Next, it's not a point that has been discussed much, but there are some extra complications or ironies involved if you go the budget reconciliation route. We're going to be discussing this in more detail later. But there are some technical particulars about the reconciliation process (particularly tied to the so-called Byrd Rule) which come into play. Specifically, to be allowed under budget reconciliation, bills need to meet certain standards about their effect on the federal budget. And because of that, it may be that to get a health care reform bill through reconciliation it would need to have a substantially more progressive budget option, because of its effect on the budget. I know that's a lot of gobbledygook to take in. But the upshot is that the decision to go through reconciliation may not just be a matter of how tough the Dems want to get. It may force them to beef up the public option, which in turn could affect the number of Democratic votes availability.
On the Republican gun crazy/flat earth society front we've got prayers that Obama will die.
There is no evidence of that problem at present, when the unemployment is a historically high (for Japan) unemployment rate of 5.7 percent.
As a more general issue, a relative decline in the size of the labor force would simply mean that the least productive jobs go unfilled. This could mean, for example, that jobs held by the pushers who shove people into Tokyo's overcrowded subways may go unfilled. There may be fewer people working as parking lot attendants, custodians in office buildings and convenience store clerks. As an offset, this densely populated country, with very high land prices, will become less densely populated and have lower land prices. It will also be much easier for Japan to reduce its greenhouse gas emissions and other pollutants. It is difficult to see where the crisis lies.
Agathon: "As I was saying, the market system chooses an allocation. That allocation can only be justified under the assumption that moves along the Pareto frontier in every direction--moves that transfer wealth from one member of society to another--are of no benefit to social welfare, while moves toward the Pareto frontier do benefit social welfare. If we restrict ourselves to social welfare functions that are weighted sums of individual utilities, that means that the market system's social welfare function gives each individual a weight inversely proportional to his or her marginal utility of wealth."
Glaukon: "Didn't somebody say about society that there was no such..."
Agathon: "Hush! If you want to quote Margaret Thatcher, you must introduce her as a speaking character in this dialogue and grant her some of her time..."
Glaukon: "I? You're the authorial stand-in in this dialogue, not me..."
Agathon: "That means that the market system, in weighting utilities and adding them up, gives you a much lower utility than it gives Richard Cheney. In fact, if marginal utility of wealth is inversely proportional to the square of lifetime wealth, the market system gives Richard Cheney about 400 times as big a weight as it gives you."
Glaukon: "That's sick."
Agathon: "And it gives Bill Gates a weight about 400,000,000 times as big a weight as it gives you."
Glaukon: "That's sicker."
Agathon: "But it gives you about 40,000 times the weight it gives your average Bengali peasant, who thus has about 1/16,000,000,000,000 the amount of the market system's concern as Bill Gates has. Will you teach that?"
Glaukon: "They'll call me a Communist!"
Agathon: "But it's true!"
Glaukon: "That I'm a Communist?"
Agathon: "No. That that's what the market system does!"
Glaukon: "We are value neutral economists! We don't care about distribution! We care about efficiency!"
Agathon: "But claiming that you don't care about distribution is implicitly saying that shifts in distribution are of no account--which can be true only if the social welfare function gives everybody a weight inversely proportional to their marginal utility of wealth."
Glaukon: "You're introducing politics into a value-neutral technocratic social science."
Agathon: "Politics?! Moi? I'm simply evaluating the derivatives of a social welfare function under the assumption that the market allocation is its ArgMax. What could be more technocratic than that? I'm just trying to attain a little clarity of thought."
Thrasymachus: "But where rule rests not--as somebody or other said at one of Old Joseph de Maistre's little soirees in St. Petersburg--on the hangman, but on misdirection and confusion, to strip away the veils of alienation and false consciousness that keep humans from perceiving their species-being, the act of unveiling is itself a powerfully political act."
Agathon: "Are you Thrasymachus or Karl Marx?"
Thrasymachus: "Ah. Marx thought unveiling was a good thing. I think it is neither good nor bad, for 'good' like 'justice' is really just another word for the interest of the stronger party."
Glaukon: "And we gave you tenure here at Berkeley?"
Thrasymachus: "Shhh! The humanities departments still think relativism is sexy. They haven't yet figured out that to assume a position of relativism--like the claim to be neutral on issues of distribution--is really a statement that you are on the side of the powerful."
Agathon: "And are you?"
Thrasymachus: "It is the just and the good--or, rather, the 'just' and the 'good'--thing to do.
But when it comes to the United States Senate it is always worth recalling that majority rule is a funny concept.
If you attribute to each Senator half the population of the state he or she represents, then the Democrats’ two Senators from California, two from New York, one from Florida, two from Illinois, two from Pennsylvania, one from Ohio, two from Michigan, one from North Carolina, two from New Jersey, two from Virginia, two from Washington, two from Massachusetts, one from Indiana, one from Missouri, and two from Maryland together represent 51.125 percent of the American people. That’s just 25 Senators. There are an additional 35 Democratic Party Senators. Legislation by “majority rule” would mean something less like “50 Senators get to make laws” than “the House of Representatives gets to make laws.” And keep in mind that for all the problems with Barack Obama’s strategy and all the perfidy of the right-wing and all the fecklessness of the media and all the ineffectualness of the Democratic Party leadership, if we operated on a majority rules system of government we’d be having a very different conversation. Absent the Senate, the American Climate and Energy Security Act would be law. And absent the Senate we would have a health care bill financed through taxes on the wealthy providing subsidies for families up to 400 percent of the poverty line, and creating a somewhat robust public option.
Now, obviously, that’s not the country we live in and everyone knew the Senate existed before we started down this road. But it’s absolutely crucial to understand that our political institutions are shaping these outcomes much more heavily than are individual tactical decisions.
According to just about everybody, Teddy Kennedy represented the “soul” of the Democratic party, which presumably refers to his long-professed concern the poor and the weak. Now that that soul is safely buried, the Dems can move on to the important stuff, like preserving Wall Street power and escalating the war in Afghanistan.
...because of the mistakes of his youth, Ted Kennedy felt he had something to prove in the Senate. And we're all better off as a result.... Sen. Kennedy built an entire career on perseverance. He struggled in the legislative trenches day in and day out. He stuck to his ideals when it came to unpopular votes. There's a chance that he never would have had something to prove, never would have been so committed to his truth, if he hadn't made such a fatal mistake in 1969. As he told 60 Minutes, "I think I've always wanted to try and be a better person." Of course we wish he could have manifested all of these qualities without the loss of a promising young woman's life.
health-care reform will have major effects on decreasing deficits over the long term, when spending discipline is actually important -- today's deficits are a necessary response to the recession.
The single major driver of growth in government spending is health care, which is increasing widely out of proportion to population growth and, if left unchecked, could make up 25 percent of the United States' gross domestic product by 2025. Proposals currently under discussion in Congress aim to slow the growth in health-care expenses with a variety of policy tools, including a public plan that could increase competition (and thus lower costs overall), cutting deals with various industry stakeholders to find savings, new studies to determine the most cost-effective ways to treat illness, and an independent board to study Medicare and Medicaid reimbursement and set more realistic prices.
Despite the president's focus on health care as deficit reduction and evidence that the Congressional Budget Office, charged with discovering the costs of these bills, chronically overestimates the costs and underestimates the savings of health-care bills, most experts think that no feasible bill will bend the curve as much as is necessary to directly slow the increase in spending -- ironically, the cheapest option, single-payer, is politically toxic. Savings that do result from reform will be required to subsidize health care for most of the 47 million Americans who have no health insurance. But even this kind of health-care reform is important for reducing the long-term deficit.
First of all, reform will provide more information to policy-makers. Studies of comparative effectiveness and data from a public insurance plan will provide a deeper understanding of inefficiencies in the system and the solutions to those inefficiencies. The White House Council of Economic Advisers has also estimated that health-care reform will lead to increases in GDP, reaching over 2 percent in 2020 that would lead to proportional increases in tax revenue and lower deficits. But most important, eliminating the "crazy system of cross-subsidies," as Center for Budget and Policy Priorities economist Jim Horney calls the complex interweaving of publicly and privately subsidized care for the under- and uninsured, would create a much simpler framework for future cost-reduction efforts.
"It really is important to get universal or near-universal coverage in order to help create a system that is more sensible," Horney explains. "That system will help us to design [more efficient] reimbursement systems."
The people standing directly in the way of health-care reform are conservative Democrats who claim to be deficit hawks, like Max Baucus and Kent Conrad in the Senate and the Blue Dogs caucus in the House. Of late, however, their interest in cutting the deficit has been eclipsed by political cowardice in the face of unified Republican obstruction to any and all reform efforts. The stumbling efforts of these supposed paragons of fiscal responsibility to maneuver the politics of health-care reform have decreased the chances of a bill that would reduce the deficit over the long term.
So get it straight: If the latest budget projections are keeping you up at night, the best way to ease your troubled mind is to support health-care reform. Otherwise, costs will keep rising, and deficits along with them. Opportunities to improve health care only come along once in a while -- the last major effort was 15 years ago. Fifteen years from now, it's possible that nearly one-quarter of every dollar spent in the U.S. will be spent on health care -- much of that coming, directly or indirectly, from the government. That sounds fiscally responsible, doesn't it?
President Obama has pledged many times not to sign a reform bill that will add to the federal deficit. It means that he will have to finance that $1 trillion with either
- additional federal tax revenue, or
- cuts in currently projected spending on federal programs — e.g. Medicare — that the Congressional Budget Office will recognize (the jargon is “score”) as a genuine reduction in projected federal spending relative to its baseline forecast of federal spending, or
- a combination of the two.
Additional federal revenue could be raised by
- increasing the income tax rate on some or all taxpayers — for example, on taxpayers with a taxable annual income above $250,000;
- taxing some or all of the health insurance premiums paid by companies and their employees
- imposing excise taxes (also called “sin taxes”) narrowly aimed at use of alcohol, sugar, fat, tobacco and other substances that can either cause ill health or impose spillover societal costs on through accidents, domestic violence or insurance premiums for illnesses caused by that consumption;
- collecting a simple, earmarked federal health care sales tax of, say, one-half of 1 percent or so on all retail sales to consumers, with perhaps a cap on large purchases like cars or high-cost households durables, like refrigerators or furniture.
Each of these measures — new taxes or spending cuts — will naturally elicit outrage from the groups affected by them. Naturally also, they will prompt feigned outrage from those who oppose health care reform this year for more political reasons.
Raising income-tax rates, especially on high-income Americans who think of themselves as the most creative and productive Americans, will give rise to prophesies of economic doom for America.
Taxing employment-based health benefits will lead to outrage not only from the left of the political spectrum, but also from employers and the right-of-center United States Chamber of Commerce. The argument will be that eliminating the annual tax preference of $250 billion or so accorded to job-based health insurance will spell its doom, thereby the doom of private health insurance, and thereby the doom of American health care as we know it.
Imposing “sin taxes” will be denounced as regressive by commentators all along the political spectrum, sometimes on the theory that low-income Americans are particularly prone to engage in “sinful” forms of consumption.
Earmarked sales taxes will be deplored as regressive as well, although such a tax strikes me as eminently worth considering. It would give all Americans some stake in health care cost containment. Annual consumption spending in the United States is now about $10 trillion. It will grow in the decade ahead. If even 80 percent of that total were subject to a small sales tax of, say, one half of 1 percent, it would yield well over $400 billion additional federal revenue over 10 years toward the required $1 trillion price tag of health reform.
Finally, cutting current federal health spending on, say, Medicare will be assailed as threatening (a) the health and even life of America’s elderly, (b) the closing of hospitals and (c) the impoverishment of doctors. Sometimes these outcries come from the very groups — e.g., the editorial page of The Wall Street Journal — that also assert that government spending on Medicare is out of control and wasteful.
It is interesting, and perhaps worth noting, that while political opposition seems to be hardening against the $1 trillion, ten-year cost of the early versions of health reform, barely a peep of concern has been raised about the $3 trillion price tag for President Obama’s plan to extend most of the Bush-era tax cuts.
The message seems pretty clear: The President, congressional Democrats, and nearly all Republicans are fine with busting the budget to cut taxes for nearly everyone, notwithstanding a cumulative deficit over the next decade of $9 trillion. They are, by contrast, unwilling to spend one-third as much to provide medical insurance for those who cannot afford it. I’ve always felt that health reform is as much an ethical choice as an economic one. We appear to be making ours.
it makes no sense to let taxes go up until we are well into a strong, robust economic expansion--but it also makes no sense at all to permanently extend the Bush tax shifts of the burden from us to our children and grandchildren.I am most definitely not fine by extending the Bush-era--well, Howard could start by not calling them "tax cuts" because they are not: they are a tax shift from current taxpayers into the future.... My view is that we should (a) decide how much we want to spend, and then (b) balance the non-Social Security budget. And that is not at all consistent with extending the Bush tax cuts. But is there a chance that any number of Republican-leaning economists will join me? They are very scarce on the ground.
And Obama's senior economic advisers appear to be lobbying the president to choose differently than Gleckman assumes:
Obama officials: Taxes may rise: Geithner and Summers both sidestepped questions on Obama’s intentions about taxes. Geithner said the White House was not ready to rule out a tax hike to reduce the federal deficit; Summers said Obama’s proposed health care overhaul needs funding from somewhere. “There is a lot that can happen over time,” Summers said, adding that the administration believes “it is never a good idea to absolutely rule things out, no matter what.”...
“If we want an economy that’s going to grow in the future, people have to understand we have to bring those deficits down. And it’s going to be difficult, hard for us to do. And the path to that is through health care reform,” Geithner said. “We’re not at the point yet where we’re going to make a judgment about what it’s going to take.”
Back last fall, those of us who had sat at the feet of John Hicks and Charlie Kindleberger said two things that made many around us think that we are crazy:
That the enormous debt quantities the federal government was about to start issuing were unlikely to significantly push up interest rates.
That the federal government, if it managed the TARP money properly, might well wind up making a profit from it--buy low sell high after all.
The first of these has certainly come true. Now Dan Gross says that the second may as well:
At one level, all policy analysis starts with benefit-cost analysis: on what basis could one choose among option except their advantages (benefits) and their disadvantages (costs)? That makes it puzzling, at first blush, that benefit-cost analysis should be controversial; when it comes to environmental and safety regulation, benefit-cost is beloved of industry lobbyists and loathed by activists. (Benefit-cost studies are rarely applied to questions such as going to war or extending prison sentences.)
But the puzzle has a solution: the benefit-cost analysis practiced in the regulatory process – what I teach my students to call “forensic” benefit-cost – differs in three ways from ideal, or armchair, benefit-cost, as practiced by someone trying to figure out what course of action will best serve the public interest, conceived as the sum of gains and losses to individuals. Each of those differences constitutes a frank error, and all are enforced by the courts and by the Office of Information and Regulatory Affairs (OIRA) of the Office of Management and Budget.
the Congress should order the administration to commission a study by the National Research Council to establish a set of standards for regulatory benefit-cost analysis, which can then be written into the statutes that require such analysis before a regulation can be issued, and adopted by OMB for benefit-cost analysis done in other administrative contexts. The legislation establishing the study should tell the NRC to develop rules that embody distributional adjustments, Bayesian weighting of uncertain gains and losses, and willingness-to-pay evaluation of gains and losses that do not come with market prices attached.
Their basis for ignoring the plain language of the Constitution is a statement by James Madison that federal spending is only really permitted when it advances one of Congress' other enumerated powers, such as by building a post office or funding a war. Since the words "health care" do not appear in the Constitution, there can't be any federal power to pay for health care, and the uninsured can eat cake.
Although tenthers are correct that Madison did make such a statement, his views hardly reflect the founding generation's consensus. Alexander Hamilton, the nation's first Treasury secretary and a co-author of Madison's Federalist Papers, emphatically rejected Madison's claim that the words "provide for the … general welfare of the United States" have any kind of secret meaning. Moreover, it is not even clear that Madison still believed that the Constitution requires a decoder ring when he was elected to the White House. Justice Joseph Story, whom President Madison appointed to the Supreme Court, was a Hamiltonian.
If anything, the tenthers' invocation of Madison reflects the danger inherent in any appeal to the founding generation. Early American politics were at least as contentious as our own, and the framers debated the Constitution's meaning with just as much zeal and uncertainty as we bring to such arguments today. Indeed, the framers' many conflicting statements offer such a rich menu of viewpoints that it is possible to find a quotation to support nearly any political agenda.
More important, there is something fundamentally authoritarian about the tenther constitution. Social Security, Medicare, and health-care reform are all wildly popular, yet the tenther constitution would shackle our democracy and forbid Congress from enacting the same policies that the American people elected them to advance. After years of raging against mythical judges who "legislate from the bench," tenther conservatives now demand a constitution that will not let anyone legislate at all.
Once the basic technological problems were solved, the use of coins spread rapidly. The whys and wherefores of how this happened are intricate and imperfectly understood. But the key to the transition from the use of relatively few coins made of the naturally-occurring but highly-variable gold/silver alloy of electrum to large numbers of coins of refined metal seems to have been the discovery stamped by governments to guarantee their value. Virtually always minted by the state, the new coins were counted, not weighed.
What’s really interesting is what happened next, as the Greeks began to grapple with the system they had invented. Money was homogeneous and impersonal, they discovered, abstract and concrete, an end in itself and a means to universal aims, different from everything else. The most unsettling thing about it was the recognition that its possessor could buy his way out of all other (pre-monetary) forms of social relationship, at least in principle: violence, reciprocity, redistribution, kinship, ritual, and so on. No wonder some people would do anything for money!
The recognition that money could dissolve these bonds worried the Greeks. “Hence the focus of much Athenian tragedy on the extreme isolation of the individual – from the gods and even (through killing) from his closest kin,” writes Seaford. “I know of no precedent for this in literature, certainly not in the pre-monetary society depicted in Homer.” The figure of the tyrant preoccupied Athenian society, he writes: absorbed by money as the means to power, violating the sacred and murdering his kin, never more memorably than in the dénouement of the Oedipus saga in Aeschylus’ Seven Against Thebes, in which the king’s sons kill each other battling over their inheritance. The words “hero” barely appears in Athenian tragedy, but “tyrant” (turranos) occurs more than 170 times.
The most peculiar novelty of money, Seaford says, was that it was unlimited. As a case in point, he cites Aristophanes’ last play, Wealth, almost certainly the earliest surviving text on economics. The whole play revolves the leveling powers of money, but Seaford describes the key exchange: “whereas one can have enough sex, or loaves or music, or honor, cakes or manliness and so on – money is different: if somebody obtains thirteen talents (a lot of money), he is eager for sixteen, and if he obtains sixteen he swears that life is unbearable unless he obtains forty.”
Hence the impact of the invention of money on pre-Socratic philosophy. The usual accounts of the emergence of philosophy and science that began in the sixth century B.C. center on politics, and the new-found conviction that that citizens in Greek city-states ought to be ruled, not by monarchy, but by impersonal law before which all were equal. That is part of the story of an intricate and mysterious change, Seaford acknowledges. But the appearance of a strange new technology facilitating the universal exchange of one thing for another – that is, money – may have supplied an even more fundamental metaphor to guide the philosophical cosmology. And in a series of highly-technical chapters on Anaximander and Xenophanes, Heraclitus and Parmenides, Pythagorus, Philolaus and Protagoras, he seeks to show how the early experience with the world’s first cash economy led to the “privileging of limit over the unlimited” that is so familiar a feature of the metaphysical and ethical writing of Plato and Aristotle.
A matter for specialists, clearly. Those ancient preoccupations with order seem so strange to us today – Aristotle’s conviction that the use of money to make money is wrong, Plato’s obsession with civil order, down to his war on music. But then we have only recently performed a massive deregulation of our own. Seaford describes the elimination round that began in the 1970s:
limits on the movement of capital (once controlled by nation-states); limits articulating cultural space, with the result that a Holiday Inn in Minneapolis is now exactly the same as a Holiday Inn in Mombasa (money homogenizes); limits on the salaries-cum-bonuses that money-controllers pay themselves; limits on the gap between rich and poor (an unlimitedness that makes common purpose impossible). It has also destroyed the limitation of speculative price by any internal relation to its financial or artistic product (investing in junk bonds is essentially the same as investing in junk art, and done by some of the same people.)
We have become blasé. Social science has replaced metaphysics. Instead of Aristophanes we have David Mamet, who gave a wonderful line to Danny DeVito when he played a crooked fence in the film Heist – “Of course you need money. Everybody needs money. That’s why they call it money” – in which the very sound of the word has become its meaning. Yet many of us, perhaps most of us, haven’t given up thinking about how some degree of limitation might be re-imposed on what Seaford calls “our hyper-monetized, atomized and self-destructive culture of the unlimited.”
A key observation to take away from this picture isn't the recent acceleration in core goods prices. The highly volatile behavior of goods prices tends to make them an unreliable guide to underlying inflation trends. Rather, it is noteworthy to consider the significant downward trek of core services price growth. Indeed, the 12-month trend in core services prices was a shade under 1.6 percent in July—its lowest reading in the post-WWII era and roughly 1¾ percentage points lower than this time last year.
Some of the downward pressure on core services prices is a direct reflection of the housing crisis; a little more than half the core services price components are computed from housing rents. But that's not the whole story as a rather sharp disinflation was evident in core services excluding rents....
Likewise, productivity-adjusted labor costs—so-called "unit labor costs"—have also recently turned negative. These aren't record declines, but they are well off their prerecession growth rates....
Is this a sign that economic slack has begun to show through to the retail price numbers? It could be a bit early to bet the ranch on that one. Nonetheless, the evidence seems to offer a pretty compelling story at this time.