Taking Note

The President’s Budget and The Challenge of Universal Coverage

President Obama’s budget demonstrates how difficult it will be to build a sustainable, effective, and safe health care program for all Americans. His ten-year $634-billion plan for funding health care reform depends on “asking the wealthy to pitch in a bit more” (budget director Peter Orszag’s happy phrase), wringing some of the waste out of Medicare and Medicaid (cuts that are needed, but that will not be popular ); and strong-arming drug makers to raise discounts on Medicare drugs from 15 percent to 21 percent. About half of the money will come from changes in government programs, half from tax increases.

As the Congressional Quarterly reports, “the new proposals for tax hikes on couples earning over $250,000 “will immediately test the limits of the new political dynamic on Capitol Hill in the midst of a recession.” And even then, the budget provides only a “down payment” on health care reform-- roughly half to two-thirds of what is likely to be needed to cover everyone.

The Commonwealth Fund’s Plan for Universal Coverage

Last week the Commonwealth Fund published a proposal for a “High-Performance Health Care System” that is ambitious, and admirably honest. Unlike many health care pundits, the lead author, Cathy Schoen, understands our Byzantine health care system from the inside out. As a result, she does not try to paper over the complexities, inefficiencies and inequities of U.S. health care.  She acknowledges them as she struggles to make an irrational system rational.

The Commonwealth Fund’s 90-page report deserves a close reading. But before I begin to analyze it, let me stress that whatever objections I may raise about the Commonwealth proposal only illustrate just how hard it is to devise a plan that will deliver high quality, affordable, sustainable health care to all Americans.

Eric Holder's Counterproductive Race Speech

Attorney General Eric Holder's recent speech to Justice Department staff calling America "essentially a nation of cowards" for not talking more about race has unleashed a flurry of commentary, from Maureen Dowd, who said in a time of economic crisis, "we don't need a Jackson/Sharpton-style lecture on race," to Dayo Olopade, who said Holder's address was "better" than Barack Obama's race speech in Philadelphia during the campaign.  I think Holder's speech was counterproductive, managing to provoke whites (like Dowd) without advancing the ball on racial justice.

While some said Holder was "courageous" for saying we should talk more about race, the sentiment is really a matter of catechism.  As Walter Benn Michaels has written, "Although no remark is more common in American public life than the observation that we don't like to talk about race, no remark...is more false."  I've been on dozens of panels where the topic is race and someone invariably gets up and says we need to talk more about race. The line always garners enthusiastic applause but there is hardly ever any substantive followup on where this additional race-talk is supposed to take us.

Holder, for example, talked about Brown v. Board of Education, but said nothing about what the Justice Department or the Obama Administration should do about school segregation. He could have talked about the fact that segregation remains one of the key sources of the black-white achievement gap. (In general, research finds, poor blacks go to high poverty schools while poor whites go to middle class schools, giving poor whites a decided advantage.) And here's what we're going to do about it. That speech would have been courageous and deserving of applause.

Deficits Past, Present, and Future

The stimulus package of nearly $800 billion has a lot of people scared. Combined with tax shortfalls from declining incomes, and on top of the large deficits since 2002, what will this huge deficit do to the economy in the longer run?  

In fact, if we have a deficit this year and next equal to 10 or even 15 percent of GDP, it will be small potatoes compared to the succession of deficits we ran in the early years of World War II. In 1943, the federal budget deficit exceeded 30 percent of GDP, $4.2 trillion in today’s dollars. As recently as 1983, tax cuts and a recession pushed the deficit to 6 percent of GDP about $850 in today’s dollars.   

There is no reason to fear dire consequences from one or two years of high deficits if they are followed by the sort of sensible fiscal policy that was the rule in the United States in the first three decades following the end of World War II.  

Figure 1 below (click to enlarge) shows the budget balance from 1940 through 2007.  In the figure, the deficit (or surplus) of the year in question is scaled to 2007 by first expressing it as a percent of the GDP that year and then multiplying that percentage by the GDP of 2007. So, for example, the deficit of 30.3 percent of GDP from 1943 corresponds to a deficit of $4.3 trillion in 2007.

The Last Fiscal Republican

Was Eisenhower the last true Republican president?  The evidence supports the claim that no Republican administration since 1960 has followed the principle of “keep tax and spending growth low.”  Each of the four Republican administrations since Eisenhower endeavored to keep taxes low.  But with increasing enthusiasm, Republicans have run up spending, on average faster than Democrats.  Almost the entire accumulation of the national debt since 1960, from $290 billion to more than $10 trillion, is the result of deficits under Republican presidents.  Under Kennedy-Johnson and Carter, revenue growth matched spending growth.  Under Clinton, as under Truman, spending grew much more slowly than revenues, erasing big budget deficits, and, under Clinton, turning them into big surpluses. 

The ascendancy of President Obama, as the economy plunges into a deep depression and his administration struggles to stop the collapse, has revived the conventional wisdom that Democrats spend like sailors on shore leave, while Republicans fight for fiscally responsible policy.   The most common cliché is that Democrats “tax and spend” while Republicans favor “small government.”   As too often is the case when the conventional wisdom confronts historical data, the conventional wisdom has it wrong.

Support for Economic Stimulus Package Increases

Conservatives tried their best to derail President Obama’s economic stimulus package. They accused it of being a big government, big spending wish list loaded with pork that would do little to create jobs. And they found a few items in the House version of the bill to beat up on publicly and claim were representative of the whole wasteful package. But despite all their weeping and wailing and gnashing of teeth, support for Obama’s package wound up increasing, not decreasing.

The latest Gallup poll shows that support for the stimulus package has reached 59 percent in favor and just 33 percent opposed, despite the fact that the question mentions a price tag of “at least $800 billion.” That’s up from 52-38 in favor on February 4.

The Future of News

            It didn’t start out this way, but the newspaper survival crisis has taken on some of the trappings of the broader financial calamity in the country. Last week there was a Time cover story, a New York Times online round-table of experts, a Charlie Rose panel, and a torrent of punditry elsewhere on what must be done, including now the piece that follows. All of those opinions being amassed in search of solutions recall the notion that, with so much debris, “there must be a pony in there somewhere.”

            Arguments about the future of news, like those over the country’s broader economic troubles, tend to proceed along two tracks that are parallel but intersect in crucial respects. The first track is ideological, in many ways  comparable to the controversy about the role of government surrounding the stimulus package.  The second track, similar to the arcane details of the “bail-out” for the banking sector, is what to do about the demonstrably broken business model of metropolitan newspapers and news magazines.

Israeli Elections: A clarifying moment for Israel and the Palestinians

But what about the Obama administration?

 
With the final results now in, the horse trading over forming a new government in Israel is very much underway after Tuesday’s elections seemed to produce the messiest of political outcomes – anything but clarity.

Two narratives regarding the voters choice are currently competing with each other; Livni and Kadima are claiming a mandate for a centrist government, being the largest party while Netanyahu and Likud argue that a shift to the right has occurred producing a mandate for the right to govern (the right-wing bloc has taken 65 seats in the 120 member Knesset). Some time next week in accordance with the Israeli rules of the game, President Shimon Peres will call on either Netanyahu or Livni (and most money is on the former) to form a governing coalition within 28 days with a possible extension of 14 more days. The coalition bargaining in the weeks ahead will suggest that everything is up for grabs. Yet in more ways than may seem immediately apparent, Tuesday’s results have added a degree of clarity to where Israel is at.

Uwe Reinhardt: “The U.S. is Not a Democracy; it’s an Aristocracy”

Implications for Healthcare Reform – Part 1

In a private conversation with bloggers at the Families USA healthcare conference last week, Princeton healthcare economist Uwe Reinhardt recalled a conversation, when he asked health care economist Victor Fuchs, “When will we ever have universal health insurance in the U.S.?”

Fuchs’ answer:  “Not until World War III, a Great Depression, or a major epidemic that threatens everyone.” 

In other words, Fuchs believed that it would take a catastrophe before Americans finally would realize that we are all in one boat together: Wars, natural disasters and economic upheaval can create great solidarity. 

World Publics Optimistic About Obama Presidency

One of the many problems that the Obama administration inherited from Bush and the conservatives is America’s abysmal image around the world. It is therefore good news that recent polling data finds the world’s publics in an optimistic mood about relations between the United States and other countries.

A BBC World Service poll found that an average of two-thirds of the public in 17 countries believe the Obama presidency will produce improved U.S. relations with the rest of the world. Just 19 percent said relations would stay the same, and only 5 percent thought they would get worse.

The most optimistic countries were Ghana (87 percent expect improvement), followed by Italy (79 percent), Germany (78 percent), Spain (78 percent), France (76 percent), Mexico (74 percent), and Nigeria (74 percent). In our own country, 65 percent believe relations with the rest of the world will improve.

These optimistic opinions represent a very large shift from early fall of last year. At that point, the average response across countries was 47 percent better/21 percent no change/9 percent worse.