Why is health care reform unpopular?

Obama isn't giving up, but efforts to revive health care reform seem to be failing. It is worth remembering that Democrats could still pass the bill if they chose to. I still think they should. House Democrats could use their big majority to pass the Senate measure. But they cannot bring themselves to do it. Democrats with substantive objections and Democrats who fear an electoral backlash have fallen in with Republicans to block the reform.

The politics is complicated but fear of electoral reprisals is plainly one critical component. Should it be? Megan McArdle thinks that Democrats would be crazy to press on with an unpopular bill. Nate Silver questions this. He thinks the bill's unpopularity is suspect. He thinks many people are misinformed or mistaken, and will come round once they see it working. He says it is "better to be strong and wrong, especially when you're actually right." It would be political suicide for Democrats to abandon a cause they have championed for so long.

From my point of view, this is the equivalent of a Republican saying: "You know what, my opponent is right - lower taxes are a bad idea on principle."

Americans liked the idea of health care reform well enough in 2008. What changed their minds? And how easily might they change them back?

Opinion polls offer little guidance. Gallup's Frank Newport says that his research indicates no great failure to understand the bill. Silver, looking at the numbers, is unconvinced: the polling, he says, is consistent with the idea that opposition to the bill is misinformed.

My take on Gallup's numbers was different. Like Silver, I'm sure people are confused. But I'm not so sure they would like the bill more if they understood it better. Only 25% of people opposed to the legislation are concerned about higher costs, for instance. More information might drive that number up. It probably ought to. (I support the reform despite believing that it will raise costs.) The same goes for the 28% who said they were worried about greater "government involvement" in health care. Silver sees this category containing "incorrect beliefs" about death panels and socialized medicine. Sure. But it includes valid concerns too. This is a bill which increases government involvement in health care.

I think opposition is driven less by specific concerns of this sort and more by general disgust and exhaustion. As this saga has dragged on and on, it is incredible to me that nobody has tried to explain and justify any specific reform to the general public. The process has been unfathomable, and entirely inward-looking. People see that a major complex change in the works. This promises to transform services that most of them (remember) are satisfied with, so they have something to lose. But nobody is in charge. Nobody is even talking to voters about it, except to pat them on the head now and then and say "trust us". I'm surprised that the majority opposed to reform is not bigger.

I do think opposition would eventually subside if the bill were passed, and that some of its provisions would in the end be so popular that there would no going back. But the bill is an unfinished work. It will need to be fixed almost as soon as it is passed. So the issue does not go away. Meanwhile, costs as well as (prospective) benefits will be apparent. The pendulum would not swing back by November, that's for sure. Meanwhile the party would have stuffed an unpopular measure down the country's throat.

Is Silver's argument about repudiating a core belief the clincher? Not at all. Democrats do not need to repudiate a core belief. They could say, "We are right, and you know we are right. But we have failed to make our case and do this well. We need to work on this. We remain committed to comprehensive health care reform, and will come back soon with a better, simpler plan, capable of commanding wide support." What's wrong with that?

Politically, nothing. That's the trouble. That's why health care reform may fail. I still think the House should seize the moment and pass the Senate bill. But I'm not running for election.

Dalrymple on Galbraith

In a novel approach to memorial lectures, Theodore Dalrymple sets about JK Galbraith, who is once again in vogue. It is an excellent essay (not that I needed much persuading).

Galbraith's egotism and condescension toward most of the human race is evident in his admiration for Franklin D. Roosevelt-or rather, in the grounds for that admiration. Here he is in the preface to Name-Dropping, a singularly uninformative book of reminiscences of the great whom he met: "I turn now to Franklin Roosevelt, the first and in many ways the greatest of those I encountered over a lifetime. And the one, more than incidentally, who accorded me the most responsibility." I think you would have to have a pretty tough carapace of self-regard not to recognize the absurdity of this, or to have the gall to commit it to print.

If your reaction to that is, "How unfair. Surely Galbraith was joking," I can only say that you have not read much Galbraith.

At another point, Galbraith writes that Roosevelt saw the United States "as a vast estate extended out from his family home at Hyde Park, New York. For this he had responsibility, and particularly for the citizens and workers thereon." A tree-planting program that Roosevelt initiated in the Plains states, for instance, was "the reaction of a great landlord, an obvious step to improve appearance and property values, a benign action for the tenantry." Galbraith meant this as praise, which is not surprising, because his own attitude toward the country was similar. The people were sheep, and government, with Galbraith as advisor, was the shepherd.

I could just keep quoting. Better read it for yourself.

Some links

In praise of populism. Larry Sabato, Crystal Ball. He makes a good point: populism in moderation is a good thing. (See also: Obama should try populism. David Paul Kuhn, RCP.)

Tom Hoenig for Treasury. Simon Johnson, Baseline Scenario. But as I said the other day, Geithner's position is unassailable.

Freeze tax expenditures. Len Burman, Washington Post. Good idea. But would it be any easier than a VAT?

Alito was right. Kenneth Gross, Foreign Policy. Obama was wrong to say that, thanks to Citizens United,  foreign corporations can spend without limit in US elections.

Volcker on the Volcker rule

Paul Volcker's written testimony to the Senate Banking Committee yesterday put the Volcker rule in a clearer perspective. The theatricality of Obama's earlier announcement - not to mention its vagueness (as yet unresolved) and populist spin - led a lot of observers to think that the White House was advocating a return to Glass-Steagall as the cornerstone of its approach to financial regulation, or at least as one of its most critical components. I thought Volcker tried to correct that impression.

[T]he first point I want to emphasize is that the proposed restrictions should be understood as a part of the broader effort for structural reform...

The first line of defense, along the lines of Administration proposals and the provisions in the Bill passed by the House last year, must be authority to regulate certain characteristics of systemically important non-bank financial institutions. The essential need is to guard against excessive leverage and to insist upon adequate capital and liquidity.

It is critically important that those institutions, its managers and its creditors, do not assume a public rescue will be forthcoming in time of pressure. To make that credible, there is a clear need for a new "resolution authority", an approach recommended by the Administration last year and included in the House bill.

If that focus on better regulation of non-banks can be maintained, then I have no strong feelings one way or the other about Volcker's proposed restrictions on deposit-taking banks. Whether they make sense will depend on the details and the implementation. I note, by the way, that Volcker seems to envisage plenty of regulatory discretion:

Most of those institutions [big commercial banks doing proprietary trades] and many others are engaged in meeting customer needs to buy or sell securities: stocks or bonds, derivatives, various commodities or other investments. Those activities may involve taking temporary positions. In the process, there will be temptations to speculate by aggressive, highly remunerated traders.

Given strong legislative direction, bank supervisors should be able to appraise the nature of those trading activities and contain excesses. An analysis of volume relative to customer relationships and of the relative volatility of gains and losses would go a long way toward informing such judgments. For instance, patterns of exceptionally large gains and losses over a period of time in the "trading book" should raise an examiner's eyebrows. Persisting over time, the result should be not just raised eyebrows but substantially raised capital requirements.

Well, well. So much for simple rules and clear-cut prohibitions. When the regulator judges it appropriate, raise capital requirements!

So long as the rest of the agenda is not forgotten, fine. My worry has been that the Volcker rule will be a distraction from what the great man himself calls the first line of defense: more demanding capital requirements, liquidity requirements, leverage caps and early resolution authority for all systemically important financial institutions. Distraction and delay are still the risk, I think: see these FT and NYT reports. But I am glad that Volcker, at any rate, does not see his commercial-banking rule as any kind of substitute for those other measures.

We seem to agree on the main thing, after all. Which is good. I hate disagreeing with Volcker.

Climate change, ripped bodices, and the precautionary principle

This, from the first paragraph of an Observer piece, made me laugh:

The climate secretary, Ed Miliband, last night warned of the danger of a public backlash against the science of global warming in the face of continuing claims that experts have manipulated data.

A danger, you say? Call me an alarmist, minister, but I'd say this was more than a danger. I'd say the backlash has happened. I wouldn't go so far as Walter Russell Mead, who writes that the global warming movement is dead, but it looks crippled, and the Climategate scandal, which is still unfolding, is a principal reason. I am not a climate change denier; I am an IPCC sceptic. I think it is important to fix what has gone wrong at the IPCC and its feeder groups, restore the credibility of climate science, and devise intelligent policies in response to the threat. Miliband has other ideas, apparently:

[I]n the government's first high-level recognition of the growing pressure on public opinion, Miliband declared a "battle" against the "siren voices" who denied global warming was real or caused by humans, or that there was a need to cut carbon emissions to tackle it.

If he wants to bring moderate public opinion round, the battle Miliband should wage is with the people who have brought climate science into such disrepute. To begin with, how about calling for the resignation of Rajendra Pachauri? Speaking of things that made me laugh, I see that the IPCC chief has a second career all mapped out: despite his crushing official workload, he has written a novel (mainly about breasts, apparently). A second Nobel prize cannot be far behind. I'd say climate science can spare him.

In addition to Pachauri's novel, I've another reading recommendation for Miliband. The Observer quotes the minister as saying:

Everything we know about life is that we should obey the precautionary principle...

I don't think so. As Cass Sunstein has pointed out:

The precautionary principle takes many forms. But in all of them the animating idea is that regulators should take steps to protect against potential harms, even if causal chains are unclear and even if we do not know the harms will come to fruition... [I]n its strongest forms, the precautionary principle is literally incoherent, and for one reason: There are risks on all sides of social situations. It is therefore paralysing; it forbids the very steps that it requires. Because risks are on all sides, the precautionary principle forbids action, inaction, and everything in between.

This would be a good thing for a minister of energy and climate change to understand.

Squaring America's fiscal circle

The challenge is to flip the all-party, pro-spending, anti-tax coalition. One way might be to link specific spending more closely with specific taxes. The question to ask voters is not whether they want guaranteed health insurance, which they do, and higher taxes, which they do not. It is whether they are willing to pay higher taxes for guaranteed health insurance.

Slowly, very slowly, interest in a US value added tax is spreading beyond public-finance academics. Comeback America, an excellent new book by David Walker, formerly US comptroller-general and until 2008 head of the Government Accountability Office, includes this among its recommendations. The purpose is partly just to raise money. The book argues that tax increases and spending cuts will both be needed, and the hollowed-out US income tax system cannot deliver. If a VAT were tied to public spending on health, however, it would do more than raise money.

Unlike income tax, which more than 40 per cent of Americans no longer pay, a VAT would ask everyone to pay something. No part of the electorate could vote for guaranteed health insurance entirely at other people's expense. Some Democrats would recoil at this idea, but there is something in it for them: revenue to support the services they value.

An idea like this needs a champion. Mr Obama would be ideal, but seems unlikely to step forward. Most likely, the existing coalition would prevail, Democrats denouncing an unfair regressive tax, and Republicans opposing any kind of tax. But maybe, just maybe, Democrats could see a way of supporting needed public services. And perhaps Republicans, searching deep into their collective memory, could find a trace of the fiscal conservatism they once represented, and regard a modest broad-based VAT as the lesser evil.

If not, there is always going bust.

A procrastinating budget

No huge surprises in the budget proposal. There is a bit more short-term stimulus than I had expected. In addition to the widely trailed $100bn "jobs package", the proposal includes another $150bn or so of temporary tax cuts, extended unemployment benefits, and help for states. (It tells you something that the administration is now playing down its efforts to stimulate the economy instead of playing them up.) That's fine: if anything, too modest. On the other hand the proposals for longer-term fiscal control are weaker than I had hoped. For the past six months, officials have been promising a budget that would bring fiscal policy back under control. This is not it. Again, given the political difficulties, this is not so surprising.

The budget proposes a deficit target of 3% of GDP (compared with 8.3% in 2011). This would be enough to stabilize public debt, at what the White House hopes will be a supportable level. Having announced the goal, the plan misses it by a wide margin. Through 2020, the deficit is above 3% despite the three-year freeze on non-security discretionary spending (if it happens), despite the Medicare savings that will supposedly flow from the health care plan (if it happens), and despite the substantial tax increases on upper-income households already legislated for 2011 (if they happen). After 2020, the deficit's trajectory is rising. A proposed budget deficit commission will have to come up with other ideas, and Congress will have to enact them, to close the gap.

It would be a serious mistake to withdraw stimulus too quickly while the economy is still weak. But a further and possibly prolonged delay in addressing the long-term issue is just as bad - and that is what the budget, in effect, advocates.

Robert Greenstein's supportive analysis is well worth reading. I agree with his praise for the proposed narrowing of tax subsidies, including the cap on high earners' tax deductions. But I think he is too generous in offering this rationale for the administration's timidity on longer-term control:

Had the President proposed major additional budget cuts and revenue increases, not only would Congress almost certainly have rejected them, but the inevitable harsh attacks on them could have "poisoned the well" and made them even harder to achieve in the future if and when a more bipartisan atmosphere makes greater budgetary progress possible.

Obama needs to wait for a more bipartisan atmosphere before he starts advocating long-term fiscal discipline, and spelling out to the country what that would mean? How long might that be? Even if outreach to Republicans is pointless at the moment, this does not stop Obama taking the message to the wider public. It might be one way to put Republicans on the spot. Greenstein's advice is to admit defeat at the outset.

Keith Hennessey's hostile take on the proposal is also worth reading. I disagree with his insistence that the deficit problem is not taxes that are too low but spending that is too high. It is both. But it is still valuable to look, as he does, not only at what the budget would expect to "save" from some questionable current-policy baseline - the usual approach - but simply at levels of taxes, spending and deficits, compared with those in the previous budget, and with historical averages. Freeze notwithstanding, the main difference between this year's budget and last is that public spending is significantly higher all through the next decade. That is something you might have missed.

Some links

Bernanke must rebuild confidence. Robert Samuelson, RCP

Bernanke's exit strategy will fail. Allan Meltzer, WSJ

After Obama's speech, Democrats are confused. Paul Kane and Shailagh Murray, Washington Post

Deficit hawks and marching peacocks. Paul Krugman, NYT

Keep the focus on health care and taxes

From my new column for National Journal:

President Obama says he gets the message from Massachusetts. Expect a new focus on jobs and living standards. Expect fresh attention to overgrown public borrowing. The country's pressing concerns, he says, will be his own priorities.

Fine. Now what? Closer attention to these problems will only underline how little the administration can do to solve them. Saying "jobs, jobs, jobs" does not create any. This is a campaign slogan, not a policy.

The country does not want a second fiscal stimulus. The first was unpopular and another would make the debt problem worse. As for reining in borrowing, there are two ways to do that: lower public spending and raise taxes. When it comes to specifics, people oppose both.

Just what this sharp new focus on the economy is going to achieve is therefore unclear. Caps on student-loan repayments and expanded child care tax credits, as proposed this week? I do not see these turning the economy round. The president calls for a temporary freeze on nondefense discretionary public spending, which is less than 20 percent of the overall budget. Again, not exactly radical -- even if it happens.

Are these the bold policies that the health care debate has distracted us from? Obama's critics say that the focus on health reform was his big mistake. I disagree. In fact, cost control in health care, especially Medicare, is indispensable for long-term fiscal discipline. The White House was right about that. The problem was that its plan raised costs in obvious ways (subsidies, expanded Medicaid) and pressed down too vaguely elsewhere: lots of good ideas and experiments, not enough action. What the administration said about cost control in health care was right in principle but not believable in practice.

It was the correct subject, though...

My two cents on the iPad

I am an avid Apple convert, quite devoted to my iPhone (AT&T notwithstanding: it helps not to live in New York). But I wonder if Steve has slipped up with the iPad. Even if he hasn't slipped up, and the thing is a huge success, it was not the device I wanted, which is obviously what matters.

Is this a laptop replacement? Without a keyboard, without multitasking and so forth, it is not a good one. But if it is not a laptop replacement, am I supposed to carry this thing with me in addition to my laptop and phone? How many people will want to do that? This feels more like a niche than a mass market.

My first self-interested reaction was, "Oh no, it's too heavy!" What I wanted was a better Kindle. A device as light and compact, with excellent battery life, preferably with a better screen and faster processor, and definitely with the user-interface kinks ironed out. What I wanted, in other words, was a device optimised as an ebook reader: an iPod for iBooks, rather than iTunes.

The Kindle gets thrown in my briefcase along with my laptop and iPhone. The iPad, no.

When I've bought it, I'm not sure it will be used that much.