health care

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Health Care Summit and Housing: Blather and Gloom

Not just a big snow storm provided gloom at the end of the week. The report on existing home sales was miserable, and even the revision upward to fourth quarter GDP failed to lift the mood; it simply confirmed that growth still depends on one time efforts and is not yet strongly sustainable.

The National association of realtors reported today that sales of existing homes dropped 7.2% in January to an annual rate of 5.05 million. this is the lowest level for seven months and means we have given up all the gains of last summer and fall. there is not too much to say with regard to this, other than we can take it as yet another supporting datapoint confirming the sideways drift we now find ourselves in. One by one, most of the major economic indicators are shifting from positive to neutral. The gains of late last year are evaporating and we are being exposed to the distinct possibility of a halt to our current growth path.

That growth path is best described by the fourth quarter GDP figures that were revised in a report issued today.

The first estimate of fourth quarter growth had GDP rising at a 5.7% annual rate. This second report, based on more detailed information, alters that slightly and has growth at 5.9%.

Be careful with is number. looking into the details reveals that most of this growth came from sources unlikely to be repeated any time soon. In particular, a big chunk of it came from the inventory adjustment we were all talking about late last year. From the looks of the orders data earlier this week that adjustment has run its course and will not provide as substantial a boost in the next few quarters. Other strong points were an increase in non-residential investment – that the durable goods orders report on monday suggests is now weakening – and a better trade position produced by both a decrease in imports and an increase in exports. The problem with that trade improvement is that if, and when, the economy kicks into a higher gear imports will increase sharply, if for no other reason than oil consumption is highly sensitive to economic activity. With the dollar picking up value against the Euro, it is tough to see exports gaining speed too. So the bright spots in the fourth quarter provide little comfort for 2010.

In particular the drop in personal consumption expenditure is a worrisome trend. If that decline is repeated we would be left relying on those other factors to keep GDP growing. Given this week’s drop in consumer confidence it is very hard to argue that consumption is going to gather sufficient strength to offset the flattening out I expect in inventory adjustments.

So we remain firmly attached to life support. The good news is that there is plenty of stimulus impact coming on stream this year – probably enough to offset declines elsewhere. That buys us time to get consumption going.

Nonetheless this has been a very gloomy week.

And that gloom was not exactly lifted by the health care summit yesterday.

There is not much to be said for a multi-hour ideological stand-off. Nothing happened to elicit hope that a grand coalition would emerge and push reform through to the finishing line. Of course there is no surprise in what happened. The lines have been drawn months ago and are not about to be crossed. The issue of health care reform is such a divisive one for the political parties that I doubt compromise was possible even had the GOP made an effort to come around and support it.

The plain fact is that the Republicans, in their current ideological frame of mind, are dead set against reform for two reasons: one, they see it as a major political points gainer to resist what they characterize as yet another unaffordable government program; and, two, they are still mired in their Reagan inspired de-regulatory mindset.

The first of these requires the GOP to frame all reform as an expensive and bureaucratic waste of taxpayer money. In this they appear to have succeeded in part. This is despite the fact that the CBO has clearly said that the reform as it now stands is a major cost saver to the Federal budget.

The second line of attack is more important to them since it springs from their belief system: government is bad, markets are good. This requires them to defend the insurance companies and stop the government pooling resources in order to use its bargaining power to lower costs.

By combining opportunistic political posturing with a strongly market driven ideological sentiment the GOP has defined itself very clearly. Its ongoing problem will be squaring this with the general attitude of the voting public who remain supportive of reform. Were the GOP to articulate their true value system, which inevitably has to include the abolition of the New Deal safety net, they would face huge voter resistance, and the loss of any chance of regaining power in the near future. So they have come up with a different approach: obfuscation and obstruction in order to create a war of attrition. This is intended to buy enough time and to create enough confusion that the populace gets tired of the bickering and lashes out against Congress for its inaction. Such a backlash would hurt the Democrats more and would, possibly, return Congress to Republican hands.

The virtue of yesterday’s farce was that it called the bluff and ended any opportunity for the GOP to claim it had been ignored. As it stands the Senate bill – which has been passed – includes Democrats are balking at voting for the combined bill. This erosion of support within the Democratic ranks makes a complete mockery of the Republican claims that they had no influence or that they were ignored.

So what happens next?

Reconciliation, and an ‘up and down’ vote. The Republicans hate this prospect because it means, inevitably, that reform will pass. Their objection, repeated in the media, that such an important piece of legislation should not be subject to a simple partisan vote is arrant nonsense. Nor is it without precedent. A reconciliation vote has occurred twenty-one times in the last three decades, and most of them have been for highly contentious legislation. The Bush tax cuts were passed on a 50 – 50 vote with Cheney breaking the deadlock. Those tax cuts had a far greater impact on our budget than the proposed health care reform will ever have, and they were just as ideologically divisive. As the White House has pointed out: every single GOP Senator attending the summit yesterday and objecting to the ‘unfairness’ of reconciliation, has voted more than once along partisan lines in previous GOP inspired reconciliation votes.

So the only bump remaining in the road is that Democratic unease with passing the watered down and Republican influenced legislation.

So as the week ends we seem to be back in familiar territory: all blather in Washington; and all gloom in the economy.

Let’s hope spring gets here quickly. We all need some fresh air.

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Health Care Back In Focus

With the economy stuck firmly in its jobless trajectory, and with the Senate obdurately refusing to do anything at all, we shift our attention this week back to health care reform. After all the fuss in the wake of the Massachusetts election health care reform was presumed to have died, at least in its then existing form. Apparently not: the drop from 60 to 59 votes did nothing since there was no coherent package that could have elicited 60 votes. Those of us who railed against the lack of democracy in the Senates obsession with that mystical 60 vote threshold can now breath a little easier. Reconciliation is the way to go.

This week we have the great gathering summoned by the President as he seeks to continue his futile search for a middle ground. There is none. Health care reform is a life and death issue for the Republican leadership who have fought for decades to kill all our social programs from Social Security to Medicare. For them government interference in health care is one bridge too far on the road to socialism.

I admire the consistency of the GOP. Not once have they avoided stating their views. They are not willing to ‘come to the middle’ because, for them, the middle is as treacherous as the left. I reserve my criticism for their unwillingness to come clean in public to the voters and say outright that they want to abolish all these programs and so see no reason to support any reform of health care at all.

Far from being a breakdown of democracy the deep divide between the parties offers us all a clean and clear choice. There is no muddy or murky consensus where we don’t quite know who wanted what or who to blame. No, this one is as simple as it gets: the Democrats – most of them – want reform. The Republicans – all of them – don’t.

This should have been a no brainer. We went through an election last year during which health care reform was a major feature. The candidate offering reform won that national election handily. In other words the voters went with reform by a very clear margin. Democracy should have then seen to it that reform took place. After all we like to think of America as a democracy.

The reason things bogged down was the Senate’s evident lack of a democratic ideal. The minority there can thwart the will of the people by asserting their ‘right’ to filibuster. It is as if last year’s presidential election never took place.

But the Senate is an endless mine of procedures and rules. Now, after having frustrated, confused, and annoyed the populace for a whole year our leaders discover the infamous ‘reconciliation’ method of legislation. In plain language reconciliation is the enforcement of the democratic will – a simple majority will get something passed into law.

Whoever would have thought of that? A majority can get laws passed? In America?

Snark aside: it’s about time.

The President has come out and said explicitly that if the Republican don’t budge then he will seek a straight up and down vote. I have to assume, although with this crowd it may prove to be a dangerous assumption, that the White House is confident that it can get 50 or 51 votes in the Senate.

I therefore assume that reform will now get passed.

Perhaps the most important shot fired in this protracted war was that in California where insurance premiums are now being re-set to take into account the damage done by that state’s economic slide. As more and more healthy people seek to cut costs and abandon health insurance California’s insurance pool has shrunk rapidly and unbalanced the ability of the insurers to spread the premium costs across a diverse pool. So the cost of covering treatment is falling more on the sick. This is the classic way in which insurance collapses. All insurance pools rely on having many more non-claimants than claimants. That way the cost of care is absorbed by a wide spectrum of people – even those who never make a claim. Once that pool starts to shrink and the concentration of claimants becomes more concentrated premiums have to rise rapidly. Eventually, of course, if all the healthy people dropped out, premiums would be set at the cost of care. Which is precisely the opposite outcome from that envisaged by the concept of an insurance pool.

I mention this because California’s experience is exactly what the government is trying to avoid. Any privately provided insurance pool will be susceptible to the selection problem outlined above. Insurers will always be forced to pass on the cost of the shrinking pool. This is why one of the most important reforms is to mandate insurance coverage: it is a way of spreading the cost across the entire population and produces the most stable and least cost insurance pool possible.

And it is elementary economics.

That the GOP opposes it is simply an indication that they value opposition to government more than they value health care. They are caught between these two positions. Their attack on ‘big government’ implies that they would be willing to see voters without coverage. Sick people without health care is a lesser evil than having the government involved in care provision. Their conundrum is how to sell this anti-social policy. So far they have succeeded simply because our health care system has held up despite the strain. It hasn’t collapsed and enough middle class voters get their coverage as an employee benefit that the illusion of strength can be projected onto the system. The true cost of our system is also hidden since we have made the employer cost tax deductible and thus a burden on the taxpayer: even if you have no employer program you are implicitly paying for health care for others through the lost federal revenue caused by that tax deductibility. It is only when the inefficiency and danger of reliance upon private insurance pools gets exposed, as it now is in California, that people realize how precarious our system really is.

I think the crisis in California is focusing some senators on the issue. About time. This was not a difficult issue to figure out.

Plus, as the other big debate – the one about the Federal budget – gets under way we all need to realize that any solution has to incorporate adjustments to entitlement programs, especially Medicare which has all the potential to bankrupt us. So instilling cost control over the health care industry and demanding results for all that cash we throw at it is an essential part of fiscal reform. Using the pricing power of the government is the only way we can square the two goals of keeping care affordable, and balancing our budget.

Let’s see how the week unfolds. This is one moment when the GOP has to take a stand and quit its obstructionist mode. It shouldn’t be difficult. Anyone with a fiscally conservative bent should support health care reform as a first step towards balancing the budget. As long as left wingers realize that the trade-off has to include cost control in Social Security and Medicare a deal should be possible.

But that sounds too simple for our leadership, so look for more conflict and posturing before any resolution.

Addendum:

I shouldn’t accuse the Senate of doing nothing at all. Plenty of lesser legislation has been passed and that rotten stimulus bill did get enacted. The year long discussion of reform in health care and banking has given me a jaundiced perspective. That’s because they happen to be the most important things we need to get done. So I will amend my criticism: the Senate does nothing important.

Also: I cannot disagree with the Economist magazine more strongly. Last week’s edition placed a good heap of the blame for inaction in the Senate on Obama’s pandering to the left wing of the Democratic party. That’s just a joke. He spent too much time pandering, or trying too at least, to so-called ‘centrists’. If anything his attempts to get consensus annoyed the left into sullen opposition to him. Plus those anti-democratic rules don’t actually help matters. Apparently the Economist gets all teary eyed over the obstructionist role the founding fathers gave to the Senate. The radical slowing down or even the abrogation of the will of the majority is seen, by that magazine, as a valuable service: it allows a more considered legislative process to emerge.

Phooey.

That’s sentimental nonsense. In the days of the founders a ton of time was necessary for debate because information had to to travel across great distances. Slowing things down allowed all voices to be heard from the various distant corners of the land. Now the debate rages in real time and in a myriad of places all instantly connected. The pace has picked up a little from the late 1780’s. Duh.

The Senate is an antiquated, quaint, and anachronistic anti-democratic citadel. It should be abolished. Even the British have taken a good stab at reforming their aristocratic legislative body – the House of Lords is a shadow of its former self and probably will go completely in the near future. The Economist supports that reform, but loves the Senate which plays the same role here.

Our democracy should move at a more contemporary speed.

And the Economist should stop getting so caught up in its worship of all things American.

A little modernization would do us all good.

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The Freeze Part 2

No I haven’t changed the basic thrust of my opinion: the freeze still is rubbish. It covers a small part of the budget and so will garner very little by way of actual deficit reduction. At the same time it represents an abject capitulation by the White House to Republican arguments. At best it panders to populist emotions about government profligacy in the face of private penury.

And we all know how wrong that is.

Ezra Klein absolutely nails the capitulation issue. Obama has tossed overboard one of his better arguments: health care reform was our best and brightest shot at cutting the deficit. The problem became that the GOP was successful in getting the public think of reform as a new, and costly, government program, which it isn’t. Obama conspicuously failed to get his message across: his view of reform was that of cost control rather than of entitlement extension.

Come to think of it I doubt he really tried.

In the longer term, after the effects of the crisis have abated, the basic deficit questions can be resolved down to these:

  1. Revenues have been slashed by the Bush tax cuts of 2001 and 2003 without resulting in an offsetting boost to GDP growth. Greg Mankiw tried to explain them as Keynsian deficit spending, but he absolutely failed to make the case. Instead the loss in revenue has plunged us into red ink on a permanent basis : this is the structural problem we need to fix.
  2. Entitlements are too expensive. The really big issue is health care. We cannot keep Medicare funded the way it is now. It will bankrupt us. It needs modification. Bush added vast costs and blocked the implementation of efficiencies. The current health care reform fixes those errors and more.
  3. In contrast Social Security is relatively easy to fix: raise the retirement age to reflect modern demographic realities; and eliminate the ceiling on social security taxation. Along with minor tweaks these solve any cash problems the program has.
  4. Defense spending is way too high. We are conducting wars hither and yon, without any limit in time or extent. Frankly we cannot afford to anymore. We need to modernize and reduce the military: one attractive plan is to eliminate the air force as a separate entity and spread its functions into the army and navy. The savings would be enormous.
  5. Our debt levels expose us to much higher interest costs if rates jump at some future date. Right now we are lucky rates are historically low. That luck could run out at any time.

Fixing all these problems would not be easy at the best of times. In the context of a fractured and recalcitrant Senate hell bent on obstruction it seems impossible without strong White House advocacy and leadership. Which we do not have.

By capitulating to the 41 GOP senators who, for some reason, put the fear of god into him, Obama has adopted their agenda in a craven attempt at electoral survival. He has put survival ahead of principal. He now stands for nothing other than winning elections, and so prolongs rather than changes the course of the Reagan/Bush trajectory – which would be great if that trajectory led somewhere other than deeper into debt.

The implication is that, instead of making fundamental shifts in spending on entitlements and defense, we will focus simply on tax and spending cuts only. Defense will be ruled off limits. Intelligent cost reduction of health care will give way to the reduction of benefits and the reduction of entitlements rather than the enforcement of cost control.

The change we can believe in is long forgotten.

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Holiday Wrap up

With the holidays upon us and with the monumental event of health care reform behind us I think is time to wrap up this week’s news before taking the weekend off.

  • Health Care Reform:

Obviously the big news has been the long and painful procession towards this morning’s historic vote in the Senate. I will eschew any comment in depth simply because the real news was in the theatrics and Senatorial machinations rather than in the actual content of the legislation.

Am I happy with the bill that emerged from the Senate? No. Not by a long shot. However, given the undemocratic procedures and hide bound rules of the Senate what we now have is probably the best we could have hoped for. Some people are arguing that the ‘political’ landscape is the ultimate reason we ended up with a half-hearted reform. I disagree. Political landscapes can be shaped. They can be altered by two things: a crisis that unmoors traditional sources of opposition; and by leadership that advocates for change. Combined these two have, historically, been the cause of most of the inflection points in social trajectories – think France circa 1789.

The problem in health care is that many people, and particularly many entrenched people, deny that a problem exists. They do not offer alternatives to reform because they see no need for any action at all. They are content that we over consume health care. This is largely due to their ideology denying the possibility of over consumption: true believers in market magic accept any market outcome as being ‘correct’ simply by virtue of being the product of a market. By denying any normative content to economics they are forced into this acceptance as a matter of ideological consistency. They look at people such as myself who make claims about ‘over consumption’ as placing a burden on an economic process that cannot be there. To them the fact that we are headed towards allocating 25% of our annual income on health care as a choice we have collectively made. The only alternative, in their model of an economy, is that we change our minds and consume less.

This interpretation of of economic outcomes is a passive one. Economists who follow to this path prefer to call their subject ‘positive’ economics to distinguish it from the ‘normative’, and less ‘scientific’, kind that suggests interference in the marketplace in order to direct outcomes towards a socially more balanced outcome.

I have never though of economics as being truly scientific the way, say, physics is: it will forever be tainted by ideology. Besides my background in history informs my view and imbues me with a pragmatism not to be found in the text books.

So my position is that no sector of the economy can absorb 25% of our wealth without having a deleterious impact on other sectors. For every dollar we spend on health care we have one less to spend on something else. This would be fine if the social benefit from that cost justifies the expense and was a superior return that that available elsewhere. Traditional economic theory, because it presumes efficiency, is thus forced to presume this superiority. It can make no comment on our allocation towards health care because, a priori, it regards the outcome as correct. Inefficiency cannot exist, it is waved aside by the existence of market magic. But if the sector in question is wasteful, then our much of our allocated wealth to it is being consumed unwisely: and may have been better consumed elsewhere.

In the real world our health care system is riven through with inefficiency. To take one example: its fragmented nature means that its office technology is woeful. There is no national system to make the transference of records easy because there is no market discipline – i.e. profit – to enforce it into being. It would have to be imposed on the market via regulation. Doctors moan about having to absorb the cost of moving into the modern era of record keeping because there is no return to them from the effort or cost. Patients benefit, but since the causation between cost and benefit is difficult to tease apart they are not inclines to shoulder the cost either. So, contrary to economic theory, the set of selfish local decisions do not sum into a social optimum. The hidden hand fails.

Health care is riven through with such instances which is why market processes do not work well, if at all, for it.

Ultimately this is why reform became so urgent.

The current legislation falls well short of curing all the system’s problems. But, given the corruption and endemic inertia in the American political system it is the best we can do.

It is this systemic failure we should all be concerned about. Countries who cannot govern themselves without corruption, or whose political system becomes so rigid it cannot respond to economic or social problems, are doomed to suffer a loss of power and a slide into cycles of ever increasing internal division.

So my lesson from the health care debate is not so much that the legislation is flawed, but that we are faced with a much deeper and more profound issue: our political process is now a liability and needs an overhaul.

  • The Economy:

The news this week has been disappointing. The revised data on the overall economy chopped nearly 0.7% from the growth rate for the third quarter – GDP is now calculated to have grown only at an annual rate of 2.2% in those three months. While this is no surprise to those of us who have preaching caution, it is nonetheless a setback. It implies that the outlook for 2010 is equally that much weaker. We are a very long way from being on safe ground which means that it is way too early for us to begin a discussion about undoing any of the stimulative policies that continue to be our biggest source of growth. Were we to take away those policies – as some hardliners are advocating – we would assuredly fall back into a very deep and protracted recession. Given the immense social cost of such a collapse we have to maintain our current support for a much longer period than many of us envisaged at the beginning of the decline.

There are a pile of studies to tell us that recessions that have origins in financial excess are worse and longer than those that stem from manufacturing cycles. History is replete with bank failures that lead to or are associated with an economic downturn. Each such downturn is far more painful than ‘regular’ recession. We will need to keep our focus well into the new year if we are to avoid collapse.

This is supported by today’s unemployment news.

The numbers for new claims for unemployment assistance dropped smartly – by 28,000 – last week. This tells us that job ‘destruction’ is slowly ebbing and that we are stabilizing at long last. We are now back roughly to where we were in September 2008. Our problem is the job creation is still negligible. We know this from the stickiness of the claims for ongoing assistance, which are still above the 5 million mark despite a drop of 127,000 last week. This persistence of long term unemployment remains a blight on our prospects for the new year and is a measure of the huge adjustment we need to make in order to expunge the imbalances that built up during the decades of illusion. We are paying the price now for a very long period of denying that our economy had growing problems. It is ever thus when Pangloss gives way to reality.

The years ahead will be choppy and possibly tumultuous. Next year definitely looks to be a mixed bag, with much hanging on the outcome of this holiday season’s consumption numbers.

  • Bernanke:

The confirmation hearings have gone pretty much as expected. I do not want to dwell on them, since they have revealed little new information and seem to have been perfunctory. My take: there must be, somewhere, someone more capable than Bernanke. His tenure looks like a simple extension of the Greenspan era. In the past I have gone back and forth over whether I support his return at the helm of the Fed. Right now I am opposed. That may be more a reflection of my general frustration with policy, particularly financial reform, as it is to do with him personally. This frustration is reinforced by some of his glib responses to what few penetrating questions he was faced with during the Senate hearings. We are no nearer a resolution of the banking crisis than we were months ago. The recent spate of good earnings simply add a veneer over the continued precarious nature of our banks.

If there is anything that we should all be concerned with it is that we have failed to sort out the big banks. This failure will rebound on us sooner than any of us wish. We would be fools to let that happen, yet I see little evidence of urgency or courage in Washington.

I wonder whether, like the difficulties that beset health care reform, our seeming inability to take strong action to ‘fix’ the banks will be viewed by future generations of historians as a watershed moment in our national decline.

Nations really do rise and fall in lock step with the ability of their leadership to confront problems. We cannot forever bargain and compromise away our difficulties. Nor must we emulate Charles Dickens stinging rebuke of bureaucracy in his character of Podsnap. Recall that a Podsnapian response to a problem was to sweep it away with a wave of his hands – to dismiss it as not relevant to the great issues of his day.

Great issues demand action not paperwork. We seem to be very good at the latter. Health care reform being a salient example. Let’s hope we are able to act in 2010. Otherwise the outlook dims even more.

With that I will sign off for the holidays.

Enjoy the break.

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Health Care Reform Moves Ahead

Even for a skeptic such as myself this is good news. The idea that the Senate Democrats have reached an agreement and have legislation that they can get sufficient votes to pass is a massive step forward for the country. That the bill being proposed lacks many features I would have preferred to see – I am an unreconstructed advocate of a single payer system – is, ultimately, less important than the simple fact that a bill, any bill, is being voted on this week. If all goes according to plan [Joe Lieberman we are looking at you] America will, at long last, have a chance to untangle the mess that is its health care system.

The reason I can support the bill is not so much its content, as I have said I find much to be critical of, but that at a more fundamental level we have just seen a sea change in our politics. For the first time in many years, if not decades, our government has been presumed to have an important role to play in shaping economic outcomes. This sea change in the terms of our national debate explains the hysterical opposition that right wingers have thrown up. Ever since Reagan sent us down the road of illusion the central premise of legislation was to limit government and expand the market. That road brought us to grief in the financial sector and has us headed to an even more cataclysmic crash in health care. We have finally altered the shape of discussion. Hopefully from here on similar debates will be somewhat more easy and less fraught with ridiculous and often contradictory claims of creeping socialism or fascism.

This is something for us who do not believe in the magic of the market, as told to us by the ideologues anyway, to cheer about the holiday season.

For those of you who remain unconvinced I turn your attention to the following facts, culled from Atul Gawande’s excellent reporting:

  • The Senate bill will extend coverage to about 94% of all Americans.
  • Lack of coverage caused approximately 45,000 premature deaths last year.
  • Health care costs are slowly destroying our economy: the annual premium for a typical employer provided plan has risen from $5,800 to $13,400 in just the past ten years. At the same time the average cost per beneficiary of Medicare has risen from $5,500 to $11,900. This is the very definition of an unsustainable trajectory.
  • Health care consumes about 18% of every dollar the nation earns. That figure is set to rise to 25% as the population ages.
  • Health care costs are sinking our competitive ability: our auto industry was largely destroyed by the burden of providing coverage for workers who were not even employed any longer. Other manufacturing industries are sinking under the same weight.
  • Our health care system is legendary for its inefficiency. We lead the world in paperwork, but lag way behind in health care outcomes. For a nation wired end to end, our health care providers are stuck in the technological dark ages.
  • While other Western nations may struggle with the cost of their systems, ours sets the record for waste. The cost has doubled in ten years while the outcomes have generally stayed the same or even worsened. We are pouring money down the drain.
  • Our system is awash with glittering new technologies and drugs all of whom have a common theme: they are expensive. We lag the world by vast stretches in cheaper treatments and low cost approaches.

This list could go on further. But there is no point. The salient feature to hammer home is that our system has failed us as a social enterprise. Completely. We get a very poor return on our huge investment. With the impending demographic shift the nation is to undergo as the baby boomers age and start to cost a lot more – yes, that’s the right way to think about it – we have a clear choice: bankrupt ourselves or reform.

As I have said here many times, health care reform is a cost driven issue first and foremost.

Does the Senate bill past muster in that regard? Yes it does. The Congressional Budget Office scoring is quite strong. This legislation, flawed as it is, will save the country money. Frankly those whose opposition to health care reform was predicated on its cost should either now apologize or simply shut up: the CBO has given it the green light. The Federal budget can breath a sigh of relief. Deficit hawks can sing songs of rejoice. That is if they have the courage to recognize the reality of what this legislation represents.

Those who cling to market magic as the be all and end all for economic problem solving have totally failed to build an alternative case. This is for a very simple reason: they can’t. Market based economic theory doesn’t work in health care. It breaks down on many technical and theoretical levels. The best evidence is the system we have today: the incentives to doctors and other providers is to use the most expensive care they can. That’s where the money is. That’s where they can make the most profit. Whenever a system is driven by the profit motive it will hurtle out of control unless competition is strong enough to rein it back in. It is impossible to build the right level of competition into health care without using draconian regulations that are far more invasive than a simple government system would be.

Markets are not always perfect. How refreshing to able to say that in the context of a major national debate. Sometimes the government is less of a problem than the market is.

The ability to make that comment alone makes this legislation worth holding my nose for.

So today’s news that the Democrats have to votes to move forward is the first step towards not just cheaper health care, but better health care.

And even a skeptic like me can be happy about that.

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