Washington’s next challenge
By James Pethokoukis The opinions expressed are his own.
Reuters invited leading economists to reply to Larry Summers’ ope-d on his reaction to the debt ceiling deal. We will be publishing the responses here. Below is Reuters Breakingviews columnist James Pethokoukis’ reply. Here are responses from Laura Tyson, James Hamilton, Robert Frank, Russ Roberts, Benn Steil and Donald Boudreaux as well.
Like Larry Summers, I have a “multifaceted reaction” to Washington’s debt ceiling and budget deal. In fact, I have the exact same multifaceted reaction, except driven by completely different rationales.
1. Like Summers, I feel relief — but not because the agreement averted default and avoided harsh austerity. While the package doesn’t fundamentally change America’s fatal fiscal trajectory, it keeps the legislative momentum headed in the right direction with a focus on reducing debt via spending cuts rather than tax increases.
Nor do I think the process was some sort of “shabby spectacle.” The democratic process is always messy, and frequently driven by a sense of crisis. But it was designed to prevent tyranny; not to promote efficiency. And the recent House ban on earmarks ensured much of the haggling revolved around policy rather than political favors.
2. Likewise, I am cynical — but not about the nature of the debt deal. Future editions of Congress and the economic cycle will have great say about how much America taxes and spends in coming years. Fiscal norms are being set and attitudes changed now, such as when Congress rejected President Barack Obama’s recent budget 97-0. The new budget deal is part of that ongoing evolution.
I am bothered, however, by the unwillingness of the current administration to clearly outline its vision for America’s fiscal future. The consensus of left-of-center economists and policy wonks is that America needs to tax and spend far above traditional levels in coming decades due to America’s aging population and public investment deficit. The White House should come clean and have an upfront debate with Republicans about where the country needs to go.
Who lost the dollar?
– James Pethokoukis is a Reuters columnist. The views expressed are his own –
The state of the dollar probably hasn’t been a first-tier political issue in the United States since, say, the presidential election of 1896. Back then, it manifested as whether or not America would stay on the gold standard or switch to a bimetallic one. (The William Jennings Bryan “cross of gold” speech and all that.)
The aftershocks of the global financial crisis may now be propelling the dollar back to the political forefront. The greenback’s continuing slide makes it a handy metric that neatly encapsulates America’s current economic troubles and possible long-term decline. House Republicans for instance, have been using the weaker dollar as a weapon in their attacks on the Bernanke-led Federal Reserve.
For more evidence of the dollar’s return to political salience, look no further than the Facebook page of Sarah Palin. The 2008 GOP vice presidential nominee — and possible 2012 presidential candidate — has shown a knack for identifying hot-button political issues, such as the purported “death panels” she claims to have found in Democratic healthcare reform plans. In a recent Facebook posting, Palin expressed deep concern over the dollar’s “continued viability as an international reserve currency” in light of huge U.S. budget deficits.
She might be onto something here, politically and economically. A recent Rasmussen poll, for instance, found that 88 percent of Americans say the dollar should remain the dominant global currency. Now, the average voter may not fully understand the subtleties of international finance nor appreciate exactly how a dominant dollar has benefited the U.S. economy. But they sure think a weaker dollar is a sign of a weaker America.
And that’s the political problem for the Obama administration. Its benign neglect of the dollar is another example of an economic policy — along with TARP and the $787 billion stimulus — that the White House thinks is helping the economy, but many Americans find wrongheaded.
In his New York Times column today, Paul Krugman makes the usual case for a weaker dollar: It helps U.S. exporters and is a necessary part of a global economic rebalancing. And there is some truth in that, particularly the idea that Rising Asia will result in a less-dominant dollar.
Well informed blog, interesting. I like this site. Just to let you know what I see is inflation and the smart money managers moving their funds to combat it. Grocery store prices on normal items have all went up fifteen cents so that corporations can recoup their losses. And the treasury will be printing money to cover all the debt the country has incurred and will continue to incur.
The dollar will be worth less. The only bright spot I see happens to be in the fact that the cost of producing goods overseas will increase because of fuel cost, low currency value, and higher wages for overseas workers, hopefully to the point that it will become cheaper to produce products in the United States again. If the money keeps flowing out of this country and the debt keeps adding up we will eventually be broke and suffer a recession in spite of the bailouts.
from James Pethokoukis:
The myth of Lehman, part two
John Taylor has maintained that it was the government's reaction to Lehman that freaked out financial markets. Now Luigi Zingales and John Cochrane make a similar pitch in the WSJ:
On Sept. 22, bank credit-default swap (CDS) spreads were at the same level as on Sept. 12. (CDS spreads are the cost of buying insurance against default.) On Sept. 19, the S&P 500 closed above its Sept. 12 level. The Libor-OIS spread—which captures the perceived riskiness of short-term interbank lending—rose only 18 points the day of Lehman's collapse, while it shot up more than 60 points from Sept. 23 to Sept. 25, after the TARP testimony. (Libor—the London Interbank Offer Rate—is the rate at which banks can borrow unsecured for three months.)
Why? In effect, these speeches amounted to "The financial system is about to collapse. We can't tell you why. We need $700 billion. We can't tell you what we're going to do with it." That's a pretty good way to start a financial crisis.
Dear friend,
Let allow me boasting of myself in regard to articles.
Major of your articles on pure economics are very interesting,grasping and reaches to high school of thoughts.
Here,you have narrated Lehman part two,
Everywhere, after shock of Lehman brothers, financial organisations closure and its impact.
Instead of forgetting these worst financial disaster,you-means journalists and famous world news channels,websites and newspapers had almost conducting ritual ceremony to this closure.
To conclude here,we need 700 million dollars for recovery and for running financial system.
This financial journey is very hard,roads are in bad conditions and lot of confusions, daily more statements on this subject by world leaders,economists, blogs are common on now a days.
I am typing one semi real solace sentences for more interests and for correct solution finding exercises from famous schools of economic theories.
Economic roads are very rough ,but we will overcome from known hurdles with future years.
from James Pethokoukis:
3 reasons why cap-and-trade is in trouble
The man who will almost certainly become Japan's next prime minister, Yukio Hatoyama, is promising to cut the nation's greenhouse gas emissions by 25 percent from 1990 levels by 2020.
That is a far more ambitious target that can be found in the legislation currently making its way through Congress. The cap-and-trade bill passed by the House of Representatives would trim U.S. emissions by 17 percent from 2005 levels. That translates to around a 6 percent cut from 1990 levels.
But even that lesser reduction seems unlikely to happen anytime soon. Climate change legislation faces a tough road in the Senate, and it may get pushed back to 2010 or beyond.
Cap and trade is, like healthcare reform, in trouble, and for many of the same reasons:
- There doesn't seem to be an acute crisis. Polls show that the vast majority of Americans are satisfied with their healthcare. Reasons for complacency can also be found in recent developments in climate change. A new NASA study notes global temperature increases have stalled out this decade, likely because of decreasing solar irradiance.
Obviously some dire event, such as a terrible swine flu season or a brutal spike in temperatures, could refocus public attention and concern. But for now there doesn't seem to be an emergency to motivate either voters or lawmakers.
- Most people won't see an immediate benefit. Proposed changes in the U.S. healthcare system wouldn't immediately change the current insurance coverage of most Americans, despite new government spending and higher taxes. Likewise, cutting carbon emissions will likely incur big costs today with any tangible benefits coming later this century. During a recession, neither provides the sort of cost-benefit analysis that strapped Americans are likely to find compelling.
Any impact will come from technology to scrub CO2 from the atmosphere, not lower emissions. Only working to lower emissions to stop global warming is like taking your foot off the gas when you’re in a car headed down hill with no brakes. You might crash at a slower speed, but you still crash.
from James Pethokoukis:
Are Obama’s healthcare troubles actually a good thing?
Mickey Kaus gives his theory:
It’s easy to forget that, even if Obama’s health care effort is bogging down, the effort itself still serves his presidency as a crucial time-waster, tying up Congress and giving him a reason to postpone (or the public a reason to ignore) those other divisive, presidency-killers. Obama needs some excuse for putting off unpopular Democratic demands; health care’s a good one. If he keeps failing to pass health care until spring, that might not be such a bad outcome. In fact, even quick passage was maybe never in his interest. There are things more unpopular than struggling. ... Cap and trade, immigration legalization, “card check”—these are not what you’d call confidence building appetizers leading up to the main course of Obama’s presidency.
Me: None of it works when Americans have less and less confidence in Obama. And that number will continue to work against him as long as unemployment stays high.
Democrapic policies – from illegal amnesty, to card check, to “the fairness doctrine”, to health care, to affirmative action quotas, to lawyers for terrorists, to tax hikes – are all disasters for the US and unpopular.
It just goes to show that the health and happiness of America is not their primary concern – buying votes from special interest groups is.
from James Pethokoukis:
Why healthcare co-ops are a political solution, not an economic one
Here is a devastating critique of the idea of healthcare co-ops in place of a true public option (via Tim Foley at Change.org):
We’re guessing at the details, since they haven’t been divulged. How it would work? Does the government give seed money in the form of grants to set these up? Does it give loans? Who, pray tell, does it give this seed money to? How long would it take to get one of these co-ops up and running? How long would it take them to get a network of doctors? Since the co-op would start with no customers and presumably no bargaining power, how long would it take for insurance companies to be quaking in their boots?
That said, we do know a lot about them:
- We know that we used to have health care co-ops in this country. What happened to most of them? As Professor Timothy Stoltzfus Jost explains, “The Farm Security Administration withdrew support in 1947, and they collapsed. They had a hard time getting going anyway.”
- We know the ones that have been relatively successful have had their own network of providers, like Kaiser or the VA. However, the best of them took decades to develop – up to 60 years.
- The GAO looked at health insurance co-ops in 2000. These weren’t the same idea – they would allow small businesses to pool their employees in a co-op to shop for insurance. The GAO’s conclusion? They don’t work very well and did nothing to lower costs.
- The fact that a health co-op is a non-profit won’t in and of itself yield competition. As I pointed out earlier, “Conrad’s home state of North Dakota has 475,000 people enrolled in the not-for-profit North Dakota Blue Cross Blue Shield. That’s not just competition – it’s a monopoly, 60% of the market. Guess what? It hasn’t helped. Premiums jumped 74% in the past seven years.”
- Most co-ops won’t be as successful as already-existing Blue Cross plans, which means they won’t have market clout to lower costs or change the game for private insurance. Which is, you know, the whole point.
- Conrad introduced the co-op in June to solve a political problem – find common ground to allow the Senate Finance Committee to release their bill. So far, the Finance Committee remains at impasse, we’ve seen no bill, and every other committee has been done for weeks now. Great job.
- By the way, Republicans aren’t biting. They say the co-op is a public option in sheep’s clothing. So they’re against it.
- And, of course, progressives are furious at even the hint that there won’t be a public option, so they’re against it, too.
I guess Conrad succeeded in uniting the left and the right. Unfortunately, they seem to be united against his idea – the same idea whose sole existence is not to make American health care better but to win votes.
from James Pethokoukis:
A healthcare plan to save Obama’s presidency
President Barack Obama has told Americans to be skeptical of reports of an end to the recession, saying the downturn has "many more months" to run. Given the recent retail sales data, Americans seem to be listening to their economist-in-chief.
Obama may well be right in his dour forecast. Whatever the next quarter or two of GDP numbers say, continuing high unemployment and depleted personal wealth should keep the vibe more recessionary than expansionary. It's tough to be cheerleader-in-chief, after all, when people's pocketbooks are telling them a starkly different story.
But another issue is exacerbating Americans' sour attitudes and raising doubts about the president's competence: healthcare reform. Indeed, a recent Gallup poll shows identical pluralities of 49 percent disapproving of both Obama's handling of the overall economy and his handling of healthcare policy.
Healthcare reform poses three problems for Obama. First, it seems to cost way too much in an era of trillion-dollar budget deficits. Americans are now as obsessed with budget deficits as they were in 1992, when fiscal concerns helped make Ross Perot a presidential contender. Second, many Americans are skittish about increased government involvement in the sector. Third, an inability to push healthcare reform through a Democrat-dominated Congress makes both the president and his Congressional allies appear ineffectual (as does the dithering over whether a public option needs to be part of any reform plan).
Now, political historians will note that a healthcare reform fiasco helped sink Democrats in the 1994 midterm elections -- despite a fairly strong economy -- and forced President Bill Clinton to shift to the right and work with congressional Republicans. Together, Clinton and the Republicans balanced budgets, cut taxes and reformed welfare.
But why wait for a political disaster to change course? If Obama wants to deliver meaningful change to the nation's healthcare system, why not a grand compromise with Republicans that would also bring along centrist Democrats.
Call it the Purple Plan, one that brings red and blue together. Make health insurance mandatory and subsidize those who can't afford it. (That's the blue part.) But at the same time dismantle employer-based health plans, which prevent consumers from understanding the true costs of their healthcare decisions. In any case, employer plans are just an accident of history. (That's the red part.)
Tubal reversal is process through which women can go for the option of re-pregnancy. As we know that Every woman has right to dream of having a baby. Tubal reversal allows a woman the ability to conceive naturally without any harm. Although tubal ligation is considered a permanent method of birth control,
from James Pethokoukis:
Oh, about that U.S. economic recovery …
What might stand in the way of a robust economic turnaround. Gary Becker outlines the following factors:
The federal government is creating many programs, such as reducing student loan repayments and mortgage payments for persons with low incomes, which discourage the unemployed from finding jobs, and encourage the employed to become unemployed. The proposed caps of various kinds on executive pay, especially in the financial sector, the large government debt being created due to huge fiscal deficits that will put upward pressure on interest rates, the European style reorientation of anti-trust policies toward protecting competitors rather than consumers, the enormous excess reserves that have a considerable inflation potential, the federal government's likely incompetent management of two of the three American auto companies and a major insurance company, and the planned creation of a consumer czar that will interfere with the goods and services offered consumers are examples of policies that are likely to discourage business investment and risk taking.
Me: It is not about aggregate demand, gang, it's about confidence.
I recently read your article I thought i would share it as it has some very interesting facts and insights on the crisis and expected recovery.
http://studentsblog2.blogspot.com/2009/1 0/great-ways-to-student-debt-recovery.ht ml
from James Pethokoukis:
5 reasons why Obama will hike middle-class taxes
C’mon, how about some Walter Mondalesque candor from the Obama White House on taxes? Yes, yes, it was 25 years ago this summer that the Democratic presidential candidate self-immolated on the issue at his party’s convention in San Francisco. But surely Americans have become more urbane and sophisticated since then as to what makes for sound economic policy, oui?
[Find out five ways to boost the economy and create jobs]
Nope. If you had any doubt that higher taxes are still poisonous policy in center-right America, all you had to do was listen to White House Press Secretary Robert Gibbs yesterday. He briskly and precisely walked back the White House from the ambiguous statements made by Tim Geithner and Larry Summers on the Sunday chat shows. “I am reiterating the president's clear commitment in the clearest terms possible that he's not raising taxes on those who make less than $250,000 a year," Gibbs said.
But what’s so clear, Mr. Gibbs? “Commitment” in this context is a schemer’s word, the much-weaker-yet-more-conniving sibling of “guarantee.” Did Broadway Joe express a mushy “clear commitment” to winning the 1969 Super Bowl? Clearly not. In any event, feel free to ignore Gibbs or any other White Housespinmeister who gives the impression that President Obama raising middle-class taxes would be the equivalent of playing himself in a Hollywood biopic -- so unlikely as to be fanciful. It’s not and here’s why it will happen eventually:
1) Obama knows the budget math doesn't work. Put aside today’s budget mess. It’s gospel among center-left wonks (the kind of folks who give Obama economic advice) that structural government spending as a percentage of GDP is headed sharply higher over the long term because of entitlements -- and there’s little that can be done about it. The ratio has been around 20 percent or so the past few decades, and number crunchers forecast a sharp rise to 25 percent (best case scenario) to 30 percent (worst case) of GDP over the next few decades. Tax revenues typically hover around 18 percent of GDP. That gap -- representing $500 billion to $1 trillion a year -- will need to be closed or else cause economic chaos. The possible answers: a) less spending, b) higher tax revenues from higher growth, or c) higher tax revenues from higher rates on the non-wealthy. Oh, and the wonks are convinced “a” is a political impossibility and “b” an economic one. They're wrong, but that's what they think.
[See if Obama's big economic gamble is paying off]
2) Obama seems to prefer tax hikes to spending cuts. Reduced future healthcare spending needs to be a huge part of the budget solution, and ObamaCare doesn't make the grade at this point. Right now the various Obamacrat plans actually make things worse by failing to "bend the curve." What’s more, Obama has proposed nothing as president to make Social Security solvent. And during the campaign, his preferred fix was higher payroll taxes rather than commonsense measures like extending the retirement age or changing how benefits are calculated. Of course, Obama has also proposed raising income, investment, corporate and energy taxes. Cut spending or raise taxes – forObama it’s an easy pick, unfortunately.
Healthcare: Going back to Massachussets?
– James Pethokoukis is a Reuters columnist. The views expressed are his own —
Time for a political reality check. Government-run public health insurance that competes with private plans — a Democratic dream since President Truman suggested it in 1945 — may not be dead for now on Capitol Hill, but its vital signs are awfully faint.
Of course, many proponents are hoping to use the congressional August recess to rally the grassroots and the netroots for one final push come September. And maybe that will work.
But it’s more likely that Democratic leaders in Washington will use the break to tell the outside-the-Beltway crowd the cold truth: If they want something that can be legitimately called “healthcare reform” to pass in 2009, they need to quit wasting time, energy and money on the fading dream of a public plan and instead work to get other key elements passed.
And what might those elements be?
Analyst Daniel Clifton of Strategas Research makes an educated guess. He thinks President Obama may get the chance to sign an $800 billion (over 10 years) bill that would contain features such an individual mandate to buy health insurance, subsidies up to 300 percent of the poverty limit to purchase a regulated plan through a health insurance “exchange”, and an expansion of Medicaid. Obama might even get his commission that would try to determine what Medicare pays doctors and hospitals — now that the Congressional Budget Office has determined it would pretty much be powerless.
As one lobbyist put it: “I would see this as mostly a symbolic victory (for Republicans), as the Dems can get most of what they want without calling it a public option. Frankly. it’s pretty close to the Massachusetts model.”
I am a registered nurse and I work in a not for profit hospital. We struggle to break even, because there are so many uninsured patients and government insured patients. We already have a form of socialized medicine those with insurance pay for those without it.
The government also pays us less money to treat medicare patients than it costs to care for them. And in thise year when my state is running a deficit the government as decided to cut reimbursement to healthcare, but not to limit services. Once again private insurance is left to make up the difference.
If you really want to cut healthcare costs you have to limit care. And another thing, the doctors in my facility do not make extra money if they order more tests. Parents and families are the people that insist that we run every test under the sun.
