Mr. Keller has proved himself, once again, to be one of the Very Serious People that Prof. Krugman talks about. Today, in “Obama’s Fault,” he sniffs about the bad timing and missed opportunities that brought us to the sequester zone. Prof. Krugman has a question in “Mooching Off Medicaid:” Is it O.K. if corporations do it? Here’s the Very Serious Person:
Our feckless leaders may be incapable of passing a budget, but, boy, can they pass the buck. The White House spent last week in full campaign hysteria, blitzing online followers with the message that heartless Republicans are prepared to transform America into “Les Misérables” in order to protect “millionaires and billionaires, oil companies, vacation homes, and private jet owners.” Republicans retort that the budget-cutting Doomsday device called sequester was actually invented by the White House.
In fact, the conceptual paternity of sequester was bipartisan. Both sides agreed that Congress should set in motion an automatic deficit-cutting scheme so draconian that it would force a divided Washington to come together around some sane compromise. The scandal is that Washington is so incapable of adult behavior that it can do the right thing only if it is staring down the barrel of a shotgun — and, it turns out, not even then.
Some of this is the fault of a budget-making system that is a mess of special favors, stopgap measures, side deals, promissory notes and flimflam. And, of course, it is true that much of the responsibility for our perpetual crisis can be laid at the feet of a pigheaded Republican Party, cowed by its angry, antispending, antitaxing, anti-Obama base. When it comes to distributing blame for the consequences of sequester — jobs lost, investments put on hold, downgraded credit ratings and withering G.D.P., not to mention the longer lines at airport security — the polls show a plurality of voters are likely to take it out on the Republicans. If all you care about is winning more Democratic seats in the 2014 midterms, then you can sit back and enjoy the show.
But if you care about the long-term health of the country, the president has more to answer for than just inventing a particular type of fiscal time bomb. The large mess we are in is in no small part the result of missed opportunities and political miscalculation at 1600 Pennsylvania. So, while we await the fate of Yellowstone Park and food safety, let’s contemplate the road not taken by the White House — that is, the high road.
When President Obama told us in his first Inaugural Address that our time of “putting off unpleasant decisions” was over, advocates of reforming our fiscal disorder read that as a promise that the new president would go beyond the perennial economic quick fix. After pulling the country back from the brink of depression by pumping some stimulus into the system (thumbs up for that), it seemed plausible that he would make some hard choices to put the promises of government more in balance with its resources.
Instead, the president’s first big initiative was to create an overdue but expensive new entitlement, the Affordable Care Act. I’m not one of those who fault him for putting health care at the front of the line. But Obama emerged from that battle looking like a president who had spent the last of his political capital. And the great fiscal issues remained unaddressed.
His next act was to launch a bipartisan commission to grapple with those “unpleasant decisions” promised on Inauguration Day. In December 2010 the commission, led by Erskine Bowles and Alan Simpson, delivered its list of spending cuts and revenue increases, plus the entitlement reforms necessary to fortify Medicare and Social Security for the surge of baby-boom retirees.
The Simpson-Bowles agenda was imperfect, and had plenty to offend ideologues of the left and right, which meant that it was the very manifestation of what Obama likes to call “a balanced approach.” So did he seize it as an opportunity for serious debate about our fiscal mess? No, he abandoned it. Instead, he built a re-election campaign that was long on making the wealthiest pay more in taxes, short on spending discipline, and firmly hands-off on the problem of entitlements.
If Obama had campaigned on some version of Simpson-Bowles rather than on poll-tested tax hikes alone, he could now claim a mandate from voters to do something big and bold. Most important, he would have some leverage with members of his own base who don’t want to touch Medicare even to save it. This was missed opportunity No. 1.
In the summer of 2011, the president tried to find a grand bargain with House Republicans, and failed. Then, with the Republicans threatening to cut off the government’s borrowing power unless they got budget cuts, the White House and Republicans agreed on a bad bargain: the debt ceiling was raised, and the sequester was launched. There is a strong argument to be made (Noam Scheiber made it well last year in his book “The Escape Artists: How Obama’s Team Fumbled the Recovery”) that the president was unwise to let Republican zealots get away with such blackmail. Authorizing the government to pay the bills Congress has already incurred should be a matter of routine, not ransom. But the sequester was locked and loaded.
Which brings us to missed opportunity No. 2. Remember, the original plan was for the sequester to detonate at the beginning of this year, at the same time as the expiration of the Bush tax cuts. These twin shocks were supposed to work together to drive both parties toward the middle. For Republicans, the horrible prospect of an automatic, across-the-board tax increase (plus sequester’s deep cuts in defense spending) would be reason to come to the negotiating table. For Democrats, the opportunity to extract a little more tax money from the wealthy (plus the threat of cuts to cherished domestic programs) would be incentive to bargain.
But with 2012 winding down, the White House and House Republicans struck another bad deal. They let the Bush tax breaks expire for the top bracket, while making them permanent for everyone else. The sequester spending cuts were postponed until — well, until now.
That year-end tax deal was not a negotiating triumph for the Democrats. Obama wanted $1.2 trillion in new revenues over 10 years. Boehner let it be known he would go as high as $800 billion. By the time the master deal-makers of the White House were done, the “compromise” tax hike was $620 billion. I’d love to be the guy who sells the president his next car.
But the bigger mistake was to do the deal at all. Here we had Washington staring down the double barrels of that fiscal shotgun — automatic spending cuts and automatic tax hikes — and the White House agreed to remove one barrel. Once the tax deal was done, the Republicans, having budged once on taxes, felt no inclination to budge again. As John Boehner would say, over and over, “He’s gotten his tax hikes.” And with Republicans unwilling to revisit the issue of taxes, Democrats had even less enthusiasm for a broader budget bargain that would cut programs they regard as sacred.
If Obama had held firm and let the Bush tax cuts expire for everyone, as some recommended at the time, he would now have at his disposal a powerful inducement for both parties to come together. A bargain could be built around restoring the lower rates for most taxpayers. With an actual, large tax cut at the heart of it, you just might construct the kind of big bipartisan bargain that has been so elusive. But it’s too late for that.
Now that we have entered the sequester zone, Washington has assumed (or is feigning) a mood of resignation bordering on complacency. The Republicans may hate whacking defense, but they don’t hate it enough to offer up any more taxes, regardless of what the polls say. So they have adopted the view that while the sequester may be crude at least it cuts government spending — austerity on autopilot.
Liberal Democrats have found silver linings, too, calculating, as Jonathan Weisman reported in The Times, that the sequester, however ham-handed, is a rare opportunity to cut Pentagon spending. Besides, they say, sequester protects the poor from the worst cuts, and “the process could take pressure off the Democratic Party, at least in the short run, to tamper with Social Security and Medicare.” (God forbid.)
And the president? For weeks he has been playing the game political scientists call “Fireman First.” That’s when scaremongering politicians threaten to cut the most essential services. It’s true, the sequester is a grotesque and hurtful substitute for the kind of reforms the country needs. Bad things will happen. Maybe the furloughs and canceled contracts will stir the public enough to break the impasse. But by the weekend even the president was sounding helpless, if not acquiescent.
Clearly the days of “putting off unpleasant decisions” are not over. And this is where they get you.
Mr. Keller is a waste of perfectly good oxygen. Here’s Prof. Krugman:
Conservatives like to say that their position is all about economic freedom, and hence making government’s role in general, and government spending in particular, as small as possible. And no doubt there are individual conservatives who really have such idealistic motives.
When it comes to conservatives with actual power, however, there’s an alternative, more cynical view of their motivations — namely, that it’s all about comforting the comfortable and afflicting the afflicted, about giving more to those who already have a lot. And if you want a strong piece of evidence in favor of that cynical view, look at the current state of play over Medicaid.
Some background: Medicaid, which provides health insurance to lower-income Americans, is a highly successful program that’s about to get bigger, because an expansion of Medicaid is one key piece of the Affordable Care Act, a k a Obamacare.
There is, however, a catch. Last year’s Supreme Court decision upholding Obamacare also opened a loophole that lets states turn down the Medicaid expansion if they choose. And there has been a lot of tough talk from Republican governors about standing firm against the terrible, tyrannical notion of helping the uninsured.
Now, in the end most states will probably go along with the expansion because of the huge financial incentives: the federal government will pay the full cost of the expansion for the first three years, and the additional spending will benefit hospitals and doctors as well as patients. Still, some of the states grudgingly allowing the federal government to help their neediest citizens are placing a condition on this aid, insisting that it must be run through private insurance companies. And that tells you a lot about what conservative politicians really want.
Consider the case of Florida, whose governor, Rick Scott, made his personal fortune in the health industry. At one point, by the way, the company he built pleaded guilty to criminal charges, and paid $1.7 billion in fines related to Medicare fraud. Anyway, Mr. Scott got elected as a fierce opponent of Obamacare, and Florida participated in the suit asking the Supreme Court to declare the whole plan unconstitutional. Nonetheless, Mr. Scott recently shocked Tea Party activists by announcing his support for the Medicaid expansion.
But his support came with a condition: he was willing to cover more of the uninsured only after receiving a waiver that would let him run Medicaid through private insurance companies. Now, why would he want to do that?
Don’t tell me about free markets. This is all about spending taxpayer money, and the question is whether that money should be spent directly to help people or run through a set of private middlemen.
And despite some feeble claims to the contrary, privatizing Medicaid will end up requiring more, not less, government spending, because there’s overwhelming evidence that Medicaid is much cheaper than private insurance. Partly this reflects lower administrative costs, because Medicaid neither advertises nor spends money trying to avoid covering people. But a lot of it reflects the government’s bargaining power, its ability to prevent price gouging by hospitals, drug companies and other parts of the medical-industrial complex.
For there is a lot of price-gouging in health care — a fact long known to health care economists but documented especially graphically in a recent article in Time magazine. As Steven Brill, the article’s author, points out, individuals seeking health care can face incredible costs, and even large private insurance companies have limited ability to control profiteering by providers. Medicare does much better, and although Mr. Brill doesn’t point this out, Medicaid — which has greater ability to say no — seems to do better still.
You might ask why, in that case, much of Obamacare will run through private insurers. The answer is, raw political power. Letting the medical-industrial complex continue to get away with a lot of overcharging was, in effect, a price President Obama had to pay to get health reform passed. And since the reward was that tens of millions more Americans would gain insurance, it was a price worth paying.
But why would you insist on privatizing a health program that is already public, and that does a much better job than the private sector of controlling costs? The answer is pretty obvious: the flip side of higher taxpayer costs is higher medical-industry profits.
So ignore all the talk about too much government spending and too much aid to moochers who don’t deserve it. As long as the spending ends up lining the right pockets, and the undeserving beneficiaries of public largess are politically connected corporations, conservatives with actual power seem to like Big Government just fine.