View From Down Under

This week has been kind of fun to watch.  As President Obama signed the health care bill, the right wing responded with fits of screaming hissies.  Government is out to end our way of life!  Democrats have finally lain the cornerstone of their Socialist utopia on the backs of the American people!  This is a Job Killing Government Takeover of Health Care and it’s being Shoved Down Our Throats!  You can almost see the mouths foaming.

From the White House, the rhetoric was ecstatic.  A victory for the American People!  A new season in America!

The left wing was a bit more subdued, saying the reform doesn’t go far enough but is certainly better than nothing.

Meanwhile, the bill signed into law was not even health care reform.  No extension of Medicare (the socialist health care system so loved by those it covers – including the tea partiers).  No change in the way health care is delivered.  No government takeover of anything.  Not even a public option.

It was just a bit of health insurance reform, tightening up the way insurers can deal with insured and mandating insurance for those without.  Sure there are some pilot programs which are likely to result in some cost reduction over time, and a few other initiatives, but at its core the bill is insurance reform.

It was nonetheless a major political win for President Obama, largely because of the way the Republicans fought it tooth and nail.  If they had decided to work with the President on reform, it would have been over much quicker, probably would have been a better bill, and the Republicans could share the credit.  Instead, believing that making Obama fail is their best chance to win re-election,  Republicans decided to demonize a reform package that looked remarkably similar to the ones proposed by Republican presidential candidates (including John McCain and Mitt Romney).

The view from down under is that the over-the-top Republican rhetoric makes them look petulant, obstructionist, and petty.

Still, I kind of admire their way with words.  Laying the cornerstone of a socialist utopia on the backs of the American people – that is truly a work of art.

When the US GDP numbers for Q4 09 were first announced, I mentioned they were likely to be revised upward.  Turns out they were, from 5.7% to 5.9%.

Despite the strong fourth quarter, and continued evidence of recovery,  economists are wary of forecasting growth.  The dreaded double dip is a continued worry.  The consensus economic forecast for the US economy in 2010 is 3%.  Although this is up from 2.4% a few months ago, it is still too bearish.

In another well written article, Forbes columnists Brian S Wesbury and Robert Stein recently explained why they are more bullish.

The consensus is still underestimating the resilience and robustness of the U.S. economy and remains stuck on expectations of a “new normal.” But productivity is strong, monetary policy is (and will continue to be) easy, inventories are razor-thin and corporate profits are growing rapidly.

The biggest risk to recovery?  Not the deficit.  Government spending has clearly had a positive impact on the US economy, and helped to lessen the severity of the recession.  Although I do believe that deficits matter and fiscal responsibility is important, the level of US debt is nowhere near crisis proportions.

The view from down under is that the biggest risk to continued economic growth is China.  If the plural of anecdote is data, there are some clear signs of a Chinese real estate driven bubble.  If China’s economic growth drops from its current 8-9% per year, the impact on the global economy could be severe.  Even if China maintains 4-5% growth (which would be considered extremely robust in developed economies) it could still push the OECD into strife.  This is because most investments being made in China are based on the assumption of continued high growth rates, and any drop in those rates will cause many of these investments to be shelved.

This risk was highlighted last week when Chinese Premier Wen Jiabao warned that China may not be able to sustain their growth.  There is no question that China’s growth is unsustainable over the long term, and the only question is when – not if – the slowdown will come.  I suspect we are several years away, and by then the global economy will have had a full recovery.  But if I’m wrong …

I’ve written before about the lack of statesmanship in the House and Senate, and how getting re-elected is a more powerful motivator than doing what’s best for the country.  It seems that Americans are fed up with it as well.

The anti incumbent cannons are loaded and pointing directly at Congress.  A recent AP/GfK poll found that while 53% of Americans think Obama is doing a good job, only 22% think Congress is doing a good job.  This is also remarkably bi-partisan.  61% of Americans think the Democrats in Congress are doing a lousy job, and 67% think the same of Republicans.

In worse news for incumbents, almost half of those polled want their own member of Congress replaced.  In the past, most people have tended to complain about Congress as a whole, but have supported their own member.  Now this dynamic is breaking down, and is no doubt the reason so many incumbents are retiring rather than face re-election.

In Texas a sitting Senator (Kay Bailey Hutchison) challenged a sitting Governor (Rick Perry) in the Republican primary (which in itself is quite remarkable).  Governor Perry pulled out a convincing win with a campaign that highlighted the Senator’s ties to Washington.  Hutchison, who was leading the polls going into the race, got 30% of the vote to Perry’s 51%  - the tea party candidate picked up the other 19%.  Perry’s anti-Washington tactics are likely to be widely copied in other states.

Both the left and the right are trying to take advantage of the sentiment.  Organisations from Moveon.org and the SEIU to tea partiers and NFRA are seizing the moment to either pressure sitting members to vote their way, or replace them with candidates who will.

The view from down under is this is likely to make Congress even less effective.  Replacing sitting members of Congress with others who are either more to the left or more to the right will only guarantee future deadlock.  The US will get more grandstanding and less compromise.

Recently came across a paper by Eric Lawrence, John Sides, and Henry Farrell (from George Washington University).  (H/T The Monkey Cage).

From the abstract:

We find that blog readers gravitate toward blogs that accord with their political beliefs. Few read blogs on both the left and right of the ideological spectrum. Furthermore, those who read left-wing blogs and those who read right-wing blogs are ideologically far apart. Blog readers are more polarized than either non-blog-readers or consumers of various television news programs, and roughly as polarized as US senators.

The study discusses how blog authors of similar political persuasion tend to reinforce each other’s beliefs and push further from the center, with something similar occurring among blog readers.  Only 6% of those who read political blogs read both right and left wing blogs.  The remainder, 94%, read only left wing or right wing but not both.

Which fits in with a few earlier comments on polarization of the US electorate, but suggests the View From Down Under is unlikely to appeal to the majority of blog readers.

Which is fine by me.

UPDATE:  There is also a cool chart in the study showing how liberals watch PBS Newshour and conservatives watch Fox News.  We all knew that, but the graph is well presented.

Gallup has a cool app on their website allowing you to compare approval ratings across Presidents.

Here is Obama compared to the last two one-term Presidents – George HW Bush and Jimmy Carter.  So far, Obama is tracking pretty closely to Jimmy Carter’s trajectory.

Not looking so good for Obama, although I was also interested in the amazing collapse in popularity of Bush Sr.  His popularity in early 1991 was nearly 90%.  One year later he was below 40% and never recovered.  Perhaps he was better at being President than campaigning for it.

Let’s have a look at how Obama  is tracking against two very popular two-term Presidents: Reagan and Clinton.

Hmm.  Obama not looking too bad here.  Slightly more popular than Reagan at this point in the Presidency, slightly less popular than Clinton.

Clearly what counts for re-election is how popular a President is at day 1400, not day 400.

Final point of interest:  Obama v George W.  The Sep 11 attacks had an extraordinary impact on the popularity of the President (as well as Congress).  Interesting that at the 2004 election, W was down to just over 50% approval, and deteriorated pretty consistently after that.

As part of their health care rebuttal, Republicans have focused on tort reform as a way to dramatically reduce costs.  As Senator Jon Kyl (R-AZ) said “Everybody knows that there is a huge amount of money that could be saved in health care delivery if we did something to reform this jackpot justice system.”  President Obama seems to agree, and has added some tort reform to his health care proposal – although stopping far short of what Republicans want.

The argument for tort reform is that  frequent malpractice claims and high awards have forced doctors into prescribing extra, and unnecessary, tests and procedures in order to reduce their potential exposure in a lawsuit.  Therefore reforming the malpractice system should reduce those unnecessary activities and reduce costs.

This assumes that these extra procedures are, in fact, unnecessary and add nothing to the value of health care received.  It also assumes that many malpractice claims are based on the desire of plaintiffs to ‘hit the jackpot’ and not on genuine malpractice.

Some on the left wing argue that this is far from proven.  Ezra Klein notes that Texas, which enacted tort reform in 2003, also has the city with the highest medicare costs per enrollee (McAllen).  Indeed Texas as a whole has one of the highest medicare reimbursement rates per enrollee, even adjusting for age, sex, and race.  (As a Texan who enjoys my vegetables battered and fried, I wonder if there is a bit of cultural self selection there).  So the link between tort reform and cost reduction looks tenuous.

In order for tort reform to have an impact on medical costs, it must either reduce the number (or type) of tests and procedures being prescribed, or reduce malpractice premiums (which would then be passed on to consumers).

This sounds like a theory that can be tested, and this afternoon I was wondering if there is any data which could tell us if tort reform has a meaningful impact on health care costs.

Turns out there is.  A recent study looked at the differences in tort reform enacted by various states and correlated that against the costs of employer sponsored health insurance plans over an eight year period.  They looked at four different kinds of tort reform:

• caps on pain and suffering awards;
• collateral source reforms (reducing payouts if plaintiffs have already received insurance or other payments);
• joint and several reforms (limiting ability of plaintiffs to sue a deep pocket for the full amount even if they are only partly at fault); and
• caps on punitive damages.

The authors concluded that the first three types of reform lowered insurance premiums of self insured plans by 1-2% (caps on punitive damages had no impact).  That sounds like a good outcome and should provide encouragement for further tort reform by the states.

However, for fully insured plans (HMOs) there was no decrease in premiums as a result of tort reform.  The authors conclude that HMOs are already doing a good job of monitoring care and avoiding unnecessary activities.

The Congressional Budget Office looked at this study as well as a number of other studies done in the last decade, and have concluded that enacting the four reforms above would likely reduce the total health care costs of the government by 0.5%.

It is not a silver bullet for solving the problems in the US health care system, but is definitely worth pursuing as part of any comprehensive reform.