Morning Fog

Cuba, Iraq, GM - Three Quick Takes

These topics have nothing in common except that each of them is in the news, and each brings up an irritating false assumption that should be corrected.  I might write a book (or at least a chapter) on each of them, but today I will be brief.

Cuba:  There's a new impetus to ease restrictions on travel; some oppose this but it seems to me relations should be normalized completely.  Our attempts to isolate bad guys have seldom worked; what have we got out of 50 years of isolating Cuba, besides the Bay of Pigs?  A major mistake we make in foreign relations is basing policy on the undying bitterness of emigres who bring with them to this country their old-country biases.

Iraq:  The Sunni "Awakening," a military/political group which has cooperated with U.S. forces, resents being reined in from attacks on the Shiite dominated government forces.  This demonstrates the degree to which they (and the Shi'as also, probably) fail to grasp the essential elements of democracy.  This is why we need to be cautious in declaring the surge a success; absent any previously existing democratic institutions or tradition in Iraq, success will be dependent on the presence of U.S. forces to "correct" such overreaching. Will Iraqi democracy survive our departure?

General Motors:  Lamenting the forced resignation of GM's CEO, some claim that GM is being penalized for "just building the cars Americans wanted."  I'm getting tired of hearing that line; GM and the other companies conceived and built the SUV, then went to great lengths to create a desire, and a market, for it.  Some Americans may indeed have wanted such a vehicle at the time, but I'd guess 80% of the market was created by the vehicle makers, or maybe be the outlandish tax breaks that people got for buying these "trucks." 

Tracking Key Government Appointments

After a very rapid start in naming the cabinet, and a few embarrassing setbacks due (apparently) to inadequate vetting, the Obama White House settled into a much slower mode, to the extent that lack of appointees in key spots sometimes became an issue of effectiveness. 

For example at Treasury, at the time of the big flap over AIG bonuses in mid-March (not to mention a very full plate of other matters to deal with), only two of 18 senior positions had been confirmed (Secretary Geithner himself and an Under Secretary held over from the Bush administration).  Candidates had not even been announced for most of the other positions, though shortly afterward, on March 23, two more senior appointments were announced, and on March 28 still others were named.

With so much to be done by government, we might hope for a quicker pace to these appointments, but that's not my main point today; rather, it's a moment of praise for the "traditional" media.  Tracking government appointments was difficult in the past because of spotty coverage, but it's much easier now, thanks to the Washington Post's authoritative on-line Head Count feature.  That was the source of the info above regarding the Treasury Department. 

This is a small example of the sort of useful reporting that a brick-and-mortar newspaper with a fact-checking staff can produce better than anonymous on-line sources.  The established press has a reputation to maintain, which plays directly into its ability to continue selling papers/subscriptions.  Without a product, a more anonymous website lacks this incentive.  The result is that "traditional" media have the edge, in the form of a higher degree of confidence for the reader.     

Health Reform Dialogue

"Health Reform Dialogue" is a disparate group of insurance companies, doctors, hospitals, consumers, employers, and other groups.  They all have stakes in the U.S. healthcare system.  They've been meeting for six months or more, brought together by private facilitators, away from day-to-day public scrutiny, to discuss possible changes to the system, and have now issued a report on their discussions. 

The actual report seems to have been released only to the press.  By all accounts, it could be a positive step in achieving meaningful change to U.S. health insurance and care.  As one article put it, it's the first time that all major players have "coalesced around significant changes." That's certainly good news; just getting the parties talking would be good news.  But from what I've seen so far, there is less here than meets the eye.

There are little red flags that I think ought to make us all very cautious about premature elation.  For starters, I note that there's no indication anyone from government took part in these discussions; that professional facilitators (with a built-in interest in making the results of their work look positive) presumably crafted the report; and that the few bits of wording that appear in quotes are very carefully phrased.  

One key quote is this one: "We should seek to ensure coverage for all."  Really?  Duh! And this revelation was reached after only six months?  I suppose there are participants in the Health Reform Dialogue for whom that statement is a radical change of view, but it's a long way from where we need to go.  The more contentious issues, however, aren't dealt with. 

The hang points are where they have always been, on the money and the mechanism.  Of course there will be a lot of debate about how to pay for universal or expanded coverage and we will need agreement on that, but in a society as rich as ours, in the long run it's not a financial problem but a political one.  More disappointing is the failure even to agree that coverage should be universal.  We don't need to "cut in half" the number of uninsured Americans (as one media source reports), we need to devise a system that leaves NO uninsured Americans.   Step by step change is one way to get there, but it's extremely disappointing to think that the HRD group couldn't even agree that should be our goal.

The question of how to deliver expanded (or preferably universal) health insurance has also been complicated by the "refusal" of insurance companies to accept any government-operated plan that would provide insurance for those left out of the private system.  We should utterly reject the notion that insurance companies can "refuse" anything.  Who elected them?  Of course they are major players, and of course their views will be taken into account.  But the provision of a social safety net (in health insurance as in social security or food stamps) is a government function, if anything ever were.  By definition, private business interests do not put the public interest first.

Insurance companies say they are concerned about a government program that would be so generous that people would start migrating out of private plans.  Nonsense. There are many ways to craft a government plan to deal with that.  The usual model for a "government plan" is the plan that federal civil servants (and Senators) have.  The key elements of that are transferability and a choice among different plans, but all insurance coverage is still provided by private insurers.  A safety-net plan would not have to offer all the bells and whistles of coverage that the government employees plan has, however; a more basic level of services would easily encourage people to move up to private insurance when/if they could. 

The proposed alternative to a government-based plan is the Baucus suggestion for a "mandate" - requiring that people obtain health insurance (as drivers now must have liability insurance).  For those least able to pay for insurance, the government would then have to pay insurers to offset costs in those cases, or offer tax breaks to the insured.  I guess that might work, but why complicate things?  Elsewhere in business, it used to be conventional wisdom to "eliminate the middleman."  I guess it makes a difference if, as in the case of the health insurers, you ARE the middleman. 

None of this is to suggest that the HRD isn't a step forward.  Positive developments include a consensus that change is needed, that more people need to be insured, and that insurance companies could get by without charging more for people who have existing health problems.  The HRD discussions will undoubtedly help advance the process of change.   

Local Budget Issue, Nationwide Implications

The School Board of Prince George's County, Maryland (just east of Washington, D.C.) has announced its decision to close eight schools permanently and consolidate their students into other nearby schools.  Most were found to be underutilized (as little as 60% of seats filled) because there are fewer school-age children in the neighborhoods they serve.  Originally, in January, the board had said as many as 12 schools could be shuttered, but after study and voter comment, that was reduced to 8, and the Board approved unanimously.  This sensible decision is reportedly based on low occupancy but of course it also will save considerably on costs.  

This school board decision is a purely local issue, but it reflects a story being played out in thousands of localities and in what's happening nationally.  A local television station gathering those beloved man-in-the-street reactions found a stalwart citizen of PG county who said it "didn't make sense to sacrifice education for money."  He failed to say how much in additional taxes he would be willing to pay to keep the underused school in his neighborhood.  And there's the rub.  

On the national level, as we debate next year's budget, and the pros and cons of spending more or spending less, we're going to have to keep in mind a dirty little secret:  Government services have a cost, and we have to pay taxes to get them.  Politicians of both parties prefer to ignore this irksome little fact -- they can't resist the urge to add a new program, increase benefits, begin a new war, or even legislate tax cuts (!), but they can't muster the courage to talk about increasing taxes.  That's because they know most of their constituents are like Mr. Stalwart above.  It's easier to follow the herd than to try to lead it.  But is that what we elect our representatives for? 

At the current stage of our budget deliberations, I have to credit the Democrats with being at least willing to float some trial balloons, however small they may be; and to give the Republicans a few demerits for generally encouraging Mr. Stalwart to keep believing in something for nothing.  Yet it's not clear that Sen. Kent Conrad, a Democrat who's leading the effort to pare some spending from the Obama budget, is having much success thinking in terms of new revenue, either. In fact what he really seems to be doing is reducing the new honesty in the current budget proposal, resorting to the practices of previous administrations by just hiding certain elements of USG expenditures.  

A cost-benefit analysis can't be done by considering only the benefits.  A budget can't be developed without looking at the revenue side.  Our elected representatives need to be honest in telling us that there is no free lunch.

Political Humor - A Contradiction In Terms?

Generally the daily news is pretty serious stuff - budgets, disasters, politics, automobile crashes and murders.  And amidst all the dead-serious work being done now in Washington, politicians are being especially serious.  But I was struck today by the several unintentionally humorous items I saw (not even counting the comics page).

Senator Judd Gregg is a serious fellow and worthy of our respect, yet when he says (speaking for the Republicans) "We don't think prosperity can be provided by a government that spends too much, taxes too much, and borrows too much", I can't process that unless I take it as an attempt at comedy. 

Speaking of comedy, Gregg's serious mind is usually reflected in serious, down-in-the-mouth photos as well.  But I was struck by how much he physically resembles a real comedian, specifically, the fellow who once played in West Wing on TV and now plays (I had to think a moment where I'd seen him lately) the ex-husband in "The New Adventures of Old Christine." It began to feel a little eerie when I found out his (the comedian's) name is also Gregg - but I can find nothing in either's biographies that suggests they are related.

Another normally serious fellow was also playing for laughs yesterday:  House Minority Leader John Boehner allowed himself to be photographed presenting the Republican "alternative budget" -- all 18 pages of it.  Granted, the whole thing was trumped up just to be able to offer a photo op, and the Republicans know it would be wasteful spending to do a full-blown alternative budget.  Still, it looks silly.  They should have resisted the urge to produce an outline.

On the Democratic side, the Administration's nominee to head the federal personnel system, one M. John Berry, was approved in hearings yesterday.  It's interesting that Mr. Berry's last job was as Director of the National Zoo.  As a former fed myself, I have to wonder if they're trying to tell us something. 

March - Out Like A Lamb

We're not quite finished with the month of March yet, but there is no question about the "in like a lion" part of the old adage; here's how it looked around our place the morning of March 2:

Overall, March is kind of a blah month.  It has more famous ides than most months, thanks to Shakespeare, but even if we had forgotten Caesar's warning about them, we've come to beware these March ides all over again thanks to Congressman Ed Markey, the modern-day prince of darkness.  Other than that, March in the mid-Atlantic tends to be blustery, chilly, wet, and altogether too long as we await the coming of spring.  Even the other half of the adage, "out like a lamb," isn't always true. Fortunately, though the month isn't quite at an end yet, the forecasts point toward a warm and sunny March 31 this year, so I am able to close with a splash of color taken amidst this morning's Morning Fog, a harbinger of things to come.

     

A Band Of Moderate Democrats Try Bayhpartisanship

On March 18, Indiana Senator Evan Bayh announced that he and 14 other Democrats in the Senate were forming a group of moderates to help shape upcoming legislation on the budget and other matters.  Since that news landed with a dull thud and attracted little notice outside blogdom, Bayh later decided to raise the group's profile with an op-ed item, "Building Bridges on the Hill,"  (co-authored with Blanche Lincoln and Tom Carper) in the March 25 Washington Post.

Some commentators have raised doubts about Bayh's motives, and suggest the efforts of Bayh's little subgroup won't be welcomed by the White House.  On the first point (motive), Bayh's opinion-page piece denies that he's looking to derail any part of the President's program.  Rather, he hopes to "strengthen and sustain it" by exploring the pragmatic middle ground that will attract the votes it needs for passage (and that will also appeal to the broadest spectrum of the public).

On the second point (White House reaction), there is nothing in anything Obama has done or said to suggest that the White House won't welcome dialogue within the party.  Obama has been in politics long enough to know how the game works and won't be expecting that every jot and tittle of his proposed program can be approved.  (He said as much in his March 24 press conference.)  The President may even welcome this group's clear potential to counterbalance some of the more extreme views in his own party. 

As a moderate and a pragmatist, I view the development of Bayh's effort as very positive.  It's not yet bipartisan, but regardless of party, if moderation has found a voice in Congress, it could be a step toward breaking down the walls of isolation behind which the Republican Party has retreated.  Moderates have typically played a pivotal role; why not now?

My favorable opinion is muted only slightly by the feeling that we need to know more about this group and its goals.  I went spelunking in the Caves at Emptor and came up with the following thoughts:

• Let's hope the participants truly are moderates with an open mind toward change. Most of the members of the group have chosen to be anonymous for the time being, though undoubtedly they'll become known soon.

• As mentioned above, this is not a bipartisan effort yet.  I would hope it would lead in that direction, though, either through active work to get some moderate Republicans involved at some later stage or more likely, that Republicans would begin a similar process based on this example.

• And finally, to keep the door to bipartisanship open, I hope the group won't attempt to do the Republicans' work for them by preemptively removing programs or ideas they know the GOP opposes. That's a part of the give and take that should come later; if it's done now, the opposition can simply pocket those concessions and will have less incentive to moderate their own extremists.

 

Charity Begins At ... The I.R.S.

As I've probably already mentioned somewhere over the past couple of months, every special interest group will come shrieking out of the woodwork to protect its own little (or large) piece of federal munificence the moment anyone even hints at changes.

A recent case is the wheedlers, that is, the organizations that depend in whole or in part on the charitable donations of others.  They're protesting the suggestion that the income tax deduction for charitable donations by people with incomes over $250,000 be cut from 35% to 28%.  The latter figure, by the way, is the amount that less well-heeled donors can deduct.  It seems fair that everyone should get the same tax deduction for a donation, but recipients are burning up the hustings with their preemptive protests, and they're dragging in nominally independent theorists like Martin Feldstein of the National Economic Research Board.

Feldstein argues essentially that the rich are different; that they deserve a higher deduction rate for their giving, and if they don't get it, they'll reduce their donations accordingly.  He says he knows of a significant body of economic research that demonstrates a direct correlation between the amount of deduction and the amount of giving but fails to tell us where he buried the body.  Other commentators I've read make the opposite claim.  For example, this New York Times editorial comes down in favor of cutting the deduction, and references several opinions and studies suggesting that donations are relatively inelastic and don't vary hugely with the tax rate.  With two such different claims making the rounds, clearly, there are some mushy statistics out there.  For that reason, I don't find the statistical claims on either side very persuasive. 

I think the real truth lies in segmenting the "market," in this case, both donors and donees.  Regarding donors, the real question is whether high-income givers react differently to the tax deduction that those of modest/average income.  Speaking for myself in the "average" income category, I give what I think I can afford to causes I think are worthy, and do not consider the tax benefits until filing time in April. (This is what one of the sources in the New York Times concludes is typical.)  On the other hand, I'm sure that in higher brackets, where "real money" is concerned, people may think harder about tax consequences.  Still, I suspect their giving won't change by 7%; the really big donors are just as motivated by other unquantifiable factors, such as personal prestige (having the plaque in their name or the wing of a building named for them) and the psychic income from "giving back." 

Where donees are concerned, I would wager that the continuity of giving levels varies with the recipient.  Where a charity is doing work that directly benefits the needy or vulnerable (a soup kitchen, a children's hospital, research on cancer, and the like) I'd be surprised if their donations dropped off very much.  On the other hand, the more marginal activities like symphony orchestras, art galleries, or some more ethereal causes probably suffer a little more when times are tough.  That's fair enough - these are things we can and do cut back on when funds are short.

Generally, I don't believe most charitable giving originates in contemplation of the I.R.S.  I think the most practical attitude is that reported by the Chronicle of Philanthropy:  any change in the volume of donations that might occur due to a change in the tax deduction is likely to be small potatoes compared to the effects of the gloomy economic picture.  That's basically what Obama said in his March 24 press conference - that putting the economy back on track would do more to help NGOs and charities than anything else. 

More broadly, though, the reaction by charity recipients against any suggestion of change is exactly the kind of lockstep thinking we need to alter.  The conundrum of the U.S. budget is the huge proportion of it sucked up by "entitlements" (social security, etc.) and legally required spending, which leaves so little in discretionary funds.  If we can't break this logjam, we will never be able to address areas where shifting circumstances have left us with insufficient or outmoded social services.  To me, such sacred tax cows as the charitable donation deduction and the mortgage interest deduction need to be drastically reformed (as do many other spending categories). 

Business and the Environment

Can business be a partner in environmental change? Here are a few recent developments:

A)  Businesses are spending heavily to stave off prospective changes.  Those irrepressible "people of America's oil and gas industry" have stepped up their self-protective ads on television, and the "clean coal" lobby has self-promoting spots on web pages.

B) The EPA today put a further hold on the practice of mountaintop mining, which tends to pollute streams and groundwater. In reaction, West Virginia Coal Association President Bill Raney said, "It just absolutely puzzles me as to why the same federal government that's trying to straighten the economy out wants to dismantle the economy of another state, particularly as it relates to the workers at these sites."

C)  Another report today covers an EPA "finding" that greenhouse gases endanger the public health and welfare, which sets up the legal requirement for the government to set limits on emissions.  For environmentalists, this news is a welcome and overdue acknowledgment of reality, but business spokespersons like William Kovacs of the U.S. Chamber of Commerce opine that the legislation of limits on emissions would be "devastating" to the economy.

D) Also today, in another of those incessant health and nutrition studies, the National Cancer Institute informs us that too much red meat increases our odds of dying "early."  No surprise -- after all, man the hunter-gatherer probably had meat rather infrequently, until he learned to husband his own herds.  But that's where it gets interesting for the environment because it turns out that commercial breeding of cattle pollutes earth and streams, uses large amounts of water, and releases significant quantities of greenhouse gases (methane).  Thus, those who support cutting red meat consumption also suggest that in doing so, we can help improve the environment.  The American Meat Institute  calls the study "unreliable" and shows concern over the potential shrinkage of sales.

All in all, the signs aren't encouraging.  Businesses have grown too used to looking at the short term, reflexively rejecting anything that threatens their margin.  For years (not just in the Bush administration) we've been told that environmental problems would take care of themselves if we allowed the market to work.  That has not occurred, we are consequently far behind where we should be, and the private sector will need to catch up.  On the other hand, businesses do make legitimate points in some cases, and they do have their own interests to look out for.  They will be an essential part of any solution.  I'm hopeful that if we don't make villains out of them, they will be more open to the changes that need to be made, and sooner.

In the meantime, all of us - including environmentalists - should be prepared for the fact that the solutions have costs, and that prices of many goods and services will go up as we begin to implement some of the "green" recommendations. 

The Obama Press Conference - One Important Point

Having just finished watching Tuesday night's presidential press conference, one thought stands out. It's not any specific point that Obama made on the issues but rather a point of process:  As a result of Obama's accessibility and articulateness, all Americans are - or have the opportunity to be - unprecedentedly well informed about what their government is up to.  I don't think that can be a bad thing.

Will it continue, or will Obama, like some Presidents before him, get disillusioned or lazy and back away from press conferences and similar direct presentation of policy?  I'm guessing "continue." After all, one of his points tonight was about the value of persistence.