James Pethokoukis

Politics and policy from inside Washington

The hypocritical White House attack on McKinsey

Jun 16, 2011 19:52 UTC

Consulting firm McKinsey put out a report on Obamacare that the White House doesn’t like very much. Here is the relevant bit (bold is mine):

US health care reform sets in motion the largest change in employer-provided health benefits in the post–World War II era. While the pace and timing are difficult to predict, McKinsey research points to a radical restructuring of employer-sponsored health benefits following the 2010 passage of the Affordable Care Act.

Many of the law’s relevant provisions take effect in 2014. Our research suggests that when employers become more aware of the new economic and social incentives embedded in the law and of the option to restructure benefits beyond dropping or keeping them, many will make dramatic changes. The Congressional Budget Office has estimated that only about 7 percent of employees currently covered by employer-sponsored insurance (ESI) will have to switch to subsidized-exchange policies in 2014. However, our early-2011 survey of more than 1,300 employers across industries, geographies, and employer sizes, as well as other proprietary research, found that reform will provoke a much greater response.

· Overall, 30 percent of employers will definitely or probably stop offering ESI in the years after 2014.

· Among employers with a high awareness of reform, this proportion increases to more than 50 percent, and upward of 60 percent will pursue some alternative to traditional ESI.

· At least 30 percent of employers would gain economically from dropping coverage even if they completely compensated employees for the change through other benefit offerings or higher salaries.

· Contrary to what many employers assume, more than 85 percent of employees would remain at their jobs even if their employer stopped offering ESI, although about 60 percent would expect increased compensation.

McKinsey, shorter: Anyone who tells you that if you like your current health plan you can keep it under Obamacare is trying to sell you a false bill of goods. Now the White House points to other studies that arrive at a different conclusion, that employers won’t change their plans much if at all.  So the White House is banging on McKinsey to release its methodology:

McKinsey says they obtained their data after they “educated respondents” about reform and that their survey used proprietary research. We don’t know what respondents were told or whether they had the chance to check with their colleagues or crunch the numbers for their business before responding.

The firm has so far declined to reveal any more info to the administration of congressional Democrats. Now what I find interesting is that the WH and its minions in the blogosphere have apparently forgotten that Team Obama likes to keep things secret as well. Remember the infamous Romer-Bernstein prediction that claimed the Obama stimulus plan would keep unemployment from reaching 8 percent? We still don’t know exactly how they arrived at that number.

Then there’s the recent budget speech by President Obama in which he presented a plan that would supposedly cut projected deficits by $4 trillion over 12 years. As I wrote in April:

When he made his big budget speech last week, it wasn’t at all clear from where his numbers were coming — nor in what direction they were heading. A “fact sheet” on his “Framework for Shared Prosperity and Shared Fiscal Responsibility” gave a few more specifics, but little or no context to make real sense of them. Even for seasoned budget experts, it was a puzzlement.

So maybe the White House should lay off McKinsey until it submits Obama’s big budget “plan” to the Congressional Budget Office for scoring, which is what Rep. Paul Ryan did with his Path to Prosperity. And if the White House really wants more info from McKinsey, maybe they should call Diana Farrell. She is the former head of the McKinsey Global Institute who until last November was a deputy director on Obama’s National Economic Council.


This is not hypocritical in the least, instead of producing a nonpolitical study McKinsey has apparently slanted their study to arrive at a politically desirable conclusion. If this turns out to be true, they are dishonest and their study is worthless. The citizens of the U.S. have a right to know if Republican politicians are trying to sway public opinion with faulty information.

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2011 ‘Recovery Summer’ looking like a disappointing rerun of 2010

Jun 16, 2011 16:13 UTC

Those “bumps in the road” are starting to come fast and furious. The mix of disappointing U.S. economic reports and fear of a Greek default must be weighing heavily right now on the minds of the Obama 2012 re-election team. We are now looking at another quarter of around 2% GDP growth, which will do little to lower unemployment.  A few selections from my email in-box:

–  Michael Dard, MKM Partners: “With Greece appearing to be on a fast track to default, and Ireland and Portugal likely not far behind, the stench of a “credit event” is once again in the air.”

– Nicholas Tenev, Barclays Capital: The Philadelphia Fed manufacturing index sank to -7.7 in June from 3.9 in May, well below our (8.0) and consensus (7.0) forecasts and the first negative reading since September.  … While respondents continue to report small increases in shipments and employment, the overall weakness of this report corroborates the Empire State manufacturing survey’s discouraging tone, signaling that the manufacturing slowdown worsened in June.:

– RDQ Economics: “The Philadelphia Fed’s general business conditions index was much weaker than forecasts …  It is now three months since the Japanese quake and tsunami and it is hard to attribute a further weakening in manufacturing in June to this event. However, this then begs the question as to why manufacturing appears to be slowing further (and possibly contracting in June). For now, we are letting the data speak for themselves and it looks like the manufacturing sector continued to lose steam in June.”

– Daniel Silver, JPMorgan: “The most recent jobless claims report showed a bit of improvement in the data, but the data still signal weakness in the labor market relative to what was reported throughout most of February, March, and April. Initial claims for the week ending June 11 declined 16,000 to 414,000 from an upward revised figure for the prior week. This decline was a small step in the right direction for the labor market, but claims have now remained above 400,000 for ten straight weeks. “


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