I'm a big fan of Missoula Mayor John Engen. I lent a (very small) hand to his campaign in '05 even as I was living down in Billings. He continues to impress. He cares deeply about the health of his home town. He's smart. He listens. He's a good politician, in the best sense of that term. He focuses, constantly, almost to a fault, on making measurable progress.
But Engen more than made up for that a few weeks later when he provided a detailed outline of the [economic development] project's mission and methods, and made it clear that he is prepared to continue cracking the whip in order to get results right away.
And check out the team he's assembled to help:
St. Patrick Hospital president Jeff Fee, University of Montana executive vice president Jim Foley; Williamsworks founder and president Whitney Williams, NorthWestern Energy president Bob Rowe, First Security Bank president Scott Burke, Washington Cos. president Larry Simkins and Missoula Redevelopment Agency director Ellen Buchanan
That's a damn smart collection of folks.
My only complaint? The focus seems to be, as it is so often, on recruiting business. There are huge gains still to be made in Montana by developing homegrown businesses. Le Petit's expansion can be big local news. Big Sky's expansion has brought lots of jobs to town. Kettlehouse's growth is having a similar effect. There are interesting tech companies already based in town. Helping these folks grow is likely a surer bet for stable economic expansion than poaching industries from elsewhere.
It's not that poaching business is a terrible idea. I just think it shouldn't be job one.
Number one suggestion..stop spending money on failed stimulus. Tax relief!!
A full third of the ARRA was tax relief. That's why payroll withholding dropped last year. It is why there's a $400 or $800 Make Work Pay tax credit on people's returns this year.
Beyond that, the spending in the stimulus didn't fail, unless our Congressman is advocating for cutting short COBRA subsidies or unemployment insurance. Hilariously, Congressman Rehberg tweeted this yesterday, around the same time he was touring the stimulus-funded Northern Hotel renovations:
When the two reached Nelson's basement office, Rehberg's work began. The congressman inquired about what the government could do for the Northern, promising to have a staffer look for grant options and Department of Energy assistance.
A year ago, by cooperating with the city of Billings, the Northern was able to sell $20 million in tax-free "stimulus bonds" to pay for the hotel's remodeling. Investors like the government-backed, tax-free bonds, which were made possible through the American Recovery and Reinvestment Act of 2009.
Rehberg is looking into government grant options and DoE assistance for private projects? Sounds like government spending to me.
Even worse, our Congressman is apparently aware that he's full of it:
In an interview with The Billings Gazette editorial board Tuesday, Rehberg, who opposed the ARRA and is advocating a shift toward tax cuts, said the construction projects funded by the ARRA had merit....
If Denny Rehberg thinks COBRA benefits, food stamps, unemployment, and local business projects like Northern renovation are failures, he should say so explicitly. He's trying, as always, to have it both ways.
And keep in mind when Rehberg rails about government spending that his office repeatedly calls for higher spending on numerous programs. This guy is absolutely all over the map.
Fresh in the inbox, a Congressional newsletter from Montana's junior Congressman Dennis Rehberg:
Congressman Denny Rehberg
HAS A SOLUTION TO OUR DEBT PROBLEM:
STOP SPENDING AND BALANCE THE BUDGET!
Already, Cappy McShout, let's see your solution:
Congress can decrease the deficit and decrease the debt by:
* Freezing non-defense discretionary spending
* Reforming "entitlement" spending
* Increasing tax incentives for small businesses
* Lowering taxes for hard-working Americans
Low-hanging fruit first: Items 3 and 4 will increase the deficit, not reduce it. Cutting taxes means slashing revenue. Budget deficits by definition amount to expenditures minus revenues. If revenues get smaller, deficits go up.
Obviously, some practitioners of voodoo economics will argue that resulting improvements in economic growth will make up for any loss of revenue, but the math here is quite fuzzy and, at the tax rates currently levied in the United States, almost certainly inaccurate. There are policy arguments for cutting taxes and accepting the deficits, but we're almost certainly on the wrong stretch of the Laffer curve to have tax cuts actually increase revenue.
But let's look at the other two proposals, starting with the discretionary non-defense spending freeze. First, this is an Obama proposal. Second, in terms of the budget, it's virtually meaningless. Check out this interactive budget graphic from The New York Times. Look at the overall budget, then click on the "Hide Mandatory Spending" button. Now, pretend that the National Security and Veterans Benefits (I'm presuming Rehberg isn't advocating freezing spending on Veterans). Look at what a small share of the budget is left. Now remember that we're not slashing this, we're freezing its growth.
So, not really a big deal.
What's the last proposal? Entitlement reform.
Where to begin with this one? Entitlement reform is GOPese for "cutting Medicare and Social Security," often through privatization. Depending on the particular privatization scheme with Social Security, there's a good chance that Rehberg's proposal would actually increase costs.
But let's just keep in mind that any savings on the Social Security front are likely to be minimal. The real driver of costs within the long-term budget is Medicare (which is one of the big reasons I favor health care reform). Rep. Paul Ryan, the House Republicans' point person on the budget, solves this problem by voucherizing Medicare and freezing its spending, a proposal that has the virtue of balancing the budget solely through spending cuts. Of course, Rehberg has also played politics by pretending to oppose any reduction in Medicare services. Instead, he'll just destroy the program in wholesale fashion.
One last point, despite Paul Ryan's ability to balance the budget solely with spending cuts, it is worth knowing that he had to instruct the CBO to assume no revenue reductions, which means no tax cuts.
In short, Montana's Congressman is pushing fiscal snakeoil. No surprise there. As Tyler Gernant put it a few weeks ago:
While Rehberg claims that fiscal responsibility is at the core of his being, Gernant said he voted for "a massive tax cut for the wealthy that completely eliminates our budget surplus and returns us to deficits."
Gernant said Rehberg voted to put two wars on the country's credit cards and voted for a pharmaceutical drug plan that lets the big drug companies charge the U.S. government whatever they want.
Rehberg doesn't give a shit about the deficit. He's either an idiot or a liar on this stuff. What he really wants is to destroy government, except when he can have a press conference to take credit for it.
Sadly, politicians rarely explain the federal budget to constituents. Neither, really, does anyone else. That means we're left with misleading crap like this being peddled instead.
One of the more helpful but underutilized concepts to come out of economics is the theory of the second best -- namely that the conditions necessary for optimal outcomes are often impossible, but we should not necessarily rely on near-optimal conditions to produce near-optimal outcomes.
I think that basic idea would be instructive in this debate between Ezra Klein and one of his commenters regarding the importance (or non-importance) of focusing on impossible-but-theoretically-perfect policy solutions or possible-but-imperfect ideas.
Political science already has some (at least implicit) corollaries to the theory of the second best, many of which feature in the Federalist discussions about the need for countervailing powers and the ability of factions to be empowered to fight each other. But this is a different set of problems.
Interesting story in this morning's Missoulian about John Barrrett and Barrett Production's quest to lower airfares in-and-out of Missoula as an economic development bid. It's a great reminder that:
Markets occasionally get into trouble but that internal corrections are possible.
Some of the biggest barriers to growth and development in Montana probably have virtually nothing to do with government.
Identifying and creating opportunities for cost savings in travel budgets is just as important as identifying savings in taxes. In fact, it may be an improvement. While much of government spending (infrastructure, education, and emergency services come to mind) is actually helpful for business, a restructured travel system can be cheaper and equally effective for business.
There's a lot this state could do to strengthen the state's economy. But doing it means some serious conversations that look at all of these factors, as well as tax structures (not just overall revenue levels).
I don't know who originally coined the axiom, "First, do no harm," but that is what the government needs to do in order to get us even close to thinking about an economic recovery. As Congress debates and the President presses for sweeping changes in health care, climate change (cap & trade), card check, different tax rates for investors, different rates for income tax payers, death tax revisions, huge financial and banking reforms, and record deficit spending, my question is this - who would want the risk of hiring new people in a time of record uncertainty? And not just economic uncertainty, but uncertainty largely created by government officials and regulators.
It's not an easy time to be a business owner right now, especially a small business owner. I think most are thinking they are safer just treading water than trying to expand, and it's due in large part to many things being debated in Congress right now. If we want to get our people back to work, we must first understand what's been keeping businesses from hiring new people. Tax credits aren't going to get people back to work in any large numbers.
Jon doesn't come right out and say it, but it's the obvious rationale for the policy of status quo - which means deregulation, corporate subsidies and tax breaks, etc & co. Of course, the kicker is this: the crises that are causing so much instability are the targets of the policies Bennion is singling out. The global financial crisis. Global warming. The health care crisis. All of which are the direct results of the kind of pro-corporate status quo that the Montana Main Street blog is paid to represent.
But Bennion is right. These problems aren't going to be solved with your usual run-of-the-mill tax credits. We need something else that address the roots of the crises that face us.
Which brings me to Cory Pein's profile of economist Samuel Bowles:
"Inequality," she says, "really holds us back."
Bowles offers a key reason why this is so. "Inequality breeds conflict, and conflict breeds wasted resources," he says.
In short, in a very unequal society, the people at the top have to spend a lot of time and energy keeping the lower classes obedient and productive.
Inequality leads to an excess of what Bowles calls "guard labor." In a 2007 paper on the subject, he and co-author Arjun Jayadev, an assistant professor at the University of Massachusetts, make an astonishing claim: Roughly 1 in 4 Americans is employed to keep fellow citizens in line and protect private wealth from would-be Robin Hoods.
The job descriptions of guard labor range from "imposing work discipline"-think of the corporate IT spies who keep desk jockeys from slacking off online-to enforcing laws, like the officers in the Santa Fe Police Department paddy wagon parked outside of Walmart.
The greater the inequalities in a society, the more guard labor it requires, Bowles finds. This holds true among US states, with relatively unequal states like New Mexico employing a greater share of guard labor than relatively egalitarian states like Wisconsin.
The problem, Bowles argues, is that too much guard labor sustains "illegitimate inequalities," creating a drag on the economy. All of the people in guard labor jobs could be doing something more productive with their time-perhaps starting their own businesses or helping to reduce the US trade deficit with China.
And think off all the service workers laboring to justify the inequities of our system. Like the Montana Main Street blog. Why, Fox News, too, is essentially "guard labor," isn't it? Working tirelessly to protect the status quo and its economic inequities, producing nothing of actual value?
Bowles' suggestion is a one-time sum of $250,000 for every American when they turn 18, allowing them to go to college or start a business and break individuals out of the rut of poverty. Not sure if I'd go there, but a nice alternative would be to give generous tax breaks to those in the lower strata of tax brackets while levying higher taxes on those that earn more.
Great discussion on some of the reasoning surrounding Citizen's United, which reinforced the concept of "corporate personhood," and promises to unleash corporations on political campaigns.
James Fallows points out this statement from Chief Justice John Roberts, challenging the notion that corporations engaging in elections causes harm to shareholders:
"Roberts sharply challenged this line of argument. 'Isn't it extraordinarily paternalistic,' he asked, 'for the government to take the position that shareholders are too stupid to keep track of what their corporations are doing and can't sell their shares or object in the corporate context if they don't like it? ... ' "We the government have to protect you naive shareholders." '
As Solicitor General Elena Kagan pointed out, most folks own stock through mutual funds and retirement funds, and have little or no influence over corporate action or even knowledge of what the corporations are doing. Fallows:
Of course Kagan's response is the practical and real-world one. Virtually all such "wealth" as my wife and I hold, apart from our house, is in low-cost indexed mutual retirement funds. I literally have no idea which specific companies I might have bigger or smaller positions in. By the prevailing wisdom of the day, I'm behaving rationally for a non-expert prudent investor. By Roberts' standard, I am "too stupid to keep track" of what every one of these companies is doing and shifting my positions day by day in response. Or maybe just too lazy.
As long ago as 2003, Roberts owned no fewer than 46 different common stocks, on top of 31 different mutual funds, one ETF, and a REIT. I very much doubt that he was keeping track of what all of the corporations he owned were doing, and selling his shares or objecting in the corporate context if he didn't like it. And I don't think that he believed that his mutual-fund managers were doing that either. Maybe he assumed that the magical qualities of the efficient market hypothesis meant that he didn't need to do that, and that some other group of shareholders would do it for him....
As Justin Fox noted in a 2006 column, it's been some time since boards of directors have actually performed their function, "that of vigilant monitors of CEO pay and performance," having long since been taken over by the managers they were supposed to watch. Roberts' notion that corporations answer to any kind of populist shareholder pressure can't be characterized as merely quaint, but instead as dangerously oblivous.
Glenn Greenwald, on the other hand, defended the court's decision, arguing that it did strike down campaign finance laws that were overly burdensome especially to nonprofit organizations and that it won't give over more power to corporations because, essentially, they already control the body politic. Here's the main basis of his argument:
I tend to take a more absolutist view of the First Amendment than many people, but laws which prohibit organized groups of people -- which is what corporations are -- from expressing political views goes right to the heart of free speech guarantees no matter how the First Amendment is understood. Does anyone doubt that the facts that gave rise to this case -- namely, the government's banning the release of a critical film about Hillary Clinton by Citizens United -- is exactly what the First Amendment was designed to avoid? And does anyone doubt that the First Amendment bars the government from restricting the speech of organizations composed of like-minded citizens who band together in corporate form to work for a particular cause?
But, as Fallows, Fox, and Salmon point out, corporations aren't "like-minded citizens" who "band together" to "work for a particular cause." Unlike most non-profits I know, corporations are a mass of shareholders oblivious and captive to the irrational or biased political beliefs of a small group of executive managers. Ironically, that's what Justin Fox argues violates Milton Friedman's demand that corporate executives shouldn't "impose their own notions of social responsibility on corporations that were owned by others."
The individuals who make up the electorate in the United States are, as Friedman described, beings of many facets - their actions and their views shaped by pecuniary self interest but also by values, beliefs, and loyalties that might conflict with that self interest. The ideal for-profit corporation, on the other hand, is out to do nothing but make as much money as it can "within the rules of the game." It is supposed to behave in a fashion that for an individual would probably be described as psychopathic. And if corporations are allowed to play a decisive role in shaping the "rules of the game," we have effectively put the inmates in control of the asylum.
This feels like a pretty compelling justification for treating corporations differently from individuals in the political process.
A bad week for Republicans. First, despite the insistence by Republicans that Brian Schweitzer doesnt know what he is doing, the Wall Street Journal wrote an editorial praising the Governor's solid fiscal management as a national example of how states can operate frugally while still fulfilling important obligations. No response yet from Republican leader Bob Story, who recently argued that Judy Martz is responsible for Montana's current fiscal strength.
Then, a new chapter in Tennisgate. You'll recall Republican Bozeman Mayor Jeff Krauss got into trouble recently when he chose to spend stimulus money on a new rubber-tiled tennis court. Schweitzer publicly chided this expenditure, and the Mayor ended up having to defend himself on Fox 'News'. This past Monday the volume was amplified when Schweitzer decided to attend, as a citizen, the weekly City Commission meeting in Bozeman.
According to several observers, Schweitzer was first accosted outside of the meeting room by Commissioner Chris Mehl, who cursed at him, saying:
"what you are doing is bullsh**, Governor."
(Mehl obviously takes his tennis very seriously).
When the meeting came to order, Schweitzer waited in the back of the room as six or seven proponents of the tennis court project gave their testimony. Then it was Schweitzer's turn to speak. The only opponent present, Schweitzer said that he, as a property owner in Bozeman and a tennis player, supported fixing the courts, but believed such a project was inappropriate use of federal stimulus funds. The house was packed mostly with Krauss partisans, and there was some hooting and hollering as Krauss and Mehl tried to razz the Governor, questioning him from their perches. Whatever you think of Schweitzer, this much can be said: not many gunfighters would walk into a saloon like this one.
Krauss and Mehl, in what a number of people saw as disrespectful behavior toward a Governor, started interrupting Schweitzer and attempting to pepper him him with spicy one-liners. But Schweitzer, who did not interrupt the commissioners, hushed the crowd when he said:
"Just because somebody puts a chocolate cake in front of you, doesn't mean you have to eat the whole thing,"
in response to Krauss' argument that Bozeman has the legal right to spend the funds on tennis courts.
Personally I think Krauss has picked a stupid fight. The Governor's position on this issue is very popular, even in Bozeman where the Chronicle online poll of over 900 respondents shows a 74-26% vote against the tennis project. Plus, it turns out that the tennis court contract was awarded to a Minnesota firm, meaning no Montana jobs would be created.
Finally, if Krauss has aspirations beyond city council, he is going to have a tough time. As of now, the notable items on his resume are 1) spending stimulus money on tennis, and 2) a city policy that required all job applicants to hand over their passwords to their e-mail and facebook accounts.
That resume won't get you very far in a Republican primary.
Normally, I'm a big fan. I voted for you and was very pleased when you won. I have in the past defended you vigorously from spurious claims that you go in big for pot, porn, and perversion, and I would still stand up to those kinds of slanderous whack-jobs. However, and I'm only saying this because I care, I really wish you would stop talking about the death spiral of the Montana economy while simultaneously giving your employees handsome raises. The timing is probably coincidental, but it doesn't look good and it certainly doesn't engender good feelings among ordinary Montanans, some of whom had been hoping to find jobs at some point in this young decade.
Bozeman's deputy Mayor Jeff Krauss has a history of brilliant moves, but this really takes the cake!
The Bozeman mayor is now touting an appearance on Fox and Friends in defense of a fancier tennis court in Bozeman. I guess this guy would rather see the state cut Meals-on-Wheels? Bozeman Republicans are too much!
He attempts a "defense" of his actions on 4 & 20 Blackbirds. However, his defence fails to explain how an out-of-state contractor building a tennis court in Bozeman will stimulate Montana's economy.
Krauss writes:
Bozeman's general fund budget dedicates an average of about 9% each year to parks and recreation. We have two swimming pools, many parks, baseball and soccer fields, tennis courts, ice skating and hockey rinks and miles of trails and bike lanes.
So, you don't really need the new tennis court?
***UPDATE: Wulfgar pointed out that Krauss is now the mayor of Bozeman and that he did appear of Fox News. Wulfgar also says this guy was vehement about correcting the fiasco after it happened, and if so that's good at least, though it would have been better to prevent it from happening in the first place. You can see his apology here from the article I linked to above:
"I'm sorry that we couldn't get in front of this quicker. When Thursday came around and we tried to answer the questions from the national press, before we started defending it on Thursday night, I'm sorry we missed that opportunity to apologize and by Friday much of the damage had been done. What really is needed now from us to the community and the state is that we apologize for wandering down a road that violated basic rights of our citizens and we will do all we can to restore that public trust," Deputy Mayor Jeff Krauss said.
Some good news this morning as unemployment fell in November...at least on the initial count. National unemployment remains barely in double digits, but this is good news (and, yes, that number is seasonally-adjusted).
The news is far more mixed in Montana, where tax revenues are down and are likely not to recover fully until 2015. Some of this is economic in nature -- when people are making less money, the same tax rates will collect fewer dollars. But some of it is policy -- we've cut taxes in this state a lot over the past 15 years, although not very often for most Montanans.
Do you ever go to sports games and here fans boo their favorite teams and wonder what is wrong with people? Personally I can't stand 'boo birds'. Of course, real life is different than a sport. When it comes to every day real life, careers and the after effects of certain decisions, I would consider booing bankers.
A Bankers convention recently went down in Chicago but was met with protesters. Basically, banks are only concerned with making as much money as possible. The fat cats sitting at the top have no problem giving themselves some of the relief money granted by the Obama Administration. A couple of things that Obama has worked towards improving deal with the lending industry. Obama has encouraged a loan modification to homeowners facing possible foreclosure. He even invested $75 Billion in perks for lenders who can avoid foreclosure. Well, recent reports have come out saying that it is STILL better for lenders to eat a foreclosure than go through a loan modification. The entire scene is SLOPPY.
I don't know, but to me that is just a travesty. This is something the Obama Administration has to change quickly. With the rise is unemployment lenders have to put their clients best interests first. People need all the help they can get.
As National Journal noted, the House measure "would be much more expensive than extending the 2009 rate." For the record, under current law, 99.7 percent of households will be completely exempt from the tax. So by Brady's own calculation, $250 billion will buy an exemption for .1 percent of households.
And as for looking to "preserve small businesses and family farms," current law would only affect about 100 of them, and "all but a handful would have sufficient liquid assets on hand (such as bank accounts, stocks, and bonds) to pay the tax without having to touch the farm or business."
I think a $250 billion budgetary hole in the name of preserving fewer than 100 family farms is just insane.
I got referred to this story (h/t Bunk in the West) and it really is a pretty incredible example of just no understanding of how taxes work. In Montana, we have repeatedly made clear our preference for income and property taxes over sales taxes. Just as income taxes tax income and sales taxes tax sales, property taxes tax property. There's an admirable truth in advertising at work here.
That means that when property values rise, as they have up in the Flathead, where the setting is gorgeous and lots of people want to move, the taxes rise along with them. This is actually part of the argument for a property tax: the property being taxed costs the owners more as others would be willing to pay more for it, which means that owners have an incentive to sell. That generates economic activity and ensures that property is going to a more productive use (as determined by the market).
The flip side of this, of course, is that some people's property taxes are declining massively -- for folks in places like Hysham, I would guess. Places where property values have stagnated or declined, taxes will actually fall for homeowners. You really can't have one without the other.
That's not to say that there isn't a human interest story here. It also isn't to say that there aren't some policy responses -- we could decide that we think that some lands deserve to be inherited for the rest of time (and perhaps give the Flathead Lake coast to American Indians) and cease property taxation. We could also instill some circuit breakers such that property taxes can't overwhelm a family's income on properties up to certain values.
But there are good reasons why it shouldn't be free to hold on to a property worth $2 million. And, as Bunk in the West notes, if you've got a piece of property worth $2 million and paying property taxes is an issue, now is a pretty good time to take out a mortgage on the place and take out some diversified investments. You can probably pay the property taxes on the income from the investments and pay down the mortgage over time. Maybe it won't work out. Maybe it will. Maybe the land will stay in your family. Maybe it won't.
But economic stagnation for generations isn't going to be good for the state...and it is a policy that we abandoned centuries ago.
Update -- Just remembered that Chuck Johnson actually wrote a pretty helpful guide to the reassessment, including for people who are seeing giant hikes in valuation.
Following our Congressman on Twitter is an absolute pleasure. It lets me encounter items like this:
As economy improves, beware politicians taking credit. Stimulus was designed to create jobs, but jobs lag behind.
This is an amazing amount of wrong to pack into a Twitter post.
Note, just to begin, that the first sentence predicts economic recovery and the second sentence downplays recovery.
Next, let's think about the number of projects Congressman Rehberg has taken credit for despite voting against (including a number in the jobs recovery bill).
Third, let's note that the reason why "jobs lag behind" is that the Bush/Rehberg recession was worse than anticipated by the White House. Our Congressman is right that jobs lag behind -- but it was his party driving economic policy in this country for the last 8-14 years, depending on whether we're counting WH or Congress or both. Add in Randian Fed chief Greenspan and the run is quite long.
In his time in Congress, I've not seen many Rehberg economic proposals that make much sense. His constant criticism of textbook macroeconomics, his outright denial of the problems associated with healthcare inflation, and his steady vote for the Bush Administration tell me that I need to beware his taking credit for anything economically related.
I should also note that our Congressman recently claimed to be paying his own health insurance tab and didn't respond to my mild fact-checking. Members of Congress have 2/3 of their premiums covered. As a millionaire, picking up that other 1/3 is unsurprisingly not much of a problem. Perhaps if our U.S. Representative's financial situation more closely mirrored that of the typical Montanan, we'd see a different tone on healthcare.
I'd recommend Ryan Lizza's profile of Peter Orszag, the wunderkind (relatively speaking) heading up the White House's Office of Management and Budget. Orszag is a brilliant economist noted often for his interest in behavioral economics, that realm that applies psychology to the statistics of traditional econ.
Understanding Orszag seems key to understanding our current President. His inclusion (along with Cass Sunstein, among others) in the leadership of the Administration make me optimistic that we may see some interesting components in health care reform besides the changing of incentives around treatment reimbursement and comparative effectiveness. Might we also see default enrollment instead of penalties for failure to enroll?
I'm in DC this week for a series of meetings and just got done watching our senior Senator give a talk at the Center for American Progress Action Fund on health care reform.
There were some positive notes -- he spoke highly of a public health insurance option and didn't take using the reconciliation option off the table; he said he wants it to be bipartisan, but not at the expense of a good bill, etc. For more of a roundup, check out my tweets on it either on Twitter or Facebook (where you can comment).
At the heart of the conversation, as always of late (it seems), was the public health insurance option. Unsurprisingly, private insurance companies REALLY, REALLY hate it. So do Republicans. But here's what I don't get. Virtually all of the cost control measures being discussed -- from monopsony negotiating power to comparative effectiveness and moving away from fee-for-service -- rely on a public health insurance option, either directly or indirectly through modeling good insurance behavior (and imposing it on a wildly uncompetitive insurance industry).
So if we take the public health insurance option off the table, the question becomes -- how do we control costs without it? In theory, we can do one of three things:
Hope insurance companies adopt better cost control practices on their own.
Impose fierce regulations so that private insurance basically becomes a publicly-controlled, privately-profitable industry, but where meaningful competition DOES NOT EXIST.
Throw people to the wolves.
Compared to a straight-forward public option, these all strike me as asinine choices. Number two strikes me as the most likely compromise point, but I can't see why either liberals or conservatives would rather end up here than with a public health insurance option (although I can see why private insurance companies would).
Note: this is the justification for even having a relatively toothless public health insurance option -- one prohibited from negotiating and required to operate without public subsidies. Such an operation could still apply market pressure by embracing the moves away from fee-for-service and deploying comparative effectiveness research.
Am I missing something?
Update -- As with the panel at CAPAF, I still don't know if anyone has a realistic answer to this other than extremely fierce regulation of insurance companies. Again, insurance companies are probably OK with that alternative. Guaranteed revenue streams make up for harsh regulations. But both quality and cost will suffer for it because of the elimination of market incentives. We'll instead be hoping that government gets it right.
To put it another way, this solution -- government deciding exactly how insurance will work with private companies getting the profits -- has all the worst aspects of central planning and capitalism run amok.
The Flathead Beacon provides some of the best political coverage in the state, but this article is disappointing.
The AIG bonus mess has more or less settled the argument over whether the $800-billion stimulus plan was rushed. It's safe to say it was.
That's the lede and it is accurate. No one says that the stimulus stewed in a low simmer for months. It was pushed through very quickly, but that doesn't necessarily lead to this conclusion:
It appears that Congress, by overlooking or ignoring the insertion and ramifications of a provision that protects AIG, a company bailed out with billions of taxpayer money, should have slowed down the process.
The bonus provision affects, what, $150 million -- much of which has been returned just through political pressure?
How much should Congress have slowed down? Economists, people who study, you know, stimulus, were calling for extraordinarily quick action. Congress took that. Days delayed on this stuff can have huge impacts on when outcomes play out.
I don't think the Jobs Bill was perfect. I'm not sure anyone does. But time was of the essence.
Update -- In comments, Dave Budge asks for evidence that economists actually think the proper way to respond to these kinds of circumstances is to move quickly. Here's Simon Johnson, former Chief Economist of the IMF, writing in The Atlantic:
In a financial panic, the government must respond with both speed and overwhelming force. The root problem is uncertainty-in our case, uncertainty about whether the major banks have sufficient assets to cover their liabilities. Half measures combined with wishful thinking and a wait-and-see attitude cannot overcome this uncertainty. And the longer the response takes, the longer the uncertainty will stymie the flow of credit, sap consumer confidence, and cripple the economy-ultimately making the problem much harder to solve.
Note: Johnson is actually talking not just about stimulus, which in itself is by definition a temporary action and time-sensitive, but about banking reform, which carries the dual obligations of happening quickly and being done correctly, as ideally you're passing long-term reforms.
I've been writing a lot about how Max's proposal to tax benefits would work for a reason: misinformation and confusion ran rampant in the 1993 health care debate. That ended up doing a lot of harm -- not just to progressives, but to the American people who remain stuck in the most broken health care system of any in the industrialized world.
That said, even though Max Baucus's proposal isn't akin to John McCain's, there are good reasons it has a lot of people upset (I should note here that tax deductibility is not one of the areas I've given a ton of thought to in this realm). This letter from the NEA to Rep. Rob Andrews, who chairs the same subcommittee that Pat Williams did when Pat passed out both Clintoncare and a single-payer bill back in the '93/'94 effort, explains those concerns quickly:
Guarantee that the employee tax exclusion for health benefits is not limited or capped in any way. Over the course of their careers, many public education employees have traded salary increases for the long term security of a comprehensive health plan. Telling hard-working employees that benefits will be cut or that they will pay more taxes would unfairly penalize them. A tax on salaries above a certain amount would also be unfair to experienced educators who, after decades of dedicated service, have climbed to the top of their salary schedules. Limiting or capping the tax exclusion for health benefits could have a disastrous effect on public education by discouraging highly qualified workers from entering or staying in the profession.
Health care is a huge, difficult subject. And most of this stuff is more complicated than it looks on first blush. We'll keep trying to help navigate the weeds of it here on Left in the West.
So I dug up the relevant portions from Baucus's white paper on health care. I'm glad it is in there, both because that means that it wasn't an off-the-cuff remark...and because I remember it being in there the first time I read the paper and thinking to myself, "Hmmmm... this is bold. He'll probably catch hell for this."
So here, in full after the jump, is the section on "Tax Incentives for Health Coverage" in all of its glory, released last November:
