Sunday, January 20, 2013

Good news from the GOP, Part 2

I didn't get to say this in the previous post, but the GOP's offer to delay the debt ceiling vote for three months seems very significant to me. Obviously the three months aren't significant, but the possibility of a positional or tactical change in the GOP is.

The change I sense is that the GOP is trying to scale back its demands. That's not surprising since they lost the election. However, they didn't scale back their demands in December, or on the basis of pollling all during 2011-2. At first after the election, they still tried to maintain the Bush tax cuts, then tried to maintain all the tax rates, before they finally gave in. Then they vowed to get as many spending cuts as they could in exchange for raising the debt ceiling.

A common thread here is what I'll call a "maximalist position." The GOP seems to aim for the biggest payoff they can get. That's normal, I suppose, but contrast that with the Dems, who gave in on tax increases in August 2011, and readily allowed the higher threshold for tax increases during the fiscal cliff negotiations. The Dems haven't held up for the maximum return.

Why are the GOP working to hard to extract the maximum they can from their position? I have a theory. Most of the GOP converted very late to fiscal conservatism, like in the second half of 2008. Having wasted so much time, including their own period of political hegemony (House, Senate, presidency), they had to quadruple their efforts to cut back government.

If this sounds like I'm trying to mock the GOP (and I think it could be interpreted that way), you'll have to take my word that I'm not mocking them. I sincerely believe there was a realization among conservatives that they had slept through their chance to streamline government, but they were awake now, and want to make up for that missed opportunity.

So small government talk went into overdrive. Maintaining the Bush tax cuts and lowering government spending were twin objectives. However, on the spending side there had been a lot of ground lost, with the budget doubling between 2000 and 2009. That can largely explain the desperation of the GOP to fight all spending and to emphasize spending cuts.

My theory has its flaws. Many Republicans don't seem to mind defense spending, and even supported higher defense spending. Increased spending on Medicare wasn't attacked, and savings were criticized instead. The GOP may want spending cuts, but not enough to actually detail what they should be. Frankly, there are a lot of holes in my theory. Perhaps fiscal discipline is only a campaign cry for the GOP. However, there is something about the intensity of the desire to cut spending that this theory captures.

In contrast, some conservatives, in particular Charles Krauthammer, are talking about lowering their sights and trying for fewer cuts. Part of the idea is partisan, to let the Democrats run wild and expose how much they'd love to spend. But another thread may be that some in the GOP are recalibrating what they can achieve, and backing away from the maximalist position. Perhaps if they try to do less, they'll actually succeed in gaining more of their agenda in the near future and in future elections. That would be ironic, to achieve more by aiming for less.


Extra. Another time I thought the political scene was changing. I was wrong then, but it was fascinating how much did change, but not as I predicted.


Anonymous said...

Another nice post, MP. You seem to have regained some footing.

There's an alliance in the GOP in opposing spending, but the factions have different reasons. For the anit-gov philosophical ones, your explanation of the lost time is solid. Plus they see it easier to villify Dems for spending rather than a GOP president/Congress for doing the same things, if not worse. So their contrarianism NOW on spending is primarily political opportunism sprinkled with true philosophical opposition to government in general.

For the other faction, opposition to spending is almost wholly political. It's a salable message that they hoped and still hope can return them to power. But they aren't going to specify anything that would prevent them from getting elected (unlike the other faction) but instead want the Dems to propose and pass spending cuts which they can slam in the next election -- after voting against them!!

So faction #1 wishes spending cuts were the route to power, and faction #2 knows they aren't unless you can use them for political advantage. This is the GOP divide that the Dems can use to their advantage. They want Paul Ryan's budget to be front and center. The GOP loses the argument that way. Boehner / McConnell want President Obama "to lead", by which they mean to lead with his nose so they can smash it. But I think he's smarter about that and if the GOP actually wants cuts, they will have to propose and vote for them, including ones that lose them votes in the next election, or the Dems are going to wait.

This is, after all, the government given to us by Bush and the GOP, after Clinton I reversed the trends at the expense of a 40-year Dem-controlled House. This time around, the Dems are not going to let the GOP regain control by taking politically damaging positions even if they are for the good of the country ... like huge cuts for deficit reduction. They know that the GOP will use to regain control of the government, and just flush the gains anyway.

Rove was probably correct that the GOP could have produced a generational political advantage, had they not screwed up the wars and the economy. The Dems would be foolish -- and wrong -- to give them another chance.

ModeratePoli said...


I actually think I've had a run of good post since this bad one on Dec. 1.

You're so worried that the Dems will fall into the trap of making unpopular cuts that you apparently don't see the bigger trap of not knowing how to restrain spending. The GOP would love to see the Dems fall into that one.

I think the Dems lost the House in the 90's the same way they lost the Senate in the 80's--overreach on the spending for liberal social engineering. More, more, more gets tiring and expensive, whether it's Dems or Pubs.

Anonymous said...

You restrain "spending" by eliminating the least beneficial "spending" first: defense. Next to go should be corporate give-aways, both in the tax code and in subsidies, followed by pork projects that add little value to the country.

For entitlements, you means-test everything. This can include SocSec retirement age, Medicare benefits, etc.

The big thing regarding Medicare (in general) and Medicaid (for nursing home care) is fee-for-service which sets the wrong incentives.

Now, going through this list, which you probably agree is reasonable, show me ONE ITEM that the GOP has not demagogued about come election time. Then you can call me and the Dems paranoid. So, naturally most Dems want to means-test entitlements, but if they come out in favor they a) lose some of their base and b) lose an election. Where's the benefit in that? Now, if the GOP came along on, say, means-testing, then you might see something happen. But as long as there's a hint that a GOP opponent will use it against them, why be for a marginal change that nets the people who vote for you nothing?

And the Dems lost the House because they voted for a necessary tax increase in 1993 that GOP challengers made many Dems eat in 1994. The GOP is better at the politics and the Dems know this. "Overreach" is just another term for politically-spinnable by the opposing party.

Truth > Spin said...

Anon at 3:48pm, most people who have reviewed the evidence think the 1994 GOP take over was the result of two things: 1) the corruption being bad enough to cross into the public consciousness (think post office and check bouncing scandals). And 2) the big gun vote of Sept that same year.

You should read Linda Killion's book, The Freshman if it is of interest to you. She did a follow up in 2004.

Nevertheless, the same dynamic happens both ways. I've seen Dems use votes taken by the GOP against candidates even when that vote mirrored the Dem position.

As far as your ordinal rank of ways to restrain spending, count me as one who does not agree it is reasonable.

ModeratePoli said...

@Anon, I think you just doubled-down on what you wrote the first time. Fine. The electorate is very quick to turn on officials and vote them out if they ignore reality and there is a workable alternative. If the budgets keep growing and the deficits don't shrink, the GOP will be there to remind people and offer an alternative. This isn't demagoguing (which wasn't very effective in the last election), and the Dems will be hard-pressed to defend themselves.

Anonymous said...

OK T->S, what are your ordinals for spending cuts? Is there sufficient political will out there to support them?

T>S said...

@Anon - you can call me Willie Sutton if you want, but the primary place spending needs to be cut is Medicare. Do what you want with Defense, corporate give-aways and pork. Push them to zero. Absolute zero. Cut everything else in the discretionary budget in half to boot and all you've done is bought time if you don't change the slope of the Medicare line.

Is there significant political will? Are we talking about the real world? If so, then you know the answer to that question. But I am sanguine about it; I really am. Because at some point the market will impose the discipline that the politicians can't.

T>S said...

I should add that it isn't only the market that will impose discipline, but also a host of other actors and system, who may have alternate motivations as well.

Anonymous said...

Alright. I'll play. How would you choose to cut Medicare? What is the balance on a) reducing payment to providers or b) reducing benefits to recipients?

If you are going to reduce benefits, how are you going to decide whose benefits get reduced and what medical care they can can can't have on Uncle Sam's dime? "Death panels"? That's the way it will be spun by political opportunists.

BTW, medical care costs are rising for everyone. Employer-sponsored group plans go up and up, which is reflected in lower profits for the business and/or less income for the covered employee (either from reduced raises or employee deductions). But someone pays as they go up. But for Medicare, the tax rate has been 2.9% of earned income (half employer, half employee) for as long as I can remember, despite healthcare consuming an ever-increasing share of GDP. So I'd argue that for Medicare it's not a spending issue. It's a taxing issue. Taxphobic legislators don't want to ask people to pay for the Medicare they clearly want. Unlike in the private sector, the public will fire the people who make them pay more for their healthcare.

Obamacare tries to do something about that by levying a Medicare tax on unearned income and increasing the rate individuals pay on earned income over $200K per year. It also reduces payments to providers. But if Medicare consumes 5% of our GDP, and only taxes 3% of a game-able portion of that GDP, naturally it will run a huge deficit forever.

Do you seriously think that Medicare spending could be cut in half? Defense could, probably, with little impact on our actual safety. Do the same with Medicare and millions will face suffering and bankruptcy.

There is a lot of money in the healthcare system scooped up by the middlemen: private insurance companies. If we as a society recouped that money we would immediately bend the healthcare cost curve. We can also restructure healthcare delivery for greater efficiency, but that only solves the problem a little. If we are going to put 20% of our GDP into healthcare, while other developed nations do 13%, we have to pay higher taxes than we do now to pay for it. Good luck with that politically.

Anastasios said...

Well, Anon, and Truth as well, you are quite right about the money that is absorbed by Medicare and by middlemen, and not just in the insurance system. Medical costs, which drive insurance costs, are also driven by middlemen to a significant extent (although probably not to the extent that many would claim).

Okay, what does that mean, though? Are we talking about corporate profits or corruption or outright milking the system? Sure, there is some of that. But once again, not to the extent many would claim.

The fact is that ultimately much of that cost is taken up in the salaries of middle-class people doing work as pharmaceutical distribution technicians, medical supply reps, software development engineers, records management professionals, and a myriad of other professions. Any attempt to seriously crack down on those costs will mean going to them and saying "Look, we know you've been hard at work distributing pharmaceuticals for twenty years and good job by the way, but really the job is total bunk and we will all be better off once you are unemployed."

Now, given that these people tend to vote and spend money in their districts, is it any wonder there is little political will to take that course of action? And this, as Anon points out, is supposedly the easy part, as it does not involve cutting benefits to patients or reimbursements to the direct care providers.

I'm afraid that ultimately in healthcare like in every other area of the economy we are going to have to accept that the vast majority of the costs is tied up in people. There is simply no way to ultimately control medical costs that does not affect people profoundly. We are talking about putting many of these middle-class people out of work into an economy where they will have little chance of recouping from the blow. Ultimately we are also, there is no avoiding it, talking about suppressing the salaries of the medical professionals, i.e. the doctors and nurses, themselves, as well as beginning to deny people benefits they have come to expect, particularly at the end of life.

So, it isn't any surprise at all that politicians can't bring themselves to shoulder the burden absent a clear and vigorous mandate that has shown no sign of materializing. And it's going to take one devil of a market reaction to force that kind of mandate out of an electorate that believes strongly in raising someone else's taxes. Oh, and that government check of mine that IS NOT GOVERNMENT BENEFITS THANK YOU VERY MUCH better be deposited precisely on time.

So I'll split the difference. Something will be done about healthcare costs for seniors, Truth is right. But likely only after most of the things in Anon's list have been gotten to first.

ModeratePoli said...

I think we'll see changes in medical practices for seniors with less extreme treatment for seniors (such as fewer days in intensive care) and more awareness and use of "Do not resuscitate" orders. The pressure will come from the top down as reimbursement are capped rather than being an open spigot and hospital administrators apply restraints on more expensive services. This mirrors how spending grew, mostly from the top down as innovative expensive treatments became available.

As for people in health care losing their jobs, it will be more matter of flattening growth, not stripping current employees.

I don't think we'll see savings in the federal budget everywhere else before Medicare. It's the biggest target, so of course it's already been the target for some savings, and will continue to be.

Anastasios said...

I just don't know MP. I hope we can get by with the relatively painless changes you describe, but I just don't know. Much of our cost problem, at least in comparison to other OECD nations, is pathway driven. Through a combination of carelessness, exuberance, hubris, and poor or non-existent comparison and planning, we stumbled into several highly expensive detours and now it is too late to double back and take a wiser route. Everything from insurance company organization to hospital architecture is geared to higher expenditures than our peer nations have ever been willing to tolerate, and having jacked our baseline so high even decreased rates of growth might still be problematic. We just do not have the cost saving options available to us that other industrial actions have used, as we do not have the programmatic capability or political will to mandate cheap drug choices, limit hospital amenities, or restrict physician salaries. I really hope you are right, but I fear true cost control is going to be much more painful, and require much more directive and coercive measures, then any political actors have so far been willing to honestly acknowledge.

ModeratePoli said...


Actually, both parties want to cut the growth of Medicare spending. Since they each have their plans to do it, the GOP will have a harder time demagoguing the Dem changes (as shown in the last election). They might still try, but it just isn't successful. Dems will still have an advantage because they support an egalitarian system with the same care (if less) for all.

I also think "No" is going to have much more of a place in medical care. After all, most people under the age of 65 know that the baby boomers can't have the same level of medical care as their parents got without bankrupting the system. We don't know what kind of adjustments will have to be made, but we are expecting changes.

Anastasios said...

Well, MP, you and I and Truth are expecting changes. I am not so sure that most other people really are. Oh sure, when asked in appropriately phrased questions they acknowledge the need for cost control. I also strongly suspect they firmly believe the care their parents got also belongs to them as a matter of fairness and of right (both social right and moral right). I fear that trying to change that will be ... explosive. That is the main reason I suspect that, in terms of true and painful cuts, the other areas Anon listed will feel them before Medicare. You have the numbers on your side. You are right. But I just do not think that being right is going to matter in the short or medium term. People simply believe passionately that they have a right to that care, and woe-betide the politician who gets athwart that.

Anonymous said...

The year is 1900. If you are rich and get sick, you can go to a private hospital and highly trained but scientifically challenged physicians and nurses may be able to keep you comfortable and less prone to physical stresses so that you might recover. If you are poor and sick, you're probably going to die.

The year is 1950. If you are wealthy and sick you can go a wide variety of hospitals or even have in-home highly-trained physicians or nurses care for you and with antibiotics you are probably going to live. If you are middle class you are going to spend your own money to get what you can and hope for the best. You will be poorer, probably, but live, probably. If you are poor, you might get charity care but you'll lose money from not working and be poor for a very long time, if you live.

The year is 2013. If you're wealthy you can survive anything but unless you're VERY wealthy you might go broke. If you're middle class and have insurance, you may end up bankrupt but you'll live. If you don't have insurance you'll live and end up bankrupt for sure. If you're poor, with or without insurance, you'll probably live and definitely end up bankrupt while suffering more than others while waiting your turn with the doctors and nurses. Everyone will probably live because the highly-trained physicians and nurses, including those who develop drugs and therapies, have the science down pretty well by now.

But the core problem is that most people in our society have never been able to afford then-current level of science and training for medical professionals, despite their skills being critical to own most important asset: our bodies!!

People can and will sacrifice financial assets in virtually unlimited amounts to preserve their most important asset. This should come as no surprise. Most can't afford it unless they insurance for that risk; most can't afford to insure it.

So the only solution is an admission that everyone deserves as a fundamental right basic medical care, and nobody should go broke in order to achieve it. That's my healthcare plan. As to what constitutes "basic" care -- the floor, so to speak -- I'll leave that to experts to decide; perhaps a sort of Supreme Medical Court. As to paying the costs, I'll leave that to the politicians to hash out. The wealthy will certainly pay more, but they'll still have plenty. The middle will pay more, too, but at least they don't have to worry about bankruptcy. The poor already pay.

No matter what, it's going to cost a lot.