J. Bradford DeLong's Blog, page 2111
January 26, 2011
David Axelrod Is Not Making Sense
And Matthew Yglesias is unhappy:
The Eternal Mystery: I just got out of a meeting in the West Wing between David Axelrod and a few progressive writers and . . . well . . . I don’t have a ton to report.
An awful lot of progressive dialogue with the administration just keeps coming around to the same one point. According to the Obama administration the nation’s fiscal problem is in the long term. According to the Obama administration the nation’s fiscal problem is mostly due to entitlements. And according to the Obama administration in the short-term there’s a large output gap. So why a short-term discretionary spending freeze? Well on the merits there’s just no good reason you can give. The logic is clearly political. So, fine, politics is part of governing. But the White House’s belief that a strategy of unilateral preemptive concessions is a smart approach to legislative negotiations is as deeply held as it is difficult to understand. When has this worked? What has it helped achieve?...
I guess the thing to say is that as best I can tell the people working in the Obama administration are smart people who understand the fiscal policy situation perfectly well. That's a huge step forward relative to a lot of other people in Washington. But understanding is only as useful as your tactical approach lets it be, and I'm very skeptical on this front.
Dear Gmail:
Messages from Twitter saying that so-and-so is now following me are not important messages.
Thank you.
Ulysses S. Grant on the Secession of Texas
Via T-Nehisi Coates, U.S. Grant:
U.S. Grant: Doubtless the founders of our government, the majority of them at least, regarded the confederation of the colonies as an experiment. Each colony considered itself a separate government; that the confederation was for mutual protection against a foreign foe, and the prevention of strife and war among themselves. If there had been a desire on the part of any single State to withdraw from the compact at any time while the number of States was limited to the original thirteen, I do not suppose there would have been any to contest the right, no matter how much the determination might have been regretted. The problem changed on the ratification of the Constitution by all the colonies; it changed still more when amendments were added; and if the right of any one State to withdraw continued to exist at all after the ratification of the Constitution, it certainly ceased on the formation of new States, at least so far as the new States themselves were concerned. It was never possessed at all by Florida or the States west of the Mississippi, all of which were purchased by the treasury of the entire nation. Texas and the territory brought into the Union in consequence of annexation, were purchased with both blood and treasure; and Texas, with a domain greater than that of any European state except Russia, was permitted to retain as state property all the public lands within its borders.
It would have been ingratitude and injustice of the most flagrant sort for this State to withdraw from the Union after all that had been spent and done to introduce her; yet, if separation had actually occurred, Texas must necessarily have gone with the South, both on account of her institutions and her geographical position. Secession was illogical as well as impracticable; it was revolution. Now, the right of revolution is an inherent one. When people are oppressed by their government, it is a natural right they enjoy to relieve themselves of the oppression, if they are strong enough, either by withdrawal from it, or by overthrowing it and substituting a government more acceptable. But any people or part of a people who resort to this remedy, stake their lives, their property, and every claim for protection given by citizenship--on the issue. Victory, or the conditions imposed by the conqueror--must be the result.
Dawn Patrol...
No, we cannot see the sun rise this morning:
Paul Krugman Is Depressed by How Very Little Republican Politicians Know
It really does seem that to actually know something about the world leads you to say things that disqualify you from a position of authority in the Republican Party.
Paul Krugman:
Shiny Lazy People: A few further thoughts about the Ryan response to the SOTU... [I]f your whole public act is based on your supposed knowledge of the importance of fiscal responsibility, wouldn’t you long ago have made sure that you actually know something about the fiscal crises now taking place in Europe? But no. I suspect that Ryan is honestly unaware that Ireland, far from being a spendthrift, was seen as a fiscal role model before the crisis. And that’s not hyperbole: in 2006 George Osborne, now Britain’s Chancellor of the Exchequer, declared that
Ireland stands as a shining example of the art of the possible in long-term economic policymaking, and that is why I am in Dublin: to listen and to learn.
And I also suspect that Ryan is honestly unaware that the UK has not, in fact, experienced a debt crisis.
How can he be unaware of these things? The only explanation I have is intellectual laziness — why check the facts when you already believe that you have The Truth?...
Ryan warns that if we don’t deal with our fiscal problems, we’ll have to raise taxes and cut benefits for seniors. So what can we do to reduce the deficit? Well, government spending is dominated by the big 5: Social Security, Medicare, Medicaid, defense, and interest payments; you can’t make a significant dent in the deficit without either raising taxes or cutting those big 5. Defense is untouchable, says the GOP; so that leaves the entitlement programs. And 2.7 of the three entitlement programs are benefits to seniors (70 percent of Medicaid spending goes on seniors). So let’s see: to avoid cuts in benefits to seniors, we must … cut benefits to seniors.
I’m reasonably sure that Ryan hasn’t thought any of this through.
Macro Advisers Becomes Increasingly Confident
They think we will have a real recovery:
The unanticipated strength in new home sales in December raised our forecast for growth of brokers' commission in the first quarter. To the nearest tenth, this left our tracking estimate of GDP growth in the first quarter unchanged at 4.0%...
Reality-Based Economists' Letter on the Affordable Care Act
David Cutler, Harold Pollack, and Karen Davenport put this letter http://www.americanprogressaction.org/issues/2011/01/pdf/budgetcommitteefinal.pdf together and assembled the signatures in 48 hours...
Harold Pollack emails:
We have at last count 272 labor, public finance, and health economists, several on this list. Had we included health services researchers and other social scientists (a tiny number of non-economists ended up on there for various random reasons), we could have doubled that number with people who have credible specific expertise. A pdf should be posted soon.
What's striking is the reach across the profession--not so much the dignitaries such as Arrow or Kahneman, but former CBO, Treasury, CEA people, serious people in research and government.... For what it's worth in a post-truth environment, we can honestly say that economic and clinical claims made on behalf of the repeal effort are generally viewed as non-substantive within the health policy community, and that ACA commands broad support from researchers who have researched the subject.
January 26, 2011
Honorable Dave Camp, Chairman
Honorable Sander Levin, Ranking Member
U.S. House of Representatives
Committee on Ways and Means
Washington, DC 20515
Dear Chairman Camp and Representative Levin:
This week, Congress is holding hearings on the economic impact of health care reform. We write to convey our strong conclusion that leaving in place the Patient Protection and Affordable Care Act of 2010 (ACA) will significantly strengthen the economy and promote economic recovery. Repealing the Affordable Care Act would cause needless economic harm, and would set back efforts to create a more disciplined and more effective health care system.
Our conclusion is based on two economic principles. First, high medical spending harms employment and economic growth. Many studies demonstrate that employers respond to rising health insurance costs by reducing wages, hiring fewer workers, or some combination of the two. Lack of universal coverage impairs job mobility as well; workers pass up opportunities for self-employment or for positions working for small firms because they fear losing their health insurance or facing higher premiums. Second, the ACA contains essentially every cost-containment provision policy analysts have considered effective in reducing the rate of medical spending. These provisions include:
Payment innovations including greater reimbursement for patient-centered primary care; bundled payments for hospital, physician, and other services provided for a single episode of care; shared savings approaches or capitation payments that reward accountable provider groups that assume responsibility for the continuum of a patient’s care; and pay-for-performance incentives for Medicare providers.
An Independent Payment Advisory Board with authority to make recommendations to reduce cost growth and improve quality within both Medicare and the health system as a whole
A new Innovation Center within the Centers for Medicare and Medicaid Services, or CMS, charged with streamlining the testing of demonstration and pilot projects in Medicare and rapidly expanding successful models across the program
Measures to inform patients and payers about the quality of medical care providers, which provide relatively low-quality, high-cost providers financial incentives to improve their care
Increased funding for comparative effectiveness research
Increased emphasis on wellness and prevention
Taken together, these provisions are likely to reduce employer spending on health insurance. Estimates suggest spending reductions ranging from tens of billions of dollars to hundreds of billions of dollars. Because repealing reform would eliminate the above provisions, it would increase business spending on health insurance, and hence reduce employment. One study concludes that repealing ACA would produce job reductions of 250,000 to 400,000 annually over the next decade. Worker mobility would be impaired as well, as people remain locked into less productive jobs just to get health insurance.
The budgetary impact of repeal would also be severe. The Congressional Budget Office concludes that repealing ACA would increase the cumulative federal deficit by $230 billion over the next decade, and would further increase the deficit in later years. Other studies suggest that budgetary impact of repeal is even greater. State and local governments would face even more serious fiscal challenges if the ACA were repealed, as they would lose substantial resources provided under the new law while facing the burdens of caring for 32 million more uninsured people. Repealing the ACA would thus make a difficult budget situation even worse.
Rather than undermining health reform, Congress needs to make ACA as successful as it can be. This would be as good for our economy as it would be for the health of our citizens.
I would like to note that my guess is that repealing the Affordable Care Act would have a smaller drag on employment than David Cutler thinks--perhaps half of a third as large...
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