The Shape of Things to Come and Not to Come

by on September 25, 2010 at 8:00 am in Economics, Political Science | Permalink

Here is a very good post from Matt Yglesias, who gets to keep his name on the Yglesias Award.  I am reluctant to pull any bit out of context (do read the whole thing), but here is one excerpt:

Get 40 Senators together to filibuster everything and that’s what you get. And when you add in state and local government, that’s a pretty healthy big government agenda right there, especially when you consider that states are shouldering a health slice of the Medicaid bill. Realistically, does anyone think we’re going to increase the overall size of the government faste than that? I sure don’t.

…So the future of American politics is necessarily going to be about things like making the tax code more efficient, finding areas of government spending to cut relative to projection, and thinking of policy measures that will help people that don’t involve spending more money.

I've arrived at somewhat similar conclusions, though from a different direction.  Here is an alternative version of What is Not to Come:

1. Obamacare won't be repealed or declared unconstitutional, nor will Republican candidates be running against it six years from now.  Trying to repeal parts of it would likely backfire and destroy the private insurance industry, given that the process would be ruled by public choice considerations rather than rational technocracy.  We still would end up with a larger public sector role in our health care institutions.

2. I don't view "$200 billion a year to redistribute what is for this purpose a largely fixed supply resource" as an especially good investment, but it won't bring this country to its knees.  The policy won't do much for fiscal responsibility.

3. Social Security won't much change, keeping in mind that the number of elderly voters is growing larger every day.  Given all their elderly white voters, the Republicans are already "the party of Medicare."  The Democrats have become "the party of Medicaid."  That locks three major programs into place, more or less.  I don't hear serious talk of major cuts in defense spending.

4. Taxes won't be raised much (do the Dems seem to have great love for reversing the Bush tax cuts?), spending won't be cut enough (the recent Republican document is extremely weak), and within twenty years we will have a sovereign debt crisis in the United States, as one day a Treasury auction won't go well.  I'll predict, but not favor, the emergency passage of a VAT, a' la TARP, which will restore fiscal stability but lower the long-term rate of growth.  When that time comes, the VAT will indeed be necessary, though ex ante I would opt for less social protection and a higher rate of economic growth.

5. The most important changes will come from aging, how other nations in the world fare especially China and India, the rate of technological progress, and foreign policy events which are exogenous from the point of view of economic policy.  Overall it will be more interesting to follow other nations than the United States.  Get ready for this and pick a few countries.

6. We should try to take back many of our vanquished civil liberties.  Such a fight may or may not succeed, but at least fiscal considerations won't rule out this counterblow for liberty.

7. On issues such as drug legalization and gay rights, I see a more cyclic than melioristic pattern.  We will see marginal improvements but we won't enter a new age of reason, in either the public sector or the private sector.  The Netherlands is backing away from its very liberal social policies, including on drugs, and the cause of gay rights could as easily fall back as progress.  I believe that many people are broadly programmed to be prejudiced in this area.

8. We will tweak financial regulation, but whether this is for better or worse, the link between reforms and final outcomes will continue to be opaque, to say the least.

9. More and more laws will be frozen in place.  This already seems to be the case with immigration policy.  More and more expenditures will be frozen into place.  Politics will become more symbolic, and in some ways more disgusting, in response to the absence of real issues to argue over.

10. Climate change will remain an important yet insoluble issue.  Even major legislation (which seems unlikely) would not change this much, not for a long time at least.

11. People will write profound books and papers on how and why "status quo bias" has strengthened, and then one day some new technological development will change everything.  It's an open question whether this will happen before or after the sovereign debt crisis.

12. In the meantime, the United States will experience an ongoing "late" period of cultural blossoming, driven by the proliferation and democratization of new electronic media.

That's all for now!

1 Andrew Berman September 25, 2010 at 8:49 am

I think there is bias in the first line of your excerpt:
“Get 40 Senators to filibuster everything and this is what you get.”

The left has complained that it now takes 60+ votes to pass anything now, because the Senate Republicans were so ‘obstructionist.’ However, the Republicans were able to maintain their cohesion so successfully because those 41 (previously 40) Republicans were backed by a strong majority of Americans. Most Americans are so unhappy with the Democrats’ performance that the Democrats cannot mount successfully publicity campaigns against Republican filibusters. In comparison, will the Democrats have the support of a majority of Americans to filibuster in 2013 should we, say, have a ‘Chris Christie’ type President and Republican House and Senate majorities filled with people who won with support of the Tea Party (and Chris Christie), not to mention 30-35 Republican Governorships many of whom will owe something to the Tea Party (and Chris Christie)? Oh, and all the local positions which conservatives are poised to win in November as well?

There could be hope.

2 dearieme September 25, 2010 at 9:15 am

How refreshing to see reference to “civil liberties” rather than “human rights”.

3 Andrew September 25, 2010 at 9:39 am

Isn’t “Gay rights” a subset of “civil liberties” that has a well-defined consituency? In other words it’s also a subset of tyranny.

4 RobbL September 25, 2010 at 10:12 am

“10. Climate change will remain an important yet insoluble issue. Even major legislation (which seems unlikely) would not change this much, not for a long time at least.”

I am not so sure. Now that people realize that climate change means more bed bugs and shield bugs, the reality may start to sink in that something must be done. The future has become concrete.

5 Stan September 25, 2010 at 10:22 am

Not to be contentious, but I wonder if Indy, who said that ObamaCare “will, inexorable, evolve into the functional equivalent of the NHS” could give an example taken from the real world. Switzerland, the Netherlands, Germany, and a number of other countries use the Bismark model on which the Affordable Care Act is based. Have any of them actually evolved into the NHS?

6 darwish September 25, 2010 at 11:02 am

I’m guessing MR will be advocating for the migration of the creative class to Singapore in a couple months.

7 Hmmmmmm September 25, 2010 at 11:15 am

What Miltie said.

“I believe that many people are broadly programmed to be prejudiced in this area.”

Expand, please!

8 charlie September 25, 2010 at 11:31 am

Hmm. Carbon tax could do a lot of good. REduce coal and oil use.

I’ve always thought we would go the way of the 17th century dutch.

9 WhiskeyJim September 25, 2010 at 12:21 pm

I suggest you have missed some trends.

First are the 2 billion people reaching middle class status in China and India, creating a market much less dependent on exports. This is a world changing event. It also means capital and entrepreneurial flight from USA, hastening our statist decline.

Second, most ‘socialized’ countries are no larger than one of our large cities. Their programs have at least some chance of being effective in their own statist way, and if not, can be fixed. In a country of 300 million dominated by special interest, our triumvirate government structure almost guarantees we will do this very badly.

For your reasons and mine, I see a much faster decline than you do. And given our culture, that scenario results in multi-state secession.

We are not watching a slow multi-decade slide into European style structural bankruptcy; that is built in and will happen. We are watching a devolution of western civilization, but with a global alternative for flight which makes the problem worse.

The brief experiment with relatively free markets in the USA is long over. In fact, devolution is the progressive agenda. Free marketers are not equipped to fix it.

10 Yancey Ward September 25, 2010 at 12:52 pm

The CBO baseline indicates things that won’t happen- I agree. First, that dotted line will not rise like that. The non-interest, non-entitlement wedge probably won’t drop like that, and the fiscal calamity will eventually reset Matt’s claimed final push of the welfare state back to one more the responsibility of the individual for themselves which was always the only sustainable path to begin with. You can only depend on the kindness of strangers so much until they tell you to fuck off and take care yourself.

11 8 September 25, 2010 at 1:10 pm

I have been contemplating #2 for more than a decade and once Bush got his Medicare drugs passed, we were well and truly screwed. The young don’t have the votes and a worse future was locked in. Obama has made it even worse.

The sovereign debt crisis will arrive as soon as more people figure out that change is impossible and then run a discounted cash flow on USG. I would be surprised if it doesn’t happen before the end of this decade.

Asia is already the place to be for entrepreneurs. This will be obvious to everyone after the crisis, when relative wealth adjusts.

12 joe September 25, 2010 at 1:38 pm

8, I would argue that the problem started when politicians realized they could pass big tax cuts and increase spending in certain areas without cutting spending in other areas, and face no political consequences. This of course was the first year of the Reagan administration. We managed to climb back from the brink there and enter a period of surpluses. But Bush II’s advisers did not forget the political lessons they’d learned from Reagan and brought us right back to big tax cuts, bigger military spending, and as you point, added their own brilliant idea with Medicare Part D.

Obama has certainly not helped address the deficit in any significant way, but he has not really made the problem worse. The stimulus is expiring and the health bill was fully paid for by tax increases and spending cuts. Increasing spending is not the problem as long as it’s paid for. The problem began when politicians decided that they could have a free lunch and ignore basic fiscal math, and the guilty parties here are Reagan and Bush II.

13 Bill September 25, 2010 at 2:09 pm

1. Material wealth will increase because of the existence of a low income foreign middle class. You will be purchasing, at very low prices, items valued by the Indian and Chinese middle class–very low cost refrigerators, TVs, clothing, etc. that will reach the mass market foreign middle class and will then be sold in the US. Deflation of the ordinary consumables.

2. US health science will decline or lose out to Britain, France, Japan and Korea because of restrictions on funding of stem cell research. Religion will become a greater handicap on biological research. US competitive advantage will be lost.

3. Misinformation will continue to increase in value as the costs of its dissemination will decrease with the absence of an honest mediator (newspaper or TV network that), and some mediators (Fox News) will go direct and sponsor and run its own political party (Tea Party) sponsored by its advertisers. Once in power, it will block other media outlets and restrict the expansion of the internet or limit the amount of spectra available to potential competitors (satellite, wifi).

4. Mercantilism will increase and alter business competitive practices. The most mercantilist will subsidize or partially own businesses, but other mercantilists will subsidize and protect R&D of their “national” champions.

5. Foreign Sovereign wealth funds will increase, and social security funds or state retirement accounts will be used to invest in US businesses to prevent foreign sovereign wealth funds from acquiring US firms. Social security, state retirement programs or private trustees purportedly acting on behalf of social security will increasingly purchase losers to protect jobs.

14 Yancey Ward September 25, 2010 at 2:22 pm

Joe, the health bill is almost certainly not paid for if we take realistic view of how Congress actually behaves in these regards. Much of the “funding” is promised reductions in Medicare spending which are sure to be fixed just like all promises of cuts in Medicare are dealt with. In addition, a lot of the taxes will probably be trimmed before they take effect 4 years from now since there is already strong opposition to them from natural Democratic constituencies. And I haven’t even addressed the fact that almost all such entitlements cost more than the initial projections by whole number factors.

15 BKarn September 25, 2010 at 2:44 pm

“and within twenty years we will have a sovereign debt crisis in the United States”

This entire post in a nut shell: America is finished economically and politically, and will no longer matter other than the damage to be managed as its global position winds down. Let’s talk instead about exotic places, they’re much more interesting (and they have better food and books!) and actually matter. It would be nice to see you simply admit this is your outlook, Tyler, particularly in light of your obvious (but in itself interesting) fascination and preference for The Other.

“US health science will decline or lose out to Britain, France, Japan and Korea because of restrictions on funding of stem cell research. Religion will become a greater handicap on biological research.”

All the world’s a nail, eh Bill …

16 Morgan Warstler September 25, 2010 at 3:00 pm

I’m going to just do Obamacare – of course it will be destroyed. It is EASY.

Remove the mandate to purchase, and suddenly the costs are too high, unless you dramatically roll back mandated coverage…

Which gives us what we SHOULD and OUGHT to have: at least two tiers of care. What we actually have in Medicare today.

The baseline care will run say $4K per patient per year, and because it is the liberal safety net, it will eventually morph to provide the best cost effective care that can be gotten for $4K on a global budget like the VA (including salaried doctors), but means tested – so if you run without insurance, and then need the basic care you get it – and you keep paying for it until it is paid off. X-Rays, off-patent drugs, helping old people who can’t afford supplemental care to die with dignity.

The premium supplemental will be a BIG hit likely $12K+ year… but it naturally will grow steadily towards HSA / Catastrophic, and the only decent thing those “exchanges” will do is make price shopping for SERVICES (not insurance) very easy.

This is a BIG change – and a positive one over the current system.

But Obamacare is done. The “haves” want there to be Soup Kitchens, but they don’t want to eat in them.

17 Lee A. Arnold September 25, 2010 at 4:32 pm

Matt and Tyler are coming round to essentially the correct view. The nation is most likely going to go forward with a piecemeal approach. There are a few things that they missed: in particular, a missing item that stems from the fact that this will be a dynamic process: there is an enormous public learning that has just begun, and even the economists and the experts don’t quite know the outcome.

The substantive nub is taxes vs. spending, or private initiative vs. size of government. The Tea Party is about to find out that the spending they need to cut, in order to give tax cuts to everybody, is their own self-deserved Medicare, Defense, and Social Security.

Better still, for pedagogical purposes, this commencing debate won’t be a full issue debate. It will be brought-up and discussed piecemeal, as each little policy of budget and taxes becomes a separate public discussion.

This is going to force the long-needed discussion on the real trade-offs and it will do it piece by piece. And this is exactly what we (i.e. all of us) would specify that a non-ideological approach would require, from the beginning: A methodologically atomic approach to reality.

And for the discussion to continue now, it is perhaps a necessary next step, that the Republicans should take back a house of Congress (and the House in particular) to get skin in the game.

This sounds like the expressed feelings of the Independents (i.e. the middle 20% of the population), although that may be ascribing them too much political and psychological strategy. But it is very clear that the Independent swing to the Republicans is really a swing, not to the grand old brand of swill, but to gridlock. In a nutshell, they don’t like the complexity — and at the least, they first want to check the calculations, and let the “body politic” recalibrate itself.

That will be good enough. The Democrats can sit tight, and teach. In particular they should always demand that the Republicans enact the real spending cuts to cover their long-term tax cuts — to specify everything in the same Congressional bill. Then the rest of us can all talk about it, before they pass it. Corollary idea: Start creating an official Democrat dataset of things that the Republicans have punted on.

This sort of thing is all the Democrats have to do for now, to finally get the voters to understand how everything is connected to their standard of living. A strong, active defense of the safety-net that can go on for several years.

And I guess it will take a few years, so everybody has to stick with the program. I thought that the polling in favor of healthcare would be higher by now, but I always forget that I am following these issues much more closely than any ordinary, sane person. My basic optimism hasn’t budged, however: poll after poll continues to show that when considered piecemeal, approval for Obamacare is somewhere between 55-70%. And its basic design makes it head naturally toward a two-tier system, like any other intelligent country.

Perhaps it is necessary for the next period to be a period of learning by a populace that is harried and stressed about life, and bombarded by pop-phrased propaganda. You could hardly respond better than with the moral discussion inherent in an accomplished healthcare law. A good platform for complicated debate.

The outcome won’t be salutary for the Republican Party. They’ve been selling painless tax cuts since Ronald Reagan, then blaming the Democratic Party for the resulting deficits. Now their voters are going to have to grow up, and face reality.

Their likely conclusions are: (1) Government is slowly going to get bigger, because the world is getting crowded and more complicated. (2) We have to pay for it. (3) The only alternative is a piecemeal approach to better institutional design, improving services while ultimately saving costs. (4) Holy cow, that’s what the Democrats were trying tp do, by ACA.

18 BKarn September 25, 2010 at 4:50 pm

“The outcome won’t be salutary for the Republican Party. They’ve been selling painless tax cuts since Ronald Reagan, then blaming the Democratic Party for the resulting deficits. Now their voters are going to have to grow up, and face reality.”

Yeah, Republicans are stupid poopy-heads, and it’s all their fault. I agree. You can have a juice box now.

19 CriticalCat September 25, 2010 at 5:04 pm

What shall I file this post under? Clairvoyance? Idle musing? Forecasting on topics outside of my domain of knowledge? Making assertions so vague that at points in the future they can neither be confirmed nor repudiated?

Why can’t Tyler stick to concrete posts on topics that lead to some productive discussion or knowledge dissemination?

20 MM September 25, 2010 at 5:26 pm

I disagree. this is the view of older generations who have stopped participating in the future. It is like those old moribund Spaghetti Westerns of the 1960s. The ones where the book is closing on the West that the WWII generation connected with and times were shifting.

Demographics is all, as you said. I agree. But the Millennium Generation thinks different, acts different, is growing up with less and a view of no free lunch.

China, India, Brazil, South America are all ascendent. That changes everything.

How old people will live on SSI and Medicare will change and be changed. The idea that they will live as independent consumers going to any doctor they want and having treatment for anything and everything will end. HMOs and rationed care for younger and healthier will be the norm. Like Switzerland does today. DNR is normal practice for old people unless the doctors agree that they have a prognosis for longer and functional life and not continuous care until they die. Every Swiss must buy med insurance. Period. Not state funded care 100%.

Because old scared people will clog up the voting process social power will shift outside government to people who grow up on social networks, Facebook, Twitter, Blogs and all the rest. Power and decisions will be made outside of government and more locally.

The world will not be the world and the systems and the society that was invented in the middle of the 20th century. The people who invented that will not have power or money to influence things to keep it going and will be shunted aside for new ideas and new things.

Welcome to the future – it is already starting.

21 Tom September 25, 2010 at 5:59 pm

“1. Obamacare won’t be repealed or declared unconstitutional, nor will Republican candidates be running against it six years from now. ”

That leaves us 2014, then, right?

22 Lee A. Arnold September 25, 2010 at 6:13 pm

“Republicans are stupid poopy-heads, and it’s all their fault.”

Emotionalism, all the way down. On the emotional side it starts in resentment that you are paying for somebody else getting something that isn’t deserved; on the intellectual side, the economic ideology that tax cuts create market growth enough to pay for themselves has imploded, and now the Tea Party has arrived, to hold them to it, or tear them apart.

23 Duracomm September 25, 2010 at 7:25 pm

Lee A. Arnold said,

The substantive nub is taxes vs. spending, or private initiative vs. size of government.

The Tea Party is about to find out that the spending they need to cut, in order to give tax cuts to everybody, is their own self-deserved Medicare, Defense, and Social Security.

We have a problem with spending not revenue. Taxes can’t be raised enough to pay for the spending the politicians have promised.

The only question is how much damage is done before the political class acknowledges and acts on the fiscal facts.

“It’s the Spending, Stupid”

here’s an excellent col by John Merline on AOL News who points out just where the mega-deficits come from at the federal level: Excessive spending.

As the chart nearby shows, since 1950, tax revenues have been remarkably stable. Despite endless machinations, reforms, tweaks to the tax code, new breaks, tax hikes and tax cuts, tax revenues as a share of the total economy (called gross domestic product, or GDP) have stuck steadily at right around 18 percent.

What has changed is spending….

Deficit hawks pretty much have only one option — spending cuts. And that means digging into entitlements, particularly Medicare, Medicaid and Social Security, which consume a huge and ever-growing share of the federal budget.

24 Stephen Smith September 25, 2010 at 7:46 pm

The Netherlands is giving up on its liberal drug policies because a) its huge neighbors aren’t backing down on theirs and it’s causing traffic jams in border towns, and b) the supply side was never legalized, so there’s still tons of organized crime there, and the illegal marijuana supply trade has attracted lots of other totally-illegal drug trades, like ecstasy and amphetamine (where NL is the world leader), and heroin and cocaine (where NL is the European leader). California will have neither of these issues (the whole supply chain will be legal, and they’re the biggest state around so no worry of being overrun by French/German/Belgian drug seekers). If Prop 19 passes, California’s experiment with legal pot will turn out much better than the Netherlands’.

25 jorod September 25, 2010 at 8:07 pm

CINOs are out.. Conservatives in Name Only.

Democrats and Republicans both.

The times are a changin’.

26 Lee A. Arnold September 25, 2010 at 9:39 pm

Duracomm: “Taxes can’t be raised enough to pay for the spending the politicians have promised.”

No, taxes certainly can be raised enough, and maybe indeed while our standard of living is miles higher — but nobody can prove it, and nobody wants it. To illustrate what the long-term looks like, the CBO’s baseline scenario is the second graph, here:

The first graph is what happens if taxes are NOT raised according to the scheduled expiration of all the Bush Tax Cuts* [see note below]

Now, I don’t think we are going to get there. I think that medical innovation is going to start bringing down healthcare costs by 2040, and balanced budgets after that will max-out at 25% or so of GDP. Maybe start to go down. But that’s just my own kooky guess.

Duracomm: “People always like the idea of a getting free government pony.”

They are getting it now. And you are giving it to them. They show up at the last minute in the worst possible condition at the most expensive place, the emergency room. You are currently paying more than you have to, more than necessary, in your own insurance premiums and county taxes, to cover them. Let’s get everybody into the system to create the proper demand so the supply can respond, and mandate them ALL to cover themselves, when possible.

Duracomm: “I don’t think arguing that voters who oppose obamacare are ignorant rubes is going to be a winning electoral strategy for the democrats.”

Certainly not. They are about to figure it all out for themselves, anyway.

Duracomm: “You mean the taxpayer money obama has thrown at wealthy but politically connected corporations and institutions?”

Absolutely, you betcha! (And please include Bush too.) It appears to have started the Tea Party. Most of that will be paid back, supposedly. Of course everybody gets angry at the thought of undeserving recipients, and the Democrats have trouble right now with their progressive left.

But I think it palls when compared to the trouble that the Republicans are about to have with the Tea Party. It’s a new movement with electoral momentum, and they are demanding some results. Either that, or Rand Paul becomes a sell-out: Which is it going to be?

Consider also, they are not really that loyal to party. After 2012, some of them could start to prefer the Democrats. Watch.

[*] I did an animated flowchart of the Bush Tax Cuts, here:

27 anonymous September 25, 2010 at 11:58 pm

Any discussion of the future of politics and the legislative process is incomplete without mentioning the unusually broad role of the judicial branch in the US, which has steadily expanded the scope of its activity into what would normally be the exclusive province of the legislative (and executive) branches in most other countries (in what other country would a major industrial policy like the breakup of the old AT&T in 1982 be decreed by a judge?)

As the legislative branch calcifies into an ineffectual menagerie of professional grandstanders, the judicial branch might simply take over most of its functions. The fact that this is kind of, well, unconstitutional is no insurmountable obstacle when you consider who it is that gets to decide what’s constitutional. And in any case, there is ample historical precedent for creatively interpreting and ignoring the constitution (eg, the Tenth Amendment is currently superseded by the commerce clause, and the Fifteenth Amendment was long superseded by Jim Crow laws).

The judiciary (activist judges) could theoretically provide the vigorous reforms that Congress is no longer willing or capable to undertake (as they seem to be doing with regards to gay marriage, for instance). However, there are obvious drawbacks. For instance, the doctrine of stare decisis (respecting precedents) greatly complicates the process of “repealing” ill-considered “legislation”.

More significantly, judicial independence, when applied to de facto legislating, is incompatible with democracy, in that there is no reliable way — by design — for popular opinion to sway or overturn judicial opinions. Popular referendums such as Proposition 8 might occasionally attempt to do so, but the courts can always simply invalidate these as well (and in the case of Prop 8, already have). Even if you applaud or welcome such outcomes when they further a progressive agenda, there is no guarantee that this will always be the case. An “Iranian Guardian Council” scenario, perpetually overriding the will of the people by invoking a higher moral authority, might ensue in the long term.

28 Mat September 26, 2010 at 4:59 am


You wrote in: “The most important changes will come from aging, how other nations in the world fare especially China and India, the rate of technological progress, and foreign policy events which are exogenous from the point of view of economic policy. Overall it will be more interesting to follow other nations than the United States. Get ready for this and pick a few countries.”

What do you mean with “follow other nations”?

29 Andrew September 26, 2010 at 6:56 am

“Let’s get everybody into the system to create the proper demand so the supply can respond, and mandate them ALL to cover themselves, when possible.”

Ummm, how ’bout no. Just as easily, in fact easier, rather than add another mandate to fix the first mandate, which will ultimately require another and another and another, repeal the mandate of free primary care that is destroying emergency rooms by turning them into free clinics and taking away their usefulness in emergencies.

And let’s not cite poll numbers. Everyone knows that the whole issue is that people can’t get what they want for free.

30 Jonah Thomas September 26, 2010 at 9:29 am

The outcome won’t be salutary for the Republican Party. They’ve been selling painless tax cuts since Ronald Reagan, then blaming the Democratic Party for the resulting deficits. Now their voters are going to have to grow up, and face reality.

Who has ever won an election by depending on voters to grow up and face reality?

The swing voters have always been the ones who depended on government to wave a magic wand and fix everything.

And now the swing voters want government to wave a magic wand and fix everything by abolishing government.

31 Lee A. Arnold September 26, 2010 at 11:39 am

Duracomm: “There is one other point brought up in the explanation of the charts that flatly contradicts what your arguments so far.”

I understand the explanation. You are repeating what I wrote, using other words. I thought I was clear, but let me try to make it clearer: (1) The baseline scenario is if Congress sticks to current law and “pay-as-you-go” or paygo, i.e.: Bush Tax Cuts expire, no Medicare doc fixes, Obamacare brings in cost savings, etc. etc. Nobody thinks that the first two will happen — and as for the third, there’s just as good a chance that Obamacare will bring in even more savings, since after 20 years out from now, the CBO reverted healthcare spending to the current HIGHER trend because analytical information for Obamacare is unavailable beyond that timeframe.

The alternative scenario, the other graph, is if Congress doesn’t stick to paygo. So a very good approach to our current dilemma is to take things piecemeal, and try to get Congress to stick to paygo.

(2) You originally wrote, “Taxes can’t be raised enough to pay for the spending the politicians have promised.” I understand the sentiment, but as expressed, this is strictly unknowable. Historical post-war precedents don’t clinch the argument, either, though there have been commentators here in the past who have tried to pull-out some magical GDP percentage that deficits cannot cross. What I think is correct is, as I wrote, that “nobody can prove it, and nobody wants it.” YOU are calling it the “rosy scenario”, not I. (Again, I think a better guess is that the budget is likely to level-off due to medical innovations, and then head downwards, disproving the CBO scenarios.)

32 Duracomm September 26, 2010 at 1:10 pm

Lee A. Arnold,

The CBO has to score based on the legislative guidelines the politicians give them, not the facts.

So when scoring the healthcare bill the CBO had to assume that the medicare reimbursement rates are as a point in fact going to be cut. Something that the CBO doubts is going to happen.

Even then obama and the democrats double count the “savings” for the reimbursement cuts. The CBO has said this error substantially decreases the savings obama and the democrats are promising.

The CBO provides useful information but they are constrained by politicians in the type of analysis they can perform. The CBO score of the healthcare bill was gamed to death by the democrats in congress.

The unrealistic conditions they forced the CBO to use renders the CBO fiscal analysis of obabmacare undependable at best.

Lee Arnold said,

Historical post-war precedents don’t clinch the argument, either, though there have been commentators here in the past who have tried to pull-out some magical GDP percentage that deficits cannot cross.

The fact that the revenue as a percent of GDP have stayed pretty consistent through decades of various tax regimes may not clinch the argument.

It is however, vastly more persuasive than the wishful thinking obamacare supporters bring to the table.

33 Lee A. Arnold September 26, 2010 at 2:39 pm

Duracomm: “The CBO has to score based on the legislative guidelines the politicians give them, not the facts.”

More or less, except that a “legislative guideline” which has passed, is called a “law”.

The only time something is “forced” on CBO is when it scores a specific legislative proposal at a Congressperson’s request.

Nothing has been forced on the CBO in their Long-Term Budget Outlook. The “facts” are current law (including paygo) and the other “facts” are that the CBO doesn’t think Congress will stick to current law (including paygo).

There is no better projection. And what is the outcome? For me the main lesson is, take things piecemeal and at least make Congress try to stick to paygo. Because we don’t have another, more realistic plan. And we don’t have a better Long-Term Budget Outlook than the CBO’s.

“Double-counting” doesn’t affect the CBO’s overall estimates that Obamacare lowers the long-term deficits by 2/3rds. It is included. The canard is adequately dealt with, here:

Duracomm: “The fact that the revenue as a percent of GDP have stayed pretty consistent through decades of various tax regimes may not clinch the argument. It is however, vastly more persuasive than the wishful thinking obamacare supporters bring to the table.”

Not all that persuasive — for example, fear of larger short-term deficits seems to be the main reason we won’t end the recession quickly. It’s just stupid really. (Though there are the additional bad credit problems.)

And as for the long-term, we are going to pay for the medicine, even if it goes to private insurers. But we already know how they want to manage it. Let’s stick with the party that is improving services while reducing the long-term deficits. Certainly transaction-cost economics allows that it may be theoretically possible.

34 Lee A. Arnold September 26, 2010 at 4:36 pm

Jonah Thomas: “I haven’t heard of anybody ever losing an election by planning for voters not to grow up and face reality.”

Right — but this time, it’s what happens afterward. Because it looks like the Republicans are going to win the House. After that, IF the Tea Party stays fired up and doesn’t back down, then the Republicans have to come up with something. They will start having to come up with ideas. They will start having to come up with real spending cuts to match their long-term tax cuts. This is going to lead their grassroots into substantive thought processes. Or not: Can they simply be bought-off and deflected? There’s a theory that a Republican House will just initiate goofy investigations of the Administration and ride their united hatred of Obama into 2012.

35 Duracomm September 26, 2010 at 5:50 pm

Lee A. Arnold,

Past estimates of healthcare costs have been wildly inaccurate. That is something that needs considered when evaluating the CBO scores.

What Will Obamacare Cost? Chicanery, Underestimation, and their Ilk

Since the end of World War II, major health care reform proposals have generally always cost more-sometimes significantly more-than the highest cost estimates published while the legislation was pending†¦

†¦Medicare (entire program). In 1967, the House Ways and Means Committee predicted that the new Medicare program, launched the previous year, would cost about $12 billion in 1990.

Actual Medicare spending in 1990 was $110 billion-off by nearly a factor of 10.

There is a debt tsunami headed our way. The proper response in that situation is not to add another huge entitlement to the existing public debt.

Which is exactly what the passage of obmacare has done.

36 Jon September 26, 2010 at 8:29 pm

Any number of outside factors could derail a debt crisis in the US: For example, a debt crisis in another major nation. Also in the running: a collapse in China, a truly major war, a massive natural disaster, major technological or scientific breakthroughs.

On gay rights, absent massive catastrophes which would change everything I don’t see any backsliding (though I also do not see gay marriage being legal in all 50 states any time soon). After all, we have not seen such backsliding in any other area of civil rights: no one, for example, has seriously challenged women’s rights, let alone tried to repeal the 19th Amendment. In fact the only area where I see social conservatism achieving a major victory is the possibility that Roe vs Wade may be overturned– and even so abortion will remain legal in most of the US.

The social safety net will not only endure, but may be strengthened somewhat more. Reason being: far more people will find themselves dependent on govermment largese during temporary but frequent periods of joblessness. Also, saving for retirement will probably become less and less possible for larger numbers of people.

In the next century the US will either grow to include parts of Canada, Mexico and the Carribean, or it will suffer secession into at least successor states (at least one of which may then unify with Canada)

37 Ken Nelson September 27, 2010 at 1:06 pm

I disagree with most of what you’ve written. Starting with anything “great” from Matt Yglesias. But one guess is as good as another. Although, tenured PhD’s have provided recent decades of excellent reasons to ignore their guesses….

The biggest contradiction in your post is that I don’t see how you can intellectually resolve an increasingly powerful and financially consumptive government with an improvement in the “civil liberty” picture.

Ain’t gonna happen.

38 mulp September 28, 2010 at 1:20 am

Obama is Reagan, but instead of being in the Republican Party, he is in the Democratic Party.

Reagan called for tax cuts, budgeting more military spending, put off dealing with deficits, and increased entitlements saying on April 20, 1983:

This bill demonstrates for all time our nation’s ironclad commitment to social security. It assures the elderly that America will always keep the promises made in troubled times a half a century ago. It assures those who are still working that they, too, have a pact with the future. From this day forward, they have one pledge that they will get their fair share of benefits when they retire.

Obama saw Reagan was very popular among conservatives who rewrote history to make him a hero.

Clinton proved conservatives only want free lunches.

Clinton proved conservatives do not want to reduce the deficit, but instead are determined to increase the deficit and double the debt as quickly as they can.

Clinton proved conservatives will never tell the American people there are limits.

Clinton balanced the budget knowing he would be attacked for doing so. Democrats voted for Clinton’s plan to seriously reduce the deficit, knowing from the defeat of Bush by conservatives that they would be attacked. The deciding House vote was told in the House in conservative jeers they were going to defeat her for being a fiscal conservative.

And in two years after Clinton left office, conservatives took their Republican victory in 2000 as a mandate to double the debt in a decade, and delivered on schedule.

When conservatives run on a platform of promising to eliminate Social Security completely, and clearly stating that what that means:
– if you die while in your working years, most of your children will be living in poverty, begging for handout because most of you can’t afford large enough life insurance policies
– if you become disabled in your working years, you and your children will be living in poverty because you almost certainly afford the long term disability insurance
– if you reach retirement and bet the stock market or real estate market wrong, you will be working and living in poverty

After all, this is the glorious past that conservatives worship – bring back to poor houses.

Reagan was born into, and lived long enough in, those glorious days to praise and support Social Security.

Conservatives promise the free lunch of the safety net that we all assume to exist because none of us have lived without it, while claiming taxes and government can be slashed to the bone with life being better than ever.

Tax rates are the lowest they have been in decades, yet I don’t recall any time in my life when I’ve heard so many people claim they are being taxed to death.

Conservatives cut taxes, so Obama has been just like a conservative and cut taxes, and just like conservatives have done since 1980, not worried a bit about the deficit.

And just like Reagan and Bush, Obama has increased entitlements, knowing conservatives never have the guts to clearly campaign to roll entitlements back to the glorious 20s.

39 Jonah Thomas September 28, 2010 at 12:40 pm

“The civil liberties situation is a unidirectional ratchet moving in the wrong direction. Despite all of the blame heaped on W. and the R’s, O and the D’s have done nothing to fix the situation and may be making it worse.”

Yes. I suspect the problem is that too much of the public is afraid.

So if they do improve civil liberties, and then we get a widely-reported terrorist attack, the public might say “This wouldn’t have happened if the US government was more serious about catching terrorists. We demand fewer civil liberties and more security!”

So they doin’t dare enhance our civil privileges. I think they ought to be called “civil privileges” instead of “civil liberties” since they are so easily granted or revoked.

But maybe the Democrats don’t actually want freedom any more than the Republicans do. I can imagine them bargaining that away for political advantage, or I can imagine them not wanting it. Which is worse?

Maybe it’s a choice — sheer malevolent evil Republicans or Democrats who’re so stupid they do the same evils. Which is worse?

40 Jonah Thomas September 29, 2010 at 3:38 pm

Dirty, for almost every reason medical care is a bad candidate for a free market.

Start with the problem of unequal information. “Don’t ask your barber whether you need a haircut.” But who can tell you whether you need surgery, except your surgeon?

Given a choice, Americans have usually chosen incompetent quacks who have a good spiel, over real doctors. However, we should also look at history. What part of the medicine from 1930 do we now think was ineffective or dangerous? Pretty much all of it but the bonesetting. From 1950? Pretty much all but the bonesetting and the antibiotics. From 1970? Maybe 20%? From 1990? Maybe 40%? Sixty years from now, when we have a better perspective, how much of today’s medicine will we think we should have avoided? Maybe quacks with harmless nostrums would be better….

So we have MDs who tell us what medical care we need and tend not to tell us ahead of time how much it will cost.

We tend to be satisfied with that care unless we die, but enough people are dissatisfied that MDs need very-expensive malpractice insurance which we pay for.

Medical services are not a monopoly but they mostly do not compete on price — you do not choose the cheapest brain surgeon you can find.

Knowing just this much, what economist would fail to predict medical expenses rising to whatever the market would bear?

But then there’s the insurance. People sometimes have crushing medical bills, so they want insurance to pay them. Insurance companies are not a monopsony, there are multiple insurance companies bargaining with multiple hospitals etc. But the biggest insurance companies have the most economy of scale. Scale that allows random events to average out is what insurance companies have to sell. And the biggest insurance companies have not only the biggest profit at any particular rate, but also have the most bargaining clout. They can negotiate rates right down close to variable cost. And who pays the medical fixed costs? Smaller insurance companies, and the uninsured, the people who have less to bargain with. So medical costs rise even faster for the uninsured. You can’t afford to be uninsured.

And if insurance companies have a win with bargaining down costs, they can do that for routine costs too. Their costs for routine medical treatment are low, and somebody else makes up the difference. You *really* can’t afford to be uninsured.

So you have to have medical insurance, but insurance companies don’t have to have you. Who gets the better of that deal? Companies can bargain with insurers, and the bigger the company the better the bargain it can drive. And the good deal the big company gets must be paid for by…. You have to have medical insurance, and you can’t afford it. You need to be covered by a business Preferably a big business.

Say your company offers you three insurance plans, by three different insurers. Each of them gives you 50 to 100 pages of fine print telling you what’s covered and what isn’t. Can you read that and tell which is the better deal? You don’t understand medicine enough to tell how good your doctor is. You don’t understand medical insurance enough to tell how good your policy is.

Do you see a way to solve this? If you say “free markets” would be a big improvement, everybody who isn’t spot-welded to some kooky economic theory will laugh at you in utter derision.

(Not do say that the Federal government is likely to do a good job either….)

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