What Have They Got To Run On?

It looks like the Democratic Leadership will get its wish, a sprawling “health care reform” bill, mostly focused on changes to the health insurance system that deliver many millions of new customers to the health insurance industry. The Democrats are making many upbeat claims about this bill, calling it historic and claiming that it will produce affordable “universal” health care coverage for Americans, and for 32 million more than are covered by insurance today, while blithely ignoring the contradiction between these two statements. There have been many recent analyses of these claims, and I won’t add another one here. The analysis of the FDL team authored by Jane Hamsher, contrasting mythical claims about the pending bill with “the truth,” is the best of the analyses of the bill I’ve seen in the past few days.

So, assuming that the Leadership’s HCR legislation passes the Senate and moves to the President’s desk for final approval, I’d now like to look forward and ask where the Democrats stand politically in the wake of their nearly one year investment in painstakingly crafting their “health care reform” bill. To put it crassly, what will they have to run on that means something to most, or, at least, a large number of voters?

Not saving the financial system. While the Administration’s bank bailouts have arguably prevented a crash, as they try to take credit for this, others will point out that there were other ways to avoid a ruinous crash that would not have 1) required restoring “money manager capitalism” and making the big banks even more powerful than they were prior to the crash by providing them with very lightly regulated and opaque financial bailouts; 2) produced what are perceived as outrageous bonuses for financial system employees while their institutions were literally surviving on public money; 3) produced a situation where financial institutions don’t lend money to Main Street, but instead seek and gain unprecedented profits by using Government supplied or guaranteed funds to trade complex and unregulated financial instruments; and 4) required changing accounting rules so that the big banks could avoid recognizing the real market value of the “toxic assets” on their books, and, in turn, avoid looking insolvent to the public. No, with this overall situation in place, the Administration and the Democrats will get a big argument when they try to claim credit for saving the country from ruin, because most people will be very susceptible to the view that the cure the Democrats implemented was so opposed to the American sense of justice and fairness; and had so little visible impact on the well-being of ordinary Americans, that it may have been worse than the disease

This doesn’t mean that the Democrats will be sunk by the replies they get to this argument. But it does suggest that the talking point that they saved the financial system is, at most, a draw for them, and possibly a defeat if they focus on it as a reason to get re-elected. The biggest asset they have in this area is that no one really believes that the Republicans would work with the banks any differently. If the Democrats were running against a truly populist party right now, however, that non-existent party would eat their lunch on this issue; so the Dems had better hope that the Republicans are incapable of morphing into such a party.

Not financial system reform. The Democrats have had 15 months do do something substantial in this area, and they are just now getting close to developing a bill in the Senate, which is much weaker than an already inadequate House Bill. The Senate bill already looks like it’s shot through with concessions to the financial industry, including either abandonment of the proposed Consumer Financial Protection Agency in favor of stand alone regulations, or perhaps location of that agency within the Federal Reserve Bank, rather than making it an independent agency. The bill going forward looks more and more like one that is designed not to offend the financial industry rather than to seriously regulate it. The Democrats will pass a bill and try to claim credit for it. But it will not be apparent to people that the bill will work to protect them from the fallout resulting from financial instrument trading activities by the banks. There will be a lot of criticism of the bill and a lot of forecasts that a new crash is coming because “the system hasn’t been fixed.” It doesn’t matter much whether or not this criticism is valid. Given the cynicism and mistrust of the public towards Government, the public will not believe in any financial system reform bill, unless one is very straightforward and obviously designed to mandate good behavior by the banks. Unfortunately, the bill Chris Dodd is working on is one of these “make everybody happy” efforts that will not communicate to the public as a serious regulatory bill, even if it turns out to have some good provisions.

Not Consumer Credit card Reform. This is a bill that Chris Dodd and the Democrats trumpeted last spring when they passed it. After a nine month adjustment period for the Banks it has just gone into effect. It has some good provisions. But it doesn’t limit credit card interest rates, and the immediate effect of its passage on borrowers was to trigger a scramble by the Companies to raise interest rates substantially before the new rules went into effect. From the viewpoint of those who have borrowed from the Companies, the Democrats passed a bill that led directly to substantial increases in their credit card payments. For some carrying a $10,000 credit card balance, carrying costs may have tripled from $500 per year to $1500 per year, and this estimate neglects those who have found their rates suddenly increased to a usurious 30% annual rate, and may now be paying as much as $3,000 per year if they don’t have the cash to get out from under their debt. Clearly, for such credit card customers, who number in the many millions, the immediate negative economic impact of the Credit Card Reform Act, more than compensated for the positive economic impact of the tax cuts implemented in the stimulus package. In short, these folks will not view the Democrats’ attempt at credit card reform as the greatest thing since sliced bread, and if they try to run on it with any great investment of resources, I’m afraid they’re going to delude themselves.

Not Economic Recovery. At the time the stimulus bill passed, many economists warned that it was inadequate in size and wrongly targeted and that it would not help very much on the road to recovery. Since then there have been many disputes about the effectiveness of the bill, and of course its impacts are not easy to measure and are in considerable dispute. It’s in the nature of these things that disputes about its impact will continue through the elections of 2010 and thereafter. What we do know, unambiguously, is that the legislation hasn’t managed to reduce the unemployment and underemployment rates by very much and that the unemployment rate is still at around 10%. Also, the Administration is currently predicting that unemployment will continue high for some time to come. If it does, then the Democrats won’t be able to run successfully on Economic Recovery. They can say they prevented even worse from happening, but what can they say when people ask them what they plan to do now to end this crippling recession? Band-aid job bills of miniscule magnitude won’t help, and major programs are out of the question, because more and more Democrats have lately been giving lip service to “deficit hawkism.” Their commitment to that ideology will prevent them from proposing a new and substantial jobs program, and their performance in first round economic recovery legislation won’t give anyone any confidence that they know how to bring down unemployment.

Not Government Spending Control. From the beginning, the Obama Administration has been far too much concerned with deficit neutrality. This hasn’t been just lip service either. Both the stimulus and hcr bills were limited in size because the Administration was trying to build a foundation to make the case that it is financially responsible, and that deficits matter, even though its story is that it was forced to incur very large ones because of the mess left it by the Bush Administration. Nevertheless, by the time of the 2010 election, it will still have very large deficits to contend with, which the Republicans will try to saddle the Democrats with responsibility for. So, it will have large deficits, but no booming economy to justify them. So, on the one hand, the deficits are too large to allow the Democrats to escape responsibility for them, while on the other hand, the economic recovery won’t be far enough along to balance the negative resulting from the deficits. Not a pretty story to tell, making it unlikely that the Democrats will run on their success in deficit control.

Not Health Care Reform. There’s a lot of talk from Democrats about all the things that the hcr legislation is going to do for people, and how “historic” the reform is. The Firedog Lake analysis linked to earlier, contrasts no less than 18 “myths” about the “reform” with corresponding “truths.” The bottom line however, is that most of what the hcr bill will do for and to people, will not be felt before the election season of 2010. During that campaign, and between now and November, here are the changes that Democrats can point to: 1) high risk pools for those with pre-existing conditions will be established and those denied insurance will be able to buy health insurance through these pools if they can afford the cost of this insurance for which the companies will be able to charge a multiple of standard pricing; 2) denials of insurance for children with pre-existing conditions will be illegal, but the bill will not have established any specific enforcement mechanism for this prohibition; 3) children whose parents have family coverage will be able to retain coverage under the policies of their parents until they are 26 years old; 4) lifetime limits for insurance reimbursement will be illegal; 5) rescissions of health insurance policies for any reason other than fraud will be illegal, but no enforcement mechanism is in the bill to see that this really happens; 6) partial closure of the Medicare “donut hole” will have occurred; 7) small businesses will be able to apply for tax credits to but health insurance for their employees; and 8) Medicare cuts and tax collections to fund the legislation will have begun.

Among these changes, the Medicare cuts and tax collections will be visible to people, as will partially closing the Medicare “donut hole,” but the other immediate benefits will be relatively invisible, because they will involve relatively few people out of the total uninsured. For example, it is doubtful, according to CMS, that more than 0.7% of the currently uninsured will be insured due to the high-risk provision in the bill. That’s only about 350,000 of the estimated 47,000,000 uninsured.

So, when the 2010 election season is in full swing, the bill will have had little effect for people to experience. They will have to derive their impressions of the bill from the debates among Republicans, Democrats, and others about the impact they expect from the bill. The Republicans and other critics will talk about and criticize the individual mandates in the bill, talk about the bill as a Government take-over, and use any number of talking points they’ve already introduced. Republicans will also introduce legislation to repeal the individual mandate, So, the debate about hcr, won’t focus on “the great things Democrats will already have done,” but will focus on the benefits to be introduced later, and on the individual mandate forcing people to buy insurance from private insurance companies. What it comes down to is whether the Democrats will be able to defend the individual level mandate against Republican attacks. I don’t think this will be easy, especially since from the standpoint of people actually being able to get health care, the benefits in the bill don’t seem that unambiguous, since, even when the exchange and the subsidies become available, people are looking at paying a considerable amount in both premiums and co-pays, if they go beyond just getting insurance to taking advantage of it to actually get health care.

So, bottom line, will the Democrats be able to run on hcr in the Fall, when the opposing parties will still be hurling predictions at one another about the results to expect from the new bill, and when the Republicans will be able to exploit the fear of the IRS and facilitate a movement for repeal of the individual mandate? I think the answer is plainly “no!” Once the Republicans bring in future exposure to the hated IRS as a central issue, Democrats will become very defensive about this part of the bill, and will run away from it, and their claims of credit due for passage of other aspects of the bill still be to be experienced will fall on deaf ears.

Democrats may try to counter this by talking about the hcr bill as a deficit reducer contributing to greater control of Government spending. But I think it is too easy to refute that kind of argument by a) questioning CBO’s forecast of scoring due to false assumptions; and b) simply pointing out that the deficit reductions are primarily in the future, and that as of the 2010 campaign they are of no importance when set against the plain fact that Americans would be coerced into buying the product of a private company if the mandate is allowed to take effect in 2014.

So, where do the Democrats go from here? By election time they will have had almost two terms in control of Congress and what will they have accomplished in settling the burning issues of the day? According to the review above, not very much relative to the scale of the problems facing us. My discussion hasn’t focused on other serious problems such as ending the Wars, “terrorism,” restoring the constitution, investigating and prosecuting violations of domestic and international law, occurring over the past 10 years, climate change, energy, educational reform, and the other serious problems facing the United States, that this Congress has spent so little time addressing. When we add these to the review I’ve given, it is even more true that these two terms of Democratic rule of Congress have been a failure.

I do not say this because I think that Republican rule would have been any better. In fact, I think there is every reason to believe that it would have been worse. But that doesn’t mean that the Democrats’ performance has been creditable or acceptable. It has, in my view, been neither, and if the Democrats are to make a credible case for re-election, I think they have very much to do, and not very much time to do it between now and the election season. Plainly, they need to get some unambiguous successes to run on. I think that comes down to two issues.

First, the Democrats have to do something about jobs that will work, and work immediately, and, most importantly, that people can see working. There are two things that would work. First, is Warren Mosler’s proposal for a Federal Payroll Tax Holiday until the economy recovers. Second, is Warren’s proposal for a Federal Guaranteed Jobs Program, which would pay a wage of $10 per hour, along with the fringe benefit of cost-free access to the Medicare Program. Either of these measures would immediately restore demand and bring a speedy end to the recession. The issue of deficits caused by either of these measures is not a serious issue for reasons I’ve previously outlined here, here, here, and here. Of course, the Republicans will immediately grab on to the ballooning deficit issue, but the favorable reaction to ending unemployment will more than compensate for the negative reaction to a further increased deficit, especially if the Democrats stop playing the politics of deficit hawkism themselves, and explain to people why deficits do not threaten the solvency of the United States.

Second, as soon as Democrats do something serious about jobs, they need to turn, once again to health care reform. They won’t have time to fight through drafting another complex health care reform bill to fix this one. But they will need to fix it, because, very shortly, they will own health care reform. At a minimum they ought to repeal the individual mandate, and create Alan Grayson’s Medicare buy-in at cost, effective immediately, so that it is available at election time, and the threat of a mandate enforced by the IRS is gone. They can then move to other incremental changes after the election, assuming, of course, that they are returned with majorities in both Houses.

But will they be returned with such majorities? I think that if they do the two things I’ve outlined they will be, because they will have done two highly visible and concrete things for their historic constituency of working people. If they continue on their present course of trying to serve corporate masters while pretending that they are serving people, however, and then employing marketing and PR techniques to try to persuade working people that they have acted in their interests, I think they will be forcefully ejected from their majority positions and will lose the House and perhaps even the Senate to Republicans. Support for the Democrats in Congress has been in free fall lately. Probably passage of the hcr bill will stabilize it for awhile; but once the Republicans start campaigning on the economy and the mandate, the free fall will begin again, and Democrats will be facing massive defeats in the Fall without very much in the way of support from their historic base. The Republicans may not have started singing “Bye, Bye, Nancy” yet. But if the Democrats stand pat with what they’ve passed up to now plus their hcr reform, it won’t be very long before you hear that song echo in the Halls of Congress.

(Also posted at the Alllifeisproblemsolving blog and Correntewire.comwhere there may be more comments)

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