The President’s Speech: 1st Glance

The President went before Congress in a perilously weak state. According to a new AP poll, his overall job approval rating stands at 50%, with 49% disapproving. That represents a drop of five percentage points in about six weeks, and a drop of almost 25 points since the beginning of the year. Perhaps more important is the strong approval/strong disapproval stats: 24% to 35%. That ten point deficit could be a real killer, as it represents weakness in his base and intensity in his opponents.

On the economy generally and healthcare specifically, the news was just as bad. Overall approval/disapproval of his handling of the economy is 44/52%, and on healthcare 42/52%. That's the hole he's in, and the question is whether he began to dig himself out, or just kept on digging.

As a speech, I thought it was about as good as I've seen him give. He grappled with one issue after another, gave a lot of specifics, used a lot of compelling contrasts, and presented a pretty good general defense of the idea of healthcare reform. Maybe this is one of those Star Trek moments, where Captain Kirk can make a great speech and convince the evil computer to destroy itself or two alien races locked in mortal combat to look at each other and say: "common, let's give us a hug!" If it is one of those moments, this may have done it.

We won't know for a couple of weeks or so how much good the President did for himself. But I see reason to doubt. The President's supporters think the problem has been his presentation, and if that were true a truly effective speech could make a difference. But I think that the real problem has always been that the various parts of the policy didn't add up. I am not sure that changed tonight.

For example, the President reaffirmed his commitment to the public option with this argument. The public option must be there to cover people who can't afford private insurance or for some reason lose their insurance. It will be entirely funded by fees paid in, and so will not draw revenue from the rest of the budget. He also projected that no more than two percent of the people will sign up for such an option. Is it my imagination or is there a problem here? How can the public option fund itself if the people using it can't afford to pay for it? Can 2% of the population, and not the best off 2%, really support the public option? He certainly made it sound like the public option would support itself, but I just don't see how that could be true.

There also seems to be a contradiction between two ways that the President presents the problem. He tells us, plausibly, that we are already paying for healthcare for the needy, in emergency rooms and elsewhere. So we can just shift from paying badly to paying smartly. But he also wants us to feel deep compassion for all the people who are being left behind, who don't get care because they can't pay for. Maybe that's true, but doesn't it mean we are going to have to pay for more care than anyone is now paying for? Doesn't that mean the reform will require additional revenue?

But the bigger problem is that the President claims that his healthcare plan (which seems to be Senator Max Baucus' plan) will be revenue neutral. It will pay for itself by eliminating waste and inefficiency, and by new taxes on insurance agencies, businesses, and penalties on people who refuse to buy health insurance. The difficulty with that is twofold. First, you have to believe that Washington is somehow going to become much more competent at managing things. The same government that allowed so much waste in the current Medicare system will suddenly root all that waste out. Second, you have to believe that the Administration will honestly and accurately estimate the future costs and revenues of the program and so keep it revenue neutral. This, from the same Administration that recently revised its deficit estimates over the next decade upward by two trillion dollars.

The Administration began its push for healthcare reform by claiming that reform was necessary to get our financial house in order. The agenda has been in deep trouble ever since the CBO reported that the House plan would in fact add massively to the budget deficit. From that moment on, the Democrats in Congress, and the White House, have suffered from a credibility deficit. It is the lack of credibility that produced the dismal and dismally stable polls reported above. I am uncertain that the President did much tonight to restore his credibility.

Comments

[Tom]

I agree with you that President Obama gave a good speech, but that's about all I agreed with you on.

[A.I.]

What is the CBO report of which you speak showing massive deficits. The July 17 report showed deficit neutrality for H.R. 3200 or even $6 billion in deficit reduction. Is there a subsequent report I have not found that shows what you claim.

I too think Obama did very well last night. He changed the dynamic and increased support for reform including the public option. If that momentum holds, reform advocates are in good shape. As you say, time will tell.

Many of the Republicans looked like disrespectful, petulant little snots even without Joe Wilson's foot-up-to-the-knee gaff. That will not help their cause and perhaps makes passing reform through reconciliation more acceptable to more people--if that is the method chosen. At least that would be logical as it was pretty obvious a large block of R's have had no intention of supporting any Obama-proposed reform.

[KB]

Tom: At least I got something right!

A.I.: According to the letter from CBO director Elmendorf to the "Honorable" Charles Rangel, the total cost of the insurance coverage parts of the legislation (not the total cost) would be $1 trillion, forty-two billion dollars from 2010-2019. That is off-set by $219 billion in reduced outlays and an estimated $583 billion in new revenues. That leaves $239 billion added to the deficits. I don't know where you got the idea that the legislation is deficit neutral.

A deficit addition of $239 billion used to look like a lot in the long distant past of the last administration. I called it massive, but these days maybe it's chump change. But that $583 isn't nothing either. This kind of CBO analysis can't account for what is going to happen to the rest of government operations. But if the estimate is correct, the real cost of the legislation in its form at that point was over $800 billion dollars. Maybe it is going for a "moral" cause, but it still means wealth that can't be spent on something else.

Of course, all this assumes a lot of things. Will the revenues meet projections? Will the savings from other outlays be realized? Let me suggest that this is not usually the case. Policies almost always prove more expensive over the long run than their backers suggest.

But there's another big question, isn't there? Aren't you the least bit curious about what happens after 2019? I can virtually guarantee you that the answer is going to be very grim. I say that because the only people talking about that are the critics of the legislation. The proponents are staying mum. I say it also because that is what always happens. All the bad stuff is pushed off into the distant future, long after the Charlie Rangel's of this generation plan to retreat to their off the books island hideaways.

I am sorry my friend, but the idea that this thing is going to be "deficit neutral" is about as likely as leprechauns.

[A.I.]

What I was missing in the differences between Elmendorf's letter and the CBO figures I cited was the so-called "doc fix" which is $245 billion dollars budgeted to increase Medicare reimbursements to doctors over the next 10 years. I was citing an analysis that claims those dollars should not be included in estimates of reform costs. The CBO report includes that money and thus accounts for the $6 billion difference between what you cite and what I cite--the $239 deficit from Elmendorf minus the $245 billion doc fix that arguably would be spent regardless of reform, leaves a $6 billion surplus.

What happens after 2019 is relatively less important than what happens in the interim. The current trajectory is for a doubling of insurance premiums in that period. That is unsustainable and dwarfs any increased deficits projected, whether real or contrived. Our first priority thus becomes the near rather than the distant future. But if you really want to consider 2019 and beyond, look at spending in countries that have systems in place akin to what is being proposed. Most spend 30 to 50% less on health care than we do. Would that be so bad?

As for Charlie Rangel, he's 79 years old. He may be well advised to stay a bit closer to advanced medical facilities than retreating to an off-the-books island hideaway would allow.

[KB]

A.I.: At this point I am still skeptical that we are going to see any significant healthcare legislation. The problem is a public lack of confidence in the fiscal management of the whole thing. You say: "What happens after 2019 is relatively less important than what happens in the interim."

Here is what David Brooks says: "[The House healthcare] bill would add $220 billion to the deficit over the first 10 years and another $1 trillion to the deficit over the next 10 years." A program that is "revenue neutral," if you get the right stuff off the books, for ten years, and creates exploding deficits thereafter is exactly the kind of thing people are afraid of. All the good stuff is front loaded. All the bad stuff comes later. And when we get to later, we find that the program is now untouchable and can't be fixed.

Tell me that what is being proposed costs a lot less in other countries sounds nice, but I need to see that what is being proposed won't be ruinously expensive in this country. I plan to be around after 2019.