Problems fixed and improvements made in last post

My last post has been substantially revised and improved. I think now it's pretty complete and well done.

Why the Blue Dogs and Republicans probably can't stop a good universal health insurance bill -- if Obama is willing to fight

MAJOR REVISION AT APPROXIMATELY 9:30 pm, JULY 27TH

Paul Krugman writes in today's column, "Right now the fate of health care reform seems to rest in the hands of relatively conservative Democrats — mainly members of the Blue Dog Coalition". Krugman rightly wants to put pressure on the Blue Dogs to do the right thing, but note that he uses the word "seems".

There are three key ways to consider that the Blue Dogs, Blue Dog-like senators, and the Republicans might legislatively stop a good universal health insurance bill:

1) The Blue Dogs could refuse to let the bill leave the House Energy and Commerce Committee – A July 15th CNN article states, "Democrats outnumber Republicans 36-23 on the Energy and Commerce committee, which contains eight Blue Dogs, including Ross. If seven Democrats vote with Republicans against the bill, it would fail to advance to the House floor."

What could the Democrats do in this case?

The authoritative book "Congress & Its Members", 10th edition, 2006, has an excellent chapter on committees in both houses of congress. On page 232 the authors begin a section called, "Bypassing Committees", which gives recent examples in the house and senate where uncooperative committees were simply bypassed; the bills were brought to the floor for a vote without their consent. The authors conclude the section writing, "Some analysts contend that, 'There are few consequences if [committees are bypassed] because nobody outside congress cares whether a bill went through committee or not'"

In fact, we see that bypassing the Energy and Commerce committee is being considered in an article from The Hill from just three days ago, "Waxman may let health bill skip committee":

Chairman Henry Waxman (D-Calif.) says there is "no alternative" but to have healthcare legislation bypass his Energy and Commerce Committee if Blue Dog Democrats don't accept a deal worked out Friday.

Waxman is now playing a game of legislative chicken with the Blue Dogs. He's hoping the inclusion of a study on Medicare reimbursement rates in the healthcare overhaul will be enough to placate the centrist Democrats, who say the government program short-changes hospitals and physicians in their rural districts.

If that’s not, the seven Blue Dogs could join with the committee's Republicans to "eviscerate" healthcare reform, and that’s something Waxman will not tolerate.

"I won't allow them to hand over control of our committee to Republicans," Waxman told reporters.

"I don’t see what other alternative we have, because we're not going to let them empower Republicans on the committee."

The reimbursement rates are important to the healthcare bill, because the government-run "public option" would be based on Medicare

2) Blue Dog representatives could join with Republicans to defeat the bill in a full vote of the house – The Wall Street Journal writes today that there are 52 Blue Dogs in the house. Their source is the group itself. The Democrats have 256 seats to 178 for the Republicans. If all Republicans vote no, then the Blue Dogs could defeat the bill with 39 out of 52 joining the Republicans (In the house, if there's a tie, the bill is defeated). However, the Wall Street Journal article states, "Overall, House Blue Dogs are not always in alliance. But the bloc of seven on the Energy and Commerce Committee -- an eighth Blue Dog there, Rep. Jane Harman of California, is a liberal on health-care issues -- has shown every sign of remaining unified.", so Harman should be a yes. I would hope that Obama and the Democrats would, if necessary to preserve a good effective bill, go all out LBJ style with positive and negative incentives, and really using political capital, to get at least 13 others, and would succeed

3) Blue Dog-like senators could join with Republicans in an attempt to stop the bill with a filibuster – The impetus for my recent study of congressional rules and procedures is an assertion I read by New Republic Senior Editor Jonathan Chait, that Clinton could have passed universal health care by using a procedure called Reconciliation, which prevents filibusters and allows bills that qualify for it to pass with just 50 votes, plus the vice president breaking a tie.

Chait claims this in his 2007 book, "The Big Con: The True Story of How Washington Got Hoodwinked and Hijacked by Crackpot Economics" on page 204:

Perhaps the most incredible thing about the [1993 Clinton] health care debacle is that the Democrats could have avoided the filibuster that ultimately killed the reform if not for the stubborn insistence of one senator...West Virginia's Robert Byrd...an old fashioned New Deal Democrat who supported reform but cared more about the traditions of the Senate than anything else...He would not budge in the face of pleas from Clinton and his fellow senators, and his ability to tie the senate in knots if so inclined deterred the Clinton administration from crossing him. In the end, Dole spearheaded a filibuster that killed the potential reform.

Is Chait right? and could Obama and the Democrats today use reconciliation to prevent a filibuster and pass the bill with just 50 votes and Vice President Biden breaking a tie?

It looks like probably yes based on what I've read, for at least a reasonably good universal health insurance bill. The Republicans have recently used reconciliation to pass several big bills with less than 50 votes, including tax cuts overwhelmingly for the rich that costed more than universal health insurance!

The Senate parliamentarian will make a decision on whether reconciliation can be used to avoid filibuster, or if not how the bill might be altered so that reconcilliation could be used. The Hill has a good brief article on this from April 22nd. A filibuster decision of this type by the senate parliamentarian has never been disregarded, but it may be possible. The legality, potential moves, counter moves, and supreme court rulings are difficult to say, and it's beyond my current expertise in this to conjecture here.

Conclusion:

It looks likely that if Obama is willing to really fight for the great good of a good universal health insurance bill – he cares a lot more about that than looking new-age fairy land post-partisan – he can succeed.

As I wrote in a November 6th, 2008 post:

I strongly believe that health care is the most important thing. It is the most valuable thing that can be done when considering the probability distribution of its payoffs -- in non-mathematical-economics jargon, it is the most valuable when considering how much good it's likely to do.

Why is this?

Isn't there more potential to do good (or prevent bad) in combating global warming? Yes, but the best way to combat global warming is to pass a good universal health care program, or at least to move us greatly in that direction. The reason is that this would be so enormously good for people's lives [if it were really a good bill, certainly a good single-payer would qualify, but we aren't getting that], and for the economy, that it would generate a gigantic amount of gratitude and political capital for the Democrats, and that would allow them to push through far stronger anti-global warming legislation [over the coming years and decades] -- a lot more money for alternative energy, a lot greater conservation measures, etc. And it would also help Democrats in elections for decades to come, greatly decreasing the harm Republicans can do on so many issues (at least in the Republican party's present extreme, anti-thinking form).

There's nothing more important than passing a good universal health care program, and hopefully Obama won't falsely think it's too politically risky to push for this, because once we've had it, and Americans saw the reality of just how much better it made their lives, rather than the Republican false arguments and lies [Again, if it were really a good bill, certainly a good single-payer would qualify, but we aren't getting that], it would be like the New Deal; it would generate enormous gratitude and political capital for decades; it would expose the falseness of the Republican arguments and lies, and the Republicans would never be able to get rid of it. Would the Republicans dare even to try to get rid of old age social security, medicare, or unemployment insurance? No, these are programs that the Republicans could never get rid of once enacted. Universal healthcare would be the same.

As Nobel Prize Winning Economist Paul Krugman wrote in his 2007 book, "The Conscience of a Liberal", "Health care reform is the natural centerpiece of a new New Deal. If liberals want to show that progressive policies can create a better, more just society, this is the place to start." (page 216), and, "The most dangerous government programs, from a movement conservative's point of view, are the one's that work the best and thereby legitimize the welfare state." (page 228), and finally, "Getting universal care should be the key domestic priority for modern liberals" (page 243).

Bipartisanship at any costs

Paul Krugman writes, "David Broder has a column this morning calling for bipartisanship. I know, you’re shocked."

If the Republicans wanted to require everyone to wear their underwear on their head every day, David Broder would say the Democrats should be bipartisan and compromise 50-50, passing a bill requiring everyone to wear their underwear on their head every other day.

If Paul Krugman can do it, why can’t I?

...Please don't answer that.

Anyway, here is Mitzie Edelweiss Serlin and I:

Two "New" Posts

Mike at Rortybomb was kind enough to alert me that my RSS feed was not updating. It turns out that the service I use, FeedBurner, has a limit on the total size of the feed (all of the blog posts in the feed file) that is not that hard to reach for a blog.

Once this limit was reached, rather than dropping the oldest blog posts from the feed file, they just stopped adding the new ones. I've addressed this by limiting the feed file to only the newest 10 posts, so there shouldn't be a problem in the future, but in the meantime those subscribing to my blog have missed the last two posts.

I encourage you to still read them, especially, "What we do to our kids: 19% and it can never be discharged in bankruptcy". This is a very important issue that's little known and discussed. The other post, "It's far better for China to increase demand and net-imports through investment spending than consumption spending", is on a far larger and more covered issue, but I think it contributes some important points that are widely misunderstood, and is well explained.

It's far better for China to increase demand and net-imports through investment spending than consumption spending

Oliver Blanchard writes:

China has embarked on a major fiscal expansion, with a focus on investment rather than on consumption. This was the right policy given the need to increase spending quickly, but this increase in investment can only last for a while. The question is whether, as time passes, China will allow an increase in consumption.

Why is it constantly the case that we see calls for increases in consumption to stimulate demand and/or net-imports, even over longer run periods, when demand and net-imports can be increased with investment spending instead, which will create far more growth in wealth, science, technology, and medicine over the long run. Why are people constantly calling for China and other countries to spend more on big screen TVs, fashions, and eating out, when demand could be stimulated and net-imports could be increased just as much through investment in schools, universities (and student aid so a much greater percentage of young Chinese could go), infrastructure, health (mentioned briefly by Blanchard, but his focus was predominantly on increasing consumption) and safety, relatively clean power generation and conservation, provision of computers and internet access to the rural poor, etc., etc.

These things would make the people of China far wealthier over the long run, and advance science, technology, and medicine for the whole world far more than if instead demand and net-imports were stimulated through the purchase of big screen TVs, Nikes, Burger King, and SUVs.

Blanchard does give this reasoning:

China has embarked on a major fiscal expansion, with a focus on investment rather than on consumption. This was the right policy given the need to increase spending quickly, but this increase in investment can only last for a while.

and

...there will be heavy pressure on the US government to maintain a strong fiscal stimulus for as long as private demand is weak, and this may lead to larger and longer deficits than would be wise. While strong fiscal stimulus was and still is needed to fight the crisis, it cannot go on forever; at some stage, debt dynamics become unsustainable, markets react and fiscal deficits become counterproductive.

But a shift in the mix of a nation's spending away from consumption and towards investment can be maintained indefinitely without "at some stage, debt dynamics become unsustainable, markets react and fiscal deficits become counterproductive.", through the use of something called "increased taxes" to eliminate the deficit.

If a country, or the world, is in a demand-crunch, increased government spending of X on investment will stimulate demand more than increased taxes of X will decrease it. You can read the many excellent posts of Nobel Prize winning economist Paul Krugman explaining how increased government spending creates more stimulus per dollar than tax cuts, but the main idea is that a tax increase of X will cause a decrease in consumption of less than X. But all of the increased taxes of X will be spent by the government -- on high-return investments in this case.

As Krugman wrote:

Other things equal, public investment is a much better way to provide economic stimulus than tax cuts, for two reasons. First, if the government spends money, that money is spent, helping support demand, whereas tax cuts may be largely saved. So public investment offers more bang for the buck. Second, public investment leaves something of value behind when the stimulus is over.

To elaborate, some of the tax increase on consumers will result in them consuming less, but a large amount of it will result in them saving less. Essentially, when taxes are increased to pay for more government investment projects you are making consumers save less and spend more, but not on Nikes and TGI Fridays, instead on infrastructure, education, alternative energy, conservation, basic scientific and medical research, etc.

Moreover, increased government spending on high enough return investments (and there are plenty) can be maintained indefinitely even without tax increases (in rate) because the high enough returns over the long run allow the payoff of the government debt and much more (if that debt can be reasonably financed in the shorter run until the investments pay off. Nonetheless, tax increases, once the demand crunch recession ends, are desirable to eliminate deficits, and the public debt, much faster). As Berkeley Public Policy Professor Robert Reich recently wrote:

...That growth path, by the way, will be faster and stronger if the nation invests in our infrastructure, our schools, and our environment -- which is exactly what Obama aims to do. In this respect, national budgets are like family budgets. It’s dumb for an indebted family to borrow more money to take a world cruise. But it’s smart even for an indebted family to borrow money to send their kids to college. So too with the Obama budget. Public investments, just like family investments, build future wealth. They allow faster growth. They make the debt/GDP ratio even lower and more manageable over time.

What we do to our kids: 19% and it can never be discharged in bankruptcy

New York Times columnist Gail Collins writes:

Citigroup sent a call to arms to its student borrowers, which is currently posted on Talking Points Memo. It warns darkly that if the Obama Armageddon comes to pass, “students and their families will not enjoy the benefits that competition has made possible for more than 40 years.”

There is, indeed, currently an army of different providers vying to supply students with financing for their higher education. I’m not entirely sure if the borrowing-money choices are as numerous as the body-hydrating ones, but they’re right up there.

This brings us to the critical question of whether endless options actually do any good. “We don’t hear students clamoring for choice in lenders. If anything, students and families need simplicity to understand the process and know how to navigate it,” said Edie Irons, communications director for the Project on Student Debt, a nonprofit dedicated to making college more affordable...

Some students receive financial counseling, but it’s usually cursory, and it is only mandatory for government-backed loans. “It’s not required for private loans, and a lot of students in the worst situation have both,” said Robert Shireman of the Department of Education. Shireman was just back from a panel where he met an officer in the United States Student Association, who told him that some of her loans had an interest rate of 19 percent.

The real competition among the lenders is not to win over students so much as the school financial aid officers. This has led to unfortunate but deeply unsurprising instances of thinly disguised bribes and kickbacks.

The 19% loan is a fully private student loan. Government student loans, and government backed student loans, have interest rates capped at reasonable levels.

With the 2005 bankruptcy law, to our great shame, private student loans can never be discharged in bankruptcy with extremely rare exception. Lawyers.com writes:

Student loans are not dischargeable in bankruptcy unless you can show that your loan payment imposes an "undue hardship" on you, your family, and your dependents. Non-dischargeable debts are those debts that you cannot totally eliminate when you file for bankruptcy and will have to be paid by you.

It is almost impossible to show an undue hardship unless you are physically unable to work and the chances of your obtaining any type of gainful employment in the future are non-existent.

So we have 19% loans for large sums of money sprung on unsuspecting 18 year olds that can essentially never be discharged in bankruptcy. With the immense exponential power of compound interest at 19%, this can quickly spiral to the point where it can never be paid off, with payments beyond a person's entire income – This is shamefully close to a return to lifetime indentured servitude.

I once mentioned this to Al Melvin, Republican co-chair of the Arizona Senate Appropriations Committee. His reply was, "There's a thing called personal responsibility." But how can you be responsible for something you don't know about or understand? There are almost no 18 year olds who know that private student loans are not dischargeable in bankruptcy, or who could read the legalese in the contracts. There are few who understand the devastating power and implications of compound interest at 19%, which, with it's incredibly exponential growth, doubles debt in less than 4 years. Most don't realize that they should rely solely on government student loans as best they can because of the great protections of those loans and low rates (For example, federal government student loans allow for "Income Based Repayment" where payments are capped at 15% of disposable income (just 10% of total income for a family of four making $100,000/year), and any principle remaining after 25 years of payments is forgiven.)

We're not living in a freshwater economist's model. All 18 year olds don't hold all publicly available knowledge in their brains, and have advanced degrees in every area and specialty there is so they can always figure out what the perfect choice is, and instantaneously, with no time or money costs of analysis whatsoever.

Democratic Senator Dick Durbin wrote in a floor statement in 2007:

Mr. President, I would like to tell you about Connie Martin from Sycamore, IL. Connie's son decided to go to culinary school in Chicago 5 years ago at the age of 25. To pay for tuition, he borrowed $58,000 in private loans from Sallie Mae at 18 percent interest. His first payment was $1,100 a month--his entire monthly salary at a downtown eatery where he worked after graduation. His loan balance, including government-backed loans, is now $100,000. Connie's son has been working hard, and she and her husband have been trying to help him make the payments. I worry for borrowers like Connie's son who can't start over and will have debt that will likely haunt him for the rest of his life.

Is this really the society we want to live in? Where predators can troll the TV stations all day long with dreamy pitchs about how young people can become executive chefs, medical technicians, and fashion designers at exorbitantly priced for-profit schools (especially compared to community colleges), financed with private student loans at 18%, or more, that can never be escaped in bankruptcy. If you want to live in a country where predators are free to prey on our unsuspecting young, destroying their adult lives before they can even get started, then vote Republican. But if you want to fix the great harm that they have done over the last generation, oppose them in every election. The less Republicans there are in opposition, the more likely we can pass laws to protect our young from inescapable rapacious debt.