canada.com/topics/sports/tsnstory.html?id=8118674" target="_blank">agreed at the last minute to fly to Copenhagen</a> to stump for the Games, he put himself at the center of the dysfunctional local shouting match. Alas, it didn't quite work out. The jock vs. nerd concept might even shed light on infighting among conservatives these days, but that's a whole other story. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=Nzk3ZmI0NDNkNDYxYzg4ODE0ZmNmYzdkYzBmOTIzMjM= Mon, 05 Oct 2009 17:05:46 -0400 Manchester -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=ZWVkMzhiZTlmMGE3MTBlNzJjMDA2N2ZhZDdjZWI4Y2U= The Conservative Party is having its annual conference in Manchester this year, a departure from past years when party conferences would take place in England's various seaside resorts. Fraser Nelson, the new editor of The Spectator, explains the shift: Why a Monday start? And why Manchester? The seaside resorts were chosen when party conferences were rallies of the grassroot members, and venues were chosen for their supply of cheap (usually B&B) accommodation. Now, most people who attend are the new breed of political professionals who are not paying their own hotel bills. Lobbyists, quangocrats, NGO advisers, journalists, the whole lot. ... There are fewer and fewer grassroot activists who do it for love. The reason for starting conference in a weekend was to let those activists get back to work. For the political pros now stuffing the conferences, this is work - don’t blame the Tories for starting on a Monday in Manchester - but it is a sign of the steady professionalisation of politics. And I don’t mean that in a good way. Many NR readers find David Cameron's transformation of the Conservatives dispiriting. His efforts to "modernize" the party are often interpreted as a leftward lurch. I take a somewhat more favorable view. My sense is that Cameron has been far too accommodating on Britain's National Health Service. Indeed, his stance on the NHS is arguably to the left of Labour, which is a scandal. Yet it is a fairly predictable political decision given the landscape, one that resembles the recent tendency of Republican lawmakers to defend Medicare in the same apocalyptic tones once used by Democrats. And it's also true that Cameron hasn't been as forthright as he should be regarding the spending cuts that Britain will have to endure over the coming years. He acknowledges that cuts have to be made and that Britain faces a fiscal emergency (see <a href="http://www.economist.com/world/britain/displaystory.cfm?story_id=14505343">this report</a> on the country's public finances from The Economist), which is more than can be said of some politicians, but I wish he'd hammer the point more aggressively. The danger, again, is that he'll be demagogued by Labour. Labour's attack on the Conservatives has been contradictory: he's a dangerous right-wing ideologue and he's an opportunist with no convictions. But now the consensus is that the Labour party has settled on the dangerous right-wing ideologue narrative, and to that end they maintain that Conservatives are gleeful about slashing public spending. Having emphasized their "compassionate" credentials, this kind of attack has lost its force. The Conservatives have instead focused on introducing choice, competition, and accountability into public programs. This had been part of Blair's agenda, yet it was undermined by intense resistance within the Labour Party. Michael Gove, one of the bright lights of Cameron's shadow cabinet, has done a brilliant job of selling the party's ambitious plan to embrace Swedish-style school choice, which allows parents and charities and for-profit firms to establish schools that would then compete with state schools. And they're also pushing an ambitious welfare reform agenda spearheaded by David Freud, who recently defected from Labour, and the slightly disappointing Theresa May. So far, the Conservatives have been cautious about offering tax cuts. They've proposed tweaks here and there, but they've also accepted some of Labour's more egregious tax hikes in response to the looming debt crisis. At the same time, the party seems increasingly receptive to tax cuts designed to <a href="http://www.spectator.co.uk/coffeehouse/5396768/we-have-a-tax-cut.thtml">spur job creation</a>. My hope is that they will, like the Canadian Liberals, create a very transparent, open process for sharply reducing government spending once in office, and that they will then pursue an agenda of tax-cutting and tax-simplification. After spending time with a lot of sharp Conservative thinkers, I sense that this is their intention: to gain credibility on spending before they make promises they can't keep. For a sense of Cameron's rhetoric, check out his recent <a href="http://www.telegraph.co.uk/news/newstopics/politics/david-cameron/6258144/David-Cameron-we-will-offer-the-radical-new-direction-the-country-is-crying-out-for.html">comment</a> in The Daily Telegraph. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=ZWVkMzhiZTlmMGE3MTBlNzJjMDA2N2ZhZDdjZWI4Y2U= Mon, 05 Oct 2009 16:49:43 -0400 The Air Capture Approach -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=N2E5MDhiZThlNzdmNDkzNDZiZGIyMDQ1NjMzZjU1YWE= Via <a href="http://www.futurepundit.com/archives/006577.html">FuturePundit</a> I found a really fascinating short article in Science by University of Calgary climate scientist David W. Keith, in which he argues that we should sharply increase investment in air capture, "an industrial process that captures CO2 from ambient air, producing a pure CO2 stream for use or disposal." Technologies for decarbonizing the energy system, from solar power to the capture of CO2 from the flue gases of coal-fired power plants, can cut emissions but they cannot reduce the climate risk posed by the carbon we have already added to the air. It may be possible to increase the Earth's reflectivity, engineering a cooling that counteracts the CO2-driven warming. Although climate engineering may be important for managing climate risk, it cannot eliminate long-term climate and geochemical risks posed by elevated CO2. It is therefore in our interest to have a means to reduce CO2 concentrations in order to manage the long-run risks of climate change. Like most climate scientists, Keith believes that we should focus on reducing emissions, and to that end he favors the creation of a carbon market. While I think reducing emissions is a worthy goal, I've been convinced by Jim Manzi that most of the proposals for decarbonizing the energy system, which focus on some combination of a carbon market and large transfers to incumbent energy firms, are too costly relative to the likely benefits, which is why I prefer large-scale public investment, financed out of general revenue, in technologies like air capture: whether you believe, as I do, that the IPCC is most likely underestimating the dangers from climate change or that it is overestimating them, this is a smart hedging strategy. So why not back a carbon market? I'd be more inclined to support one if we could somehow create a global carbon market. Brad Plumer recently cited a report from Climate Group on what a multinational carbon market might look like. More specifically, the Climate Group estimated that, by 2020, carbon prices in Europe would hover around $65/ton if the E.U. was still going it alone. But, if both the E.U. and the United States had interlinked cap-and-trade programs, the price would go down to $28/ton. And if all developed countries and China somehow hooked up under one big cap-and-trade system, the price of carbon could be as low as $4/ton. In other words, the cost of reducing carbon would be nearly negligible. Basically, the Chinese use a number of obscenely inefficient coal plants. There is a lot of low-hanging fruit in the developing world. Reducing emissions in the United States and Europe, in contrast, is more expensive, as our economies are already less carbon intensive. What if air capture became so efficient that we could unilaterally scrub the atmosphere? I'm sure that David Keith considers this a far-fetched scenario. But this research agenda certainly seems worth more than the $3 million of public and private research money we're spending at the moment. The benefits of a breakthrough would be massive. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=N2E5MDhiZThlNzdmNDkzNDZiZGIyMDQ1NjMzZjU1YWE= Wed, 30 Sep 2009 19:35:08 -0400 Steve Coll on Afghanistan -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=Y2EwZWM1MDQzMTk4OWY0YzQ2NTdiZDg5ZDU0YWFlOTU= Steve Coll, my boss at New America, has written two excellent posts on what we can learn from the Soviet experience in Afghanistan. In "<a href="http://www.newyorker.com/online/blogs/stevecoll/2009/09/ink-spots.html">Ink Spots</a>," he describes the state of Afghanistan between 1986 and 1992 and how it might prefigure a successful U.S.-led counterinsurgency strategy: realistically, the best we can achieve short of occupying Afghanistan with a 500,000 man army is an archipelago of secure cities linked by air or by heavily-defended roads cutting through Taliban-controlled territory. He ends on a sobering note. The uncertainties point, like so many other factors in this conflict, to the central importance of politics in Kabul and Islamabad. The Soviets failed in Afghanistan for many reasons, beginning with the brutality of their military campaigns and the implausibility of their political strategy. Nonetheless, by the end of the 1980s, they had constructed a durable ink spot strategy, albeit one based on a more defensive and internally ruthless political-military strategy from the one McChrystal is proposing. The Soviets were unable, however, to convert that partial territorial achievement into a broader and more durable strategic success. Partly they just ran out of time, as often happens in expeditionary wars. Their other problems included their inability to control the insurgents’ sanctuary in Pakistan; their inability to stop infiltration across the Pakistan-Afghan border; their inability to build Afghan political unity, even at the local level; their inability to develop a successful reconciliation strategy to divide the Islamist insurgents they faced; and their inability to create successful international diplomacy to reinforce a stable Afghanistan and region. Does that list of headaches sound familiar? In "Gorbachev Was Right," Coll suggests that the United States should have cooperated with the Soviets in the late 1980s, after the U.S-backed insurgency had successfully sapped the strength of the Soviet-backed Afghan state. Rather than just prop up President Najibullah, Gorbachev sought a UN-sponsored process that would isolate Islamist extremists, who were both anti-Soviet and anti-American, and create a broad-based government. Note that Ahmad Shah Massoud, who went on to become the greatest thorn in the Taliban's side, was on the verge of casting his lot with the Soviets before Afghanistan's complete collapse. The U.N. attempted, with ambivalent U.S. involvement, to pursue this vision of regional diplomacy and stabilization, through negotiations between 1988 and 1992 that included Najibullah and other Afghan leaders. It failed, however, in part because the United States, until the end of 1991, continued to fund and support a “military solution” for the mujaheddin favored by Pakistan’s army and intelligence service. The C.I.A. argued in favor of the military solution. It then concluded, as one assault after another on Najibullah-defended cities failed, that the U.S. had no further interests in the country and should pack up its financing and diplomacy and go home. A few years later, the Taliban took Kabul. One of the American policymakers responsible for this sequence of policy decisions—who was deeply skeptical of Gorbachev during the late nineteen-eighties and who was present at the decision to abandon the difficult work of regional diplomacy in 1991-1992 that Gorbachev favored—was Robert Gates, who is now Secretary of Defense. One hopes that Gates is not on the verge of making a similarly serious mistake by short-changing the counter-insurgency effort in Afghanistan. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=Y2EwZWM1MDQzMTk4OWY0YzQ2NTdiZDg5ZDU0YWFlOTU= Wed, 30 Sep 2009 18:58:35 -0400 The Party of No -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=NTgwOGQxZTNiZTIxMzQyZDAxODZiZDMyMDY5NThlODA= Many have argued that congressional Republicans have played a uniquely counterproductive role in debates over the fiscal stimulus and health reform. Some writers and thinkers have gone so far as to describe House Republicans as "nihilistic." In a<a href="http://www.tnr.com/article/madison-weeps"> lead editorial</a>, The New Republic doesn't go quite that far, but the editors do suggest that Republicans are operating outside the bounds of reasonable disagreement: The Republican reception of Baucus's bill doesn't so much represent a crisis for health care reform as it does a crisis for our system. The GOP is no longer representing interest groups; rather, it has become an interest group itself--and an implacable one. So that a compromise piece of legislation that achieves a rough consensus among the various factions in the debate fails to get even one vote from one of the two major parties. Where to go from here? Having failed to win over Republicans, Baucus should now labor to win over Democrats. If that means having Massachusetts appoint an interim replacement for Ted Kennedy's seat--or even passing some of the reform through reconciliation--then so be it. If Max Baucus's months of work achieved nothing else, he has unmasked the true nature of the contemporary GOP and, in the process, revealed just how broken our political system has become. I've recently been thinking a lot about how structural aspects of our political system have made partisan competition sharper, a subject I intend to write about at greater length. But for now I'll point you to an <a href="http://www.american.com/archive/2009/september/republicans-and-democrats-a-tale-of-two-bases/">excellent essay </a>by Michael Barone in The American, which I just came across today, on the respective congressional bases of the Democratic and Republican parties. Heavily Republican districts are concentrated in the rural and suburban South. But a significant number of these rural South districts elected Democrats—not as many as did before the 1994 election, but more than during the period of House Republican majorities from 1994 to 2006. As a result, they do not produce as large a share of Republican leaders as the gentry liberal and black districts do for the Democrats. Neither do the suburban South districts—many newly created after the 1990 and 2000 censuses because of rapid population growth—whose members tend not to have great seniority. But such districts did produce earlier Republican leaders, including Speaker Newt Gingrich (first elected in 1978 when GA-6 was a rural South district) and Majority Leaders Dick Armey (TX-24) and Tom DeLay (TX-22). The current Republican leadership thus has reason to focus less on the political realities of heavily anti-Obama districts and more on districts that in the 2008 presidential election were more marginal. That tendency is probably increased by awareness of the party’s current minority status, which gives them an incentive to appeal to voters in districts not currently represented by Republicans. These constituency realities may help to explain why the House Democratic leadership has supported a solidly liberal agenda and has concentrated on whipping enough members from marginal districts to produce majorities on the floor—the large majority on the stimulus package in February or the narrow majority on cap-and-trade in June. It may also help to explain why the Republican minority has not coalesced around any coherent opposition program, and has avoided taking stands that appeal primarily to the party’s current base. Many have noted the hypocrisy of conservative Republicans defending Medicare. Given that the composition of the midterm electorate is heavily weighted towards over-65 voters and that President Obama's health reform rhetoric initially centered on generating significant cost savings in the Medicare program to finance expanded coverage, this seems like a rational response to a political opportunity. Another way of looking at this is to say that Democrats, who have effectively used the notion that Republicans intend to "slash" Medicare to great political effect, most spectacularly in the late 1990s after the Gingrich Republicans attempted to slow the rate of growth in Medicare spending, in a sense unilaterally disarmed. Republicans, meanwhile, expanded the Medicare program during the Bush years, sensing in part that Medicare represented a serious vulnerability for them. Republicans could have chosen to ignore this unilateral disarmament n the part of the Democrats, just as McDonald's could decide to refuse to sell french fries to the parents of young children. Past experience suggests, however, that if McDonald's were to take such a stance on principle, Burger King would step in. So does this mean that democracy is in danger? Or are Republicans engaging in fairly familiar scorched-earth politics that reflects their minority status? The New Republic believes that the rejection of Baucuscare is particularly egregious, as it combines various ideas that had once been embraced by liberal and moderate Republicans. In almost Solomonic fashion, Baucus crafted a bill that gives something to--and takes something away from--each faction. Virtually every industry group--from hospitals to drugmakers to device manufacturers to insurers--that faces new fees or budget cuts in the Baucus bill is rewarded with additional revenue from the legislation. And, when it came to winning over Republicans, Baucus went more than halfway: eliminating the public option, strengthening protections against federal funding of abortions, and lowering the legislation's price tag. At the same time, the Baucus bill tightly regulates benefit packages, the interstate compact concept does not allow for the robust competition among state regulators that conservatives had hoped to cultivate, the individual and employer mandates mean that the legislation's supposed price tag masks stealth taxes on firms and families. In 2005, President Bush proposed revamping Social Security. The Bush White House made it clear that it was open to a variety of approaches that had at one point been championed by the center-left thinkers, including progressive price indexing and voluntary individual accounts. You'll recall that this didn't take off among Democratic lawmakers. Unified Democratic opposition to President Bush's Social Security effort proved highly effective. And somehow democracy survived. So at the risk of speaking too soon, I think we can rest easy. Regular readers will know that I support the goal of universal coverage, and I think that congressional Republicans, with a few rare exceptions, haven't done a very impressive job on this and other domestic issues. I am, however, sensitive to overwrought language, and to the constraints imposed by a competitive political environment. This is one reason why I favor fairly dramatic election reforms, ranging from adding at-large House districts to the most populous states, campaign finance reforms designed to strengthen challengers against incumbents, open and jungle primaries, among other things. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NTgwOGQxZTNiZTIxMzQyZDAxODZiZDMyMDY5NThlODA= Wed, 30 Sep 2009 18:14:44 -0400 How Not to Stimulate the Economy -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=YTVlZDNiNzBmMjY3OWNiODY3ODczZGUzNjVjMjRjNWI= Paul Krugman argues that we tend to <a href="http://krugman.blogs.nytimes.com/2009/09/29/the-true-fiscal-cost-of-stimulus/">exaggerate</a> the scale of the debt problem caused by fiscal stimulus in a liquidity trap. To summarize, fiscal expansion leads to smaller output losses than we'd see otherwise, and this in turn leads to a "crowding in" of private investment that will enhance the long-term growth potential of the economy. Higher GDP growth in the short and the long term mean that we'll be better able to carry the debt burden. Assuming this is true, and I think Krugman makes a reasonable case, the design of the fiscal stimulus remains relevant, i.e., how much bang for the buck are we getting in terms of smaller output losses? Desmond Lachman of AEI <a href="http://www.aei.org/article/101058">suggests</a> that President Obama's fiscal stimulus package didn't move quickly enough. The degree to which unusually large gaps have been allowed to open up in the US labor market highlights how ill-designed was the Obama fiscal stimulus package. If the purpose of the US$780 billion stimulus was indeed to jump-start the economy, one has to ask why only around one third of that package was concentrated in 2009 when the economy most needed support. One also has to ask how much economic sense it made for the fiscal stimulus to rely so heavily on the sort of temporary tax cuts that were seen not to have worked in 2008 and why the package was allowed to be so laden with pork that was sure to result in very little bang being obtained for the buck. A particularly unfortunate consequence of the Obama Administration's botched 2009 fiscal stimulus package will be to complicate the prospect for any further fiscal stimulus in 2010. Sadly, the need for a second stimulus is all too likely in the event that the economy indeed experiences a double dip later in the year as consumer demand remains weak. That is, the slow-working stimulus allowed unemployment to increase sharply. Once the unemployment rate takes off, it is very hard to lower it, not least if the main instrument at hand is fiscal stimulus. The president's allies could argue that conservative Republicans are to blame, as the stimulus was loaded with temporary tax cuts in an effort to win Republican votes. This does not, however, account for the slow-moving spending initiatives that were included in the legislation. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=YTVlZDNiNzBmMjY3OWNiODY3ODczZGUzNjVjMjRjNWI= Wed, 30 Sep 2009 17:10:46 -0400 Dean Kamen on Health -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=OTJiZGY1Nzk4YzlkZjQyOWZlNDU2M2MwM2QwMDQ4MmM= This Popular Mechanics interview with Dean Kamen is <a href="http://www.popularmechanics.com/science/health_medicine/4327012.html?page=3">well worth your time</a>. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=OTJiZGY1Nzk4YzlkZjQyOWZlNDU2M2MwM2QwMDQ4MmM= Tue, 29 Sep 2009 16:23:26 -0400 Brownlee on The Healing of America -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=NjlhYjRjOWZiYmU2MzkzMjg2ZDI4YWM4MjBiODY2YTQ= T.R. Reid's call for universal coverage in the United States has received considerable praise from <a href="http://voices.washingtonpost.com/ezra-klein/2009/09/why_frances_health-care_is_so.html">Senator Kent Conrad</a>. I wish Senator Conrad had read Shannon Brownlee's <a href="http://www.washingtonmonthly.com/features/2009/0909.brownlee.html">review</a> of Reid's book in the Washington Monthly, a favorite magazine of liberal wonks. Having read the book this summer, I'm inclined to agree with Brownlee's basic assessment. A distinguished and highly accomplished foreign correspondent, Reid appears not to know what he doesn’t know about the scientific and economic complexity of health care. He also gets his medical facts wrong, stating there are "millions of deaths each year" in the developing world from smallpox (smallpox was eradicated from the planet more than thirty years ago), that polio is a "bone-twisting" disease (it destroys nerves and can lead to muscle wasting), and that the U.K.’s National Health Service won’t give him a prostate-specific antigen, or PSA, test, because it’s not cost-effective (the NHS, in fact, does pay for PSA testing, but doctors in the U.K. don’t encourage it, having figured out long before we did that the test hasn’t been shown to reduce mortality, while leading to unnecessary and potentially harmful surgery). Health care reform is going to take a lot more than cutting the insurance industry’s overhead and slashing the prices of medical services. It’s also going to require profound and sustained changes in the way care is delivered. But you wouldn’t know any of that from reading The Healing of America. The need for delivery system reform is a lesson that health reform proponents haven't fully taken in -- they seem convinced that Massachusetts will now "solve" the problem due to rising political pressure in the wake of coverage expansion and spiraling costs, which is a bit like assuming a can opener. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NjlhYjRjOWZiYmU2MzkzMjg2ZDI4YWM4MjBiODY2YTQ= Tue, 29 Sep 2009 16:20:09 -0400 An Up-Front Wager? -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=YzE3NmFkY2E0MjNmZmMwNTRlOWQ5MzlhYWIwOGU2MmY= Ezra Klein <a href="http://voices.washingtonpost.com/ezra-klein/2009/09/senator_grassley_quotes_me_on.html">writes</a>: Liberals don't think that Congress will pass a bill outlawing private insurance. They don't think the Supreme Court will render a decision naming WellPoint "cruel and unusual." Rather, they think the market will, well, work: The public option will provide better service at better prices and people will choose it. Or, conversely, that the competition will better the private insurance industry and that people won't need to choose it. But that confidence rests on a very simple premise: The public sector does a better job providing health-care coverage than the private sector. If that proves untrue -- and I would imagine most every conservative would confidently assume that that's untrue -- the plan will fail. The public option will not provide better coverage at better prices, and so it will not be chosen, and it will languish. Indeed, if it languishes, it will lack customers and thus lack bargaining power and economies of scale, and get worse even as the private insurers get better. In that scenario, the public option not only fails, but it discredits single-payer entirely. Well, it depends on the relative advantages given to the public sector and the private sector, doesn't it? If the public option is allowed to negotiate reimbursement rates that private insurers can't also use and if private insurers are regulated in such a way that they can't define the mix of benefits and providers they offer (to avoid adverse selection), providing better coverage at better prices is fairly straightforward. How is this an up-front wager? If, in contrast, the public option is not allowed to leverage its publicness, and it has to offer the same reimbursement rates as private insurers, the public option is toothless. The real goal, as I understand it, isn't benchmarking for its own sake. Rather, it is to restrain private insurers in an environment in which private insurers will have the benefit of a captive marketplace -- thanks to the individual and employer mandates -- and no strong incentives to reduce costs and premiums. A better approach would, as Harold Luft has argued, allow private and public insurers (i.e., Medicare Advantage plans, state Medicare plans, etc.) to contract with a publicly-chartered Major Risk Pool that would gives healthcare providers a choice of either accepting Medicare rates with no balance-billing or episode-based payments to care delivery teams with balance-billing. This would encourage greater efficiency among providers without imposing new regulations. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=YzE3NmFkY2E0MjNmZmMwNTRlOWQ5MzlhYWIwOGU2MmY= Tue, 29 Sep 2009 15:59:31 -0400 Density and Carbon Emissions -- By: NRO Staff webmaster@nationalreview.com (NRO Staff) http://agenda.nationalreview.com/post/?q=YTZjZTgwOWNiZGJhZTU4ZjllNmUyY2RkZmFlMGFkNWU= Phil McKenna of Technology Review reports on new research from the National Academy of Sciences: Even if 75 percent of all new and replacement housing in America were built at twice the density of current new developments, and those living in the newly constructed housing drove 25 percent less as a result, CO2 emissions from personal travel would decline nationwide by only 8 to 11 percent by 2050, according to the study. If just 25 percent of housing units were developed at such densities and residents drove only 12 percent less as a result, CO2 emissions would be reduced by less than 2 percent by 2050. Increasing density is a cause embraced by many environmentalist, including more than a few conservative environmentalists. Yet reducing the weight of personal automobiles might be a more effective strategy. A <a href="http://onlinepubs.trb.org/Onlinepubs/sr/sr298kockelman.pdf" target="_blank">supplemental study</a> released by the NAS concludes that an immediate 0.1 percent reduction in the weight of all vehicles nationwide would be 10 times more effective at reducing greenhouse gas emissions than an immediate 0.1 percent increase in housing density nationwide. In unrelated news, I recently had the great pleasure of reading a report by soil scientist David Laird on the carbon-mitigating potential of <a href="http://agron.scijournals.org/cgi/content/full/100/1/178">biochar</a>. Last week, Brad Plumer of TNR <a href="http://www.tnr.com/blog/the-vine/does-biochar-live-the-hype">cast some doubt </a>on the transformative potential of biochar, but the idea remains every attractive. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=YTZjZTgwOWNiZGJhZTU4ZjllNmUyY2RkZmFlMGFkNWU= Mon, 21 Sep 2009 17:20:27 -0400 Baucuscare vs. Wydencare -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=ZjIwNDE5MGYzYzY5NDgwOGE5ODhlNGM3YzgxZWEyNzk= At the moment, it looks as though a gently modified form of Baucuscare will become a reality. Ezra Klein describes the <a href="http://voices.washingtonpost.com/ezra-klein/2009/09/the_three_compromises.html">remaining roadblocks</a> (possible revenue-enhancers include <a href="http://www.cbpp.org/cms/index.cfm?fa=view&id=2830">a soda tax</a> and curbing itemized deductions) and Nicholas Beaudrot, a data-driven liberal blogger based in Seattle, has been writing <a href="http://www.donkeylicious.com/2009/09/baucuscare-and-affordability.html">a series of posts</a> on how to make Baucus's reform proposal more generous to the less affluent. The debate has focused on reducing the cost of Baucuscare to the federal government, but of course any individual or employer mandate will create costs for families and firms. Without subsidies, the mandate essentially becomes an unacknowledged tax on the middle class, as James Kwak <a href="http://baselinescenario.com/2009/09/16/voodoo-cost-savings/">has argued</a>. Relative to the House bill, then, the Baucus bill costs the government $140 billion less; but it costs middle-income people exactly $140 billion more, since they have to buy health insurance. The difference is that in the House bill, the money comes from taxes on the very rich; in the Baucus bill, it comes out of the pockets of the middle-class people who are getting smaller subsidies. Put another way, the Baucus bill is the House bill, plus a $140 billion tax on people making around $40-80,000 per year. That’ s not only stupid policy; it’s stupid politics. I get the impression that Kwak is less concerned than I am about the drag created by high levels of government spending, but he makes a compelling point. The advantage of Baucuscare's "modest" price tag is purely psychological: $856 billion sounds less frightening to taxpayers than $1 trillion, yet those same taxpayers will be legally obligated to spend an additional $140 billion as Kwak explains -- only it's not a "tax." I'm increasingly convinced that Senator Ron Wyden's so-called "<a href="http://www.nytimes.com/2009/09/17/opinion/17wyden.html">free choice</a>" proposal is preferable to the Baucus approach. I believe there is a way to work with the present employer-based system to guarantee that all Americans have choices, and I am proposing it in an amendment to the latest Senate health care bill. My amendment, called Free Choice, would let everyone choose his health insurance plan. It would impose only one requirement on employers — that they offer their employees a choice of at least two insurance plans, one of them a low-cost, high-value plan. Employers could meet this requirement by offering their own choices. Or they could let their employees choose either the company plan or a voucher that could be used to buy a plan on the exchange. They could also simply insure all of their employees though the exchange, at a discounted rate. All payments that employers would make, whether in the form of premiums or vouchers, would remain tax-deductible as a business expense. Reinsurance and risk adjustment mechanisms already in the bill would balance the costs of employers who end up with disproportionately sick pools of workers, and this would avoid any disruption to existing employer coverage. Any employers that did not offer either their own choices or insurance through the exchange would be required to pay a “fair share” fee to help support the system. By increasing competition among private insurers, this approach is somewhat more likely to yield cost savings over time. While I'd much rather we move to a universal catastrophic coverage system based on <a href="http://www.forbes.com/2009/09/13/health-care-reform-democrats-republicans-opinions-columnists-obama.html">a well-designed reinsurance program</a>, Wyden's proposal might be the best of the realistic options. Many Republicans are banking on winning back Congress and the 2012 presidential election in order to repeal the reform legislation that ultimately takes shape. This is much easier said than done. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=ZjIwNDE5MGYzYzY5NDgwOGE5ODhlNGM3YzgxZWEyNzk= Mon, 21 Sep 2009 17:13:05 -0400 Do We Need to Reform the House of Representatives? -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=NGUyZTA3ZDc3ZTAwMTcyODliMmEzMzU4ZTgwMDE3OWI= I tend to think that we don't have enough members of the House of Representatives. We've had 435 members since 1911, yet the population <a href="http://www.miller-mccune.com/politics/is-the-house-of-representatives-too-small-376">has increased threefold</a> in the decades since. Some, including Jonah Goldberg, have called for increasing the size of the lower chamber dramatically, doubling it or more. I tend to think 650 would be a good number, one that would bring us in line with democratic legislatures in Britain and Germany. The trouble is that it is difficult to create and maintain working relationships in a body much bigger than that, and the U.S. population will continue increasing for many years to come. The usual argument for expanding the size of the House stems from the enormous size of today's congressional districts, which now contain an average of 640,000 people. But in 2006 Bruce Reed, CEO of the centrist Democratic Leadership Council, called for <a href="http://www.dlc.org/ndol_ci.cfm?contentid=253986&kaid=127&subid=176">creating more at-large districts for the House</a>. A recent bipartisan proposal to give new House seats to both the District of Columbia and Utah averts a mid-decade redistricting battle by having the new Utah member run statewide. Why not go all the way and turn half of all House seats into at-large districts? If half of every congressional delegation had to run statewide, it would sharply reduce the potential for gerrymandering, and every member would have to compete in a bigger, less homogeneous district. Such a system would probably have little or no predictable impact on the partisan breakdown of the House. In the seven small states with at-large members today, both parties have done proportionally better at breaking the red-blue barrier in the House than in the Senate. Two of the five at-large House members from red states are Democrats, compared with just 16 out of 62 senators from red states. One of the two at-large members from blue states is a Republican, compared with only nine out of 38 senators from blue states. This doesn't strike me as the ideal reform, and Reed's article includes a great deal of anti-DeLay sentiment that I find unconvincing. But I do think we'd be better off if there were more Republicans elected from Democratic states and more Democrats from Republican states, which is one possible outcome of the proposed reform. Free-market conservatives based in cities like New York and Chicago might have a decent chance of winning statewide and bringing their distinctive views to bear on national debates. (I have a bias here, obviously.) <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NGUyZTA3ZDc3ZTAwMTcyODliMmEzMzU4ZTgwMDE3OWI= Mon, 21 Sep 2009 16:10:17 -0400 Thinking About Net Neutrality -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=YzRkYWQ3M2Y4NjIyMzE4YmRhZmFlODNmZTRhYjIyOWY= I have many friends on both sides of the net neutrality issue. Internet advocates like Tim Wu and Lawrence Lessig have long argued that the government needs to intervene to prevent Internet Service Providers from discriminating between different types of content so as to preserve the <a href="http://en.wikipedia.org/wiki/End-to-end_principle">end-to-end principle</a>. With Julius Genachowski at the helm, the Federal Communications Commission has proposed new net neutrality regulations. Fawn Johnson and Amy Schatz of The Wall Street Journal have written a <a href="http://online.wsj.com/article/SB125354032776727741.html#mod=WSJ_hps_LEFTWhatsNews">very useful account</a> of the announcement and the salient issues. One major concern is that overburdened ISPs will have to start charging customers higher rates: If the FCC does force U.S. wireless carriers to open their networks to data-heavy applications like streaming video, it could push them beyond the limited capacity they have. Already, in areas like New York and San Francisco, a high concentration of iPhones has caused many AT&T customers to complain about degrading service. In such a scenario, wireless carriers may have to rethink how much they charge for data plans or even cap how much bandwidth individuals get, said Julie Ask, a wireless analyst at Jupiter Research. The FCC's proposal will take into account the bandwidth limitations faced by wireless carriers, according to people familiar with the plan, and would ask how such rules should apply to current networks. The rules could encourage big Internet companies to launch new data-intensive services by establishing that their traffic can't be slowed or blocked. In the business market, companies that make Internet-phone services or video-conferencing software may invest more heavily in those services, some analysts say. Engadget, one of the world's most popular technology blogs, offered <a href="http://www.engadget.com/2009/09/18/fcc-to-propose-new-net-neutrality-rule-disallowing-data-discrimi/">a more accessible take last week</a>: Based on what we're hearing, a slate of soon-to-be-proposed FCC rules may <a href="http://www.engadgethd.com/tag/data+discrimination/">stop</a> the likes of Comcast from<a href="http://www.engadgethd.com/2009/01/29/cox-follows-comcast-down-the-data-discrimination-road/">discriminating</a> against P2P applications on their networks, and AT&T sure will have a tougher time justifying why it won't let the <a href="http://www.engadgetmobile.com/2009/05/12/atandt-issues-official-statement-on-slingplayers-3g-blackout-for/">iPhone's version of SlingPlayer</a> run on 3G while giving WinMo and BlackBerry users all the bandwidth they can handle. Julius Genachowski, the <a href="http://www.engadget.com/tag/Julius%20Genachowski/">new chairman</a> of the entity, is slated to discuss the new rules on Monday, though he isn't expected to dig too deep into the minutiae. Essentially, the guidelines will "prevent wireless companies from blocking internet applications and prevent them from discriminating (or acting as gatekeepers) [against] web content and services." We know what you're thinking: "Huzzah!" And in general, that's probably the right reaction to have as a consumer, but one has to wonder how network quality for all will be affected if everyone is cut loose to, well, cut loose. Oh, and if this forces telecoms to deploy more cell sites to handle the influx in traffic, you can rest assured that the bill will be passed on to you. Ain't nuthin' free, kids. Words to live by. P.S. Julian Sanchez has written <a href="http://www.cato-at-liberty.org/2009/09/21/eye-of-neutrality-toe-of-frog/">an excellent post </a>on the Genachowski announcement for Cato. If you foreclose in advance the possibility of cross-subsidies between content and network providers, you probably never get to see the innovations you’ve prevented, while discriminatory routing can generally be detected, and if necessary addressed, if and when it occurs. And the worst possible time to start throwing up barriers to a range of business models, it seems to me, is exactly when we’re finally seeing the roll-out of the next-generation wireless networks that might undermine the broadband duopoly that underpins the rationale for net neutrality in the first place. In a really competitive broadband market, after all, we can expect deviations from neutrality that benefit consumers to be adopted while those that don’t are punished by the market. I’d much rather see the FCC looking at ways to increase competition than adopt regulations that amount to resigning themselves to a broadband duopoly. This strikes me as exactly right: the real problem is that consumers don't have enough choices when it comes to broadband providers. In a more competitive environment, consumers would have a better check against broadband than the slow-moving blunt instrument that is the regulatory apparatus. Sanchez also links to a <a href="http://www.cato.org/pub_display.php?pub_id=9775">very insightful paper</a> by Tim Lee, a libertarian Internet advocate who opposes onerous net neutrality regulations. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=YzRkYWQ3M2Y4NjIyMzE4YmRhZmFlODNmZTRhYjIyOWY= Mon, 21 Sep 2009 15:48:00 -0400 William Easterly on Wishful Thinking -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=YjVkMWJiMWE5NGQyYzZmZDliNGY1N2I0MDRmMGZhYWI= I had the great pleasure of reading William Easterly's review of Ha-Joon Chang's Bad Samaritans, an often frustrating anti-trade jeremiad. Part of Easterly's broader argument is that we're all subject to confirmation bias, i.e., to seeing the evidence that we want to see. This is true of pro-market enthusiasts like myself and, I'm guessing, most readers of National Review as well as pro-intervention enthusiasts like Chang. I was particularly amused by the following passage, in which Easterly teases apart one of Chang's central arguments against the much-maligned Washington Consensus: His main piece of evidence for the superiority of heterodox policies, which he repeats over and over throughout the book, is that developing countries grew during the "heterodox" period of the 1960s and 1970s "on average, at double the rate" they have since the 1980s, when "neo liberal" free trade policies became orthodoxy. The big question is, what year should we pick as the breaking point between the protectionist era and the free-trade era? It is easy to manipulate breakpoints to confirm your beliefs. Chang picks 1980 as the big turning point, allowing him to calculate a 3 percent average per capita growth in developing countries between 1960 and 1979, with 1.7 percent average growth in the same countries from 1980 to 2002.[2] But Chang elsewhere suggests that the change in policy occurred around 1983. The developing countries, he writes, were "first pushed by the IMF and the World Bank" to liberalize trade "in the aftermath of the Third World debt crisis of 1982." But if we take 1983 as the breaking point, the change in growth rates is less dramatic: 2.6 percent between 1960 and 1982 as compared to 1.8 percent between 1983 and 2002. (There was a big recession in 1980-1982, so it's a little suspicious that Chang includes this bad time in the free-market period even though he says the policy change wasn't until 1983.) Another classic way to check before-and-after claims is to find some new data. We now have data up through 2008. If we include this most recent data and use Chang's own policy breaking point of 1983, there is virtually no change: growth in developing countries was 2.6 percent between 1960 and 1982 and 2.7 percent between 1983 and 2008. Chang's key piece of evidence goes up in smoke once we correct for confirmation bias. The essay, which appears in the latest issue of The New York Review of Books, is a pleasure to read. Their version is gated, but you can find a preview <a href="http://blogs.nyu.edu/fas/dri/aidwatch/2009/09/the_anarchy_of_success.html">at this link</a>. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=YjVkMWJiMWE5NGQyYzZmZDliNGY1N2I0MDRmMGZhYWI= Mon, 21 Sep 2009 15:26:03 -0400 The Wrong Card-Check Compromise -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=NmE1YmI5YWFjNTM3OWM0ZmExMzRmZWViNjdiZjZiY2U= In the past, I've supported a compromise on labor legislation. Though I think workers should retain the right to a secret ballot -- a very good reason to oppose the "card-check" provision -- I also think that there should be rigorous enforcement of labor laws. As he fights for reelection, Senator Arlen Specter has moved sharply to the left, not least on labor legislation. Despite having received the strong support of the AFL-CIO as a Republican, Specter briefly broke with the labor movement by opposing card-check, presumably in an effort to shore up support among conservative voters. Having join the Democrats, he's now feeling different pressures. And so he's called for a card-check compromise, one that economist Diana Furchtgott-Roth has <a href="http://www.realclearmarkets.com/articles/2009/09/17/dont_buy_specters_efca_compromise_97412.html">sharply criticized </a>in RealClearMarkets: Instead of card check, Mr. Specter would limit the time between the announcement of a union election by the National Labor Relations Board and the workers' vote. In addition, employers would have to allow union organizers to attend company-sponsored meetings held to tell employees why they should not join the union. The object, according to the senator, is to make it more difficult for employers to pressure workers to reject union membership. In addition, Mr. Specter proposes to modify the mandatory arbitration provision. Rather than giving the arbitrators the power to start from a clean slate, they would use "baseball arbitration" and pick one of the last offers from one of the two parties. Furchtgott-Roth is convinced that limiting the time between the announcement of a union election and the vote is wrong-headed. Take the limits on timing of elections. On average, 42 days-six weeks-elapse before workers vote whether to join unions. Say the time is cut to seven days, as anticipated by Stewart Acuff, the AFL-CIO's organizing director. This means that unions will need to lobby workers intensively for one week to make the case for union representation. As a practical matter, employees will not be permitted to hear both sides of the issue and will be rushed into decisions without receiving full information. I tend to think that shortening the window is a good idea, insofar as it could reduce the disruption caused by organizing and counter-organizing campaigns, not to mention the potential for abuses by labor and management. On "baseball arbitration," however, Furchtgott-Roth is absolutely right to be concerned. And take baseball arbitration. In Major League baseball, with neutral arbitrators required to choose an offer by either a club or a player, both sides have incentives to be reasonable. If one side makes an outrageous proposal, the arbitrators likely will choose the other side's proposal. But if the arbitrators are political appointees, chosen by the director of the mediation service, himself a presidential appointee, neutrality may be compromised. Unions will know that the arbitrators are more likely to take their side in a Democratic administration, and employers will know that their offer is more likely to be picked in a Republican administration. Neither case encourages true compromise. We'll see how this plays out. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NmE1YmI5YWFjNTM3OWM0ZmExMzRmZWViNjdiZjZiY2U= Mon, 21 Sep 2009 15:04:09 -0400 The Source of Obama Anxiety -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=Y2FjN2RmNTIxNzE2NTdmZjg5OTZhNTlkMTNiMzJmMzM= Mickey Kaus has an interesting -- and persuasive -- <a href="http://www.slate.com/blogs/blogs/kausfiles/archive/2009/09/20/it-s-not-that-he-s-black-it-s-that-he-s-an-enigma.aspx"> theory</a>. The more I think about it, the more the townhall anti-Obama anger isn't explained completely by the issues (sorry, <a href="http://www.nydailynews.com/opinions/2009/09/20/2009-09-20_the_real_reason_for_the_rage.html">Frank</a> ). There's also something about Obama himself-. But that something (or the main something) isn't his race. It's that he's a relative newcomer, as Presidents go--an unknown quantity, an enigma, with a short track record and patches of that record left fuzzy. That means opponents can fill in the blanks with ominous possibilities. It makes paranoia more rational, if you will. In Kaus's view, this accounts for the strength of the anti-Obama backlash from the right. The uncertainty about Obama made it wildly important that he not do things that would give the most common ominous speculation--that he's way on the left of the possible envelope--any traction. Obviously, Obama's White House understands this. Larry Summers is not a lighnting rod for the right. But the Obama-ites apparently failed to internalize this imperative sufficiently to allow them to exclude the Van Joneses and Yosi Sergants from government with the ruthlessness required in a year when they were asking taxpayers to trust them with administering an unprecedent stimulus package and restructuring Detroit and the financial system--all before transforming the nation's health care system. Kaus also describes Obama's stance on card-check, the subject of my next post. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=Y2FjN2RmNTIxNzE2NTdmZjg5OTZhNTlkMTNiMzJmMzM= Mon, 21 Sep 2009 14:53:06 -0400 Patrick Gaspard and the Future of New York -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=ZDZlZDJiMDI4ZTM1ZmY2ZTYwMzM2N2NlMGU5YzFmMTE= Dana Goldstein has an<a href="http://www.prospect.org/csnc/blogs/tapped_archive?month=09&year=2009&base_name=obama_paterson"> interesting left-of-center take</a> on the Obama White House's effort to convince David Paterson to stay out of next year's gubernatorial race. But first, some scene-setting: The main danger for Democrats is that Paterson might polarize the party's primary electorate. In 2002, Democrats were divided between Carl McCall, the state comptroller and an African American with strong ties to Harlem's political establishment, and Andrew Cuomo, son of former governor Mario Cuomo and HUD secretary during President Clinton's second term. To put it bluntly, Cuomo, a prodigious fundraiser, forced McCall to draw down his war chest well before the general election. And once McCall won the primary, the DNC, led by Clinton ally Terry McAuliffe, refused to provide him with the resources he needed to mount a serious challenge to George Pataki. Though Pataki first won office as a budget-cutting conservative, he neutralized the Democrats by spending massive sums to curry favor with the most left-of-center public sector unions, most prominently Dennis Rivera's Local 1199. It is easy to see why the Harlem political establishment, and African American primary voters more broadly, might not have the warmest feelings towards Andrew Cuomo. Now, of course, Cuomo is New York's popular state attorney general, and it is all but certain that he will run for the Democratic gubernatorial nomination against Paterson, New York's first African American governor who, like McCall, has his power base in Harlem. Further complicating this byzantine picture is the looming specter of Rudy Giuliani, which, per Goldstein, has caused considerable anxiety in the White House: Paterson's refusal to cede the office, though, allows for the reemergence on the national scene of Rudy Giuliani, who remains popular among upstate conservatives and suburban moderates. Giuliani has shown a real facility for exploiting conservative populist moments like the one we're in right now, with the grassroots revolt against Obama's health plan and the racial animus bubbling over throughout the country. As New York City mayor, his approach to crime, police violence, and public hiring <a href="http://www.nytimes.com/2007/07/20/nyregion/22giuliani.related.html">alienated</a> the black community. Equally important from the White House's perspective, Giuliani could energize Republican voters, increase turnout, and help down-ticket races, leading to New York Democrats losing their weak hold over the State Senate. Why is dysfunctional Albany of interest to Obama? Because it controls the congressional redistricting process, and the administration, looking ahead to even its second term policy priorities, does not want to lose a single Democratic House seat. As Goldstein goes on to note, the Obama campaign was far-sighted enough to invest considerable resources in Texas to influence state legislative races to that same end. Goldstein also identifies Patrick Gaspard, the publicity-shy director of the White House Office of Political Affairs, as the architect of Obama's New York strategy. The key administration player on the New York story is White House Director of the Office of Political Affairs Patrick Gaspard, a former New York union operative and veteran of the David Dinkins and Jesse Jackson campaigns. Gaspard has Karl Rove's old job. And there's no love lost between Gaspard's former employer, the SEIU 1199 Health Care Workers East, and Gov. Paterson. The union has <a href="http://www.seiu.org/mt/mt-search.cgi?IncludeBlogs=1&tag=Governor%20David%20Paterson&limit=20">marched against</a> Paterson's proposed $3.5 billion in health care budget cuts, even as he opposed raising taxes on the super-rich. Lest we forget, 1199 endorsed Pataki in 2002. Though it is possible that Gaspard objected to this decision at the time, it is certainly worthy of note. More interesting still, Goldstein ends her post with a reference to the great admiration that New York pols have for Gaspard's organizing prowess. PolitickerNY writer Jason Horowitz <a href="http://vip.politickerny.com/4185/patrick-gaspard-writes-poems-collects-comics-kills-obama">reported</a> that Al Sharpton has told members of the Obama administration, "It’s hard for me to march against you if I ever get mad, because you’ve got our best organizer." Sharpton was referring to Gaspard. Late last year, Sam Stein of The Huffington Post wrote a <a href="http://www.huffingtonpost.com/2008/12/04/obamas-glue-man-the-best_n_148415.html">detailed profile</a> of Gaspard, who is, despite his low profile, clearly one of the most impressive political operatives of his generation. One of his most successful efforts was a multi-pronged campaign launched on behalf of Amadou Diallo. By 1999, Gaspard was working as the chief of staff for councilmember Margarita Lopez, when a 23-year-old immigrant from Guinea was shot and killed by four New York City Police Department plain-clothed officers. Amadou Diallo would become a symbolic crest to the anything-goes, oftentimes brutal police work that personified the Rudy Giuliani administration. Unarmed at the time of the shooting, Diallo's body was riddled with 19 bullets (out of 41 shots fired). When the four officers were acquitted of charges of second-degree murder, demonstrations erupted across New York. One of the city's most powerful unions, SEIU's 1199, needed someone to coordinate their Diallo efforts. And the group's political director, Bill Lynch, turned to his old aide for the task. "[Patrick] took the lead on that," he recalled. "He helped organize city-wide efforts and was instrumental in bringing leadership together." The protests were massive in their scope, with multiple elected and religious officials as well as a scattering of celebrities taking to the streets. And while they did not result in legal vindication, in March 2004 Diallo's family did receive a $3 million settlement from the government. Gaspard had his entrance into union life. Over the next few years he would help augment 1199 as a political force in the city and nationally. His work took him from Florida -- to help with the 2000 presidential recount -- to the streets of New York. And he took to the task with his usual vigor. There was some dispute as to whether the Diallo incident was a mark of structural racism and police brutality, the view shared by Sharpton and Gaspard, or a tragic accident that can be traced in part to the training police officers receive. We can't settle the issue here. But one can safely assume that Gaspard is not an admirer of Rudy Giuliani. Gaspard's later successes in building effective coalitions can be traced in part to his remarkable ability to unite New York's fractious Democrats. What I find most striking about Gaspard is his ability to compartmentalize: during the 1990s, he was an ally of Al Sharpton, who continues to praise him, yet his union also played a prominent role in keeping George Pataki in office. Now, as a White House political strategist, he is orchestrating what you might call the defenestration of David Paterson, a Democrat who, unlike the Republican Pataki, has called for fiscal discipline. This is about to get interesting. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=ZDZlZDJiMDI4ZTM1ZmY2ZTYwMzM2N2NlMGU5YzFmMTE= Mon, 21 Sep 2009 12:34:05 -0400 A Useful Corrective from Professor Willem Buiter -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MzJjZDIwMzNkNjA1YzU4ZWUzZWZmOWNkYjA5YzkyZjU= Buiter delivers some <a href="http://blogs.ft.com/maverecon/2009/09/expect-little-and-you-may-yet-be-disappointed/">real talk</a> to the American public: According to my back-of-the-envelope calculations there is about a 10 percent of GDP gap between the medium and longer-term spending plans of the Obama administration and the taxes the Congress is willing and able to impose. The reality that you cannot run a West-European welfare state (with decent quality health care, decent pre-school, primary and secondary school education for all), rebuild America’s crumbling infrastructure, invest in the environment and fulfill your post-imperial global strategic ambitions while raising 33 percent of GDP in taxes, has not yet dawned on the Obama administration or on the American people at large. Unlike some of my friends and colleagues, I don't think of President Obama as an unusually bad president. Rather, he reflects, as Buiter goes on to argue, the qualities you need to win office. Clearly, the qualities one needs to get elected to high office in western democracies are not qualities that are likely to be helpful once you have achieved high office and are expected to govern and lead. To survive the selection process to become president you have to be able to stitch together a coalition of special interests that can provide sufficient financial and sweat equity resources to win this grueling race to the top. Once you get there, you should shed the unfortunate baggage you accumulated on your way up and govern in the interest of all the people. Few can do that. Apparently Obama is not one of them. Many liberals are deeply disturbed by conservative protesters. The trouble is that this is what an engaged public looks like. The more decision-making is centralized in the hands of elected officials, the more anger will be directed towards elected officials. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MzJjZDIwMzNkNjA1YzU4ZWUzZWZmOWNkYjA5YzkyZjU= Wed, 16 Sep 2009 15:44:26 -0400 Brad DeLong Brightens My Day -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=YzA4YTkyZDljMDU5NjE2ODc2YjI0YWZiY2IzOWE4NWQ= Brad DeLong is a brilliant economist and a gifted writer for broad audiences. He can also be inexplicably harsh in his characterizations of those he sees as political enemies. Most of the time, said enemies are conservatives, in particular anti-tax conservatives. But on Sunday he began <a href="http://delong.typepad.com/sdj/2009/09/barack-obama-does-something-really-stupid-tire-tariffs.html">a post</a> on President Obama's decision to slap punitive tariffs on Chinese tires with the following sentence: Why oh why can't we have better Democratic presidents? For anyone who's ever read DeLong, this is pretty funny stuff. And the post is dead on. Daniel Drezner has written <a href="http://drezner.foreignpolicy.com/posts/2009/09/14/im_setting_the_ptotectionist_threat_level_to_orange">an indispensable post</a> on the tariff controversy. His conclusion: With the Obama administration, however, this feels like the tip of the iceberg. Most of Obama's core constituencies want greater levels of trade protection for one reason (improving labor standards) or another (protecting union jobs). This isn't going to stop. "Trade enforcement" has been part and parcel of Obama's trade rhetoric since the campaign. The idea that better trade enforcement will correct the trade deficit, however, is pure fantasy. It belongs in the Department of Hoary Political Promises, like, "We'll balance the budget by cracking down on tax cheats!" or "By cutting taxes I can raise government revenues!" It. Can't. Happen. If I knew this was where the Obama administration would stop with this sort of nonsense, I'd feel a bit queasy but chalk it up to routine trade politics. When I look at Obama's base, however, quasiness starts turning into true nausea. Developing.... in a very, very scary way. One of the new developments Drezner cites is China's rising economic nationalism. Despite Tom Friedman's <a href="http://www.nytimes.com/2009/09/09/opinion/09friedman.html">enthusiasm</a> for one-party rule in China, it turns out that even the Politburo of the Chinese Communist Party has to respond to public opinion. One hopes that the loud and angry chorus of critics of Bush-era unilateralism will now denounce the Obama White House for its reckless disregard of international public opinion and the health of the global trading system on which we all depend. Or something like that. To his credit, Brad DeLong has gotten the ball rolling. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=YzA4YTkyZDljMDU5NjE2ODc2YjI0YWZiY2IzOWE4NWQ= Tue, 15 Sep 2009 15:22:37 -0400 Tyler Cowen on the Medicare Prescription Drug Benefit -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=NWJiZTFlZWE5MDkzNDBjYWIwMzU1NDQ3ZWNmN2I5Mjc= Cowen, no apologist for the Bush administration, notes that the Medicare prescription drug benefit has been <a href="http://www.marginalrevolution.com/marginalrevolution/2009/09/the-cost-of-the-medicare-prescription-drug-beneift.html">strikingly successful</a>. He cites a 2007 paper by Neeraj Sood and Darius Lakdawalla, the abstract of which reads as follows: In spite of its relatively low benefit levels, the Medicare Part D benefit generate $3.5 billion of annual static deadweight loss reduction, and at least $2.8 billion of annual value from extra innovation. These two components alone cover 87% of the social cost of publicly financing the benefit. The analysis of static and dynamic efficiency also has implications for policies complementary to a drug benefit: in the context of public monopsony power, some degree of price-negotiation by the government is always strictly welfare-improving, but this should often be coupled with extensions in patent length. Note the wording of the last sentence: price-negotiation can prove valuable provided there is compensation in the form of an extension of patent length. This reminds me of Michael Kremer's case for patent buyouts, which Alex Tabarrok <a href="http://www.independent.org/newsroom/article.asp?id=423">summarized</a> for the Independent Institute in a longer essay on drug prices: Harvard economist Michael Kremer explains patent buyouts in his chapter in the new book <a href="http://www.entrepreneurialeconomics.org/">Entrepreneurial Economics: Bright Ideas from the Dismal Science</a> (Oxford University Press). Kremer argues that the government, or a wealthy non-profit foundation, should buy pharmaceutical patents and turn over the rights to the public for free. Patent buyouts would reduce pharmaceutical prices by 60 to 70 percent because instead of having to wait a decade or more for the patent to expire, generic-drug manufacturers could immediately begin to sell the new drugs in a competitive market. Patent buyouts would not impede innovation because the innovating firm would be well paid for its research. Indeed, the patent buyer could easily increase the incentive to innovate by raising the buyout price. But suppose a patent buyer does not know how much the rights to a new drug are worth? What is to stop the patent buyout from becoming a wasteful subsidization of low-quality research? Kremer offers an ingenious solution to this problem: invite patent holders to tender their rights in an open auction. Open and competitive bidding for the rights to the new drug would establish a good estimate of its true value. The government could then use information from the bids to buyout the patent - perhaps with a bid somewhat higher than the top auction bid. Sadly, I have a hard time imagining an idea like this taking hold, particularly in a climate in which the pharmaceutical industry is seen as sinister. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NWJiZTFlZWE5MDkzNDBjYWIwMzU1NDQ3ZWNmN2I5Mjc= Tue, 15 Sep 2009 15:07:04 -0400 Enrico Moretti and Matt Yglesias on Consumption Inequality -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=Y2RkMzBiZWY3OGZiNWY2NWZlMWE2NWY0ZDg1ZmQ3MjA= I can't say I'm much of a Twitterer, but I did recently Tweet a very interesting paper by Enrico Moretti on how variation in the cost of living across metropolitan areas might change our picture of consumption inequality. I show that from 1980 to 2000, college graduates have increasingly concentrated in metropolitan areas that are characterized by a high cost of housing. This implies that college graduates are increasingly exposed to a high cost of living and that the relative increase in their real wage may be smaller than the relative increase in their nominal wage. To measure the college premium in real terms, I deflate nominal wages using a new CPI that allows for changes in the cost of housing to vary across metropolitan areas and education groups. I find that half of the documented increase in the return to college between 1980 and 2000 disappears when I use real wages. Matt Yglesias, a far more prolific blogger than yours truly, than offered <a href="http://yglesias.thinkprogress.org/archives/2009/09/housing-and-inequality.php">his thoughts on Moretti's findings</a>. The way I read this research result, if we take a bunch of money away from rich people it will cost them relatively little in welfare since almost half of the excess income of the rich is going to bidding up the price of housing in the kinds of places where rich people can find jobs. If they all had less money, they’d all live in equally good houses; the houses would just be cheaper. But the money acquired through taxation could be used to provide services—better transportation infrastructure, better teachers, healthier food, more medicine—that have real value to the middle class and the poor. There is, of course, another way to approach the stylized facts: the high cost of housing is to some extent an artifact of severe land-use restrictions. By easing these land-use restrictions, we might lower the price of housing. And in doing so, the affluent will have more resources that they can save and invest, or that they can spend on in-person services. I tend to think that somewhat more public investment on infrastructure and early childhood education and health could be money well spent, but we have to mindful of the need to achieve some kind of balance. (One of the best ways to encourage density, incidentally, would be to embrace a strong form of school choice that would encourage middle-class families to settle in urban jurisdictions.) <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=Y2RkMzBiZWY3OGZiNWY2NWZlMWE2NWY0ZDg1ZmQ3MjA= Tue, 15 Sep 2009 14:00:35 -0400 Correct Me If I'm Wrong on Medicare Part D -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MDcwZjlmNDBmYjQyMzFlZDhiZWQ2YzUzNzY5NGNkNDU= Defenders of the Democratic health reform proposals have noted that though a Republican administration and a Republican Congress backed Medicare Part D, the unfunded new prescription drug entitlement, congressional Republicans are reluctant to back a mostly-funded new healthcare entitlement. Did Democrats object to the Republican Medicare proposal on the grounds that it was unfunded, or on the grounds that it wasn't sufficiently generous? My sense is that the opposition centered on the notion that it was not sufficiently generous and that the Medicare Advantage plans represented a giveaway to private insurers. Democrats who suggested that we should only expand Medicare if we also increased the payroll tax or pursued some other revenue-enhancing measure deserve praise for their consistency. Those who didn't deserve as much blame as the Republicans who failed to consider the long-term costs. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MDcwZjlmNDBmYjQyMzFlZDhiZWQ2YzUzNzY5NGNkNDU= Tue, 15 Sep 2009 13:19:46 -0400 Chris Hayes Makes the Case for Inflation -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=NTU3ZjdjZThiM2RkNDcwZDEwYjgxZDhkMDM1MTIyODc= Chris Hayes, Washington editor of The Nation and one of my colleagues at the New America Foundation, has written a policy paper calling for a period of moderate, sustained inflation. My guess is that many readers will strenuously object to this idea, but I strongly recommend that you give Hayes's paper <a href="http://www.newamerica.net/publications/policy/overcoming_americas_debt_overhang_case_inflation">a close read</a>. Hayes is drawing in part on arguments made by economists like Greg Mankiw and Ken Rogoff, who believe that moderate inflation can facilitate a sustainable recovery. Rogoff has maintained that we need an inflation rate in the 5-6 percent over the next two years to slow the pace of job losses and ease the debt burden. In his view, we've simply gone from <a href="http://www.project-syndicate.org/commentary/rogoff60">a financial crisis to a long-term government debt crisis</a>. We are constantly reassured that governments will not default on their debts. In fact, governments all over the world default with startling regularity, either outright or through inflation. Even the US, for example, significantly inflated down its debt in the 1970’s, and debased the gold value of the dollar from $21 per ounce to $35 in the 1930’s. For now, the good news is that the crisis will be contained as long as government credit holds up. The bad news is that the rate at which government debt is piling up could easily lead to a second wave of financial crises within a few years. Most worrisome is America’s huge dependence on foreign borrowing, particularly from China - an imbalance that likely planted the seeds of the current crisis. Asians recognize that if they continue to accumulate paper debt, they risk the same fate that Europeans suffered three decades ago, when they piled up US debt that was dramatically melted down through inflation. It's easy to angrily denounce thinkers like Rogoff for contemplating an effort to increase core inflation -- but what is the alternative? We could eliminate Medicare, Medicaid, Social Security, and the United States Navy, or we could certainly radically pare back spending on all four programs. This isn't very likely. We can raises taxes, and we'll probably need to do so. But raising taxes enough to close the gap and start paying down the debt could threaten the economic recovery. We need some combination of spending cuts and tax increases, and even in that case we might need moderate inflation. Overall, it's an extremely depressing picture, one that puts the fiscal and monetary policy failures of the past fifteen years in sharp relief. One concern I have is that generating moderate, sustained might prove extremely difficult. Weak consumer demand and globalization mean that we're not likely to see wage/price spirals that derive from very tight labor markets, as Hayes explains. We could see a sharp spike in, say, oil prices, but this won't necessarily increase core inflation. Rather, higher oil prices will just hammer consumers without any of the salutary consequences. What looks like an easy-ish way out is in fact a puzzle. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NTU3ZjdjZThiM2RkNDcwZDEwYjgxZDhkMDM1MTIyODc= Tue, 15 Sep 2009 12:57:39 -0400 Thoughts on the Political Conversation -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=ZjU2ZGU0YmE0NDA3YzllMjk2NGZmNjhlMDUyYWNiN2I= In dozens of conversations with left-of-center journalists, activists, and politicians, I've detected a deep sense that turnabout is fair play. The questions raised by conservatives regarding the costs of the president's approach to health reform are essentially illegitimate because the previous administration was responsible for tax cuts that were not matched by spending cuts, an unfunded new entitlement program, and two expensive military campaigns. This strikes me as an interesting, coherent, and hilariously irresponsible view. Arguendo, let's accept that the left critique of the Bush administration is right in all the particulars. Let's also assume that the Peterson Foundation and other nonpartisan groups that have noted the gap between likely costs and likely revenues of the president's reform proposals are not members of a "right-wing noise machine" that actually delights in the prospect of denying Americans access to crucial medical care. Where does that leave us? The centrist opposition to the particular design of the president's health reform has been largely ignored, for the understandable reason that the centrist opposition doesn't threaten to dislodge Democratic lawmakers. The Republican opposition is in a sense the only effective opposition, as the Republican party can do what the centrist intelligentsia can't. It should go without saying that Republicans don't generally embrace the ideological worldview of the centrist, budget-balancing critics I have in mind, who want spending cuts and tax increases to deal with out long-term fiscal crisis. But there is a real sense in which the budget-balancing center and the right are objective allies insofar as they encourage an emphasis on delivery-system reform and whether or not the cost of premium subsidies will prove sustainable. Virtually no one believes that we can afford universal coverage without new taxes that will impact the "bottom 95 percent" of the population, yet my left-of-center interlocutors believe that the supposed anti-tax "insanity" of the GOP means that Democrats are obligated to be sparing with the truth. My own view is different: I think that the party that respects the American public will be rewarded for doing so. If the president openly and honestly explained to the American public that he believes that American workers should trade some disposable income for less risk, and that this tradeoff should happen through taxes and transfers, my guess is that a majority of Americans would, despite conservative objections, embrace the idea. Instead, the White House has emphasized that finding efficiencies through an iterative, centralized series of Medicare reforms as a way to finance coverage. To be sure, this is a matter of emphasis. (Anti-war critics often accused President Bush of selling the Iraq invasion in a misleading manner; this was mostly a matter of emphasis, that is very difficult to prove or disprove to partisans.) This kind of Medicare reform sounds very attractive to me, just as it sounded attractive to Newt Gingrich and the Republican Congress. But should we be surprised that seniors are concerned? Moreover, is it fair to malign for seniors for being concerned? Left-of-center observers often cite signs -- many of them apocryphal, but some of them real -- demanding that government keep its hands off of Medicare, a laugh-line for those who essentially believe that most Americans are easily-duped rubes. (I'm not exaggerating.) The conceit is that there are no sincere critics of small government, and that selfishness underlies all opposition to the agenda of the Democratic party circa 2009. Indeed, some observers have concluded that reversals for said agenda constitute a threat to democracy. Note that many of the same observers believed that political success for conservative Republicans in 2002 and 2004 was also a threat to democracy. Political success for liberal Democrats, in contrast, never represents a threat to democracy. You might recall that many right-of-center intellectuals found themselves in a similar spot during the early Bush years: convinced that a Republican White House must be defended, many conservatives compromised their core principles, and insisted that the hypocrisy of the Democratic opposition was reason enough to justify any number of misguided policies. I think it's fair to say that this approach didn't end well. It could be that we're in a poisonous political moment and we have no choice but to throw up our hands. Conveniently, many on the left believe that the only way to break this logjam is to permanently crush the Republican party so that objections to taxes and overspending will be permanently silenced. One popular new notion is that the Democratic party itself represents the full spectrum of responsible opinion, from Blue Dogs who want to spend a corporation-friendly $900 billion to Progressives who want to spend a somewhat-less corporation-friendly $1.4 trillion. At the risk of coming across as a threat to democracy, this doesn't sound right to me. I'd rather the Republican opposition take a different approach to countering the president's health reform effort, one that emphasizes cost-effective alternatives to achieving universal coverage. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=ZjU2ZGU0YmE0NDA3YzllMjk2NGZmNjhlMDUyYWNiN2I= Tue, 15 Sep 2009 12:07:26 -0400 Christopher Caldwell's New Book -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=N2ZlNDM2ZWY0NzYxNGNiNjI3MWIxOTZlNGJjN2M2NDg= Christopher Caldwell's Reflections on the Revolution in Europe is the best non-fiction book published in 2009. It is also a very reliable Rorshach test. Consider the reviews from <a href="http://www.barnesandnoble.com/bn-review/note.asp?note=24158628">Michelle Goldberg</a>, prominent feminist critic of the evangelical right, and <a href="http://www.thenational.ae/apps/pbcs.dll/article?AID=/20090828/REVIEW/708279968/1008">Perry Anderson</a>, a brilliant, idiosyncratic left-wing historian, to the frankly embarrassing reviews by NYU law professor <a href="http://www.prospect.org/cs/articles?article=chicken_little_goes_to_europe">Stephen Holmes</a> and Berlin-based author <a href="http://www.bookforum.com/inprint/016_02/3852">Gal Beckerman</a>. One gets the impression that Beckerman didn't actually read Caldwell's book -- I'm sure this isn't literally true, but that's the impression one gets from lines that accuse the book of lacking nuance or that maintain, bizarrely, that Caldwell's analysis "drips with disgust" for Europe. And Holmes's review is simply tiresome: he objects to Caldwell's (clever) title, and he claims that views embraced by many in the European center and left are "fringe-conservative." Oddly, Holmes doesn't seem to understand that the Christian tradition is diverse and in many respects contradictory: Readers may be forgiven for feeling lost at this point. Isn't Christianity one of the cultural sources of humanitarian universalism? After all, Christ allegedly died for all mankind. That is obviously what a secular philosopher such as Jürgen Habermas has in mind when he writes, in a passage cited by Caldwell, that "Christianity, and nothing else, is the ultimate foundation of liberty, conscience, human rights, and democracy, the benchmarks of Western civilization." So how can Caldwell apotheosize Christianity for its contribution to European culture and then go on to unmask the moral decay and self-loathing that motivates the universalism that is said, in his own book, to be Christianity's most inspiring legacy? Actually, readers can't be forgiven for feeling lost at this point. Like the Islamic tradition, Christianity isn't monolithic, and its influence manifests itself in essentially post-Christian societies in lots of different ways. Caldwell explains this in impressively lucid language. Holmes mischaracterizes Caldwell's arguments throughout the essay, not least on the subject of the role of women. Goldberg, an authority on the subject of women's freedom, sees things differently. Still, he makes a convincing if disturbing case when he argues that immigration is exacting "a steep price in freedom. The multiculturalism that has been Europe's main way of managing mass immigration requires the sacrifice of liberties that natives had come to think of as rights." This is in some ways an overly broad generalization, but it deserves more than a knee-jerk response. It is certainly unsettling, for example, to learn that the British Department for Work and Pensions is now giving benefits and recognition to the additional spouses in polygamous marriages. And there is no question that the fear of offending Muslim pieties has impeded freedom of speech in many European countries. Moreover, Caldwell offers a highly sympathetic take on European social democracy and the anxieties and anger of Europe's young Muslims, something Holmes fails to appreciate in his rather crude reading. At times, Holmes seems to make things up out of whole cloth, e.g., In addition, America has retained the moral fiber that Europe has lost. It is more Christian and more convinced that Christianity is morally superior to Islam. It is also less squeamish about using force to defend itself abroad (Iraq, Afghanistan) or at home. When Caldwell remarks that "a quarter of the prison inmates in the world are held in the United States," he means this not as criticism but as praise. Reflecting on U.S. "policies that are distasteful to most Europeans," such as the death penalty, he observes that such toughness means that "American cities and suburbs are extremely inhospitable places for immigrants who are criminally inclined." This is one of the principal ways in which America, unlike Europe, "exerts Procrustean pressure on its immigrants to conform." Most important, the United States believes in itself, while "Europeans are confused about whether they are citizens of the world or citizens of their own nations." No wonder they can neither defend their borders nor distinguish clearly between members and nonmembers of their community. Far from praising the American outlook, Caldwell is simply making neutral observations. The truth is that Holmes is smuggling in his own assumptions; Caldwell, like many conservatives ranging from evangelical conservatives like Charles Colson to fairly secular Muslims like myself, believes that mass incarceration is deeply problematic -- but that's not the subject at hand. Anyone who has even passing familiarity with Caldwell's work should know that he is far from a reflexive champion of the use of force; he is, in fact, a sharp critic of what he sees as neoconservative excess. But this doesn't fit Holmes's cartoon view of the world. The embarrassing extrapolations continue: Not Christ-like concern for the weak and the marginalized but readiness for organized violence is presumably why America's culture strikes the editors of the Weekly Standard as less drab than Europe's. America shares nationalist bellicosity with some parts of the Muslim world, and this is a good thing. At this point, we're not talking about Caldwell at all; rather, we're talking about a collectivity that exists mostly in Holmes's imagination. Believe it or not, Caldwell doesn't agree with his fellow editors in every regard. It's worth noting that Holmes's critical limitations extend to his work on left-of-center writers as well. Holmes was widely praised for a lacerating review of Roberto Unger, a daringly unconventional thinker who, alas, writes in an elliptical manner that Holmes evidently found difficult to understand. Anderson, one of my favorite writers, is also very critical of Caldwell's Reflections. Yet Anderson has a first-rate intellect, and his essay is well worth your time. Whereas Holmes is engaging an imagined neoconservative mafioso, Anderson is familiar with his subject, presumably because Anderson reads widely. Christopher Caldwell is a white crow among American journalists today, to use a Russian expression. Not merely is his cultural range perhaps without equal - more than just fluent in the major European languages, he is conversant with what is written in them. But in the cast of his intelligence, he is quite unlike most reporters or commentators. Although his background is in literature, it is a philosophical turn of mind that most distinguishes his writing from his peers. What typically attracts his interest are dilemmas - conceptual, moral, social - obscured or passed over in standard discourse about leading, or even marginal, issues of the day. About these, his conclusions are nearly always unconventional - in one way or another, quizzical or unsettling. This familiarity allows Anderson to actually land some blows, as in this passage: His characterization of the general historical contrast between post-war immigration in America and Europe is a tour de force of hard-headed pertinence and trenchancy. It is not exhaustive, since Reflections on the Revolution in Europe says little or nothing about the racist discrimination, harassment and animosity so widely meted out to Muslim or other arrivals from overseas, by officials and natives alike. Caldwell explains that his book focusses on “the difficulties immigration poses to European society”, not “the difficulties faced by immigrants”. The two can hardly be separated, however, as if the objective experience of immigrants at the hands of European society were irrelevant to their subjective attitudes towards it, about which Caldwell writes at length. Tacitly, he is certainly aware of this side of the situation, though choosing not to dwell on it. But there is a much larger dimension to which he appears completely blind. This is a fair point. I'm amazed by the contrast between the essays by Holmes and Anderson, and you will be too. Remember that Anderson's case against the Iraq war, made with characteristic intellectual daring in the London Review of Books, rested on his belief that states like Iraq are entitled to develop chemical and biological weapons as a defense against great powers. As for Holmes, it's not clear to me that he's ever said anything interesting at all. That's not a crime, to be sure. Neither is badly misrepresenting Christopher Caldwell's book. But you'll forgive me for being disappointed and even a little peeved. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=N2ZlNDM2ZWY0NzYxNGNiNjI3MWIxOTZlNGJjN2M2NDg= Thu, 10 Sep 2009 21:04:51 -0400 The Political Impact of Obamacare -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=M2Q3YTlhMWEwNDNiNTUzMjc5NDQyZDI3MTNmMWM1YjU= Josh Marshall, the editor of the center-left muckraking site Talking Points Memo, has <a href="http://www.talkingpointsmemo.com/archives/2009/09/do_i_have_the_politics_wrong.php">posted</a> a very astute email from a reader on the likely political impact of a successful Democratic health reform. In political terms, such a bill would be a tremendous boost for the Democratic Party. It would leave the present system intact in most of its essentials, thus assuaging the fears of the vast bulk of the electorate. One substantial group of voters - those for whom the subsidies render health insurance more affordable - would be fairly pleased. A smaller group, mandated to buy coverage it can scarcely afford, would be discontent, but mostly because the Republicans had thwarted Democratic efforts to help it - and, in cold political terms, this isn't a constituency likely to defect. And the public at large would see that Obama had promised health care reform, and then delivered it, with few painful trade-offs or compromises. A fairly clear-cut political victory. No, the problem is that such an arrangement would deliver a political victory, but fail to achieve most major policy goals. It wouldn't do much to rein in costs, to improve the quality of care, or to provide a greater sense of security. It's politically feasible, and a political triumph, precisely because of its modest aims and feeble provisions. It wouldn't do much, but it would do something. Most importantly of all, it would firmly establish the provision of universal healthcare as a federal problem. I'd like to see a better package emerge from this debate. But let's not mistake the ultimate goal, nor the magnitude of the potential victory. Today, paying for health care is a problem for individuals. The day any of the proposed bills passes, it becomes a policy problem for the federal government. Unsurprisingly, the reader believes that this is a very good thing. The policy wonk in me wants to get this right, because the costs of half-way measures are crippling. But the political handicapper in me is whispering that a half-way measure will actually be better than an honest bill come the midterms. It's a depressing thought, but with a silver lining. It should be obvious why conservatives might object. As a result, I'm very torn: it seems inevitable that the Democrats in Congress will pass something, and I think it's at least possible that Republicans can substantially improve the final legislation. Yet there's also a serious case for disavowing any involvement with the reform proposals. The Peter G. Peterson Foundation has just released a new report on the long-term costs of H.R. 3200 that is <a href="http://www.pgpf.org/newsroom/press/lewin_healthcare_report/?lk=8019135-8019135-0-38474-g9q3BLmZPYHQ5McDN7N4ikI8y/6GIWS2">well worth reading</a>. The basic conclusion of the report is that while the new revenue measures would basically pay for the proposal over the first decade, costs start to dramatically outstrip revenue in the second decade. Granted, it is impossible to make reasonable estimates over such long time horizons, and we have to assume that we'd see reforms of health reform in the years that follow passage. Two bullet points leapt out at me: <ul> <li>Overall, employer health spending would increase by an average of $305 per worker. Employers that currently offer insurance would see an increase in health spending of $123 per worker, while employers that do not now offer coverage would see an increase in health spending by an average of about $813 per worker. (However, most economists believe that employers would eventually offset the increased costs through slower wage growth. As a result, families and individuals would ultimately bear the increases in costs, which is reflected in the bullet above.) Small businesses currently providing insurance would save up to an average of $811 per worker due to a tax credit.</li> <li>The number of people covered in employer-sponsored plans (outside of the health insurance exchanges) would fall by 11 million, and overall enrollment in private plans would decline by about 900,000.</li> </ul> Trading off some disposable income for a lower level of risk might be the right decision; but I worry that we're not acknowledging that there is a tradeoff. And while the decrease in the number of people covered in employer-sponsored coverage might be inevitable -- this would be true under the status quo -- it helps underline why so many voters have expressed deep doubts about the feasibility of Obama's health reform effort. Which is why tonight's speech is important. My hope is that the president will level with the public and acknowledge that his effort will involve tradeoffs. I'm a little skeptical. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=M2Q3YTlhMWEwNDNiNTUzMjc5NDQyZDI3MTNmMWM1YjU= Wed, 09 Sep 2009 17:22:35 -0400 Unemployment and Support for Unions -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MjU4NDQ2OGVkMGYzNzk5ZmY5NzIyZDI5MjA2YzIzNDI= To follow up on my <a href="http://www.forbes.com/2009/09/06/labor-unions-workers-opinions-columnists-reihan-salam.html">Labor Day column</a>, Nate Silver has written a very useful post plotting <a href="http://www.fivethirtyeight.com/2009/09/as-unemployment-rises-support-for.html">pro-union sentiment against the unemployment rate</a>. The regression line finds that, for every point's worth of increase in the unemployment rate, approval of labor unions goes down by 2.6 points. Alternatively, we can add a time trend to the regression model, to account for the fact that participation in labor unions has been declining over time. This softens the relationship slightly, but still implies a decrease in approval of 2.1 points for unions for every point increase in unemployment. Both relationships are highly statistically significant. This makes intuitive sense; during a straitened economic moment, the public is more concerned with retaining their jobs or with job growth than with collective action. Interestingly, Bob McDonnell's gubernatorial campaign has very effectively used its opposition to card-check as a wedge issue against Democrats in Virginia, one of many reasons why Creigh Deeds is trying to shift the debate towards social issues. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MjU4NDQ2OGVkMGYzNzk5ZmY5NzIyZDI5MjA2YzIzNDI= Wed, 09 Sep 2009 17:02:08 -0400 The Baucus Plan -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=NGJmNGYzNjYzNjMyOTE5ZTdkZjU1YmY5ZGM2YjA1ZWQ= Via Ezra Klein's Washington Post <a href="http://voices.washingtonpost.com/ezra-klein/2009/09/exclusive_the_baucus_framework.html">blog</a> I've just downloaded Max Baucus's $900 billion healthcare framework, which reflects the thinking of the "Bipartisan Six," which sounds like the name of a team of superheroes with the power to bore their enemies to death. Below you'll find some preliminary thoughts. This will be a long post, I'm afraid. Drug prices Beginning in 2010, in order to have their drugs covered under Medicare, manufacturers must provide a 50% discount off the negotiated price for brand-name drugs covered on plan formularies when beneficiaries enter the coverage gap. This proposal will probably backfire. In a 2007 CBO report, Peter Orszag, now President Obama's OMB director, noted the following: A vivid example is the Medicaid “best price” provision, which essentially requires manufacturers to give the Medicaid program rebates that are at least equal to the largest private rebates they provide. After those provisions were enacted, private purchasers who had been receiving the largest price concessions saw their rebates decline. That is, Medicare prices will decline and prices for those insured privately will increase. This is the kind of short-term thinking that led to the unrestrained growth in private insurance premiums after the Balanced Budget Act of 1997. The impetus for this proposal seems to be political: it will go into effect before the midterm congressional elections. Health insurance exchanges The proposal calls for state-based health exchanges, as opposed to a national exchange or regional exchanges. Will state-based exchanges have enough scale to work well? Insurance Reform in the Non-Group Market Plans will be subject to severe restrictions; premiums can only vary according to age, family composition, region, and, interestingly enough, tobacco use. Many proposals have suggested that insurers be limited to charging premiums only on the basis of regional and demographic factors. But if we include tobacco, one wonders why we don't also include, say, alcohol use. (As a near-teetotaler, I have a special interest in this subject, as do America's devout Mormons and Muslims.) "Young Invincibles" Young adults will be allowed to purchase catastrophic coverage, which is (mostly) good news. Health Care Affordability Tax Credits As expected, the Baucus framework offers somewhat less generous assistance to families; rather than extending to 400 percent of the poverty level, subsidies extend to 300 percent. My main concern is that the structure of subsidies might lead to a high effective marginal tax rate, but we'll know more soon enough. Small Business Tax Credits Speaking of strange incentives, assistance to small business owners works as follows: Credits are again limited to firms with fewer than 25 employees and average wages below $40,000, and the maximum credit available would be 50%. So what happens when you give your employees a raise? I have to assume I'm missing something here. Individual and Employer Mandates The individual mandate is fairly straightforward; if you can't demonstrate that you have coverage, you pay a fine. For most individuals, the fine won't be much of a deterrent in itself. It will, however, swell the size of the IRS and create a massive enforcement headache. Some form of automatic enrollment might actually prove more cost effective. Employers with more than 50 full-time employees are penalized for not offering coverage, and the fine is tied to the cost of direct taxpayer subsidies to the employees. This is not a very strong employer mandate. CO-OPs This aspect of the Baucus framework seems fairly inconsequential; basically, it authorizes start-up funds for state-based non-profit insurers chartered to lower costs and improve benefits relative to the competition. CO-OPs offering integrated care, like Kaiser Permanente or the Mayo Clinic, will receive a strong preference. Risk Sharing Rather discouragingly, the framework only includes the following on the vitally important subject of risk. To protect newly reformed markets against adverse risk selection and facilitate market entry of new plans, the proposal includes three mechanisms to share risk: risk adjustment, reinsurance and risk corridors. I'm a huge supporter of the reinsurance approach, which has the potential to sharply reduce or even eliminate the need for private insurers to engage in adverse selection. But I haven't seen any details. Medicaid The fundamental problem with Medicaid is that it divides responsibility between the states and the federal government in a manner that encourages the worst kind of buck-passing; James Capretta explains this in great detail in his National Affairs essay on <a href="http://nationalaffairs.com/publications/detail/the-new-middle-class-contract">the middle class social contract</a>. The Medicaid program, meanwhile, fuels growth in health-care costs because it is financed with a flawed system of federal-state matching payments, with no limit on the amount that can be drawn from the Treasury each year. For every dollar of Medicaid cost, the federal government pays, on average, 57 cents; the states pick up the rest. But it's the states, not the federal government, that call the shots in the program's management: They determine who is eligible for what, and how much to pay hospitals and doctors for services. Under this arrangement, if governors or state agencies want to reduce Medicaid's cost to their budgets, they have to cut the program by $2.30 to save $1.00 — because the other $1.30 belongs to the federal government. Paying the full political price for benefit cuts while getting less than half the economic benefit obviously does not appeal to most state politicians. So instead, they spend most of their energy devising ways to maximize what they can get from the federal government while minimizing the state contribution. The Baucus framework will do nothing to change this. Revenue To my chagrin, the Bipartisan Six has embraced John Kerry's kludgy idea for a "High Cost Insurance Excise Tax." Because the Obama campaign fiercely attacked John McCain for his proposal to limit the tax subsidy for high-cost employer-provided health plans, Democrats have concluded that they can't simply adopt the McCain approach. And so they've done the next best thing: adopt a crude and ineffective replica. The other revenue measures seem trivial and inadequate. Unfortunately, there is good reason to believe that this proposal will bear close resemblance to the health reform plan that eventually passes. My rough guess is that costs will continue to grow unabated and that the mandates will prove close to unenforcable. The plan would be greatly improved by jettisoning everything but the individual mandate and adding <a href="http://healthaffairs.org/blog/2009/05/20/beyond-the-public-plan-debate-a-pathway-to-transform-the-delivery-system/">a publicly-chartered non-profit reinsurer</a> along the lines proposed by Professor Harold Luft. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NGJmNGYzNjYzNjMyOTE5ZTdkZjU1YmY5ZGM2YjA1ZWQ= Tue, 08 Sep 2009 15:09:00 -0400 National Affairs -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MjhkMzAwMzk4YzU3YmFjMzQ1ZTMxMDk4MmVmY2IyNGQ= Today isn't just the start of the long, cold denouement of 2009 -- it is the launch date for <a href="http://nationalaffairs.com/">National Affairs</a>, which Pete Wehner has <a href="http://corner.nationalreview.com/post/?q=YjcxZmZiNjVkNjk1N2JiZjNmYjJlMWNhOGQwN2UzMTM=">plugged </a>on The Corner. Most of you know Yuval Levin, the editor of National Affairs, as one of the country's brightest lights on domestic policy. I've now known Yuval for a few years, and I'm still humbled by his formidable brainpower and also his sharp political instincts. Meghan Clyne, the magazine's managing editor, is a name you'll be hearing more of; a veteran of National Review and the White House. Clyne is a brilliant writer, who writes a fantastic, pugnacious column for The New York Post, and a gifted editor. I'm happy to report that I'm serving as a contributing editor along with my friends Matt Continetti of the Weekly Standard and Adam Keiper of The New Atlantis. The debate around the future of the American economy so far has been arid and dominated by narrowly-focused technocrats who share a number of unexamined assumptions. National Affairs intends to change that. David Brooks <a href="http://www.nytimes.com/2009/09/08/opinion/08brooks.html">strongly recommends</a> essays by <a href="http://nationalaffairs.com/publications/detail/the-new-middle-class-contract">James Capretta</a> and <a href="http://nationalaffairs.com/publications/detail/getting-ahead-in-america">Ron Haskins</a>, and so do I. Read them both at the new National Affairs website, which will feature original writing. (I'll have an essay there later this week.) <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MjhkMzAwMzk4YzU3YmFjMzQ1ZTMxMDk4MmVmY2IyNGQ= Tue, 08 Sep 2009 11:30:15 -0400 The Case for Company Unions -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=YmJiMmQyZDdlZjQ5ZDc1ZTEyNjc0MjYzZWM1Mjg4NmQ= On Monday, I made the case for pro-market labor reform in my <a href="http://www.forbes.com/2009/09/06/labor-unions-workers-opinions-columnists-reihan-salam.html">Forbes.com column</a>. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=YmJiMmQyZDdlZjQ5ZDc1ZTEyNjc0MjYzZWM1Mjg4NmQ= Tue, 08 Sep 2009 11:13:28 -0400 Van Jones and Bob McDonnell -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=NjU1YzU5YzYwODcxNWY4ZWMzYzVjMjM2MzFlMjJkMjE= A short while ago, I wrote a post defending Bob McDonnell. The truth is that I didn't think, and I don't think, McDonnell needs much defending. He's been lambasted in the press for expressing views in a 1989 master's thesis that are shared by many conservatives. The most controversial views involved the role of women in the workforce, and more particularly the role of the mothers of young children. Ironically, McDonnell embraced a position taken my many left-of-center critics of welfare reform, namely that children need a mother in the home. In the years since, however, McDonnell has embraced the cause of working women; apart from his employed wife, he is the father of professionally accomplished daughters, one of whom is serving in the military. More recently, Van Jones, the recently resigned White House green jobs advisor, has been attacked for past statements regarding his radical chic affiliations. David Weigel has <a href="http://washingtonindependent.com/57958/climate-change-skeptics-oust-jones-with-green-socialist-attacks">described the controversy</a> in detail. Apart from Jones's baffling decision to sign not one but two petitions sponsored by so-called 9/11 Truthers, one gets the impression that Jones is a fairly conventional urban left-liberal who has moved steadily to the political center. Is this shift a sham designed to increase his power and influence or is it a genuine recognition of the limits and indeed the ultimate uselessness of radical chic? I have to assume it's both, just as McDonnell has recognized the limits of emphasizing his social conservatism and he's had a genuine change of heart on the role of mothers in public life. To be sure, McDonnell and Jones are very different; McDonnell's views are comfortably in the mainstream while Jones's early 1990s embrace of black nationalism and, remarkably, communism, are not. It's worth thinking through the psychology that might be at work -- to do his work well, Van Jones has to have credibility not only with business leaders and centrist technocrats; rather, he has to seem authentic to inner-city residents who feel angry and dispossessed. His radical pose was a part of this. So in a sense, Jones is a tragic figure. This isn't to say that Glenn Beck shouldn't have gone after him: given his past statements, Jones would have done the White House advisor a favor by staying outside the administration. But Jones's basic contribution has been valuable: America's poorest inner-cities are plagued by a culture of worklessness, a problem that is in some sense more destructive and more pervasive than homelessness. Encouraging job growth in these communities will reduce welfare dependency, the central goal of conservative welfare reform efforts. And Jones saw various clean-energy initiatives as a way to do this. There's a reason this idea has been embraced across the political spectrum: it's not a bad idea. In the inaugural issue of National Affairs, Johns Hopkins political scientist offers a fascinating history lesson on the evolution of "compassionate conservatism." Part of his discussion involves the GOP's outreach to African Americans from Nixon on. Especially in competitive non-Southern states, spotting the Democrats the entire black (and, increasingly, Hispanic) vote made it extremely difficult for Republicans to achieve long-term partisan realignment. A segregated party could not be a majority party, something that even Nixon recognized. So while he was openly appealing for Southern segregationist support in his judicial nominations, Nixon experimented with support for "black capitalism" through affirmative action in government contracting and small-business programs. He also sought to attract Hispanic voters by adding a new category to the 1970 census and supporting bilingual education. These measures were unsuccessful in both policy and electoral terms, but they represented an instinct that Republicans would flirt with on and off for the next quarter-century, culminating with the Bush campaign in 2000. While I oppose vast clean-energy industrial policies, low-cost strategies for dealing with climate change will have to involve revamping urban infrastructure. The right has good reason to take this to heart. As for the political futures of Van Jones and Bob McDonnell, the Virginia Republican is still polling fairly well, though it remains to be seen if national Democratic muscle will really get behind Deeds in the months to come; Jones will likely return to Oakland, where he'll find a city in rapid decline. Jones's past radicalism may well bar him from a place on the national stage, but he is a smart and savvy activist who is far more pro-market than your average member of the Oakland left; one wonders if he'd ever consider running for mayor or for Congress, where he'd represent a distinct improvement over Congresswoman Barbara Lee. A final note: in 1976, Jimmy Carter said different things to different audiences so often that he gained a reputation among his Democratic rivals as spectacularly deceitful even for a politician. In front of liberal audiences, he represented himself as a champion of civil rights; among working-class white voters, Carter defended the racial purity of white neighborhoods. Left-of-center critics often claim that Ronald Reagan relied on segregationist appeals; they tend to let Carter off the hook. Carter's double-game, just barely possible in the 1970s, is now completely impossible. If you want to impress readers of the East Bay Express with your radical past, Glenn Beck will eventually find out. The end result is that young people seeking a career in public life will have to be more cautious than ever. And I'm not sure that's a good thing. I wrote a <a href="http://www.thedailybeast.com/blogs-and-stories/2009-09-08/victims-of-the-thought-police/">short piece</a> on Jones and McDonnell for The Daily Beast, and I'm afraid they gave it the headline "Leave Van Jones Alone." Given that I don't think Jones or McDonnell should be "left alone" -- they should face the same scrutiny that all public officials face -- I'd much prefer a different title. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NjU1YzU5YzYwODcxNWY4ZWMzYzVjMjM2MzFlMjJkMjE= Tue, 08 Sep 2009 11:09:49 -0400 Not Quite Universal -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MTRiNmVlNzY0ZmIxNjFlYjlhMmY1OWZmNDQ0NmYzOTY= Last month, David Rivkin and Lee Casey argued that the individual mandate at the heart of most Democratic reform proposals is <a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/08/21/AR2009082103033.html">unconstitutional</a>. Their argument has been strongly challenged from <a href="http://balkin.blogspot.com/2009/08/inevitable-conservative-argument-that.html">the left</a> and from <a href="http://volokh.com/posts/1250981450.shtml">the right</a>, and my sense is that the Roberts Court would never dare overturn health reform legislation, regardless of the merits of the originalist argument made by Rivkin and Casey. The op-ed did make me think about what health reform might look like if we put aside achieving the goal of universal or near-universal coverage. In 2006, Katherine Swartz, an economist at the Harvard School of Public Health, published <a href="http://books.google.com/books?id=3YI3wSDa81MC&dq=katherine+swartz+reinsuring+health&printsec=frontcover&source=bn&hl=en&ei=gHahSuzeBY6HmQeH5OnfDQ&sa=X&oi=book_result&ct=result&resnum=4#v=onepage&q=&f=false">Reinsuring Health</a>, a case for an interim step that would preserve the broad architecture of our current health system, dominated by employer-based coverage, while making coverage far more accessible to those in the small-group and individual markets. If you follow the health insurance debate, you know that while the federal government offers generous tax subsidies for employer-based coverage, it does not offer the same subsidies to coverage purchased by individuals. Using numbers from the mid-2000s, Swartz estimated that this subsidy amounts to roughly $850 per person covered. If you are self-employed or if your employer doesn't offer coverage, you see none of this subsidy, which seems more than a little arbitrary. Part of the reason why small firms tend not to offer coverage is because they don't have the scale adequate to smooth risk across older, sicker employees and younger, healthier employees. Small-group insurance is tough, and the individual market is in many respects even worse. To address this problem, Swartz proposed a government reinsurance program, financed by general revenues or a dedicated tax or by trimming the subsidy for employer-based coverage at the high end, that would ease the burden on private insurers who offer small-group and individual insurance policies. The top 1 percent of individuals generate 28 percent of medical expenses, but it's very hard to tell who will belong to this 1 percent. Understandably, insurers spend a great deal of time and effort trying to avoid covering people in the top 1 percent. This is very expensive. A government reinsurance program would agree to take on the expenses of these outlier patients and in return it would ask for cost-saving measures and that the private insurers charge lower premiums that reflect their reduced risk. And these lower premiums would sharly reduce the number of uninsured, even without an individual mandate. This is far from a flawless solution, as Swartz would acknowledge, but it does represent a less sweeping and more importantly less expensive alternative. This is not my preferred approach to reinsurance. For example, I don't think it does enough to contain costs, as Swartz would readily acknowledge. In a better economic climate, it might serve as a decent stopgap. My worry is that we actually need to do something far more dramatic to slash costs, and that means rejecting the status quo and Obamacare as currently conceived in favor of an approach that (yes) emphasizes delivery system reform. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MTRiNmVlNzY0ZmIxNjFlYjlhMmY1OWZmNDQ0NmYzOTY= Fri, 04 Sep 2009 16:46:34 -0400 Mitch Daniels on Resetting State Governments -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=ZGU4MmYyMzk3ODkxOTk0ZDlmYzFhNTk4YTAyNTQxZDE= Also in today's WSJ, an excellent, tart missive from Mitch Daniels. I agree with virtually everything Daniels says in the piece. His basic argument is that state governments are facing a structural revenue collapse, and that they need to resize public spending appropriately. Unlike the aftermath of past recessions, odds are that revenues will take a long time to catch back up to their previous trend lines—if they ever do. Tax payments have fallen so far that it would require a rousing economic rally to restore them. This at a time when the Obama administration's policies on taxes, spending and more seem designed to produce the opposite result. From 1930 to 2008, our national average annual real GDP growth rate was 3.49%. After crunching the numbers, my team has estimated that it would take GDP growth of at least twice the historical average to return state tax revenues to their previous long-term trend line by 2012. <a name="U10149052376DIB"></a> I doubt even that would suffice to rescue most states. Instead, historical forecasting models need to be revised. One-third of state revenues (over half in seven states) come from sales taxes, but it's hard to imagine them snapping all the way back up to where they were just a few years ago. Americans are now saving much more then they used to relative to how much they are spending. This sudden shift will mean that even in good economic times to come consumers will likely spend less and therefore pay less in sales taxes than they did during bubble years. Incredibly, state spending has ballooned over the past decade, growing at a rate of 6 percent a year, far in excess of population growth or wage growth. I have one small disagreement with Daniels, however. The "progressive" states that built their enormous public burdens by soaking the wealthy will hit the wall first and hardest. California, which extracts more than half its income taxes from a fraction of 1% of its citizens, is extreme but hardly alone in its overreliance on a few, highly mobile taxpayers. Both individuals and businesses are fleeing soak-the-rich states already. Those who remain in high-tax states will be making few if any capital gains tax payments in the years to come. Even if the stock market comes roaring back to life, the best it could do is speed the deduction of recent losses. Though think Daniels basic point is right, namely that California doesn't have a business-friendly climate, I think that this has more to do with regulation than the tax burden on the rich per se. (Interestingly, Daniels proposed a surtax on high earners to close a budget shortfall early in his first term.) Despite high taxes, California's rich aren't the most footloose slice of the population. Last week's issue of The Economist noted the following: The Public Policy Institute of California (PPIC), a non-partisan think-tank in San Francisco, has examined domestic migration in and out of California, and found that the high personal income taxes that are allegedly driving out the rich cannot be to blame. The poorest Californians, those paying very little in taxes, are the most likely to leave the state: 1.73 households are leaving for every one that arrives. Among the richest, only 1.09 households are leaving for each arrival. It is true that the top destinations for those leaving include Nevada, Texas and Washington, three states that have no personal income taxes. Oregon, however, is also popular and it has high income taxes. Proximity seems to be a bigger factor than tax rates, says the PPIC. The rich can afford high taxes. Taxes are a far more potent threat to families that are trying to build wealth than those that already have it. The real problem with California's economic policy is that it is making life miserable for California's poor and lower-middle-class, and a lot of this happens not so much through the tax code as through perverse restrictions on job growth and development. In City Journal, Ed Glaeser <a href="http://www.city-journal.org/2009/19_1_green-cities.html">brilliantly described</a> how development restrictions in coastal California have been a disaster for the environment. California’s abundant restrictions on new construction don’t do much to deter building across America as a whole. No matter what the Bay Area does, plenty of new households will come into being, and they will need new homes. By restricting local development, California regulators just make sure that construction occurs someplace else. That someplace else tends to be a lot less environmentally friendly than the California coast, blessed as it is with a superbly temperate climate. The net result of this process: land-use restrictions in California increase carbon emissions and raise the risks of global warming. Glaeser doesn't add the obvious point that these development restrictions also encourage less-affluent Californians to flee the state in search of cheaper housing. These pressures will presumably ease in the near term, but not enough. A brief aside: Progressives focus on Proposition 13, the consequences of which have been negative in many respects, e.g., it has undermined local government by centralizing the raising of revenue, it has also undermined "horizontal equity," i.e., the notion that similar people should pay similar tax rates, etc. But progressives tend to think that centralizing the raising of revenue is a good thing: it leads to a more egalitarian distribution of public goods, it leads to less <a href="http://en.wikipedia.org/wiki/Tiebout_model">Tiebout choice</a>, which conservatives like and progressive generally loathe. Again, I don't think Prop 13 proved to be a great thing in the end. But progressives don't seem to understand its real flaws. Rather, they use it as a clumsy shorthand for broader anti-tax sentiment, not understanding that the revolt against the property tax began as a movement of the left and the right. Mitch Daniels is badly needed on the national political scene as a voice of reason. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=ZGU4MmYyMzk3ODkxOTk0ZDlmYzFhNTk4YTAyNTQxZDE= Fri, 04 Sep 2009 15:46:28 -0400 A Depressing Note on Afghanistan -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=M2ZiYmZkMmM4ZWE5ZDRiYzNlZjJkNjZiNTY5OTE3NTE= Today's Wall Street Journal Opinion section features two really indispensable pieces. One is on Afghanistan, with Dan Senor and Pete Wehner offering a counter to George F. Will's <a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/08/31/AR2009083102912.html">advocacy of withdrawal</a>. The war in Afghanistan is a crucial part of America's broader struggle against militant Islam. If we were to fail in Afghanistan, it would have calamitous consequences for both Pakistan and American credibility. It would consign the people of Afghanistan to misery and hopelessness. And Afghanistan would once again become home to a lethal mix of terrorists and insurgents and a launching point for attacks against Western and U.S. interests. Neighboring governments—especially Pakistan's with its nuclear weapons—could quickly be destabilized and collapse. <a name="U10149052512QQF"></a> Progress and eventual success in Afghanistan—which is difficult but doable—would, when combined with a similar outcome in Iraq, constitute a devastating blow against jihadists and help stabilize a vital and volatile region. Here's the problem, as I see it: I agree with Senor and Wehner on the essentials, namely that we have very good reasons to be in Afghanistan for a long time and in large numbers. Peter Feaver, one of the sharpest foreign policy thinkers, has made the case <a href="http://shadow.foreignpolicy.com/posts/2009/09/01/the_scariest_thing_ive_read_on_afghanistan">very persuasively</a> in blog posts for Shadow Government. But Feaver has also raised another thorny problem. There are few things more toxic for effective civil-military relations in wartime than the military believing that their political commanders are not serious about seeing the conflict through to a successful conclusion. No army can remain more resolved than the Commander-in-Chief is -- not for very long, anyway. And once doubts about that resolve seep into the interagency and theater decision-making process, they are very hard to eradicate. Indeed, once entrenched, efforts to rebut them with bold statements of resolve suffer from the "thou doth protest too much" problem and may even reinforce those doubts. We're in a spiral. I linked a short while ago to Stephen Biddle's <a href="http://www.the-american-interest.com/article-bd.cfm?piece=617">excellent, judicious essay</a> on the case for staying and fighting in Afghanistan. Part of his point is that the war in Afghanistan is "only barely" worth fighting, a sentiment I imagine Senor and Wehner would reject. Note that Senor and Wehner highlight the danger that Afghanistan might become a launching pad for attacks against the West and U.S. interests. U.S. interests are present throughout the globe, so that provides an essentially limitless case for intervention. As for attacks against the West, Biddle offered some interesting thoughts on the subject. The United States has two primary national interests in this conflict: that Afghanistan never again become a haven for terrorism against the United States, and that chaos in Afghanistan not destabilize its neighbors, especially Pakistan. Neither interest can be dismissed, but both have limits as casus belli. The first interest is the most discussed—and the weakest argument for waging the kind of war we are now waging. The United States invaded Afghanistan in the first place to destroy the al-Qaeda safe haven there—actions clearly justified by the 9/11 attacks. But al-Qaeda is no longer based in Afghanistan, nor has it been since early 2002. By all accounts, bin Laden and his core operation are now based across the border in Pakistan’s Federally Administered Tribal Areas (FATA). The Taliban movement in Afghanistan is clearly linked with al-Qaeda and sympathetic to it, but there is little evidence of al-Qaeda infrastructure within Afghanistan today that could directly threaten the U.S. homeland. If the current Afghan government collapsed and were replaced with a neo-Taliban regime, or if the Taliban were able to secure political control over some major contiguous fraction of Afghan territory, then perhaps al-Qaeda could re-establish a real haven there. But the risk that al-Qaeda might succeed in doing this isn’t much different than the same happening in a wide range of weak states throughout the world, from Yemen to Somalia to Djibouti to Eritrea to Sudan to the Philippines to Uzbekistan, or even parts of Latin America or southern Africa. It's understandable that preventing Afghanistan from becoming a safe heaven is at the heart of the political case for the war in Afghanistan, but the strategic case rests on: The more important U.S. interest is indirect: to prevent chaos in Afghanistan from destabilizing Pakistan. With a population of 173 million (five times Afghanistan’s), a GDP of more than $160 billion (more than ten times Afghanistan’s) and a functional nuclear arsenal of perhaps twenty to fifty warheads, Pakistan is a much more dangerous prospective state sanctuary for al-Qaeda. This is a true nightmare scenario. Biddle goes on to establish, rather depressingly, that we have very limited means of influencing the Pakistanis, and so the real case for committing troops to Afghanistan is as follows: If we cannot reliably influence Pakistan for the better, we should at least heed the Hippocratic Oath: Do no harm. With so little actual leverage, we cannot afford to make the problem any worse than it already is. And failure in Afghanistan would make the problem in Pakistan much harder. ... This is the single greatest U.S. interest in Afghanistan: to prevent it from aggravating Pakistan’s internal problems and magnifying the danger of an al-Qaeda nuclear-armed sanctuary there. And yet the stakes "do not merit an infinitely high price tag," in Biddle's words. The tragedy for me is that I think we can succeed in Afghanistan at a reasonable cost. If we commit enough troops now, we can make a difference. But if we pursue a politically-influenced half-way option, in which we commit a somewhat smaller number of troops than we need so as not to alarm the public, we will actually have more casualties and a far higher likelihood of failure than we would with a more robust approach. Keep in mind that managing Pakistan's perceptions is vitally important. The Pakistanis don't trust us and never will; because the Pakistani security establishment convinced that we will eventually "bug out," they have a strong interest in keeping a Plan B of accommodating the Taliban in Afghanistan in the hopes of having an ally that will not challenge their rule in Pakistan. To be sure, more and more Pakistanis recognize that the Taliban is a transnational movement that poses a serious threat to the integrity of the Pakistani state itself. But many in Pakistan believe that they can still cut a favorable deal. The only way to solve this problem is to convince the Pakistanis that the United States is fully committed to the war effort. And like it or not, the Pakistani elite reads the same newspapers that we do. In a sense, the expectations management game has already been lost. So where does that leave us? Part of me thinks that we should either commit fully to the war effort or we should recognize that our effort in Afghanistan might be a lost cause. I find this prospect extremely depressing and I'd like to be convinced otherwise. Rest assured, George F. Will is not alone among conservatives, and anti-war sentiment will only grow in the conservative grassroots if people get the sense that soldiers live are being put in danger not in pursuit of an achievable strategic goal but rather to avoid a backlash from hawks. In the healthcare debate, the Obama White House crafted their proposals in anticipation of conservative objections and to counter the inevitable attacks. They knew that Americans like employer-provided coverage, and so they savaged McCain for undermining that system. This put them in a bind when it came to crafting a workable policy. Similarly, the anti-war left was careful to attack the "bad war" in Iraq and call for a more strenuous effort to fight the "good war" in Afghanistan. This was an effective means of channeling the sentiments of conservative independents who were committed to the fight against Al Qaeda, yet who were skeptical on the importance of the Iraqi front. But did it represent a real commitment? Now that those same conservative independents are abandoning the president, and now that the wars in Iraq and Afghanistan have less political salience, it seems very likely that the White House will distance itself. Unlike yours truly, Matt Yglesias is not an Afghanistan hawk. He does, however, offer some useful insight into <a href="http://yglesias.thinkprogress.org/archives/2009/09/two-friedman-units-later-in-afghanistan.php">what Team Obama is thinking</a>. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=M2ZiYmZkMmM4ZWE5ZDRiYzNlZjJkNjZiNTY5OTE3NTE= Fri, 04 Sep 2009 14:42:59 -0400 What Exactly Does Corker Have In Mind? -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=OWRkMGEzOGJlY2RiNGM1NjQxNjMzZDYzZTQ5YWM3Mjc= Bob Corker strikes me as a pretty interesting figure. During his run for the Republican Senate nomination in 2006, he was a moderate candidate who made a strong effort to establish his conservative credentials. As mayor of Chattanooga, he was lauded across the political spectrum for his very hands-on, pro-development management style. And as a senator, he's staked out a distinctive profile. On a number of issues, he's taken the tack of offering market-driven alternatives to government-driven policies. He took the lead in opposing the auto industry bailout, instead favoring an aggressive restructuring plan that would invole far less public money. He's also called for jettisoning cap-and-trade in favor of <a href="http://www.grist.org/article/2009-bob-corker-on-climate-legislation">a modified form of cap-and-dividend</a>, not unlike a <a href="http://www.mcclatchydc.com/homepage/story/68130.html">proposal </a>offered by Reps. Jeff Flake and Bob Inglis. According to Shailagh Murray in the Washington Post, Corker is now applying a similar logic to health reform. As he sees it, insurers would no longer be allowed to deny coverage for preexisting conditions, Corker told the crowd, and would offer an array of plans via a new insurance exchange, unrestricted by the current boundaries of state insurance laws. To help the uninsured gain coverage, the government would provide vouchers or tax credits, and would tax the most generous employer-offered plans to pay the cost. But a public insurance option is a non-starter, Corker warned, and unless Obama pushes the idea off the table next week, meaningful GOP support will not materialize. A serious and gradual bid to control costs and expand coverage, however, could prove difficult for certain Republicans to resist, he said. Suffice it to say, the details matter. What constitutes a serious bid to control costs? At the end of the piece, Murray cites one Corker idea that is very worthy of consideration. One proposal that appears to be gaining traction among some Democrats and Republicans, including Corker, would limit the insurance people are required to buy to only a catastrophic coverage plan. Another idea, proposed by McCain on the 2008 campaign trail and now getting a second look from certain Democrats, would create special risk pools for people with serious illnesses. Some individuals familiar with health-care negotiations said that if Obama chooses to take a staggered approach, gradually expanding coverage over time, either of these ideas could prove promising starting points. The great appeal of the catastrophic coverage approach is that it achieves one of the central goals that Democrats and Republicans are ostensibly working towards, namely protecting families against income shocks, while also creating a more "consumer-driven" healthcare marketplace, in which routine medical expenses are the responsibility of individuals rather than third parties. The hope is that this will encourage more responsible consumption of medical services. The danger, of course, is that we'll see more adverse selection and that the less affluent won't seek out much-needed preventive care. But there are ways of addressing these concerns. As for the idea of special risk pools, there is another possibility for an interim reform, one that cut the number of uninsured roughly in half, namely federal reinsurance for the small-group and individual marketplace. More on that to come. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=OWRkMGEzOGJlY2RiNGM1NjQxNjMzZDYzZTQ5YWM3Mjc= Fri, 04 Sep 2009 11:56:07 -0400 I'm Feeling Strangely Optimistic -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MzcwNGM1ODZlNGU0Y2E4NjU2M2ZkNmE1MGRhMTNhOGQ= After many weeks of pessimism regarding the prospects of health reform, I'm suddenly feeling strangely optimistic. My pessimism rested on a few fronts: (1) The president is right to suggest that we need a healthcare overhaul, yet he's been, in my view, very misleading regarding the likely consequences of his proposed health insurance reforms. (2) Republicans have been right to oppose many of the president's proposals, yet their opposition has rested on a spirited defense of the status quo, including a defense of Medicare FFS, possibly the most counterproductive aspect of healthcare as we know it. So if the president "won," we'd have an enormous new entitlement likely to grow more expensive over time. And if the Republicans "won," future conservative policymakers would be sharply constrained in their ability to impose spending restraint. Now, however, I'm suddenly convinced that there might be room for a constructive reform proposal, one that could be embraced by congressional conservatives and moderates. Basically, the public option is a solution to a problem we're set to create -- that problem is that, as a number of liberal analysts have pointed out, a combination of an insurance mandate, reforms designed to eliminate or minimize adverse selection, and low-income subsidies is heaven for private insurers: there is nothing there to prevent them from charging ever-higher premiums. Because we're not reforming the delivery system, the real driver of cost growth, we might actually see accelerating cost growth as a result of these reforms, which will eat into wage growth that has already been battered by the economic downturn. The public option is, as we've discussed, designed to "discipline" private insurers. Yet this is a mirage as long as we don't reform the delivery system: the public option will be "strongest" if it is allowed to impose Medicare reimbursement rates or close, which means that we'll see cost-shifting as we did during the late 1990s. To oversimplify, the period from 1989 to 1996 saw a slowing rate of growth in health insurance premiums. Part of this derived from a shift towards managed care plans on the part of employers and private insurers. But part of it derived from the fact that Medicare was relatively generous during this period. After the Balanced Budget Act of 1997, however, Medicare slowed the rate of growth in its reimbursements to hospitals. And so hospitals demanded more from private insurers. I have no religious opposition to the fact that Medicare reimburses hospitals at low rates -- that is one of the benefits of scale. I do, however, have a problem with the fact that they reimburse hospitals at low rates without leveraging their market power to make the system more efficient; instead, Medicare effectively makes our health system less efficient. A number of centrists, including some of my colleagues at the New America Foundation, want a weaker version of the public option, one that will serve as a non-profit benchmark. Whatever the virtues of this proposal, I don't think it's going to generate the necessary system-wide reforms. Among liberals, the consensus view is that we should have coverage expansion now and reform of the delivery system later, when our hand is forced by spiraling costs. This strikes me as a fairly cynical view, and one that might backfire. We're already facing mammoth deficits for a decade or more: if not now, when? The good news is that a handful of congressional conservatives, like Senator Bob Corker, seem willing to <a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/09/03/AR2009090303839_pf.html">force changes</a> that will get us out of this impasse. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MzcwNGM1ODZlNGU0Y2E4NjU2M2ZkNmE1MGRhMTNhOGQ= Fri, 04 Sep 2009 11:32:05 -0400 Brian Beutler on the Fate of the Public Option -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=NzBmODU1ZGYyZDllY2VlNzg2OGU0M2QwNjVhZDQ4YmI= In Talking Points Memo, Brian Beutler suggests that the reconciliation process lends itself to <a href="http://tpmdc.talkingpointsmemo.com/2009/09/going-it-alone-on-health-care-dems-face-tug-of-war-over-public-option.php">a more Medicare-like version of the public option</a>. According to Martin Paone, a legislative expert who's helping Democrats map out legislative strategy, a more robust public option--one that sets low prices, and provides cheap, subsidized insurance to low- and middle-class consumers--would have an easier time surviving the procedural demands of the so-called reconciliation process. However, he cautions that the cost of subsidies "will have to be offset and if [the health care plan] loses money beyond 2014...it will have to be sunsetted." Paone's view parallels the Commonwealth Foundation's findings, which <a href="http://agenda.nationalreview.com/post/?q=NjNlYzk4YTMwMjJiZmRjNTcxZjk0YjM5NGMyOGZlMTE=">we discussed</a> last week. Though I'm not a fan of the public option, it is useful to think of it as a means of disciplining heavily subsidized private insurers, an idea that I discussed in <a href="http://www.forbes.com/2009/08/30/health-care-insurance-opinions-columnists-reihan-salam.html">a column published yesterday</a>. Harold Luft offers a better, more market-friendly means of accomplishing the same goal in his book <a href="http://www.amazon.com/Total-Cure-Antidote-Health-Crisis/dp/0674032101">Total Cure</a>. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NzBmODU1ZGYyZDllY2VlNzg2OGU0M2QwNjVhZDQ4YmI= Tue, 01 Sep 2009 18:32:46 -0400 Express Kidnapping -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=NDZmMWVhMmM0NWZiYThkMTdkM2NjOGYzNGY1ODIyYjg= Graeme Wood has written a post on crime in Mexico City and Cairo that raises <a href="http://correspondents.theatlantic.com/graeme_wood/2009/08/twin_cities.php">broader questions</a>. The signature act of thievery is the "express kidnapping," which elevates the streetside stick-up to the level of grand theft. The victim is taken from cash machine to cash machine and forced to empty his accounts. Since his bank likely places a daily limit on his withdrawals, the kidnappers often keep him past midnight to get a second day of cash. They may even activate networks of accomplices in the banks, to reset the daily limit for a third or fourth harvest of withdrawals. When the account is depleted, the victim's credit cards fund high-end buys at Walmart or elsewhere, till finally the victim is left free and bankrupt. This sort of criminal spree (sometimes called a "millionaire's tour") happens on the order of half a dozen times daily in Mexico City. I suppose what shocks me is that this sort of crime -- high-reward and not more than medium-risk -- does not happen more in America, and at all in most other great cities. I have never heard of ATM theft at all in Cairo, and though it happens in New York, I have never heard it described as such a developed industry anywhere else. I've often wondered the same thing. This is one of many reasons why I think we'd do well to replace a mass incarceration approach to crime control with one focused on more effective crime prevention strategies, including sharply increasing the number of police. Thus far, we haven't seen a spike in crime in major American cities despite the economic downturn. But the costs of crime remain staggeringly high and very unevenly distributed. Apart from the direct costs, there are indirect costs ranging from the relative decline of cities versus suburbs to stress levels in high-crime neighborhoods that contribute to various maladies. In the post, Wood also offers some insight into his scrupulous journalistic methods. The most garrulous character in the park was Andreas Montecristo, a tenor and auto mechanic who told me his thoughts on crime in exchange for a half a packet of fried plantains. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NDZmMWVhMmM0NWZiYThkMTdkM2NjOGYzNGY1ODIyYjg= Tue, 01 Sep 2009 18:09:29 -0400 Obama's Commitment -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=M2JhNWM0ZDRmNTViY2E5YTA3MmZhMTA1YjkzMWUyMDE= Citing a <a href="http://www.mcclatchydc.com/227/story/74649.html">McClatchy report</a> on Obama's commitment to Afghanistan, Peter Feaver <a href="http://shadow.foreignpolicy.com/posts/2009/09/01/the_scariest_thing_ive_read_on_afghanistan">writes</a>: There are few things more toxic for effective civil-military relations in wartime than the military believing that their political commanders are not serious about seeing the conflict through to a successful conclusion. No army can remain more resolved than the Commander-in-Chief is -- not for very long, anyway. And once doubts about that resolve seep into the interagency and theater decision-making process, they are very hard to eradicate. Indeed, once entrenched, efforts to rebut them with bold statements of resolve suffer from the "thou doth protest too much" problem and may even reinforce those doubts. Only one thing could scare me more: If these doubts are based on first-person encounters with President Obama and his top-most national security team. In my experience, even "senior Pentagon officials" can have only vague and dodgy understandings of what the president actually believes. During the Bush years, I sometimes encountered people matching that anonymous source's description who based their assessments primarily on what they had read in the newspapers, not on any real knowledge of White House discussions. For the time being, then, I am hoping this story is based on a misapprehension of President Obama's resolve. But I will be watching closely to see if it is based in fact. If so, the Afghanistan mission is in real trouble. Note that the report comes shortly after President Obama characterized Afghanistan as a "war of necessity." Feaver also makes note of George F. Will's case for withdrawal from Afghanistan, a view that I suspect will gain popularity on the right in the months to come. And if the right turns against the war in Afghanistan, anti-war Democrats, who have been gritting their teeth in deference to the White House, will bolt. One of the central problems we face in Afghanistan and Pakistan is that the Pakistanis are convinced that we aren't committed to securing Afghanistan, and so they feel obligated to hedge their bets. We're proving their point. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=M2JhNWM0ZDRmNTViY2E5YTA3MmZhMTA1YjkzMWUyMDE= Tue, 01 Sep 2009 17:58:15 -0400 The Bob McDonnell Controversy -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=OGY4YTg2M2FiYzA3NTA4NDRmZjg2YzFhMWNkZjJjNTk= A number of liberals, including <a href="http://www.doublex.com/blog/xxfactor/feminism-enemy-american-family">Hanna Rosin</a>, are very exercised by positions that Bob McDonnell took in <a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/08/29/AR2009082902434.html?sid=ST2009082902758">a 1989 master's thesis</a>. Rosin is a writer and thinker I admire very much, and I found her thoughts stimulating as always. One of the political phenomena I enjoy the most is when Virginia Republicans from the evangelical wing try to repackage themselves for higher office. Robert McDonnell, candidate for governor, was doing a passable job until this week, when his <a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/08/29/AR2009082902434.html?sid=ST2009082902758" target="_blank">1989 master’s thesis was discovered</a>. The paper is a classic of earnest Christian right activism of the late '80s. It’s too bad this PDF is <a href="http://www.washingtonpost.com/wp-srv/politics/documents/McDonnell_thesis_082909.pdf" target="_blank">not searchable, or one could have great fun</a>: Find “fornicator,” “feminist,” homosexual,” “abortion,” “prayer in schools,” “working women.” Pick any culture war issue and young McDonnell has, in this paper, taken the most extreme side of it. She goes on to argue that McDonnell's career has been in keeping with the thesis. McDonnell’s response was that he should be judged by his 14 years in the General Assembly, not some paper he wrote as a kid. But, of course, as a legislator he has acted pretty much in keeping with what the blogosphere has taken to calling <a href="http://www.dailykos.com/story/2009/9/1/775088/-Bob-McDonnells-Controversial-Grad-School-Thesis:-the-Twitter-Edition" target="_blank">“Bob’s Manifesto</a>,” calling for abortion restrictions, tax policies to favor the traditional family, opposing ending wage discrimination, and supporting the arcane notion of covenant marriage. It’s just that young Bob grew up, so he stopped talking like that. It is clearly true that McDonnell favors abortion restrictions and tax policies designed to support traditional families. McDonnell has argued that he has limited control over abortion policy given Supreme Court precedent and that he intends to focus on economic issues while in office. But it's clear that his Democratic opponent Creigh Deeds intends to <a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/08/08/AR2009080802533_pf.html">highlight McDonnell's anti-abortion stance</a> in an effort to garner support among social liberals in northern Virginia. This is fair game. I do wonder, however, if it is fair to say that McDonnell opposes ending wage discrimination. While he may have opposed legislation that intended to end wage discrimination, this isn't exactly the same thing as favoring wage discrimination. Some legislative measures designed to achieve a particular purpose have unintended consequences. Many have argued that the Americans with Disabilities Act, for example, has raised unemployment for the disabled, whereas programs in Japan and western Europe that subsidize the employment of disabled persons have proven more effective. To be sure, I can't speak to the efficacy of the legislation in question, but my sense is that McDonnell is not an enthusiastic supporter of arbitrary wage discrimination. Is covenant marriage an arcane idea? Rosin, a student of the evangelical right, knows far more about the subject than I do, yet I understand that it is an idea that has been discussed and debated for decades. It's certainly true that McDonnell, like many social conservatives and social moderates, believes that couples should be allowed to choose a covenant marriage, as in Arkansas, Louisiana, and Arizona. Covenant marriage has never been a popular choice, and it's not clear how it poses a danger to those couples who don't choose it. McDonnell argues that his thesis was an abstract academic exercise, and far removed from the work he's done as a public servant. Given that a fair bit of time has passed, I get the impression that his views on a variety of questions have moderated, as one might expect. He has distanced himself from his views on a wide range of issues, including women's economic roles and gay rights. Virginia has grown more diverse and socially liberal over the intervening years. It is to be expected that an ambitious politician would thus move to the center on some issues. It is also entirely natural for a politician to have a genuine change of heart on some issues after encountering thorny problems and new voices. McDonnell issued a <a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/08/29/AR2009082902434_pf.html">statement</a> on the subject, which I first found via the Washington Post: "Like everybody, my views on many issues have changed as I have gotten older." He said that his views on family policy were best represented by his 1995 welfare reform legislation and that he "worked to include child day care in the bill so women would have greater freedom to work." What he wrote in the thesis on women in the workplace, he said, "was simply an academic exercise and clearly does not reflect my views." McDonnell also said that government should not discriminate based on sexual orientation or ban contraceptives and that "I am not advocating vouchers as there are legal questions regarding their constitutionality in Virginia." And in today's paper, the Post's Amy Gardner, Rosalind S. Helderman and Anita Kumar <a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/08/31/AR2009083103855_pf.html">write</a>: Democrats have long attempted to characterize McDonnell as an ultra-conservative who is playing down his views on such issues as abortion, school prayer and gay rights so as not to alienate moderate voters, particularly in Northern Virginia, who increasingly decide statewide elections. But McDonnell's public record and his reputation among colleagues paint a more complex portrait. He appears as a man with deeply conservative views that spring from a strong Catholic faith but also as reasonable, open-minded and increasingly focused on such issues as jobs and transportation. It is certainly possible that McDonnell is an ideologue who intends to promote his 1989 agenda if elected to office. But opportunism cuts both ways. Given that McDonnell has gone out of his way to repudiate many of the most controversial views he expressed twenty years ago, one gets the impression that he intends to govern in line with his 2009 views. And surely that counts for something. I'll also add that the views McDonnell expressed in 1989 are, as Rosin writes, common among religiously devout conservatives. He didn’t write anything different than you could have read in 100 books—and no doubt college theses—during what was the birth of the Christian pro-family movement. She also suggests, in a tart final sentence, that Sotomayor didn't get the benefit of the doubt from conservatives under similar circumstances. This is a fair point. A number of writers and thinkers have raised questions about the changing composition of the American family and its impact on children. Elizabeth Warren and Amelia Warren Tyagi wrote a <a href="http://www.amazon.com/Two-Income-Trap-Middle-Class-Mothers/dp/0465090826">brilliant and indispensable book</a>, The Two-Income Trap, on the social impacts of two-earner households; while the authors would take strong exception to McDonnell's views, they've described how middle-class life has become more volatile and insecure in a climate of rising inequality, fraying social protections, and rising labor force participation among parents of young children. Conservatives like <a href="http://www.amazon.com/Home-Alone-America-Hidden-Behavioral-Substitutes/dp/1595230041/ref=sr_1_2?ie=UTF8&s=books&qid=1251838588&sr=1-2">Mary Eberstadt</a> have cited the same social conditions as evidence that we need less rather than more labor force participation among parents, particularly mothers -- this is the central reason why Eberstadt opposed the 1996 welfare reform. I disagree with Eberstadt's conclusions, but I agree that the work-life balance issues are vitally important, and not just for women. Sociologists like Neil Gilbert and Catherine Hakim have noted how work-life preferences vary across and within social classes, and both have argued that the policy mix in market democracies tend to privilege some preferences above others. This strikes me as a subject worthy of serious discussion. Unsurprisingly, I don't agree with McDonnell's take on these issues in his 1989 thesis. I do, however, think it's a very good thing that there is a gubernatorial candidate who has actually thought deeply about these issues. I'm also disappointed that McDonnell's efforts to focus the campaign on economic issues keeps getting derailed. For liberals who embrace Thomas Frank's What's the Matter with Kansas? thesis, there is no small irony in this fracas. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=OGY4YTg2M2FiYzA3NTA4NDRmZjg2YzFhMWNkZjJjNTk= Tue, 01 Sep 2009 17:07:00 -0400 Responsibility and the Healthcare Debate -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MzE2MjU0NDI0MzUxNDhmNzMyNTJjZWMwYjNiNGI0ZWE= At Baseline Scenario, James Kwak <a href="http://baselinescenario.com/2009/08/26/comments-on-the-health-care-debate/">flagged</a> an <a href="http://baselinescenario.com/2009/08/25/medicare-and-the-public-option/#comment-25187">insightful comment</a> by StatsGuy that might be of interest. The entire comment is worth reading. To summarize, StatsGuy is convinced that healthcare reform in its current configuration will swell costs while massively increasing profits for private insurance firms, an anxiety expressed by <a href="http://agenda.nationalreview.com/post/?q=YWY5NzI4NGNiMmJhZDhjZGFhYjM3NDUzMWI2OGY5MmY=">many advocates</a> of the public option in recent weeks as well as opponents like Keith Hennessey. Hennessey has argued in a similar vein that health reform <a href="http://keithhennessey.com/2009/08/07/lower-wages/">might accelerate cost growth</a> and thus have a negative impact on wages. This won't necessarily trouble employers. David Leonhardt has noted that employers are not the ideal consumers of health insurance plans: The cost of insurance comes mostly out of employees’ paychecks. If insurance costs more, employees are generally paid less. If insurance costs less, employees are paid more. The cost of insurance does not have a big effect on employers’ overall compensation costs. Now back to StatsGuy, who highlights other consequences of fragmented responsibility: Will the federal subsidies for health care only apply to basic care or care that has high return-on-investment (but not hideously expensive end-of-life care, or expensive diagnostic services or treatments that are not clinically proven to offer benefits)? Will we NOT cover cancer treatment for smokers, or diabetes people who are clinically obese (due to primarily non-genetic causes)? Will we NOT cover the cost of orthopedic surgery for high-risk athletes like climbers or football players (just like most states force hikers to pay the cost of helicopter evacuations)? Will we pass rules that govt. funded or subsidized care plans (including Medicare and Medicaid) will NOT cover expensive procedures when there is a lower cost procedure that is almost as good? Note that the measures StatsGuy is implicitly embracing are all restrictions that current Medicare beneficiaries and, interestingly, many Republican lawmakers bitterly oppose. I don't think that there are any good answers at this point. My basic view continues to be that the government role in healthcare should be limiting to an income protection or social insurance role: medical emergencies shouldn't lead to bankruptcy or poverty. But achieving that goal in a revenue-neutral or close to revenue-neutral fashion will, unfortunately, require a serious reorganization of the healthcare marketplace. And almost no one wants to do that. Which is depressing. (Sorry about the sentence fragments, guys.) <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MzE2MjU0NDI0MzUxNDhmNzMyNTJjZWMwYjNiNGI0ZWE= Thu, 27 Aug 2009 15:29:45 -0400 How to Replace Ted Kennedy -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=YzcwMWQ3NmU2MzFkMzgxNjJhMWZlNzJiNzlkMGNiOTg= Ezra Klein, one of the hardest working reporter-bloggers on the web, <a href="http://voices.washingtonpost.com/ezra-klein/2009/08/replacing_kennedy.html">writes</a>: Looks like the effort to allow Deval Patrick to appoint an interim senator to Ted Kennedy's seat is <a href="http://www.bostonherald.com/news/politics/view/20090826successor_plan_gains_steam_speaker_robert_a_deleo_ok_with_giving_gov_patrick_appoint_power/">gaining steam</a> in Massachusetts. The House speaker has apparently given his blessing to the effort, and a hearing has moved forward to Sept. 17. This seems like something of a no-brainer: The people who elected Ted Kennedy presumably wanted a senator able to cast an affirmative vote on health-care reform. That was, after all, Kennedy's top priority, and he was hardly silent about it when running for office. But of course this is <a href="http://www.boston.com/news/local/massachusetts/articles/2009/08/20/kennedy_looking_ahead_urges_a_quick_filling_of_senate_seat/?page=2">far from a no-brainer</a>, for reasons Frank Phillips outlined in the Boston Globe less than a week ago. Under the 2004 law, if Kennedy were to die or step down, voters would select his successor in a special election to be held within five months of the vacancy. But the law makes no provisions for Massachusetts to be represented in the Senate in the interim. In the meantime, President Obama’s plan to overhaul the nation’s health care system, the fate of which may hinge on one or two votes, could come before Congress. When Rudy Giuliani flirted with suspending term limits in 2001 in the wake of the 9/11 terror attacks, he was rightly castigated. It is easy to see why Massachusetts voters would want to replace Senator Kennedy very quickly; that was a sound reason to oppose the 2004 law. I'll add, briefly, that while Senator Kennedy has been lauded for his contributions to expanding the American welfare state, he deserves credit and praise from conservatives for spearheading consumer-friendly deregulation, as Nick Gillespie of Reason <a href="http://www.reason.com/news/show/135658.html">has observed</a>. There are many who believe that Kennedy was less an American hero than a reckless scoundrel who was directly responsible for the death of Mary Jo Kopechne. David Weigel of The Washington Independent points to <a href="http://washingtonindependent.com/56793/remember-chappaquiddick">anti-Kennedy sentiments</a> being expressed on the right, and I've encountered a fair bit of this among my close friends. I'll just note the following: In reading about the Chappaquiddick incident, one is truck by how much American politics has changed in the intervening years. Weigel writes: Kennedy got better treatment because he was a Kennedy, and the country had watched him lose two brothers to assassins’ bullets in the six years before the accident. It’s so obvious that it’s hardly worth saying, but it seems to have escaped him. This sounds right, yet it should also be said that a Kennedy or a Bush or a Clinton or an Obama would not be treated the same way today. And if liberals are right to believe that Senator Kennedy was a vital and indispensable figure, this raises questions about the rigorous scrutiny to which we subject the personal lives of elected officials who are guilty of far less egregious infractions. One recalls the reaction to George W. Bush's decades-old DUI charge during the 2000 presidential campaign. One can imagine a utilitarian calculus, in which a member of the anti-war left argues that while Kennedy engaged in wrongdoing, he also helped millions of Americans via the creation of various social programs; in contrast, this same anti-war liberal would condemn President Bush for his role in the deaths of Iraqi civilians since the U.S.-led invasion of 2003. When President Reagan died, some liberals chose to condemn him for, among other things, his failure to reckon with the threat posed by the AIDS epidemic. Very few also praised him for promoting human rights in the Soviet bloc and also in authoritarian anti-communist states like the Philippines. President Obama won considerable goodwill when he half-heartedly praised Reagan during an early presidential debate, and Paul Krugman still won't forgive him for it. All this is to say that I think these questions are thorny and not terribly productive. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=YzcwMWQ3NmU2MzFkMzgxNjJhMWZlNzJiNzlkMGNiOTg= Thu, 27 Aug 2009 15:07:15 -0400 We're Slowly Nationalizing Health Care -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=N2FjZTVmYWQ3ZTI3MjE3ZDNmZGRiN2I5ZWNjZWJmMGY= Slate's Moneybox columnist Daniel Gross offers an <a href="http://www.slate.com/id/2223936/">interesting take</a> on insurance coverage, one that takes into account the role of public sector employment. The system of employer-provided health care coverage is crumbling before our eyes, and for more Americans—and for more American insurance companies—government-funded health care is all that separates them from financial disaster. A <a href="http://www.gallup.com/poll/121970/Nearly-Insured-Government-Coverage-2008.aspx" target="_blank">Gallup poll</a> found that the percentage of Americans who say they get their health insurance from an employer has fallen from 58.9 percent in January 2008 to 56.5 percent in May 2009, while the percentage who get it from the government (Medicare, Medicaid, VA benefits) has jumped from 26.5 percent to 29 percent. (The rest purchase it on their own.) But this poll understates the case. About 17 percent of payroll jobs today are government jobs. Crunch the numbers, and it's more like 39 percent getting insurance from government sources (public programs and public-sector jobs) and about 47 percent from private-sector jobs. Simply by doing nothing, we're slowly nationalizing health care. This is part of the reason why I'm so sympathetic to root-and-branch reform. Some will object that Obamacare will simply accelerate the process Gross describes. But other reform approaches can take current public spending and redistribute it in such a way as to deliver better outcomes across the health system; this is the basic goal of the Luft approach, and also that embraced by Graetz and Mashaw in True Security. My sense is that the Luft plan would be more politically viable. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=N2FjZTVmYWQ3ZTI3MjE3ZDNmZGRiN2I5ZWNjZWJmMGY= Tue, 25 Aug 2009 15:57:43 -0400 A Massive Giveaway to Private Insurers? -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=YWY5NzI4NGNiMmJhZDhjZGFhYjM3NDUzMWI2OGY5MmY= <a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/08/25/AR2009082501075.html">Simon Johnson and James Kwak</a> and <a href="http://www.marginalrevolution.com/marginalrevolution/2009/08/a-defense-of-the-public-option.html">Alex Tabarrok</a> separately offer useful correctives on the public option. First, Johnson and Kwak have a column on the subject in the Washington Post. Imagine health-care reform without a public option: Insurers have to charge the same price regardless of customers' medical history; everyone has to buy insurance; and poor people get subsidies to help them afford it. From the insurers' perspective, they get more than 40 million new customers, they subsidize the old and sick by overcharging the young and healthy (who have to overpay because of the mandate), and the government even pays people to buy their product. There are no new competitors (additional choices for customers), and there is no pressure to reduce costs. What could be better? This type of reform, with no mechanism to reduce long-term costs, would still be a significant achievement, especially for the millions of uninsured. But it's only a temporary solution because rising costs would force the government to go back to the drawing board (to pay both for Medicare/Medicaid and for those subsidies). This is why the public option seems to be on the Obama administration's preferred-but-not-absolutely-critical list. The true alternative to a public option isn't "no public option"; it has to be some other lever to force private insurers to reduce costs. Saying that people can get all the care they want and private insurers will simply pass on the costs as higher premiums is not a solution. Tabarrok writes in a similar vein: In short, insurance reform will mean that everyone will be required to buy a product that will be tightly regulated and more homogeneous. Both of these factors will increase the market power of insurance firms. Since escape via non-purchase will no longer be a potential response to higher prices, mandatory purchase will reduce the elasticity of demand giving firms an incentive to increase prices. Moreover, in oligopolistic markets, a more homogeneous product can increase the ability of firms to collude. I believe that health insurance reform will increase the market power of insurance firms and drive up prices. In this scenario, the public option at least has a raison d'etre, although whether it actually fulfills its purpose is an open question. And as Tom Hamburger and Kim Geiger report in the Los Angeles Times, the insurance industry is setting itself up for a massive windfall. "The insurers are going to do quite well," said Linda Blumberg, a health policy analyst at the nonpartisan Urban Institute, a Washington think tank. "They are going to have this very stable pool, they're going to have people getting subsidies to help them buy coverage and . . . they will be paid the full costs of the benefits that they provide -- plus their administrative costs." I have the sinking feeling that we're walking into a buzzsaw. I'm increasingly drawn to innovative reinsurance proposals, and also to the more radical structural approach Harold Luft outlined in his book <a href="http://www.hup.harvard.edu/catalog/LUFTOT.html">Total Cure</a>. I'm hoping to write more on Luft this weekend. For now, I recommend <a href="http://www.latimes.com/news/opinion/opinionla/la-oew-luft6-2009apr06,0,7548299.story">an op-ed</a> he wrote back in April. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=YWY5NzI4NGNiMmJhZDhjZGFhYjM3NDUzMWI2OGY5MmY= Tue, 25 Aug 2009 15:49:29 -0400 Bloggingheads with Mike Konczal -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=M2FjZDkxODc4NjU2MzQwMGRiNzE2MmVhOGEyN2EwNDk= I had the great pleasure of talking to Mike Konczal of <a href="http://rortybomb.wordpress.com">Rortybomb</a> last week. If you are so inclined, you can watch it as well <a href="http://bloggingheads.tv/diavlogs/22026">here</a>. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=M2FjZDkxODc4NjU2MzQwMGRiNzE2MmVhOGEyN2EwNDk= Mon, 24 Aug 2009 17:39:43 -0400 Economic Pessimism or Economic Optimism? -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=ZDQ2YjljZjg2NzYwOTk3YThjZWM3N2RlYjIxNGJjOGQ= I'm a great admirer of Jon Henke of The Next Right. Along with Patrick Ruffini, he's one of the political strategists I most enjoy reading. He has a gift for clarifying political questions, as in <a href="http://www.thenextright.com/jon-henke/the-republican-strategy-on-health-care-please-vote-for-us-in-2010">this post</a>: What exactly is the message here? That Republicans think Medicare is peachy? Republicans are now the Party of the <a href="http://www.cato-at-liberty.org/2009/08/24/steele-and-the-left-wing-republicans/">Entitlement Status Quo</a>? The Democrats tried to address Iraq like this in 2004. Their proposals amounted to "The same, but....better! And less expensive! No hard choices for America! Please like us." The GOP is doing the same thing on health care. This is not a policy vision; it is a campaign vision. The message is: We want to <a href="http://politics.theatlantic.com/2009/08/republicans_pick_a_target_demographic_seniors.php">pick off</a> some senior citizen votes in 2010. On the off chance that the Republican leadership is listening to anybody but their campaign operatives these days: <a href="http://www.thenextright.com/jon-henke/marketing-should-not-drive-policy">The horse is supposed to go in front of the cart</a>. Policy should not be made by polling. Campaign committees and operatives should be selling policy, not making it. I do, however, disagree with him <a href="http://www.thenextright.com/jon-henke/getting-better-all-the-time">on this</a>; Henke points to data that shows that household income has increased over the last thirty years as a way of suggesting that concerns about wage stagnation are overblown. But increases in household income can be attributed in no small part to an increase in the number of wage earners per household, i.e., more two-earner households. More two-earner households have tended to bid up the prices of housing in desirable school districts, and they've also removed an economic cushion for households experiencing temporary income loss. This doesn't mean that the middle class is impoverished -- that's absurd. But it does mean that middle-class anxieties are rooted in reality. I wrote my column for Forbes.com <a href="http://www.forbes.com/2009/08/23/middle-class-real-estate-opinions-columnists-reihan-salam.html?feed=rss_author">on this subject</a>. It's a bit more pessimistic than I'd like to be, but with good reason. It's based on some ideas I've discussed here at The Agenda. One thing many readers won't like: like Greg Mankiw, I suggest that moderate inflation might be a good idea. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=ZDQ2YjljZjg2NzYwOTk3YThjZWM3N2RlYjIxNGJjOGQ= Mon, 24 Aug 2009 17:31:50 -0400 Cascio on the Healthcare Status Quo -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=NDJjMWFkZThhMjUzYmRkN2NhN2VhMzIxODUzMzEzYTY= Jamais Cascio, one of my favorite thinkers, has written a post on healthcare that offers <a href="http://www.openthefuture.com/2009/08/paranoia_is_a_pre-existing_con.html">a useful perspective</a>. Fact #1: I am self-employed American. Fact #2: I have a severe, chronic medical problem. These two facts don't mix nicely. As a self-employed worker, I don't receive the benefits that usually accrue to salaried professionals doing similar work: employer-contribution 401K; paid vacations; and, in particular, employer-provided health insurance. I knew going in that this would be the case and decided that the other, non-material benefits of working for myself outweighed the material drawbacks. For the most part, I can provide the equivalent benefits to myself -- a retirement savings account and money set aside for vacation time. But not health insurance. Because I have a "pre-existing condition," I can't get insured. I've tried. The coverage I have, through COBRA, will run out soon -- and at that point, I could be in trouble. I bring this up not to elicit suggestions or sympathy, but to identify myself as someone very interested in the current health insurance reform process underway in the United States -- and someone who would clearly benefit from that reform's success. Cascio is definitely to my left, and I don't think he appreciates the strength of some of the criticisms of Obamacare coming from the pro-market right. But he's definitely not alone in his basic dilemma, and conservatives would be wise to pay to careful attention to the dysfunctions of the individual health insurance marketplace. John Cochrane's proposal for health-status insurance would do a great deal to help people like Cascio, yet it's not the kind of policy that would work retroactively. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NDJjMWFkZThhMjUzYmRkN2NhN2VhMzIxODUzMzEzYTY= Mon, 24 Aug 2009 17:19:08 -0400 Chris Edwards on Federal Pay -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=N2RmOTlmZDExMDRjNGZiNjI3MmNmZWZiZGQ3YWE0YjM= Chris Edwards at the Cato Institute highlights <a href="http://www.cato-at-liberty.org/2009/08/24/federal-pay-continues-rapid-ascent/">the wages of federal workers</a>: The George W. Bush years were very lucrative for federal workers. In 2000, the average compensation (wages and benefits) of federal workers was 66 percent higher than the average compensation in the U.S. private sector. The new data show that average federal compensation is now more than double the average in the private sector. This gap in average compensation is even more pronounced when you factor in state and local workers. Edwards suggests a pay freeze: Federal wages should be frozen for a period of years, at least until the private-sector economy has recovered and average workers start seeing some wage gains of their own. At the same time, gold-plated federal benefit packages should be scaled back as unaffordable given today’s massive budget deficits. There are many qualitative benefits of government work—such as <a href="http://www.cato.org/pubs/tbb/tbb-0605-35.pdf" target="_blank">extremely high job security</a>—so taxpayers should not have to pay for such lavish government pay packages. I tend tot hink that a freeze for all federal workers is too blunt an instrument. Some workers are overpaid while some might still be underpaid, e.g., effective procurement officers who can save the federal government vast sums of money. But his basic point is an important one. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=N2RmOTlmZDExMDRjNGZiNjI3MmNmZWZiZGQ3YWE0YjM= Mon, 24 Aug 2009 17:09:11 -0400 Patiently Explaining the Case Against A Strong Public Option -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=NjNlYzk4YTMwMjJiZmRjNTcxZjk0YjM5NGMyOGZlMTE= In his <a href="http://www.nytimes.com/2009/08/24/opinion/24krugman.html?_r=1&em">latest column</a>, Paul Krugman makes the case against Reaganism. He also seems baffled by opposition to the public option. <blockquote>The debate over the public option has, as I said, been depressing in its inanity. Opponents of the option — not just Republicans, but Democrats like Senator Kent Conrad and Senator Ben Nelson — have offered no coherent arguments against it. Mr. Nelson has warned ominously that if the option were available, Americans would choose it over private insurance — which he treats as a self-evidently bad thing, rather than as what should happen if the government plan was, in fact, better than what private insurers offer.</blockquote> Let me walk through -- very slowly -- an argument that I consider coherent and convincing. In June, the Commonwealth Fund published "Fork in the Road: Alternative Paths to a High performance U.S. Health System." I should stress that the authors strongly endorse a public option. The paths <a href="http://www.commonwealthfund.org/Content/Publications/Fund-Reports/2009/Jun/Fork-in-the-Road.aspx">include</a>: <blockquote> <li>Public Plan with Medicare Payment Rates. This path includes a public health insurance plan that pays providers at Medicare rates and is offered alongside private plans within a national health insurance exchange.</li> <li>Public Plan with Intermediate Payment Rates. This path includes a public insurance plan that pays providers at rates set midway between current Medicare and private plan rates and is offered alongside private plans in a national health insurance exchange—and subject to the same market rules as they are.</li> <li>Private Plans. This path does not include a public plan option; it includes only private plans offered to employers and individuals through a national health insurance exchange.</li> </blockquote> The researchers argue that the closer a Public Plan sticks to Medicare rates, the more likely it is to generate system-wide savings. <blockquote>Health system savings. All three paths would produce substantial health system savings over the 11-year period from 2010 through 2020, with cumulative savings of $3.0 trillion under the Public Plan with Medicare Payment Rates scenario, $2.0 trillion under the Public Plan with Intermediate Payment Rates scenario, and $1.2 trillion under the Private Plans scenario.</blockquote> And if the Public Plan does indeed pay providers at Medicare rates or intermediate payment rates, we will inevitably see "cost-shifting," i.e., squeezed providers will presumably demand that private insurers reimburse them at higher rates. Over time, this will make private insurance plans less attractive relative to the Public Plan. Indeed, this would be true from the start of a robust Public Plan. <blockquote>Impact on premiums. Estimates indicate that premiums for the public plan choice in the Public Plan with Medicare Payment Rates path would initially be 25 percent below those currently available for a comparable benefit package in the private individual/small firm market and 16 percent lower under the Public Plan with Intermediate Payment Rates scenario (Exhibit ES-4). Private plan premiums would initially be 3 percent lower within the exchange as it facilitates the process of choosing plans and reduces administrative costs, especially for individuals and small businesses.</blockquote> The report's authors suggest that this will spur innovation among private insurers, and they float a legislative change that really would transform the medical marketplace. I've marked it in bold below. <blockquote>Effective private-sector cost containment. Offering a public health insurance plan as an alternative choice should be a catalyst for private plans to innovate in the way they operate and pay for care. It would help them reduce their administrative costs and implement payment and system reforms that lead to more appropriate utilization, better care, and slower cost growth—and, in the process, contribute to reduced premiums. Community health plans partnering with integrated health care delivery systems in particular have considerable potential to achieve economies through redesign of care, control of chronic conditions, and prevention of avoidable hospitalizations. Private plans could also be given the authority to adopt public plan payment methods and rates. If private plans adopt effective cost-containment measures sufficient to slow a rise in their premiums relative to trends in public plan premiums, over a three-to-five-year period public plan premiums and private plan premiums within the exchange would be roughly comparable.</blockquote> If private plans were given the authority to adopt public plan payment methods and rates, rest assured, private insurers would be fighting tooth and nail for a public option. Medical providers, in contrast, would be extremely upset. Many progressives argue that there is no reason why a Public Plan should operate on a level playing field with private plans. Why not use its monopsony power to deliver better outcomes? This view makes sense when you consider the origins of the Public Plan concept as a more politically palatable alternative to single-payer -- the idea is to achieve a single-payer option in stages. So it's not terribly interesting to say that the Public Plan would be "better" than private insurance plans when it can force providers to accept lower rates of reimbursement. I would get better prices at my local sandwich shop if its owners were legally obligated to sell me sandwiches for twelve cents. It's by no means obvious that other customers would be better off. To be sure, I could then resell my sandwiches to other customers by setting up a stand outside of the original sandwich shop. Said customers would be delighted to patronize my new "business." For a while, we might even generate "system-wide savings." But surely the providers would object, particularly as customers who pay the standard rates start drying up. Believe it or not, a few sandwich shops might even go out of business. This is, of course, a gross oversimplification. As Shannon Brownless has argued, American medicine suffers from oversupply in some areas and undersupply in others. In my view, fee-for-service medicine is the problem, a case David Ignatius made in <a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/08/19/AR2009081902261.html">an excellent column</a> published last week. Perhaps medical providers should be encouraged to work for less. I certainly think we can organize providers into more efficient networks. There are many good reasons to oppose single-payer. For example, systems with a bias towards catastrophic coverage tend to yield far greater savings, which is one reason why Michael Graetz and Jerry Mashaw favor such an approach in their book True Security. This is, admittedly, a somewhat subtle argument. But surely it's coherent. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NjNlYzk4YTMwMjJiZmRjNTcxZjk0YjM5NGMyOGZlMTE= Mon, 24 Aug 2009 16:26:18 -0400 Michael Grunwald on Energy Myths -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=Y2UyYzkxYzllYTNiMWUzNzEyMjc5OTEyNjNlNTM0NjU= Michael Grunwald has written a <a href="http://www.foreignpolicy.com/articles/2009/08/12/seven_myths_about_alternative_energy?page=full">primer on alternative energy</a> for the latest issue of Foreign Policy, and he makes a number of excellent points. His skepticism regarding biofuels is warranted, and his core argument that efficiency increases are of central importance is well taken. That said, I don't think Grunwald gives nuclear power its due. (Seed Magazine published a <a href="http://seedmagazine.com/content/article/the_lesser_evil_nuclear_or_coal/">symposium</a> on the relative virtues of nuclear power and coal power last month that's worth a look.) He rightly emphasizes the staggeringly high start-up costs involved in nuclear power and the excruciatingly slow process of getting nuclear plants up and running. Unlike biofuels, nukes don't worsen warming. But a nuclear expansion -- like the recent plan by U.S. Republicans who want 100 new plants by 2030 -- would cost trillions of dollars for relatively modest gains in the relatively distant future. Nuclear lobbyists do have one powerful argument: If coal is too dirty and nukes are too costly, how are we going to produce our juice? We're banking on the emergence of new technologies that will sharply reduce these costs. In June, Keith Johnson of the Wall Street Journal surveyed the state of <a href="http://blogs.wsj.com/environmentalcapital/2009/06/11/honey-i-shrunk-the-reactor-small-nukes-arrive/">small nukes</a>. In a nutshell: The smaller reactors can be built in U.S. factories, then shipped to where they’re needed. That gets around many of the roadblocks to building big nuclear reactors, such as a bottleneck on reactor core vessels made only in Japan. Babcock & Wilcox say the new reactor, which uses existing technology, will also be as cheap or cheaper than existing plants—“less than $5,000 per megawatt.” That compares favorably to recent cost estimates for large-scale nuclear construction. Part of the appeal of a would-be small nukes revolution to policymakers is that it could generate manufacturing employment, though that remains to be seen. Then there are a number of more exotic possibilities, some of which Brad Plumer <a href="http://www.tnr.com/story_print.html?id=532df6a0-27db-420d-8480-25e229618117">surveyed</a> in his TNR essay on how the promise -- perhaps the false promise -- of technological breakthroughs shapes the climate debate. Last December, the office [the DOE's Office of Basic Energy Sciences] released an "energy challenges" report that offered a lavish vision of what a new "control science" could accomplish. If, for instance, the steel used to make nuclear reactors was built by manipulating atoms at the nanoscale, rather than through traditional bulk processes, we could have materials that self-heal and better resist chemical corrosion and intense radiation, allowing the construction of nuclear reactors that operate at much higher temperatures and efficiencies--meaning more power and less waste. Or ultra-light materials could be used to build cars that require far less energy to propel. Or batteries built on chemistry yet unknown could allow electric vehicles to vastly surpass their currently limited range. Or solid- state lighting that used just a fraction of the power that incandescent light bulbs use, and without the glare of compact fluorescent lights, could drop the percentage of electricity the nation needs for lighting from 22 to 2 percent. Grunwald also briefly references the idea of technological approaches to mitigating carbon emissions. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=Y2UyYzkxYzllYTNiMWUzNzEyMjc5OTEyNjNlNTM0NjU= Mon, 24 Aug 2009 14:43:44 -0400 Bryan Caplan on Europe and Amerca -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MWE2MWFmZjQzMGM3OGI0N2MzMTI3YjExZTYzM2I0YWI= One hates to indulge in broad generalizations, but Bryan Caplan has written <a href="http://econlog.econlib.org/archives/2009/08/touristic_bias.html">an interesting post</a> on why Europe is a wonderful place to visit while America is a wonderful place to live. Tyler Cowen <a href="http://www.marginalrevolution.com/marginalrevolution/2009/08/is-it-america-or-europe-which-is-overrated.html">added</a> the following observation: My alternative view is that Americans rate European life so highly (in part) because the buildings from previous eras are so striking and attractive. If all of the U.S. looked like U.S. postwar construction, the country would still impress more or less as it does. If all of Europe looked like its postwar construction, Americans would be less likely to admire European policies and political institutions. During the heyday of laissez-faire, when the success of Victorian economic liberalism seemed undermine the case for dirigiste economics, you did get a lot of handsome architecture, but now we're just belaboring the point. On an unrelated note, Tim Lee argues that Jim Henley's <a href="http://highclearing.com/index.php/archives/2009/08/18/9744">pessimism</a> about the American future is <a href="http://timothyblee.com/?p=493">probably excessive</a>. But I think if we take a longer view, the problems we’re facing today just aren’t out of line with problems faced by previous generations. What follows is characteristically measured and smart. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MWE2MWFmZjQzMGM3OGI0N2MzMTI3YjExZTYzM2I0YWI= Mon, 24 Aug 2009 14:01:41 -0400 The Tom Ridge Non-Story -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MTJlOTYzZjM0MjRhYmZlMTg3MDIyMzM4OTA5YTQ0YzM= I used to admire Tom Ridge. After reading Peter Baker in The New York Times, I have to say, I've <a href="http://www.nytimes.com/2009/08/21/us/21ridge.html?pagewanted=print">lost a lot of respect for the man</a>. By now you've probably heard about Ridge's allegation that he faced political pressure to change the Homeland Security Department's threat level in 2004. The most sensational assertion was the pre-election debate in 2004 about the threat level, first reported by U.S. News & World Report. Mr. Ridge writes that the bin Laden tape alone did not justify a change in the nation’s security posture but describes “a vigorous, some might say dramatic, discussion” on Oct. 30 to do so. “There was absolutely no support for that position within our department. None,” he writes. “I wondered, ‘Is this about security or politics?’ Post-election analysis demonstrated a significant increase in the president’s approval rating in the days after the raising of the threat level.” But Baker, to his great credit, then states the obvious: Mr. Ridge provides no evidence that politics motivated the discussion. Until now, he has denied politics played a role in threat levels. Asked by Eric Lichtblau of The New York Times if politics ever influenced decisions on threat warnings, he volunteered to take a lie-detector test. “Wire me up,” Mr. Ridge said, according to Mr. Lichtblau’s book, “Bush’s Law.” “Not a chance. Politics played no part.” Interestingly, a number of observers have taken Ridge's remarks -- which, lest we forget, have been made in the run-up to the publication of a book that in the absence of shocking revelations would likely sink like a stone -- as confirmation of their long-held views. As Marc Ambinder<a href="http://politics.theatlantic.com/2009/08/liberals_and_gut_hatred_or_why_im_sorry_i_wrote_what_i_wrote.php"> correctly notes</a>, the only new information we have is this: Reading the excerpts from Tom Ridge's book, it is not clear to me that he is actually arguing against interest, or that he is correct. No doubt, Don Rumsfeld and John Ashcroft had very strong views about terrorism, but simply because Ridge -- who disagreed with Rumsfeld and Ashcroft about many, many things -- had a feeling that Rumsfeld was trying to tinker with an election's outcome does not, by a mile, prove anything. What it establishes is that Ridge had the same suspicions as many liberals and libertarians. And Ridge, having access to most of the intelligence, had sound reasons to object. Which is fair enough. But this doesn't strike me as "confirmation" of anything. The fundamental problem is that the idea of a "threat level" was itself completely specious. Consider the controversy over the CBO's bizarre analysis of IMAC, the president's proposal to shift authority over Medicare from Congress to an independent commission. Peter Orszag wrote <a href="http://www.whitehouse.gov/omb/blog/09/07/25/CBOandIMAC/">an insightful blog post</a> on the nature of the CBO's cost estimate. Part of the problem with the CBO's analysis, in Orszag's view, was that: The point of the proposal, however, was never to generate savings over the next decade. (Indeed, under the Administration’s approach, the IMAC system would not even begin to make recommendations until 2015.) Instead, the goal is to provide a mechanism for improving quality of care for beneficiaries and reducing costs over the long term. In other words, in the terminology of<a href="http://www.whitehouse.gov/omb/blog/09/06/01/ABeltandSuspendersApproachtoFiscallyResponsibleHealthReform/">our belt-and-suspenders approach to a fiscally responsible health reform</a>, the IMAC is a game changer not a scoreable offset. How does one responsibly "score" something like a "threat level"? This is fundamentally a matter of political guesswork. And it's also about something we call "CYA." Ridge seems to believe that the Bush administration wanted the threat level raise to enhance the president's re-election prospects. But after the Bin Laden tape, many people believed that the Al Qaeda threat was real and potent. While Ridge claims that there was "absolutely no support for that position within our department," other administration officials clearly disagree. Moreover, the decision-makers were presumably mindful of the consequences of not raising the threat level and then facing a major terrorist attack. This is the reason why the threat level concept has always been utter nonsense. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MTJlOTYzZjM0MjRhYmZlMTg3MDIyMzM4OTA5YTQ0YzM= Fri, 21 Aug 2009 16:11:53 -0400 The Fate of the Middle Class -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=NDY0ZWQwZjVlY2EzZjgwZTllN2U2NGIxMjdiNDgyYjg= Via Mike Konczal, I've come across some <a href="http://baselinescenario.com/2009/08/18/united-states-inequality-in-the-recovey-period/">interesting numbers</a> that offer a useful contrast to the aforementioned report by <a href="http://www.nytimes.com/2009/08/21/business/economy/21inequality.html?em=&pagewanted=all">Leonhardt and Fabrikant</a>. Tom Petruno of the Los Angeles Times flagged a Bank of America Merrill Lynch research brief on "The Myth of the Overlevered Consumer," which essentially argues that an economic recovery will depend on<a href="http://latimesblogs.latimes.com/money_co/2009/08/the-well-heeled-might-be-able-to-save-the-us-economy-from-a-long-period-of-dismal-consumer-spending----if-only-we-dont.html"> renewed spending by the affluent</a>. The top 10 percent of earners spend almost as much (42 percent of total consumption) as the next 50 percent of earners (46 percent), yet that next 50 percent -- let's call them the middle class -- face a heavy debt burden. In terms of their debt burdens, neither lower-income families nor the wealthy are constrained the way the middle class is constrained, the report asserts. It estimates that middle-class families’ debt as a percentage of disposable income was 205% in 2007, a function of the level of trading-up during the housing boom and of the cash people pulled from their houses via home-equity loans. By contrast, lower-income families’ debt-to-disposable-income ratio was a much less onerous 133%. And for the wealthy the percentage was lower still, at 116%. Thus, the need to pare debt is most urgent now for middle-income earners. Petruno highlights the uneven impact of the housing collapse. What’s more, on the asset side, BofA Merrill says the middle-class has suffered more than the wealthy from the housing crash because middle-class families tended to rely more on their homes to build savings through rising equity. Also, the wealthy naturally had a much larger and more diverse portfolio of assets -- stocks, bonds, etc. -- which have mostly bounced back significantly this year. The crippling effect of negative equity on middle-class families is one reason why a number of conservatives and liberals have been rallying behind Dean Baker's right-to-rent proposal, which Konczal <a href="http://baselinescenario.com/2009/08/20/dean-bakers-right-to-rent/">outlined</a> for Baseline Scenario. "The Myth of the Overlevered Consumer" reminded me of Ajay Kapur's 2005 report on "Plutonomy," which Robert Frank of the Wall Street Journal <a href="http://blogs.wsj.com/wealth/2007/01/08/plutonomics/">summarized</a> as follows: In a series of research notes over the past year, Kapur and his team explained that Plutonomies have three basic characteristics. 1. They are all created by “disruptive technology-driven productivity gains, creative financial innovation, capitalist friendly cooperative governments, immigrants…the rule of law and patenting inventions. Often these wealth waves involve great complexity exploited best by the rich and educated of the time.” 2. There is no “average” consumer in Plutonomies. There is only the rich “and everyone else.” The rich account for a disproportionate chunk of the economy, while the non-rich account for “surprisingly small bites of the national pie.” Kapur estimates that in 2005, the richest 20% may have been responsible for 60% of total spending. 3. Plutonomies are likely to grow in the future, fed by capitalist-friendly governments, more technology-driven productivity and globalization. One wonders if the top 10 or 20 percent can drive a sustainable recovery. More importantly, one wonders how middle-class families will respond politically to the painful process of paring down debt. Unfortunately, I think it's easy to imagine a turn towards punitive soak-the-rich policies that end up undermining America's long-term growth potential. This is a good time to point, once again, to Zachary Karabell's <a href="http://online.wsj.com/article/SB10001424052970203517304574306414148814226.html">excellent essay</a> in the Journal on why corporate earnings aren't a good guide to the state of the real economy. As the BofA Merrill report notes, the fortunes of the wealthy are tied to corporate earnings that are buoyed by global growth. Yet as Karabell argues, As these companies profit from global expansion and greater efficiency, they have little or no reason to rehire fired workers, or to expand their work force in a U.S. that is barely growing. If you are a global company, you want to hire and expand where the most dynamic growth is. Unfortunately for Americans, that’s not the U.S. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NDY0ZWQwZjVlY2EzZjgwZTllN2U2NGIxMjdiNDgyYjg= Fri, 21 Aug 2009 12:27:21 -0400 The Fate of the Rich -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=YmZkOTI5ZGY5NDVhY2I3N2E3YThiMDgyNWUxYjA1NWM= Michael Mandel of BusinessWeek recently posted on the 2000s as a<a href="http://www.businessweek.com/the_thread/economicsunbound/archives/2009/08/the_lost_decade.html"> lost decade </a>for U.S. economic growth. From the second quarter of 1999 to the second quarter of 2009, real GDP grew at a 1.9% annual rate. That beats (in a negative sense) the 2.0% growth rate for the decade which ended in the first quarter of 1983. It's hard to wrap one's head around the fact that this past decade was worse than the era of stagflation when it comes to growth, in part because of the tremendous wealth boom that happened at the top of the spectrum. That wealth boom was driven to a great extent by market forces, but there's good reason to believe that so-called access capitalism has played a role, e.g., political insiders using their access to secure governments contracts, etc. In today's New York Times, David Leonhardt and Geraldine Fabrikant report that the trend towards the concentration of income and wealth, rising for the past thirty years, may be reversing. The rich, as a group, are no longer getting richer. Over the last two years, they have become poorer. And many may not return to their old levels of wealth and income anytime soon. For every investment banker whose pay <a title="Earlier article on Goldman Sachs bonuses." href="http://www.nytimes.com/2009/07/15/business/15goldman.html">has recovered</a> to its prerecession levels, there are several who have lost their jobs — as well as many wealthy investors who have lost millions. As a result, economists and other analysts say, a 30-year period in which the super-rich became both wealthier and more numerous may now be ending. Is this just a function of the business cycle? At least one economist Leonhardt and Fabrikant interviewed believes that something more structural is at work. “We had a period of roughly 50 years, from 1929 to 1979, when the income distribution tended to flatten,” said Neal Soss, the chief economist at <a title="More information about Credit Suisse Group A.G" href="http://topics.nytimes.com/top/news/business/companies/credit_suisse_group/index.html?inline=nyt-org">Credit Suisse</a>. “Since the early ’80s, incomes have tended to get less equal. And I think we’ve entered a phase now where society will move to a more equal distribution.” Assuming we don't see a sharp turn towards vastly higher taxes and higher spending, and that's very much an open question, I think Soss is wrong. As Harvard economist Lawrence Katz told the Times, you need sweeping interventions to reverse the trend. Beyond the stock market, government policy may have the biggest effect on top incomes. Mr. Katz, the Harvard economist, argues that without policy changes, top incomes may indeed approach their old highs in the coming years. Historically, government policy, like the New Deal, has had more lasting effects on the rich than financial busts, he said. Again, we could see the return of ruinously high marginal tax rates, but it's important to note that the Democratic coalition depends on a small number of affluent voters who, as we saw during the debate over the proposed income tax surcharge in the House health bill, are tax-sensitive. While progressive activists want significantly steeper progressive taxes, the Democratic donor base does not. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=YmZkOTI5ZGY5NDVhY2I3N2E3YThiMDgyNWUxYjA1NWM= Fri, 21 Aug 2009 11:57:22 -0400 Steven Pearlstein Says Something Very Astute -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=OGVlYWZlNTdiNTg3MTFmMjU5ZDRiZmExMDc4YTJkM2Q= I've been critical of Steven Pearlstein in the past, but in a <a href="http://voices.washingtonpost.com/ezra-klein/2009/08/steve_pearlstein_responds_on_t.html">reply</a> to his Washington Post colleague Ezra Klein he makes a very valuable point, one that James Capretta has made very persuasively. Most of Medicare now is fee for service, and that is not transformational -- in fact, it will bankrupt the country. And piggybacking on Medicare's monopsony power to dictate hospital rates that are below cost doesn't really solve the cost problem as exacerbate the cost-shifting problem. In the column, I give a couple of other suggestions for bringing down prices. In <a href="http://www.washingtonpost.com/wp-dyn/content/article/2009/08/18/AR2009081803449.html">the column</a>, Pearlstein dispels some misconceptions about a public option. You also hear the argument that government-run insurance would have lower costs because it wouldn't have to generate a profit (that's true) and would be more efficient than private insurers (that isn't). The evidence of greater efficiency is Medicare, which spends about 2 to 3 percent of its budget on administration. But if a government-run plan had to spend its own money to collect premiums, market itself to customers, maintain a reserve, and manage care in a way that lowers costs and raises quality -- none of which Medicare now does -- then you can be sure its administrative costs would be nowhere near 2 or 3 percent. David Cutler, the Harvard economist who has advised the Obama campaign and now works closely with the left-of-center Center for American Progress, emphasized in his excellent book Your Money or Your Life that paying for quality will necessarily raise administrative expenditures. This is a concept that shouldn't be hard to grasp, yet it's often glossed over. As for so-called government-chartered co-operatives, Pearlstein writes: Finally, there are the government-chartered cooperatives that key members of the Senate Finance Committee are pushing. Although public-option enthusiasts scoff at the idea, the experiences of a number of communities show that cooperatives could significantly contain costs, provided the cooperatives are big enough and built around networks of hospitals and physician practices that accept a fixed, annual fee for treating patients rather than billing for every procedure. The key isn't that the cooperatives would be not-for-profit, but that the annual payments would give doctors and hospitals a financial incentive to control costs, better coordinate care, and eliminate procedures with little or no benefit. This is a very important point: as conservative reformers have been arguing for years, fee-for-service medicine is the heart of the problem. Spurring the creation and spread of efficient provider networks is not a bad idea, provided it can be done at a sustainable cost. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=OGVlYWZlNTdiNTg3MTFmMjU5ZDRiZmExMDc4YTJkM2Q= Wed, 19 Aug 2009 16:19:45 -0400 Jon Cohn on Inertia -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=NDViYWRjODU1NTkyZTM0Mjg3Zjk0YWQ4NTY5YzFlMzI= Jon Cohn of The New Republic and I disagree pretty strongly about the right way to reform heathcare, but he's written <a href="http://www.tnr.com/politics/story.html?id=aca67416-f26c-4790-86b5-bbb76b02cb6c">an excellent analysis </a>of the central political and policy difficulty at the heart of Obamacare: the president's pledge that "if you like your health care plan, you will be able to keep your health care plan, period." After explaining why this pledge is basically untenable, Cohn proposes a different strategy for the Democrats: In an ideal world, the best approach would to be to admit that promising everybody the opportunity to keep their coverage, as Obama has done, is just not that advisable. A better promise would be that government won't force anybody to drop good coverage--that the relatively modest number of people switching insurance will be making a change for the better. There are signs that the House legislation is at least moving in that direction, since it seems to have a more porous firewall--and an apparent commitment to high subsidies. After acknowledging the downsides of this approach, including its paternalism, Cohn explains its political logic: Embracing this argument would also mean telling some people with insurance that their world is going to change. But Obama--or any of his allies--can say honestly to those people that change is coming anyway. As proof, they can point to the aftermath of Clintoncare, when all those people who turned against the plan ended up enduring radical changes in insurance anyway. It happened because employers, buckling under the burden of employee-benefit costs, decided to make changes on their own. They moved everybody into managed-care plans--which, as it happens, is precisely the prospect that scared so many people about the Clinton reforms. The same trade-offs apply to those of us who want to create a more consumer-driven healthcare marketplace. And my gut instinct is that it is better to be honest and upfront about the trade-offs than to pretend that the healthcare status quo is acceptable or even salvageable. At the heart of the president's recent political difficulties is, I think, the sense that he isn't leveling with the public. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=NDViYWRjODU1NTkyZTM0Mjg3Zjk0YWQ4NTY5YzFlMzI= Wed, 19 Aug 2009 14:31:53 -0400 Alan Robock on Geoengineering -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MTE4NzZiZmFjZGMyMGZjODU2NjYwZDYxOGUxMWYzZDE= Alan Robock, a leading climate scientist and a professor at Rutgers University, begins his RealClimate post on geoengineering on an unfortunate note: Bjorn Lomborg’s <a href="http://www.copenhagenconsensus.com/CCC%20Home%20Page.aspx">Climate Consensus Center</a> just released an un-refereed report on geoengineering, <a href="http://fixtheclimate.com/fileadmin/templates/page/scripts/downloadpdf.php?file=/uploads/tx_templavoila/AP_Climate_Engineering_Bickel_Lane_v.3.0.pdf">An Analysis of Climate Engineering as a Response to Global Warming</a>, by J Eric Bickel and Lee Lane. The “consensus” in the title of Lomborg’s center is based on a meeting of 50 economists last year. The problem with allowing economists to decide the proper response of society to global warming is that they base their analysis only on their own quantifications of the costs and benefits of different strategies. In this report, discussed below, they simply omit the costs of many of the potential negative aspects of producing a stratospheric cloud to block out sunlight or cloud brightening, and come to the conclusion that these strategies have a 25-5000 to 1 benefit/cost ratio. That the second author works for the American Enterprise Institute, a lobbying group that has been a leading global warming denier, is not surprising, except that now they are in favor of a solution to a problem they have claimed for years does not exist. Is Lee Lane a global warming denier? If not, why damn him by association? Moreover, is it fair to claim that AEI is a hotbed of global warmer deniers? AEI hosted an excellent address by Jim Manzi, who has forcefully argued that human-forced climate change is a real threat. That said, Robock goes on to make a number of excellent points, many of which I hadn't considered. My main areas of agreement with this report are that global warming is an important, serious problem, that SRM with stratospheric aerosols or cloud brightening would not be expensive, and that we indeed need more research into geoengineering. The authors provide a balanced introduction to the issues of global warming and the possible types of geoengineering. But Bickel and Lane ignore the effects of ocean acidification from continued CO2 emissions, dismissing this as a lost cause. Even without global warming, reducing CO2 emissions is needed to do the best we can to save the ocean. The costs of this continuing damage to the planet, which geoengineering will do nothing to address, are ignored in the analysis in this report. And without mitigation, SRM would need to be continued for hundreds of years. If it were stopped, by the loss of interest or means by society, the resulting rapid warming would be much more dangerous than the gradual warming we are now experiencing. Bickel and Lane do not even mention several potential negative effects of SRM, including getting rid of blue skies, huge reductions in solar power from systems using direct solar radiation, or ruining terrestrial optical astronomy. They imply that SRM technologies will work perfectly, and ignore unknown unknowns. Not one cloud has ever been artificially brightened by injection of sea salt aerosols, yet this report claims to be able to quantify the benefits and the costs to society of cloud brightening. They also imply that stratospheric geoengineering can be tested at a small scale, but this is not true. Overall, Robock offers a thoughtful take on the issue, one that ought to take wind out of the sails of geoengineering enthusiasts like myself. Cloud brightening has always struck me as an attractive, low-cost approach, yet Robock highlights some of the pitfalls. With respect to cloud brightening, Bickel and Lane ignore the Jones et al. (2009) results that cloud brightening would mainly cool the oceans and not affect land temperature much, so that it is an imperfect method at best to counter global warming. Furthermore Jones et al. (2009) found that cloud brightening over the South Atlantic would produce severe drought over the Amazon, destroying the tropical forest. This is an important thing to keep in mind about the climate debate: our models for understanding the climate are incredibly crude, and we have a very poor understanding of the feedback mechanisms at work. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MTE4NzZiZmFjZGMyMGZjODU2NjYwZDYxOGUxMWYzZDE= Tue, 18 Aug 2009 17:41:19 -0400 The Coming Higher Education Revolution -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=OGY0MmRlZDZkMTllZmUzZWY3NWJiMTQxYjdkZWY1NWE= Our failure to boost human capital is a major source of sluggish productivity growth and stagnant wages. Despite a significant wage premium for those who finish college, we have persistent high dropout rates for students attending high school and college. Higher education is expensive, inefficient, and inaccessible. Fortunately, as Anya Kamenetz <a href="http://www.fastcompany.com/node/1325728/print">reports</a> in Fast Company, there's good reason to believe that private entrepreneurs are on the verge of making it cheaper, more efficient, and more accessible. The article is a terrific antidote to economic pessimism. Definitely worth your time. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=OGY0MmRlZDZkMTllZmUzZWY3NWJiMTQxYjdkZWY1NWE= Tue, 18 Aug 2009 17:19:27 -0400 The Missing Singapore Model -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=MTdlNjhkYjc5ODRlMTI0OTcwMmUwOTllYzc1M2EzNzA= I intend to write more about Singapore's approach to healthcare in the near future. I'll just make a simple observation: many on the left emphasize the virtues of the National Health Service, most strikingly the fact that health expenditures in the UK amount to roughly 8.4 percent of GDP, slightly more than half of what the public and private sectors spend on health in the United States. But Singapore, which has a system built around catastrophic insurance coverage and health savings accounts, spends less than 4 percent of GDP. And according to the World Health Organization, Singapore has the world's sixth best healthcare system, miles ahead of Britain or the United States. Rowan Callick wrote <a href="http://www.american.com/archive/2008/may-june-magazine-contents/the-singapore-model">a brief and useful summary </a>of the virtues of Singapore's approach in The American last spring. To grossly oversimplify, Singapore relies on a mix of mandatory savings and universal catastrophic coverage. David Goldhill has proposed <a href="http://www.theatlantic.com/doc/200909/health-care">something similar</a> for the U.S. in The Atlantic. So has Brad DeLong. Ross and I backed a similar approach in Grand New Party. And Ron Bailey made the case in Reason <a href="http://www.reason.com/news/show/29303.html">back in 2004</a>. One thing to keep in mind: we really do need a big healthcare overhaul. Defending the status quo is attractive in the short term, but it will cause serious problems in the long term, as Ross argued in <a href="http://www.nytimes.com/2009/08/17/opinion/17douthat.html?scp=1&sq=douthat&st=cse">his latest column</a> for the Times. If the Democratic Party’s attempt at health care reform perishes, senior citizens will have done it in, not talk-radio listeners and Glenn Beck acolytes. It’s the skepticism of over-65 Americans that’s dragging support for reform southward. And it’s their opposition to cost-cutting that makes finding the money to pay for it so difficult. While Republicans are very eager to beat Obamacare, their opposition to IMAC and other Medicare cost-containment measures will undermine the cause of limited government. Ross says it well: Maybe Republicans will be able to cast themselves as the protectors of entitlements today, and then impose their own even more sweeping reforms tomorrow. That’s the playbook that McConnell, Brownback and others seem to have in mind: first, save Medicare from Obama; then, save Medicare from itself. But for now, their strategy means the country suddenly has two political parties devoted to Mediscaring seniors — which in turn seems likely to make the program more untouchable than ever. Not all Republicans are falling into this trap. Paul Ryan, for example, has done an excellent job of emphasizing the trade-offs that are at work. But there are only so many Ryans in the House. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=MTdlNjhkYjc5ODRlMTI0OTcwMmUwOTllYzc1M2EzNzA= Tue, 18 Aug 2009 17:02:07 -0400 Co-ops -- By: Reihan Salam webmaster@nationalreview.com (Reihan Salam) http://agenda.nationalreview.com/post/?q=YWQxNGQzNTUyODI0Y2M1OGU5MWJlMzZkZmY1OGM5YmM= Why are Republicans rushing to oppose co-ops? In the New York Times, Robert Pear and Gardiner Harris describe the vagueness of the various co-op proposal floating around the moment before ending on a discouraging note. Senator <a title="More articles about Orrin G. Hatch." href="http://topics.nytimes.com/top/reference/timestopics/people/h/orrin_g_hatch/index.html?inline=nyt-per">Orrin G. Hatch</a>, Republican of Utah, said he saw the differences as more semantic than substantive. “You can call it a co-op, which is another way of saying a government plan,” Mr. Hatch said. But is this a fair characterization? Mark Schmitt, editor of The American Prospect, has written <a href="http://www.prospect.org/csnc/blogs/tapped_archive?month=08&year=2009&base_name=the_history_of_the_public_opti">a useful primer</a> on the evolution of the public option, which has its intellectual origins in Jacob Hacker's Medicare Plus proposal. Schmitt, writing from a left-of-center perspective, notes the following: One key player was Roger Hickey of the Campaign for America's Future. Hickey took UC Berkley health care expert Jacob Hacker's <a href="http://www.sharedprosperity.org/bp180.html">idea</a> for "a new public insurance pool modeled after Medicare" and went around to the community of single-payer advocates, making the case that this limited "public option" was the best they could hope for. Ideally, it would someday magically turn into single-payer. And then Hickey went to all the presidential candidates, acknowledging that politically, they couldn't support single-payer, but that the "public option" would attract a real progressive constituency. This explains why many on the left are so disappointed by the apparent death of the public option. (Let me stress that I'm convinced that the White House fully intends to resurrect the public option.) Schmitt continues: But the downside is that the political process turns out to be as resistant to stealth single-payer as it is to plain-old single-payer. If there is a public plan, it certainly won't be the kind of deal that could "become the dominant player." So now this energetic, well-funded group of progressives is fired up to defend something fairly complex and not necessarily essential to health reform. (Or, put another way, there are plenty of bad versions of a public plan.) The symbolic intensity is hard for others to understand. But the intensity is understandable if you recognize that this is what they gave up single-payer for, so they want to win at least that much. Indeed, Schmitt goes on to describe the public option as "stealth single-payer." He suggests -- rightly, I think -- that the Democratic left might have been smarter to have simply pushed a "Medicare for All" proposal. As Ramesh has argued, a key problem with the Obamacare effort has been the increasingly pervasive sense that the White House isn't leveling with the public. By simply calling for single-payer and, say, backing a tax hike on the rich, the Democrats could have set a new, and possibly quite popular, leftward benchmark. Unfortunately for the Democrats, President Obama failed to recognize that the promise of painless reform Co-ops, in contrast, point in a very different direction. When Arnold Schwarzenegger -- not a popular governor around these parts, I realize -- called for a statewide healthcare reform, he tried to address "medical loss ratios," the <a href="http://www.statehousecall.org/organized-medicines-unhealthy-focus-on-medical-loss-ratio">share of premiums spent on medical care rather than administration or profits</a>. He wanted to mandate that all insurers maintain MLRs of 85 percent or higher. MLRs for for-profit insurers tend to be in the neighborhood of 80 percent. This isn't a smart idea for a lot of reasons: the MLR is an artifact of accounting, and setting a rigid requirement will prompt little more than creative accounting. Yet it reflects a basic anxiety: do private insurers have the right incentives? In Paul Krugman's latest column, he talks up Switzerland's 1994 healthcare reform. Switzerland offers the clearest example: everyone is required to buy insurance, insurers can’t discriminate based on medical history or pre-existing conditions, and lower-income citizens get government help in paying for their policies. Like the United States, Switzerland used to have a lot of for-profit health insurance firms. After the reform, insurers were obligated to offer health insurance plans on a non-profit basis. They can offer other insurance policies on a for-profit basis, and offering supplemental coverage has been a big source of growth for them. The vast majority of universal health systems built around private insurers have a similar non-profit requirement. The United States is definitely the outlier here. The Democrats presented the public option as a matter of choice. Why not let consumers choose a leaner, more efficient system? But as Gregory Mankiw has <a href="http://www.nytimes.com/2009/06/28/business/economy/28view.html">observed</a>, a public provider is fundamentally different from a private provider: it can't really go out of business. Even if one accepts the president’s broader goals of wider access to health care and cost containment, his economic logic regarding the public option is hard to follow. Consumer choice and honest competition are indeed the foundation of a successful market system, but they are usually achieved without a public provider. We don’t need government-run grocery stores or government-run gas stations to ensure that Americans can buy food and fuel at reasonable prices. An important question about any public provider of health insurance is whether it would have access to taxpayer funds. If not, the public plan would have to stand on its own financially, as private plans do, covering all expenses with premiums from those who signed up for it. But if such a plan were desirable and feasible, nothing would stop someone from setting it up right now. In essence, a public plan without taxpayer support would be yet another nonprofit company offering health insurance. The case for co-ops is simple: we don't have enough non-profit insurers. Let's encourage the creation of more of them. This might be wrong. But the potential upside is considerable and the potential downside is negligible. Bitter opposition to the idea suggests that the right is needlessly hostile to reform. <hr width=100% size=2> http://agenda.nationalreview.com/post/?q=YWQxNGQzNTUyODI0Y2M1OGU5MWJlMzZkZmY1OGM5YmM= Tue, 18 Aug 2009 16:17:24 -0400