James Pethokoukis

Politics and policy from inside Washington

About those Baucus healthcare co-ops ….

Sep 16, 2009 18:47 UTC

Here is what the CBO says about them:

The proposed co-ops had very little effect on the estimates of total enrollment in the exchanges or federal costs because, as they are described in the specifications, they seem unlikely to establish a significant market presence in many areas of the country or to noticeably affect federal subsidy payments.


Responding to ASW:

Bravo my good man!

One point you might consider as well is the plan put forth by Baucus will maintain the status quo. Very likely it would expand the customer base for the same vampires who screw us now!

If pre-existing conditions are forced on insurance companies what would prevent them from jamming the backbreaking premiums and deductables on that same hapless individual to the point of bankruptcy?

As far as your protectionist views are concerned,,, I applaud you for them! After all,,, What about America is not worth protecting? (besides those zany characters in my upcoming video,, “Capitalists gone wild”

Posted by RH Pyle | Report as abusive

What liberals think of BaucusCare

Sep 16, 2009 17:39 UTC

Are they excited that Congress is moving a step closer to fulfilling decades of their healthcare dreams? Nope. This, from the liberal Health Care for American Now group:

The Baucus bill is a gift to the insurance industry that fails to meet the most basic promise of health care reform: a guarantee that Americans will have good health care that they can afford. The Baucus bill would give a government-subsidized monopoly to the private insurance industry to sell their most profitable plans – high-deductible insurance – without having to face competition from a public health insurer.

Under the Baucus bill, employers would have no responsibility to help pay for their workers’ coverage and would be given incentives to have workers pay more for barebones insurance. Americans who don’t get health benefits through work would still not be able to get good, affordable coverage.

We urge Senators on the Finance Committee to replace the Baucus plan with legislation that will do what the Senate HELP Committee and three House committees have done: guarantee that Americans have good health insurance that they can afford with the choice of a strong national public health insurance option.


Since when has Health Care for America Now spoken for all liberals? Generalizing a little bit, aren’t we?

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Kudlow: Maybe a V for 2010

Sep 16, 2009 15:34 UTC

Larry Kudlow gives the bull case:

I wonder if Mr. Bernanke isn’t underestimating the very substantial monetary stimulus that he has injected into the economy, going back about nine months. This is the Milton Friedman monetarist experiment. The Fed’s balance sheet has grown by over $1 trillion; various money-supply measures are running about 10 percent on average; the Treasury yield curve is very steep and positively sloped; and of course the target rate is near zero. Add to that $1,000 gold and a weak dollar.

We’re talking easy money here. It started last fall, and with a roughly six-to-twelve-month lag, it’s now beginning to impact the economy in a significant way.

So Mr. Bernanke may be underestimating a V-shaped recovery that will extend through 2010. And don’t forget that marginal tax rates are going up in 2011. That’s likely to mean — in supply-side-incentive terms — that many folks will bring as much income and investment as they can into 2010 to beat the tax hike. And that could add to GDP in a significant way next year.

Me: The second point is a good one, and one that is not being factored in.

The coming wave of healthcare taxes

Sep 16, 2009 15:28 UTC

The guys at ATR give the rundown:

· Employer Mandate Tax. $400 per employee if health coverage is not offered. Note: this is a huge incentive to drop coverage, as $400 is much less than the average plan cost of $11,000 for families or $5000 for singles (Source: AHIP)

· Backdoor Death of HSAs. By requiring that all plans (besides the few that are grandfathered) provided first-dollar coverage for most services, there would be no HSA-qualifying plans available from the Massachusetts-like exchanges

· Excise Tax on High-Cost Health Plans. New 35% excise tax on health insurance plans to the extent they exceed $21000 in cost ($8000 single)

· Report Employer Health Spending on W-2. This is clearly a setup for the easy individual taxation of employer-provided health insurance down the road.

· Cap Flex-Spending Account (FSA) Contributions at $2000. Currently unlimited.

· Eliminate tax deduction for employer-provided retirement Rx drug coverage in coordination with Medicare Part D

· Medicine Cabinet Tax. Americans would no longer be able to purchase over-the-counter medicines with their FSA, HSA, or HRA

· Increase Non-Qualified HSA Distribution Penalty from 10% to 20%. This makes HSAs less attractive, and paves the way for HSA pre-verification

· Corporate 1099-MISC Information Reporting. Currently, only non-corporations providing property or services for a business must be issued at 1099-MISC. This would expand the requirement to corporations doing business with other businesses. The amount of reporting needed for an average business would be huge. Paves the way for full information reporting to the IRS.

· Various industry tax grabs based on market share. $2.3 billion PhRMA; $6 billion health insurance providers; $750 million clinical labs; $4 billion medical device manufacturers

The mild ‘W’ scenario

Sep 16, 2009 15:22 UTC

Yardeni sketches it out, though he thinks a “muddling along” is more likely:

1) Actually, the Petering Out scenario could start before yearend. Auto sales were clearly boosted during July by the Cash for Clunkers program. Congress expanded the program by an additional $2bn in August, and auto sales continued to rebound. Auto sales will probably weaken again unless it is renewed. Also, an $8,000 tax credit for first-time homebuyers will expire in November.

2) Furthermore, tax hikes are coming. The good news is that the Obama Administration hasn’t endorsed Charlie Rangel’s proposal to slap a big tax surcharge on high incomes as a way to pay for more government spending on health care. The bad news is that a massive tax increase is coming in 2011 after the Bush tax cuts expire next year. It is conceivable that consumers might cut back their spending in 2010 in anticipation of higher taxes.

3) Another concern is that the government will exit its various rescue programs prematurely. For example, last October, the FDIC provided temporary insurance guaranteeing the new debt of banks. Debt issued under the program is insured in some cases through June 30, 2012, and through December 31, 2012, in others. As of September 4, $304.1bn in debt was outstanding under the program. Ninety-four financial institutions have used it to issue debt.

4) The global economic recovery might also be at risk if Chinese authorities step on the brakes. During August, a few of them indicated that they are not happy to see that too much of bank lending has gone into real estate and stock market speculation. So they are leaning on the banks to lend less for such activities. Indeed, bank loans rose $60bn and $55bn during July and August, down from $181.5bn on average from January-June.

In conclusion, my sense is that a W-shaped economic pattern is widely expected. As the focus of investors extends beyond 2010, there are mounting concerns about the likelihood of the second recovery in this scenario, especially during 2011, if the Bush tax cuts are allowed to expire.

The Japan comparison

Sep 16, 2009 15:18 UTC

David Rosenberg draws an uncomfortable parallel:

Speaking of Japan, and we say this because the U.S. is following a very similar post-credit collapse pattern, we note that the Nikkei posted six 20%+ rallies since its bubble burst in 1990 and no fewer than four 50%+ rallies.  … So actually there is nothing in this flashy move off the lows in the S&P 500 that is inconsistent with a pattern of a bear market rally — this is not the onset of a whole new sustainable bull market.  … They are not premised on improved fundamentals, despite data that are skewed to the upside by rampant government intervention. Just remember, nobody built more bridges or paved more river beds to skew the economic data than the LDP did in Japan for much of the 1990s. With U.S. T-bill yields close to zero, as they were in Japan, we have at least one market — the money market — that sees what we see, which is an economic outlook fraught with fragility, as is typically the case after a secular credit expansion moves shifts into reverse.

The day in healthcare reform

Sep 16, 2009 15:10 UTC

– The Baucus healthcare bill is released.

– Baucus makes his case. (WSJ)

Health care is a complicated and deeply personal issue; it takes time and effort to get reform right. Legislating every piece of this puzzle would be impossible and counterproductive. What we can do is seize this opportunity to put America back on a fiscally sustainable path. The Senate Finance Committee proposal builds on what already works and fixes what threatens to break the bank for future generations.

– Rockefeller: Baucus bill contains “dangerous” tax hikes on middle-class (ABC):

He should understand that (his proposal) means that virtually every single coal miner is going to have a big, big tax put on them because the tax will be put on the company and the company will immediately pass it down and lower benefits because they are self insured, most of them, because they are larger. They will pass it down, lower benefits, and probably this will mean higher premiums for coal miners who are getting very good health care benefits for a very good reason. That is, like steelworkers and others, they are doing about the most dangerous job that can be done in America. … So that’s not really a smart idea,” Rockefeller continued. “In fact, it’s a very dangerous idea, and I’m not even sure the coal miners in West Virginia are aware that this is what is waiting if this bill passes.

– Obama speech gives healthcare a bounce, not a sustained boost in polls.

– No Snowe, Dems ready to go it alone. (The Hill)

Me: Failure is not a political option for Dems, so reconciliation it will be if need be. Don’t doubt that.

Obama risks trade war to help union allies

Sep 16, 2009 14:44 UTC

Has President Barack Obama thrown Big Labor under the bus? It sure might seem that way after watching his performance yesterday before two union audiences, G.M. workers in Lordstown, Ohio, and an AFL-CIO convention in Pittsburgh.

Both speeches were fiery, pro-union stem winders. Yet the president barely mentioned the top item on Big Labor’s 2009 political agenda, the Employee Free Choice Act. The legislation would require a company to recognize a union without a secret-ballot election once organizers submitted union cards signed by a majority of its workers. Unions believe it would increase unionization, which is probably a pretty good bet given how hard Corporate America is fighting the bill.

But the card check bill has struggled mightily on Capitol Hill and could clearly use a boost from the White House. Still, the president didn’t speak its name in Lordstown and devoted just a single sentence in Pittsburgh. Is that any way to treat the folks who poured tens of millions of dollars into Democratic campaigns last year?

Maybe not, but you didn’t hear any booing. Heck, there probably wasn’t even a slight grumble given the myriad ways Obama has already helped his union allies. His stimulus package helped prevent layoffs of many government union workers, while key provisions serve to prop up union wages on infrastructure projects. His restructuring of the American auto industry left the United Auto Workers with a majority stake of Chrysler and a fifth of General Motors for the price of relatively minor pay and benefit concessions. And his healthcare reform looks to bolster underfunded union retiree benefit plans, while avoiding taxes that would hit pricey union insurance packages.

Then, of course, there is Obama’s decision to impose a 35 percent tariff on imported tires from China, much applauded by Big Labor. As the AFL-CIO put it, “The trade decision was the president’s first down payment on his promise to more effectively enforce trade laws.”

Not only does the move directly hurt U.S. consumers, but it will certainly encourage more domestic industries, such as steel and apparel, to look to Washington for help. Even more dangerous than copycat protectionism: by blaming China for economic woes here at home, Obama risks rekindling anti-China efforts in Congress, such as pushing China to allow a renewed and rapid escalation in its currency. That is how you could get a full-blown trade war.

Hard truth: When it came time for Obama to choose between his political allies on one hand and America’s economic allies (and consumers) on the other, he chose the former this time.

And who knows, a slightly watered down card-check bill might still get passed by year end and signed by the president. In retrospect, Obama should have dumped his own Pittsburgh speech for that of Labor Secretary Hilda Solis who told the gathering that she “was proud and humbled to be your humble servant.”

Now that’s more like it.


I present products at trade shows all the time. I found that many small businesses are resentful when having to do a trade show where unions are involved.
Once I had to hook up the power to the lights on the booth. I called the electrical guy. He came down and called a rigger to come and tie the cable to the overhead beam. When the rigger arrived all these guys where standing around. I asked them, what is going on? The one guy told me that a supervisor had to be present before they could go ahead and do the job. So then a supervisor turns up after 55 minutes and within less than one minute the electrician pushes in the plug, the rigor ties the cable with a cable tie to the beam and I get charged three hundred Dollars for the job. It took three unions guys and one hour to plug in a electrical extension cable.
When complaining about the price to the show organizers response was that it is union labor and they have no control on the costs.
I suddenly realized why GM and many other American companies are in so much trouble.

Posted by Charles Hibberd | Report as abusive

Taleb: Suck it up, America!

Sep 16, 2009 14:25 UTC

Nassim Nicholas Taleb (via The Globe and Mail) on why the banks should not have been bailed out and why China should not buy our bonds:

Today we still have the same amount of debt, but it belongs to governments. Normally debt would get destroyed and turn to air. Debt is a mistake between lender and borrower, and both should suffer. But the government is socializing all these losses by transforming them into liabilities for your children and grandchildren and great-grandchildren. What is the effect? The doctor has shown up and relieved the patient’s symptoms – and transformed the tumour into a metastatic tumour. We still have the same disease. We still have too much debt, too many big banks, too much state sponsorship of risk-taking. And now we have six million more Americans who are unemployed – a lot more than that if you count hidden unemployment. …  A lot of the growth of the past few years was fake growth from debt. So swallow the losses, be dignified and move on. Suck it up. I gather you’re not too impressed with the folks in Washington who are handling this crisis.

Ben Bernanke saved nothing! He shouldn’t be allowed in Washington. He’s like a doctor who misses the metastatic tumour and says the patient is doing very well. The first thing I would tell Chinese officials is, how can you buy U.S. bonds as long as Larry Summers is there? He’s a textbook case of overconfidence. Look what happened to Harvard’s finances. They took a lot of risk they didn’t understand, and it was a disaster. That’s the Larry Summers mentality.

10 ways to make a better world

Sep 15, 2009 17:17 UTC

Here is the list from New Scientist:

1. Base economic policy on scientific evidence

2. Legalize drugs

3. Give police your DNA

4. Find non-economic measures of success

5. Study climate geo-engineering to see if it would really work

6. Tax carbon and equally distribute the proceeds

7. Embrace genetic engineering

8. Protect the seas

9. Pay people to feed energy back into power grid

10. Move to a four-day work week


…under “Political Risk: Here is the list from New Scientist:” – oxymoron or paradox ? Shocking article.

1. Base economic policy on scientific evidence: scissors beats paper.

2. Legalize drugs: yeah right, like in Afghanistan ?

3. Give police your DNA: yeah right and why, guilty before charged ?

4. Find non-economic measures of success: will we be paid for this ?

5. Study climate geo-engineering to see if it would really work: yeah right, and donate 6 billion PC’s for research purposes to include all ?

6. Tax carbon and equally distribute the proceeds: this would require an accounting system to calculate the tax in the first place.

7. Embrace genetic engineering: I only want to play God when making a baby.

8. Protect the seas: too late she cried.

9. Pay people to feed energy back into power grid: they will require a budget to create/store and channel this energy back in the first place.

10. Move to a four-day work week: …and work 10 hours each day, I am in.

Mufaso, unless you are joking or creating feeble debate, you belong in the jungle with Rafiki.(posted September 15th, 2009 10:58 pm GMT).

Posted by Casper Lab | Report as abusive