In the Wall Street Journal, former Bush CEA chairman Edward Lazear writes:
The big news today is that Obama plans to propose a freeze on domestic discretionary spending in Wednesday's State of the Union address. For what it's worth, I talked to some administration officials about the thinking behind this in December, not long after the idea was first floated. Here's the gist of what I found:
Republicans pounced on last week's report from the official Medicare Actuary, saying it vindicated their argument that health care reform would cause health care spending to explode. Rather than bend the curve down, as Budget Director Peter Orszag likes to say, it would bend the curve up.
But while the Actuary did in fact predict reform would mean spending slightly more in 2019 than we otherwise would, it did not suggest that the curve was bending up. If anything, it suggested the curve would bend down, albeit only a little.
On Thursday I explained why. Simply put, reform would unleash two major sets of changes. One, a strengthening and expansion of health insurance, would cause health care spending to rise, since it would mean people consume more health care overall. The other, a set of reforms to Medicare and the private insurance system, would cause health care spending to fall, since Medicare would become more frugal with its reimbursements and the incentives for purchasing more expensive private insurance would diminish. (These changes, in theory, should lead to care that is both lower in quantity and higher in quality--but that's a discussion for another time.)
Sometimes pictures tell this story better than words. So I've drawn two. And if you'll forgive my weak graphing skills, I think they make the point.
As of late this summer, Democrats in Washington shared a tidy consensus about the economy: The stimulus was working more or less on schedule, and the job market was gradually recovering. That meant the administration could start thinking about how to rein in the country’s yawning budget deficit, if not actually scale it back yet.
What followed turned that tidy consensus into a pigsty. On October 2, the Labor Department announced that September’s job-loss total was roughly 60,000 higher than the previous month's, prompting a hastily convened powwow between the president, House Speaker Nancy Pelosi, and Senate Majority Leader Harry Reid. (The number has since been revised downward.) Then, in early November, Democratic candidates handily lost gubernatorial elections in New Jersey and Virginia, with independents deserting the party in droves. “For those up next year, it was a wake-up call on the deficit,” says one Senate Democratic aide. Suddenly, spending more money on jobs didn’t look so appetizing. That is, until the following Friday, when the next jobs report showed the unemployment rate jumping from 9.8 percent to 10.2 percent--clearing a psychological threshold that was no less terrifying for being foreseeable. And on and on it went. “The entire town is more schizophrenic than I’ve ever seen,” says one senior administration official. “Everyone cares about jobs, and everyone cares about fiscal discipline. The weight shifts week by week, unemployment report by unemployment report.”
Washington Post opinion page editor Fred Hiatt frets that health care reform will likely be counterproductive. Hiatt argues that Congress is afraid to do the two most potentially effective reforms, changing the tax treatment of health care and creating an independent panel to control Medicare spending:
The OMB blog has an interesting item up about the effects of entering the labor market during a recession versus a tight labor market.
Matthew Yglesias thinks the health care industry should shut up and take what the Democrats are offering, because they'll never get a better deal. I'm not sure he really has their best interests at heart, but he's almost certainly right.
Peter Orszag thinks you should exercise more and eat right--and shows you how it's done.
The Huffington Post has broken the news that yet another incarnation of the public could be coming into favor with Senate Democrats: a plan that would begin with a robust, national public plan, but allow state governments to “opt out” of the system should they chose.
The annals of Sino-American relations have seen more than a few celebrity-diplomats: Henry Kissinger, a young Richard Holbrooke, and, of course, the current secretary of state. But, unless the record has been lost to history, none has ascended to this rarefied plane of geopolitics while running the Office of Management and Budget.
And yet, there was budget director Peter Orszag rushing to a lunch with Chinese bureaucrats on a Monday in late July. To his surprise, when Orszag arrived at the site of the annual U.S.-China Strategic and Economic Dialogue (S&ED), the Chinese didn't dwell on the Wall Street meltdown or the global recession. The bureaucrats at his table mostly wanted to know about health care reform, which Orszag has helped shepherd. "They were intrigued by the most recent legislative developments," Orszag says. "It was like, 'You're fresh from the field, what can you tell us?' "
The pundits are busy filing their reports on how President Obama blew it on health care reform. And while the health care fight is far from over--I remain convinced the Democrats will pass a bill, maybe even a good one--the pundits have a point. Obama surely has made mistakes, among them focusing so heavily on how reform would reduce the cost of medicine.
Here's something I never would have predicted: When the House Energy and Commerce Committee held a hearing this morning on permit allocations, of all topics, the room was totally packed—hardly an empty seat to be found.
Everywhere you look, health care reform seems to be chugging along. Insurers and drug companies are visiting the White House to show solidarity with President Obama. House Democrats are promising to pass a bill by July 31. But, if you talk to senior staff in the administration or on Capitol Hill, you'll detect anxiety over one tiny agency--an agency that helped kill health care reform in 1994 and has the power to do so again.
Barack Obama has the type of mind--orderly, analytical, well-read--that takes naturally to the study of ideas. But he's always been uncomfortable describing himself in ideological terms. Is he a liberal? During the campaign, Obama would mock those who applied the label to him: "There's nothing liberal about wanting to reduce money in politics," he'd say. "There's nothing liberal about wanting to make sure [our soldiers] are treated properly when they come home." Is he a moderate?
In early January, most of Barack Obama's senior staff assembled with the president-elect for a meeting inside a windowless, eighth-floor office at the transition headquarters in Washington. It was a pivotal moment in Obama's transformation from candidate to commander-in-chief. Obama's advisers had taken all of his campaign pledges, factored in his promise to reduce the deficit, and put together a provisional blueprint for governing. For the first time, Obama would get a sense of how his proposals fit together in the real world.
