Quick Hits

Japan Elections: The rout of the Liberal Democrats in Japan marks the end of a long era of pseudo-democracy in Japan.  The LDP has ruled almost continuously since the end of the post-WWII American occupation.  But it has been rule based on the integration of corporate interests, the permanent bureaucracy, and near-feudal dynastic politics.  For 35 years that led to prosperity, for the past 20 years not so much.  Whether a new order can really take hold in paternalistic Japan is an open question, but at least now it will finally be asked.

Ted Kennedy: The death of Senator Ted brings an amazing era to a close. For baby boomers like myself, one constant of our lives has been the central role of Kennedys in political life.  There may be more Kennedys in our future (Ted's son Patrick is still a Congressman after all), but the death of the last of the brothers means the Kennedy era is over.  Love him or not, it is hard to dispute that Ted's 47 years in the Senate and long list of legislative accomplishments make him one of the most influential Senators in American history.  JFK and RFK will forever be known for the way they died, Teddy will be remembered for the way he lived.  Was Teddy the most consequential of them all?  History will be the judge, but the early indications are he may have been.

Health Care: Kevin Drum neatly summarizes the bottom line of the health care debate:

Let's recap: the United States spends about twice as much on health care as any other developed nation in the world and in return receives just about the worst care.  Can someone remind me again why there's even a debate about whether we should put up with this?

A minor quibble is that our health care is not the worst in all respects, the US ranks high on dramatic interventions such as cancer care, but we trail miserably on more basic measures such as infant mortality and life expectancy.

Wing Nuts Getting You Down?

Michael Seitzman writes on HuffPo about how to deal with the lunatic wing nuts:

Are you sick to death of the I-can-out-crazy-your-crazy screaming, the Obama-wants-to-kill-yo-mama infantilism, the he's-a-Kenyan-Nazi-Communist, America-doesn't-apologize, torture-shmorture, government-is-evil-except-when-it's-interrogating-Muslims, my-gun-gets-bigger-when-you-rub-it, and the O'Reilly-Beck-Hannity-Limbaugh Axis-of-Evil? If the answer is yes, I salute you. If the answer is no, I also salute you... with this one finger.

I have some advice for all of us. Stop trying to get these people to realize how wrong they are and how right you are. Stop trying to apply reason to the profoundly unreasonable. Stop trying to mitigate or explain their collective temper tantrum. Stop trying to curry their favor, their votes, their attention. They don't care about truth, right and wrong, good or bad. They care about stomping feet, crying victim, and pointing fingers. Barney Frank had it exactly right, it's like arguing with a dining room table. Enough is enough. Fuck Kumbaya.

I'm not sure what bothers me more, the profound and disturbing ignorance displayed by some, or the ones who know what's right but protest simply because what's right was proposed by the Left. Ironically, their elected representatives don't care about them any more than they care about us. They care about reelection, they care about influence and power, they care about themselves, and they mindlessly adhere to an antiquated ideology at our collective peril (see Sunday's Paul Krugman).

Don't be afraid of them. Don't let them question (or make you question) your basic instincts for goodness, decency, humanitarianism, and the attainable America you want and deserve. Don't let them intimidate you. Think of Vivian Jones and James Hood trying to attend their first day of college, facing those bloodthirsty crowds led by none other than the Governor of Alabama seething, "Segregation now, segregation tomorrow, segregation forever!" Those kids didn't run. Martin Luther King didn't run when that same governor called him a communist threatening the fabric of America. If they didn't run at the first sounds of anger, the first sight of guns, the first smell of stubborn ignorance, neither should we. And neither should President Obama.

Serious People...Seriously?

Paul Krugman endorses the reappointment of Ben Bernanke as Fed Chairman, with one interesting caveat:

I do have one qualm, though, which isn’t really about Bernanke, but rather about the broader symbolism of the reappointment — namely, it unfortunately seems to be a reaffirmation of Serious Person Syndrome, aka it’s better to have been conventionally wrong than unconventionally right.
 
Thus, you’re not considered serious on national security unless you bought the case for invading Iraq, even though the skeptics were completely right; you’re not considered a serious political commentator unless you dismissed all the things those reflexive anti-Bushists were saying, even though they all turn out to have been true; and you’re not considered serious about economic policy unless you dismissed warnings about a housing bubble and waved off worries about future crises.

The Politics of Torture

Sully makes a brief return from his summer bloggatical to post a blistering denunciation of what Bush, Cheney and the evangelicals have wrought with their torture policies and their continuing antics to defend the atrocities undertaken in our name.

This is what Bush and Cheney truly achieved in their tragic response to 9/11: two terribly failed, brutally expensive wars, the revival of sectarian warfare and genocide in the Middle East, the end of America's global moral authority, the empowerment of Iran's and North Korea's dictatorships, and the nightmares of Gitmo and Bagram still haunting the new administration.

But what they did to the culture - how they systematically dismantled core American values like the prohibition on torture and respect for the rule of law - is the worst and most enduring of the legacies.

One political party in this country is now explicitly pro-torture, and wants to restore a torture regime if it regains power. Decent conservatives for the most part simply looked the other way. Unless these cultural forces in defense of violence and torture are defeated - not appeased or excused, but defeated - America will never return the way it once was. Electing a new president was the start and not the end of this. He is flawed, as every president is, but in my view, the scale of the mess he inherited demands some slack. Any new criminal investigation which scapegoats those at the bottom while protecting the guilty men and women who made it happen is a travesty of justice. If it is the end and not the beginning of accountability, it will be worse than nothing.

But it need not be the end of the story. Indeed, it can be the beginning if we make it so. We cannot stop this sad and minuscule attempt to restore a scintilla of accountability to some individuals low down on the totem pole. Eric Holder is doing what he can. But we can continue to lobby and argue for the extension of accountability to the truly guilty men who made all this happen and still refuse to take responsibility for war crimes on a coordinated scale never before seen in American warfare, and initiated by a presidential decision to withdraw from the Geneva Conventions and refuse to abide by their plain meaning and intent.

Our job, in other words, is to raise the core moral baseline of Americans to that of Iranians. That's the depth of the hole Cheney dug. And it's a hole the current GOP wants to dig deeper and darker.

Why the Lies Get Reported

Ezra has a very solid analysis of how and why the nonsensical lies about health care get such play in the media.

The problem isn't in the particulars. It's in the profession. Namely, it's in the competitive pressures to drift toward sensationalism and hot stories. A smear like "death panels" emerges and catches fire because it's fundamentally interesting. You could write a great thriller, or film a poignant drama, about death panels. Not so about health insurance exchanges. That said, the New York Times would probably never mention the lie if given the opportunity. But after it hits talk radio and explodes onto cable news and rips through the blogosphere, it stops being a lie and begins being a story. And though you can refuse to cover a lie, you can't refuse to cover a story. Nor is it even obvious you should. After all, if you don't correct the record, who will?

The problem is that "The Media" is a big beast with a lot of component parts. Some of those parts are respectable and sober. Others aren't. But if the legs run somewhere, the head follows whether it wants to or not. That would be fine if the head commanded the legs. But it's generally the other way around.

The central conflict of interest in the media is that the same institution that's supposed to follow the conversation is also responsible for creating the conversation. That contradiction can be elided so long as everyone in the game is playing by the same rules. And for a brief period, when the "objective" institutions were the only major outlets, that worked out fine.

But with the rise of partisan and sensationalizing mediums like talk radio and cable news and the blogosphere, half of the outlets are now consciously creating the conversation that the other half are following. But the objective institutions haven't responded to this in any obvious way. They just get caught following a manipulated conversation, and so being part of the manipulation, part of the machine that focuses on cynical lies like the death panels rather than policy specifics like the exchanges. That's not the fault of an individual reporter, though. It's structural, and it requires a structural response.

SPORTS: Plaxico Fades to the Big House

The sorry tale of Plaxico Burress reached its inevitable conclusion this week when the former NY Giants wide receiver pled guilty and agreed to a prison sentence of 2 years (20 months with good behavior). Burress has become the latest poster child for ego-driven, unrepentant, NFL head cases, following in the well-worn tradition of Terrell Owens and Chad "Ochocinco" Johnson.

Let's review the story. Plaxico Burress made his name in the NFL because of his combination of height, speed and fearlessness. He capped his career by catching the last-minute winning touchdown in Super Bowl XLII on his patented fade route to the corner of the end zone. He then extracted a contract extension that gave him a 5-year $35 million deal beginning with the 2009 season. So far, so good.

Then trouble hit. First, he gets suspended for the Oct 5 game for missing a treatment session. Then on Friday evening, Nov 28, he and teammate Antonio Pierce went to a nightclub with Burress tucking an unlicensed loaded pistol into his waistband. What could possibly go wrong? Well, just about everything. The gun slipped, discharged, the bullet hitting him in the leg. Off to the hospital, suspension, arrest, plea deal, 2 years in prison, contract voided.

And yet, the NFL has indicated that he will be eligible to play again in 2011. So, will his career simply fade to black...or is there another corner fade in his future?

Obama and the Dog Days of August

Ed Kilgore at the New Republic notes that progressives need to be careful about overreacting to perceived setbacks as Obama struggles to get health care reform enacted.

Part of the psychological problem now may be a matter of unrealistic expectations. Much of the trouble Obama has encountered in promoting his agenda has been entirely predictable. His approval ratings are gradually converging with the 2008 election results. Health care reform is a complicated challenge that threatens a lot of powerful interests and unsettles people happy with their current coverage. Major environmental initiatives lose steam in a deep recession. A new administration gradually begins to assume blame for bad conditions in the country. Republicans, adopting a faux populist tone, are fighting Obama tooth and nail. Democratic activists are frustrated by compromises and sick of having to put up with the Blue Dogs. The Senate is still the Senate, a monument to inertia, pettiness, and strutting egos.

Progressives are waiting for Barack Obama and his team to work the kind of political magic they seemed to work in 2008--except when they didn't. Cutting through all the mythologizing of the Obama campaign, the real keys to his stretch-run success last year were his legendary calm ("No Drama Obama"); his confidence in his own long-range strategy; his ability to choose competent lieutenants and delegate to them abundantly; and his grasp of the fundamentals of public opinion and persuasion. There was zero sense of panic in the Obama campaign itself late last summer, because they stuck with their strategy and organization and didn't let the polls or news cycles force them off the path they had chosen.

The administration's demure approach should thus not be terribly surprising, nor a sign that it has lost its heart or its mind. Obama has not, presumably, lost the qualities he showed in the tougher moments of the 2008 campaign. As it planned its legislative agenda for 2009, Team Obama knew health care reform was going to be challenging, and also knew they could probably get away with blaming the economic emergency for paring it back or slowing it down. They decided this was the right time to act, and it's far too soon to assume they were wrong.

Kilgore also notes that as August wound down last summer the polls showed Obama and McCain in a statistical tie, but that things worked out for the best. He expects success with health care once the silly season ends.

I agree!

Scalia and the Egg Timer of Justice

The Supreme Court this week permitted a further appeal in the case of Troy Davis, with Antonin Scalia offering a blistering dissent.  Noted international human rights lawyer, Columbia professor, and Harper's Magazine editor and blogger Scott Horton offered this summary: 

the appeal of Troy Davis, a Georgia athletics coach tried and convicted of the murder of an off-duty policeman working as a security guard at a Burger King. Following the conviction in 1991, seven of the witnesses who testified against Davis recanted, several of them fingering the last major witness to appear against Davis as the actual killer. In a series of sharply divided decisions, the Georgia Supreme Court and the Court of Appeals refused to review his case, largely on technical procedural grounds. Each of these decisions discloses an ideological fault line: movement conservative judges want to proceed forthwith to an execution, others want to give close consideration to the new evidence. Yesterday the Supreme Court sent the case back to the District Court with instructions to examine Davis’s habeas petition. But the move provoked a sharp dissent from Antonin Scalia, who used the occasion to deliver a lecture on the Constitution and its relationship to justice:

This Court has never held that the Constitution forbids the execution of a convicted defendant who has had a full and fair trial but is later able to convince a habeas court that he is “actually” innocent. Quite to the contrary, we have repeatedly left that question unresolved, while expressing considerable doubt that any claim based on alleged “actual innocence” is constitutionally cognizable.

In other words, Scalia’s Constitution does not guarantee a man who has been convicted and sentenced to death–but who is actually innocent–a review of his case. It is certainly true that the Constitution provides no absolute guarantee of justice. But Scalia’s view effectively puts an expense meter on the justice process. Once the process has run through certain steps, that’s it. In his view, it really shouldn’t matter that subsequent evidence establishes that the conviction is mistaken. It’s more efficient simply to implement the decision and execute the innocent man.

A New Direction for Health Care Reform?

The health care reform debate may have shifted significantly this week with the Republicans (led by Senate Whip John Kyl) acknowledging that they have no intention of supporting any legislation whatsoever, and the White House responding with indications that they are prepared to consider a Democrats-only approach.  Kevin Drum asks:

did Obama ever expect anything different?  Was his calm, deliberative, bipartisan sales pitch genuine, or did he know it would fail all along?
 
We've been asking this question ever since the primaries — does he really believe he can sweet talk Republicans into cooperating with him? — and we still don't know the answer.  Obama is a guy who plays his cards very close to his chest.  But the next couple of months should give us a clue.  If he really believed it, then he probably doesn't have much of a Plan B and the next stop for this train is Chaosville.  But if it was mostly an act, then his next step is obvious: he'll make a barnstorming public case that he made a good faith effort to work with Republicans but they were just completely intransigent.  He'll attack them mercilessly and do everything he can to whip public opinion into a lather against the obstinate, obstructionist, reactionary GOP.

If that was his plan all along, it wouldn't be a bad one.  He correctly divined a long time ago that the American public was weary of endless partisan fighting and wanted a break, and he rode that insight to victory.  Regardless of his own beliefs, then, it meant he had to start his presidency by demonstrating a genuine effort to work across the aisle, and he had to keep it up long enough to show he was serious.  Only if it plainly failed would he be able to turn the screws and start fighting on pure partisan lines.

Will it work?  Stay tuned.

Is Obama the Modern Day FDR?

With Obama catching flak from both the left and the right these days, Edward Harrison has a very interesting post on Naked Capitalism that challenges the prevailing wisdom that Obama has the opportunity to be FDR. Harrison disagrees:

I have said before that Barack Obama is in a political and economic position more akin to Herbert Hoover than Franklin Roosevelt. Hoover dealt with a sick economy that was still falling. Roosevelt entered the White House after a large percentage of the economic damage had been done. I believe the economic situation for Obama is certainly less severe than it was for Hoover, but still precarious. I do not mean to say that Obama is the ‘black Herbert Hoover’ as my friend Yves keeps pointing out. I do mean to say that he needs to be thinking of himself as Hoover and not Roosevelt to have the right mental predisposition of what’s at stake.

So, from a purely Machiavellian perspective, Obama needs to jettison the professorial above-the-fray coolness and get down in the trenches and fight for what he believes in. And that means he is going to have to run roughshod over his enemies.

And Harrison has a very clear idea as to how Obama needs to behave.

Put bluntly, Obama needs to be an asshole. Right now it looks like he is willing to compromise on any and every issue. Yes, compromise is an integral part of leadership and governance. But, there is a time for compromise and a time to fight.

Maybe it's time for Barack to showcase his inner Rahm.

Bipartisanship in the Modern Age

Brad DeLong challenges the basic concept of bipartisanship in the modern political era by looking back to a joint appearance by Paul Krugman and Alice Rivlin, former head of the CBO and the OMB. The discussion turned to the role that independent policy advocates could have on crafting policy and their impact on Congressional deliberations leading to bipartisan legislation. Krugman quite effectively punctures that optimistic bubble in the second paragraph.

A couple of years ago there was a debate I was sorry I did not see, between Alice Rivlin and Paul Krugman. Alice Rivlin thought that organizations like the Brookings Institution at which she worked had a role: you could design and argue for good policies, convince senators and influential House members of their value for the public interest, and then build a bipartisan coalition from the center out--either to the left or to the right, depending on which ideological extreme's price for coming on board to support sensible policies that worked was least obnoxious.

Paul Krugman said no: that that strategy worked only as long as the ideological lines of party cleavage were blurred, which would be the case only as long as there were (a) a larger number of relatively liberal northerners who voted Republican because Lincoln freed the slaves, and (b) a large number of relatively conservative southerners who voted Democratic because Lincoln freed the slaves. Once the parties realigned, zero-sum partisan loyalties would dominate: Republicans like Hatch would think hard whether it was more important to vote for a bill because it was good for America or vote against it because then you could paint the Democratic president as a failure and pick up seats in the next election, and make their decision. You had, Paul said (I think: I wasn't there) to pick your party and then work hard to make its policies the best policies possible because "bipartisanship" was no longer a viable legislative strategy.

We saw this in 1993, when Clinton's centrist bipartisan deficit-reducing budget--half tax increases, have spending cuts--attracted not a single Republican vote. We saw this in February, when Obama's centrist stimulus package--2/3 spending increases, 1/3 tax cuts (Clinton was Mr. 43%, Obama is Mr. 54%), and 2/3 the size that would have been appropriate--attracted zero Republican votes in the House and only three in the Senate. We are seeing this on cap-and-trade, where the number of Republicans willing to sign on to do something about global warming if they can then shape the bill in the direction of economic efficiency is close to zero, and now on health care too.

Nothing New Under the Sun

We are in the era of birthers, who challenge where Obama was born, and deathers, who imagine government-run death panels killing Grandma. But as Rick Perlstein notes in an op-ed in the Washington Post (h/t Josh and LSK), wingnut lunacy is nothing new.

In the early 1950s, Republicans referred to the presidencies of Franklin Roosevelt and Harry Truman as "20 years of treason" and accused the men who led the fight against fascism of deliberately surrendering the free world to communism. Mainline Protestants published a new translation of the Bible in the 1950s that properly rendered the Greek as connoting a more ambiguous theological status for the Virgin Mary; right-wingers attributed that to, yes, the hand of Soviet agents. And Vice President Richard Nixon claimed that the new Republicans arriving in the White House "found in the files a blueprint for socializing America."

When John F. Kennedy entered the White House, his proposals to anchor America's nuclear defense in intercontinental ballistic missiles -- instead of long-range bombers -- and form closer ties with Eastern Bloc outliers such as Yugoslavia were taken as evidence that the young president was secretly disarming the United States. Thousands of delegates from 90 cities packed a National Indignation Convention in Dallas, a 1961 version of today's tea parties; a keynote speaker turned to the master of ceremonies after his introduction and remarked as the audience roared: "Tom Anderson here has turned moderate! All he wants to do is impeach [Supreme Court Chief Justice Earl] Warren. I'm for hanging him!"

Before the "black helicopters" of the 1990s, there were right-wingers claiming access to secret documents from the 1920s proving that the entire concept of a "civil rights movement" had been hatched in the Soviet Union; when the landmark 1964 Civil Rights Act was introduced, one frequently read in the South that it would "enslave" whites. And back before there were Bolsheviks to blame, paranoids didn't lack for subversives -- anti-Catholic conspiracy theorists even had their own powerful political party in the 1840s and '50s.

Seniors and the Health Care Debate

As the orchestrated health care reform mayhem of the town halls continues into its third week, one notable aspect is that the preponderance of protesters come from the over-65 demographic, which is of course, the very same group that already benefits from a national, socialized health care system....Medicare. James Kwak at Baseline Scenario comments further:

What are the underlying reasons why seniors are more likely to oppose “reform?” The first – leaving aside the self-contradicting notion that health care reform will mean a government takeover of Medicare – is probably fear that Medicare will be negatively affected. Now, there is a grain of a partial truth to this fear. Several of the proposals on the table include paying for health care reform (meaning, paying for the subsidies that poor people will need if we’re going to mandate universal coverage) in part by reducing growth in Medicare spending. One proposal is the Independent Medicare Advisory Committee, which would look for ways to increase efficiency in Medicare, which could include lower reimbursements for procedures that were deemed to be not providing benefits commensurate with their costs.

Kwak then touches on one of the fundamental conundrums that fiscally conservative Medicare recipients have to grapple with, namely that

concern about health care costs rises with age. Now this makes sense; even with Medicare, seniors’ out-of-pocket medical expenses are considerably higher than those of younger people, for the simple reason that on average they consume more medical care. But there’s no good way to reduce seniors’ out-of-pocket spending without at the same time reducing Medicare spending because, broadly speaking, those two types of spending are buying the same thing – health care. You can’t have a system where Medicare spends more and more yet seniors spend less and less out of pocket (short of simply reducing seniors’ relative contribution to their health care costs, which would only make the fiscal problem worse).

It’s simply contradictory to oppose reductions in the growth rate of Medicare spending while favoring reductions in your out-of-pocket spending.

No answers here, but another aspect to an interesting problem with the healt care debate, namely that support is lowest among the group that already benefits from and has the greatest need for a national plan. At the same time, they worry about cost control, just so long as it doesn't affect them!

The Essence of Health Insurance Reform

Direct from the White House website, Eight principles for health insurance consumer protection:

• No Discrimination for Pre-Existing Conditions - Insurance companies will be prohibited from refusing you coverage because of your medical history.

• No Exorbitant Out-of-Pocket Expenses, Deductibles or Co-Pays - Insurance companies will have to abide by yearly caps on how much they can charge for out-of-pocket expenses.

• No Cost-Sharing for Preventive Care - Insurance companies must fully cover, without charge, regular checkups and tests that help you prevent illness, such as mammograms or eye and foot exams for diabetics.

• No Dropping of Coverage for Seriously Ill - Insurance companies will be prohibited from dropping or watering down insurance coverage for those who become seriously ill.

• No Gender Discrimination - Insurance companies will be prohibited from charging you more because of your gender.

• No Annual or Lifetime Caps on Coverage - Insurance companies will be prevented from placing annual or lifetime caps on the coverage you receive.

• Extended Coverage for Young Adults - Children would continue to be eligible for family coverage through the age of 26.

• Guaranteed Insurance Renewal - Insurance companies will be required to renew any policy as long as the policyholder pays their premium in full. Insurance companies won't be allowed to refuse renewal because someone became sick.

While there is no doubt that health care reform requires that cost inflation be addressed or the country will face bankruptcy, the eight points listed above would go a long way toward addressing the inequities of the current system. And if the final legislation is built around these principles, we will have achieved a great victory for the health and welfare of all Americans!

Ezra Klein has an interesting item on the current state of relations between the business community and the GOP on health reform.  First, he notes the conundrum:

We're seeing something very interesting right now. A Republican Party unmoored from its traditional supporters in the business community. A conservative base that wants something that the health care industry doesn't want. For those whose mental model of the Republican Party is that it's essentially a vessel for corporate interests, that model is about to receive a dramatic test.

Then the comparison between 1994 and today:

One difference between 1994 and 2009 is that the health-care industry and the business community range from neutral to supportive of the White House. The Chamber of Commerce, in fact, is running ads against Republicans who are opposing health-care reform. AHIP wants a deal. So does Pharma. They may not want the deal that liberals want. The deal they want may, in fact, be bad. But their preferred outcome is a lot closer to the White House's vision of success than it is to Mitch McConnell's vision of success.

Republicans, however, are no more supportive of health-care reform than they were in 1994. Conservatives are exactly as angry. The town halls are, if anything, louder and more brutal. Talk radio is up in arms. The controversy and chaos are scaring the broader public. No one wants a health care bill that might contain a euthanasia provision.

We're about to see a very interesting test case: Can the business community and the health care industry deliver Republican votes? Will their presence on the side of reform -- even if only nominally so -- change the outcome? Or has the opposition of industry been an excuse for past failures, and it's in fact the minority party's incentive to kill reform that's foiled each and every attempt?

Goldman Sachs & the AIG Bailout

Questions remain as to the role that Bush Treasury Secretary Hank Paulson permitted Goldman Sachs to play at crucial points during the September economic near-meltdown. As the former head of Goldman, Paulson had pledged to follow strict ethics guidelines. But as Matt Taibbi notes on his blog, the conflict of interest was immense, and Goldman had unprecedented access at the most critical points in the crisis.

Aside from the Fed, the Treasury, and the New York State Department of Insurance, the main players involved in the AIG bailout that weekend were AIG (obviously), JP Morgan, Morgan Stanley, and Goldman Sachs. There were swarms of bankers from the latter three banks there that weekend, poring over AIG’s books, trying to figure out if AIG could be rescued without government help.

Now, we know why AIG was there, obviously. Morgan Stanley was there representing the Treasury (it had been hired to advise the Treasury on the bailouts by Paulson during the Fannie/Freddie mess, with the rumor being that it was the only bank willing to give up market positions that would have left it too conflicted to do the work). JP Morgan we know was there because AIG had hired them weeks before to come in and try to clean up its messes. Only Goldman Sachs did not have an official role at these proceedings.

So why was Goldman there? And why was Paulson calling Goldman two dozen times that week? This is one of the other problems with Gasparino’s account (”of course” Blankfein was there that weekend, he says, not telling us why this is so obvious). I’m not sure I’ve ever seen an official explanation for why Goldman was there that weekend; the ostensible explanation that most people seem to accept is that Goldman naturally was there because it was such a large counterparty to AIG.

But I suspect we’re going to find that Paulson was not on the phone two dozen times with executives from Deutsche Bank or Societe Generale or Barclays or Calyon, all of whom were significant counterparties to AIG as well. Goldman was not even AIG’s largest counterparty in the sec-lending wing of its business (Deutsche Bank was, and would eventually receive $7 billion via the bailout as a result), and yet as far as I know there were no Deutsche reps there that weekend at all. So what made Goldman special?

Is it Really Health Insurance?

James Kwak of Baseline Scenario shines the spotlight on a rarely discussed aspect of employer-provided health insurance, namely is it really insurance? Normal insurance is a contract between the insurer and the customer to protect against specified risks. However, Kwak zeroes in on the problem:

If, like most people, your health coverage is through your employer or your spouse’s employer, that is not what you have. At some point in the future, you will get sick and need expensive health care. What are some of the things that could happen between now and then?

• Your company could drop its health plan. According to the U.S. Census Bureau (see Table HIA-1), the percentage of the population covered by employer-based health insurance has fallen every year since 2000, from 64.2% to 59.3%.*
• You could lose your job. I don’t think I need to tell anyone what the unemployment rate is these days.**
• You could voluntarily leave your job, for example because you have to move to take care of an elderly relative.
• You could get divorced from the spouse you depend on for health coverage.

For all of these reasons, you can’t count on your health insurer being there when you need it. That’s not insurance; that’s employer-subsidized health care for the duration of your employment.

Once you lose your employer-based coverage, for whatever reason, you’re in the individual market, where, you may be surprised to find, you have no right to affordable health insurance. An insurer can refuse to insure you or can charge you a premium you can’t afford because of your medical history. That’s the way a free market works: an insurer would be crazy to charge you less than the expected cost of your medical care (unless they can make it up on their healthy customers, which they can’t in the individual market).

And needless to say, all of these disqualifying events are far more likely to occur if you or your spouse get sick. Kwak goes on to point out that these problems do not exist for the over-65 Medicare-eligible population (which may explain the lower level of support for reform in that age group), who do have guaranteed coverage. But for the rest of Americans, the current system is a bad bet, with a limited payoff.

Rescission or Russian Roulette??

A truly fascinating analysis of the impact of health insurance rescission by Taunter Media (h/t Naked Capitalism), a topic that came up in June during House hearings on insurance company practices. The CEO of Assurant (a California insurer) stated in his prepared testimony, that rescission (the practice of canceling coverage after claims have been filed on the basis of errors or omissions in the application process) is a rare practice that affects less than 0.5% of their policies. However, the true meaning of this statistic is made clear in this excerpt....read it and understand what is at stake in the health care debate.

Half of the insured population uses virtually no health care at all. The 80th percentile uses only $3,000 (2002 dollars, adjust a bit up for today). You have to hit the 95th percentile to get anywhere interesting, and even there you have only $11,487 in costs. It’s the 99th percentile, the people with over $35,000 of medical costs, who represent fully 22% of the entire nation’s medical costs. These people have chronic, expensive conditions. They are, to use a technical term, sick.

An individual adult insurance plan is roughly $7,000 (varies dramatically by age and somewhat by sex and location).

It should be fairly clear that the people who do not file insurance claims do not face rescission. The insurance companies will happily deposit their checks. Indeed, even for someone in the 95th percentile, it doesn’t make a lot of sense for the insurance company to take the nuclear option of blowing up the policy. $11,487 in claims is less than two years’ premium; less than one if the individual has family coverage in the $12,000 price range. But that top one percent, the folks responsible for more than $35,000 of costs – sometimes far, far more – well there, ladies and gentlemen, is where the money comes in. Once an insurance company knows that Sally has breast cancer, it has already seen the goat; it knows it wants nothing to do with Sally.

If the top 5% is the absolute largest population for whom rescission would make sense, the probability of having your policy cancelled given that you have filed a claim is fully 10% (0.5% rescission/5.0% of the population). If you take the LA Times estimate that $300 million was saved by abrogating 20,000 policies in California ($15,000/policy), you are somewhere in the 15% zone, depending on the convexity of the top section of population. If, as I suspect, rescission is targeted toward the truly bankrupting cases – the top 1%, the folks with over $35,000 of annual claims who could never be profitable for the carrier – then the probability of having your policy torn up given a massively expensive condition is pushing 50%. One in two. You have three times better odds playing Russian Roulette.

The Joys of Health Insurance

Jonathan Alter writes in Newsweek on the the current health insurance system:

I had cancer a few years ago. I like the fact that if I lose my job, I won't be able to get any insurance because of my illness. It reminds me of my homeowners' insurance, which gets canceled after a break-in. I like the choice I'd face if, God forbid, the cancer recurs—sell my house to pay for the hundreds of thousands of dollars in treatment, or die. That's what you call a "post-existing condition."

I like the absence of catastrophic insurance today. It meant that my health-insurance plan (one of the better ones, by the way) only covered about 75 percent of the cost of my cutting-edge treatment. That's as it should be—face cancer and shell out huge amounts of money at the same time. Nice.

I like the "lifetime limits" that many policies have today. Missed the fine print on that one, did you? It means that after you exceed a certain amount of reimbursement, you don't get anything more from the insurance company. That's fair.

Speaking of fair, it seems fair to me that cost-cutting bureaucrats at the insurance companies—not doctors—decide what's reimbursable. After all, the insurance companies know best.

Yes, the insurance company status quo rocks. I learned recently about something called the "loading fees" of insurance companies. That's how much of every health-care dollar gets spent by insurance companies on things other than the medical care—paperwork, marketing, profits, etc. According to a University of Minnesota study, up to 47 percent of all the money going into the health-insurance system is consumed in "loading fees." Even good insurance companies spend close to 30 percent on nonmedical stuff. Sweet.