« Too Big to Fail: Why The Big Banks Should Be Broken Up, But Why The White House and Congress Don't Want To | Robert Reich's Blog | How Obama Can Convince Congress to Enact a Larger Stimulus, and Why He Must »
Health Care Reform is Critically Important, But Getting Americans Back to Work is More So
Presidents tend to overcompensate for the errors of their predecessors in the same party and in so doing sow seeds of their own mistakes. Bill Clinton wanted above all to avoid Jimmy Carter's fate -- losing re-election because the economy was heading south on Election Day. So Clinton made a deal with Alan Greenspan to slash the budget deficit and thereby jettison much of his ambitious campaign agenda (that was Greenspan's precondition for lowering interest rates and causing an economic boom in time for the re-election) and then Clinton took direction from Dick Morris, who told him to move to the right. The result: Clinton avoided Carter's failure and won re-election handily. But the Clinton years produced few if any major social reforms. Clinton spent so much of his initial political capital, as well as his time and energy, on deficit reduction that he didn't have enough left to enact health care in 1994.
Barack Obama came to the White House intent on not repeating Clinton's failure to enact universal health care. Did he overlearn the Clinton lesson? Obama seems to have made all the right moves to enact something he can credibly label health-care reform: Rather than spend his political capital elsewhere, he reserved most of it for health care.
I sincerely hope America gets genuine health reform and I hope it's stronger than what's emerging in the Senate. (Whoever voted for Joe Lieberman last time around ought to pray for continued good health.) I worry, though, that Obama's strategy may turn out to be a mistake comparable to Clinton's overemphasis on deficit reduction. Obama's focus on health care rather than jobs, when the economy is still so fragile and unemployment moving toward double digits, could make it appear that the administration has its priorities confused. While affordable health care is critically important to Americans, making a living is more urgent. Yet the administration's efforts to date on this more basic concern have been neither particularly visible nor coherent.
The current rate of unemployment would have been even higher were it not for the federal stimulus package, but the stimulus should have been much larger. Especially with the states still cutting back on spending and raising taxes, the federal stimulus will be barely enough to keep unemployment from hitting 11 percent by the middle of 2010. Yet as the rate of unemployment continued to rise faster and higher than the White House anticipated, Obama could not return to Congress to seek a larger stimulus. He was spending political capital on health care.
The Wall Street bailout, meanwhile, has saved Wall Street but left most regional banks in deep distress. Almost nothing has trickled down. Small businesses still can't get loans. Foreclosures continue to mount largely because jobs continue to vanish and homeowners can't pay their mortgages. Yet at this point, on the eve of a health care bill, it would be difficult for Obama to return to Congress seeking billions more to aid distressed homeowners and small businesses.
While health care reform, if done right, can help American families stay afloat in the economy, the current bills won't offer most Americans any appreciable decline in the cost of their health insurance nor clear improvement in the efficiency or quality of the health care they receive, and those who will benefit won't see the benefits until 2014 at the earliest. All this is partly a result of Obama's sharpest break from Clinton -- whose ambitious health care plan drew immediate fire from Big Pharma, the American Medical Association, and health insurers: The Obama White House bought off the medical-industrial complex by promising it fatter profits, bolstered by tens of millions of new paying customers.
That and other deals cut with industry -- including promises to Big Pharma that Medicare wouldn't use its bargaining clout to reduce drug prices, to the AMA that doctors wouldn't have to face larger cuts in Medicare reimbursement rates, and to private insurers that the White House wouldn't fight hard for a public insurance option -- are likely to make the resulting reform far more costly than it would be otherwise. These extra costs will be borne by those Americans who will be required to buy insurance but won't qualify for federal assistance, along with Medicare beneficiaries who will be paying more and receiving less. These people may not know they're indirectly paying the costs of buying off these industries, but they'll know they're getting shafted (Republicans will be sure to make them aware, even though the GOP has a much longer record of shafting the middle class for the benefit of big business).
The optimist in me says Obama can pivot off a health-care victory and launch some new initiatives that palpably and quickly spur job growth. The realist says there aren't any such initiatives -- at least none that can work fast enough to reverse the tide of unemployment before the midterm elections. Fiddles such as a new jobs tax credit can help but they won't make much of a dent. Even with a larger stimulus, a jobs recovery would still be far off. The tangible benefits of health-care reform are likely to be so elusive in the meantime that the public may become easy prey for demagogues on the right who blame Democrats for the economic insecurities that bedevil the nation next November.
If Obama and the Democrats lose one or both houses of Congress in the midterms, it will be because the president learned only the most superficial lesson of the Clinton years. Health-care reform is critically important. But when one out of six Americans is unemployed or underemployed, getting the nation back to work is more so.
Barack Obama came to the White House intent on not repeating Clinton's failure to enact universal health care. Did he overlearn the Clinton lesson? Obama seems to have made all the right moves to enact something he can credibly label health-care reform: Rather than spend his political capital elsewhere, he reserved most of it for health care.
I sincerely hope America gets genuine health reform and I hope it's stronger than what's emerging in the Senate. (Whoever voted for Joe Lieberman last time around ought to pray for continued good health.) I worry, though, that Obama's strategy may turn out to be a mistake comparable to Clinton's overemphasis on deficit reduction. Obama's focus on health care rather than jobs, when the economy is still so fragile and unemployment moving toward double digits, could make it appear that the administration has its priorities confused. While affordable health care is critically important to Americans, making a living is more urgent. Yet the administration's efforts to date on this more basic concern have been neither particularly visible nor coherent.
The current rate of unemployment would have been even higher were it not for the federal stimulus package, but the stimulus should have been much larger. Especially with the states still cutting back on spending and raising taxes, the federal stimulus will be barely enough to keep unemployment from hitting 11 percent by the middle of 2010. Yet as the rate of unemployment continued to rise faster and higher than the White House anticipated, Obama could not return to Congress to seek a larger stimulus. He was spending political capital on health care.
The Wall Street bailout, meanwhile, has saved Wall Street but left most regional banks in deep distress. Almost nothing has trickled down. Small businesses still can't get loans. Foreclosures continue to mount largely because jobs continue to vanish and homeowners can't pay their mortgages. Yet at this point, on the eve of a health care bill, it would be difficult for Obama to return to Congress seeking billions more to aid distressed homeowners and small businesses.
While health care reform, if done right, can help American families stay afloat in the economy, the current bills won't offer most Americans any appreciable decline in the cost of their health insurance nor clear improvement in the efficiency or quality of the health care they receive, and those who will benefit won't see the benefits until 2014 at the earliest. All this is partly a result of Obama's sharpest break from Clinton -- whose ambitious health care plan drew immediate fire from Big Pharma, the American Medical Association, and health insurers: The Obama White House bought off the medical-industrial complex by promising it fatter profits, bolstered by tens of millions of new paying customers.
That and other deals cut with industry -- including promises to Big Pharma that Medicare wouldn't use its bargaining clout to reduce drug prices, to the AMA that doctors wouldn't have to face larger cuts in Medicare reimbursement rates, and to private insurers that the White House wouldn't fight hard for a public insurance option -- are likely to make the resulting reform far more costly than it would be otherwise. These extra costs will be borne by those Americans who will be required to buy insurance but won't qualify for federal assistance, along with Medicare beneficiaries who will be paying more and receiving less. These people may not know they're indirectly paying the costs of buying off these industries, but they'll know they're getting shafted (Republicans will be sure to make them aware, even though the GOP has a much longer record of shafting the middle class for the benefit of big business).
The optimist in me says Obama can pivot off a health-care victory and launch some new initiatives that palpably and quickly spur job growth. The realist says there aren't any such initiatives -- at least none that can work fast enough to reverse the tide of unemployment before the midterm elections. Fiddles such as a new jobs tax credit can help but they won't make much of a dent. Even with a larger stimulus, a jobs recovery would still be far off. The tangible benefits of health-care reform are likely to be so elusive in the meantime that the public may become easy prey for demagogues on the right who blame Democrats for the economic insecurities that bedevil the nation next November.
If Obama and the Democrats lose one or both houses of Congress in the midterms, it will be because the president learned only the most superficial lesson of the Clinton years. Health-care reform is critically important. But when one out of six Americans is unemployed or underemployed, getting the nation back to work is more so.
Advertisement
The realist says there aren't any such initiatives...
I'm afraid the realist is right for now, Secretary Reich. I could explain why but it would take a book. Oh right, I just finished writing it. If you're interested in having a sneak preview of the first draft let me know at lumpoflabor (at) gmail (dot) com. I'll be holding my breath.
November 2, 2009 12:55 AM | Reply | Permalink
If health care reform is structured correctly (and there's no guarantee that it will be), it will help create jobs.
"Everyone knows" that small businesses create most of the jobs in the US. The Republicans trumpet it all the time (in the guise of the claim that tax increases on "the rich" will hit small businesses, which is silly since businesses that would otherwise be hit can simply restructure for IRS purposes). Despite this Republican claim, it's actually even true. But small businesses are hamstrung today by health-care costs. Fixing this could really improve the small-business climate, and with it, the jobs situation.
November 2, 2009 1:03 AM | Reply | Permalink
Uhhh ... Did you mention small businesses?
In addition to the health care costs, a little restructuring of the small business loans can't hurt either ...
~OGD~
November 2, 2009 3:27 AM | Reply | Permalink
Could not jobs be created by a properly crafted HealthCare reform bill --This is not an either -ither point!
Though I do enjoy your perspective..it is not always a clinton 'black and white' choice!
November 2, 2009 8:19 PM | Reply | Permalink
So Wall St. firms were bailed out. They didn't have to pay their debts immediately...or at all. But what's driving the stock market rally? Which companies are making huge profits and how are they doing it? If that isn't driving the market, then what manipulations are?
If the rally is due to real rises in production then someone, somewhere is buying more stuff. Who? Where? Who's making that additional stuff?
November 2, 2009 9:57 AM | Reply | Permalink
Please don't respond if you don't know and can't factually support your answers. I'm not interested in hearing ideological clap-trap or endless, blame-game drivel.
November 2, 2009 10:00 AM | Reply | Permalink
Here's Roubini's answer (which I just found)
http://www.rgemonitor.com/roubini-monitor/257912/mother_of_all_carry_trades_faces_an_inevitable_bust
It looks terrible. If he's correct - and his record in these matters is superb - then, sometime in the next 8 years - the economy will tank in a way never before seen, and take down the Democratic party for a very, very long time.
November 2, 2009 10:24 AM | Reply | Permalink
Much of the stock market rally is just returning to a reasonable pricing. The extremely low prices in early March were due to the market doing what it always does - overreacting. Ultimately, a stock price is determined by expectations of future earnings. P/E ratios in early March were down almost to single digits, which is ridiculously low. It's now recovered to around 16, which is near the historical levels.
November 2, 2009 1:42 PM | Reply | Permalink
Excellent description of the current status of the nation and the Obama administration. The Obama administration was handed two badly implemented and unfocused wars, a Wall Street run wild and having run the American economy into the ground in such a way that it was taking the rest of the world with it last January. Add to that the six decade-old unfinished business of a non-existent health care system which is not only a massive problem in itself, but also makes the other problems worse.
The Bush administration either exacerbated or initiated these problems while at the same time either outsourcing and exploiting the government or shutting it down on the assumption that some sort of magic (or perhaps god) would provide effective governance, even as they stole the government blind. Even as they expanded what government does (wars, Part D of Medicare, etc.) they have been cutting taxes and ripping off the government through exploitative contracts (Halliburton, etc.)
It's enough to make obvious just how small the White House is in the face of these conservative-created disasters. The Obama team was pretty clearly staffed, organized and prepped to take on health care when they entered office. The wars were going to be outsourced to the Pentagon for a while. As for the economy ... no one expects the Spanish Inquisition. Team Obama had years to anticipate the health care campaign and prepare it. They tried to outsource the economic problems to the Wall Street insiders the same way they outsourced Afghanistan to Bill Gates and the Pentagon, but the Wall Street professionals have ideological blinders on and simply don't seem to think broadly enough or can't accept their own failures as an industry.
The relatively powerless Republicans have done everything possible to keep Obama's appointees from taking office so far this year in a breathtaking level of anti-American obstructionism of the kind not previously seen since just before the U.S. Civil War. I find no surprise that much of this comes out of South Carolina. Oklahoma is another source of the contagion. The religious conservatives control politics in those states as they do here in Texas.
So Obama has slapped a field dressing on the economic wounds and is performing triage, getting the health care situation dealt with first and making the economy wait until the operating room comes free again. The key resources needed to properly deal with the economy are apparently still tied up in getting health care. Lieberman and the Blue Dogs recognize this and are using it to exploit the health care debate for everything they can personally get out of it right now.
The story resembles the pattern of a suspense novel. The novel starts out introducing the central character and the key problem the protagonist will face, and then through the middle of the novel throws one problem after another at the protagonist until it seems he has to lose. It builds to a climax at which time suddenly all the problems are resolved and the reader goes away happy. We seem to be entering that period of climax at which the various problems are resolved or not. Only there is a lot of doubt that the structure of a novel can apply to real life here. There was no real resolution during the Clinton era, just a restart of the problems and a process of making them worse than before as Bush/Cheney took over.
With luck we are going to see a resolution of the health care battle (good, bad or indifferent) which will allow the White House operating room to open up and apply resources to the economy, to finance/banking and to unemployment. Getting the Senate off its dead ass and getting the rest of the Obama appointees into government would appear critical, but without the leverage of the health care decision which is now at its critical juncture the Senators should have a lot less leverage for obstructionism.
To change my metaphor a bit, I think we have been seeing the buildup of a logjam, primarily in the Senate. That's because of the limited White House resources and everything needing to be done at once. But the pressure is still building, and that logjam is going to break soon, probably before Christmas.
After that many of the problems that are currently stalled will start moving and they will rearrange themselves as some are resolved. Could this be why Joe Lieberman has taken such a publicly visible role recently? Does he see this coming, and has he decided to position himself to ride the broken logjam instead of being swamped by it?
In any case, I think we are nearing the climax of this story and will see it resolve itself soon. As in any good story, that resolution is not clear yet. But the arc of the story and its timing is becoming more noticeable.
November 2, 2009 10:45 AM | Reply | Permalink
Noble comment. Especially:
Bob Gates is at the Pentagon not Bill.
Obama is governing a country where half or more of the population think Bush protected us (notwithstanding 9/11, and 2 unfinished wars) and where irresponsible self-aggrandizing scam artists like Palin, Limbaugh and Liz Cheney are considered fountains of wisdom and great national leaders. It will clearly be an uphill slog to move this nation forward.
November 2, 2009 12:19 PM | Reply | Permalink
How disappointing that at this critical stage Sec. Reich fails to impart on his readers his strategy for overcoming current hurdles in passing the sort of health care reform for which he has for the past few months uncompromisingly advocated. The political realities he failed to address, in favor of accusations hurled at the administration, were all along too evident to those paying attention. Pesky realities such as the composition of the Democratic senatorial majority, have now become evident after months of red meat tossing, and now suddenly, the must-have-at-all-costs reform is suddenly deemed as "overcompensation", focus on attaining it is treated as "overemphasis" and as misguided priorities.
Traitor Joe, Blanche, and Mary did not just appear out of nowhere. Sec. Reich was too busy ignoring their inconvenient existences because he was too busy hurling sell-out accusations at the administration for an uncompromising Liberal base. Regardless of the merit of these accusations, they were done with ignorance, if not willful neglect, of the actual political realities. Now that we have reached this juncture and Senator Reid has taken pretty much the stand on which Sec Reich has fervently insisted, we are now dealt a curly-shuffle on what was hitherto the most important legislation of our generation because suddenly the secretary has become alarmed about unemployment. Good advice and well-taken, but at this juncture in the heat of the debate, the political capital has been invested by the Senate leader, the stakes could not be greater, but Sec. Reich switches priorites, and doubtlessly, he will be indulged.
In addition, the Sec. expresses that that Pres. Clinton gave us few social reforms, but he did get us high employment and economic prosperity. Yet he believes this administration and congress, which is focused on reform, should pay more attention to employment. Thanks for your insights Mr Secretary. I cannot be more glad that you are nowhere near the helm.
November 2, 2009 10:55 AM | Reply | Permalink
After a solid summer and fall complaining that Obama hadn't done enough to further health care reform we're now suppose to ask ourselves whether he has done too much and neglected putting people to work. I should be surprised at this gem from Professor Reich...but I'm not.
November 2, 2009 12:55 PM | Reply | Permalink
You've got the same problem with jobs that you do with healthcare. The "moderates" don't give a damn about either. Unfortunately, being the postpartisan, pragmatic, post ideology guy that he is, Obama, unlike FDR, is not capable of articulating an ideological narrative that joins the issues together.
I made one of my infrequent visits to the cathedral while visiting mom, and there's the bishop speaking on the anniversary of murders in El Salavador and the evils of exploiting the poor in central America and then swinging right from there to tell us to call and attack the health bill because it isn't strong on abortion. You'd never know that the health bill had anything to do with social justice because the Democratic Party is terrified of standing for anything.
November 2, 2009 2:35 PM | Reply | Permalink
Oh and Bob, whatever you do, DO NOT MENTION Dean Baker's proposal of an "easy and quick way to begin to get these unemployed workers back to work."
The thing is, if they tried this, or even discussed it openly free of the infallible pontifications of the know-nothing economistchiki, a lot of people would get very, very angry when they found out the con that the econ profession and policy bureaucrats has been pulling on this baby.
So, mum's the word, eh, Bob? Talk about doing something, anything. But don't step on that third rail.
November 2, 2009 5:37 PM | Reply | Permalink
Great article! It's true getting Americans back to work is important, but it's not entirely separate from the healthcare and public option debate. In fact, they are more connected than we may at first realize. http://cli.gs/z3AtaY/
November 4, 2009 4:27 PM | Reply | Permalink
As a scientist, I am puzzled by the thinking processes of economists. They apparently have great ability to analyze economic symptoms, like the prospect and impact of passing a health care bill, but fail to identify and explain basic forces and processes driving the economy.
A good case in point is an elemental process basic to all modern economies: the creation of money.
Economists do not frequently address such questions as: who creates our nation’s money supply? How is it created? Why is money in such short supply? Why do we pay interest on 99.9% of our money? Why does the government allow it to be traded as a commodity with fluctuating value?
And, most important, why does the government not issue all of the nation’s money supply as a public utility, thereby avoiding the interest payments on the national debt, the money shortage and fluctuating the value known as inflation?
November 4, 2009 9:22 PM | Reply | Permalink