Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Month: July 2009 Page 1 of 5

Republicans pull nearly even on Congressional vote numbers

By

On July 30, 2009

Comments

Brilliant!

A compilation of major polling resources shows that republicans have nearly closed the gap with democrats in a generic congressional vote. This is a poll where voters are asked, without naming any specific names, if they are likely to republicans or democrats in the upcoming 2010 midterm elections. Democrats now lead by only 1.5% after the gap had been well into double digits at the time President Obama took office.

The village consensus on this is going to be that if only Democrats had been more bipartisan that the numbers would be better.  Debunking such nonsense is a waste of my time and your brain cells.  There are two main reasons why these numbers are where they are:

Republicans understand opposition politics: when you’re in the opposition, you don’t smile bipartisanly, you gnaw at the ankles of the ruling party.  Nothing they do is right, everything they do is wrong.  You talk about how their policies are going to fail, so that if they do, you are the opposition (Democrats did not understand this when in opposition).

Continuation of ineffective Bush policies.  Not to put too fine a point on it, but in too many cases Obama and the new Congress are pursuing Bush lite policies.

  • Escalate in Afghanistan
  • Spend more money on the military
  • Get out of Iraq around about the time Bush wanted to anyway
  • Continue the Bush/Paulson financial policies
  • A stimulus bill which was 40% tax cuts (granted, not tax cuts for the rich, but still tax cuts)

Americans voted for Democrats because they were sick of Bush and Bush era policies.  And here Congress is repeatedly voting for Bush era policies.  Congressional numbers are melting down faster than presidential ones because people know that Obama’s their only hope. It may not be much of a hope, but if he can’t fix things, they’ve got to wait most of 4 years for a chance at someone who does.

Proper governance liberal style works like this.  Pass effective bills even if it requires not being bipartisan.  When those effective bills create good effects (a good economy, everyone having good health care) reap the benefits of voters being happy with good jobs and not going bankrupt over health care.

Congress’s stimulus bill was crap.  Congress’s cap and trade bill is crap.  Every indication is that the health care bill is likely to be… crap.

Why would people be happy with this?

It’s the economy stupid.  By choosing to bail out financial companies instead of the real economy Obama and Congress cast their die.  It has not lead to a recovery in the real economy, and by the time the next recession happens my prediction and that of many others is that jobs will still not have recovered to pre-recession levels.  This is not something unknown to the Obama administration, they are well aware of it.  Their hopes of winning the next election are based on two things: Republican disarray, and the financial sector continuing to give much more money to Democrats.  Neither is a sure thing.

Good policy creates a country in which people are doing better than in the past.  People who feel they are doing better vote for the incumbent more than not.  Congress and Obama seem to have forgotten this basic electoral reality. The will reap as they have sowed.

What’s More Important Than Saving American Lives? Almost Everything

By

On July 29, 2009

Comments

Let’s spell this out.  You can’t have health care reform which increases the deficit because the borrowed money was all given away to corporations and rich people.  The 15 trillion of bailouts are the case in point, but the lousy Cap and Trade bill is also to blame.  If it was auctioning all of the permits instead of 15% that would have raised 582 billion dollars more than the current bill.

Spending money is a matter of priorities.  Congress and Obama’s first priority is not health care, if it was, they’d be willing to spend money on it.  They aren’t, so it isn’t.  Period.

If find this especially odd given that “protecting Americans”, aka “saving American lives” is supposedly the job in Washington. 22,000 Americans die every year due to not having health care and many more due to inadequate care,, but apparently “saving American lives” is only job when it means you get to spend money on the military, kill foreigners and put American troops in body bags; or when it means you get spy on Americans and torture people.

Al-Q’aeda would need to commit 11 9/11’s a year to kill as many Americans as die due to not having health care.

So, what’s more important than American lives, as measured by willingness to actually add to the deficit for it?

  • Killing Iraqis
  • Tax Cuts
  • Killing Afghanis
  • Sending American soldiers to die in foreign countries to “save American lives”
  • Bailing out large corporations like Citigroup, AIG and  Goldman Sachs
  • Giving money to the IMF to bail out other countries banking systems

What else is more important than saving American lives?  Add to the list in comments.

Why Can’t Progressives Lobby Or Fundraise Effectively?

By

On July 29, 2009

Comments

In response to my post on American politicians actually being pretty cheap to bribe compared to how much money the acts they past give those who pay them, DavidN asked:

Since politicians can be bought so cheaply, why is it only the big corporations that play the game?  Why don’t progressive groups, say, tell America that, if every American were to chip in $1, they could have more bargaining power than all of the big corporations? ($300 million > $283 million)

I know the big unions do it too, but why not more?  Why are all the progressive fundraising outlets seemingly focused on giving money to politicians’ election campaings with few, if any, strings attached?

Then, in a double whammy, Lord Mike said:

Act Blue DESPERATELY need s lobbying arm especially since so many of our candidates are turning their backs on us!

Y’know, both of these things are true.  Progressives need an effective lobbying arm, and to the best of my knowledge, other than perhaps MoveOn and unions (by which I mostly mean SEIU), we don’t have one.  And while I love my union friends, they have their own priorities, which while they often match up with progressives, don’t always.  As for MoveOn, well, let’s say that they can’t do everything.  The whip effort from FDL, Kos and others on healthcare which is going on now is doing yeoman work, but I’m sure they’ll agree that more money and full time lobbyists would make a huge difference.

So I’m genuinely throwing this out there.  I don’t know why we don’t have really effective fund-raising which is sufficient to do effective lobbying.

Why?

If Pharma is for health care reform…

By

On July 29, 2009

Comments

First it was the AMA supporting health reform, now Pharma. Pharma has spent 4 million on Harry and Louise ads in support, and are considering spending 120 million during the August recess in support.

If both Pharma and the American Medical Association are for something, well, let’s just say that any liberal with sense should be thinking not just twice, but thrice.

Robert Reich noted a while back what Pharma will probably get in exchange for their support:

  • Not allowing drug reimportation from Canada
  • Not allowing the government to negotiate drug prices

Add to that forced enrollment of Americans into a insurance plans, and I’d lay long odds that Pharma has calculated that they’re going to make a bundle off of the new medical system, much more than the 80 billion they’ve promised to give up (a promise that isn’t worth much in the first place.)

At this point in time the strategy to get through a reform bill appears to be to bribe every powerful interest opposed to one enough to get rid of their objections.  If the goal of this is to significantly reduce costs, every major participant deciding that they’ll make more money under the new legislation rather than less is not a good sign.

The method is simple enough.

Use the Senate conservatives and blue dogs.  Obama may have the ability to move much of this under reconciliation, but it’s clear than neither he nor Reid want to do so.  The Senate HELP bill is weaker than the House bill, and the “bipartisan compromise” coming out of the Justice bill is going to be even weaker (it most likely won’t even have a public option, but instead co-ops, which are too weak to work).

Blue dogs, in my opinion, are the lesser threat.  I believe Pelosi when she says she can move a bill through the House.  I could be wrong on that, but so far Pelosi has proved very good at winning crunch votes.

The only way a good public option will happen is if progressive in the House are willing to buck Pelosi, Rahm and Obama and spike a bill.  There are more progressives than Blue Dogs in the House, more than enough to kill the bill.

The reason conservatives get a much larger voice in legislation is because they are willing to vote it down. Rahm and Obama whip progressives far harder than they whip Blue Dogs.  If progressive representatives actually want a good public option enough to fight for it, they need to make Rahm and the White House whip the Blue Dogs.  If Democrats are unpopular in 2010 because of a failed legislative agenda, it’s not progressives who are going to lose their seats, it’s conservatives in swing districts.  And White House threats to turn off money, staff and volunteers are much more effective against people who run in swing districts.

I know the idea of actually whipping conservative democrats the way progressives are whipped is crazy-talk in modern Washington and to Obama and Rahm, but maybe it’s just crazy enough to work.

Or maybe we’ll just get a lousy health care “reform” bill with no public option or one that’s completely crippled.

The China Syndrome: what the current talks with China tell us about America’s situation

By

On July 28, 2009

Comments

Chinese and American flags flying together

Chinese and American flags flying together

The US/China talks are actually, in many respects more important than the healthcare debate. What China is willing to pay for may well be what the US can do, and what is being negotiated right now is what they’ll pay for.

Let’s take a look at the issues.

The exchange rate and Treasury purchases

First we have this:

At stake is continued demand by China, the largest foreign investor in U.S. Treasuries, for the unprecedented issuance of American government debt.

Sounds good.  But then we have this:

The value of China’s currency, the yuan, is also on the agenda. The U.S. regards China’s currency policy as a distortion and wants China to let the value of the yuan appreciate.

Here’s the problem. Those two things are in opposition.  The more treasuries China buys the more downward pressure there is on the Yuan and the more upward pressure on the dollar.  Buying treasuries (or any other dollar denominated assets) does not lead to the Yuan appreciating, unless China buys less of them.  But if China buys less of them, well, the US won’t have enough purchasers (actually the US already won’t have enough purchasers and the Fed will have buy treasuries, but how much is in question.)

US Savings Rates, the Death of the American Consumer and the everlasting great recession

What’s interesting about all this is how honest Geithner is being about the US economic situation with the Chinese.  Take for example, this:

In the talks today and tomorrow in Washington, U.S. officials said they plan to tell the Chinese the American rebound from a recession won’t be led as much by consumers as past recoveries.

Why is this?  Because employment is not going to recover before the next recession, and because the savings rate for the US has to stay relatively high so that Americans can de-leverage, as has also been admitted:

“We are committed to taking measures to maintaining greater personal saving and to reducing the federal deficit to a sustainable level by 2013,

What this means is that the consumer spending is not going to lead the recovery this time around.  Consumers are not going to dig the US out of this, because China is not willing to lend US consumers that much money anymore.

But the statement is contradictory on its face.  If deficits have to be brought under control, and savings rates have to be kept relatively high, who’s going to create the demand required by the economy to get out of the great recession?  Not government, because of the deficit issue.  Not consumers, because they are going to have a higher savings rate and their assets (read houses) aren’t going to look good to be borrowed from.

Which leads us to another point.  Both America and China did a stimulus.  China’s stimulus is already working.  It had 7.1% GDP growth.  The US is still mired in recession.

Why?  Two main reasons.

  • China did its stimulus right.  It wasn’t 40% bullshit tax cuts with almost no stimulative effect.
  • China, as a creditor rather than debtor nation with huge savings, can credibly be expected to continue its stimulus, while the US can’t.  When businesses make decisions about spending they need to know the money will be there next year, they don’t know that with the US.

Americans also want the Chinese to move to greater domestic demand,, to open up the Chinese market to US investment (because American companies desperately want to be able to invest in a country with real growth prospects, rather than the US) and to start buying more US goods.  This requires letting the Chinese currency appreciate against the US dollars and is needed long run for American health.  But in the shorter term it leads to a fiscal crisis.  If America doesn’t want to increase taxes to pay for its own spending, how can China buy less treasuries and US assets and thus allow the Yuan to appreciate?  And why should they, when right now in exchange for money the Chinese can afford to lose and crappy consumer goods, the US is exporting its industrial base to China?  An industrial base is worth any price.  Americans, with their unwillingness to tax themselves, aren’t willing to pay for the American industrial base.  The Chinese are.

Why can’t we get a good healthcare bill?

Because the US is a debtor nation, and China isn’t willing to pay for Americans to have healthcare.  That’s why it has been declared that the health reform bill must be deficit neutral (or close). On the other hand, since bailing out the financial system meant bailing out the value of a lot of Chinese assets, the Chinese were (grudgingly) willing to go along with that, since they benefited.  They do not benefit from Americans getting health care.

Can you say co-dependent?

I sure hope so, because that’s the Chinese/US relationship. But one side of the relationship is getting a lot more out of it than the other one and every year the Chinese need America less, and America needs China more.

Why High Frequency Trading needs to be ended and how to do it

By

On July 28, 2009

Comments

charging-bull-by-wallygOver the weekend the high frequency trading (HFT) story exploded.  HFT is when large traders place their own trading computers in exchanges.  Doing this gives them a very sligh (microseconds) speed advantage over anyone who doesn’t have their computers co-located.  Not only do they have a slight speed edge, in exchange for a fee they see orders slightly (a few microseconds) before other traders.  They use this speed advantage to front run slower investors.  In addition, they issue and then cancel orders to see what prices other traders are willing to pay. Using their speed advantage they can then, if they, for example, see you want to buy X stock at $5 or less,  and it’s trading for $4.80,  buy it before you and sell it to you at $5, capturing the profit in between.

About 50% of market volume is now high frequence trading. Large firms front running smaller traders, engaging in strategies normal traders can’t engage in, to make sure that they make small profits on as much of the business going on as possible, all the while creating the illusion of real stock market activity when there is half the fundamental demand that there appears to be.

Fleecing sheep and manipulating the market seems to be the mild way to put it.

The solutions to this are simple enough. First getting information before other market participants do should be illegal.  It is fundamentally anti-market.  Ban that.

Second, add a micro fee or tax on every order, whether filled or not.  Say one cent per.  That will make much of this unprofitable, since it relies on micro-profits per transaction.

Third, capital gains tax at a very high rate (say 50%) any profits on securities held for less than a minute.  Even most day traders don’t hold securities for less than a minute. Society wants secondary markets largely so that money can be raised on primary markets, this is not making raising money on primary markets more attractive.

There is no socially beneficial reason to allow high frequency trading, especially when it includes front-running.  HFT defenders say it increases liquidity, but this mistakes churn, which is doing many small trades to get tiny profits per, with liquidity which is making sure those who actually want to own the stock can.  Any minor liquidity benefits are minor compared to the cost, which is that HFT is capturing profits which would have gone to other market participants by having unfair advantages that smaller traders can’t match.

There’s a lot of suspicion that the US market is being manipulated in various ways.  Ordinary investors are leary of getting back in.  And scams like HFT are one of the reasons why: the market seems designed to work for large inside players and to fleece everyone else.  The only reason you’d want in on that is if you know when to get off the train before the next train wreck.  But that’s not a trading policy any sane society should allow.

Finding Common Ground Between Public Option Advocates and Single Payer Advocates

By

On July 27, 2009

Comments

A heated argument is going on about the right health insurance model between those those who believe in a public option and those who believe in single payer.

Or perhaps I should say between those who are willing to take what they can get: public option; vs. those who want to hold out for what they consider the best option: single payer.

By way of reconciling what differences can be reconciled, let me ask a question of each side.

A Question for Public Option Advocates

Do you want to eventually have a single payer or a comprehensive system like the French have?  If not, why not?

A Question for Single Payer Advocates

Are you willing to fight for a public option which could eventually lead to single payer or a comprehensive system like the French one? If not, why not?

At this point what I’m seeing is both sides retreating into moralistic screaming.

The public option folks are saying: “It is better to save some lives than none, and if you single payer purists don’t support a public option which will save even a few lives, you’re responsible for those deaths.”

The single payer people are saying: “The public option is so watered down that all it will do is discredit real public reform, aka single payer.  You public option folks are settling for so little that the few lives you might save are outweighed by all the lives you won’t save and the damage to the chance at real comprehensive health care reform.”

Both sides are assuming the other side is operating in bad faith.  The public option folks assume the single payer folks just want to be pure rather than saving lives, the single payer that the public option folks are just sell-outs shilling for a bad bill.

But what I’m seeing, as someone with a foot in each camp, is that both sides are (mostly) sincere.

Now there is one group that can’t be reconciled.  People who want a public option so weak it either won’t survive, or can’t be used as the basis for a comprehensive system.  The usual suspects like Insurance company executives, for example.  But also some people in the Obama administration, such as Health Secretary Katherine Sibelius, the health secretary, who said that the plan would be drafted specifically so that it could never become single payer.

But for everyone else, for those acting in good faith, there should be some common ground from which we can work together. Let’s start by recognizing that the battle over public option vs single payer is a distraction away from what we could accomplish if we worked together.

United we stand a chance.  Divided, we will lose our chance at health care reform.

What the Public Option MUST Have To Work

By

On July 27, 2009

Comments

On Saturday I wrote about a piece by Kip Sullivan which attacked the Public Option on its own merits.  Kip’s most devastating, and I think, accurate, criticism was that the public option as envisioned by the current House proposal (let alone likely Senate modifications) is so weak it might not even survive.

Why?

  • Because it has no built in customer base, which increases its upfront expenses for advertising and a sales-force significantly.  People who have company healthcare plans can’t join.
  • Doctors, hospitals and so on are not required to accept it, and providers will not accept it if it provides below market rates unless it also provides large numbers of patients, which it can do because it isn’t pre-populated and isn’t a good buy for insureds unless it can provide a low premium, which requires it to pay low rates.
  • It must make a profit in order to return the money up-fronted to it, and it has only 10 years to do that, but it has to start from scratch, as noted above.

Looked at through this lens, the idea that the Public Option will survive 10 years is ridiculous.  With these burdens, it can’t obtain the necessary number of insureds to allow it to negotiate provider agreements that are low enough to make it attractive enough to enough people to have enough people to negotiatite provider agreements which are low enough to… (well, I’m sure you see where this is going.)

This is a public option designed not just to never turn into either single payer (what Canada has) or comprehensive health care (what France has), it is a public option so crippled it may not even be able to get off the ground.  New companies have significant startup costs, there are massive barriers to entry in the health insurance field, and the term over which the public plan has to return its costs is too short.

So what does the Public Option need to work?

First: it needs to be populated with enough people to be viable. Here are some possibilities of how to do that without a lot of auto-enrollment.  You don’t need to do all of these, you do need to do some of them or something similar.

  • On the income tax form, have an opt in box for anyone who wants to enroll, so that every American sees the option, without needing to see advertising
  • If there is an individual mandate requiring people to buy insurance, if they don’t have it after the first year—if they haven’t bought, auto-enroll them at tax time into the public option.
  • auto enroll everyone on disability into the plan, as top-off insurance.  Whatever the gap between what they get from their disability and public option is covered by the public option
  • Veterans auto-enroll into the public option as well, in exactly the same way, as top-off insurance.  They still get all their veterans care, but anything that isn’t covered by Veterans, that is covered by the public option, they now also get
  • everyone must be free to choose the public option, including people who are enrolled in corporate healthcare plans (this is baseline, this must be in the plan to give it the ability to drive down costs.)
  • State rollovers.  If a state has a plan that doesn’t cover everything the public option does, then everyone on the State plan is automatically enrolled, and the cost of those health care services is taken out of Federal Medicare funds.

Institute enough of these policies, and the public plan can have a large enough enrollment base to matter, and because it is easy to enroll in can put price pressure on private firms.  But even with all of these, the public option will still start out not all that large and have trouble negotiating contracts.  So, what else do you need?

Second: it needs to work with Medicare and Medicaid.

  • Negotiation must take place between the all three plans as one, and providers.  This will drive down prices the fastest.  It will not just help the public option, it will also drive down Medicaid and Medicare rates.
  • If a provider accepts Medicaid or Medicare they must also be required to accept the public option.  No picking and choosing.
  • The rate does not have to be the same as the Medicare rate, but it must be based off the Medicare rate.  The House plan is Medicare + 5%.  That’s fine.
  • All limits on the ability of Medicare/Medicaid and the public option to negotiate prices with providers (for example, not allowing negotiations with pharmaceutical companies) must be removed.  Failure to do so will mean not only that costs won’t be contained, but that the government plans will be at a disadvantage compared to private plans which an do this.

The above are the minimum requirements to create a viable public option.  Public option advocates who are not willing to draw a line on the above are advocating for a plan which will, most likely, not survive—a plan that is not viable.  The cry of public option advocates has been “saving even a few lives is worth compromising!”  But if you compromise to the point where the plan is not viable, you’ve compromised to the point where there’s no point.

There are other requirements for a good public option, such as guaranteed issue, the whole population being enrolled in some insurance (mandates in the current debate), the plan being national in scope so it has scale, private plans being required to cover the same things as the public plan, and high enough subsidies so that everyone can actually be enrolled (if you insist on mandates).  Those requirements, however, seem to be better understood by public option proponents.  What is required for viability, however, does not seem to be.

The current House Plan is not viable as written and other options are worse.  There is no practical difference between no public option, and a non-viable public option and at that point the argument of “don’t let the perfect (single payer) be the enemy of the good (a public option which will save some lives)” becomes non operational.

I will be happy to support a viable public option.  So far we don’t have one.  I urge public option advocates, and even single payer advocates, to push for one.

Page 1 of 5

Next

Powered by WordPress & Theme by Anders Norén