Mark Schmitt

Muliplication of Risks

The Wall Street Journal's David Wessel's father was my pediatrician, so I've always assumed he was a smart guy. (I don't know him.) He hit on a very important point in his story about the Medicare bill today. Fortunately for those of us who don't subscribe to the WSJ, Brad DeLong posted about half of it. Medicare Reform?: Archive Entry From Brad DeLong's Webjournal:

[The so-called "premium support"] is a big switch from today's Medicare. The current system charges every participant the same premium, provides a fixed menu of benefits, and generally pays doctors and hospitals on a fee-for-service basis. About the only way the government controls spending is by squeezing those fees. The change would be akin to the continuing move away from defined-benefit pensions (for which employers promise a monthly check) to defined-contribution pensions like 401(k) plans (for which employers put aside money and workers manage investments). It would give the elderly more choices of health plans -- though not necessarily as much latitude to pick a doctor as they have today -- and force them to bear the consequences of such choices.

We have to stop looking at each of these proposals, whether it's Medicare premium support or partial privatization of Social Security, in isolation, and instead see them, as Wessel does, in the context of a much larger pattern in which we have, as a society, exchanged security for risk, always in the name of choice. The shift in pensions is one good example, and so is the shift of most individual savings from FDIC-insured accounts to mutual funds and direct stock ownership. (see p. 4 of this report.) The reemergence of huge long-term deficits is another example -- it creates a lot of problems, but one of them is simply that it increases the risk of heading into a future economic downturn without the capacity to stimulate the economy.

Choices are great to have, but at a certain point, shifting everything from secure foundations with limited choices, to high risk ventures with more choices, actually makes it harder to make realistic choices. How can you decide whether to put your retirement savings in a high-risk venture if you're not sure whether your basic medical needs will be taken care of through Medicare? A certain base of security is essential for people to take the risks of entrepreneurship and investment. At the same time, many people, especially those influenced by the casino ideology of the right, will go "all in," making the riskiest choice in each area, without the careful evaluation of the consequences of interlocking risks which modern economics shows is one of the most difficult calculations for anyone to make.

I hope Democrats can begin to learn to talk not just about programs, programs, programs, but about the consequences of this overwhelming shift away from security, toward risk and choice, risk, risk and more risk. It's not just about Medicare and Social Security, ever popular as those words and programs may be, but really about how we make fundamentally responsible choices for the future.

Bush Press Conferences of the Future

President George W. Bush discusses jobs and the economy at the Timken Company in Canton, Ohio, May 28

"The sign did not mean that my economic plan would create jobs. In fact, the White House had nothing to do with the sign. It was put up by the workers at that factory, and it just meant that those particular workers had jobs."
President George W. Bush, May 28, 2004

McCain and Iowa

A week or so ago, I made the case that anyone not named Gephardt or Dean really had no business trying to compete in the Iowa caucuses. I thought Clark and Lieberman had made the right choice, just as Senator McCain had in 2000.

(Late addition: David Broder this morning seems to agree with me: "It will be a major upset if those two [Dean and Gephardt] do not finish on top in Iowa...My guess is that the reward for finishing third will be minimal." Great minds...)

So last night over dinner I was talking to someone who had been a top official of the McCain campaign in 2000. Out of nowhere, he said something like, "I had to laugh when I saw all these stories that say it's o.k. for Lieberman and Clark to stay out of Iowa, because McCain stayed out of Iowa and it didn't hurt him. None of the stories mention that McCain lost!"

That's not something that had ever occurred to me. I assumed that skipping Iowa and putting his attention into New Hampshire set McCain up for his big win there, and then the wild ride through South Carolina, where the Bush attack machine got him, followed by a comeback in Michigan but it wasn't quite enough.

This person's theory was that, if McCain had participated in Iowa, he might have come in third, setting him up as the key rival to Bush in the party. I guess it might have got him going a week or so earlier than he did. The other part of this person's argument was that building an organization in Iowa is simply proof of a campaign's national scope and organizational ability. Maybe. I think that's the old Carter theory once again, romanticizing the idea that he just out-organized his rivals in Iowa. Today I'm pretty certain that the only way to get somewhere with the 100,000 of Iowa Democrats who give up their evenings for the caucuses is through preestablished organizations, especially labor. But I could be wrong about that. I certainly hadn't considered the possibility that McCain made a mistake in bypassing Iowa. I still think that, even if he had done well there, he would have lost the nomination in South Carolina. But it shows how tough these decisions are.

Why do candidates have to have a "plan" for everything?

It's beginning to seem like a hazing ritual. In order to be treated seriously as a presidential candidate, one must come up with detailed "plans" on any number of issues, particularly health care: Clark Proposes Health Care Coverage for All U.S. Children (washingtonpost.com)

The hazing of Clark has been particularly harsh, because with his late entry and lack of electoral experience, he was less prepared to produce such plans. So, of course, the press felt entitled to demand them. But now that he's got a plan, like every other plan it will have one of two effects: Either it will be marred by some telltale flaw that allow the press or opponents to rip the candidate to shreds. Or, it will be ignored, by the very same reporters who had written sentences like, "nonetheless, X has not yet offered detailed proposals on Y."

That's it. There are no other possibilities. The plan will not become law, and almost certainly won't even resemble the legislation that the candidate eventually sends to Congress if he or she becomes president. And thank goodness for that: I'd much rather have a health proposal that's written by HHS staffers and senior Office of Management and Budget staff, along with some politically savvy people thinking about what can pass, than one written by a few confident recent Harvard graduates and McKinsey types pulling an all-nighter, which is, roughly speaking, how all campaign plans get produced!

The budget numbers are also complete back-of-the-envelope guesses. Would Clark's plan cost "$695 billion over 10 years," as reported? Or $770 billion, which seems to be the estimate he obtained from Emory University expert Kenneth Thorpe? It could be roughly in that range, or it could cost twice as much or half as much. There are all sorts of variables, such as how many people would actually take advantage of expanded COBRA coverage, that could swing this number in either direction and no one -- not even the legendary Mr. Thorpe, who I believe has "scored" most of the Democrats' plans at this point -- can even begin to produce a proper cost estimate in the few days available to him. (Thorpe might have even more credibility if he would occasionally admit that.)

Such plans, in their specifics, also won't attract votes in either the primary or the general election. Voters are smart enough to know that voting for that candidate doesn't mean they would get that plan; it takes a lot of time and attention to understand the distinctions between the Dean, Gephardt and Edwards plans; and voters really just want to hear that the candidates care about an issue and intend to do something about it.

I'd like to see a candidate have the guts to just set some goals, such as to insure all children and reduce the number of uninsured adults by, say, 20 million within five years. And then identify some plans or ideas that have been developed by others, such as the New America Foundation or the Progressive Policy Institute that show how that the goal is achievable. And perhaps some general hints about the candidate's instincts are necessary, such as the degree to which they want to use private sector competition, and their willingness to propose mandatory insurance coverage for kids (kudos to Clark and also to Edwards on this one). An advantage of referring to plans or ideas developed by outside groups is that it gives the candidate a defense against the inevitable potential problems in the plan -- he doesn't own it, it's not his problem.

The rest of the plans are just, as I say, a hazing ritual. The details are either unnecessary or cause problems, and the cost estimate is typically about as realistic as the Laffer Curve. And candidates for president and their staffs have so many better things to do with their time. Let's bring this game to an end.

How a Bill Really Becomes A Law

Perhaps as a subtle way to explain being hoodwinked by House Ways and Means Committee chairman Bill Thomas last week, Robert Pear and a colleague turn in this superb account of how conference committees work these days.

This is one of the best how-a-bill-really-becomes-a-law articles I've read, and anyone who teaches congressional politics or the standard law school class on legislation should put it in their readings, because this is what's not in the book. Pear and Carl Hulse are covering the House-Senate conferences to resolve the differences in the Medicare prescription drug bill and the energy bill, respectively. They report that

Republican leaders increasingly use such conference committees to shape legislation to their taste, removing some provisions passed by the full House and the Senate while adding a few of their own.
Seventeen lawmakers — nine from the Senate, eight from the House — have been appointed to the committee trying to reconcile Medicare bills passed by the two chambers. But only 12 do any work. Most of the Democrats, including Tom Daschle of South Dakota, the Senate minority leader, have been excluded.
Even fewer people are directly involved in writing a final version of the energy bill, which gained new importance after the August blackout. Although the formal conference committee numbers 58, most of the emerging bill was written by Senator Pete V. Domenici of New Mexico and Representative Billy Tauzin of Louisiana, both Republicans.

Conference committees are one of the most obscure aspects of Congress, and as the article notes, have "almost no rules." They can be the roughest, craziest form of open democracy, or they can be tightly controlled, two-men-in-a-room operations. Nor are there any longer parameters on what they can produce. In theory, conference committees are not supposed to change language that's identical between House and Senate bills; in practice, they do it quite often. (This is particularly useful when legislators want to be recorded as voting for a popular amendment, but know that it will be removed in conference.) They also are not supposed to add material that passed neither House, but that happens as well. The article notes that the Senate leadership pulled out and passed a Democratic energy bill just to give Domenici a vehicle to go to conference, with no intention of fighting for its provisions. And whatever a conference committee comes back with, legislators have no choice but an up or down vote. The Senate can filibuster it, which requires 40 rock-solid votes, the House can vote by majority to return it to conference to try again. But, to take the energy bill example, at no time will there be a chance for any senator not named Domenici to offer a revision and have it voted on. "'I will rewrite this bill,' Mr. Domenici said gleefully at the time," according to the article.

The only fault with the article is that, typically for the Times, it's a little too quick with the moral equivalence:

When Democrats ran Congress, they convened tightly controlled conference committees as well. But the current Republican majority has made no secret of preferring to write legislation in conference and to send it back to each chamber for an up-or-down vote, without the prospect of amendments.

That's really not true. Conference committees in the Democratic era were often wide-open affairs. When I worked on Capitol Hill, I was loosely involved in the conference on the crime bill in 1993, because I had helped get an amendment passed that added a lot of money for after-school programs. I remember night after night in a packed House committee room, full of staffers like me who actually had no business being there (my boss wasn't on the Judiciary Committee, much less the conference committee). That's not a good way to write legislation either, and the final result was a debacle, one of the few bills in history that the House actually voted to recommit to conference. But even the Republicans of the past didn't use conference committtees this way. The conference on the welfare refom bill in 1996 had several meetings with all the members involved, and several meetings of all the staffers involved. We didn't all have influence, of course: If I offered a suggestion in the staff meetings, the response would be, "Would your boss vote for the bill if we made that change?" And, of course, the answer was no -- he objected to the core of the bill and wasn't likely to vote for it. That's not unreasonable; it's perfectly normal political negotiation.

But that's the key difference between that era and now. Back then, it seemed the Republicans wanted to get every vote possible. If Senator Bradley could have been persuaded to vote for the bill through some changes that wouldn't have lost other votes, they probably would have done it. Not today. Today the goal seems to be to produce legislation that can just barely pass, with a vote or two to spare. The account of the conference on the 2003 tax bill is a good example -- as soon as Majority Leader Bill Frist could report to the two men in a room that he had 50 votes, they instantly brought the bill to the floor and pushed it through. The current Republican leadership seems to take pride in these narrow escapes, because it means they've had to compromise as little as humanly possible. That's the radical break from the past, both Democratic and Republican, that the article doesn't quite recognize.

There's a lot more to say about this Medicare bill in the next week or two. It's a big deal.

"Givers and Takers"

Massachusetts doesn't have a single Republican member of Congress. They haven't elected a Republican Senator since 1972, and the legislature is not merely in Democratic hands -- of 200 legislators in the state house and senate, only 29 are Republicans. Yet the state has now elected its fourth consecutive Republican governor. And these are an increasingly dangerous bunch. Last week, Governor Mitt Romney's budget advisor, Eric Kriss, told the Chamber of Commerce that the state needs

an ecosystem-like balance between those who contribute through taxes and those who receive government benefits,. What ratio is sustainable? Lyndon Johnson's Great Society figured it to be around 9 to 1 -- that is, 90 percent should help the bottom 10 percent rise up. . . . Forty years later our ratio at the state level is more like 3 to 1....Some -- most in this room probably -- are net contributors, while others are net beneficiaries. The ratio betwen givers and takers turns out to be a critical variable of government.'

According to the Boston Globe, Kriss later admitted that he had completely made up the figures in this analysis, particularly the 9 to 1 ratio of the Great Society. And of course that's obviously not what anyone in the Johnson administration was thinking, because by their very nature, Great Society programs like Medicare would reach far more than 10% of the population.

This is painfully reminiscent of a nasty old routine by former Texas Senator Phil Gramm, in which he would put on his phony drawl and complain that "We got too many people ridin' in the wagon, and the rest of us are pullin' the wagon. We need the people ridin' in the wagon to get out and start pullin' the wagon." (I can quote that from memory because almost every Gramm floor statement in his eighteen-year Senate career included that little riff, plus his proud declaration that "Ahh flunked the third, fifth, and ninth grade.")

Noah Berger of the Massachusetts Budget and Policy Center (which is part of the excellent State Fiscal Analysis Initiative that I'm involved with in my other life) has a superb response to Kriss, pointing out among other things that the share of total personal income going to government in Massachusetts has declined from 18.8% in 1979 to 16.5% today. But more to the point, Berger notes that all of us are "givers" and "takers" in different ways at different times in our lives. The kid in school is a "taker" today, and a "giver" later when he has skills and a job. The senior using Medicare today or relying on Medicaid for long-term care is likely to have been paying taxes for forty years or more.

To me, this is the central truth that has to be reestablished as the basis for liberal politics. It is not about "compassion," distributive economics, or the obligation of the rich to help the poor. That's nothing more than the converse of the Kriss/Gramm line. The point we need to reestablish is that government at its best can provide a platform of economic security for all of us, one that any of us might use at one point in our lives, not at others, and if we happen to be very lucky, never at all. I'm not collecting Unemployment Insurance today, but I'm sure glad it exists. I'm probably less likely to need Medicaid or TANF benefits, but they are there for all of us if, in some way, the floor falls out from under us. And this platform of economic security, no matter how far we might feel we are from needing it, provides us all with a peace of mind that allows us to take economic and personal risks -- risks that often create prosperity -- that we would not be able to take in the pre-New Deal environment.

One of the great mistakes of liberalism is to misunderstand this. For example, I often hear people say that policies regarding welfare should be determined by "those affected" -- that is, current recipients of welfare/TANF benefits. And, of course, the poorest people often go unheard in government, so anything to boost the voice of the neediest is worthwhile. But this way of framing the question has always seemed to me to perpetuate the Eric Kriss/Phil Gramm notion that there are just two kinds of people, welfare recipients and the rest of us, takers and givers, those "ridin' in the wagon" and those "pullin' the wagon." That's wrong, and we have to fight that at every turn. I may not have that much in common with a woman raising kids on her own with an $8/hour hotel job, but we both have a stake, both personal and ethical, in a system of economic security that prevents us from tumbling all the way to rock bottom. And that's why we have to fight the "givers and takers" rhetoric with passion and outrage. It's a narrow, ugly way to look at the world.

They're finally going after the New Deal

Usually when liberals complain about Reagan or Bush destroying the New Deal, they mean it as more or less a rhetorical point. And conservatives like Gingrich would usually insist that they were merely rolling back the excesses of the Great Society expansion of the New Deal, not the New Deal itself.

But now that the last of the generation of voters who know that they owe their economic security entirely to FDR is dying off, and now that the right has succeeded in rolling back almost everything associated with the Great Society (they still have to work out that agreement on the Medicare bill, though), it's almost as if a decision has been made to go after the New Deal.

Amazon.com: Books: FDR's Folly: How Roosevelt and His New Deal Prolonged the Great Depression

Here's the description of the book:

In FDR’s Folly, historian Jim Powell argues that it was in fact the New Deal itself, with its shortsighted programs, that deepened the Great Depression, swelled the federal government, and prevented the country from turning around quickly. You’ll discover in alarming detail how FDR’s federal programs hurt America more than helped it, with effects we still feel today, including:

- How Social Security actually increased unemployment
- How higher taxes undermined good businesses
- How new labor laws threw people out of work

By the way, this book ranks 245 on Amazon. Not bad, without a single review that I can find in any non-right-wing paper or magazine. What prompted me to look it up was a reference in the New York Times business section last Sunday in a little filler column where they ask executives what they're reading. (Not online.) So a book like this, which is one of the first products of the new Crown Forum line of right-wing books, is evidently in circulation among businesspeople, etc.

The only press coverage of the book has been from Robert Bartley, the longtime editor of the Wall Street Journal editorial page and from Thomas Sowell, who reports that the book proves that "some of the people who most admired and almost worshipped FDR -- poor people and blacks, for example -- were hurt the most."

I haven't read this book so I can't judge whether it really makes the case that poor people and African-Americans would have been better off under the Hoover regime. But I'd sure like to see the Times Book Review or The American Prospect give it to Alan Brinkley or William Leuchtenberg or some other first-rate historian of the 30s and 40s and have them treat it like a real history, which is what it pretends to be. Perhaps there's some truth to the book. But we ignore the Right's attempt to write it's own version of history at our own peril.

What is it about Joe Lieberman that makes people crazy?

I don't want to make this weblog a Lieberman Defense site (indeed, I don't want to write much about the 2004 campaign at all), but I can't understand how it is that people look at this fairly mild-mannered, sometimes annoying and sometimes charming, accomplished moderate/liberal and see Satan?

In the Village Voice (which I haven't read in years, I confess), Rick Perlstein goes bananas over a scenario under which Lieberman destroys the Democratic nominee if it's not him:
The Village Voice: Features: Day of the Spoiler by Rick Perlstein

His argument is that Lieberman will "pick up some delegates here and there...[but] as his star fades, he'll have only one viable strategy left, a manic, all-or-nothing strategy: trying to convince Democrats that the front-runner must be dumped altogether, using the dark arts of opposition research, trying to dig up something purportedly embarrassing from the front-runner's past that the jubilant Republicans might even have missed if left to their own devices." His support for this prediction: it's kind of what Al Gore did in 1988, when he was running as the Democratic Leadership Council candidate and hit Dukakis with everything he could find, including the first attacks on Massachusetts's prison furlough program, which in the Republicans' hands and with an added gloss of racial coding became the Willie Horton ad.

Perlstein is a smart guy,who wrote a wonderful book about the rise of Goldwater that I reviewed two years ago. He knows the history of modern presidential campaigns as well as anyone. But this scenario is crazy. First, of course, Republican oppo research isn't missing anything. And they didn't need Gore to point them to Willie Horton in 1988 either. And Lieberman is not Gore. He is not given to "manic" self-destructive outbursts. Whereas Gore is, not so much because he's a bad guy but -- I believe -- because he's never really liked politics or been comfortable in it. He's like a boxer who doesn't really know or like what he's doing -- dangerous to himself and others. A couple of years ago I read the transcripts of all the 1988 debates, and from the very start, Gore stands out. Six guys are having a reasonable, respectful exchange about trade, farm policy, defense, whatever, and then -- BOOM! -- in comes Gore, hitting away from the left, right, and center. Gephardt -- you supported Reagan. Simon -- you're soft on ethanol. Dukakis -- you're weak on defense. He had just turned 40, was in over his head, had too many handlers with their own agendas (David Garth in New York, Al From elsewhere), and didn't know what he was doing. Of course, he didn't have the same excuse when he pounded away at Bill Bradley twelve years later.

Whatever Gore's motivations in 1988 -- and I do subscribe to the psychobiographical theory that he's not a natural politician, but needed to prove something to his father, and thus reacted with panic rather than natural grace when in a tough spot -- none of this applies to Lieberman. He's a grownup, he knows his own mind, he's graceful and instinctively modest, and he's an incredible natural politician. He's also a very loyal Democrat who has never done anything to hurt his party. (Although one comment on my earlier post noted that his decision to run for his Senate seat simultaneously with the vice presidency in 2000 would have hurt Democrats had he won because it would have turned the Senate over to the Republicans, because the Republican governor of Connecticut would have named his replacement.)

Perlstein concludes that Lieberman "must withdraw. He should do it fast." Why? Because Perlstein predicts that if he stays in the race he will do something that's completely out of character for him? Or because, as Perlstein says elsewhere, he might become the nominee but activist Democrats will be turned off and won't help him? That doesn't make any sense either: He's not going to become the nominee without support from the activist base of the party. It's not like the power brokers of the party are going to anoint him against the wishes of the base.

The funny thing is that Perlstein, after attending a fundraiser, notices just what I pointed out earlier:

Joseph Lieberman may be more conservative than the other Democratic candidates, and he may be puppyishly eager—disastrously, selfishly so—to advertise the fact. But let's face it: When it comes right down to it, he is still a Democrat. His handsomely progressive new tax plan shows that.

So, then, what's the big deal? He's probably not going to be the nominee, and if he is, it's because proposals like his progressive tax plan actually generated enthusiasm among Democrats.

Finally, just an aside: Perlstein reports that the only way he could see Lieberman in person is at a $250 fundraiser. "Bingo," he says. "That my reporter's expense account could afford." Unfortunately, he's going to be out $250 because it's against the law for your employer to reimburse you for a political contribution.

He's still a great historian.

Rumors abound!

I got the following e-mail last week from a fairly prominent person:

Mark,

Rumor has it that you may be doing some work for Wes Clark. If true,
let me pitch an idea for The Speech.

What followed was brilliant, but I won't give it away.

Maybe I should let these rumors spread. But eventually I'd have to deliver. Unfortunately, it's not true.

Is the Medicare Bill Really Almost Done?

It's pretty rare that Robert Pear of the New York Times misses a story on federal social or health policy. He's been on that beat forever, everyone knows him, he's the first person they call when they want to put something out. But his story on progress on the Medicare prescription drug legislation is flatly contradicted by the Washington Post:

Congress Strikes a Tentative Deal on Drug Benefits (NY Times)

Medicare Proposal Outlined (washingtonpost.com)

Pear reports that the House and Senate negotiators have reached a general agreement on some of the core issues, including the basic structure of benefits and premiums, and the policy, which for some reason is called "premium support," under which Medicare services would be open to private-sector competiton. In general, the draft agreement is closer to the outrageous bill passed by the House than the somewhat more responsible bill passed in the Senate.

The Post's Amy Goldstein, though, reports that what really happened is that Bill Thomas, the disagreeable chairman of the House Ways and Means Committee, put down on paper what he thought the final deal should look like, and pissed off everyone, including Senate Republicans, one of whom was heard saying "Hell, no" about the provision on private-sector competition.

So which story is right? It's crazy to bet against Pear, but his story doesn't identify his sources, is vague about specifics, and he's so focused on whether the bill will "attract bipartisan support" that his only quotes come from Senate Democrats, most of whom are unlikely to vote for the bill anyway, and probably won't be needed. Goldstein's sources are anonymous, but she's pretty specific about her evidence that Republicans disagree with the draft and are angry with Thomas, which is what really matters. Plus, Goldstein's story has the virtue of plausibility: Bill Thomas acting in a haughty manner and dividing Republicans -- this is a movie we've seen before.

But even Pear's story offers a long list of issues yet to be resolved:

House and Senate negotiators said these issues were still unresolved:

How to ensure that the cost of drug benefits does not exceed $400 billion over 10 years.

Whether to allow consumers and pharmacies to import drugs from Canada and Europe.

Whether to offer new tax breaks to encourage people to save for medical expenses.

The negotiators are also searching for ways to deter employers from dumping their obligations for retiree health benefits onto Medicare.

Anyone want to try to figure these four things out over the weekend??

Seriously, there's less than one chance in five that Congress will produce any kind of Medicare prescription drug bill at all. And that's not a bad thing, because these are terrible bills. When one possibility is off the table -- forcing pharmaceutical companies to absorb discounted prices to either a government purchaser or individuals -- then we're left with a bill that will simultaneously cost individuals too much, provide only modest benefits -- roughly a 50% discount for someone with $3,000 in drug costs -- and saddle the government with an enormous, unpredictable new long-term obligation.

The conventional wisdom is that it will hurt Bush to fail to produce a Medicare bill. But it is also likely to hurt Bush if seniors ever get the chance to find out just how much they will have to pay and how little they will get, not to mention that they may lose Medicare as they know it.

The only way for the Republicans to gain an advantage from Medicare would be to somehow make it seem as if it's the Democrats who are blocking the bill, a spin that Pear's story helps facilitate. But Ted Kennedy's strong support earlier this year helps belie the claim that Democrats aren't serious about prescription drug coverage. A number of people wondered at the time what Kennedy was doing, and wished he had not conferred his credibility on such a bad bill. But maybe he knew exactly what he was doing. Maybe he knew that the House and Senate Republicans could never produce a compromise, and that by supporting the bill, he could prevent Democrats from getting blamed for its failure. If that was what he was thinking, good for him, because it's exactly what's happening.