Economy Department with Ezra Klein
Thursday, July 9, 2009; 12:00 PM
Ezra Klein writes a Post blog about economic and domestic policy, and he was online July 9 at noon ET to take your questions about collapsing banks, cap and trade, health care reform and pretty much anything else you can attach a chart to.
Ezra Klein: Health-care is struggling. Michael Jackson remains dead. I just had some gross scallion cream cheese. At least it's nice out. Let's do this.
New York: Have you read Taibbi's article about Goldman Sachs, and do you find it persuasive? Please don't brush off the question, like a certain financial columnist did yesterday, by saying that "I don't believe in conspiracy theories."
Ezra Klein: I haven't read it in full. I really need to. I did read a lot of financial press commentary on it, and the consensus seemed to be that there was some genuine oversight but an implausibly monocausal explanation to the crisis.
What I'm really looking forward to reading, though, is Michael Lewis's new piece on the
Washington, D.C.: Do you think the Senate will be able to pass cap-and-trade legislation this year? And if so, do you think it will be stronger or weaker than the version passed by the House last month?
Ezra Klein: I don't know. I vaguely doubt it. If they do manage to pass it this year, I think it will border on being unacceptably weak. The politics just aren't there to support a strong cap-and-trade program yet. This can't be all inside game, which, at the moment, it is. But there are still a number of months left in this year, and if Obama is able to turn his full attention to it and makes a huge public push...who knows? I'd still judge it unlikely. But unlikely things happen.
Sacramento, Calif.: Do you eat healthy everyday, Ezra?
Ezra Klein: Try to. For instance: I'm really attempting to stay away from gross scallion cream cheese.
Princeton, N.J.: Ezra, you consistently tell us to go after the juicy Gewapples high up on the tree, and to forget about the smaller SP Pears lower down. One of the reasons you give is that our present medical practice is not sustainable. On the other hand, you refuse to talk about the CEPR Health Care Budget Deficit Calculator which tells us that if we could switch to the health care systems of any of 23 other countries, instead of a huge deficit in the future, we would have a sizable surplus, so there are 23 solutions to the sustainability problem. Why don't you ever talk about the calculator or even look carefully at any of the 23 solutions?
Ezra Klein: Go ask Dean Baker who in the blogosphere has posted that calculator the most times. I think you'll be surprised who he names.
Washington, DC: Ezra, through your twittering I have developed a growing respect for you. However this morning you posted something that gave me a pause: how can a self-described foodie not like scallions in cream cheese? Since Gene Weingarten is no longer chatting weekly, virtual panty-throwing to you hinges on this answer!
Ezra Klein: I would like cream cheese that tasted like scallions. I might even like scallions that tasted like cream cheese. But scallion cream cheese is an unholy new taste that should never have been let loose from the lab.
Boston: What's the chance that we slip back towards depression like economic stagnation and what bullets does the U.S. Government and other nations have left if that starts to happen? At what point do factors like the debt and other liabilities (guarantees) we have taken on so far suck us down like a whirlpool?
Ezra Klein: Debt and other liabilities probably won't hit us in the near-term. I'm not too worried about that. A slip back into stagnation is possible. Other arrows in the quiver? More stimulus spending, primarily. Noam Scheiber brought up the idea of a sharp cut in payroll taxes, which I think makes a lot of sense.
Silver Spring, Md.: Putting on your most coldly objective lenses for a moment, to what extent are we in danger of not having any health care reform at all?
Ezra Klein: Hard to say. It's always a possibility. I think the chances of some bill are very good. The chances of a bill that isn't really health-care reform -- it's just a bit of coverage expansions, and nothing near universal -- are pretty good. And the chances of a genuinely good bill? Small. But that's the legislative process. Reforming a fifth of the economy ain't easy.
Richmond, Va.: Ezra, do you know who the most influential wonks are behind crafting the early health-care reform legislative drafts in the House and Senate? Who are the experts advising our elected representatives?
Ezra Klein: On the Senate side, Liz Fowler, Max Baucus's chief health care aid, is really the crucial mind. On the House side, I'd probably give the nod to Karen Nelson, Henry Waxman's influential adviser. But there are a lot of people involved in this process -- not just other staffers, but outside voices, like Len Nichols from New America, Judy Feder and Karen Davenport from CAP, Jacob Hacker from Berkeley, and so on.
Albany, N.Y.: I'd be interested in your take on how big of a problem the President really has over continued unemployment and the failure to get the stimulus money out the door as fast as some might like -- My impression was that CBO had well publicized estimates that only a limited amount of the various kinds of construction money, for example, could be spent this year. Granted, people are worried about their jobs, but shouldn't we let the stimulus take effect before we write it off as a failure?
Ezra Klein: This gets a bit complicated. The stimulus could "work" and we'd still need another. Imagine I'm at the market and I'm predicting how hungry I'll be later tonight. I figure I'll have a big lunch, so I buy a modest dinner. I don't have a big lunch. I eat my modest dinner. I'm still hungry.
Did my dinner fail? No. The conditions changed. And that's what happened here: The stimulus was built for lower unemployment expectations. We can assume the stimulus will work in blunting some of the impact, but also predict, quite confidently, that it will not be fully up to the task. The question is should we get more dinner after our light lunch, knowing we'll need it later? Or wait and hope that our small dinner is enough, knowing the stores might be closed and we won't be able to get anything?
Reston, VA: I see that Congress is falling back on the "we'll make the rich pay for it" plan for the health care reform bill they're putting together.
While I'm sure it is very popular to have The Other Guy pay for everything, isn't that well going to dry up eventually?
Ezra Klein: Yes.
Philadelphia: First, how is "Infinite Jest" treating you?
Second, I've been trying to eat more and more meat-free dishes. What are a couple of your favorite meat-free dinners?
Ezra Klein: I'm about 50 pages behind schedule. The book is good, but as no plot has kicked in, there's nothing to keep me reading save for the schedule. But I'm trying!
As for meat-free dinners, tofu stir fries work well. I made a killer goat cheese/olive/broiled tomato bruschetta the other night and paired it with green bean and chickpea salad with harissa dressing. That was good. I made pizzas for a dinner party last weekend. And so on. Deborah Madison, Mark Bittman, and, sigh, Crescent Dragonwheel (or something similarly hippified) all have great vegetarian cookbooks if you're in the market for that sort of thing.
New York, N.Y.: Despite yesterday's meeting between Harry Reid and the ranking Republican members of the Senate Finance Committee, it still seems that most Democrats, including Reid, would rather push partisan reform, now that Franken has been officially sworn in. But I can think of around 10 Democratic senators who have expressed opposition to the public plan, and thus to such a one-sided bill.
So why isn't bipartisanship the obvious path at this point? It has been historically proven that bipartisanship is essential to the success of major pieces of legislation, and in this case it looks to be essential to the bill's passing, so why is it being so adamantly avoided?
Ezra Klein: I don't think there are anywhere near 10 Dems who have opposed a public plan. I'm not sure there are, at this moment, two in firm opposition.
But the question is not why Democrats don't want a bipartisan bill. They do. Max Baucus has basically begged Chuck Grassley to work with him. The question, rather, is why Republicans don't want a bipartisan bill. And that's simple. They don't want Obama and the Democrats to rack up a huge and historic accomplishment. Democrats were the same way when they were in the minority.
The problem with "bipartisanship" is that it only works when people have compatible incentives. But what if they don't? What if the majority wants something to pass and the minority doesn't? How can you achieve bipartisanship if the two sides don't agree on the basic worthiness of eventual passage?
And that's where we are. Democrats haven't abandoned a bipartisan bill. They'd love one. They're simply coming to terms with the reality that that's probably not possible.
Central Mass.: When estimating the cost of health-care reform, it seems the assumption is that this is all new spending. We spend many billions on health care now - how do those funds figure into the equation? Won't billions of the dollars we spend now just be redistributed under a reformed plan?
Ezra Klein: The assumption is wrong. Let me state this clearly: Health-care reform will contain no new borrowing. Zero. Not a dollar. It will be deficit neutral.
Originally, the idea was to get the money from inside the health-care system. Capping the employer tax exclusion, for instance, moves dollars that are currently subsidizing employer-based plans and puts them to work subsidizing health-care reform. But as that falls by the wayside, we may see some new taxes on the wealthy, or on providers. None of it will add to the deficit however. It will all be paid for.
Washington, D.C.: Will Al Franken be able to help unions sway the Democratic Senators who are wavering on Employee Free Choice? And if he does, will Minnesotans back him?
Ezra Klein: Almost certainly not to the first question. I don't imagine that many senators have just been waiting for Franken to come tell them what to do.
New York, NY: To what extent should we be focusing on reforming the U.S. agricultural and food systems to mitigate greenhouse gases and global warming? Aren't livestock farms the single largest producer of greenhouse gases in the country? Why doesn't this get more attention in the press relative to the auto and other industries?
Ezra Klein: To a large extent. I don't know if that's true in this country, but it is true in the world. And it's a huge problem. Estimates have the food production system -- mainly, meat production -- accounting for more greenhouse gases than does the global transportation sector. Attacking the problem without addressing that reality will be very, very difficult.
Columbia, S.C.: What should we made of the recent drop in the President's approval numbers (and the subsequent rise in his disapproval numbers)? Gallup internals seem to show that the bulk of the movement comes from self-IDed Republicans, so is it nothing to worry about or a sign that people might be getting impatient with the economy? Is the president's political capital wounded, hurting the prospects for health care reform to make it through Congress in 2009?
Ezra Klein: I don't think much should be made of them. The economy is rough. Legislation is in the dirtiest, least appealing phases. Gas prices are rising because it's the summer. Poll numbers go up and they go down. That's what they do. I wouldn't gi ve it much more thought than that.
A friend did point out to me, though, that the big difference between Obama's drop and, say, Clinton's in the 1990s, was that a) Clinton's was much worse, and much more about him, but more importantly, b) Republicans rose at the same time. Voters, in other words, began thinking they wanted different leadership. That's not in evidence here.
Prescott, Ariz.: I read that post you did about Reason Magazine's Matt Welch and his critiques of your thoughts on whether news has actual saleable value. It frankly cracks me up that someone like Welch (who works for an unprofitable enterprise that exists solely thanks to "donations" from millionaires and billionaires willing to subsidize magazines that push things they really want, like tax cuts for millionaires and billionaires) appears to have no self-awareness of his own welfare existence. Do you think that these "hobby" organizations like Reason, or the National Review actually think they are capitalist ventures because they push uber-capitalist doctrine so hard?
washingtonpost.com: Can We Sell the News?
Ezra Klein: It's really hard to say. I was amused, though, by Welch defending the bankrupt Tribune Company's profit margins as compared to Wal-Mart. For a professional libertarian, the guy isn't overly impressed with the judgments of the market.
Silver Spring, MD: What are your thoughts on peak unemployment. I was reading Brad DeLong's blog and he states some economists are predicting a worste case scenario of 12%. I think 11% sounds about right. You?
Ezra Klein: No idea.
Stimulus: Back when the stimulus bill was being "debated", I recall members of the GOP and conservative pundits arguing that the stimilus wouldn't take effect quickly enough. They argued that many of the spending projects wouldn't hit the ground until a year or more out.
The administration and Democrats in general scoffed at this criticism and said that the monies would flow immediately. That jobs, jobs, jobs would be created right off the bat.
Perhaps the administration and Democrats should have listened to their critics, because now they are acting surprised that the stimulus isn't having the immediate effect they expected.
Ezra Klein: I don't think so. The stimulus is basically working on the schedule Bernstein and Romer predicted in their paper. It's possibly been a bit slower than that, but not by a whole lot. And a lot of the slowdown has come from the efforts to protect against fraud (which some people, like this paper's crack reporter Alec McGillis, predicted at the time).
But the stimulus was only so fast and so large. People want it to be faster, than larger. But they didn't want it to be larger at the time, and I'm not sure it could have been that much faster and still have been directed towards worthy projects, which people were pretty insistent on back then.
McLean, Va.: How can you just boldly assert that healthcare will be deficit neutral? What about the mammoth bureaucracy that will be required to operate it? It requires a real suspension of belief to think this will be "deficit neutral."
Ezra Klein: The "mammoth bureaucracy" will cost next to nothing. The major cost will come from subsidies for low-income folks. CBO will calculate their likely cost and fund it in the bill. Lots of things the government does are deficit neutral. CBO could get it wrong, as anyone can, but their guesses tend to be conservative, and Republicans and Democrats alike trust their numbers.
Frederick, Md.: The Congressional Budget Office stated at least two months ago that the spending at that time was unsustainable. Now we're talking about nationalizing health care, cap-and-trade and the rest. That is a significant warning sign. Of course, China, India and probably a couple others would be happy to see our economy go down the tubes. Your take? Agree or disagree with the CBO assessment?
Ezra Klein: Cap-and-trade raises money. It does not cost money. On this there's no dispute. It makes our deficit situation better. Similarly, the long-term question of health-care reform is if it begins to cut spending in the system. Developed countries with nationalized health systems pay, on average, half as much as we do per person. So actually nationalizing health care would probably improve the spending picture quite a bit. Sadly, we're unlikely to do that. But if you read the CBO's documents over the past year, their argument is very simple: Spending is unsustainable because health-care spending is unsustainable. And that requires a government fix. And I agree with the CBo on that.
Toronto: I imagine there are many people in the U.S. who stay in jobs they hate because of the employer-based health insurance. Do you think there are also people who stay in marriages they hate for the same reason, i.e. family coverage through one spouse's insurance plan?
Ezra Klein: There is certainly anecdotal evidence of it happen. Some paper or another had an article on that a few years back. There are also a lot of examples of people getting married so they can get their spouse's benefits. I doubt it's a huge influence on the numbers, but it's another absurd consequence of our inane and inefficient system.
Atlanta: Can you explain again why progressive health care reform advocates who support a strong public option won't get what they want if the bill is passed by reconciliation? I'm still not entirely clear on this.
Ezra Klein: Essentially, reconciliation only allows things that *directly* change federal revenues. So something that changes revenues indirectly -- like an insurance market reform -- doesn't count. What would happen, essentially, is that all sorts of things important to progressives -- health insurance exchanges, regulations that block insurers from discriminating based on preexisting conditions, an employer mandate, an individual mandate, etc -- would be at risk of being stripped from the bill. You might get a public plan option. But you wouldn't get a lot of them ore basic reforms that are necessary.
It would be like buying a car with the knowledge that the dealer might take out the carburetor, seats, wheels, steering wheel, stickshift, and a couple of other random parts. It may be better to get what you can get rather than ending up with nothing. But it's not what you wanted.
Wokingham UK: It seems that some employers are persuading their workers to take wage cuts, maybe under the guise of long breaks from work. British Airways is pushing that agenda at the moment. Is this way of dealing with the crisis likely to play a big part over the next twelve months?
Ezra Klein: Yep. I'm hearing a lot about unpaid "furloughs," too. Essentially, you can do two things when labor costs are too high. You can fire people are you can cut their compensation. This is a way of cutting their compensation. And it means that the employment statistics are even worse then they look, because people are getting paid less money.
Seattle: Ezra, What tools does Reid have at his disposal to really force the "centrist" Democrats in line?
Ezra Klein: If the Senate leadership doesn't like you and the president does't like you your ability to achieve legislative priorities effectively ends. But none of the centrist believe that will actually happen to them.
Durham, N.C.: Do you have any idea of what the final, out-the-door unsubsidized cost to consumers the various proposed public health insurance plans will be? Say for an individual, and for a family of 4? $300 and $600/month? And what form is this coverage going to take? Copays, coinsurance? This has been the hardest thing for me to figure out.
Ezra Klein: Assume a level playing field public plan. Lewin estimated this at nine percent savings against traditional insurance. So take average premiums and subtract nine percent. But there's a lot of uncertainty here. Will it be nine percent? What will the risk pool look like? And, of course, there's a big difference between an employer buying you into it and you buying it for yourself in terms of out-of-pocket spending.
Re: It does not cost money: What about the increased costs to businesses of cap and trade? Won't that cost consumers more dough? No cost indeed.
Ezra Klein: First, that money will be rebated back to them under most of the proposals under consideration. Second, the long-term costs of global warming will *also* be very, very, very expensive. If it costs me $100 to fix my septic tank, but the alternative is that I pollute the town's water supply over 15 years, then it's cheaper to fix my tank.
Jupiter, Fla.: Hey Ezra,
A few questions:
1. With Sen. Baucus seeming intractability on certain issues (including a freakish need for Republican support), do you think Obama's selection of Jim Messina has actually borne anything of value? If so, what are they?
2. What can non-Montanans do to pressure Baucus to act like a progressive?
3. You have spoken about "regulatory capture" in the past. Along those lines I want to ask about the Obama Administration hiring so many high-powered Congressional staffers.
Now, I understand that by looking at Obama's past there is a clear effort at consensus-building, but is it possible that the tragically compromised measures we are seeing from the administration (ie. a weak ARRA) arise from a sort of "Legislative Capture" that is gripping the White House? If so, what would your prediction be, generally, about future White House-led policies, etc.?
Ezra Klein: I don't really have answers to these question. But I think they're interesting. Particularly number three.
Ezra Klein: That does it for me. Thanks for the great questions, folks. It was a lot of fun. And for those asking for the health-care reform reading list, I promise I'll get to it on the blog very soon.
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