Mea Culpa #1

A few days ago I made the following statement:

But that last point brings up an uncomfortable truth about the modern GOP, it has become so partisan that a health plan quite similar to the Massachusetts plan is now so beyond the pale that it seems that think tank people are being fired and muzzled (at the AEI) for even considering the Obama plan as a possible starting point for further compromise. 

I still have this general concern about the GOP, but the specific example I cited was false.  I had based my comments on the AEI on a report from Bruce Bartlett, who reported on a conversation he had had with David Frum.  Frum was recently fired from the AEI.  Because the firing occurred immediately after Frum’s famous ”Waterloo” article, which attacked the Republican establishment, many people assumed that the article led to the firing.  Obviously there is no way to know for sure, but surely the AEI must have known that if Frum was fired right after the article, rather than 3 months later, then people would draw that inference.  In any case, I drew that inference.  Of course it’s their right to employ the people they feel most comfortable with; my point was that the GOP currently needs a bracing dose of criticism.   

It now turns out that Bartlett’s statement was false.  Frum recently indicated that he had merely mused out loud that AEI researchers might have been afraid to speak out in favor of aspects of Obama’s proposal.  Furthermore, articles like this one lead me to believe that the AEI does not muzzle its researchers.  Normally my instincts are to wait and see on these sorts of disputes, as there is often another shoe to drop.   Especially as I have found most conspiracy theories to be false.  In retrospect I wish I hadn’t made that specific accusation against the AEI, as I didn’t have enough evidence.  So I apologize to the AEI.

So is there anything left of my complaint about the right’s approach to health care?  I admit that I haven’t followed this issue closely, but I certainly had the impression that back in 2006 there were quite a few people on the right, in places like Reason magazine and the Heritage Institute, that had lots of good things to say about Romney’s Massachusetts proposal.  So I still think the right as a whole has a perception problem here–specifically the perception that the much more strongly negative reaction to the very similar Obama plan was partly based on political considerations.  And I still think the Republicans should have tried harder to get a compromise bill enacted. 

[And recall that I opposed the bill, and probably would have opposed a compromise.  But a compromise probably would have been better than what we got.]

I freely admit that my perceptions may be erroneous.  Perhaps I was mistaken in assuming that the Heritage Institute had supported the mandatory insurance/subsidies approach of Massachusetts, after all, I merely relied on news reports.  And perhaps Olympia Snowe had all her suggestions shot down in committee, I wasn’t there.  In any case those who know more about this mess than I do should feel free to add information to the comment section.

HT:  Greg Ransom–you were right on the muzzling charge.

PS.  At least I’ll never have to apologize to the Singapore government, unlike certain newspapers.   :)

Update:  Here’s Bruce Bartlett’s response to David Frum’s clarification.


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27 Responses to “Mea Culpa #1”

  1. Gravatar of Trent McBride Trent McBride
    30. March 2010 at 10:54

    I could be gravely mistaken, but as a big fan of Reason magazine, I don’t remember any good reviews of the Massachusetts health care reform. A (very) cursory search from older articles did not uncover anything positive. Again, I could have missed something.

  2. Gravatar of Thorfinn Thorfinn
    30. March 2010 at 12:28

    Half of the coverage expansion come from straightforward expansion of Medicaid. Much of the rest come from heavily subsidized exchanges. The funding for all of this comes either from cuts to existing health programs or taxes on the rich. This may be a good thing, but how on earth is that in any way conservative?

  3. Gravatar of Greg Ransom Greg Ransom
    30. March 2010 at 12:38

    One of the problems with massive government “intervention” in the society and the economy is everything it too complicated for anyone to really understand — and everyone becomes compromised as the net of implicated self-interested deepens and expands. So trust declines — and the possibility if honestly communicating complexity erodes.

    At some point the payoff for what Harry Frankfurt defines as “bullshit” expands and the costs of trading in bullshit dramatically recedes (no one really knows enough to know what is bullshit and what isn’t) — critically damaging the public debate and democracy.

    I think we’ve reached that point, and if there are a few non-bullshitter holdouts here and there — and both Frum and the AEI researchers may be among those holdouts — I’d wager, given current trends, the domain of the non-bullshitters is not long for this world. It’s sad to see the good guys in a circle shooting at each other.

    Reference: Harry Frankfurt, _On Bullshit_ (just google it).

    Final note — it turns out that when “the worst get to the top” in social democrat mega-state, it’s not so much the worst liars that win out, but the biggest bullshitters (see Frankfurt).

  4. Gravatar of Greg Ransom Greg Ransom
    30. March 2010 at 12:39

    Make that:

    “the possibility of honestly communicating complexity erodes”

  5. Gravatar of Don the libertarian Democrat Don the libertarian Democrat
    30. March 2010 at 14:33

    I’m glad you posted this. I was for the bill for one reason: I’m for Universal Coverage. That’s what I took the issue to really be this time, and it’s a clear issue for me. Of course, you could ask me “In theory…?”, but, what I’ve learned from Burke, is that “In theory…?” isn’t that useful and can, in fact, be dangerous.

    As for all the moving parts, I’ve no idea what will happen going forward with this plan or how this plan will work out. That’s the reason I find all the arguing and predictions about it less important, and why so much of the commentary has been overwrought in my view. I feel that this tangled knot of a hybrid system we have will see many revisions in the next ten years.

    I’m for a version the following:

    http://www.thepublicinterest.com/archives/2001winter/article1.html

    I simply feel that, once the universal nature of the issue is settled, a plan such as I favor will get a fairer hearing, which is all that I can ask. Going forward, with universal coverage being accepted, the merits of such a plan will become more apparent. With Health Care in the US, there’s no straight path to getting where I’d like us to be.

  6. Gravatar of Jon Jon
    30. March 2010 at 19:56

    The GOP did try to craft a compromise bill. Claims to the contrary are revisionist, partisan rubbish. It is interesting to consider what went wrong:

    1) Problem one: the bill was framed as being about containing the growth in health-care costs, but it turns out to have actually been about extending and supplementing medicaid. The lack of straight talk on this point was caustic.

    But… a new health-care entitlement for the poor was a narrow, partisan goal. There simply was not much to talk about, the administration knew this and kept negotiations focused on peripheral matters, but of course this meant things went no where because most of the costs are tied up in the new program.

    Problem Two: Olympia Snow and the Finance Committee engaged in real, honest negotiations, but the agreements reached in that forum were repudiated by Harry Reid. Which ensconced a widespread conclusion that any negotiation was essentially a fraudulent exercise.

    Problem Zero: The problem with your logic is also that people who once supported the Massachusetts plans did so in part because they believe in the laboratory of the states. Second, the Massachusetts program is in trouble. So I think its fair for people’s opinions to be shaped by what we know now in contrast to what we might have speculatively supported before.

  7. Gravatar of scott sumner scott sumner
    31. March 2010 at 04:00

    Trent McBride, I am pretty sure they did. A liberal blogger recently posted an old Reason article, unfortunately I forget which blogger. Probably Yglesias, but he has so many they are hard to search.

    Just to be clear, I don’t recall them endorsing the exact bill-just saying good things about the general approach.

    Thorfinn. Those are good points, and partly explain why I oppose the bill. But I am trying to figure out why conservatives seemed to like the Massachusetts bill, but then suddenly opposed mandatory insurance plus subsidies. If they do support the Romney bill, why not press Obama to make his bill more like Romney’s? Instead they used cliches like “socialized medicine.” As far as I can tell most Republicans support socialized medicine (Medicare, Medicaid, mandatory insurance, universal coverage, subsidies, etc.)

    Greg, Good point—that makes me want to read Frankfurt’s book.

    Don, I understand your point–now that we have universal coverage, let’s get on with the key issue, which is reforming the system. This isn’t the end of the process (it doesn’t reform the system) but rather the beginning of a process that I hope eventually leads to HSAs rather than excessive insurance.

    Jon, Those are very good points, and you might well be right. I am at a disadvantage because I haven’t had time to study the issue closely, and thus had to rely on the press. Obviously the narrative in the press was different from what you report. But then I’ve never much trusted the press. Your report is consistent with what I know about Senator Snowe–she is a real moderate, not a conservative pretending to be a moderate, as some liberal bloggers claimed.

    I suppose the other argument I could make is that the Republicans didn’t try to do anything while in power. The counterargument is that they favor the laboratory of the states (as do I), and hence thought it was better to reform at the state level first.

    The counterargument to that is Bush’s trillion dollar Medicare drug program. So there are lots of sides to this argument.

  8. Gravatar of Steve Steve
    31. March 2010 at 06:00

    Dear Scott,

    I have a question unrelated to what you have written here, it is about future NGDP targeting.

    What happens if there is a severe supply side price shock? As in the 70s with the oil price. Inflation goes up, also future price levels will be higher, leading to a tighter monetary policy than is optimal. In the extreme, you would need a negative real growth to compensate for the increase in price level. Would you allow for some measure of extra inflation when calculating the 5% target?

    Maybe you have explained that somewhere else, but I couldn’t find it.

    S

  9. Gravatar of Blackadder Blackadder
    31. March 2010 at 06:00

    Reason ran an article in 2003 that was mostly positive on the idea of a mandate. Here’s the article.

  10. Gravatar of Blackadder Blackadder
    31. March 2010 at 06:04

    The real shocker, though, is that Hayek seems to have put his imprimatur on the same idea in his Constitution of Liberty:

    Once it becomes the recognized duty of the public to provide for the extreme needs of old age, unemployment, sickness, etc., irrespective of whether the individuals could and ought to have made provision themselves and particularly once help is assured to such an extent that it is apt to reduce individuals’ efforts, it seems an obvious corollary to compel them to insure (or otherwise provide) against those common hazards of life. The justification in this case is not that people should be coerced to do what is in their individual interest but that, by neglecting to make provision, they would become a charge to the public. Similarly, we require motorists to insure against third-party risks, not in their interest but in the interest of others who might be harmed by their action….

    Up to this point the justification for the whole apparatus of “social security” can probably be accepted by the most consistent defenders of liberty.

  11. Gravatar of Blackadder Blackadder
    31. March 2010 at 06:13

    Btw, Scott, you’re not wrong about Heritage. If you go to their website, you can find friendly articles about the mandatory insurance concept up until around 2006 or so (here is one example). At some point before the 2008 election, however, they become more critical.

  12. Gravatar of StatsGuy StatsGuy
    31. March 2010 at 07:17

    Jon:

    “Problem Zero: The problem with your logic is also that people who once supported the Massachusetts plans did so in part because they believe in the laboratory of the states.”

    The “states rights” argument seems to be a convenient fallback position that serves many political purposes, and rings entirely hollow in Romney’s case.

    http://www.huffingtonpost.com/sahil-kapur/mitt-romneys-breathtaking_b_489247.html

    States Rights is an argument raised when it’s convenient, and otherwise ignored – the Democrats favor states rights for marriage laws, the republicans for health care. In a sense, whenever there is a race-to-the-bottom effect, those political elements who favor the ‘bottom’ tend to favor states rights.

    “a new health-care entitlement for the poor was a narrow, partisan goal.”

    Peter Orszag has essentially admitted this much – that the goal was expanding care, not improving efficiency – but I can’t find the quote. The only efficiency-enhancing provisions are the ones to gather and consolidate information on treatment efficicacy and cost, which are a worthy goal – but no one can agree if/how much this will save any costs unless we have rationing of some sort.

    When the Republicans finally started putting some meaty proposals out (which was later in the process), they developed some decent ideas – among which, removing the ban on cross-state competition while putting in place some national standards on issues like rescission. But the level of dishonesty from _both_ sides in characterizing the other side was high – it’s hard to feel sorry for the GOP given the media content they were generating.

    Blackadder is correct about the Heritage position, as I recall.

  13. Gravatar of Mark A. Sadowski Mark A. Sadowski
    31. March 2010 at 07:48

    Not only is Blackadder right about the Heritage Foundation, the earliest record I can find of anyone proposing an mandatory insurance/subsidies approach was by, drum roll please, the Heritage Foundation. A 1990 Heritage Foundation proposal outlined a quality health system where “government would require, by law every head of household to acquire at least a basic health plan for his or her family.”

    http://www.heritage.org/Research/Reports/1990/07/Using-Tax-Credits-to-Create-an-Affordable-Health-System

    So the Heritage Foundation not only were for a mandatory insurance/subsidies approach before they were against it, they probably invented it.

    Another interesting quote is this:

    “Basically, it’s the same thing,’’ said Jonathan Gruber, an MIT economist who advised the Romney and Obama administrations on their health insurance programs. A national health overhaul would not have happened if Mitt Romney had not made “the decision in 2005 to go for it. He is in many ways the intellectual father of national health reform.’’

    http://www.tnr.com/blog/jonathan-chait/romney-death-watch

    But I wouldn’t worry about Romney, he’s already polishing up his “Romneycare is nothing like Obamacare” talking points.

  14. Gravatar of Greg Ransom Greg Ransom
    31. March 2010 at 09:30

    Frankfurt’s book is very short and free on the internet.

    Worth a read. The second half is the best part.

  15. Gravatar of Greg Ransom Greg Ransom
    31. March 2010 at 09:39

    Blackadder — Hayek’s father was a civil service doctor providing government health care in Vienna. Hayek’s son worked as a doctor/pathogen specialist in the British governmen health care service.

    His son is said to have been a critic of the British system.

    It would be interesting to get Hayek’s more extended thoughs on this topic, as well asmhis shoot from the hip opinions. No such papers or interviews exist on this topic as far as I am aware.

  16. Gravatar of Greg Ransom Greg Ransom
    31. March 2010 at 09:48

    Blackadder — note how Hayek’s view is just another example of his rather “left” position on social welfare issues, and note how 1930s leftists like Paul Samuelson vilified and marginalized Hayek on false grounds despite such views — revealing much about themselves while obscuring and twisting the truth about Hayek.

    It was an intentional smear job with political motivation — and we still see this sort of behavior from prominent leftist economists today.

  17. Gravatar of TGGP TGGP
    31. March 2010 at 20:37

    What you call “race-to-the-bottom”, I call “consumer surplus”.

  18. Gravatar of StatsGuy StatsGuy
    1. April 2010 at 04:54

    “What you call “race-to-the-bottom”, I call “consumer surplus”.”

    From the perspective of Satan, Dante was climbing the Himalayas… :)

    Though honestly, in both cases above, I favor the “bottom” as well. But not so much in areas like environmental policy.

  19. Gravatar of scott sumner scott sumner
    1. April 2010 at 05:11

    Steve, No, you would not allow for extra inflation. Nor would a 70s-style oil shock require negative real growth. RGDP growth was about 3% during the 1970s, about the same as the 1980s. It is a myth that higher oil prices sharply reduce the LRAS.

    But even if they do reduce growth, NGDP targeting will give you what is roughly the optimal reduction in real growth. Remember, inflation targeting would slow growth much more than NGDP targeting when there is a supply-shock. So my proposal is actually much more flexible during a supply-shock than the major alternative–inflation targeting.

    Blackadder, Reason, Hayek, Heritage—just a bunch of Obama-loving socialists. Who cares what they think! Seriously, I appreciate your digging up that info.

    Statsguy, I agree there is a lot of hypocrisy on both sides–except not with me. I favor states right for health care, marriage laws, almost everything (except Jim Crow laws.)

    Mark, That’s even better–so Heritage is the originator of ObamaCare. Seriously, there are some differences, but they aren’t great enough to explain the dramatically different receptions on the right.

    Greg, I think everyone agrees that the British system is not a good one. I used it in the 1980s, at which time it was really bad. It might have improved a bit since then, but even people on the left tend to point to Canada, not Britain. I also heard a horror story about the British system from a UK professor who’s wife almost died because they kept refusing to treat her. There are lots of horror stories in our system as well, but the specific story I heard would not have occurred over here.

  20. Gravatar of Steve Steve
    1. April 2010 at 07:27

    Scott,

    I agree that NGDP targeting is more flexible than inflation targeting. But that just makes it better than the status quo, not good in itself.

    A pure supply shock that increases prices (say of oil) shouldn’t affect real growth at all, optimally. Isn’t that right? So under your NGDP targeting, the real growth is suboptimal. You SHOULD have some mechanism in place that takes account of this supply shock to get better outcomes under your NGDP targeting. Not that I know what this could be…

    PS: I did not say that a “70s-style oil shock require negative real growth”, as you saud. I just said it is possible!

    S

  21. Gravatar of scott sumner scott sumner
    2. April 2010 at 08:12

    Steve, I think a severe oil shock should affect growth. Oil is a key input. If we have much less oil (I’m assuming the high prices come from reduced supply from OPEC) then our output should fall. Jobs will be lost in oil intensive industries.

  22. Gravatar of Steve Steve
    2. April 2010 at 09:20

    Ok, Scott, I agree, there will be real growth impact. But that is not what I meant (although you couldn’t see that from my comment).

    What I meant is this: in addition to these real growth impact and adjustment costs etc., your NGDP targeting will add an additional (!) strain on growth by reducing aggregate demand because of tighter monetary policy to accomodate the oil price increase (in order to fulfill the NGDP target). Of course, pure inflation targeting is even worse, but that is not the point. The point is, NGDP targeting could do better if it took into account these purely exogenous, supply side price shocks (if there are some in the future). But how could that be done?

  23. Gravatar of ssumner ssumner
    3. April 2010 at 07:53

    Steve, No, an NGDP target is identical to an AD target. You try to keep nominal spending stable. You try to keep the AD curve from shifting. (I define AD as NGDP.)

  24. Gravatar of Steve Steve
    3. April 2010 at 11:54

    Scott, yes I understand that. At least I think I do.

    The point is this: through your NGDP target, you keep expectation of AD stable. But with an oil price shock, the actual AD at this moment will be lower because monetary policy with an NGDP target HAS to accomodate this shock in some way.

    Now I know, expectations are more important, but is actual AD at this moment not important?

  25. Gravatar of ssumner ssumner
    4. April 2010 at 17:18

    Steve, Transitory changes in real GDP due to supply shocks don’t do any significant harm, as long as one year forward expected NGDP is stable. Hurricane Katrina is a perfect example–it did not cause any significant macro problems (unemployment, etc) although output fell briefly.

  26. Gravatar of Steve Steve
    5. April 2010 at 00:06

    Scott, thanks for your explanations once more.

    But now you are comparing an output shock that reduces output (and so should lead to a expansionary central bank policy, if NGDP growth is expected to be affected) to an output price shock (where the central bank has to do just the opposite, to reach a predefined NGDP target). Is that an appropriate comparison?

    Don’t you think that your policy would be even better if it took the oil price out of the calculation of NGDP?

  27. Gravatar of ssumner ssumner
    5. April 2010 at 04:45

    Steve, Lower oil output and higher oil prices (in the 1970s) are just two sides of the same coin. It is the same shock. If the demand elasticity is one, nominal expenditure on oil need not change in either case.

    One can argue that a nominal wage target is better than a NGDP target, and that may be the implication of your oil question. Earl Thompson has some interesting stuff on nominal wage targets. You also might want to take a look at George Selgin’s work.

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