So does more public interest in healthcare reform help or hurt?
Politics and policy from inside Washington
While both healthcare and cap-and-trade look to be in various degrees of trouble, some savvy Capitol Hill watchers make this point to me: Democrats look at failure to do something about healthcare as an Extinction Level Event, with a failure on cap-and-trade also incredibly damaging, particularly with the Dem base. House Speaker Nancy Pelosi told wavering Dems that a cap-and-trade failure was a dagger in the Obama presidency. She pushed them to the wall. Healthcare even more so. Expect a full-court press in the Senate on both. At the same, either of those issues slipping into 2010 is fatal to their chances. The next five months may make or break the Obama presidency.
This analysis by the great Thomas PM Barnett really places the recent troubles in Iran in a geopolitical context. It also explains why Iraq is, in the end, a win for America and the West:
The collapse of legitimacy in Iran comes after a string of similar setbacks to the movement: Morocco 2007, Jordan 2007, Pakistan 2008, Indonesia this year, Kuwait this year, and then Lebanon. In each instance the more radical groups, which had done better previously or were perceived to be on an upswing, have suffered surprisingly bad outcomes–when votes were actually counted. Why the broad reversal? The brutality of the radicals. This is why I’ve always maintained that Iraq would have its desired effect either way: if we had succeeded from the start, the Big Bang could have been unstoppable (remember all the positive tumult back in 2005 across the region); but done badly, the outcome works just as well and in some ways better. Why? One, the U.S. military is forced to evolve as it should, making it far more ready for the tougher slog in Af-Pak (which, as I argue, is of far lesser strategic value–thus the need to have our ducks in a row thanks to the far more important battlefield called Iraq). But two, any temporary al Qaeda “victory” or “cause célèbre” just allows their brutality to emerge, and that works in our favor nicely. In the end, history will judge Bush-Cheney kindly on the choice to go in, even if the execution sucked.
My sources have been unrelentingly negative about the chances of a cap-and-trade bill getting passed, but far less so about a renewable energy standard on electricity providers. So any suggestion to split the Waxman-Markey approach into separate cap-and-trade and RES bills, as Sen. Byron Dorgan is doing, is a big negative for capandtraders. It’s also amazing to see how the current anti-Wall Street sentiment is hurting cap-and-trade because of the perceptions that financial firms will make a mint in the trading of emission permits. Here is a bit from a recent Dorgan op-ed piece:
For those who like the wild price swings in the oil futures market, the unseemly speculation in mortgage backed securities or the exotic and risky financial products such as credit default swaps that pushed our economy into the ditch, this cap and trade plan will be the answer to their prayers.
Just last year, speculators overwhelmed the oil futures market, and every day they were trading 20 to 25 times more oil than was being produced. That speculation drove the price of oil from $60 to $147 a barrel and gasoline to more than $4 a gallon.
Then the same speculators forced the price back down and made money in both directions. The American public paid the price for it.
And remember the financiers who wallpapered America with risky derivatives and credit default swaps that they traded in dark markets before the financial collapse last year? We shouldn’t need a second expensive lesson in how manipulation in financial markets can hurt our country.
Don’t’ get me wrong. I like free markets. But given recent history, I have little confidence that the large financial markets are free or fair enough to trust them with a new, large cap-and-trade carbon securities market.
I can tell you the pro-Obamacare Washington wonks I chat with are pretty down right now about the chance of “real reform” getting passed. And as the costs and inadequacies of Obamacare become more apparent, I expect to here more ideas like this one by economic analyst Ed Yardeni:
I think that the problem isn’t that health care costs too much. Rather, we provide it too cheaply. Insurance companies should probably charge higher copayments. Medicare simply gives health care services away to senior citizens without any limits on how many times a patient can go to see a doctor or go to the hospital for the same ailment. Some older folks jump from one doctor to another to get multiple opinions. Perhaps keeping electronic records might help to limit the over usage (and abuse) of our health care system. However, the government shouldn’t have access to our medical records.
We should consider a more radical solution to the Medicare problem. Privatize it! I propose that senior citizens should also be required to have coverage under private plans with the federal government reimbursing them for their premium payments. To insure competition, let them rather than the government select their health care insurance providers. It would be up to individuals to choose the best plan for themselves. The government shouldn’t set the premium fees, but let the market do so. The onus of rationing health care services for the elderly and the rest of us should fall on the insurance companies, which is where it belongs. The government shouldn’t be in the business of monitoring, approving, and allocating the health care needs of Americans.
White House economic adviser Lawrence Summers said in a speech today that the number of people searching for the term “economic depression” on Google is back down to normal levels, proof anxiety and fear are on the fade. OK, here is the chart:
And here is another chart of consumer confidence from the Conference Board …still a ways to go:
This is why the Al Franken/Supermajority Effect is overstated. Centrists in the Senate can toss a spanner into the works. The lot below (letter via HuffPost) want to slow things down for more debate.
Economist David Rosenberg of Gluskin Sheff makes the speculative — and scary — case that high unemployment + 2010 elections = Obama will devalue the dollar to boost growth. Here is case:
1) The 2009 job market is terrible.
While more than 6 million jobs have been lost, what that number masks are the near 9 million people who saw their full-time positions eliminated. There were 3 million who were pushed into part-time work, and in fact, there are now a record 9 million Americans working part-time because of the weak economy, which is a 64% increase from a year ago. Against this backdrop of a growing part-time workforce, the private workweek was cut 2.3% this down-cycle to a record low 33.0 hours. We believe that we will actually see the jobless rate hit new post-WWII highs next year.
2) The 2010 job market will also be terrible.
It means that when the economy does begin to recover, when we finally get to the other side of the mountain, companies are going to raise their labour input first by lifting the workweek from its record low. Just to get back to the pre-recession level of 33.8 hours would be equivalent to hiring 3 million workers. And, the record number of people working part-time against their will are going to be pushed back into full-time, which will be great news for them, but not so great news for the 125,000 – 150,000 new entrants into the labour market every month. They won’t have it so easy because employers are going to tap their existing under-utilized resources first since that is common sense. Also keep in mind that there are at least 4 million jobs in retail, financial, construction and manufacturing jobs lost this cycle that are not coming back. In fact, the number of unemployed who were let go for permanent reasons as opposed to temporary layoff rose by more than 5 million this cycle. This compares to the 1.2 million increase in the 2001 tech-led recession and in the 1990-91 housing-led recession (when Ross Perot talked about the sucking sound of jobs into Mexico).
3) Obama and the Democrats know high unemployment is political death.
In other words, the unemployment rate could well stay on an upward trajectory for the next few years. As we said, 10.8% would be a headline-grabber because that is the post-WWII high, and what we do know with certainty is that 2010 is special because it is a mid-term election year. The last Democratic president with an ambitious health care plan was Bill Clinton and if you recall, his party was crushed in the 1994 mid-term elections and his agenda was derailed by Newt Gingrich’s ‘Contract with America’. We are convinced that President Obama is well aware of this, and more than likely well aware that a record unemployment rate (at least in the ‘modern era’) could well be a political hot potato for any incumbent, and it is debatable whether a year from now he will be able to continue to deflect the jobless rate problem onto W.
4) In a desperate act to boost growth, Obama drive down the dollar, the only policy option left.
In addition to knowing it is going to be an election year in 2010, we also know that we have a President who has, step by step, been taking feathers out of FDR’s cap in dealing with this modern day depression. The one item that has yet to be utilized is U.S. dollar depreciation, and if memory serves us correctly, FDR snuffed out the worst part of the Great Depression when he unilaterally devalued the dollar to gold in 1933 by 40% (and fixing the price of gold at $35/oz). We’re not sure that President Obama is going to re-price the dollar price of gold. Then again, can anything be ruled out? But we are sure that as the unemployment rate makes new highs and increasingly poses a political hurdle in a mid-term election year, that it would make perfect sense, for a country that always operates in its best interest — even if it may not be in everyone’s best interest — to sanction a U.S. dollar devaluation as a means to stimulate the domestic economy.
Rosenberg’s bottom line:
Remember, this is a premise. We are just conjecturizing. But it is interesting that the dollar is the only financial metric that is at the same level today as it was two years ago, and we are of the view that the risks are high that the greenback will be on a significant downward path by this time next year.