Something to keep in the back of our collective minds as we (eventually) emerge from the current economic and employment crisis.

In his 16 March 2010 NY Times article, The Perils of Pay Less, Get More, Leonhardt writes:

As a society gets richer, its tax rates tend to rise.
This idea is known as Wagner’s Law, named for the 19th-century economist who came up with it. Citizens of richer societies generally prefer more government services, Adolf Wagner explained. With their basic needs met, they want a military to protect them, good schools for their children, comfortable retirement for the elderly, medical care even when it isn’t profitable and a strong social safety net.
Sure enough, the United States followed this path for most of the last century. In 1900, federal taxes amounted to just 2 percent of gross domestic product. By 2000, the share had risen to 21 percent.
Over the last couple of decades, though, we have repealed Wagner’s Law — or, more to the point, only partly repealed it. Taxes are no longer rising. They fell to 18 percent of G.D.P. in 2008 and, because of the recession, to a 60-year low of 15.1 percent last year.
Yet our desire for government services just keeps growing. We added a prescription drug benefit to Medicare. Farm subsidies are sacrosanct. Social Security is the third rail of politics.
This disconnect is, far and away, the main reason for our huge budget problems.

(…)

What needs to happen? Spending will need to be cut, and taxes will need to rise. They won’t need to rise just on households making more than $250,000, as Mr. Obama has suggested. They will probably need to rise on your household, however much you make.

Read on and also take a look at his follow-on piece, The Future of the Deficit.

But, as I said at the beginning, let’s fix the current employment crisis first.

-RichardH

For those of you who are old enough to know who he was, click this LA Times link and then sing along.

-RichardH

In the 18 March 2010 issue, The Boston Globe reports Catholic opposition to health bill fades.

Roman Catholic opposition to the health care overhaul package is crumbling, with some church officials and lawmakers concluding that their long-sought goal of health care overhaul trumps the desire to adopt the severest restrictions on abortion funding.

A coalition of 59,000 nuns released a letter yesterday calling on Congress to approve the overhaul, defying the US Conference of Catholic Bishops, which opposes the measure. The Catholic Health Association, which represents 1,200 Catholic hospitals, has endorsed the package, as have Catholics United and Catholic groups promoting social justice.

-RichardH

Michael Lewis’s new book about the financial crisis, “The Big Short,” goes on sale 15 March 2010.  In the past, I have posted links on this blog to Michael Lewis articles.

Two very positive reviews of this book have just come out:

On 12 March 2010, Felix Salmon of Reuters concludes, “There aren’t many reasons to be happy about the global financial crisis, but here’s one: that it brought Michael Lewis back to his roots, to produce what is probably the single best piece of financial journalism ever written.”

On 14 March 2010, Steven Pearlstein in the Washington Post writes, “If you read only one book about the causes of the recent financial crisis, let it be Michael Lewis’s, ‘The Big Short.’ ”

On 14 March 2010, CBS’s “60 Minutes” aired “Inside the Collapse”.

on 15 March 2010, Peter Lattman wrote in the WSJ’s Deal Journal, Michael Lewis’s ‘The Big Short’? Read the Harvard Thesis Instead! in which he tells about the Harvard undergrad (Anna Katherine Barnett-Hart) who wrote The Story of the CDO Meltdown, the honors thesis which inspired Michael Lewis.

I have already pre-ordered the Lewis book and downloaded the Barnett-Hart thesis.

-RichardH

Howell Raines in the 14 March 2010 Washington Post writes, Why don’t honest journalists take on Roger Ailes and Fox News?.

One question has tugged at my professional conscience throughout the year-long congressional debate over health-care reform, and it has nothing to do with the public option, portability or medical malpractice. It is this: Why haven’t America’s old-school news organizations blown the whistle on Roger Ailes, chief of Fox News, for using the network to conduct a propaganda campaign against the Obama administration — a campaign without precedent in our modern political history?

Here is one snip (out of many) from the article:

It is true that, after 14 months of Fox’s relentless pounding of President Obama’s idea of sweeping reform, the latest Gallup poll shows opinion running 48 to 45 percent against the current legislation. Fox invariably stresses such recent dips in support for the legislation, disregarding the majorities in favor of various individual aspects of the reform effort. Along the way, the network has sold a falsified image of the professional standards that developed in American newsrooms and university journalism departments in the last half of the 20th century.

The bolded phrase in the above paragraph refers to the 23 February 2010 Kaiser Family Foundation (KFF) report titled, Americans Remain Split On Stalled Health Care Legislation, but Some Provisions Popular Among Majorities of Democrats, Independents and Republicans

Read the whole Raines article and the KFF report.  In your heart, you know this material … but it’s nice to see it spelled out.

-RichardH

On 24 February 2010 (the evening before the health care summit), Charlie Rose interviewed the always articulate and intelligent Chairman of the OMB, Peter Orszag, on health care reform and the budget. The video runs about 30 minutes and I think it is well worth your consideration. [After going to the above link, click on Orszag’s face to start the video.]

-RichardH

In his 26 February 2006 NY Times column, Afflicting the Afflicted, Krugman comments on yesterday’s Republican-Democratic health care summit. Here is an excerpt:

It was obvious how things would go as soon as the first Republican speaker, Senator Lamar Alexander, delivered his remarks. He was presumably chosen because he’s folksy and likable and could make his party’s position sound reasonable. But right off the bat he delivered a whopper, asserting that under the Democratic plan, “for millions of Americans, premiums will go up.”

Wow. I guess you could say that he wasn’t technically lying, since the Congressional Budget Office analysis of the Senate Democrats’ plan does say that average payments for insurance would go up. But it also makes it clear that this would happen only because people would buy more and better coverage. The “price of a given amount of insurance coverage” would fall, not rise — and the actual cost to many Americans would fall sharply thanks to federal aid.

His fib on premiums was quickly followed by a fib on process. Democrats, having already passed a health bill with 60 votes in the Senate, now plan to use a simple majority vote to modify some of the numbers, a process known as reconciliation. Mr. Alexander declared that reconciliation has “never been used for something like this.” Well, I don’t know what “like this” means, but reconciliation has, in fact, been used for previous health reforms — and was used to push through both of the Bush tax cuts at a budget cost of $1.8 trillion, twice the bill for health reform.

What really struck me about the meeting, however, was the inability of Republicans to explain how they propose dealing with the issue that, rightly, is at the emotional center of much health care debate: the plight of Americans who suffer from pre-existing medical conditions. In other advanced countries, everyone gets essential care whatever their medical history. But in America, a bout of cancer, an inherited genetic disorder, or even, in some states, having been a victim of domestic violence can make you uninsurable, and thus make adequate health care unaffordable.

Read the whole article. I’ll just add Krugman’s final remarks:

So what did we learn from the summit? What I took away was the arrogance that the success of things like the death-panel smear has obviously engendered in Republican politicians. At this point they obviously believe that they can blandly make utterly misleading assertions, saying things that can be easily refuted, and pay no price. And they may well be right.

But Democrats can have the last laugh. All they have to do — and they have the power to do it — is finish the job, and enact health reform.

-RichardH

For your amusement: On 22 February 2010, The New Yorker posted Loudin Wainwright III’s song/video, The Krugman Blues. [See lyrics in Comment 1]

You might also be interested in Larissa MacFarquhar’s (long) profile The Deflationist-How Paul Krugman found politics in the 1 March 2010 issue of The New Yorker.

-RichardH

In case you need a soothing nine-minute break from politics and economics …

144 Beautiful Faces – Long Version via YouTube. Turn on your sound; it enhances the mood.

This video brings a much-needed smile to my face. I hope it affects you the same way.

-RichardH

Paul Krugman in his 19 February 2010 New York Times column, California Death Spiral, uses insurer Wellpoint’s arguments for dramatically increasing California health insurance premiums in order to analyze some health insurance myths.

[H]ere’s the thing: suppose that we posit, provisionally, that the insurers aren’t the main villains in this story. Even so, California’s death spiral makes nonsense of all the main arguments against comprehensive health reform.

For example, some claim that health costs would fall dramatically if only insurance companies were allowed to sell policies across state lines. But California is already a huge market, with much more insurance competition than in other states; unfortunately, insurers compete mainly by trying to excel in the art of denying coverage to those who need it most. And competition hasn’t averted a death spiral. So why would creating a national market make things better?

More broadly, conservatives would have you believe that health insurance suffers from too much government interference. In fact, the real point of the push to allow interstate sales is that it would set off a race to the bottom, effectively eliminating state regulation. But California’s individual insurance market is already notable for its lack of regulation, certainly as compared with states like New York — yet the market is collapsing anyway.

Finally, there have been calls for minimalist health reform that would ban discrimination on the basis of pre-existing conditions and stop there. It’s a popular idea, but as every health economist knows, it’s also nonsense. For a ban on medical discrimination would lead to higher premiums for the healthy, and would, therefore, cause more and bigger death spirals.

So California’s woes show that conservative prescriptions for health reform just won’t work.

What would work? By all means, let’s ban discrimination on the basis of medical history — but we also have to keep healthy people in the risk pool, which means requiring that people purchase insurance. This, in turn, requires substantial aid to lower-income Americans so that they can afford coverage.

And if you put all of that together, you end up with something very much like the health reform bills that have already passed both the House and the Senate.

What about claims that these bills would force Americans into the clutches of greedy insurance companies? Well, the main answer is stronger regulation; but it would also be a very good idea, politically as well as substantively, for the Senate to use reconciliation to put the public option back into its bill.

-RichardH