Next Question

On Wednesday Ben Bernanke called for plans to address the deficit, providing an institutional punctuation to what is obviously the next great question for our government.

One preparation for that debate is a growing interest in the value added tax. Volcker noted Tuesday that interest in the VAT was rising. And Congressional talk of VAT is reaching CBO:

Today, Congressional Budget Office Director Douglas Elmendorf confirmed he's been getting "a lot of questions" about the VAT tax from Congress.

"Many people in Congress are interested in it," he said of the VAT, a national sales tax that adds between 10 and 20 percent to purchases in European countries where it's been implemented. "We've had conversations with a number of members and their staffs."

(CBO link via the Daniel Foster at The Corner.)

Clearly our governing class knows we have an impending problem. The current schedule calls for a report from the President's deficit commission, due sometime after the November election. But there is no reason to wait. The commission's stated purpose is to provide expert and nonpartisan advice. But this isn't some tedious and obscure question, and nothing new about will be learned in the next eight months, so we hardly need some "expert" report. And there is no technocratic, "nonpartisan" answer to questions of fundamental policy.

So never mind the commission. Congress and the President know there is a problem, and they get to work fixing it. If they accomplish nothing more than outlining the broad strokes of the alternative fixes, well, that's what elections are for.

Positioning

The factions that comprise the American Left have positioned themselves as carriers of a principle and guardians of a kind of equality, and so won the support of well-meaning people believing in those ideas. They cannot sustain that support without sustaining that position — and this bill, with its myriad deals for this group and that constituency and the other bloc, and its abandonment of so many principles, tells the tale of what the Democrats are really about.

I think my friends supporting the Democrats will, in time, regret their support for these people, and wish they had found a better vehicle to advance your hopes.

Freeze Frame

Matthew Yglesias has an important detail about the impending "freeze" proposal:

a senior administration official outlined the Obama administration’s plan . . . . [T]he plan calls for the FY 2011 budget to be higher than the FY 2010 budget, but then for non-security discretionary spending to be held constant in FY 2012 and FY 2013.

The freeze is a tentative beginning, limited by its application to a small and structurally less important section of the budget, and one that won't begin before the mid-terms. The Administration had already implied deficit reduction would begin in 2012, so I don't see much new policy here.

The effect could be perverse: it isn't hard to imagine Congress _increasing_ 2011 spending in the areas frozen, effectively pushing the 2012 increases into 2011.

Perhaps the Administration is framing the deficit question: we said we'd address the deficit after the economy improved, and here is how we'll do that. That forces GOP candidates to talk about credibility, when the party doesn't have much of its own. And to outdo incumbents, challengers might have to offer specific reductions, which could irritate voters.

Change in the climate

The CRU has admitted that its email was hacked, granting a face validity to the whole trove.

This ought to demonstrate the bias of much of the global warming expertise. Clearly this important center has gone about its work with a clear predisposition, and a decided intolerance for any dissent from its conclusions. But the larger blogal warming community is also implicated. They have relied on this center's work, despite the obvous and outward signs of that bias, and so demonstrated their own preference for a particular conclusion to an actual understanding of the situation.

The bias of this community shouldn't be news: the temperament and predisposition of much of the global warming science has been on display for years. These researchers refuse to share their data, they will not entertain obvious questions or qualifications, and they endorse transparently selective presentations like "Earth In The Balance." Ask a real scientist for a definitive conclusion from an experiment and you'll get a maddeningly caveated statement of the theories consistent with its results, followed by an exhaustive discussion of the next question to be nailed down. Ask a global warming researcher the implications of a polar ice core sample and you'll get a conclusive statement of the evils of coal-fueled generation. The difference in tone and rhetorical strength ought to be obvious.

The question ought to be, why has our discourse allowed these figures so much authority? I suggest that many of their sympathizers were suspicious of consumption, and industrial production, and business, long before "global warming" became an issue. Regulation of business and constraint on consumption have long been desired by progressives so as to redisribute wealth and reduce the political power of capital and business. The solutions to global warming are nicely consistent with this agenda, and so the issue became one more argument for progressive policies. The inability of most citizens to analyze the scientific claims forestalled a proper discussion, and the willingness of most citizens to take experts and politicians at their word left the debate in the hands of those willing to speak with the greatest urgency.

Now we're beginning to see that these claims don't pass truly scientific scrutiny. The whole effort has eroded the credibility of a corner of the scientific world, and the political establishment that accepted its claims so uncritically.

Shuffling

The Washington Post covered the cost of the mandated health insurance for young people.

But it's also essential that young, healthy people participate, said Linda
J. Blumberg, a health-care expert at the Urban Institute, because the
requirement that people have insurance "is really a mechanism for financing
health-care reform."

Yes. Requiring insurance may be simple legislating social responsibility, since our society will provide care of some kind to sick people whether they can pay or not. But controlling the price of that insurance, and requiring it be very comprehensive insurance with limited deductibles and cost sharing, forces the insurer to charge everyone the same premium. In that model, the less risky to subsidize the more risky. The premium paid by the less risky in excess of the expected cost of their particular needs is really a subsidy for the more risky. The mandate essentially becomes a tax on the less risky, administered by the insurers and spent on the more risky.

Perhaps a subsidy for the more risky makes sense, but this structure is problematic. It obscures the debate, as the subsidy is hidden and so more difficult to discuss. Its very definition becomes divisive if liberals insist that it isn't a subsidy at all but a payment for service and that any other definition of the service terms would be "unfair." The structure makes the subsidy and benefits provided more difficult to adjust, whether for social needs or the economy's ability to bear the cost.

This structure also complicates any effort to reduce the cost inflation at the center of the problem. Economists agree that the separation of the consumers from the costs of their care removes their diligence from the service selection process, denying the system the strongest force for putting pressure on costs. Consumers certainly understand quality at a very granular level, and they certainly understand cost -- forcing them to participate in the cost / quality tradeoff decision would give providers incentive to produce better choices. In such an inefficient system, that force would create a long period of declining costs and improving quality. (But I wouldn't underestimate the time or market restructuring required to get it started. This really would be a revolution in health care provision, and wouldn't come easily.) But everyone is covered, and that coverage is comprehensive and restricted in its cost sharing, it would become extremely difficult to introduce consumer forces into the cost control solution.

That would leave cost control to either a regulatory approach, or some negotiated standoff between insurers and providers. Given the local market concentrations of many important providers (eg, hospitals), it's hard to see their incentives to reduce costs. Insurers would have to bring forth new providers, and encourage patients to use them -- and why should patients cooperate without some price or quality incentive? We would probably get some cost control through improved efficiencies in care for the currently uninsured, currently met through uncompensated care pools. But that's a one-time only event.

So it is very hard to see how this helps people who already have insurance. It offers a one-time cost reduction, but then mutes the incentives for cost reduction going forward. It could well increase their premiums by reducing insurers' latitude for medical underwriting. It certainly imposes excess premiums on younger, healthier people who are not currently insured. And it doesn't do much to squeeze the excess costs out of the system and make the resources they consume available elsewhere in the economy.

How did we get here? The Democrats very much want universal coverage on a subsidized basis. Their preferred option is single payer, but this is a nonstarter because of the economic and agency problems it creates. So they turn to other formulations, but it turns out that these have the same problems. You can't get away from economic realities, no matter what structure you use.

What should we do? Address the economic realities. First take the difficult steps to make the system more transparent and economically efficient, which would reduce costs and improve care. That would alleviate many of the coverage problems we see. Then move to address the problems that remain. It's cleaner economically, and a policy matter, and as a political debate.

Evidence

Here is footage of some angry citizen chewing out Arlen Specter. I'm not wild about language like "someday God will judge you", but the gentleman is angry not about Senator Specter's health care position but the management of the meeting and the control of the questions asked.

The Senator may want an "orderly procedure", but the problem seems to be that the attendees don't trust his management of that procedure.

No Man Can Serve Two Masters

I haven't been to one of these raucous town halls, so I can only speculate from news reports about what is going on in these things.

But it wouldn't surprise me if Members, their staffs, and their allies are often trying to manage the message and tone of these things. We've seen stories of sections reserved for union attendees, who enter after arriving later than long lines of people who are held at the door. And I've read at least one report of a Member taking questions as selected for him by his staff, without opening a floor mike. Talk of "balance" and "participation" comes easily to any politician seeking to find space for his allies, and it isn't hard to imagine discussions set up to emphasize apparent support for health care reform out of all proportion to the views of the attendees.

And in such staged and stilted environments, it isn't hard to imagine attendees getting angry, and finding a way to express the real proportions of sentiment in the room.

It's also easy to imagine the dilemma of many of these Members. Computerized gerrymandering has created many safe seats in Congress and state Legislatures -- obtaining office in such a district is as much a matter of building support within the party as it is winning the general election. I suspect many of our Congressmen are more adept at intraparty politics than general elections, because the latter is far less important in their jurisdiction.

The general electorate tolerates such stuff when the stakes are low, because they are less invested in particular issues than the various constituents making up the governing coalition. But when the coalition's agenda becomes so ambitious that it clearly conflicts with the general interest, and/or the particular interests outside the coalition, the general voices become a lot stronger.

I imagine that many Congressmen now find their districts generally opposed to the policies so avidly supported by their intraparty coalitions. These face a tough problem, as they need both to stay in office, and to advance their careers, but can't please both. It would be only natural for them to try to minimize the problem by managing the discussions of the issues so as to minimize the voice of the opposition, in the hope that the issue will go away by the next general election.

At this point, I'm very worried that the liberals in Congress will ram through as many benefits for their constituents as they can, calculating that even if they lose their majorities, it will be very hard to unwind those concessions. Under a Democratic President, they might well be right.

At that point, we don't have any good outcomes. The concessions couldn't be unwound without bitter fights, and the disappointment of a lot of people who have been educated to believe they deserve all this stuff. And it would be quite hard to unwind them under a Democratic President. I'm afraid that Congress is now poised to do a great deal of damage to our economy, our governance, and our politics.