Debt Ceiling Strategy


It may have started a few months ago, but on November 4 the Atlantic's Andrew Sullivan blogged

I think the key to Obama's long-term success is being Obama: the calm, restrained, sober, reasonable adult in the room, always focused on actual problems and their feasible solution.

Later that month, Washington Post columnist Ruth Marcus wrote

After all, if children had the vote, their first instinct would not be to elect their parents or, for that matter, any grown-up - even if they know, deep down, that they need adult supervision. It will require intensive - let's be blunt, remedial - voter education about the necessary trade-offs. And this must, finally, be followed by presidential willingness to take the risk of laying out in detail what he believes those trade-offs should be, because the deficit commission isn't going to do it for him.

This past Sunday, John Heileman said on The Chris Matthews Show (transcript here)

....this comes back to President Obama because the Republicans are not serious about deficit reduction as Andrea said. Democrats are not enthusiastic about it for all the reasons that we know in terms of their weddedness to entitlement programs. The President is the only really serious adult in this conversation.

The idea of Barack Obama as singularly mature, the only adult in the room, may have played a role in the charge of Office of Economic Advisors chairman Austan Goolsbee on Sunday:

This is not a game. You know, the debt ceiling is not something to toy with. That`s the -- if we hit the debt ceiling, that`s the essentially defaulting on our obligations, which is totally unprecedented in American history. The impact on the economy would be catastrophic.

I don`t see why anybody is talking about playing chicken with the debt ceiling. If we get to the point where you`ve damaged the full faith and credit of the United States, that would -- that would be the first default in history caused purely by insanity.

Yesterday on The Rachel Maddow Show (transcript here), guest host Chris Hayes maintained that the GOP is bluffing and played a tape of House Republican leader John Boehner, in mid- November prior to the tax debate, conceding

If the only option I have is to vote for some of those tax reductions, I`ll vote for them. If the only option I have is to vote for those at $250,000 and below, of course, I`m going to do that.

Boehner at the time added "We have to have a discussion with our newest members that involves more of a plan…The United States must pay its bills."

Former Bush 43 speechwriter David Frum told Hayes that Goolsbee was sowing fear and contended that he instead should have said

We look forward to working with the new majority of the House of Representatives to put us on the long-term path to fiscal stability. The United States will meet its obligations.

That would have been, as the father of Frum's former boss would have put it, "prudent." But it wouldn't have drawn attention to President Obama's standing as The Only Adult In The Room. Goolsbee was dramatizing the peril of refusing to raise the debt ceiling, as Frum noted on his blog, to "depict Republicans as fiscal madmen." But he aim was not, as Frum maintained, because the Administration may have "political plans that would profit from causing people to worry."

If the White House wants to depict Republicans as "fiscal madmen" (which, apparently, Boehner isn't and a few are), it is probably not aimed at attaining some policy objective which would offend Frum or other conservative Republicans. Goolsbee struck a note of panic and thereby showed the GOP his hand, which would suggest the possibility of doing almost anything to prevent the fiscal catastrophe he believes would ensue with failure to raise the debt ceiling. It thus softens up the President's own party, giving liberals an incentive to accept whatever deal Obama negotiates with the GOP. That could be a cut in spending, in Social Security or elsewhere, that would not jeopardize health care reform, Obama's baby and signature accomplishment. but one which would depict the President as serious about addressing the budget deficit.

Machiavellian? Surely. But this is a Democratic Administration which opposed tax breaks for the wealthy; heard John Boehner admit in October that if tax cuts were extended only for middle incomes, he'd vote for it; then celebrated a "compromise" that forced the GOP to accept tax cuts for millionaires and billionaires. Is it unreasonable to suggest that the Administration is inflaming concerns both to demonstrate that the President is the one adult seriously addressing a grave problem and to achieve a center-right economic objective?

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On Health Care

In an article that appeared on Slate.com on July 1, 2007, Austan Goolsbee, an economic advisor to Barack Obama, argued that Michael Moore's critique of the U.S. health care system was largely accurate but his prescription misguided. Here is the article, entitled Michael Moore and the Beige Bomber, and my rebuttal.

-At the most simplistic level, giving free health care to everyone costs a lot of money. Especially since people tend to use things more frequently when they are free. But people don't consume health care the way they do other goods (such as Pepsi), which Malcolm Gladwell identifies as "the moral hazard myth." They schedule doctor's appointments only when they are ill and go to the hospital only when they need to. Nevertheless, in our market-based system, individuals generally fail to distinguish necessary care from unnecessary care and thus "tend to cut down on mundane-but-important things like hypertension medicine, which leads to far costlier complications," according to Ezra Klein in The American Prospect. Costs escalate as individual patients pursue tests, drugs, and other goods and services which are unnecessary but artificially inexpensive to them because the cost is covered by insurance- and encouraged by their doctors, confident of reimbursement while fearful of lawsuits.

-To get costs down to a comparable level, a single-payer system in the United States would have to seriously cut doctors' pay. However, maintaining a large pool of doctors is becoming harder with the current system. In a study released in June, 2007, the American Medical Association contended that if reductions in Medicare reimbursements planned by Congress are made, up to 77% of physicians would limit the number of new or existing Medicare patients. A system in which doctors could concentrate on the health of their patients and not deal with insurance companies might enhance the desirability of the profession.

-Nor do these countries have the same costs associated with malpractice lawsuits that we do. A single-payer system here would have to also include some truly major rearrangement of the tort system to bring those costs down. Doctors can be indemnified from lawsuits and a panel established to determine validity of complaints, with settlements paid from public funds. And by the way, doesn't the relative paucity of malpractice lawsuits in other western nations suggest an advantage, rather than disadvantage, of their system? Perhaps our doctors and hospitals make more mistakes than in state-sponsored systems.

-You would also need to dramatically slash drug prices.... the problem is that (Canada and the United Kingdom) get cheap drugs only because they are free-riding of the massive profits made in the American market. If our government required medicine here to be sold at no more than the lowest price charged abroad, the drug companies would drive the costs up in the other markets rather than reduce them here. Although Medicare is thus far barred from negotiating drug prices, the latter would be lowered if any large organization- such as the U.S. government- is permitted to bargain down the cost. Klein notes this is done in the Canadian provinces, whose citizens pay 60% less for pharmaceuticals than do we. Currently, many Americans break the law by smuggling drugs across the border from Canada. And reducing prices for American consumers interests me more than maintaining low prices for consumers abroad.

-But the main problem with Moore's policy solution is that a national health system wouldn't fix one of our health care system's main flaws- one that people really hate- the denial of service. It just changes who decides, so that the government makes the call. The government, unlike an insurance company, is at least open to democratic controls. Leaving rationing decisions to insurance companies requires insurance salespeople, billing specialists in doctor's offices, and underwriters and contributes to health administration costs. So the United States, reports the New England Journal of Medicine, spends 345%more per capital on health administration than does Canada. And according to OECD. org, in 2003 health spending as a share of gross domestic product was: in Switzerland and Germany, 11%-12%; in Iceland, Norway, and France, 10.1%-10.5%; in Candada, 9.9%; and in the U.S. A., 15%. And insurance companies still deny, deny, deny.

-In those (nationalized health) systems, cost-effectiveness decisions get made all the time. Care is rationed. That's what happens if you offer something for free- you have to make rules about who is allowed to get it. Except in Germany. And France. And elsewhere. In Germany, the insurers are approximately 300 "sickness funds" (neither fully private or public), which ensure that the burdens of bad health are spread across the populace and everyone receives health care. Meanwhile, citizens anxious for more comprehensive coverage can choose to purchase private insurance, as a small minority do. The French government encourages its citizens to purchase supplementary insurance, as most do. And there are private options for the affluent in most western nations, cutting wait time for medical procedures. Even in Canada, the California Nurses Association cites Physicians for a National Health Program as finding "there are no waits for emergency surgeries, and the median time for non-emergency elective surgery has been dropping as a result of public pressure and increased funding so that it is now equal to or better than in the U.S. in most areas (and) median wait times for elective surgery in Canada is (sic) now three weeks." Moreover, wait times in a market-based system, such as in the U.S., are likely to be artificially low as many individuals never seek diagnosis, and hence are unaware of their need for surgery, because they lack health coverage. Instead, such consumers often use hospital emergency rooms as doctor's office, driving up costs and wasting resources.

The United States pays more than twice as much per capita on health care than most of the industrialized world and still has 46 million people uninsured. Other individuals remain tied to inadequate employment through which they receive their health insurance. Millions are relegated to ill health, or costly operations, because they never pursued the preventive care common in nations with single-payer systems but discouraged in the largely for-profit American system. Yet, reform of the health care system is attacked as "socialized medicine."

We already have socialized medicine in the U.S.A. It is called the Veterans Health Administration, which controls costs better than the private system, serves patients with shorter wait time and higher customer satisfaction, and is generally lauded for providing better care than most of the health care industry. (Walter Reed Army Hospital is not run by the Veterans Administration but by the Defense Department, with many functions outsourced to the private sector in recent years.)

The leading Republican candidate, Fred Thompson, recently wrote "our entire medical industry- which by the way is the best and most complex in the world...." We await further details from the Presidential candidates about their plans for health care. But it is likely that any major Democratic candidate will advocate, and as President would propose, more fundamental changes than any of the major Republican candidates. Meanwhile, the former actor-Senator-actor already has disqualified himself from consideration by anyone seriously concerned about the health of our nation.