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In the Wake of the Mass Massacre—Bipartisan Reform or the Senate Bill?

In the Wake of the Mass Massacre—Bipartisan Reform or the Senate Bill?
by Maggie Mahar
Crossposted with Health Beat Blog

Let’s begin by addressing some of the myths:

First, the Massachusetts vote was not a “Massacre”: Brown won 51 percent of the vote.

Secondly, this was not a referendum which shows that the public opposes health care reform. Among Massachusetts’ voters who said health care was their top issue, 53 percent voted for Democrat Martha Coakley reports JoAnne Kenen, over at the “The MA Message? Not So Fast” New America Foundation Kenen understands politics better than most health care commentators: for more than a decade, she covered Congress for Reuters. Ignoring what the pundits are saying about “the Massachusetts message”, Kenen looked at the data:  “Jill Lawrence at Politics Daily crunched some Massachusetts numbers and discovered that ‘a solid majority—56 percent—said health care was their top issue.’ And 53 percent of them voted for  . . . Coakley.” “Majority of MA Healthcare Voters wanted to Save Reform” Politics Daily

Third, health care reform is not dead.  Democrats are not going to walk away from the issue. If they did, they would give the conservatives everything they need to re-take Washington. “President Obama is incapable of governing,” the opposition would argue. “He is another Jimmy Carter.”  Obama would be left a dead man walking. Democrats who had voted for reform would then have to try to explain to voters that either a) they were right but just weren’t able to pass legislation that so many Americans sorely need –even though they had a majority or b) it wasn’t that important after all. Yes, your insurance premiums are likely to rise by 25%–or more—over the next four years . . . and if you lose your job, you’re in big trouble.  But, well . . . we had other priorities. .

Fourth, I very much doubt that Republicans will step up to help forge a bipartisan bill.

Granted, Sam Stein reports Progressive Democrats are now worrying a pared down package — stripping it to its unobjectionable core (insurance regulation, money to help people buy care, etc.) – could lead to Republicans claiming they saved Healthcare reform. “New Dem Worry: GOP Taking Credit for Healthcare Reform,” Huffington Post

“Senate Minority Leader Mitch McConnell ‘will have his whole caucus vote for it and make it a political win for the Republicans,’ one well-connected Democratic health care strategist said. ‘They’ll say, “This was the Republican plan from the beginning. We’re glad the Democrats joined us.” And take all the credit for passing reform.’” Indeed, “On Thursday, former House Speaker Newt Gingrich suggested that the Republican Party do just that Stein Observes, quoting Glen Thrush Politico. Gingrich argued that it would be “clever” for the GOP to pass non-controversial reform measures with “huge bipartisan majorities.” But consider the rest of what Newt said: “he thinks many Republicans disdain Pelosi so much they simply won’t go along with anything with the speaker’s name on it, even if it serves the party’s larger interests.”

“If you are a House member in the [GOP] caucus, I suspect we are about to have a huge argument. We could get clever and work with her…And I think people should work with her… But at that point it becomes a huge problem because nobody trusts her; they distrust her ideology, and distrust her because she has run over them so hard.

A lot of Republicans would work with House Majority Leader Steny Hoyer, but they won’t work with her,” added Gingrich.

As I reported yesterday, I agree with Bob Laszewski. “The problem with bipartisanship now is that the Republican base is not about to let any of their own Senators do anything to take the Dems off the political meat hook from which they are now dangling. A Smaller Bipartisan Bill, What It Could Look Like” HealthCare Policy and Market Review.

The anger is visceral, and it’s not just directed at Pelosi. 

Liberals and conservatives disagree on very basic values. Try to imagine what a “bipartisan” bill would look like. Please read Naomi’s post, outlining the Republican health care proposal below Can We Really Have a Bipartisan Heath Care Plan HealthBeat

There is no individual mandate—because there is no requirement that insurers offer you an affordable plan if you suffer from “a pre-existing condition.”  In other words, many of the sick remain uninsured. Most of the middle-class and lower-middle class who don’t have employer-based insurance also would be left out in the cold. Subsidies would be available only to those earning up to 200% of the Federal poverty level (not 400% as in the Senate bill). And the subsidies would be too small; at best, families would be able to buy a skimpy policy that shouldn’t even be called “insurance.” 

Meanwhile, employers would be allowed to charge employees premiums that are 50 percent higher than the premiums their colleagues pay if they are overweight and can’t lose weight –or if they don’t want to take cholesterol-lowering drugs because of side effects that include deep muscle pain and memory loss. You might be exempted if you bring a note from your doctor: can you imagine explaining to your employer that you’ve been suffering too many “senior moments” and have a hard time remembering what you are doing? Or that everyone in your family is overweight and that your doctor says it’s genetic? (Many employers adamantly refuse to believe that this is true.)

I could go on. There is no way to reconcile these differences. Conservatives do not believe that health care is a right, or that a civilized society has a responsibility to provide care for all.

What Those Who Understand Our Health Care System Say

Finally, a group of 45 health-care experts have sent a letter to Nancy Pelosi, Charlie Rangel, Henry Waxman and George Miller calling on progressive reformers to stay the course. “Tap Dump” Washington Post (Thanks to Ezra Klein for pointing to this document)

“We have come further than we have ever come before,” they write.  “Only two steps remain.  The House must adopt the Senate bill, and the President must sign it.”

“While the House and Senate bills differ on specific points, they are built on the same framework and common elements—eliminating health status underwriting and insurance abuses, creating functioning insurance markets, offering affordability credits to those who cannot afford health insurance, requiring that all Americans act responsibly and purchase health insurance if they are able to do so, expanding Medicaid to cover all poor Americans, reforming Medicare payment to encourage quality and control costs, strengthening the primary care workforce, and encouraging prevention and wellness.”

“Some differences between the bills, such as the scope of the tax on high-cost plans and the allocation of premium subsidies, should be repaired through the reconciliation process. Key elements of this repair enjoy broad support in both houses. Other limitations of the Senate bill can be addressed through other means.”

“The Senate bill accomplishes most of what both houses of Congress set out to do; it would largely realize the goals many Americans across the political spectrum espouse in achieving near universal coverage and real delivery reform.”

“With the loss of Edward Kennedy’s Senate seat, Democrats no longer enjoy a filibuster-proof Senate majority, though they still enjoy the largest Senate majority any party has achieved in the past generation.  The loss of this one vote does not require Congress or the President to abandon Senator Kennedy’s life work of health care reform. A year of political infighting, misleading debates about death panels and socialized medicine, and sheer inaction has left Americans exhausted, confused, and disgruntled.  Americans are also bearing the severe consequences of deep recession and unemployment. Still, a majority of Americans support the elements of the Senate bill.” 

“The House of Representatives faces a stark choice. It can enact the Senate bill, and realize the century-old dream of health care reform. By doing so, it can achieve a historic milestone while freeing itself to address other national problems such as joblessness and mortgage foreclosure that affect millions of Americans.  Differences between the House and Senate bill can be negotiated through the reconciliation process.” 

“Alternatively, Congress can abandon this effort at this critical moment, leaving millions more Americans to become uninsured in the coming years as health care becomes ever less affordable.  Abandoning health care reform—the signature political issue of this administration—would send a message that Democrats are incapable of governing and lead to massive losses in the 2010 election, possibly even in 2012.  Such a retreat would also abandon the chance to achieve reforms that millions of Americans across the political spectrum desperately need in these difficult times. Now is the moment for calm and resolute leadership, pressing on toward the goal now within sight.”

“Some have proposed dividing the bill or starting anew with negotiations to produce a less comprehensive bill. From the perspective of both politics and policy, we do not believe this is a feasible option. We doubt that the American public would welcome more months of partisan wrangling and debate. We doubt that the final product would match what has already been achieved. Indeed we doubt that any bill would reach the President’s desk should congressional leaders pursue this misguided course.”

This letter is signed by people who truly understand what’s wrong with our health care system—and what needs to be done.

Henry J. Aaron, Brookings Institution
Gerard Anderson, Johns Hopkins University
Ronald Anderson, UCLA
Dean Baker, Center for Economic and Policy Research
Ronald Bayer, Columbia University
Anna Burger, Secretary-Treasurer, SEIU
David Cutler, Harvard University
Linda C. Degutis, Yale University
Eric Feldman, University of Pennsylvania
Thomas Fisher, University of Chicago
Brian R. Flay, Oregon State University
David Grande, University of Pennsylvania
Thomas Greaney, St. Louis University
Colleen Grogan, University of Chicago
Jon Gruber, MIT
Mark A. Hall, Wake Forest University
Jacob S. Hacker, Yale University
Jill Horwitz, University of Michigan
James S. House, University of Michigan
Peter Jacobson, University of Michigan
Timothy Jost, Washington and Lee University (organizer)
Theodore Joyce, CUNY
George A. Kaplan, University of Michigan
Jerome Karabel, University of California at Berkeley
Mark A.R.. Kleiman, UCLA
Paula M. Lantz, University of Michigan
Simon Lazarus, NSCLC
Arleen A. Leibowitz, UCLA
Theodore Marmor, Yale University
Lynda Martin-McCormick, NSCLC
Michael L. Millenson, Northwestern University.
James A. Morone, Brown University
Jonathan Oberlander, University of North Carolina at Chapel Hill
Karen Pollitz, Georgetown University
Harold Pollack, University of Chicago (organizer)
Daniel Polsky, University of Pennsylvania
Sara Rosenbaum, George Washington University
Meredith Rosenthal, Harvard University
Lainie Friedman Ross, University of Chicago
William Sage, University of Texas
Theda Skocpol, Harvard University
Paul Starr, Princeton University
William Terry, Brigham and Women’s Hospital
James A. Tulsky, Duke University
Alexander C. Wagenaar, University of Florida
Joseph White, Case Western Reserve University
Celia Wcislo, 1199-United Healthcare Workers East, SEIU
(Institutional affiliations listed for identification only).

I know many of them. I respect them. I have quoted some of them in my book and on this blog.  And I wholeheartedly agree with them.

Forget the personal politics. Forget who disappointed you. This is about people who need health care—and the fact that we must make that care affordable. Spiraling health care costs are the greatest threat to the U.S. economy. Cost control cannot be spelled out in the legislation; we don’t want politicians deciding where to make cuts. Healthcare professionals will have to make those decisions, based on medical evidence that tells us where our health care dollars can best be spent to benefit patient

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Not the Cheeriest Way to Start the Day: Bernanke Part 1 of 2

It’s bad enough to violate Brad DeLong’s first rule (which, I hasten to rationalize, was posted when DeLong himself was disagreeing).

It’s worse when the opposition to Krugman is coming from…the WSJ editorial page. (Or, as Barry Ritholtz correctly describes it, “the comics section.” Just less funny, and more likely to make the two-drink minimum unnecessary.)

This seems to be a direct violation of reality.

But compare the Krugman “endorsement”:

But — and here comes my defense of a Bernanke reappointment — any good alternative for the position would face a bruising fight in the Senate. And choosing a bad alternative would have truly dire consequences for the economy.

Furthermore, policy decisions at the Fed are made by committee vote. And while Mr. Bernanke seems insufficiently concerned about unemployment and too concerned about inflation, many of his colleagues are worse. Replacing him with someone less established, with less ability to sway the internal discussion, could end up strengthening the hands of the inflation hawks and doing even more damage to job creation.

with the WSJ:

No matter how it plays out, Ben Bernanke’s bruising confirmation battle has damaged the U.S. Federal Reserve’s clout and perceived independence.

Mr. Bernanke is more than the Fed’s chief decision maker. Fed officials see him as their brand, a smart, honest and stoic voice best able to defend decisions of the past two years to a skeptical Congress and public. Even if the Senate backs Mr. Bernanke this week, he won’t speak with the same authority, and the Fed will have a harder time casting itself as above partisan politics.

Fortunately for the Fed, the hard call about when to raise interest rates doesn’t need to be made now. Fortunately for Mr. Bernanke, his support inside the Obama administration, and even more so inside the Fed, is solid. But the longer the battle drags on, the more it could interfere with the Fed’s ability to communicate convincingly. And no matter what, the Fed will have less sway as Congress debates whether to rein in its powers.

Oh, wait. That’s a news article. The editorial page throws a few random facts:

Mr. Bernanke continues to deny any Fed monetary culpability for creating the mania. Shortly after the New Year, even with his nomination pending, Mr. Bernanke issued an apologia that was striking for its willingness to play to the Congressional theory of the meltdown by blaming bankers and lax regulators. [note: lax regulators includes the Fed itself.]

with semi-credible analysis:

Others argue that any alternative to Mr. Bernanke could be worse, and that is certainly a risk. Mr. Geithner and White House economic adviser Larry Summers couldn’t be confirmed, even in a Democratic Senate. In the short term if Mr. Bernanke is defeated, Vice Chairman Donald Kohn might run the Open Market Committee, and he shares Mr. Bernanke’s contempt for Fed critics. President Obama could also select San Francisco Fed President Janet Yellen, but she thinks the Fed should be even easier. [Oh, the evil of Ms. Yellen, who immediately replaces Laura D’Andrea Tyson as my pick to run the Fed.]

with sheer insanity:

We agree that the Fed needed to ease money precipitously when the financial markets suffered their heart attack in late 2008, and we praised Mr. Bernanke for that at the time and since. But the issue for the next four years is whether the Fed can extricate itself from its historic interventions before it creates a new round of boom and bust. We already see signs that it has waited too long to move.

Yes, because—along with more obvious indicators—Durable Goods orders have been down two months in a row. Anyone betting January will be up? I fear they have used “real” tea leaves to make their tea.

So the WSJ came to the right conclusion for all the wrong reasons, while Krugman comes to the wrong conclusion for the right reasons.

How did we get here? in the next post.

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Responding to Glenn Greenwald’s: What the Supreme Court Got Right

by Divorced one like Bush

For this post I will formally introduce myself. I am Daniel J. Becker. It is only proper and just to do so. I am using Mr. Greenwalds discussion only as a platform to add my thoughts regarding the Citizens United decision.  Also this is a long read. So I’ll give you up front the crib note version: The source of error and thus argument is that the arguing/arguments are starting in the middle of the line of reasoning and not at the beginning.

The “rule of law” means we faithfully apply it in ways that produce outcomes we like and outcomes we don’t like.

The above is, I believe, the thrust of Mr. Greenwald’s argument. It has always been his strength and the source of the pleasure I receive when I read his arguments. I do not disagree with his statement. I believe it is the same argument presented by Mr. Jonathan Turley on MSNBC and by the ACLU. Mr. Turley specifically states that the Constitution does not protect us from bad decisions.

Our predicament with this latest decision and the examples of Bush et al’s “warrantless eavesdropping, torture, unilateral Presidential programs” which Mr. Greenwald presents is not found in the argument of whether we like or dislike the outcome. The argument however is addressing an issue I have had for years with the way law is practiced.

What is the proper means of using, applying, implementing a form of governance based on the ideology of “the rule of law”?

We need to step back further to see the source that can lead to a dire results upon implementing a ruling of properly applied law. One side is asking “how can you ignore the cliff?” The other is responding with “it’s the law”. There might even be a third party arguing that both sides can be viewed as just differences of interpretation of the words used. Maybe this even comes down to a simple placing of a comma? 

Seems like quite the dilemma for us, no? If we are not true to applying the law as written then we are by definition of “rule of law” no longer under “rule of law” and thus the entire concept of law as we are historically taught becomes instantly nonexistent.

So it appears we are at times left with only the forced acceptance of hurting ourselves, hurting our social order for the ideal of living by the rule of law, an ideal existing for the purpose of removing the errors of emotion in the attempt to achieve betterment in producing justice.

I’m sorry. I will not accept that a system designed by persons who devoted their lives to understanding human nature and history, and used civil war to create the environment needed such that their ideas regarding government could live, is inherently flawed in a manor that we have to live with the threat of what can be called “legal masochism”. The question becomes: Where is the flaw in the application of the ideal and concept of “the rule of law” such that we have a masochistic results? Even Mr. Turley notes that this current decision has the ability to be a major self flagellation.

The only point at which both sides or all sides can resolve this predicament (assuming you are not accepting that legal masochism is an inherent aspect of our system) is at the place in any sentence where the word “faith” or it’s variant appears. Faithfully. Faithful. This word “faith” can not be interpreted and thus the sentence understood without answering the question: Given to what? What is our faith given to? What is the basis of our faith? We give faith to something because we accept that the “something” has a power of some nature.

SCOTUS: …and that I will faithfully and impartially discharge and perform all the duties incumbent upon me as _________, according to the best of my abilities and understanding, agreeably to the constitution and laws of the United States.

All federal employees: …that I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same…

President: …I will faithfully execute the office of President of the United States, and will to the best of my ability, preserve, protect and defend the Constitution of the United States.

Vice President:… I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same…

Congress: …I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that I will bear true faith and allegiance to the same…

The only entity in our governing system not to specifically or tangentially pledge their faith to the Constitution is “We the People”. The Pledge of Allegiance is a pledge to each other as one. I would argue, that such a pledge implies our faith in “We the People”. This is as it should be. We are not bound to the Constitution by any external power. Not by religious power, royalty power, dictatorial power, corporate power, etc. We can not be so bound because we are the power. There is no other hierarchical power in our system of governance. Any faith we express regarding our ability to govern our self is the result of the enlightened reality that people governed are the source of all governance power. We are the power. We agreed to this understanding of power in ratifying the Constitution.

Thus, the only power that the Constitution has is the power that We write into it. This is the genius of our founders. The Constitution is the written word so to speak of our power. It is our collective thoughts regarding governance. It is our identity as a governed people. It is the blue print to be used by any entity to come if such entity desired to reproduce our governance mind.

Many have noted the Preamble of the Constitution as a reference to why the Citizens United ruling is in error. The presentation is that it states only “We the People” and thus follows that only humans can have rights and power. But, this is incorrect as to why the argument as Mr. Greenwald and Mr. Turley state is in error.

The Preamble does not give power to us. The Preamble however, is very important for it is the statement from us to each other declaring what “We the people” will do with our power. The Preamble is the point of source and reference for all of our laws and the Bill of Rights and thus rulings. The Preamble is the stated purpose and desired goal of the application of our power. It is the final test as to the consistency of all that comes after it. All that comes after the Preamble is the listed means by which we will exercise our power. This includes the Bill of Rights. As an individual, it would be one’s purpose in life.

Here’s the real rub however, that I have with all I have read and the current way law is practiced and the reason for the above set up of this discussion. I am not a sum of parts and neither are you. I am a whole, a one which can not be understood or related to by subsection analysis. My intentions can not be fully implemented or appreciated as to their appropriateness to my overarching purpose independently of each. If you accept that this is true and I believe that the prevailing founders did, then our Constitution as the written word of our power and it’s use must so be understood and applied as a whole life which is summarized in the Preamble.

To exercise our Constitution in a reductionist manor, I believe is a mistake and a disservice to the intellect of those who wrote it. Such proof of thought can be found in the very division of our power. No one division can have purpose, can have material to work with without the other. The concept of separate but equal can only be appreciated if it is understood that the separation is only for the purpose of job distinction. Our power can not be exercised in whole by any one branch. The strength of the whole of our power can not be experienced in any one branch. That each branch is originated in the Constitution and each branch is dependent on the others for its job, is proof of construct and thus application and exercise of the Constitution and all that comes after it. One can not properly determine the appropriateness of any decision originating out of any of the branches without considering the the relationship to the whole of the Constitution. The whole being the relationship back to the Preamble which is the stated purpose and intentions of the application of our power. That such work is not performed creates what the Citizens United case has created…legal masochism.

Yes, we are at the point of faith. “We the People” refers to a collective and thus, the collective faith in the source of governance power. Our government exists solely as the result of our collective agreement to have faith in the idea that the power to govern comes from the governed. The entirety of our power is the collective faith in the idea: the power to govern comes from the governed. This was never made more real to me than when the issue of the “Nuclear Option” materialized. I wondered why not just go to the SCOTUS to get the question of constitutionality settled? I learned that the SCOTUS would not consider such a question coming from another equally powerful branch of our governance. Thus, the rule regarding filibusters and in fact the entire functioning of our government as laid out in the Constitution came down to an agreement by two parties (political or otherwise) to abide by the rules . Once one side decides not to agree, all governance related to the purposeful use of our power as stated in the Preamble stops. It is the Civil war at the extreme of disagreement. It includes the decision to not abide by the intention of the use of our power as stated in the Preamble leading to our incapable congress.  That is, filibustering everything.  It is why one party could pass all they wanted with just 50 votes.

There is only one means by which an individual or collection of individuals can decide not to agree as it relates to applying our power as designated in the Constitution. It is by not placing faith in the source of the power of government. Once faith is given to any other power than “We the People”, our government instantly ceases to exist. There is no Constitution, no Constitutional power, no Constitutional declaration of the purpose and use of power without faith in “We the People”. It is in this understanding that the argument as presented by Mr. Greenwald and Mr. Turley and those who present the first three words of the Preamble in counter argument fail.   Placing power of any type in any entity other than “We the People” is a displacement  of the faith.  Stating that power comes from any other source than “We the People” is a displacement of the faith.  Both makes the Constitution just a bunch of words.

There is a reason those who are charged with acting on our behalf, charged with implementing our intent have to pledge their faith to the Constitution. It is because they are pledging their faith to the source of the power they will exercise: We the People. In pledging to the Constitution, they are pledging to Us. It is this pledge to Us that gives us the ability to judge where their faith lays. The moment power is place in something other than “We the People”, our governance as dictated by the Constitution ceases to exist.

This gets us to the freedom of speech issue. Freedom of speech can only be applied to Us because as a declared right within our Constitution, the document that is the materialization of our power, it is a declared means by which We exercise our power. There is no other source of power regarding governance and thus there is no other entity that can have or obtain such power. The right of free speech can not be bestowed to an entity that is not a “people” by virtue of judging it’s bestowment via the Constitution. To do so is a violation of the pledge of faith to the source of our power.

In the issue of the entity called a corporation, the only true means to give it such power would be through legislation though I would argue that the transference of power properly has to be by constitutional amendment as all issues of seat of power are of the Constitution and not laws created by the legislative branch. Laws can not create power in our governance as it is constructed. At the same time, being that corporations are creations of law, it is impossible to reason that they can have the free exercise of a power which is only sourced from our faith in the idea that the power to govern comes from us. That the SCOTUS in the past has ruled (and this is even questioned) that corporations are proxies for people is a misplace of faith. It is a violation of their oath.

Then again, I could have simply pointed out that to conflate our economic system and its structure and components with our governance system as being a proxy for our governance system is the gravest of insults to our founders.  They certainly understood power and they certainly understood the power of pooled money.

Corporations are properly a part of our economic system. It is a system that is in service to “We the people” for it only exists by virtue of law and not by virtue of the Constitution. It is a system that exists for a very specific and limited purpose; a purpose that does not included being a part of our governmental structure which exists for the purpose of exercising our power. Those structures that exist for the exercise of Our power are only the three branches. But consider the argument that corporation are just a coming together of people to exercise their power? Such a thought is a violation of our Constitution and ultimately our faith because the only means to come together to exercise our power is the direct interaction with our government through our Constitution. It’s called voting. That is the only means that exists in the Constitution for all those “strict constitutionalists”.

The economic system should properly be viewed as the results of our implementation of laws that protects us during the exercising of our personal freedom, not power. Freedom certainly results in greater power, but we have limited our individual exercise of power via our faith in the collective power such that all are endowed with the freedom of “domestic tranquility” and “the Blessings of Liberty.” One is free not to be screwed by another to be blunt but, one is not free to screw another.

At this point I am willing to accept that what I am suggesting with this entire presentation suggests that we are currently living under many rulings that are actually in error and thus would result in the undoing of a major amount of what we consider settled law. For example, the entity called a corporation should have never been accepted as the proper vehicle, model or structure for people to freely assemble for the purpose of forming a relationship with their government. Free assembly is just that. Assembly free of formal structure. What it means is that those looking to be elected really do need to go one person at a time to get said person’s vote. What it means is that at the point in the growth of our nation that campaigning became an expense for the candidate, we should have implemented public funding via law, or amended the Constitution to allow another form of assemble for the purpose of funding campaigns. Such a method would be an issue of placing power and certainly relates to the Preamble’s stated purpose and application of our power:

…in Order to form a more perfect Union.

Thank you.

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I took a trip back to memory lane via the archives to the very first post from the Angry Bear on Feb. 28, 2003 that I know of. The look and style of Angry Bear has changed over time, as well as who writes and having an expanded list of subject matter. 2003 seems an eternity ago in internet time.

I had to chuckle at an early post by Angry Bear exuding excitement about being ‘linked’ by Atrios. The fun and newness of the format for many of us needs refreshing sometimes.

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Inflation in China is not necessarily a bad thing

Yesterday, the release of key economic indicators in China produced headlines like this: China Targets Inflation as Economy Runs Hot. The table below lists the full release, including the consensus expectations (Bloomberg’s survey) for each statistic. (Here is the link for the actual data release.)

As you can see, the survey undershot the actual results across many of the releases, including that for GDP and inflation (CPI). The surge in the CPI, 1.9% y/y in December versus 1.4% y/y expected, attracted a lot of attention. According to the Economist, Helen Qiao and Yu Song at Goldman Sachs points out that prices may be on an (increasingly) upward trajectory:

The recent rise in inflation was caused mainly by higher food prices as a result of severe winter weather in northern China. In many cities, fresh-vegetable prices have more than doubled in the past two months. But Helen Qiao and Yu Song at Goldman Sachs argue that it is not just food prices that risk pushing up inflation: the economy is starting to exceed its speed limit. If, as China bears contend, the economy had massive overcapacity, there would be little to worry about: excess supply would hold down prices. But bottlenecks are already appearing. Some provinces report electricity shortages, and stocks of coal are low. The labour market is also tightening, forcing firms to pay higher wages.

The final sentence is very important – a tight labor market will lead to higher wages (the data on wages is 4 months old, so I will not plot it out). This suggests, completely by inference on my part, that prices pressures will be the wage-price spiral type – this can quickly get out of hand.

To be sure, the inflation surge was driven primarily by food prices, up 5.3% over the year; but with retail sales growing at a rate of 17.5% over the year and broad money growing at a 27.7% pace in 2009, prices hikes are bound to spread. We already saw inflation pressures building in the trade balance. Now I get to my chosen post-point: why is inflation in China necessarily a bad thing?

The inflation pop sparked a lot of market angst yesterday. Of course, this is just a single data point; but if inflation does build, and the government insists on maintaining its tight peg against the $US, then inflation will do what US consumers and Asian savers have not: reverse trade flows.

Specifically, and holding all else equal, sizable inflation in China would drive up the value of its real-exchange rate (REER), where the REER is the nominal exchange rate adjusted for relative prices in China versus its trading partners – faced by the Chinese.

As illustrated in the chart above, the REER has been on a downward trajectory throughout 2008, but remains elevated compared to its 2006 levels. The real exchange rate is the single-most important factor in determining trade flows. An inflation-driven growth in the real value of the Chinese yuan (REER) would effectively, and eventually, drop China’s export share with key trading partners.

Rebecca Wilder

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Why Soc Sec TF Balances Grow in a Time of Recession

by Bruce Webb
(Update-something in this doesn’t look quite right. The over all argument is right but something is amiss down in the post. Bonus points if you find it before I do.)
(Update 2-found it. I think, see strike out and addition below. But there are a lot of numbers in play here.)

Blogger/Reader BK: I know what the TF says and I know what the CBO says,and I think they are both wrong. We will top out the Fund at a much lower number $2.8 T and it will come much sooner than anticipated.

To see why this isn’t so and actually just can’t be we need to inspect the following table from the 2009 Report Table IV.A3.—Operations of the Combined OASI and DI Trust Funds, Calendar Years 2004-18. The second column from the right shows the Combined Trust Funds projected to go from $2.4 trillion in 2008 to $4.0 trillion in 2018. What would it take to freeze it at $2.8 trillion? Discussion below the fold.

Well to freeze the Trust Fund at any given value obviously ‘Net Increase in Assets’ for the year has to go to zero. And this can only happen if total ‘Cost’ equals total ‘Income’. And this is where our reader goes off the rails.

For Social Security ‘Income’ is the sum of ‘Contributions’ (payroll tax), ‘Tax on Benefits’, and ‘Interest’, on the other hand ‘Cost’ is the sum of ‘Benefits’, ‘Admin’, and RRB Interchange (another kind of benefits). All three cost components and the first two income components are in the form of cash flowing in and out of Treasury and so are a measure of current year cash-flow. The CBO calls this ‘primary surplus/deficit’. On the other hand interest does not come in the form of cash or checks, like the interest on your simple savings account it shows up as a credit, but like that interest payment does shows up on your balance. So in order to calculate ‘Increase in assets’ we take ‘Primary surplus/deficit’ and add interest which in 2008 gave us an increase in TF balance to $2.4 trillion.

The 2009 Report projected an ‘Increase in assets’ of $137 billion for 2009, $138 bn for 2010, and $154 bn for 2011 for a total of $2.9 trillion. What would it take to get that end sum down to $2.8 trillion? Well it would mean that $100 billion in interest that would have been credited as an ‘Increase in assets’ had to be go somewhere else and the ONLY place that can be is to offset a larger than expected primary deficit’. In this case in order to keep the TF Balance from going to $2.9 tn you need an ADDITIONAL $100 plus billion of primary deficit over those three years. Including of course last year.

How did we do last year? BK tried to figure that out from monthly numbers from SSA. Well Nancy Ortiz and Some Guy explained why that was a bad idea, those spreadsheets are working tools subject to all kinds of variation. On the other hand the Treasury publishes Monthly Trust Fund Reports that are pretty much the final word, at least I have not found in the past any varation between their Dec 31 totals and the year end total printed in the Annual Report (due in the Spring). And luckily for us the December final was published yesterday. Since each Trust Fund is legally separate for Treasury Dept purposes there are two reports each month, one for OASI and one for DI .

The OAS Report shows an ending balance of $2.318 trillion dollars. If we go to Table IV.A1 we see this is up from 2008 year end of $2.203 tn but fell short of anticipated $2.349 tn. And because of the way the math works ALL of that shortfall came on the receipts side. But unless those receipts fall so short that ALL interest has to be tapped to make up the difference then the TF balance will continue to go up.

Now the DI Report shows an ending balance of $199 billion. If we go to Table IV.A2 we see that this is DOWN from $216 billion. On the other hand the DI TF was already projected to decrease to $206 billion, the end result was just $10 billion worse than expected. (Which is to say bad, DI needs fixing now.)

If we add these numbers together we would get a ‘Net increase in assets’ for combined OASDI for 2009 of $108 billion to a total of $2.53 tn. And here is the key point our commenter missed in order for the INCREASE to be less, next year has to be WORSE than last year, in order for that increase to be ZERO next year has to be a LOT WORSE. Because not only would results have to be bad enough to gobble up an amount equal to the interest that made up the net increase but also any interest on that interest. In order to keep the Trust Fund to growing to $2.8 trillion we have to project an EXTRA $50 billion in decrease in ‘Net Increase’. Well that might well be, there is nothing implausible about reducing the RATE of growth of the TF balance by having only $225 billion in net increase in 2010 and 2011 instead of projected $275 billion, a year end TF balance of $2.8 trillion or less in 2011 would not at all be surprising.

On the other hand it would not on that account be frozen. Because a $2.8 trillion Trust Fund still throws off a certain amount of interest and in order for that to NOT give you a positive ‘Net Increase in Assets’ then primary deficit has to come in at more than the total amount of interest earned that year. Meaning that not only would 2010 and 2011 have to be significantly worse in terms of revenue than 2009 but 2012 would have to be MUCH worse (the effect ultimately damps out).

In order for the Trust Fund to ‘top out’ it needs to run systematic cash deficits in excess of $120 billion a year. Forever. Other wise the insidious effects of compound interest continue to work on the balances.

We are in a deep unemployment recession and the resulting decrease in payroll tax receipts has resulted in a decrease in the RATE of increase of Trust Fund Balances, but in order to get that rate to go to zero we would need to have an immediate decrease in payroll contributions of $8 billion plus a MONTH to eat up the roughly $100 billion plus of interest the current TF will earn this year. Which would mean a drop in around $775 billion in total payroll (quick numbers, please check) which is more than triple the total of wages in covered employment. This literally can’t happen. Yep too quick. The right numbers are found here: which shows taxable payroll right at $5.6 trillion, $775 billion is 14% of that meaning we would need maybe 25% unemployment to eat up that interest income in the short run.

Per the 2009 Report’s Intermediate Assumption the Combined Trust Funds were projected to peak at $4.3 trillion in 2027 and then descend fairly rapidly to zero in 2037. Under the more pessimistic High Cost Assumption the would peak at $3.4 trillion in 2018 en route to depletion in 2027. (On the other hand High Cost model had unemployment 8.5% for 2009, 9.3% 2010 and average 8% through 2016, and never better than 6.5% after that with Real Wage permanently under 1.0% (in other words a fricking catastrophic perma-recession)). Still there is a case to be made for a TF that tops out in 2018, the Trustees make it,

But there is no set of numbers that would have the Trust Fund top out at $2.8 trillion in the next two years, the momentum of the existing TF balance and the interest it accrues are simply too great to be entirely overcome by a shortfall in tax income over the short run.

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The Trouble with Cost Containment

by Tom aka Rusty

The Trouble with Cost Containment

Long-term care facilities face multiple pressures thwarting cost containment attempts.

The nursing homes have three types of patients:

rehab: typically younger post orthopedic surgery or cardiac care, short stay
joint hospice patients: who are to be provided comfort care while dying
true long-term care residents: typically an 84 year-old with multiple chronic conditions, unable to live in a residence and who will likely die in the facility

Patients #1 and #2 are pretty clear cut as to costs and treatments. #3 is a problem.

The facility is in a vise created by regulators, physicians, families, residents and malpractice lawyers. Too much aggressive care is a waste of money and often violates patient wishes. But some family members want aggressive care.

Some family members hound physicians to provide more care, and the physicians may cave in. Nurses are often put in the middle of family battles (Mrs. Rustbelt once had a distraught daughter call 911 and had paramedics arrive to resuscitate a dead cancer patient, while family members screamed at each other in the hall).

Too little care is declared neglect by regulators and malpractice lawyers. And who wants a parent or grandparent to die? How much do you want to put someone through who is on the threshold of death?

The pressure on nurses is insane, partially accounting for high burnout and high turnover rates.

So what do harried nurses and physicians do? Transfer the patient to the hospital ER, for a stay that may last 2 hours to several days. The easiest course for a physician is to approve the transfer. This drives huge Medicare costs for little value. This drives Medicare administrators batty.

Some of the transfers make sense, rehydrating a flu patient who is nowhere near dying.

Other transfers create severe discomfort for the resident, with little to show for it.

How do we solve this?
Tom aka Rusty Rustbelt

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Government payroll across U.S. Presidencies

by Rebecca Wilder

The term of Brazil’s President, Luiz Inácio Lula da Silva, concludes this year. During President Lula’s tenure, Brazil enjoyed stable monetary policy and strong economic growth. However, President Lula is likewise known for growing the size of Brazil’s government, for example, by adding over 300k government jobs. This translates into a 4.8% increase in the government payroll when adjusted for working-age population growth.

This is a criticism of Lula’s administration – growing the size of the government (here, as measured by its payroll), and stifling some prospects for long-run economic growth.

Accordingly, let’s see how previous U.S. Presidents grew the U.S. government payroll: is there a party trend? The general idea is, that the Democratic Party seeks a larger role for government as a mechanism to increase economic welfare than does the Republican Party (generally). A priori, I expect to see more robust government payroll growth during Democratic administrations.

The chart illustrates the level change in the total government payroll by Presidency since 1953 (the data are not seasonally adjusted and reported here). There is no noticeable correlation between party and the government payroll, although LBJ and Clinton, Democrats, did grow government jobs by the widest margin, 2.6m and 2.3m, respectively.

State and local government jobs are included in the measure of “government”, while a better link to party affiliation is the federal payroll. Furthermore, the population – and thus total payroll – grew as well. So, in focusing solely on the federal payroll in percentage gains (in order to remove effects of term length), and adjusting for population growth, there appears to be a stronger correlation between the current administration’s party affiliation and government jobs growth.

The top 3 federal job-creators were LBJ, JFK, and Obama, Democrats, while 4 out of the top 5 top federal job-slashers were Nixon, Bush, Bush, and Ford, Republicans. Interestingly, Clinton ranks first in cutting the federal payroll; it fell by almost 10% when the population grew by roughly the same amount – in adjusted terms, that’s -18% fewer federal jobs.

This analysis, of course, does not account for recessions, budgets, or external factors that would differentiate payroll growth across periods. However, there is a correlation, as in Brazil, between party affiliation and the growth of the federal payroll.

Rebecca Wilder

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