Sunday, May 31, 2015

A Progressive View of Change

In 2008 after Barack Obama announced that he would run for president, he said that - while he ultimately favored single payer - he felt that to go directly from our current system to single payer would be too disruptive. A few months ago, as Vermont attempted to set up a single payer system and failed, they demonstrated that he was right.

It turns out that even if a single payer system would save money on administrative costs, there is a whole lot of money we are collecting to pay for our current system. Finding a way to capture all that and use if for a single payer system would create big winners and big losers. Addressing the problem this creates in making that kind of transfer fair - especially to average Americans on Main Street - is something advocates of single payer haven't addressed.

So instead of single payer we got Obamacare, which has brought the rate of uninsured Americans down to a historical low, all while slowing the rate of health care inflation and extending the life of Medicare.

When President Obama took office, this country was careening towards another Great Depression. Treasury Secretary Tim Geithner has said in retrospect that his goal was to provide a soft landing for the economy. Some economists thought that the best option was to nationalize the financial institutions that were near collapse (and would have triggered a Great Depression if they were allowed to do so). Instead, through an infusion of both public and private money, we bailed them out and initiated "stress tests" to demonstrate the kind of stability that could calm everything down.

It turns out that, while this produced a slow recovery (but faster than any other country), it ended up costing taxpayers less that the alternative of nationalizing the banks. It also had the desired effect of calming things down rather than ramping up the kinds of insecurities that would have come from nationalizing the banks. After criticizing Geithner for this approach, even Paul Krugman has admitted that it worked. In other words, it protected Main Street from another Great Depression and the kind of insecurity and chaos that would have led to a prolonged Great Recession.

That was followed up by the passage of Dodd-Frank that brought us the Consumer Financial Protection Bureau, made the stress tests an annual occurrence, and incentivized the "too big to fail" financial institutions to downsize.

My purpose in going back over all that history is to point out that there is a lesson to be learned about President Obama's approach. The current frame on these issues is that populist Democratic politicians and presidential candidates who support things like single payer and breaking up the banks are to the "left" of the President because they stand for "Main Street" while he has too often protected "Wall Street." I see that as fallacious thinking.

If you think that the chaos that would be created by jumping from our current health care system to single payer would be good for Main Street, then I'm afraid we disagree. Likewise, if you think the chaos that would have been created by nationalizing the banks would have socked it to Wall Street but had no impact on Main Street, then I think you aren't paying enough attention to how our economy works.

Over the years President Obama has often referred to his "North Star" that guides him. Here's how he described it back in 2010.
So, my job is to make sure that we have a North Star out there, what is helping people live out their lives; what is giving them more opportunity.
From watching him over the years, I'd suggest that its safe to say that following his North Star means recognizing the fact that the disruption of huge change creates unintended consequences that usually fall disproportionately on Main Street. Instead, he has sought changes that slowly and steadily build on a platform of security and increasing opportunity.

There are those who legitimately disagree with this view of change. Some deny that chaos is the result of big change and other simply think it would be worth it. That's a debate we need to have. But we'll never have that conversation as long as we continue to cling to the fallacious thinking that I've described here. Protecting Main Street from the unintended consequences of chaos while redirecting our ship of state towards our North Star is actually my idea of what pragmatic progressivism should be about. You might see it differently. That would be the basis for an intelligent debate.  

25 comments:

  1. Thank you for this, Nancy.

    I've gotten fed up with the constant bleating from some on our side of the fence that President Obama hasn't been a true progressive--and I realized I'd reached my limit when I saw a comment on another blog that was happy for Senator Sander's run for the White House because finally, a "true progressive" was running. If only these people would actually look at the President's record instead of pouting and huffing, they would see that there has been a great amount of progressive change--one that will surely vanish should the GOP get into power.

    And in regards to the ACA, I'm glad the "kill the bill" supporters did not win. If it wasn't for the ACA, I would have incurred serious costs from my stay in the hospital a few months ago--or I would be dead.

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    1. Thanks Marc.

      I'm ready to engage on the question of how different progressives see the process of change. But frankly, this "break up the banks" stuff scares me. I don't think folks have thought through the possible consequences...not to Wall Street, but to us.

      Good to hear that ACA came through for you!

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    2. Lucky for me. A TWO for one answer.
      1.Some economists thought that the best option was to nationalize the financial institutions that were near collapse (and would have triggered a Great Depression if they were allowed to do so). Instead, through an infusion of both public and private money, we bailed them out and initiated "stress tests" to demonstrate the kind of stability that could calm everything down.

      My idea back then was that the CDS( BS bundling of BS mortgages) was causing most of the liquidity crap.
      At that point, lots of smart people knew CDS were graded by firms( AIG? it's been a while) that were trading the crap they were grading,and were crap.

      I would have had the Federal Governemnt buy the BS CDCs at maybe 60 % , making the banks EAT 40% to get out lucky, and become LIQUID again.

      The beauty of the Federal Government is that IT can outlast problems better than private industries are capable of doing. The Banksters would have been lending again, sooner than later, and the housing market
      more liquid, enabling a more predictable(?) rebound.

      ACA

      My plan was to have insurance based on a progressive sliding scale as a percentage of family income.
      Since 16% was the commonly quoted precentage of GDP Health cost, I would have topped out at 14%
      for Billionares, who weren't looking for new insurance
      OK You got the sliding scale, and you have to apply to Private insurers FIRST. If they don't want you,
      AMERICA will then insure you at the progressive rate you qualify for. First Private, and then the FEDS.
      If you are happy with your insurance, and don't care what they Rape you for, you are Allowed to pay anything you want for insurance.

      OK, but what about the uninsurables; the one's with pre existing diseases or physical problems that NO
      insurance would ever insure under the sliding scale. MY favorite part:

      The FEDS will take ALL the pre-existers, no questions asked, and make the Private insurers pay for this group with a COST that is based on the last years profit for the Private Health Insurance INDUSTRY. Industry makes more, industry pays the Feds more to take those they don't want. Less profit, less premium.

      Hypothetical: Will the insurance companies make more, and HAVE TO pay more, or will they tone down profits so the cheap whores have to pay less premiums? Think about THAT one Nancy! LOL

      This all came to me the week that Joe Wilson screamed "YOU LIE" to a Black President. Does anyone remember a White President described that way while speaking to Congress?

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  2. There are some on both the left and right (though its a much bigger problem on the right) who try to wish away nuance and complexity, but that's impossible. Indeed, the very essence of Progressivism is right there in the word itself: making progress. Sometimes it's slow, but it's progress nonetheless. Obama is a Progressive in the truest sense.

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  3. Vermont Senator Bernie Sanders listed single payer as part of his presidential platform. A pragmatic progressive he is not.

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  4. How does nationalizing the banks, selling off the assets of the criminal enterprises to honest businesspeople, and charging and imprisoning the perpetrators of crimes within the criminal enterprises hurt the general public?
    Do you see any benefit to the general public in them knowing that crime will be investigated and prosecuted no matter who commits it (i.e. the removal of a two-tier justice system)?

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    1. You'll have to fill me in on where you would have found the "honest businesspeople" who had the capital at that point to buy the assets.

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    2. Are you questioning the number of honest businesspeople, or are you saying the government could't provide honest businesspeople with capital, so we gave the capital to criminal enterprises instead?

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    3. Are you suggesting that the government should have given people the capital to purchase these companies? Their debt alone was larger than our annual federal budget.
      http://www.washingtonpost.com/wp-dyn/content/article/2009/01/23/AR2009012304169.html

      Here's a good primer on what happened when the government "nationalized" IndyMac (by comparison a pretty small-fry institution) at about that time:
      http://www.boomantribune.com/story/2009/3/21/195943/861

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    4. That's why you break-up the banks and sell off parts piecemeal over time. I agree, that if your first priority is "you can't breakup the banks", this makes nationalization of the banks a non-starter.

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    5. Yeah, while you're selling off the parts piecemeal "over time," we're careening into a Great Depression, the housing market is tanking and we're losing 700,000 jobs a month. Sorry...doesn't work.

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    6. If only we had trillions to prop-up the citizenry like we did the corrupt enterprises.

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    7. And I would really like to see you address my question:
      Do you see any benefit to the general public in them knowing that crime will be investigated and prosecuted no matter who commits it (i.e. the removal of a two-tier justice system)?

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    8. I get it...when in doubt, change the subject.

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    9. No, you don't...when you ask one to engage constructively, expectations are that you will too.

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  5. I don't remember anyone calling for the Banks to be nationalized in the Progressive circles I was reading back in 08. What people have been calling for then and still is to break up these few huge institutions into more separate companies. And let's separate functions like investment banking (high risk) and community banking (savings, checking/transaction services) which is low risk. The big problem is we have removed Competition by allowing only a few almost monopolies to form. And it's not just Banking but look at Communications especially Cable/Internet.

    Also Health Insurance is forming Monopoly power. I don't live in a big city so I only have 2 choices for an ACA policy. The price is high and neither company includes most of the Doctors around here. One only pays Providers 70% of Medicare rates so most decline to accept that insurance. We already have the Public Option for all those over 65 and it's called Medicare. People like it. I'd like to be able to buy into Medicare starting at age 50, it would be cheaper than the ACA policies currently offered in my areas. It would actually restore Competition (a Capitalistic value) to the Insurance marketplace.

    Let's make this about restoring Competition to our Economy. When Publicly provided services can compete with Private offering let's go head to head. That's a Progressive set of values. Sander and Warren both talk about this, I'm waiting for Hillary, so far, she seems to stumble when she's tried to discuss this. She's very smart so maybe she will study up on Economics as her campaign ramps up. I sure hope so.

    FWIW, I also think Econ was also a weak area for PBO but he had no one challenging him in that area. Here's to a healthy round of debate in this primary season on the real issues. It will make for a better candidate in the primary.

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    1. Read Krugman. His solution at the time was to nationalize the banks. And in the article I linked to - he admitted that what Geithner did worked.

      Krugman and a lot of others have also said pretty clearly that it was not the lack of Glass Steagall type separation that was the problem prior to the Great Recession. Many of the big financial institutions that were failing had no commercial banking assets. AIG??? It was the risks these institutions were taking in their "shadow banking" functions without the capital to back up the risks that caused the problem. When the housing bubble burst and they were left holding the bag is when everything started to fall apart.

      If you read anything about the public option during the debate about it in Congress, one of the reasons it failed is b/c they couldn't agree on a pricing structure. Final tallies from CBO projected the PO being slightly more expensive in terms of premiums than what would be offered by health insurance companies. So ultimately it wouldn't necessarily have solved the problem with competition.

      If you'd like Medicare to be extended, then you have to address the payment question I raised in the article. It's possible that can be done. But obviously the state of Vermont wasn't able to do so. And so far, Sanders has said zilch about how to do it in his proposal for single payer.

      Folks like Sanders and Warren can "talk" all they want. The solutions they often propose sound great to progressives. But we have to be smart enough to get into the weeds of how these things would actually work and make sure they don't just backfire on us with unintended consequences.

      I totally disagree with you about Econ being a weak area for PBO. He handled one of the worst scenarios ever faced by an incoming POTUS with amazing skill - all while battling a Republican Party that was willing to do anything (including sending us into another Great Depression) to see him fail. We've now had the longest period of private sector job growth (i.e., no subsequent mini-recessions as so many predicted) in modern times.

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    2. Keep your eye on the ball, Nancy.
      It was fraud, perpetrated by bankers and Wall Street workers, which caused the economic crash.

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    3. I still think you are mistaken (link below), but I'm open to hearing your theory on what caused the economic crash and recession.

      http://neweconomicperspectives.org/2014/12/wall-street-journal-still-refuses-grasp-accounting-control-fraud-via-appraisal-fraud.html

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    4. Robert,

      Here ya go:

      http://www.slate.com/articles/news_and_politics/the_big_idea/2010/01/what_caused_the_economic_crisis.html

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    5. Irrational exuberance for free-market theory? Oy vey. May as well blame it on sun spots.

      Read my link above, I think it'll be an eye-opener for you.

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  6. the economy was weak area for PBO...but he had no one challenging him in the area....

    **********************

    PBO has one shot to get it right...if you remember we were hemorrhaging jobs...the auto industry was on the verge of collapse...whew...he was getting no help from the Party Of NO...

    it is easy for folks to sit back and give all these theories that might or might night not have worked...

    what ever Dem candidate clears the field...they will have a much better hand than was handed to President Obama...on just about every measure....

    Waiting to hear that come from their mouths

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  7. FDR was sworn into office in 1933, almost four years after the depression hit. He had time to formulate plans to rescue the economy and still made mistakes. The current economy tanked in September, 2008. Obama had very little time to help rescue it. He did a wonderful job under extreme pressure, despite whatever missteps he had. If he had a nominally cooperative Congress to work with, one that put country over party, we'd be head over heels with his economic successes.

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    1. http://neweconomicperspectives.org/2015/01/state-union-speech-presidents-credibility-gap.html

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