Rahm’s Authorization to Use Military Force

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This plan from Rahm has a number of people in a tizzy:

Mr. Emanuel, the chief of staff, said he hoped Congressional Democrats would take up the jobs bill next week. Then, in his view, Congress would move to the president’s plan to impose a fee on banks to help offset losses to the Troubled Asset Relief Program, the fund used to bail out banks and automakers.

Lawmakers would next deal with a financial regulatory overhaul, and then pick up where they left off on health care. “All these things start and lead to one place: J-O-B-S,” Mr. Emanuel said.

Jonathan Cohn, Ezra, Gregg, Chris Bowers, and Digby all make very important points about Rahm’s comments. [Update: now The Shrill One piles on.] But I think they may be missing one potential aspect of Rahm’s thinking.

You see, I’ve been waiting for this for a few months.

There are two theories about how to pass difficult legislation. The operative theory with health insurance reform, thus far, had been to do it early in Obama’s term, when he had a lot of poltiical capital. That theory has been overtaken by events.

But think about how Karl Rove preferred to pass difficult legislation. Those bills didn’t have January or February signing dates. They had October signing dates. Take the Military Commissions Act, signed on October 17, 2006, just three weeks before the last mid-term election. Or the Authorization to Use Military Force in Iraq, signed on October 16, 2002, even less than three weeks before the prior mid-term election.

And with each of these, the timing worked in Rove’s favor. He could and did threaten that IF YOU DON’T PASS THIS BILL YOU WILL BE BRANDED AS A TERRORIST JUST IN TIME FOR ELECTION DAY!!!! And sure enough, people like Debbie Stabenow, who normally would think twice about supporting unconstitutional laws that give torturers a do-over, fell in line and passed the bill.

Rove used the urgency of the upcoming election to push Congress to pass legislation that they would soon regret.

Now, obviously, Rahm won’t be calling Raul Grijalva a terrorist because he doesn’t pass health insurance reform. But the Administration already has been saying that Congress should pass a bill, any bill. The Village punditry already accepts as true that a failure to pass health insurance reform will doom the Democratic party. So you can be sure that if health insurance reform hasn’t passed by September, you’re going to start hearing the Administration predicting sure doom on November 2 for Democrats if they don’t pass the bill BEFORE THE ELECTION OR YOU’LL BE BRANDED A LOSER!!

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Bad Nelson, Bayh, and Lincoln Objectively Pro-Cornhusker Kickback

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Picture 184Thus far today, Ben Nelson, Evan Bayh, and Blache Lincoln have come out against passing health care reform through sidecar reconciliation.

Of course that means they’re defending all the corrupt aspects of the Senate bill that proved to be so unpopular in MA, starting with the Cornhusker Kickback (and including the Louisiana Purchase that similarly bought off Mary Landrieu). And they’ve flip-flopped on their earlier demands that such corrupt deals be removed from the bill.

Mind you, I can’t say I’m surprised that Bad Nelson and Blanche and Bayh can’t decide whether they want to keep or lose their personal bribes. Just that if anyone should be labeled a monster, it’s probably the folks so diligently protecting the stuff that voters say, overwhelmingly, they despise.

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"MD's Sob Story"

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I’m not Raul Grijalva or Jerry Nadler, but I thought I’d try to respond to TPM reader MD’s “sob story” (as MD called it) because the story illustrates the issues at stake in health care reform. Here’s the story.

Like everyone I have a sob-story to tell about health care. After telling it to countless liberals who oppose the Senate’s health-care reform bill, I still haven’t heard a good answer from them about why they can’t support the Senate bill. They usually stop talking, or try to change the subject.Maybe Raul Grijalva or Barney Frank or Anthony Weiner or Jerry Nadler have wrestled with this problem and I haven’t seen it. Have you seen anything from them about this?

My story: My father is dying of Huntington’s disease. Before he dies in 8 to 10 years, he will need anti-depressants, anti-psychotics and drugs that fight dementia and his tremors and convulsions. He’ll need multiple brain scans and physical therapy sessions.

Current medical treatments can’t save him, but they will give him a few more years before the slow death strips him of his memories, personality and control of his body.

There’s a 50 percent chance the same slow motion death awaits me and each of my three siblings. If I ever lose my job I’ll become uninsurable, permanently. My sister already lost her insurance.

That means whatever treatment is developed for Huntington’s will be unavailable to us. There’s simply no way we could afford it. Not only high tech gene therapies or other interventions, but the medications and treatments that exist now that would buy us enough time to see our kids’ graduations or weddings, and would give them hope of not suffering their grandfather’s fate.

There’s a bill that would mean we’d never be rejected for health insurance or have it canceled. Health insurance that could ease our final years, or maybe even save us.

But liberals are refusing to support it. I know there are principles and politics at stake. I know people are tired of being told to shut up and take what’s given to them. But in the end, there a thousands of people with Huntington’s and millions of people with other serious or terminal illnesses who will never benefit from treatment because they are uninsured. Millions more who are otherwise healthy will die premature or unnecessary deaths because basic health care isn’t affordable.

What do liberal leaders say to them? What do those liberals tell people like my dad, a die-hard activist Democrat, a UAW member who worked his way through college to become a teacher?

I’m used to Republicans and conservatives not giving a damn about people like us, or mocking us for asking questions like this. That’s why my father spent so much of his life fighting to keep Democrats in power. But to be abandoned by people my father worked with and supported his entire life? What in the bill is so terrible to justify that?

This isn’t about betrayal, or a slap in the face, or an insult. It isn’t about strategies to keep seats, or grand theories of justice. Democrats in Congress have the chance to cast a single vote that will make the lives of tens of millions of Americans less wrenching, our demises less brutal. That’s what this is about.

I’d like to hear Reps. Grijalva, Frank, Weiner or Nadler tell us why they can’t cast that vote.

Now, to begin with, MD’s entire premise is wrong. To suggest that Grijalva and Nadler are the people preventing a bill from moving forward ignores the fact that, as things stand, even with their votes, the House would be at least one vote short of passage. As I pointed out here, until MD can convince one of the following to vote for a bill, there is zero chance of the Senate bill passing: Bart Stupak, Larry Kissell, Dennis Kucinich, Eric Massa, or any number of Blue Dogs who refused to vote for the bill the first time. MD would do better yelling at the Catholic Bishops, who think it’s more important for Bart Stupak to make choice less accessible to all women than it is to provide lots of poor Catholics health insurance, than he would yelling at Grijalva and Nadler.

And because the bill is at least one vote short, it is going to have to get more populist (to convince Kucinich or Massa to support it) or still more conservative (to get either the anti-choice vote or the Blue Dog vote) before it passes, presumably through reconciliation.

And frankly, it may get better in ways that are very important for MD and his family. Read more →

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Some Thoughts on Healthcare

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From the start, let me say I support sidecar reconciliation going forward–the passage of the Senate health care bill, tied to the simultaneous passage through reconciliation of some fairly substantive changes (eliminating most of the excise tax, inclusion of a public option, possibly with Medicare buy-in, elimination of the antitrust exemption, and drug reimportation) that would not only make the Senate bill palatable and much cheaper, but would constitute real reform.

With that out the way, let me just throw a few things out there on which I will base my further discussion.

Rahm’s trial balloon on a stripped down bill

On Wednesday, Rahm proposed a stripped down bill.

RAHM PITCHES STRIP-DOWN, reports Inside Health Policy’s Wilkerson, Coughlin, Pecquet and Lotven: “White House Chief of Staff Rahm Emanuel called House leaders Wednesday to sell a smaller health care reform bill with insurance market reforms and a Medicaid expansion, Democratic and Republican insiders tell Inside CMS. House Speaker Nancy Pelosi (D-CA) so far is not buying it, they say, and one Democratic policy analyst considers Emanuel’s pitch a trial balloon. … Pelosi was scheduled to meet with Blue Dog and progressive coalition members Wednesday (Jan. 20) afternoon and a full Democratic caucus meeting is scheduled for Thursday morning. ‘I would agree she’s not buying it,’ a Democratic policy analyst said, referring to Emanuel’s idea of a smaller bill. ‘We’re hearing that she’s trying to figure it out.’ … In the Senate, Budget Committee Chair Kent Conrad (D-ND) said that while he had opposed using the fast-track process for the health reform legislation ‘writ large,’ he believes reconciliation could be used as a way to make fixes if the House passes the Senate bill.”

Greg Sargent makes it clear that this doesn’t necessarily mean Rahm (or the White House) prefers such an option–he’s just looking into what is possible at this point.

After talking to insiders my sense is that the procedural issues at play are extremely complex, and White House advisers and Dem leaders really want to understand the full range of options before them, as limited as they appear to be, before leaning hard one way or another.

I’m also told that reports that Rahm Emanuel is pushing for a scaled-down bill are false. Rahm is actively involved in sounding out Congressional leaders to determine what’s possible, but hasn’t stated a preference, for the above reasons. This may not amount to a satisfactory explanation for many, but this, as best as I can determine, is what’s happening.

So for the moment, let’s just leave this out there as a trial balloon.

Within hours of Brown’s win, Max Baucus said reconciliation would be part of the solution

After saying for months that reconciliation wouldn’t work, Baucus has spun on a dime and said that reconciliation will be part of the solution.

“Reconciliation, I’m guessing at this point, will be part of the solution,” said Senate Finance Committee Chairman Max Baucus (D-Mont.).

Clearly, this is not the same as having one of the true obstructionists–Lieberman, Nelson, or Landrieu say this–in the Senate. But we don’t need them to pass a bill through reconciliation; we need the still significant majority we have in the Senate.

Note, Baucus’ quick concession that reconciliation would be needed to pass this bill ought to make all those who, before, said, “Reconciliation won’t work, you have to capitulate to Joe Lieberman” think twice about whether their earlier read of the situation was correct, and what Baucus’ quick concession says about the good faith of the hold-outs on the Senate side. If reconciliation is now possible, the only reason it wasn’t possible in the past was the political situation, largely created by the large number of people empowering Lieberman and Ben Nelson by saying “reconciliation won’t work, you have to capitulate to Joe Lieberman.” And that ought to make the same people hesitate before they cry again, “Progressives have to pass the Senate bill as is, without working to fix the bill through reconciliation.”

Votes (particularly through reconciliation) are easier to get in the Senate than the House right now

Here’s a detail many on the left seem to be missing when they call on progressives to just suck it up and pass the Senate bill: the numbers.

Check out the roll call for the passage of the House bill last year. The bill passed 220-215. But that 220 includes Bart Stupak and Joseph Cao, both of whom have said they would not be happy with Nelson’s anti-abortion language–they want Stupak’s own, harsher language (and Stupak says he’s got 10 more Democrats like him). And it also includes Robert Wexler, who has since retired.

In other words, just based on losing those three votes, you don’t have enough votes in the House to just “suck it up” and pass the Senate bill.

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Supreme Court Unleashes Corporate Campaign Cash In Citizen's United Decision

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images5thumbnail1.thumbnail11The stunning and decisive loss by Martha Coakley to Scott Brown in the Massachusetts Senate special election has already caused a tsunami of fear among Democrats, and corresponding joy among Republicans, heading toward next fall’s midterm elections. If you think this is cause for concern for Democrats looking forward to the 2010 midterm elections, picture the scene if the Republican party were also able to benefit from removal of restrictions on corporate and financial industry cash infused into their electoral coffers heading into the midterms and 2012 Presidential election.

As I wrote back last August, the Supreme Court took very unusual steps in a case by the name of Citizens United v. FEC to craft a case – originally argued on separate grounds – into a vehicle to make a Supreme Court declaration on the constitutionality of campaign finance restrictions and regulations. As Adam Cohen of the New York Times put it:

If the ban is struck down, corporations may soon be writing large checks to the same elected officials whom they are asking to give them bailouts or to remove health-and-safety regulations from their factories or to insert customized loopholes into the tax code.

Citizens United v. FEC was originally argued on March 24, 2009; but subsequently noticed for re-argument on the new grounds involving the opening of corporate campaign contributions on September 9, 2009. The general consensus among the cognoscenti is that the Justices were leaning heavily toward blowing up the regulations and restrictions on corporate campaign contributions. For a complete blow by blow procedural and substantive history leading up to the decision, see Lyle Denniston’s SCOTUSWiki on this case.

Well, the decision in Citizens United v. Federal Elections Commission is in and attached hereto. As you can see, it is a 5-4 split decision with Justice Kennedy writing the majority opinion. The decision below is reversed in part and affirmed in part, and the seminal case of Austin v, Michigan is hereby overruled as is that part of McConnell v. FEC which upheld the resitrictions on independent corporate expenditures. In dissent, and/or partial dissent is Justice Stevens, joined by Ginsburg, Sotomayor, and Breyer. Justice Thomas also filed an opinion concurring in part and dissenting in part.

Today’s decision in Citizens United v. FEC abolishes the previously settled distinction between corporate and individual expenditures in American elections and would appear to apply to state and local elections as well as Federal ones given that the Court recognizes such a First Amendment right. This is literally an earth shattering change in the lay of the land in campaign finance, and it will have ramifications in every way imaginable for the foreseeable future.

Quoting a very interested observer, Senator Russ Feingold, he of McCain-Feingold fame, John Nichols had this to say in The Nation:

But U.S. Senator Russ Feingold, the Wisconsin Democrat who has been in the forefront of campaign-finance reform efforts for the better part of two decades, is worried.

“This would be in my view, a lawless decision from the Supreme Court,” says the senator who gave his name to the McCain-Feingold law. “Part of me says I can’t believe they’ll do it, but there’s some indication they might, and that means the whole idea of respecting the previous decisions of the Supreme Court won’t mean anything anymore.”

A lawyer who chairs the Constitution Subcommittee of the Senate Judiciary Committee, Feingold notes with regard to controls on corporate campaigning: “These things were argued in 1907, when they passed the ban on corporate treasuries. It was argued in 1947, Taft-Hartley did this. The Supreme Court has affirmed over and over again that it’s not part of free speech that corporations and unions can use their treasuries (to buy elections).”

If the court does overturn both law and precedent to advance a corporate Read more →

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Lanny Davis's Rent-a-Wisdom

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Lanny Davis has wasted no time trying to spin MA voters’ rejection of Obama’s focus on corporations rather than people into an attack on progressives. He starts by ignoring that aspect of the liberal complaint and (as the Administration is doing) blaming all of this on Coakley.

Liberal Democrats might attempt to spin the shocking victory of Republican Scott Brown in Massachusetts by claiming that the loss was a result of a poor campaign by Martha Coakley. Would that it were so.

Then, incredibly, Lanny says something I agree with:

This was a defeat not of the messenger, but of the message—and the sooner progressive Democrats face up to that fact, the better.It’s the substance, stupid!

But from there, Lanny makes several mistakes of analysis you’d expect from someone with a history of selling out real Democratic values.

Lanny says backroom deals sunk Coakley; but then says this is the fault of progressives (Ben Nelson? Hello!!!)

Lanny turns on the insurance industry’s second-biggest champion after President Lieberman, President Nelson, and disowns his smarmy deals.

Then there were the two “deals” that put congressional Democrats in a worse light than the infamous “Bridge to Nowhere”—as impossible as that might have seemed—as an emblem of the special interest politics Barack Obama ran against. We Democrats had to explain to Massachusetts voters and other Americans why non-Nebraskans and nonunion members have to pay more taxes, while Nebraskans and union members get to pay less. Those two deals seem to have alienated most people across the political spectrum.

It is true that voters soured significantly on Coakley after Ben Nelson got his deal. Of course, one big reason for that is that, after MA primary voters picked Coakley partly for her very strong stance defending choice, her election would simply have empowered people like Nelson to gut choice. But somehow Lanny ignores both the demands Nelson made on choice as well as Nelson’s and Lieberman’s insistence that insurance companies not face any competition from Medicare or a public option.

Lanny says a deal that had not yet happened–the excise tax deal–and actually explicitly benefited more than unions was the cause of Coakley’s loss because it painted unions as exceptionalists?

And then there’s Lanny’s attempt to throw the unions–who have been negotiating a deal on the excise tax–in with Ben Nelson. Thing is, that deal, unlike Nelson’s deal, hasn’t happened yet! Not to mention the fact that the deal proposed between the unions and the Administration would have helped all middle class families by exempting dental and vision coverage, making sure older and sicker workers weren’t unfairly punished, and raising the amount at which the excise tax kicked in.

Lanny celebrates getting everyone health insurance–but not care

Then, Lanny makes the mistake that many supporters of the insurance friendly bill make: confusing health insurance with health care.

The Democrats have a simple message on health care that has still not really gotten through: If our bill passes, you never have to worry about getting, or losing, health insurance for the rest of your life.

Thing is, people from Massachusetts know better, because they’ve already got precisely the kind of system that ensures everyone has health insurance even if 21% of those paying lots of money to insurance companies can’t actually afford to use that insurance. MA voters know better than many that having health insurance doesn’t necessarily mean you can get health care.

Lanny mysteriously talks about an Obama plan that didn’t include EITHER a public option OR a mandate–yet there was no time when that was true (and polling still says the PO was the only thing that made this palatable)

Finally, Lanny invents a mythical Barack Obama who at one point supported neither a mandate nor a public option.

The purists on the left of the Democratic Party who demanded the “public option” or no bill at all apparently forgot that candidate Obama’s health-care proposal did not include a public option; nor did it include a government mandate for everyone to either purchase insurance or pay a significant tax approximating the cost of that insurance—the “pay or play provision” in both the Senate and House bills.

Candidate Obama supported a public option with no mandate. President Obama supported a mandate and paid lip service to a public option. But at no point did “his plan” lack both a public option and a mandate. Though I guess Lanny is distinguishing here between the mandate in Obama’s bill (up to 2% of income) and the mandate–like the one in MA’s program!–that is tied to the cost of insurance premiums. I’m not sure why that distinction would be relevant to MA residents though.

And of course, polling still shows that having a mandate is more popular when people can choose not to give their money (20% of which can go to profit and marketing) to private insurance companies.

Now, I don’t blame Lanny for staying up all night to try to spin Coakley’s loss as a call to move to the center. The more logical lesson to draw from it is that Americans are sick of corporatists like Lanny Davis (he rather amusingly adopted the label “liberal” for himself in this piece, though I suspect WSJ may have just stripped the “Neo-” that came before it). Which is precisely what Lanny’s extensive parsing tries to deny.

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On Gruber: I Don't Want Apologies. I Want Independent Analysis.

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Between the auto show and the Prop 8 trial and associated travel, last week was tremendously exhausting for me and it will take me several days to actually report on those two events. But it seems one thing hasn’t moved on very much since last Sunday–the reporting surrounding Jonathan Gruber’s role in pitching the Administration’s health care. Gruber’s defenders are still falsely claiming I accused Gruber of tainting his analysis for pay (I said, “I don’t doubt he believes all this stuff”) and suggesting that I’m ignoring Gruber’s qualification for the HHS contract (I wrote an entire post affirming that the sole source on it made sense). Now, the debate has ratcheted up as some very able commentators call for apologies.

Unfortunately, that debate–like Gruber’s failure to reveal his conflicts in the first place–has supplanted what is really long overdue in this policy debate: real analysis of the assumptions behind the $850 billion plan about to be enacted by Congress, the assumptions that Gruber had a key role in formulating.

Gruber’s public claims delayed real analysis of the claim that the excise tax would raise workers’ wages

To explain why this is important let me make a suggestion that I can’t prove, but which is the reason I started looking at this in the first place: because someone as credible as Gruber made certain claims about the excise tax, others in his field did not examine his claims in timely fashion.

Gruber, in conjunction with the Joint Committee on Taxation, has long been claiming that the excise tax would raise workers’ wages. I first started challenging that claim in October, in response to an Ezra Klein post that relied on Gruber’s faith-based claim that the excise tax would lead to higher wages. On November 5, Gruber quantified the benefit as $74 billion in 2019. And by December, I was in full panic mode, given that no economist could point me to a study proving the point, even in the face of benefit consultants’ surveys refuting it. Economists kept pointing me to Gruber’s papers and telling me not to worry my sweet little non-economist head about such matters.

Perhaps because of the work of the Economic Policy Institute, people finally started looking at this key claim in the last two weeks. No lesser economist than Gruber’s chief defender, Paul Krugman, judged that those making the claim (Krugman implied, but did not say explicitly, that this criticism was directed at Gruber) were exaggerating. And Gruber, who backed off the claim slightly after having had his conflicts exposed, has since admitted privately that he “over-reached” in his earlier statements.

So to review what happened: for a number of months, unions and benefits professionals and dirty fucking hippies like me challenged this assumption, but no one in Gruber’s field appears to have done any independent analysis of his claims. As a result, the excise tax was passed by the Senate based on at least one erroneous assumption. But now, either because economists have weighed in or because Gruber’s conflicts have been exposed, a key part of those assumptions has been challenged (and, in a perhaps not unrelated development, unions have been able to negotiate a palatable deal on this issue).

This kind of analysis should have happened last fall, but it did not, at least partly (I would argue) because someone of Gruber’s prominence had strongly made the claim. His colleagues didn’t do what scholars normally do, regardless how prominent the scholar, which is to check his work. And again, none of this is meant to say Gruber “over-reached” with this claim intentionally. Rather, because the normal peer review of Gruber’s claims didn’t happen, he (and with him, the Administration and the Senate) made a mistake, one that has already had real policy implications.

The entire basis for the excise tax remains unexamined

Now, this matters to me not because a bunch of prominent people are accusing me of being a scandal-monger, but because I believe some more key assumptions about the health care reform have not been adequately examined. In fact, there are two key claims about the excise tax that have, at the least, gotten far too little scrutiny.

Start with the revenue model. Read more →

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NY Times Admits Gruber Problem, Fails To Mention Krugman Problem

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imagesIn a full throated mea culpa by the New York Times Public Editor, Clark Hoyt, appearing in the Sunday edition, the Times officially describes the critical and material implications that arise when readers are misled by undisclosed interests of sources and authors in their paper of record.

These examples have resulted in five embarrassing editors’ notes in the last two months — two of them last week — each of them saying readers should have been informed of the undisclosed interest. And on Thursday, the standards editor sent Times journalists a memo urging them to be “constantly alert” to the outside interests of expert sources. The cases raised timeless issues for journalists and sources about what readers have a right to know and whose responsibility it is to find it out or disclose it.

That is exactly right. One of the prime examples the Times’ Public Editor bases his proper conclusion on is that of Jonathan Gruber:

Jonathan Gruber, a prominent M.I.T. health economist, wrote an Op-Ed column and was quoted frequently in other Times columns, news articles and blogs on health care reform before it came to light that he had a contract worth nearly $400,000 to analyze health proposals for the Obama administration.

….

Gruber, the health care economist, wrote an Op-Ed column in July supporting an excise tax on so-called Cadillac health plans. Not long before, he had signed a contract with the Department of Health and Human Services to analyze the economic impact of various health care proposals in Congress. He did not tell Op-Ed editors, nor was the contract mentioned on at least 12 other occasions when he was quoted in The Times after he was consulting for the administration. After a blogger reported on Gruber’s government contract on the Daily Kos Web site, Gruber did volunteer it to Steven Greenhouse, a Times reporter interviewing him for an article on the excise tax. Greenhouse said he included the fact in a draft but struck it because the article was too long. Greenhouse said that Gruber’s views on the tax were so well-known that he did not think they would be influenced by a consulting contract. But had he realized how large the contract was, Greenhouse said, “I would have stood up and paid lots more attention.”

While it is nice the Times has admitted its problem with Gruber, and his wantonly serial failure to disclose material facts and appearances of conflict, it is extremely curious and convenient they dodge the most recent, and in many regards most glaring, example of their damage from Gruber’s Read more →

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Marcy Wheeler TeeVee – Jonathan Gruber and the Cadillac Plan

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There has been a fair amount of misinformation and disinformation about what has been said by Marcy Wheeler on this blog about Jonathan Gruber, his modeling work on healthcare and relationship with the Obama Administration. One instance in this regard, quite unfortunately, was notably made by Paul Krugman. Mr. Krugman, who is a solid liberal voice and worthy of respect, nevertheless very unfairly tarred Marcy with complaints he had, or perceived, with others and he owes better.

First off, I would like to point out the matter of Gruber started primarily about the duty and obligation of disclosure, and there was, unequivocally, a failure in full disclosure by both Mr. Gruber and the White House, both relying on his work (inferring that it was independent), and simultaneously funding it, whether directly or indirectly. For Mr. Krugman to extrapolate that out to being “just like the right-wingers with their endless supply of fake scandals” was startling and beyond the pale. There was also no foundation for it from Marcy’s words and statements on this blog.

The foregoing is something that I, bmaz, felt compelled to say; if you disagree, then your beef is with me, not Marcy, not Firedoglake, nor anybody else. Now, with that said, I wish to present Marcy Wheeler and let her speak for herself about exactly what the Gruber matter is about, and what it means. The attached video clip is from a MSNBC interview of Marcy conducted by David Shuster Tuesday morning.

It should be noted that Marcy was covering the North American International Auto show in Detroit when MSNBC interviewed her, as David Shuster notes. What David didn’t catch was that, the whole time he was discussing the infamous “Cadillac tax” Mr. Gruber’s work is central to, Marcy was standing in front of the Cadillac display. Now that is product placement!

Interestingly enough, in discussing the Cadillac tax, Paul Krugman has flat out admitted the claims of insurance premium reductions leading to wage increases are “exaggerated” and that “Cadillac plans aren’t really luxurious — they reflect genuinely high costs.” Mr. Krugman might want to take a look at the most recent work by Larry Mishel, an economist Mr. Krugman has cited before; in fact the exact economist Paul cited as support for the fact that the wage growth claims were “exaggerated”. Mr. Mishel’s new article seems to undercut the entire Cadillac tax thesis as to wage movement.

UPDATE: Economist Larry Mishel, who was linked to in the main post and referred to with seeming approval by Paul Krugman as well (link to that also in main post) put the following in a comment to his FDL Seminal Post yesterday:

I do think Gruber’s claim about the wage impact of lower health care inflation in the 1990s (and the reverse trends in the 200s) was wrong: The simple tale seemed to support his policy desire to curtail health care costs via the excise tax but digging into the details shows that health care costs have not driven wage trends. This does not mean that lower health care costs might not lead to better wages, just that the scale of the impact won’t move wages appreciably.

I may differ with many of you on the site though in that I don’t impugn Gruber’s motives. I don’t think there’s much of a scandal regarding his contract with HHS. I think his error in the case I’m criticizing is that he’s a health care economist and doesn’t know the details about wage trends. I, on the other hand, have been studying wages for thirty years or more. Gruber clearly over-reached with the argument about health care driving wage trends and has acknowledged that to me privately (yesterday).

So, I think he’s wrong on this issue and I also disagree with him on the overall merits of the health excise tax. But I think he’s a pretty smart, reasonable and straightforward economist. I’ve had to debate some pretty scummy economists and he’s not one of them. (emphasis added)

I agree with Mr. Mishel about the absence of malice by Mr. Gruber. But malice was never ascribed by Marcy Wheeler, she merely pointed out that there was a simple failure to fully disclose potential conflict information, that others had an interest in knowing, and that the assumptions Mr. Gruber’s model was based on may not be correct. These points have been borne out by others, indeed effectively by Paul Krugman himself and other experts he relies on. The tarring that occurred from Paul should be retracted.

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Krugman on the Cadillac-as-Chevy

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A number of people have pointed to this Krugman post, in which he seemingly agrees with the excise tax apologists.

I think that states his position too strongly. What Krugman does is argue is that it makes sense to limit the tax exclusion for benefits. At the same time, he admits there are problems with imposing the excise tax as a flat dollar amount, not least because it’ll end up targeting older workers and those with chronic medical issues. In that stance, Krugman endorses a key point raised by excise tax critics–that it is taxing people who need the insurance, rather than just the affluent.

Here’s how Krugman weighs in on the Excise Tax Raise claim.

Second, there’s the argument that any reductions in premiums won’t be passed through into wages. I just don’t buy that. It’s true that the importance of changing premiums in past wage changes has been exaggerated by many people. But I’m enough of a card-carrying economist to believe that there’s a real tradeoff between benefits and wages.

Maybe it will help the plausibility of this case to notice that we’re not actually asking whether a fall in premiums would be passed on to workers. Even with the excise tax, premiums are likely to rise over time — just more slowly than they would have otherwise. So what we’re really asking is whether slowing the growth of premiums would reduce the squeeze rising health costs would otherwise have placed on wages. Surely the answer is yes.

I’ll come back to that, but first I want to treat his rebuttal of the third complaint about the excise tax–that it targets unions that have exchanged salary increases in the past for benefits–because I think it is illustrative to the question of the Excise Tax Raise.

The last argument is that this hurts unions which have traded off lower wages for better benefits. This would be a bigger issue than I think it is if the excise tax were going to kick in instantly. But it won’t, giving time to renegotiate those bargains. And bear in mind that this kind of renegotiation is exactly what the tax is supposed to accomplish.

Krugman suggests, I think, that the unions that will be disproportionately affected by this tax will have three years to negotiate new contracts that (presumably) take more compensation in wages and less in health care.

Nationally, one of the unions that will be most affected by this is AFSCME–national, state, and local government workers. The teachers unions are also likely to be affected.

So what do you think the chances are, in an economic environment in which many states are struggling to close budget deficits, in which states are cutting basic services and educational resources dramatically, that any contract renegotiation in the foreseeable future would involve a one-to-one swap of wages for health care costs or even any raise at all? What are the chances that elected government officials would give public employees salary increases when all their constituents were struggling, rather than putting that money back into the services that constituents need?

Not. Gonna. Happen.

In another economic environment, unions might be in a position to negotiate for raises to offset hits to their benefits package. But not in this economic climate, not these unions.

Which brings me back to Krugman’s take on the Excise Tax Raise.

Krugman starts by ceding that “the importance of changing premiums in past wage changes has been exaggerated by many people.” “The Shrill One” is being polite here in not naming names. But the report he links–the EPI report I’ve cited–introduces the claim this way:

Jonathan Gruber, an economics professor at M.I.T., argued in an op-ed in the Washington Post on December 28, 2009:

And when firms reduce their insurance generosity, they make it up in higher pay for their workers. We saw this in the late 1990s, when the rise of managed care temporarily lowered insurance costs, and wages rose in real terms for the first time in many years. But as soon as managed care was weakened and health costs rose again, we once again saw flat or declining real wages in the United States. (Gruber 2009)

The paper then goes on to name Ezra Klein and NYT’s David Leonhardt as the others making this claim.

In other words, Krugman starts by saying that Gruber and others are exaggerating the degree to which wage increases in the late 1990s were caused by a slowing rise in health care premiums. So Krugman’s rebuttal is, in part, a Nobel Prize winner affirming that the excise tax’s biggest boosters are overselling their case.

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