New York Times — Democrats Nearing Consensus on Health Plan
Writer Robert Pear explains that Democrats are getting close on health care legislation – except on who the government will cover and how to pay for it.
Taxing existing insurance benefits is gaining steam among Democrats, as is the idea of requiring employers to provide health care for workers.
What the Democratic supermajority in the House wants – a single payer system – is of no consequence now. The fight is in the Senate, where conservative Democrats horrified by runaway deficits and the idea of socializing medicine only to later ration care to pay for the program.
Republicans don’t matter much either, since the majority party has the rules set to jam through a bill on a simple majority by suspending the filibuster on health care. Even so, as the opening bargaining positions are laid out over the next week, expect to hear a great deal about the slippery slope argument in which moderate and conservative Democrats that having even a small, government-run program will eventually push the private sector out and lead to a Canadian-style system.
“Senator Kent Conrad, Democrat of North Dakota, suggested that the public plan might take the form of an insurance cooperative, owned and operated for the benefit of its members — individuals and businesses with fewer than 10 employees.
This proposal, floated as a compromise, seemed to intrigue Republicans who were familiar with cooperatives that market electric power, telephone service, milk, wheat and other commodities.
‘The strength of this proposal is that it accomplishes much of what those who want a public option are calling for — that is, something to compete with private for-profit insurance companies,’ Mr. Conrad said. ‘On the other hand, it meets the objections of many Republicans and some Democrats as well. The co-op is not government-controlled.’”
Wall Street Journal — High Court Clears Way for Sale of Chrysler
Conservatives felt a brief twinge of optimism when the Supreme Court put the brakes on the Obama administration’s railroading of Chrysler and General Motor’s creditors, but the government will have its way with the companies and the people who lent and invested billions at Chrysler and GM will walk away with pennies on the dollar or nothing but the satisfaction of helping President Obama “save or create” jobs.
Writers Mark Anderson and Neil King explain:
“Both Chrysler and the Obama administration argued strenuously that speed was of the essence in the company’s Chapter 11 restructuring, and that any delays could jeopardize the Auburn Hills, Mich., auto maker’s future, chasing away potential customers, straining its suppliers, and potentially causing Fiat to turn away from the deal.
Indiana Treasurer Richard Mourdock said he was ‘disappointed’ by the decision. Thomas Lauria, a White & Case lawyer who led the legal challenge, said his experiences in the past month ‘cause me to…directly raise the question as to whether our judiciary is today able to fulfill its constitutional mission, that is, to ensure that the rule of law prevails — particularly in the face of perceived crisis.’”
Washington Post — Left, Right Press Obama on War Funds
President Obama had an easy victory ahead in his request for a $80 billion war-funding bill to pay for Iraq and Afghanistan through September, but then the administration got cute and added a $100 billion line of credit for the International Monetary Fund to the plan.
The White House knew that the GOP would be loathe to vote against funding an ongoing conflict and that even money for an international bailout plan would probably not prevent them from backing the plan.
But what it did do was allow Republicans to play some tricks of their own, like attaching an amendment that would bar the release of photos of detainees. That amendment has driven away more House Democrats who didn’t like voting to continue funding the wars in the first place. Add in the question of Guantanamo Bay, and you’ve got a real brouhaha.
Writer Perry Bacon explains:
“In addition, a bloc of 51 House Democrats, who largely oppose the increase in troops and Afghanistan and are skeptical of the president’s plan there, voted against the initial bill. Democrats need more than a dozen legislators from that bloc to vote for the final bill in the House for it to pass.
But Democrats could lose more votes if they include the photo ban.
Several were like Rep. Louise M. Slaughter (D-N.Y.), who said she opposed the ban because it would override the Freedom of Information Act. “I don’t want to suspend the Freedom of Information Act, transparency is so important,” she said. “I see no reason to suspend it.’”
New York Times — For U.S., a Sea of Perilous Red Ink, Years in the Making
Writer David Leonhardt almost manages a piece that puts the current deficit explosion — a projected 400 percent increase from last year to this year – into perspective.
Of the $1.2 trillion or more that the U.S. will borrow and spend this year, Leonhardt’s piece estimates that 37 percent is from the reduced taxes and additional social spending caused by a bad economy (two recessions since 2000), 33 percent is from Bush spending and 30 percent is from Obama spending.
President Obama has strained the ability of even his greatest media admirers to suspend disbelief in his fiscal laxity, and this week’s pledge of a new budget austerity was mostly met with a rueful chuckle. Leonhardt does, though, rather trustingly accept the administration’s estimates that huge programs like government health care or global warming fees will neither cost money nor reduce tax proceeds.
Even so, the piece lays out pretty well the dangers of being a debtor nation. Plus, the graphics are cool.
“Things will get worse gradually,” [Alan Auerbach, an economist at the University of California, Berkeley, and an author of a widely cited study on the dangers of the current deficits] predicts, “unless they get worse quickly.” Either a solution will be put off, or foreign lenders, spooked by the rising debt, will send interest rates higher and create a crisis.
The solution, though, is no mystery. It will involve some combination of tax increases and spending cuts. And it won’t be limited to pay-as-you-go rules, tax increases on somebody else, or a crackdown on waste, fraud and abuse. Your taxes will probably go up, and some government programs you favor will become less generous.
That is the legacy of our trillion-dollar deficits. Erasing them will be one of the great political issues of the coming decade.”
Laffer — Get Ready for Inflation and Higher Interest Rates
The man whose tax policies helped kick the economy into high gear during the 1980s explains succinctly and fairly how the coming inflation tsunami will arrive and how big it will be.
A great read for economic dabblers.
Laffer says that in order to prevent worse inflation and higher interest rates the Federal Reserve would have to rapidly contract the monetary supply, which he admits might stifle any nascent recovery, but not as much as inflation beyond even the 1970s epidemic would bring.
“Alas, I doubt very much that the Fed will do what is necessary to guard against future inflation and higher interest rates. If the Fed were to reduce the monetary base by $1 trillion, it would need to sell a net $1 trillion in bonds. This would put the Fed in direct competition with Treasury’s planned issuance of about $2 trillion worth of bonds over the coming 12 months. Failed auctions would become the norm and bond prices would tumble, reflecting a massive oversupply of government bonds.
In addition, a rapid contraction of the monetary base as I propose would cause a contraction in bank lending, or at best limited expansion. This is exactly what happened in 2000 and 2001 when the Fed contracted the monetary base the last time. The economy quickly dipped into recession. While the short-term pain of a deepened recession is quite sharp, the long-term consequences of double-digit inflation are devastating. For Fed Chairman Ben Bernanke it’s a Hobson’s choice. For me the issue is how to protect assets for my grandchildren.”
