The Agenda

NRO’s domestic-policy blog, by Reihan Salam.

Poverty and Worklessness


The anniversary of LBJ’s declaration of a “War on Poverty” has prompted much reflection. Florida Sen. Marco Rubio has just given a speech at the American Enterprise Institute, which draws on some of the idea Oren Cass introduced in his essential National Review article on reforming anti-poverty efforts, “The Height of the Net.” I’ll have more to say about the speech, but for now I want to address a larger conceptual question. Last week, Mike Konczal of the Roosevelt Institute observed that while there is disagreement regarding whether a modest increase in statutory wage floors will generate employment losses, there appears to be a broad consensus that it will reduce the number of people living below the poverty line. Konczal’s argument is that even if a higher minimum wage results in (modest) employment losses, this decrease in poverty is reason enough to favor a higher minimum wage, as the (anti-poverty) benefits outweigh the cost (in job losses, or reduced work hours). Rather than rehash the argument over whether the minimum wage is preferable to low-wage employment subsidies (Greg Mankiw offers the latest salvo in favor of the latter position), Konczal’s column brings to mind larger questions about poverty: what is it, how do we define it, and why does it matter?

For those who believe that the dignity of labor is an important value in itself, the fact that a higher minimum wage might mean job losses is of no small significance. It is also true, however, that a higher minimum wage can be seen as a means of enhancing the bargaining power of low-wage workers relative to their employers, and that the same is true of offering other alternatives to low-wage work via something like an unconditional basic income, like non-market work (household production, etc.) or idleness. [A friend notes that it could be the exact opposite: "There are probably a lot of people who would be willing to do certain jobs for $10 or $15/hr that would not be willing to do so for $7.25. It'd also be harder to find a new job. So the bargaining power shifts, in fact, to the employer -- the worker can be replaced with someone from the long line of eager applicants. The boss doesn’t have to be very nice to you (allowing for swapped shifts, time off, paid lunches, etc) if there’s 20 people dying to take your job. Note that this happens irrespective of whether the number of jobs is affected by a higher minimum wage. "] But the argument from poverty reduction is a powerful one, despite the fact that the concept of poverty is poorly understood. Indeed, Dube doesn’t just rely on the federal poverty level as his yardstick (it is also true, however, that the standard errors in his paper appear to be quite large to my untrained eye)*:

The findings for the gap and squared gap measures show that minimum wage increases do not reduce poverty by merely pushing some families above the poverty line, but rather by increasing incomes substantially and further below the poverty line. This finding is consistent with sizable reductions in the proportion below 50 and 75 percent of the poverty line.

One of the most important challenges facing policymakers is the fact that families that climb out of poverty often fall back into it as various personal disasters. Raising incomes, and specifically raising market incomes, seems like a worthy goal, but it’s also important to emphasize “stickiness.” That is, we don’t want people experiencing big income drops after achieving income gains; we want them to build resources, economic and social, that can keep them from falling down the ladder. This is where concerns about worklessness come in.

To make a brief tangent, Roger Pielke Jr. of the University of Colorado-Boulder, a scholar best known for his work on environmental policy, describes the origins of the federal poverty rate:

The official poverty rate was initially developed in the early 1960s, based on a long history of research and debates over the measurement of poverty (this paper by Gordon M. Fisher provides a detailed look at that history). The more proximate history of the early 1960s involved several analyses by Mollie Orshansky see this in PDF) of the Social Security Administration which arrived at a quantification of a poverty threshold. Lyndon Johnson declared a “war on poverty” soon after Mollie Orshansky published her first paper on poverty thresholds.

Orshansky came up with a threshold based on how much it cost to feed a family (this history is detailed in this paper in PDF by Fischer). Quantification of how much it cost to feed a family was based on a survey done by the US Department of Agriculture, initially in 1933 and extended in 1961 based on data from 1955 to include an “economy food plan.” Orshansky assumed that a family would spend one third of its income on food. The poverty threshold was then determined to be that point at which family income was low enough such that the amount spent on food equaled that determined to be necessary under the “economy food plan” calculated based on food prices of 1964.

And as Pielke goes on to argue, though the poverty rate is in some sense arbitrary, it has important implications for how Americans think about improving the well-being of people at the bottom of the income distribution. He offers one minor suggestion for improving how we think about poverty — shifting to a dollars per day framework:

One quick way to improve such debates would be to do as the UN does and focus on poverty in terms of an income measured in dollars per day. So instead of talking about a percentage below a “poverty threshold” whose provenance date to the 1950s, we would discuss the number of people below a daily income threshold — which in this case is $32.11 per day (recognizing that the official numbers do not fully represent what poor people actually live on, as mentioned above).

This doesn’t help us answer the more difficult normative questions, but it gives us a more accessible number to work with.

I am increasingly convinced that the social indicators that merit more attention relate to neighborhood effects, like the concentration of poverty and the concentration of worklessness, as an individual- or even a household-centered framework misses the various ways in which people are shaped by their environments. Patrick Sharkey’s Stuck in Place offers an alarming look at life high-poverty neighborhoods:

In both periods, high-poverty neighborhoods had extremely high rates of joblessness and idleness. For instance, in 1970 high-poverty neighborhoods had 8 percent unemployment, 19 percent welfare receipt, and a high school dropout rate of 28 percent among youth aged 16– 19. By 2000 these figures had changed somewhat due to the growing educational attainment of the population as a whole and the worsening economic climate in such neighborhoods— in 2000, high-poverty neighborhoods had unemployment rates of 17 percent and welfare receipt rates of 23 percent, while 18 percent of youth aged 16– 21 were high school dropouts. Compared to the rest of the nation, these neighborhoods featured a remarkable concentration of jobless adults— in 2000, the unemployment rate in high-poverty neighborhoods was more than three times as high as in the rest of the nation.

People who work full-time, full-year are very unlikely to be poor, and they are relatively unlikely to live in high-poverty neighborhoods. So high-poverty neighborhoods are environments in which people are often isolated from the world of work. And since social networks are the main way information about employment opportunities is transmitted, poor people living in poor neighborhoods find themselves caught in a trap. When you look at the income of an individual or a household, we miss valuable information about the social context in which they are embedded. It is the social context that tells us whether they will be subject to churn, falling above and below the poverty line, or if they will be in a position to climb out of poverty in a lasting, durable way.

The anti-poverty agenda of the future will involve things like streamlining wage subsidies and work supports. But it will also have to involve reorienting the networks of mutual support that already exist in poor communities towards mutual uplift and self-help, and rethinking crime control and housing policies that exacerbate the concentration of poverty and worklessness.

*I’ve revised this post to reflect Dube’s work on alternative poverty measures.

Overstating the Success of the Medicaid Expansion


The emerging consensus on the first months of the Affordable Care Act is that while the implementation of the exchanges has gone poorly by any reasonable standard, and that while cancelations of individual insurance policies have greatly exceeded expectations, the Medicaid expansion has been fairly successful, considering that a large numbers of states have refused to participate in it. But Sean Trende gives reason to doubt this consensus view. The Obama administration has observed that as many as 4 million people have signed up for Medicaid coverage in recent months, a success they’ve attributed to Obamacare. Trende suggests that most of the Medicaid enrollment we’ve seen would have occurred even in the absence of the new health law, in part because a large share of new Medicaid enrollees are in states that chose not to accept the Medicaid expansion, but also because the expansion states tend to be states that already had relatively expansive Medicaid eligibility. By comparing Medicaid enrollment across states before and after the ACA entered the picture, Trende estimates the impact of the expansion. Of the 4 million new Medicaid sign-ups, he (tentatively) suggests that only 380,000 are directly attributable to the Obamacare Medicaid expansion.


The Snowden Clemency Debate


Last week, Fred Kaplan, the Edward R. Murrow press fellow at the Council on Foreign Relations and a frequent Slate contributor, argued that though Edward Snowden might have merited lenient treatment for disclosing national security secrets that related to domestic surveillance, Snowden in fact did much more than that:

The documents that he gave the Washington Post’s Barton Gellman and the Guardian’s Glenn Greenwald have, so far, furnished stories about the NSA’s interception of email traffic, mobile phone calls, and radio transmissions of Taliban fighters in Pakistan’s northwest territories; about an operation to gauge the loyalties of CIA recruits in Pakistan; about NSA email intercepts to assist intelligence assessments of what’s going on inside Iran; about NSA surveillance of cellphone calls “worldwide,” an effort that (in the Post’s words) “allows it to look for unknown associates of known intelligence targets by tracking people whose movements intersect.” In his first interview with the South China Morning Post, Snowden revealed that the NSA routinely hacks into hundreds of computers in China and Hong Kong.

These operations have nothing to do with domestic surveillance or even spying on allies. They are not illegal, improper, or (in the context of 21st-century international politics) immoral. Exposing such operations has nothing to do with “whistle-blowing.”

More recently, Slate’s David Weigel interviewed former Montana Gov. Brian Schweitzer, an unorthodox Democrat who is emerging as a serious candidate for the 2016 Democratic presidential nomination on the subject of Snowden’s future:

David Weigel: You start off every morning at 4 a.m. or so, reading national news, so I assume you read the New York Times editorial calling for clemency for Edward Snowden. Do you agree with the Times? Would you grant clemency?

Brian Schweitzer: If Edward Snowden is a criminal, then so are a lot of people that are working within the CIA and the NSA who have been spying illegally on American citizens. They ought to grant Snowden clemency. Now, let me say this: Shame on us if we had a person working for a private contractor, without a high school diploma, who was in possession of our most delicate secrets. We look like Keystone Kops! But I don’t have any problem with the NSA and their mission of collecting information on foreign leaders. They spy on us; we spy on them. I’ve got a real big problem with American neighbors spying on American neighbors.

Schweitzer is a shrewd politician, and one assumes that he has given his position on Snowden some thought. He appears to have concluded that defending Snowden will strengthen his civil libertarian bona fides, and that Kaplan’s contention that Snowden’s revelations materially damaged America’s ability to achieve legitimate foreign policy objectives is not enough to merit serious punishment. Kentucky Sen. Rand Paul, another future presidential contender, has called for lenient treatment of Snowden, if not clemency. There are many smart people who agree with Kaplan on the one hand and Schweitzer on the other, and though I can’t imagine that the Obama administration will embrace the idea of lenient punishment or clemency, there are plenty of mainstream Democrats who favor it. I’m going to interview two very smart people on this subject on Friday, and I’ll be sure to report back.

Incomes in the ’00s


Gary Burtless of the Brookings Institution delves into a new report from the Congressional Budget Office on the distribution of household income and federal taxes from 2000 to 2010, a tumultuous decade that began with a mild recession, was followed by an anemic labor market recovery, and which saw a housing bust, a financial panic, and the sharpest economic contraction since the Depression era in its last few years. He specifically focuses on household income growth and income inequality:

Over longer time horizons and measured over full business cycles the latest CBO numbers confirm that the income gains of the top 1% have been considerably faster than those enjoyed by middle-income Americans. For example, between 1979 and 2010 the after-tax real incomes of the top 1% tripled. Households in the middle three-fifths of the income distribution saw their after-tax incomes grow only about 40% (see Chart 2). What the CBO statistics do not show, however, is that middle- and low-income families have failed to share in the nation’s long-term prosperity. Over the past one-, two-, and three-decade periods, both middle class and poor households have experienced noticeable gains in living standards. Their gains are slower than those experienced by middle-income families in the earlier post-war era, but the gains are well above zero.

One reason that many observers miss these income gains is that the nation’s most widely cited income statistics do not show them. A commonly used indicator of middle class income is the Census Bureau’s estimate of median household money income. Measured in constant dollars, median household income reached a peak in 1999 and fell 9% in the years thereafter. The main problem with this income measure is that it only reflects households’ before-tax cash incomes. It fails to account for changing tax burdens and the impact of income sources that do not take the form of cash. This means, for example, that tax cuts in 2001-2003 and 2008-2012 are missed in the Census statistics. Even worse, the Census Bureau measure ignores income received as in-kind benefits and health insurance coverage from employers and the government. By ignoring in-kind benefits as well as sizeable tax cuts in the recession, the Census Bureau’s money income measure seriously overstated the income losses that middle-income families suffered in the recession. Under the CBO’s most comprehensive measure of income—total after-tax and after-transfer income—the median household income fell less than 1% between 2007 and 2010. Under the Census Bureau money income definition, median household income fell almost 7% (see Chart 3).

The new CBO income statistics show the growing importance of these items. In 1980, in-kind benefits and employer and government spending on health insurance accounted for just 6% of the after-tax incomes of households in the middle one-fifth of the distribution. By 2010 these in-kind income sources represented 17% of middle class households’ after-tax income (see Chart 4). The income items missed by the Census Bureau are increasing faster than the income items included in its money income measure.

The irony of relying on before-tax cash incomes to inform policy debates is that doing so obscures the impact of changes in public policy that have already occurred. When we instead embrace the CBO’s approach and consider after-tax and after-transfer income, we have a more realistic sense of how public policy tools have already been deployed, and what more we can and ought to do to boost low-end incomes.

The broadest and most accurate measures of household income are published by the CBO. CBO’s newest estimates confirm the long-term trend toward greater inequality, driven mainly by turbo-charged gains in market income at the very top of the distribution. The market incomes of the top 1% are extraordinarily cyclical, however. They soar in economic expansions and plunge in recessions. Income changes since 2007 fit this pattern. What many observers miss, however, is the success of the nation’s tax and transfer systems in protecting low- and middle-income Americans against the full effects of a depressed economy. As a result of these programs, the spendable incomes of poor and middle class families have been better insulated against recession-driven losses than the incomes of Americans in the top 1%. As the CBO statistics demonstrate, incomes in the middle and at the bottom of the distribution have fared better since 2000 than incomes at the very top.

Given that the market incomes of the top 1 percent are so cyclical, there is a real danger in building a tax system that relies so heavily on high-earners, as revenues will collapse when you need them most and they will surge during business cycle peaks in ways that might give rise to unsustainable spending commitments.

I would add a minor wrinkle to Burtless’s analysis of high-end incomes, which is that while the the CBO data is very valuable, it misses an important part of the story, as Scott Winship reminded us in October — it only imperfectly captures capital income:

The CBO and Piketty-Saez income figures are only able to account for capital gains that are both taxable and realized. Burkhauser, Armour, and Larrimore point out two big problems with this restriction. First, tax-exempt realized capital gains are ignored, including those from the sale of homes. These constitute a large share of capital gains received by the non-rich, so ignoring them overstates the rise in inequality. Another issue related to tax exemption is that savvy taxpayers at the top can alter their asset allocations so that more or fewer of their realized gains are taxable in response to tax law changes.

Second, and more important, there is a conceptual problem including realized capital gains in “income” but not the gains that accrue on assets that are held rather than sold. For one, the distinction is immaterial. Gains that accrue each year add to the resources available for consumption or saving whether they are realized or not. No less than realized gains, accrued gains not realized constitute part of the annual “flow” of resources properly conceived as “income” (as distinguished from the “stock” of accumulated resources properly thought of as “wealth”). In addition, investors strategically choose to realize capital gains depending on the state of asset markets and on changes in the tax treatment of different assets. Realization of gains accrued over many years tends to show up in tax return data in lumpy ways, as Cato Institute scholar Alan Reynolds has argued. A sizable share of the capital gains accruing to middle class households builds up over adulthood in accounts such as IRAs and 401(k)s and is not realized until retirement.

So the volatility, or lumpiness, Burtless identifies is real, but it is in part an artifact of the fact that tax policy influences when people choose to realize capital gains for tax purposes. The problem, as Winship makes clear, is that it is very difficult to measure fluctuations in the value of assets over time.

Bloombergism with a Populist Mask


There is a phrase one occasionally hears on the left — “There Is No Alternative,” or TINA, a reference to Margaret Thatcher’s frequent insistence that “there is no alternative,” or rather no viable or sensible alternative, to market-oriented policies. There are at least some liberals and social democrats who accept the basic TINA thesis, and who mainly seek to soften the hard edges of neoliberalism. But others insist that there really is an alternative to neoliberalism, and that neoliberalism is morally and intellectually bankrupt. This trope comes to mind as Bill de Blasio, the new mayor of New York city, takes office. In his surprisingly hard-edged, if not mean-spirited, inaugural address, de Blasio presented himself as a tribune of the people, and in the weeks leading up to his mayorality, he pledged to depart from his predecessor’s approach to stop-and-frisk and real estate development, which he maligned (and egregiously mischaracterized) at every turn. But in appointing Bill Bratton as his new police commissioner, de Blasio has all but acknowledged that stop-and-frisk will continue. And as Jim Dwyer of the New York Times recently observed, the number of stops has already fallen dramatically — so much so that it is hard to imagine it falling much further. Meanwhile, Stephen J. Smith of The Next City reports that de Blasio’s new deputy mayor for housing and urban development is a veteran of a number of real estate projects spearheaded by the Bloomberg administration:

“We can do so much more to lift people up by investing in our neighborhoods,” [Alicia] Glen said in a statement, “especially in the outer boroughs.” She also said she would “not just [focus] on the large-scale projects that have been front and center over the past decade, but focusing on a comprehensive approach to neighborhood revitalization.”

The media played this up as some sort of rebuke to Bloomberg — who, of course, was an important partner for Glen’s work with Goldman — but it’s largely a continuation of his administration’s affordable housing strategy. Of the 160,000 housing units “created or preserved” through his New Housing Marketplace plan, only about 51,000 were located in Manhattan, with more than 100,000 spread throughout the five boroughs, overwhelmingly in Brooklyn and the Bronx.

And while “large-scale projects” like Atlantic Yards and Hudson Yards made the most headlines, they were a drop in the bucket compared to the tens of thousands of units built on city-owned land in places like Morrisania in the Bronx or Brownsville in Brooklyn. The last major affordable housing project of the Bloomberg administration — a completely subsidized, 985-unit, five-building, mixed-income complex in the Melrose section of the South Bronx – is more representative of Bloomberg’s approach to affordable housing than the megaprojects Glen seems to be subtly dissing.

So it seems that when it comes to governing monolithically Democratic New York city, the politics of which must balance the interests of a large, vocal minority of organized public employees and a large, vocal minority of high-earners, there is no alternative to technocratic neoliberalism. The alternative I can imagine would embrace the neoliberal framework, yet which would place heavier emphasis on grassroots entrepreneurship, in the private sector (relaxing licensing requirements, lowering taxes, letting informal transit boom) and the public sector (moving from an urban school system to a system of schools, reforming the city’s approach to Medicaid to promote business model innovation). But instead de Blasio is offering Bloombergism with a populist mask. We’ll see how well it plays. The really interesting question is whether de Blasio’s left-liberal rhetoric is designed to shield him from attacks from public sector unions in the event he decides to be a tough negotiator, in which case his flights of rhetorical Jacobinism are perhaps a price worth paying, or if he’s playing a different game.


The Politics of U.S. Economic Underperformance


Brad DeLong observes that U.S. GDP per capita will reach and exceed its 2007 level in 2014:

[D]uring the two business cycles that preceded the 2007 downturn, the US economy’s real per capita GDP grew at a 2% average annual pace; indeed, for a century or so, the US economy’s real per capita GDP grew at that rate. So US output is now seven years – 14% – below the level that was reasonably expected back in 2007. And there is nothing on the horizon that would return the US economy to – or even near – its growth path before the 2008 financial crisis erupted. The only consolation – and it is a bleak consolation indeed – is that Europe and Japan are doing considerably worse relative to the 2007 benchmark.

The US economy’s annual per capita underperformance in 2014 will thus amount to $9,000. That means $9,000 per person per year in consumer durables not purchased, vacations not taken, investments not made, and so forth. By the end of 2014, the cumulative per capita waste from the crisis and its aftermath will total roughly $60,000.

If we project that forward – with nothing visible to restore the US to its pre-2008 growth path – at the annual real discount rate of 6% that we apply to equity earnings, the future costs are $150,000 per capita. If we use the 1.6% annual real discount rate at which the US Treasury can borrow via 30-year inflation-protected Treasuries, the future per capita costs are $550,000. And if we combine the costs of idle workers and capital during the downturn and the harm done to the US economy’s future growth path, the losses reach 3.5-10 years of total output.

That is a higher share of America’s productive capabilities than the Great Depression subtracted – and the US economy is 16 times larger than it was in 1928 (5.5 times larger in per capita terms). So, unless something – and it will need to be something major – returns the US to its pre-2008 growth trajectory, future economic historians will not regard the Great Depression as the worst business-cycle disaster of the industrial age. It is we who are living in their worst case.

DeLong then suggests that income inequality is one of the chief reasons we haven’t seen a more robust policy response, as high-earners, who wield disproportionate political influence, have fared relatively well in recent years. There is something to this thesis, as high-earners, particularly college-educated, highly-ideological high-earners, are overrepresented in the social networks of elected officials, and the fact that they’ve fared relatively well might make them more risk-averse in assessing new policy initiatives. 

But it’s not clear to me that DeLong is right in his assessment of the past seven years:

When income inequality began to rise in the 1980’s and 1990’s, those of us who cut our teeth on the long march of North Atlantic history expected to see a political reaction. Democratic politics, we thought, would check the rising power of a largely parasitic economic over-class, especially if its influence caused governments to fail to live up to their commitments to provide full employment with increasing – and increasingly shared – prosperity. 

After all, in early-nineteenth-century Britain, growing inequality caused by the Industrial Revolution gave rise to movements for government regulation in the interests of the middle and working classes, and for a rebalancing of real incomes away from rich landlords. Similarly, the Great Depression produced enormous political pressure for reform and change (often for destructive and dangerous change, to be sure, but pressure nonetheless).

Why can’t America launch similar movements today? To the extent that this has become a valid question, most Americans should be as worried today about the quality of their democracy as they are about the inequality of their incomes.

First, it’s not at all clear that the top tenth and the top 1 percent of the income distribution, the groups DeLong (correctly) identifies as particularly politically influential, constitute “a largely parasitic economic overclass”; this might be a reasonable, or at least defensible, description of some subgroup of rent-seekers, but most of the people who fall into these groups are productive upper-middle-income professionals, many of whom are part of two-earner households. That is, these people are often pretty morally appealing and difficult to caricature or demonize as members of a parasitic economic overclass, nor can it be targeted on grounds of linguistic or ethnocultural distinctiveness, a device that has been used by populists in other eras and in other societies. During the Depression era, many of the movements that pressed for “reform and change” drew on ethnonationalist resentments to achieve their political goals. Though U.S. high-earners are disproportionately white (and Asian), this constituency is still relatively diverse.

Second, it seems churlish of DeLong to ignore the Obama administration’s efforts to promote redistribution. Though some of these efforts, like the Making Work Pay tax credit and the Social Security payroll tax cut, have lapsed, due in large part to political resistance from Republican lawmakers focused on deficit reduction (arguably to a fault), others, like the Affordable Care Act, required an enormous investment of political capital, and which promise to have large and significant effects over time. Though Obamacare isn’t exactly being celebrated at the moment, its a key part of the center-left strategy to make the U.S. welfare state more redistributive in the years to come. One assumes that DeLong doesn’t believe that Obamacare is sufficiently redistributive, but that doesn’t mean that a significant segment of the U.S. political class backed Obamacare precisely because it aims to transfer resources from high-earners to low-earners, though of course these transfers flow through medical providers. Indeed, a more interesting left-of-center critique of the Obama era might be that it has generally chosen redistribution that benefits medical and other social service providers as well as the poor rather than redistribution that cuts out the middleman. And the reply to this critique could then be that redistribution that cuts out the middleman is either unpopular (not just with the affluent but with middle-earners who resent the prospect of programs that reward people who don’t work, or who don’t work much) or that it fails to secure the support of influential service providers who are a key part of the coalition for redistribution. In other words, it could be that while President Obama shares Brad DeLong’s basic worldview, he is constrained by political realities that necessitate rewarding rent-seekers. 

I agree with DeLong that America’s economic underperformance is a tragedy, and I am open to his implied suggestion that there were spending initiatives that might have helped mitigate it, though I am more inclined to favor Michael R. Strain’s jobs agenda than the center-left prescriptions I imagine DeLong favors. But is the problem inequality or a pervasive cynicism about the efficacy of government — a cynicism that is not limited to the affluent, and that isn’t obviously a product of the underfunding of social programs?

Revisiting the Politics of the Affordable Care Act


One of the chief rationales for the Affordable Care Act was that while it would expand coverage to tens of millions of Americans, it would reduce the burden of medical expenditures over the long-run. Some of its supporters pointed to the experience of Massachusetts (an idiosyncratic state) as cause for optimism, including Jonathan Gruber in an optimistic 2011 assessment of the possible impacts of the ACA:

A major concern with such a large expansion in access to care is that it will cause congestion on the supply side of the market. Indeed, many have argued that we have a chronic shortage of primary care physicians in the Unite d States and that expanding coverage will only worsen that shortage. This has not been the case in Massachusetts, however. A recent study by the Massachusetts Medical Society found that average wait times for both family and internal medicine were basically flat in the period since the law passed (Massachusetts Medical Society, 2011).

Moreover, this expansion in insurance coverage has been associated with a rise in access to care. The share of the population with a usual source of care, the share with a doctor’s visit in he last 12 months, the share receiving preventive care, and the share receiving dental care all rose significantly from the fall of 2006 to the fall of 2008 (Long and Masi, 2009). Miller (2011) finds a modest reduction in the rate of utilization of emergency care in the state, while the Division of Health Care Finance and Policy (2009) reports a 40% decline in uncompensated care in the first year after reform.

While the Obamacare exchanges have enrolled relatively few people so far, the new Medicaid expansion is greatly increasing the ranks of the insured in the states that have chosen to participate. This is one of the many ways in which the ACA is unfolding differently than the Massachusetts universal coverage effort, as Massachusetts had a relatively small low-income uninsured population at the time its state law was passed. And so it is really important to understand how the Medicaid expansion might impact emergency care utilization, among other things. In theory, Medicaid allows low-income individuals to have a usual source of care, which in turn would tend to reduce utilization of emergency care. But as Sarah Kliff reports, a new study finds that Oregon’s 2008 Medicaid expansion has not resulted in reduced emergency care utilization — rather, it seems to have increased it:

Previous research on the Oregon Medicaid expansion has found that enrolling in the public program increased hospital visits, primary care trips and prescription drug use. That left an unanswered question: Were new Medicaid enrollees going their primary care doctor instead of the emergency department, or, were they using more of all types of health-care services?

This study suggests the latter answer: With financial barriers removed, Medicaid patients see their primary care doctor more — and also go to the emergency department at an increased frequency. Medicaid enrollees made, on average, 1.43 trips to the emergency department during the 18-month study period, compared to an average of 1.02 visits among those who entered the Medicaid lottery but did not gain coverage.

Medicaid coverage also increased the probability of having any visit to the emergency department by 7 percent. The researchers also looked at the types of visits and found no decline in use of the emergency department for primary care treatable conditions among those who had enrolled in Medicaid coverage.

Kliff does an excellent job of covering the implications of the study’s findings, and she quotes Gruber:

Gruber, the MIT economist, doesn’t see the Harvard study as a compelling case against expanding Medicaid. There are still other benefits to insurance coverage, he says, that aren’t about saving public funding. Separate research on the Oregon expansion, published last spring in the New England Journal of Medicine, found Medicaid enrollees to have significantly lower rates of depression and were more able to pay their medical bills.

“The overall notion is we’re getting people more health care,” Gruber says. “There are huge improvements in mental health. For those who want to argue that expanding Medicaid is a free lunch, this is bad. But that was never the right argument.” 

Yet as Kliff makes clear, advocates of Medicaid expansion touted the benefits of reducing emergency care utilization as an important argument in favor of passing the ACA. If the main benefit of Medicaid expansion is that it delivers huge improvements in mental health to its beneficiaries, it seems important to consider whether there are other more cost-effective strategies for yielding huge improvements in mental health, e.g., increasing cash transfers, marriage and relationship education, or targeted public health interventions.

Imagine if the debate over the Affordable Care Act had unfolded as follows — the president stated that in the interests of improving the mental health of low-income uninsured Americans, but not necessarily improving their health along other dimensions, he hoped to pass a large and expensive Medicaid expansion; to address the needs of the medically uninsurable population, he intended to implement a series of new insurance regulations that would, among other things, prompt the cancelation of large numbers of insurance policies serving the individual and small group insurance markets, with the net result being a reduction in the number of Americans with private insurance coverage, despite new subsidies aimed at low- to moderate-income households; and to finance these new initiatives, he’d restrict the growth of Medicare expenditures and he would raise various new taxes. It’s not obvious to me that this bundle would have struck many voters, including Democratic voters, as attractive.

Where Will the Obamacare Debate Go in 2014?


Jonathan Weisman of the New York Times invokes a “political fact” that isn’t best described as a fact in reporting on how Republicans are thinking about Obamacare:

“It’s no longer just a piece of paper that you can repeal and it goes away,” said Senator Ron Johnson, Republican of Wisconsin and a Tea Party favorite. “There’s something there. We have to recognize that reality. We have to deal with the people that are currently covered under Obamacare.”

And that underscores a central fact of American politics since Franklin D. Roosevelt signed the Social Security Act during the Depression: Once a benefit has been bestowed, it is nearly impossible to take it away.

Recall the political scientists Eric Patashnik and Julian Zelizer on some of the myths surrounding Obamacare:

Given how difficult it is to revise an existing law, it might seem that a program’s entrenchment is assured once it has been enacted. In his 1976 book “Are Government Organizations Immortal?” political scientist Herman Kaufman argued that “government activities tend to go on indefinitely.” More recent research demonstrates, however, that policy entrenchment has limits. According to a study by Christopher R. Berry, Barry C. Burden and William G. Howell, a spending program has a 1 percent chance of death every year in its first 10 years of life, after which the probability of termination slowly begins to decline. New policies are trial and error affairs, and they don’t always pan out. Programs can be killed. An example is the Medicare Catastrophic Coverage Act of 1988, which Congress terminated in 1989 when senior citizens soured on the measure. Short of formal repeal, programs can simply fade away, as did Lyndon Johnson’s Model Cities initiative and Richard Nixon’s revenue-sharing program. The main danger the ACA faces is not outright repeal, but the gradual whittling away of its subsidies, regulations and tax provisions.

Much depends on what we mean by “take it away.” It could be that once the principle of universal coverage is established, the genie can’t be put back in the bottle, for better or for worse. It is also true, however, that the Affordable Care Act is unlikely to achieve universal coverage in its current form, even if we assume that all states accept the Medicaid expansion. The decision by the Obama administration to allow over-30 individuals to purchase catastrophic coverage options on the exchanges suggests that we’re already seeing a “gradual whittling away” of some of the Obamacare’s regulations, and a number of its tax provisions, starting but not ending with the medical device tax, look vulnerable as well. If it turns out that the first year of implementation sees a net reduction in the number of Americans with private insurance, this whittling away will accelerate, and for good reason. (Moreover, the elimination of the filibuster for lower-court judicial nominees and executive branch appointments sets the stage for its eventual elimination for legislation as well, which greatly improves the prospects for repeal, though the odds are probably still worse than even.)

Weisman identifies two broad strategies Republicans are pursuing. Some, like Tom Price and Paul Ryan, favor root-and-branch reform that places heavy emphasis on reforming the tax treatment of medical insurance. Price’s approach, which is similar but not identical to a bill backed by the Republican Study Committee, differs in important respects from the approach Ryan has favored in the past, and it remains to be seen how Ryan and his allies will approach health-system reform in the coming year.* But Price and Ryan are both offering an agenda for replacing rather than reforming Obamacare.

Other Republicans, including Kelly Ayotte, are open to incremental reform:

Senator Kelly Ayotte, Republican of New Hampshire, said she was teaming up with Democrats on a host of incremental changes to the law, such as expanding health savings accounts and repealing a tax on medical devices. And other Republicans are wondering aloud how long they can keep up the single-minded tactic of highlighting what is wrong with the law without saying what they would do about the problems it was supposed to address.

A more robust reform agenda might focus on the ACA subsidy cliff, a subject Jonathan Wu of ValuePenguin recently addressed:

If your income is at or below the above 400% FPL figure for your household size, the government will subsidize your healthcare so that you spend no more than 9.5% of your income. Earn a dollar above the 400% FPL threshold and the subsidies disappear completely. This obviously creates a problem! If insurance costs substantially more than the capped premium for your family, that extra dollar may actually cost your household a huge amount in actual dollars.

Earlier this month, Katie Thomas, Reed Abelson, and Jo Craven McGinty of the Times reported on middle-income families bearing the consequences of the subsidy cliff, including a family in Ayotte’s home state. The problem is that addressing the subsidy cliff without deregulating the exchanges means spending much more to subsidize coverage for families further up the income scale. This is one reason why the root-and-branch approach favored by conservatives like Ramesh Ponnuru and Yuval Levin, in which the tax subsidy for ESI and the exchange subsidies are replaced with a flat and universal tax benefit for coverage, is so attractive to advocates of market-oriented reform — it doesn’t create the same work disincentives as sliding-scale subsidies, and insurers would be free to experiment with a wide range of low-cost benefit designs. Short of that, we might reform the subsidies by capping them at 300% FPL rather than 400% FPL while deregulating the exchanges, as Avik Roy and Douglas Holtz-Eakin have recommended. We’d still have a subsidy cliff, but the exchanges would also offer lower-cost options, thus mitigating its impact.

Right now, subsidies vary considerably for under-65s who are insured on the exchanges or through their employers, an artifact of the desire to contain the costs associated with Obamacare and to minimize the disruption (or the appearance of disruption) associated with moving from one mode of subsidizing insurance coverage to another. Don Taylor Jr. finds that the average subsidy for individuals with employer-sponsored insurance is $1650 while the average subsidy for individuals on the exchanges will be $5510, though of course these populations are quite different. While the subsidy for ESI rises with income, the subsidy for exchange insurance declines with income, a fact that will greatly complicate efforts to create a more coherent subsidy.

P.S. Earlier on, I incorrectly stated that the Price bill was backed by the RSC. 

Taxable Income vs. Economic Income and the Inequality Debate


Bruce Bartlett makes an important observation about the limitations of adjusted gross income or taxable income as a tool for understanding income trends over time:

Adjusted gross income excludes a number of important sources of income for the wealthy, including unrealized capital gains and interest on state and local government bonds. There are also a number of deductions from gross income to derive adjusted gross income, including contributions to retirement plans, alimony paid and others. Thus, adjusted gross income is considerably lower than what economists would call economic income — the total increase in someone’s ability to command resources during a year.

Bartlett raises this point in the context of the debate over the share of the federal income tax burden borne by high-earners, but it also has implications for the discussion over how income inequality has changed over time, as Phillip Armour, Richard V. Burkhauser, and Jeff Larrimore have suggested:

Recent research on United States levels and trends in income inequality vary substantially in how they measure income. Piketty and Saez (2003) examine market income of tax units based on IRS tax return data, DeNavas-Walt, Proctor, and Smith (2012) and most CPS-based research uses pre-tax, post-transfer cash income of households, while the CBO (2012) uses both data sets and focuses on household size-adjusted comprehensive income of persons, including taxable realized capital gains. This paper provides a crosswalk of income growth across these common income measures using a unified data set. It then uses a more consistent Haig-Simons income definition approach to comprehensive income by incorporating yearly-accrued capital gains to measure yearly changes in wealth rather than focusing solely on the realized taxable capital gains that appear in IRS tax return data. Doing so dramatically reduces the observed growth in income inequality across the distribution, but most especially the rise in top-end income since 1989. 

If we agree with Bartlett’s (implicit) take that “the total increase in someone’s ability to command resources during a year” is what matters most, it is interesting, if nothing else, that recent decades have seen a relatively modest increase in top-end economic income between 1989 and 2007:

[W]hen we include yearly-accrued capital gains excluding housing gains and private business gains, instead of taxable realized capital gains, the inclusion of these gains slows income growth in all but the bottom quintile of the distribution. Thus, when using this measure that is more in line with Haig-Simon’s income principles, the top quintile of the distribution had the least growth in income from 1989 through 2007 while the bottom quintile of the distribution had the most. Measured in this way income inequality fell between 1989 and 2007.

How is it possible that the choice of treatment of capital gains can have such a dramatic difference? It results from both the timing of realizing gains and from the likelihood of assets appearing in taxable accounts for individuals at different points in the income distribution.

One assumes that the picture has changed since 2007, and I await the evidence on how it has changed.

The Death of the Individual Mandate


Just filed a column on the latest Obamacare developments. The short version is that Obamacare is designed to expand coverage through a combination of carrots and sticks, and the sticks have been falling by the wayside. As Amy Goldstein of the Washington Post reports, the Obama administration has announced that people who’ve had their insurance policies (a) can purchase catastrophic plans on the insurance exchanges regardless of age and (b) they’ve been granted a “hardship exemption” from the individual mandate. (Here’s a quick primer on the individual mandate, which is quite a stick indeed for those subject to it.) The political challenge for the president and his allies is obvious. Douglas Holtz-Eakin of the American Action Forum explains it well:

Substantively, it opens the door to deferring the mandate entirely and by acknowledging that catastrophic plans would be suitable coverage it makes a lie of all the rhetoric about how existing insurance (“underinsurance”) is “subpar” and “poor”. It will be fine for 2014.  And it represents another round of changing the rules of the game for citizens and insurers.  It is ridiculously unfair to the latter, who the president just asked to cover bills even if they had not been paid, or even if it was not clear the person had a policy.  It is an invitation to those who have chosen policies through to cancel them and waive the mandate. Moreover, there will be a black market for fraudulent cancellation letters.

Donald Taylor Jr. considers the implications of allowing over-30 consumers to purchase catastrophic plans that were priced for under-30 consumers.

Ezra Klein of Wonkblog makes a related series of observations:

Normally, the individual mandate applies to anyone who can purchase qualifying insurance for less than 8 percent of their income. Either that threshold is right or it’s wrong. But it’s hard to argue that it’s right for the currently uninsured but wrong for people whose plans were canceled.

Put more simply, Republicans will immediately begin calling for the uninsured to get this same exemption. What will the Obama administration say in response? Why are people who plans were canceled more deserving of help than people who couldn’t afford a plan in the first place?

The same goes for the cheap catastrophic plans sold to customers under age 30 in the exchanges. A 45-year-old whose plan just got canceled can now purchase catastrophic coverage. A 45-year-old who didn’t have insurance at all can’t. Why don’t people who couldn’t afford a plan in the first place deserve the same kind of help as people whose plans were canceled?

And Avik Roy of Forbes argues that the Obama administration has implicitly acknowledged that the Affordable Care Act has resulted in unaffordable care for large numbers of people:

For years, these pages have raised the concern that the “Affordable Care Act” will drive up the cost of health insurance. “What is remarkable about the Patient Protection and Affordable Care Act,” I wrote in 2010, is “its devastating consequences for the cost of health insurance.” A 49-state analysis I conducted along with two colleagues at the Manhattan Institute found that the average state will see underlying premiums increase by an average of 41 percent in the individual market, the market where people shop for coverage on their own, instead of getting it through an employer or the government. (Our state-by-state interactive map can be found here.)

But this most recent announcement from the Obama administration is the first time it has publicly admitted that Obamacare is making health insurance less affordable, not more so, for millions of Americans.

Keep in mind that the officials charged with encouraging people to enroll have been reluctant to invoke the individual mandate, as Anemona Hartocollis reported in November:

[O]fficials at Enroll America, a nonprofit agency that is promoting the new marketplace, said they were deliberately playing down the penalty in favor of themes that tested well with focus groups: financial assistance, core benefits, no one being turned away for pre-existing conditions, and easy comparison shopping. “That doesn’t mean that the penalty or the mandate isn’t an important piece of the law from a policy perspective,” said Sophie Stern, a senior policy analyst for the agency. “But from a messaging perspective, this is what we find resonates best.”

And Enroll America seems to be typical in this respect. So what will happen when people come to understand the mandate, and how unevenly it is to be enforced? Survey data tells us that roughly twice as many uninsured Americans think the law is a bad idea as think it is a good idea, and 55 percent of Americans claim that they prefer the pre-Obamacare health system according to the Reason-Rupe poll. This is quite a feat when you consider that the pre-Obamacare health system was no great shakes.

As Yuval Levin writes at The Corner, the Obama administration is pounding on the panic button. He goes so far as to suggest that the individual mandate is done for:

I would now assume that no one will pay the individual mandate fine for 2014. The administration may give up on the mandate in the course of the ongoing enrollment period if the political pressure is great enough, or they may keep up the pretense of it through the end of the enrollment period in March (when it will have finished its work, so to speak, since its purpose is to influence choices made during that period) but then exempt everyone from it as they did with the employer mandate for this year. Having now exempted from the fine people whose policies were cancelled and who haven’t spent the money to get more expensive and less appealing new coverage, the politics of still applying the fine to everyone else who is uninsured this year will probably just not be sustainable, and the politics of exempting people from it (especially if they can hold out on doing so until after March 31) will be far too appealing for this White House to resist. They may claim the mandate will be back in 2015, but if they do exempt everyone from it in 2014 it will be hard to bring it back. 

The administration claimed in court in 2012 that the mandate was absolutely essential to Obamacare’s implementation, and maybe it was. But they have come to realize over the past few months that Obamacare as they envisioned it is not really going to happen, and their goal now is to enable the survival of whatever elements of it can survive, so that they can regroup when the dust settles and try to rebuild some form of the liberal approach to health financing. The mandate is becoming an impediment to that goal, and it strikes me as reasonably likely now that it will not survive. [Emphasis added]

One is reminded of Eric Patashnik and Julian Zelizer’s recent reminder that Obamacare is far from entrenched.

Super-High Stakes and Educational Outcomes


Intriguingly, Sanjoy Mahajan observes that it’s not poverty that drags down U.S. educational performance, as affluent American children fare poorly relative to their counterparts in other affluent countries:

If poverty explained the U.S.’s poor performance, with scores of the bottom quartile dragging down and obscuring the alleged great performance of the U.S. top quartile, then the U.S. top quartile should do well internationally. However, when compared against the top quartiles in other countries, the U.S. rank drops from 26th to 32nd. Similarly, U.S. students with a SES at the OECD average do slightly worse than the U.S. average (Figure II.2.5 of the same report).

Mahajan’s discussion brings to mind Russ Roberts’ recent interview with Lant Pritchett, in which Pritchett discussed the dismal performance of schools in low-income countries, the subject of his new book, The Rebirth of Education. Towards the interview, Pritchett briefly, and reluctantly, touches on U.S. education:

Pritchett: But I think too much disparaging of the American system doesn’t get right the marginal value of the various outputs of schooling. Right? What I mean by that is: If your kids are actually coming out of high school with some pretty decent–you know, they can read their textbooks, they can understand their textbooks, they can understand the mathematics; they are coming out with this reasonably adequate basis for further education, then I’m thinking I also want them during these years to explore other facets of life and learn other things about life. Like working together with teams through athletic experiences or choirs. Or I want them to explore other things that will be of value to them later in life, like appreciation of the arts. Now, if we say–so, I have this argument which I call the ‘pimp your ride’ argument. The pimp-your-ride argument says if you buy a car, and the car comes with a bundle of characteristics, with a given sound system and a given horsepower, you can always top up those characteristics individually. You can buy a better stereo system. Or you can buy better tires. Or you can do lots of things. And you reveal, by what you spend at the margin, where you thought where the bundle was inadequate. Right?

Russ: Yep.

Pritchett: So, if you look at American parents, they get a bundle of educational experiences out of the school system. Right? And then you say, well in what ways do parents spend their own money to supplement their child’s overall education? Well, I think they spend it a lot on additional sports experiences. Additional musical experiences. They have their kids take private music lessons. And I would think, again, in affluent suburbs, the ratio of kids engaged in some non-academic activity versus academic tutoring is probably on the order of 10 to 1.

Russ: They don’t just spend their money. They spend their time. They spend time with their kids throwing that football around and they also spend time with them on math homework. They do a lot of different margins.

Pritchett: But I’m just saying, it’s very difficult to make the case, from the way parents allocate their time and resources and kids allocate their time and resources, that parents are very unhappy with the public schools’ emphasis on math scores.

Russ: I totally agree.

Pritchett: But, go to India and it’s exactly the opposite. These kids are coming out completely illiterate, completely innumerate, and what’s been happening in India and most other countries is there’s a massive proliferation of tutoring. And there’s a massive proliferation of tutoring because the existing system, both public and private by the way–the parents are just as likely or almost as likely to hire tutors if they have their kids in private schools as in public schools because they perceive at the margin–look, if your kid isn’t reading at all, you don’t want to supplement the kid’s education with some art classes. You need him to read. And so you are going to supplement his out-of-school experience with more reading help. And if the math is going to be important to his academic success, you are going to supplement that with math tutoring. I think what we see in these other countries at the super-low levels of learning–so, in my mind, it’s very dangerous making comparisons between what’s going on in the United States or Finland and what’s going on in India or Tanzania. Because at the margin, the value to additional learning is just amazingly high from the very low levels that it is. Whereas that’s not at all obvious in the U.S. case.

This raises an interesting question — are affluent U.S. parents making the wrong bet when they invest in the social skills of their children rather than their academic skill set? Or do they know something that people who fixate on reading and math scores are missing?

And earlier on, Pritchett observes that one obvious explanation for impressive educational performance in South Korea and Singapore is generally neglected:

Pritchett: I really do think you can’t both have a system that’s exclusively top-up accountable and in fact run a good system unless you are willing to put super-high stakes on the students. So, if you look at the high-performing East Asian countries that have great scores on these PISA, like comparable things, like Korea and Singapore, the way they do it is not necessarily by having great government schools. They do it by saying, ‘By the way, when you turn age 16 or 17 you are going to take a life-chances-determining examination and the few that do well on this examination will go on to university and become the elite. And those that fail, won’t. And hence you get kids in Korea in the 1970s and 1980s studying literally 16 hours a day in which most of the education process is controlled by tutors. So to conclude — because Korean kids do well on the PISA, Korean educational system, the Korean public education is good, it’s just not on.

And so mimicking the industrial organization of Korean schools doesn’t make much sense if we don’t intend to also impose super-high stakes, which seems to be a pretty unwise strategy. I doubt that lower stakes, which is to say second chances, are all that accounts for the dismal performance of students drawn from the U.S. top quartile. But it seems to have something to do with it.

North Carolina’s Unemployment Insurance Experiment


One of the reasons I agree with Michael R. Strain’s argument that unemployment benefits should be extended (and reformed) is that, as Evan Soltas reports, the results of the expiration of unemployment benefits in North Carolina have been discouraging. In July, North Carolina cut the maximum length of UI benefits from 99 weeks, or almost two years, to 19 weeks, and the number of people receiving unemployment benefits has (as you’d expect) decreased sharply:

As intended, presumably, the number of North Carolinians receiving unemployment benefits has collapsed. It’s down by 45,000, or 40 percent, since last year. Expiring benefits aren’t the only reason for this. Far fewer are filing a claim in the first place. Initial claims are running at about half last year’s rate. Unemployment insurance is a thinner safety net than it has been in decades.

In addition, North Carolina’s labor force began to shrink. The state is experiencing the largest labor-force contraction it’s ever seen — 77,000 fewer people were working or searching for work this October than a year ago. This should, but won’t, settle a partisan debate. Cutting unemployment insurance apparently hasn’t encouraged the unemployed to look harder for work: It has caused them to drop out of the labor force altogether.

To get unemployment insurance, you have to actively search for work and prove that you’re doing so. The drop in the labor force suggests that this incentive was effective. Without it, more people just give up.

Soltas then goes on observe that civil society groups, like food pantries, have been picking up the slack, and he finds the outcome of this policy experiment discouraging. One could argue that we haven’t allowed this policy experiment to go on long enough, i.e., that we should wait and see if civil society in North Carolina eventually adapts to the labor-force contraction that has followed the expiration of UI benefits — perhaps social entrepreneurs will find ways to retrain workers and reintegrate them into the formal labor market. This would be a good cause for North Carolinians, and in particular conservative North Carolinians, to take up. But it is easy to see why Soltas is reluctant to place this bet.

P.S. Scott Lincicome draws on recent unemployment data from North Carolina to suggest that the expiration of unemployment benefits might have had positive consequences. I recommend reading his piece, which critiques Soltas’s argument, and my willingness to accept it at face value. In my defense, I actually don’t think of myself as an enthusiast for extending UI benefits. Rather, I think of myself as someone who has found Michael R. Strain’s arguments convincing, hence the first sentence of my post. And I think that an extension might be an acceptable political price to pay for reform of UI benefits. But Lincicome’s piece is worth reading regardless.

I should also note that Evan Soltas and I made an error, which was caught by Mitchell Hirsch of the (left-of-center) National Employment Law Project brought to my attention. The maximum length of UI benefits was not 99 weeks when North Carolina ended federal Emergency Unemployment Compensation (EUC) benefits on July 1st. Rather, EUC benefits lasted for 47 weeks, which, when combined with state benefits, made for a maximum duration of 73 weeks, as the extra 20 weeks of federal Extended Benefits (EB) had expired in June of 2012. In light of Lincicome’s broader point that Soltas and I might be subject to confirmation bias, it occurs to me that in his detailed critique of my (frankly rather cursory post), he didn’t mention that Soltas and I overstated, by a significant margin, the generosity of unemployment benefits. So I’m grateful to Mitchell Hirsch for the assist.

Obamacare is Vulnerable


The political scientists Eric Patashnik and Julian Zelizer identify various myths shaping how policy elites think about the future of Obamacare. The overall takeaway, for me at least, is that Obamacare opponents have a real opportunity to either jiu-jitsu the law (as Avik Roy and Douglas Holtz-Eakin and Paul Howard and Yevgeniy Feyman have suggested) or repeal-and-replace it, as: (1) programs can be killed or they can fade away, particularly in their first few years; (2) programs create political constituencies when their effects are visible, but Obamacare goes to great pains to conceal its benefits (and costs); (3) it’s not just politicians but medical providers and insurers that will determine the fate of the law; and (4) conflict over new programs can last for decades — i.e., becoming an old program doesn’t necessarily mean becoming uncontroversial.

Homelessness and Narrative Thinking


Caring for the homeless is difficult under the best circumstances, but it is more difficult still when homeless individuals are fall in and out of drug and alcohol abuse, as Nicole Gelinas explains in a short but information-dense New York Post column. During his mayoral tenure, Michael Bloomberg pursued a number of strategies to address homelessness, some of them more successful than others. Gelinas points out Bloomberg’s Homebase initiative, which provided financial assistance to families facing eviction; she observes that spending on homeless services has doubled on his watch; and that a substantial share of families that show up at New York city shelters (11.1 percent) are from outside of the five boroughs. Yet Andrea Elliott’s Dasani series in the New York Times offers a very different portrait of Bloomberg’s efforts. (It should go without saying that even the longest piece of narrative non-fiction can’t capture all complexities of the homelessness challenge; the more interesting question is how storytelling is used to yield a certain kind of response.)

Nicole’s column reminds me of Reid Hastie’s critique of narrative thinking:

[N]arratives give us a false sense of understanding and control, when they are really mere redescriptions of selected subparts of the events to which they refer. Once we have a good narrative summary, we have the illusion that we could have intervened and controlled outcomes, or could have predicted what in hindsight seems to be an obvious outcome. But, unlike valid causal explanations that support informative forecasts and suggest ways to change events further down the causal stream, narratives lack these basic properties of true causal explanations.

Narratives also tend to be dominated by a few major actors, and faux explanatory power is derived from simplistic interpretations of those actors’ characters and motives. And the universal human illusion that consciously accessible thoughts are in the driver’s seat and controlling our own actions means that the salient actors in a narrative we want to understand are attributed information and incentives to a greater degree than is warranted.

Just as Tyler Cowen argues that marketing (broadly understood) is the paradigmatic job of the future, I tend to think that the (closely related) making of narratives is the job of the future, as well-crafted narratives are a powerful tool for manipulating behavior, for good or ill. For example, if we write a story about homelessness that emphasizes the innocence of a child and juxtaposes poverty and dysfunction against the consumption habits of gentrifiers, we will push you one way; if we emphasize the role of alcohol and drug abuse, and the resources devoted to meeting the needs of the homeless and the dedication of (or at least the dedication of some of) the public servants who work with them, we will push you another way.

A Cynical Interpretation of the Minimum Wage Push


Annie Lowrey ends a recent column on the effort to raise the minimum wage on an appropriately cynical note:

Raising the minimum wage is hardly a panacea. For one, it does little for the millions of struggling families who have higher hourly wages or a salary. Second, the strongest division between those below the poverty line and those just above it is work itself. Raising the minimum wage does little to help the millions of Americans looking for a job.

Messy economics aside, the cynicism of Washington’s political class might ultimately lead to the increase. The minimum wage’s value has eroded over time, and raising it is hugely popular among voters. Corporate profits are well north of a trillion dollars a year. The federal government, meanwhile, continues to run in the red. Unlike any other form of wealth redistribution, raising the minimum wage is basically cost-free to Washington. If it won’t hurt the unemployment rate — as some research suggests — Washington figures, why not slip those fast-food joints the bill?

Earlier on, however, she quotes a Costco executive on the subject:

Craig Jelinek, the C.E.O. of Costco, agrees. “Paying employees good wages makes good sense for business,” he said earlier this year, calling for a federal minimum-wage increase. (Costco pays a starting wage of $11.50 an hour in all states where it does business.) “We know it’s a lot more profitable in the long term,” Jelinek said, “to minimize employee turnover and maximize employee productivity, commitment and loyalty.” He should know; he started his career as a checkout boy.

And it is worth reminding readers that, as Megan McArdle has observed, Costco’s business model entails “a tiny number of SKUs in a huge store,” which makes for a less labor-intensive business model and, as a result, higher revenues per employee. Costco isn’t really in the same business as Walmart, which has a far more labor-intensive business model, with substantially lower revenues per employee than Costco. That said, Walmart was one of the leading voices in favor of a federal minimum wage increase in 2005, though it has stayed out of the national debate in 2013. In Washington, D.C., Walmart opponents cleverly crafted a minimum wage increase targeted at large retailers, as Susan Berfield of Bloomberg Businessweek reported in July:

The bill, called the Large Retailer Accountability Act, classifies large retailers as those with stores of at least 75,000 square feet and whose parent companies have annual sales of more than $1 billion. Given the specifics, and the timing, many—especially those at Walmart—concluded that the only large retailer immediately affected would be the largest of them all.

Had the increase applied to all retailers, one assumes that Walmart would have been more comfortable with the increase, as Walmart could draw on its organizational prowess to best its rivals. But a narrowly-tailored minimum wage increase that targets only one firm is in effect a form of industrial policy.

While we’re on the subject of the minimum wage, it is worth noting that the notion that the minimum wage has eroded in value since its 1968 peak rests on the inflation index we choose to use. Scott Winship clarifies the issue in a recent piece on the minimum wage debate. Advocates of a minimum wage increase have claimed that had the federal minimum wage kept up with inflation, it would now be worth $10.60. But this entails using CPI-U, an index that is widely believed to overstate inflation. If we instead use CPI-U-RS, the Census Bureau’s index of choice for historical analysis, the 1968 minimum wage would now be worth $9.25. And if we use the PCE deflator, Scott points out that the value would now be $8.32 — higher than the current federal minimum wage ($7.25) but actually lower than President Obama’s proposed $9 federal minimum wage.

That is, at a time of extremely high long-term unemployment, during which workers with limited skills and social networks have fared particularly poorly, many policymakers, on the left but also on the right, are embracing a federal minimum wage that can plausibly be understood as higher than the minimum wage in 1968, when the unemployment rate was 3.6 percent. It could be that the latest empirical research now holds that the impact of a minimum wage increase is exactly the same in periods when unemployment is at 3.6 percent as when unemployment is 7 percent, or almost twice as high. I haven’t seen evidence to this effect, but I’d be delighted to read it.

In fairness, the federal minimum wage impacts far fewer workers now than it did in earlier eras, as Scott reminds us:

In 1979, 8 percent of workers made the federal minimum wage (or less), but by 2011, just 3 percent did. Comparing minimum wage workers over time compares the worst-off 3 percent today to the worst-off 8 percent in 1979.

So if a substantial increase in the federal minimum wage does negatively impact some number of less-skilled workers, the political repercussions will be limited, not least because low-income voters tend to support minimum wage increases and they are unlikely to attribute labor market dislocations to such policy interventions. It’s hard not to conclude that, as Annie suggests, the politics of a minimum wage increase are just too good to pass up.

One last thing: I was impressed, and pleasantly surprised, by Peter Coy and Susan Berfield’s take on a minimum wage increase, as it acknowledged that “a higher wage floor would undoubtedly price some marginal workers out of the market” (I know this is a low bar, but trust me, this is something) and that the notion that a higher minimum wage can substitute for government spending is a mirage:

In arguing for a higher minimum wage, Bloomberg View columnist Barry Ritholtz recently blasted Wal-Mart and McDonald’s as “welfare queens” because some of their employees, as a result of their meager pay, live partly on government benefits. (Families of McDonald’s workers have received an average $1.2 billion a year in benefits, according to an academic study funded by Fast Food Forward, which helped organize the summer strikes.)

True, those hidden subsidies to employers would shrink if the minimum wage rose, but it’s unreasonable to think they would disappear entirely. Britain’s New Poor Law of 1834 tried to end subsidies to employers by preventing recipients of relief from working for them. It locked them up instead in poorhouses of Dickensian cruelty. That’s hardly an example to follow. The other way out of inadvertently subsidizing private employers would be to cut off benefits to anyone who got a job. But that would penalize people who landed work or induce them to stay unemployed.

Though I don’t agree with much of what Coy and Berfield write (they are inordinately enthusiastic about a universal basic income, for example), their take is more balanced and realistic than most.

The Not-So-Golden Age


After acknowledging that wage growth has failed to keep pace with productivity growth in recent decades, Scott Winship reminds us of one of the downsides of the economic Golden Age of the 1950s and 1960s:

[P]erhaps all the wage-productivity gap is signaling is the death of a patriarchal regime in which male workers were overpaid relative to their productivity because we were intent on keeping women in the home. For decades earlier in the twentieth century, men actively fought to shelter themselves from female competition—pushing for a minimum wage for women in order to limit the extent to which female workers could pull the union wage down to a market-clearing one, demanding that union contracts require women workers to be let go if they got married, promoting the famous five-dollar-day in Ford factories (only for men).

Don’t get me wrong, the erosion of this regime has been a kick in the gut for less-skilled men, and we have done too little to help them adjust. It has been a boon for married women though, whose labor force participation rose steadily for decades from the 1940s (before men’s wages started stagnating) through the 1990s. The problem is not a general one of the rich appropriating the workers’ pay. Instead, it is possible that top earners and shareholders would have had something like 1929- or 2013-sized incomes during the Golden Age of the American economy—except that they, too, bought into the male breadwinner family-wage regime even at the expense of their own financial self-interest. In fact, if you start in the mid-1930s at the time of the Wagner Act’s passage that spurred union growth, median compensation and productivity have increased by roughly the same amount—it’s just that an initial period of too-rapid wage growth was followed by a long period of wage adjustment. Labor’s share of income has dropped at the same time, and the share of income going to the top one percent has risen.

The intellectual historian Thomas Leonard has discussed the various ways in which eugenic thought informed Progressive era labor market regulations:

In the United States,where nearly all Progressive Era labor legislation applied to women exclusively, laws regulating women’s work were promoted for the benefits thought to obtain when women were removed from paid employment. Leading progressives, among them women at the forefront of labor reform, advocated excluding women from the labor force on the grounds that (1) work outside the home threatened women’s health and morals; (2) working women usurped jobs that rightly belonged to male heads of household entitled to a “family wage”; and (3) women in the labor force improperly abandoned their eugenic duties as “mothers of the race.”

The progressive justifications for women’s labor legislation were diverse. Paternalists invoked women’s health; moralists invoked women’s virtue; “family wagers” sought to protect fathers from the economic competition of women; “maternalists” promoted the virtues of motherhood; and eugenicists advocated for the eugenic health of the race. But all of these different justifications for women’s labor laws shared two common characteristics: all were founded upon invidious distinctions between the sexes, and all argued that society is better off when women are excluded from work for wages.

As exclusionary labor legislation has faded away, and as cultural norms have shifted so that women are expected to be full participants in the market economy, women are competing with men on a more equal footing, and one result is that some men have fallen behind. The entry of women into the workforce strikes me as salutary development, yet it seems odd to lament sluggish wage growth for men without also noting that it is to some extent a byproduct of this salutary development.

Baumol’s Disease and the Perception of Welfare State Retrenchment


There is an unexamined assumption I often encounter when reading about anti-poverty efforts, which is that anti-poverty spending has collapsed since the Reagan era. Andrea Elliott’s recent series of articles on the challenges facing a homeless family living in Brooklyn is one recent example. But consider the following from Dismantling the Welfare State?, a 1994 examination of the politics of welfare state retrenchment in the U.S. and Britain under Reagan and Thatcher by Paul Pierson, a well-regarded left-of-center political scientist now based at Berkeley:

On the whole, the challenge proved to be too much for both administrations. Although for different reasons both supporters and opponents of retrenchment have had cause to exaggerate the success of the conservative reformers, the reality is a messy, mixed picture of welfare states beset by genuine pressures but not by fundamental crises. The fear of popular opposition to radical spending cuts repeatedly forced each administration to retreat. Only on the infrequent occasions when it was possible to design reforms that defused such opposition did radical retrenchment occur.

Robert VerBruggen of RealClearPolicy observes that means-tested welfare spending in the U.S. increased from 3.14 percent of GDP in the 1970s to 3.48 percent in the 1980s, and it has reached 6.1 percent in the 2010s so far. To be sure, the 2010s are far from over, and we’re not that far off from the 2008 financial panic. Means-tested welfare spending is high in part because we’ve lived through a lost half-decade. But it is hard to argue that means-tested welfare has been “dismantled.” Rather, it has taken a different shape, with the transformation of AFDC into TANF and the growth of the EITC, among other work supports. Scott Winship has documented the extent to which transfers have contributed to low-end household incomes in recent decades.

Recently, Max Sawicky, a left-liberal critic of universal basic income proposals, has called for super-sizing TANF:

If you like the transfer of cold cash, your chief target ought to be Temporary Assistance for Needy Families, the fruits of the Clinton/Gingrich welfare reform of 1996. The Feds provide a grant to state governments, who busy themselves with helping people to help themselves. In the actual event, states helped a lot of people off the welfare rolls and into poverty. The national poverty rate, notwithstanding this reform, steadily went up after 2000. So if you want to strike a blow for reduced overhead, simplicity, and adequacy – if you’re serious – go ahead and make my day: Federalize TANF and establish it as an individual, adequate cash payment to which every resident has a legal right. To constrain its cost, limit eligibility to families with dependent children and phase it out as other income grows.

Sawicky’s suggestion doesn’t strike me as wise. But to his credit, he acknowledges a few important facts, e.g.:

Overhead cost is typically exaggerated in conservative discussions. Conservatives present comparisons of spending under a long list of Federal programs, many of which have broader or entirely different objectives than reducing poverty. The costs of programs that try to do things requiring public employees are not the same as ‘overhead,’ nor are these employees necessarily a bureaucracy. Even the programs explicitly aimed at reducing poverty are designed to cover more than just those under the poverty line. Moreover, the overhead costs of the main programs noted below are low, for the most part.

We also see exaggerations of the number of programs that are dedicated to reducing poverty. The fact is that most anti-poverty spending is concentrated in relatively few places: Medicaid, food stamps, the Earned Income Tax Credit, Supplemental Security Income, Temporary Assistance for Needy Families, unemployment compensation, and housing subsidies. Coverage in most of these programs goes well above the official poverty line. [Emphasis added]

Again, Sawicky’s objective is to make the case for more ample programs that attach fewer strings. But when we think about why public social expenditures (a larger category than means-tested benefits) have increased, we need to keep in mind the fact that skilled workers are expensive, and so the cost of labor-intensive social services has been growing at a much faster rate than, say, the cost of televisions or air travel. People might feel as though the post-Reagan era has seen a “dismantling” of social services, but the more disturbing truth is that we’re spending more to get social services that deliver less. Student-teacher ratios, for example, have declined over the past forty years, and one result is that we’ve seen a dilution of the teacher talent pool, which in turn seems to have contributed to a deterioration in average teacher quality. There are ways around this problem, e.g., specialization or embracing an evidence-based salary schedule, but this is easier said than done, particularly in public sector organizations that are resistant to change. Similar dynamics obtain in other public services. The problem is less that we used to have great programs in the Great Society era that were subsequently destroyed than that Baumol’s cost disease is a thing. We have decided that in-kind services are preferable to cash transfers, and this has proven to be an expensive (if not necessarily inappropriate) decision. To return to Scott Winship for a moment, consider his assessment of low-end incomes:

From 1979 to 2007, median pre-tax income defined to include non-cash benefits rose by about 30 percent. I find about the same increase for median post-tax income, but my estimates do not account for tax credits. The Congressional Budget Office reports a 33 percent increase in pre-tax income and a 42 percent increase in post-tax income. At the 20th percentile, pre-tax income rose by 26 to 38 percent, depending on how Medicare and Medicaid are valued. The truth is almost surely somewhere in the middle. The post-tax increase was similar.

Finally, the Census Bureau figures do not account for the fact that households have become smaller over time. When households have fewer mouths to feed, a given amount of income goes a longer way, so even if incomes had not grown, Americans would have been better off. 

After adjusting for household size, median pre-tax income was about 40 percent higher in 2007 than in 1979, and according to CBO, post-tax income was 49 percent higher. At the 20th percentile, size-adjusted household income rose by 28 to 46 percent (with the health insurance valuation much more consequential than the inclusion of taxes). [Emphasis added]

The range of estimates Winship provides regarding the value of Medicare and Medicaid benefits is a vivid reminder that health expenditures may well be crowding out cash transfers as an anti-poverty tool.

Sawicky, meanwhile, makes a point that David Armor and Sonia Sousa have made, namely that many anti-poverty programs actually cover people who earn well above the poverty line. This is perfectly sensible in some cases, as we have to be mindful of implicit marginal tax rates as people climb out of poverty. But covering the nonpoor means that social expenditures aren’t as concentrated on the hard-core poor as they might be.

I don’t think there is any question that anti-poverty policy in recent years has had disappointing results. But that’s not primarily because spending hasn’t increased. My sense is that voters would be more comfortable with increasing anti-poverty spending if they felt more confident that it was being spent intelligently. Oren Cass has offered a valuable new framework for reforming anti-poverty spending that has attracted some attention on the Hill, and one hopes that it will help shape the debate going forward.

Military Pension Reform and the Bipartisan Budget Act


The bipartisan budget deal crafted by House Budget Committee Chairman Paul Ryan and Senate Budget Committee Chairman Patty Murray seems to have cleared the highest hurdles to passage. I hear hearing about how modest the deal is, and how it reflects a larger failure of the U.S. political class. That may well be true. I would have been far more impressed if, for example, Republicans had negotiated a reform of unemployment insurance as a condition of granting Democrats the extension of UI benefits they favor. But as I argued on Friday, the deal does protect important military investments during a dangerous geopolitical moment, when China and other rising regional powers are looking to use precision-guided munitions and other low-cost technologies to limit America’s strategic reach. And Ryan and Murray made a number of political decisions that were actually quite admirable; most notably they agreed to curtail cost-of-living adjustments for military pensions for people under the age of 62. A number of Republican senators, including Sens. Roger Wicker, Lindsey Graham, Kelly Ayotte, and James Inhofe, have described this provision as a bridge too far, as John McCormack reports. In an interview, Ryan explains his thinking to McCormack:

“We give them a slightly smaller adjustment for inflation because they’re still in their working years and in most cases earning another paycheck,” Ryan said. “Our goal here is to make sure that no other country comes close to matching the U.S. military, and the stress on the budget in the future brings that whole entire notion into question. We still have a Pentagon budget that is not where it needs to be.”

Under the 2011 Budget Control Act, about $1 trillion was cut from the defense budget over 10 years–roughly $500 billion by the law’s spending caps and another $500 billion through automatic sequestration cuts, which exempted personnel. The Ryan-Murray deal relieves $31.5 billion in sequestration cuts to defense over the next two years. “From my conversation with just Chuck Hagel and General Dempsey recently, the biggest relief this gets is military readiness,” Ryan said. “The statistics are very, very concerning about our readiness.”

The COLA reduction for military retirees, which doesn’t take effect until January of 2016, would save an additional $6 billion over 10 years in the defense budget. “The defense community asked us to look at compensation and their entitlement spending within the Pentagon. We knew we couldn’t put back into the Pentagon’s budget as much as we’d like to, and these reforms help them with their budget,” said Ryan. “The savings stays with the Department of Defense and that comes on top of the money we’re giving back through the sequester.”

And he notes that the military will have time to craft a more comprehensive solution to the problem of rising personnel costs. If Ryan and his allies are serious about reforming personnel practices, they should look to Tim Kane, a research fellow at the Hoover Institution who recently addressed the issue here at NRO:

My wish for Christmas? Chuck Hagel applies the logic of flexible personnel management to the DOD budget, embraces the Ryan–Murray deal, and spends 2014 talking about institutional reform. Instead of taking personnel expenses off the table, as sequestration did, make them the main course. Consider the proposed FY2014 DOD budget, which totals $115,210,902,000 in personnel costs.  One hundred billion is for active-duty pay, but only half of that is basic pay. The other half consists of incentives, special pay, and assorted allowances. In addition, nearly $5 billion is spent on change-of-station costs.

The reform I propose is called the Total Volunteer Force, inspired by the 1973 reform that ended the draft. The military learned then that paying volunteer soldiers more than conscripts lowered fatalities and costs. It enhanced retention, thereby lowering training costs while improving troop quality. We could do it again.

Essentially, Kane calls for decentralizing hiring practices within the military, giving all military personnel the choice to stay in their jobs, to give servicemembers more control over their careers and to allow them to specialize, and to replace the 20-year pension cliff with a 401(k)-style retirement plan. The end result will be a military that does a better job of allocating human capital, and considerable cost savings as productivity increases. The Bipartisan Budget Act doesn’t get us to Kane’s Total Volunteer Force — but by demonstrating that reforming military pensions isn’t impossible, it’s a decent first step.


Mental Illness Reform and Policy Innovation


National Review has endorsed a new proposal from Rep. Tim Murphy (R-PA) for reforming the federal government’s approach to mental illness:

The Helping Families in Mental Health Crisis Act would push federal funding away from where it’s currently spent — mostly on providing social services to people with mild common mental-health problems, such as anxiety disorders and mild depression — and toward treating people with serious mental illness (schizophrenia, bipolar disorder, severe depression, etc.). It would also give law-enforcement officials, to whom the government has largely left the task of dealing with America’s mentally ill, a role in setting policies, and empower families to get seriously ill relatives the treatment they need. These reforms can be done at relatively little cost, because the money is so poorly allocated right now; in fact, effective treatment for the mentally ill would save money elsewhere, especially in our criminal-justice system.

Earlier on, D.J. Jaffe described the origins of the bill befoe describing its central provisions:

In 2014 U.S. spending, public and private, on mental health will total $203 billion. Because of mission creep and lack of coordination among agencies, the funds are now spent by the unregulated mental-health industry on “improving the mental health” of all Americans rather than focusing on the 5 to 8 percent with serious mental illness. Throwing money at mental health, as Obama proposes, will not result in more funds’ being spent to treat those with serious mental illness, because the mental-health industry disguises worthy social-service programs, like helping people get better grades, find better jobs, and feel more empowered, as mental-health programs to gain access to the mental-health budget. Rather than concentrating on delivering treatment to those with serious mental illnesses, such as schizophrenia and bipolar disorder, they deliver improved happiness to the 25 to 40 percent they claim have “mental health” issues.

The industry now routinely, regularly, unabashedly classifies ordinary life experiences like being unhappy, having an unsatisfactory marriage, experiencing the death of a loved one, or this year’s favorite, bullying, as major unmet mental-health challenges that the federal government should fund. Meanwhile those who have serious brain disorders are left to sleep on street grates and forage in trash bins for food. Some 200,000 are homeless, 300,000 are incarcerated, and many are living hellish lives locked inside hallucinations, delusions, and paranoia, contemplating how to take their own lives.

President Obama would never let the banks write his tax policy, but he has no problem letting the mental-health industry write his mental-health policy. Rather than funding mission creep, Representative Murphy focuses on mission control. When President Obama took office, he said he would listen to good ideas wherever they came from. Representative Murphy has good ideas. The two of them should talk.

Though I can’t speak to the wisdom of Murphy’s proposal as such, it strikes me as an excellent example of the kind of thing House backbenchers ought to do. Murphy drew on the expertise of scholars who’ve been critical of the mental-health industry, some of whom, like Sally Satel of the American Enterprise Institute, are affiliated with center-right think tanks that devote their efforts to crafting workable policy solutions. Mental illness is not one of the most pressing issues on the minds of U.S. voters, yet it is an issue that comes up every time there is a mass shooting or some other spectacular crime committed by a person plagued by mental illness. And when this happens, critics of expanding government as the first resort often find themselves at a loss. There is also a labor market dimension to mental illness, as people with severe mental illness often find it impossible to work, a problem that has grown in severity quite dramatically over the past quarter-century. So this is the kind of issue where you’d want an intelligent and resourceful backbencher to specialize, and to craft a proposal that can attract broad support within the caucus.

Murphy’s proposal, in broad outline, aims to achieve savings across the public sector as a whole by deploying mental illness resources more effectively. It does, however, involve restructuring existing government agencies, empowering some bureaucracies at the expense of others, and devoting resources to a segment of the population that generates large social costs. In short, Murphy’s bill has the federal government do more than get out of the way. Rather, it represents an attempt at making government more effective, one of the core objectives of reform conservatives. One hopes that Murphy’s bill will attract positive attention, as it might then convince other GOP backbenchers to pursue policy innovations of their own. 

Former Montana Gov. Brian Schweitzer and the Democratic Future


Mark my words: if Brian Schweitzer runs for the Democratic presidential nomination in 2016, he will do exceptionally well. Michael Warren’s profile of Schweitzer in the Weekly Standard helps illustrate why. Consider that though Howard Dean was widely regarded as a moderate governor of Vermont, his forceful opposition to the Iraq war helped him vault to prominence as a champion of the Democratic left. Schweitzer has moderate bona fides as well — his defense of gun rights, his entrepreneurial bent, the emphasis he placed on tax cuts and spending restraint as governor — yet he is also a populist who championed causes like the re-importation of prescription drugs from Canada.

The reason I think Schweitzer could shake up the race is that, as Warren notes, he has been a consistent critic of Obamacare from the left:

So what are Schweitzer’s progressive bona fides? For one thing, he has no patience for Democratic third way-ism on economic issues. It’s the perspective that prompts him to refer to Obama’s presidency as corporatist. He criticizes Obamacare from the left, blaming fellow Montanan Max Baucus (the chairman of the Senate committee responsible for drafting much of the law) for allowing special interests to influence the bill. “This bill, which was written by the insurance company and pharmaceutical lobbyists, doesn’t challenge the expenses,” Schweitzer tells me. “Why would it? If you’re in the business, and you get to write the bill, what are you going to do?”

His own national health care reform would “fit on the back of an envelope.” Explaining the whole thing takes him half an hour. (“Am I boring you yet?” he asks around minute 25.) At the center of his proposal is allowing citizens below the retirement age to enroll in Medicare, forcing private insurers to compete against the government rate.

“As you probably recall .  .  . most Democrats were calling for a public option. .  .  . But what came out of the Senate Finance Committee did not have a public option,” Schweitzer says, blaming health insurance lobbyists and their enablers in both parties. “We now have the corporate party and the corporate-lite party.” [Emphasis added]

My guess is that Obamacare will still be plagued by problems come 2015 and 2016, and that while some liberals will continue to defend it, others will be looking to absolve themselves of responsibility for its various deficiencies. One assumes that there will be more than one Democratic candidate willing to champion Medicare-for-all, and other policies favored by the left. But Schweitzer is more charismatic than Warren and O’Malley, and his anti-Washington sentiment comes across as more pungent and authentic. Democrats unwilling to line up behind Hillary Clinton (or Joe Biden) might see Schweitzer as an appealing alternative, not least because he seems like the kind of candidate who could attract independents and perhaps even some Republicans. Schweitzer would be foolish not to give running for president serious consideration.


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