Informed Speculation

As many proponents of the health-care reform being pushed by Obama and the Democrats tell us quite often (including our good friend Jacques), America spends more on health care, expressed as a percentage of GDP,  than any other industrialized nation. Michael Kinsley puts a new spin on that stat: maybe it’s because we WANT to, when the alternative is rationing.

Here is a handy-dandy way to determine whether the failure to order some exam or treatment constitutes rationing: If the patient were the president, would he get it? If he’d get it and you wouldn’t, it’s rationing.

It may seem absurd to worry about whether wealthy or well-insured people get every last test and exotic or speculative treatment when millions of Americans have no health insurance and millions more have gaping holes in their coverage. But the well-insured happen to include virtually all the people making the key decisions about health-care reform — members of Congress and their staffs, the White House staff, Washington journalists, and so on. These people’s fears that they would lose the right to “choose my own doctor” (code for getting treatment with all the bells and whistles) helped kill Hillary Clinton’s attempt to reform health care in the early 1990s. Fear of rationing could kill Obamacare for the same reason.

Whether or not this makes sense is a question of taste, not policy.

David Leonhardt of the New York Times recently noted that spending so much on health care squeezes out spending on other things that we might prefer, and that is a form of rationing. On the other hand, the blogger Mickey Kaus argues that it makes perfect sense for a society growing richer (as ours soon will be again, we hope) to spend a growing share of that wealth on improving our health and longevity.

That is what we do as individuals. And what better to spend your money on?

The obvious retort is that it’s not just how much you spend, it’s what you get in return.  Are our outcomes better for the increased expenditures?  Does our satisfaction and/or longevity reflect the increased tendency to offer gold-plated coverage to those lucky enough to be insured?

I don’t have the answers to those questions, but I won’t pretend they don’t exist.  Kinsley’s article, however, poses a great question there at the end that also needs answering…

Of course, I’d like to think not…so let me cross my party twice here:

First, it’s about time Al Franken was seated. I don’t like him, and I don’t think he’ll add anything but rancor to the Senate (surprise me, Al, surprise me)…but this has gone on long enough. I’m glad Coleman finally conceded, but in late June? Too much…

Also, it’s time for Mark Sanford to get his butt out of office. The latest revelations about even more trips to his mistress, an investigation by the attorney general into use of funds, and now news that he had even more affairs…well, my sympathy to his family, but this is a man of very, very poor judgment, and I’m just glad we found out now, given his former high profile nationally. Go away now, we’ve had enough…

Okay, it’s not the weekend, and it’s only been two days and one political post since my last music clip, but today, U2 opened the 360 tour in Barcelona before 90,000 rabid fans (I’ve got my ticket for Dallas in October).

What an age we live in – the concert’s been over for about six hours, I think, and I’ve already burned a pretty great copy to CD and seen half the show on high-quality video!

Anyway, reviews have been mostly positive, though apparently the Irish lads screwed up “One” royally – the clips on YouTube show Bono pleading for The Edge to “look at me” and “just stop” before bringing it back together.  Oh, well, opening night…

Here’s a taste – the night’s second song, and the title track from the latest studio effort, No Line on the Horizon.  Nobody does stadium-sized choruses better than these guys!

Liberal defenders of the Democratic health plan like to say that the reason the CBO estimate came in high is that the public option was not included…but what if this is predicated on a false sense of lower administrative costs brought on by misleading Medicare stats?  Tom Bevan has more:

This statistic about Medicare’s low administrative costs has become one of the linchpins in the argument for a “public option” on health care. The only problem, not surprisingly, is that it’s hogwash.

The explanation is really quite simple, and it’s provided here by Robert Book of the Heritage Foundation. The statistic cited by Alter and Krugman uses “administrative costs” calculated as a percentage of total health care costs (For Medicare it’s roughly 3 percent and for private insurers its roughly 12 percent).

But here’s the catch: because Medicare is devoted to serving a population that is elderly, and therefore in need of greater levels of medical care, it generates significantly higher expenditures than private insurance plans, thus making administrative costs smaller as a percentage of total costs. This creates theappearance that Medicare is a model of administrative efficiency. What Jon Alter sees as a “miracle” is really just a statistical sleight of hand.

Furthermore, Book notes that private insurers have a number of additional expenditures which fall into the category of “administrative costs” (like state health insurance premium taxes of 2-4%, marketing costs, etc) that Medicare does not have, further inflating the apparent differences in cost.

But, as you might expect, when you compare administrative costs on a per-person basis, Medicare is dramatically less efficient than private insurance plans. …[B]etween 2001-2005, Medicare’s administrative costs on a per-person basis were 24.8% higher, on average, than private insurers…

Let’s repeat the key sentence there for emphasis so it doesn’t get lost in the flood:

[B]etween 2001-2005, Medicare’s administrative costs on a per-person basis were 24.8% higher, on average, than private insurers.

Wishful thinking is nothing to base a health plan on…if it comes to that prayer is a lot cheaper and as least as effective…

UPDATE 9:05 p.m.: Ruth Marcus attacks the public option from a different angle:

It’s not far-fetched to imagine that instead of having a public system that trounces private insurers on cost, the public plan will end up being a more expensive repository for the sickest enrollees, holding little attraction for those in reasonably good health and doing little, then, to hold down costs.

Let’s assume that public plan advocates are not promoting it as a stalking horse for a purely government-run health insurance system and that it is possible to design a playing field that is not so tilted in favor of the public plan that private insurers will ultimately be driven out of business. The more the playing field is leveled, the more you wonder: Where, exactly, is the advantage in a public plan?

Is the health-care industry so uniquely impervious to effective regulation that — even with insurers required to accept all applicants and not allowed to charge more for riskier enrollees — a public plan is the only way to ensure that they compete on price rather than engage in covert cherry-picking to attract customers who will cost less? This seems an odd position for those who tend to be fans of regulatory regimes.

Is the health-care industry so uniquely anti-competitive that a public program is required to drive prices down? Advocates of a public plan argue that many markets are dominated by just a few insurers, and that even those insurers don’t have enough muscle or motivation to extract lower prices from providers such as hospitals and specialists in increasingly concentrated markets.

This is a serious concern, but if hospitals have the upper hand in a particular market, how is a public plan going to drive prices down unless it exercises the kind of 800-pound gorilla bargaining power that the political system is unlikely to produce?

Is a public plan — without the need to turn a profit and with lower administrative costs — inevitably going to be more cost-effective than a private competitor? To some extent, but the difference in administrative costs between public and private plans is easy to overstate: Public plans would have to market themselves and collect premiums, just like private plans, while private plans, required to take all applicants on an equal basis, would be spared expenses they have now, such as the cost of figuring out how much to charge for patients of differing health status. The overall differential would probably be about 5 percent.

Although Marcus repeats the ‘lower administrative costs’ fallacy that Bevan effectively slams the door on, she at least recognizes that it’s built on assumptions that would not hold sway in the post-Obamacare world…

Continuing with my semi-regular tradition of posting music clips on the weekends (and no, it’s not Michael Jackson – you can go to approximately 3 zillion other websites for that), I’m posting today on one of the true greats.  Though he either can’t sing anymore or has just quite trying, few would deny that Bob Dylan has written more great songs than any other artist (great as Sinatra is, he was a vocal stylist, not a songwriter, and Lennon-McCartney and Jagger-Richards, along with Bruce Springsteen, are perhaps the only other artists who even merit mention in the same breath).

In 1967, D.A. Pennebaker released the excellent Don’t Look Back, a documentary covering Dylan’s 1965 tour of England.  The song itself is from my own personal favorite Dylan album (and that’s saying something), Bringing It All Back Home, also from 1965.  This is Dylan at his peak, lyrically, and a fine performance to boot.  The song?  The brilliant “It’s Alright, Ma (I’m Only Bleeding”.  (On a personal note, I’ve seen Dylan live on six or so occasions.  He can be very good or very bad.  The best show, by far, was the September 8, 1990 show at the very cool Sunken Garden Theater in San Antonio – we viewed the show from the cliff above the theater, dodging security all night as this was a no-no for safety reasons.  The setlist speaks for itself – and when he broke out “It’s Alright, Ma”, it was the single best Dylan performance I’ve ever personally witnessed).

…with major personal problems and a probable sexual attraction to young boys.  That’s all bad stuff – but give Michael Jackson his due.  Before the celebrity and the freakiness took over, he put out two heavyweight albums – Off the Wall and Thriller.  The latter will remain the top-selling album of all-time forever, because albums don’t sell like that anymore.  Sales aside, the music – at least for those two albums – was pretty damn good, too.  It’s almost impossible to hear Billie Jean come on the radio or in a bar and not start moving to it and singing along, personal feelings about the man aside.

I say all of this not to excuse the man, nor to judge him – neither of those are my area.  He never answered to me, dead or alive…but as I said yesterday with Sanford, I take no joy in the misfortune of others, and despite his fame and one-time great riches, the story of Michael Jackson is ultimately a sad one…

RIP to Farrah Fawcett, as well…her story is, to me, much sadder, because she seemed a much more normal, sane person for a celebrity…

All right, I suppose some comment on Sanford is necessary.  First of all, I find it sad when private problems overwhelm a public figure.  Obviously, Sanford’s national aspirations are dead; more than that, though, he faces public humiliation and a very difficult situation with his family. I share John Dickerson’s appraisal:

The personal impact of the Sanford affair is more gripping than the political. Sanford has done a horrible thing to his wife and family and friends. He seemed to know and feel this more profoundly than other politicians we’ve seen go through this familiar apology exercise before. That doesn’t excuse him. Not that he was asking that anyone excuse him. He seemed to be trying to take all the blame, as he should. Some might think his explanations were excuses. To me they seemed like a man confessing the details of a crime.

The minute Sanford started speaking, the reviews poured in via e-mail and Twitter. He was rambling, confused. He didn’t tear up enough when talking about his wife. He favored his mistress. He answered the questions too thoroughly. All these judgments seemed absurd. A man standing in front of a bank of cameras in the middle of a complete collapse is going to say a lot of things poorly.

The snap judgments failed to acknowledge a grain of the fundamental human carnage we were witnessing. You can laugh at Sanford, as you can laugh at a video of a wrecked Amy Winehouse falling all over her house. But at some point, even though they did it to themselves, you have to feel sorry for them as human beings. You can do that, I think, and not be a fan of adultery or drug use.

I’m not offering Sanford’s humanity as an excuse. I’m just marveling at how few people stopped for a moment to even nod to it. My thoughtful colleague William Saletan andAndrew Sullivan were exceptions. Maybe there are others. Maybe people expressed these views in private conversations. But in the e-mails and Twitter entries and blog posts I read in the aftermath, Sanford’s human ruin was greeted with what felt like antiseptic glee. The pain he’s caused, the hypocrisies he’s engaged in, seemed like license to deny him any humanity at all.

Sanford’s fumbling efforts to explain how he’s tried to rescue himself with his faith offered some people an opportunity to make fun of his religion, as if a confused, lost, flawed person were the right spokesman for anything. People tend to think the most awful thing about a person is the most true thing. They also apparently think it’s the most true thing about his or her associations. So an e-mail arrived asking, “[I]s there any Republican not sleeping around?” Maybe Sanford should have been a presidential candidate. He apparently represents an entire party and an entire religion.

What Mark Sanford seemed to be trying to say is that he screwed up, in the biggest possible way, because he lost his bearings. He lost his self-control. He was indulgent. He forgot that there were other humans in the world. Yet in the constant flow of abuse, joke-making, and grand conclusions about his failings, it seemed everyone having a good time pointing at his self-indulgence was also engaging in a form of it.

Well said…

I don’t agree with everything in this David Brooks article (doing away with the exemption for employer-provided healthcare changes incentives, all right, but it amounts to an ENORMOUS tax increase); still, I present it as a different perspective that reaches the right ultimate conclusion: we can’t afford this.

The C.B.O. measured the plans, and the results were devastating. A successful plan has to be revenue-neutral for the government over the next 10 years, and it has to reduce the total health care burden over the long term so the country doesn’t go bankrupt. The Senate committee plans failed both criteria. They would cost the government more than $1 trillion this decade and send total health care costs zooming at least twice as fast as the economy as a whole.

The C.B.O. reports sent shock waves through Washington. Senators and staffs began casting about for a way to get a good C.B.O. score. President Obama redoubled his rhetoric about fundamentally reducing health care costs. Everybody continued looking around for a compromise that could get a bipartisan majority.

…[T]he process is moving along as it has been. There is a great deal of talk about the need to restrain costs. There’s discussion about interesting though speculative ideas to bend the cost curve. There are a series of frantic efforts designed to reduce the immediate federal price tag. Some senators and advisers suggest cutting back on universal coverage. Others have come up with a bunch of little cuts in hopes of getting closer to the trillion-dollar tab. The administration has ambitious plans to slash Medicare spending.

But there is almost nothing that gets to the core of the problem. Under the leading approaches, health care providers would still have powerful incentives to provide more and more services and use more expensive technology.

We’ve built an entire health care system (maybe an entire government) on the illusion of something for nothing. Instead of tackling that basic logic, we’ve got a reform process that is trying to evade it.

This would be bad enough in normal times. But the country is already careening toward fiscal ruin. We’ve already passed a nearly $800 billion stimulus package. The public debt is already projected to double over the next 10 years.

Health care reform is important, but it is not worth bankrupting the country over. If this process goes as it has been going — with grand rhetoric and superficial cost containment — then we will be far better off killing this effort and starting over in a few years. Maybe then there will be leaders willing to look at the options staring them in the face.

There’s a headline that’s sure to upset both sides of the aisle!  But so says Megan McArdle, noting that while the Laffer Curve had some validity at one point, it was used far past that point to push for things the right wanted, like tax cuts.  Now, a similar dynamic is rising among the left, who use nebelous health care ’savings’ to push for their desired agenda:

Several days ago, Tyler Cowen triggered some righteous rage for suggesting that the administration’s promises to cut health care costs “runs the risk of becoming the new voodoo economics”.  He was expressing a growing frustration among reputable conservative economists that the promises of health care cost control have turned into the Laffer Curve of the left:  a way to pretend that their favored policies don’t have any costs.

It is true that some countries have controlled costs, and therefore made it easier to afford coverage for more people.  It is also true that some countries have cut marginal tax rates, and thereby actually raised the tax revenue they collected.  For all the derision about the Laffer Curve, it is absolutely correct–indeed, it has to be; it’s basically just an identity.  Tax revenues peak somewhere.  If you’re to the right of that peak, you could raise revenue by lowering rates.

What’s left is the empirical question:  are we to the right of that peak?

…And what about health care costs?  Is it reasonable to believe that we are going to control them?  After all, other countries have.

I’d say we have substantial empirical evidence that we are not going to control the health care cost inflation which is busting Medicare’s budget, much less the new costs the administration is planning to add.  We have been trying to control health care costs since the 1970s made it clear that Medicare was going to get really, really expensive.  And any idea that you care to name, from comparative effectiveness research to healthcare IT to preventive medicine . . . these have all been on the table for more than thirty years, under one name or another.  They haven’t happened.

The answer that those promising magical cost reductions need to ask is “Why haven’t they happened?” and “What has changed to make them feasible now?”  But when I ask this question, I get angry demands that I put forward my plan for cost control, rather than merely critiquing everyone else’s.  This seems rather like demanding that I put forward my design for a perpetual motion machine before I am allowed to point out problems in the US energy market.

That’s good stuff – wish I were that clever!  Robert Samuelson draws a clever analogy of his own.  The United States is like General Motors 25 years ago: staring down an abyss of obligations it cannot meet, and choosing to increase them, rather than pare back to what we can afford:

In theory, expanding public welfare could offset eroding private welfare. President Obama’s health care proposal reflects that logic. The trouble is that the public sector also faces enormous cost pressures, driven by an aging population and rising health costs. The Congressional Budget Office projects the federal debt to double as a share of the economy (gross domestic product) to 82 percent of GDP by 2019.

Any sober examination of figures like these suggests that the system has promised more than it can realistically deliver. We are borrowing not to finance investment in the future but to pay for today’s welfare — present consumption. Sooner or later, the huge debt will weaken the economy. Nor would paying for all promised benefits with higher taxes be desirable. Big increases in either debt or taxes risk depressing economic growth, making it harder yet to pay promised benefits.

The U.S. welfare state is weakening; insecurity is rising. The sensible thing would be to decide which forms of public welfare are needed to protect the vulnerable and to begin paring others. Our inaction poses another dreary parallel with GM. It was obvious a quarter-century ago that GM the auto company could not support GM the welfare state. But the union wouldn’t surrender benefits, and the company acquiesced. Inertia prevailed, and the reckoning came. The same cycle, repeated on a national scale with sums many multiples higher, would be correspondingly more fearsome.

UPDATE 9:52 p.m.: But don’t worry about those costs – we can afford them.  How do I know?  Paul Krugman says so!  How does he know?  Oh, he just knows – don’t worry about those little details – trust him, he’s an economist!

I’m not that worried about the issue of costs. Yes, the Congressional Budget Office’s preliminary cost estimates for Senate plans were higher than expected, and caused considerable consternation last week. But the fundamental fact is that we can afford universal health insurance — even those high estimates were less than the $1.8 trillion cost of the Bush tax cuts. Furthermore, Democratic leaders know that they have to pass a health care bill for the sake of their own survival. One way or another, the numbers will be brought in line.

Yeesh…you know, there was a time Krugman actually bothered to make arguments, rather than just assertions…guess a Nobel-Prize winner doesn’t have to marshall any boring things like facts anymore…this is starting to become a (quite hilarious) trend…

After the price tag for the Senate’s version of health care reform came back from the CBO at $1.6 trillion ($600 billion more than predicted), and amid growing signs that the public is increasingly concerned about the Obama administration’s lack of spending discipline, the Senate now appears to be drawing back for another go:

Senator Charles E. Grassley of Iowa, the top Republican on the Senate Finance Committee, said on Sunday that the panel would consider revisiting its version of health-care legislation to gain more support.

An overhaul of the nation’s health-care system was part of President Obama’s campaign pledge to expand coverage to those who do not have health insurance while lowering costs in general. But an initial price tag for the Senate Finance Committee’s proposal came to $1.6 trillion, according to the Congressional Budget Office. That figure caused enough consternation that the chairman, Senator Max Baucus of Montana, postponed a drafting session that was to have begun this week.

“So we’re in the position of dialing down some of our expectations to get the costs down so that it’s affordable,” Mr. Grassley said on CNN’s “State of the Union,” “and most importantly, so that it’s paid for because we can’t go to the point where we are now of not paying for something when we have trillions of dollars of debt.”

The Finance Committee’s plan is expected to attract more bipartisan support than legislation being written by the Senate Health, Education, Labor and Pensions Committee, chaired by Christopher J. Dodd of Connecticut. The proposal by Mr. Dodd’s committee was estimated to cost $1 trillion over 10 years but would only increase the number of insured Americans by 16 million.

Senator Lindsey Graham, a Republican of South Carolina who appeared on ABC’s “This Week,” said estimates on overhauling health care were “a death blow to a government-run health plan.”

Dianne Feinstein of California joined Republicans in voicing reservations. Ms. Feinstein, who appeared on “State of the Union,” said that controlling the cost of a new health-care system “is a very major and difficult subject.”

Ms. Feinstein also said that Mr. Obama might not have the votes in the Senate to pass his legislation. “I think there’s a lot of concern in the Democratic caucus,” she said.

Senator Richard Lugar, Republican of Indiana, appearing with Ms. Feinstein, said that overhauling the health care system should be done slowly and not this year, as Mr. Obama has insisted. “I think it should be incremental steps,” Mr. Lugar said. Mr. Lugar also suggested a period of study to find and consider alternatives.

Meanwhile, George Will is applying Occam’s Razor:

To dissect today’s health care debate, the crux of which concerns a “public option,” use the mind’s equivalent of a surgeon’s scalpel, Occam’s razor, a principle of intellectual parsimony: In solving a puzzle, start with the simplest explanatory theory.

The puzzle is: Why does the president, who says that were America “starting from scratch” he would favor a “single-payer” — government-run — system, insist that health care reform include a government insurance plan that competes with private insurers? The simplest answer is that such a plan will lead to a single-payer system.

Conservatives say that a government program will have the intended consequence of crowding private insurers out of the market, encouraging employers to stop providing coverage and luring employees from private insurance to the cheaper government option.

…The president characteristically denies that he is doing what he is doing — putting the nation on a path to an outcome he considers desirable — just as he denies any intention of running General Motors. Nevertheless, the unifying constant of his domestic policies — their connecting thread — is that they advance the Democrats’ dependency agenda. The party of government aims to make Americans more equal by making them equally dependent on government for more and more things.

Arguments for the public option are too feeble to seem ingenuous. The president says competition from a government plan is necessary to keep private insurers “honest.” Presumably, being “honest” means not colluding to set prices, and evidently he thinks that, absent competition from government, there will not be a competitive market for insurance. This ignores two facts:

There are 1,300 competing providers of health insurance. And Roll Call’s Morton Kondracke notes that the 2003 Medicare prescription drug entitlement, relying on competition among private insurers, enjoys 87 percent approval partly because competition has made premiums less expensive than had been projected. The program’s estimated cost from 2007 to 2016 has been reduced 43 percent.

On Friday, some observers were predicting the plan was near death:

President Obama’s campaign for health care reform by this fall, once considered highly likely to succeed, suddenly appears in real jeopardy.

Top White House advisers, especially chief of staff Rahm Emanuel, are still privately predicting massive changes to the health care system in 2009. But for the first time, Democrats on Capitol Hill and in the administration are expressing frank worries about stronger-than-expected opposition from moderate Democrats and worse-than-expected estimates for how much the plan could cost.

Business groups, which had embraced the idea of reform and have been meeting quietly with Democrats for months in an effort to shape the legislation, now talk of spending millions of dollars to oppose the latest proposals out of Capitol Hill. And Democrats themselves are not united, with leading party figures making contradictory declarations about how far they should go to overhaul the system when deficits are soaring and prospects for an economic recovery remain cloudy.

And top Democratic officials tell POLITICO they are increasingly pessimistic about getting any more Republican votes than they did on the stimulus package, with some aides referring to the idea of a bipartisan bill as “fool’s gold” — an unattainable waste of time.

The health plan got a boost, however, when drug companies agreed to $80 billion in price cuts:

Giving a boost to health legislation after a bruising week, the pharmaceutical industry struck a deal Saturday with Senate Finance Chairman Max Baucus (D-Mont.) and the White House to commit $80 billion over 10 years to help pay for comprehensive reform.

The promised savings from the industry will be written into the reform bill, making them binding.

…”You’ve got your first passengers on the train and now you can start moving forward down the track,” said an industry source close to the negotiations.

Not all the savings go towards the health reform bill’s bottom line because it will be split between seniors and the government. While no breakdown is available yet, “parts of the $80 billion we haven’t announced yet save the government real money,” said a source close to the negotiations. “The total deal includes savings for the government and the health system as a whole.”

So, let’s see $1.6 trillion over ten years minus some undetermined part of $80 billion leaves $1.52 trillion + still to go!  Yep, we’re almost there…yeesh!…

A while back my XBox 360 suffered the dreaded 3 Rings of Death indicating a general hardware failure.  To the credit of Microsoft, they fixed it very quickly at no charge (after some bad publicity, they extended the general hardware failure warranty to 3 years).

Actually, they didn’t really fix it – instead, they sent me a new (well, a refurbished) XBox 360.

A few nights ago, it started doing weird things on the display, like green lines and that sort of thing…and then tonight, it displayed an “E 74″ message.  Translation?  General hardware failure.  Two XBox 360s, two general hardware failures…that’s not a very good batting average, is it?…

…though it’s a feature, not a bug, is that you pontificate on subjects in close to ‘real time’ without the reflection that would accompany a magazine article or a book (that’s not an original insight – Andrew Sullivan, among others, has written about this at length).

As a result, you play “I call it as I see it” most of the time.  It’s part of what gives an individual blog its flavor.  It also results in a tendency to be stubborn and defensive and set in your ways.

One of the ways you live with this, if you try to keep at least some integrity (and I do, believe it or not), is to acknowledge not only those voices that buttress your stated opinion, but also those that contradict it.

That’s a long intro to say this:  I have been very vocal about my fear of interest rate trends and the exploding deficit.  I still remain very concerned.  However, in that spirit of fairness I am speaking of, let me acknowledge that S&P affirmed today that the United States remains a solid AAA credit risk:

The United States’ top AAA credit rating is unlikely to come under pressure in the near term as the country continues to benefit from a highly diversified economy and the dollar remains the world’s most used currency, Standard & Poor’s said on Wednesday.

S&P warned last month that Britain’s AAA credit grade was at risk of downgrade, prompting some concerns that a similar action may be due for the United States.

Bill Gross, co-chief investment officer of Pacific Investment Management Co, said after the British rating warning that the United States will eventually lose its AAA rating.

Technical analyst Robert Prechter, known for predicting the 1987 stock market crash, said this week that the United States is at risk of being downgraded by the end of 2010 as the government issues new debt in an effort to support the economy.

However, “despite significant weakening in the near-term economic outlook, projected fiscal deficits, and the high fiscal costs of government support of the U.S. financial sector, we still believe that the U.S. government’s credit strengths continue to outweigh its weaknesses,” Nikola Swann, analyst at S&P, said in a statement.

Also today, the CPI numbers came in very subdued (you can read a good roundup of economist reactions to the inflation numbers here).  Though both of these items go against my stated opinion, they’re unequivocally good news (when the good of the nation is at stake, of course I’d rather be wrong when predicting bad news than be proven right).

Still, let’s not break out the champagne bottles.  One reason (the primary reason, in fact) that inflation remains low is because the economy remains very fragile.  Housing is being trampled again by rising mortgage rates, unemployment is at levels not seen in a quarter of a century, and consumers remain rightly cautious.  When consumer demand finally gets back to full strength, some pent-up inflationary pressures are going to burst through.

More importantly, the fact remains that we cannot continue down this path as a nation.  There is simply no way that our current level of debt is sustainable…which brings me full circle back to S&P and the AAA rating of the U.S.  Let’s not forget how recently corporate giants that are either bankrupt, wards of the state, or sold at fire-sale prices were rated AAA credit risks by the credit rating agencies.  Obama’s new financial regulation plan unveiled today (more about that tomorrow or this weekend) even specifies a reduced role for credit rating agencies for just such a reason…so in and of itself, the S&P story provides little or no solace.

The bottom line:  unsustainable means unsustainable.  One day’s worth of good news doesn’t change the long-term trend…

UPDATE 11:48 p.m.: And right on cue comes the latest NBC News/Wall Street Journal poll:

As the young Obama administration spends trillions of dollars in its effort to turn around the nation’s economy and revive the U.S. auto industry, the American public is growing concerned about the size of the budget deficit and the government’s intervention into the private sector, the latest NBC News/Wall Street Journal poll finds.

Nearly seven in 10 have serious reservations about the federal government’s ownership stake in General Motors. Almost 60 percent say that President Obama and Congress should worry more about keeping the deficit down — even if that means it will take longer for the economy to recover. And fewer than half of Americans have confidence in the president’s policies to improve the economy.

Obama remains a popular figure in the poll. But these numbers on the deficit and the government’s intervention seem to mark a new period for the administration, as the public moves from welcoming his inauguration and first days in office to examining his initial actions as president.

John Dickerson says it’s reluctance to jeopardize diplomacy aimed at solving the nuclear issue, a sentiment Robert Kagan echoes…but Fred Kaplan says enough:

I’m with Kaplan…

The plain fact is, I don’t know.

I strongly doubt Ahmadinejad got 63% of the vote. Voices on the right, yes, but also voices on the left such as Roger Cohen and Juan Cole are expressing grave doubts about the validity of the vote.

On the other hand, it is POSSIBLE that Ahmadinejad won, however unlikely, for two reasons: (1) dissident voices in repressive societies often fear making their opinions known, and (2) Ahmadinejad’s knee-jerk baiting of the West and Israel are popular tactics in many segments of Iranian society.

Still, I’m leaning towards the conclusion that the election was stolen because of the large number of Iranians unafraid to hold technically illegal protests in the streets, and because of the following repressive tactics as reported by the BBC:

* More than 100 opposition figures arrested, including the brother of ex-reformist President Khatami

* Local and international phone and text message services interrupted

* Social networking and newspaper websites blocked

* “Heavy electronic jamming” from inside Iran disrupts BBC Persian TV service

* International journalists arrested and asked to leave

* Iranian newspapers do not carry reports of the violence

Hard to square with a free and fair election, isn’t it?  I mean, I may have been born at night, but it wasn’t LAST night…

Nope, on second thought, there’s no debate – this election was stolen…

Every album Frank Sinatra made with Nelson Riddle is a gem, and they all have their fans who will say this one or that one is the best.  For my money, the greatest Sinatra album is In The Wee Small Hours, 1955’s masterpiece of melancholy.  Named in the Top 100 Albums of All Time by both Rolling Stone and TIME, the album highlights Sinatra’s voice and Riddle’s orchestrations in a way that was never topped and seldom equalled.  Any song is golden, but I thought I’d post the gorgeous title track.  I could write a book about this one song, but I’ll just bring two things to your attention: one, the way Nelson never, ever upstaged Frank’s voice, and two, the immaculate phrasing and breath control that made Sinatra a legend.  (Slightly hilarious side note – the YouTube poster has the song title wrong – it is, of course, the wee small hours of the morning that are haunting our protaganist):

I’ve been riding this horse for a while now, and I’m going to keep on riding it until I see some indication that the Obama administration and Congress are taking it seriously.  Forget a massive new health-care benefit – forget cap-and-trade.  Those are programs for a prosperous economy.  If Washington doesn’t convince the bond markets that it takes the massive spike in deficits seriously, and soon, we are going to have a double-dip recession that could prove catastrophic:

Rising long-term interest rates are making it more expensive for home buyers, corporations and the U.S. government to borrow money, threatening to further stifle an already weak economy.

In just the past two weeks, the rate on a 30-year, fixed-rate mortgage has risen to 5.6 percent from 4.9 percent, ending a boom in refinancing and working against a budding recovery in the housing market. Rates on corporate borrowing have also risen, making it more expensive for companies to expand. And the government has been forced to pay more to finance its deficit.

Since the beginning of the year, historically low mortgage rates have had a twin benefit for the economy: They have allowed homeowners to refinance about $1.5 trillion worth of mortgages, thus lowering monthly payments and leaving people with more money to spend on goods and services. Low rates have also created greater incentive for people to buy homes, despite continuing troubles in the housing market.

The abrupt rise in rates has removed that key stimulant for the economy.

The rise has many causes, some of which reflect good news. As investors have grown more confident about the future, for example, they have become more inclined to put money in risky investments, such as the stock market, rather than lending it to the U.S. government and to government-backed mortgage companies.

But other causes give more reason for worry. Investors around the world are increasingly fearful that Congress and the Obama administration will be unwilling to bring taxes and spending in line in the years ahead. That makes the U.S. government appear to be a riskier borrower, leading those who lend to it to demand higher interest payments.

The Federal Reserve now finds itself in a box. It could try to lower rates by buying government debt. It has already said it would buy $1.5 trillion in U.S. Treasuries and mortgage-related securities this year to try to stimulate growth.

But doing so would likely only deepen fears that the Fed will print money to fund government deficits in the future. That possibility — while rejected by Fed officials and many mainstream economists — means that expanding purchases might not have the intended effect of lowering rates. It could even drive them up further.

Rates remain very low by historical levels. But the yield on 10-year Treasury bonds has risen to almost 4 percent this week from 3.1 percent on March 14. (It edged down yesterday to 3.9 percent.)

A wide range of other rates are essentially moving in tandem with that rate, including mortgages. That shift has far-reaching implications.

“Households really have no capacity to afford higher rates at this point,” said Scott Anderson, a senior economist at Wells Fargo. “It affects the cost of any long-term borrowing a consumer or business might do, whether it’s auto loans, mortgages or business credit.”

It’s hard to overestimate the economic damage to normal working Americans that high inflation causes, but because Paul Volcker broke inflation’s back in the 1980s (at the cost of a pretty deep recession – contrast that with today’s Fed), most people don’t remember.  Steven Malanga does:

[W]e’ve largely forgotten our most recent brush with raging peacetime inflation, the 1970s. Although nothing like Germany’s in the 1920s, ours was nonetheless powerful enough to be more dispiriting and more transformative of our culture than any stretch of post-World War II recession has been. It’s probably not a coincidence that America began its long transformation from a nation of savers to one of consumers and debtors just after the inflation of the 1970s. That’s what can happen when money seems to be “crumbling to dust in your hands,” as Fortune magazine described the inflation of that era.

One reason that inflation can be such a powerful social force is because it affects virtually everyone. To people who’ve worked their whole lives playing by the rules, that is, to the majority of adult Americans in the early 1970s, inflation at the hands of wayward government policy seemed to be a betrayal. People who had been thriftiest watched down payments for buying a home disappear, college savings accounts shrivel, retirement nest eggs vanish, the value of monthly pension checks shrink. Harvard Business School Professor Samuel Hayes recounted the damage to a relative of his in a magazine story: “He was the epitome of the Protestant ethic. He had inherited money, he had saved, he was very frugal, had a very modest house, had part of his investment money in bonds and short-term securities, had always maintained liquidity. And he came out of the Seventies looking like a fool.”

And this is why I keep harping on this.  It’s not about being partisan.  Both major Democratic proposals under current consideration – health-care reform and cap-and-trade – are guaranteed to contribute to higher inflation, one through massive new debt and the other through big increases in energy prices, which of course reverberate throughout the entire economy.  We’re at the brink of the cliff – and rather than slowing down, we’re speeding up…

This time, it was because of a crashed hard drive – I’m happy to say I’ve recovered my PC and I will be back in the saddle again very soon…thanks for sticking with me!…

What do you suppose a responsible politician would do, in the face of a struggling economy reeling under massive amounts of personal debt and a government deficit running wildly out of control and sparking still nascent but unmistakable fears of the return of crushing inflation?

We’ll never know, because we’re not governed by responsible politicians.  Instead, the Obama administration and congressional Democrats are prepared to throw another $1 trillion of your money at a new entitlement: health care for all, subsidized by new taxes on the insurance benefits of working Americans.

Senior House Democrats drafting health care legislation are considering slapping an unspecified financial penalty on anyone who refuses to purchase affordable health insurance, a key committee chairman said Monday.

In addition, officials said Democrats are considering a new tax on certain health insurance benefits as one of numerous options to help pay for expanding coverage to the uninsured.

…House Democrats also are considering a wide-ranging change for Medicaid that would provide a uniform benefit across all 50 states and increase payments to health professionals, according to several officials. Medicaid is a state-federal program of health coverage for the poor.

…Rep. Charles Rangel, D-N.Y., chairman of the House Ways and Means Committee, confirmed the proposed penalty for those who refuse to purchase coverage they can afford, referring to it as ”play or pay.”

”There is no use having a mandate without a contribution,” he said.

…Alongside those efforts, financing Obama’s plan to spread coverage more widely carries a price tag estimated at higher than $1 trillion over a decade. House Democrats are considering cutting projected Medicare payments to home health care, pharmaceutical companies, insurance companies, hospitals and others to cover costs.

The option for taxing insurance benefits is also under consideration as part of legislation taking shape across the Capitol in the Senate Finance Committee.

Numerous options are possible, many involving either a tax levied according to the value of an individual’s employer-provided health plan, or on the benefits received by upper-income taxpayers.

The issue poses multiple potential problems for Obama, who has pledged not to raise taxes on individuals making less than $250,000 and also ran commercials during the presidential campaign criticizing GOP rival Sen. John McCain’s call for a tax on health benefits.

In recent weeks, the president and his aides have sought to straddle the issue, neither accepting it nor ruling it out.

Equally troublesome politically is the issue of a government insurance option. Critics argue it would render private companies unable to compete, and it has emerged as a key sticking point in the Democratic search for a bipartisan plan in the Senate.

All the Republicans on the Senate Finance Committee except one wrote Obama recently telling him he was making a mistake if he insisted on a government option. The exception was Sen. Olympia Snowe, R-Maine, who has been trying to find a compromise that would make a government plan available as a last resort if health insurance remains unaffordable for many families even after Congress overhauls the system.

The long-term consequences of our current rate of spending are disastrous.  The long-term consequences of turning health coverage into a government-enforced entitlement are catastrophic.  If Barack Obama and congressional Democrats tax health-care benefits, it will be perhaps the largest tax increase in modern times on the middle class.  It will expose Barack Obama as a champion hypocrite.  It will reduce consumer spending by hundreds of billions just as the economy shows signs of recovery.  It will signal the bond market that we have no intention of trying to forge a return to responsible spending and stoke runaway inflation.  It will be still another massive intrustion by government into the private market.

Other than that, I think it’s a helluva idea…

Universal health care is a nice goal…but the plain fact is, we can’t afford it.  We never could, but we sure as hell can’t now.

I don’t know if a weakened Republican Party can stand up to a Democratic Party that controls both houses of Congress, led by a popular Democratic president, on this issue…but we’ve got to try…and we’ve got to control the debate.  It’s not about being cruel to the less fortunate; it’s not about being blind to the pain of the uninsured; it’s not about any sort of red herring the opposition can throw up.

It’s about reality.  It’s about one inescapable fact: our country is broke.  We are on the brink of economic catastrophe…and we can’t afford an additional obligation whose cost will be in the trillions.  We just can’t do it…

Hard to believe this came from Paul Krugman, but look at the opening of his latest column:

What would have happened if hanging chads and the Supreme Court hadn’t denied Al Gore the White House in 2000? Many things would clearly have been different over the next eight years.

But one thing would probably have been the same: There would have been a huge housing bubble and a financial crisis when the bubble burst. And if Democrats had been in power when the bad news arrived, they would have taken the blame, even though things would surely have been as bad or worse under Republican rule.

Well, despite his little dig at the end, isn’t that really an admission by Krugman that he routinely engages in partisan hackery?  I mean, has anyone else noticed his long-standing history of blaming all of the current economic problems on George W. Bush and his administration?

Then he goes and gives the game away by admitting that the housing-bubble-led credit crisis was not at all a function of the Bush presidency, but a long-simmering problem that would have exploded under Al Gore, as well, had he won in 2000 (and please, no nonsense about Gore winning – there is only ONE way you win the presidency in this country, and that’s through the Electoral College.  George W. Bush won – get OVER it, already).

Krugman goes on, of course, to blame the crisis on Republicans…but, as I noted last week, his latest tack, now that Obama has settled into office and the expiration date on “Blame it on Bush” grows close, is to blame it mostly on Reagan instead, though he does admit Clinton and the Democrats  had some role (well, it’s a classic Krugman ‘admission’, in that it neglects to mention Clinton by name, or – surely an untintended oversight – the Democratic Party, either):

For much of the past 30 years, politics and policy here and in America have moved in tandem. We had Reagan; they had Thatcher. We had the Garn-St. Germain Act of 1982, which dismantled New Deal-era banking regulation; they had the Big Bang of 1986, which deregulated London’s financial industry. Both nations had an explosion of household debt and saw their financial systems become increasingly unsound.

In both countries, the conservatives who pushed through deregulation lost power in the 1990s. In each case, however, the new leaders were as infatuated with “innovative” finance as their predecessors were. Robert Rubin, in his years as the Treasury secretary, and Gordon Brown, in his years as the chancellor of the Exchequer, preached the same gospel.

Krugman’s point is that Brown, like Bush, is bearing the blame for policies that he perpetuated rather than initiated.  That’s fine as far it goes, but remember that Krugman never extended such a courtesy towards Bush when it mattered – rather, he heaped buckets of derision upon his head at every opportunity, and never lost a chance to throw blame and aspersion in his direction.  Now that Gordon Brown, a liberal politician, is in trouble, out come the apologetics.

As interest rates rise and begin to choke off the nascent recovery (housing refinances have already sputtered out, as rising rates mean closing costs outweigh savings for almost everyone), an increase feuled by the outrageous expanse in federal spending that Krugman has loudly advocated for, expect much more in this vein from Krugman’s corner…

There are few moments in American history greater than June 6, 1944.  From a distance of 65 years, it is still enough to take your breath away.  The D-Day landings in Normandy, France, were the beginning of the end of the vile Third Reich of Adolf Hitler, but for the thousands who literally gave the final sacrifice that morning on the shores of Omaha, Juno, Sword, Gold, and Utah beaches, as well as the brave airborne troops and our British and Canadian allies, knowledge of the future was not available.  It took unsurpassed courage to step off of those landing craft into the waist deep water, weighed down by weapons and protective gear, under hostile fire, thousands of miles from home.

In one of his most remembered speeches, President Ronald Reagan stood at the site of the decisive turning point, the ridge of Pointe du Hoc, and delivered words that will be immortal:

We’re here to mark that day in history when the Allied armies joined in battle to reclaim this continent to liberty. For four long years, much of Europe had been under a terrible shadow. Free nations had fallen, Jews cried out in the camps, millions cried out for liberation. Europe was enslaved, and the world prayed for its rescue. Here in Normandy the rescue began. Here the Allies stood and fought against tyranny in a giant undertaking unparalleled in human history.

We stand on a lonely, windswept point on the northern shore of France. The air is soft, but 40 years ago at this moment, the air was dense with smoke and the cries of men, and the air was filled with the crack of rifle fire and the roar of cannon. At dawn, on the morning of the 6th of June, 1944, 225 Rangers jumped off the British landing craft and ran to the bottom of these cliffs. Their mission was one of the most difficult and daring of the invasion: to climb these sheer and desolate cliffs and take out the enemy guns. The Allies had been told that some of the mightiest of these guns were here and they would be trained on the beaches to stop the Allied advance.

The Rangers looked up and saw the enemy soldiers–the edge of the cliffs shooting down at them with machine guns and throwing grenades. And the American Rangers began to climb. They shot rope ladders over the face of these cliffs and began to pull themselves up. When one Ranger fell, another would take his place. When one rope was cut, a Ranger would grab another and begin his climb again. They climbed, shot back, and held their footing. Soon, one by one, the Rangers pulled themselves over the top, and in seizing the firm land at the top of these cliffs, they began to seize back the continent of Europe. Two hundred and twenty-five came here. After two days of fighting, only 90 could still bear arms.

Behind me is a memorial that symbolizes the Ranger daggers that were thrust into the top of these cliffs. And before me are the men who put them there.

These are the boys of Pointe du Hoc. These are the men who took the cliffs. These are the champions who helped free a continent. These are the heroes who helped end a war.

UPDATE 10:18 a.m.: Today, President Obama also spoke from the Normandy site:

Lyndon Johnson once said that there are certain moments when “…history and fate meet at a single time in a single place to shape a turning point in man’s unending search for freedom.”

D-Day was such a moment. One newspaper noted that “we have come to the hour for which we were born.” Had the Allies failed here, Hitler’s occupation of this continent might have continued indefinitely. Instead, victory here secured a foothold in France. It opened a path to Berlin. And it made possible the achievements that followed the liberation of Europe: the Marshall Plan, the NATO alliance, and the shared prosperity and security that flowed from each.

It was unknowable then, but so much of the progress that would define the twentieth century, on both sides of the Atlantic, came down to the battle for a slice of beach only six miles long and two miles wide.

More particularly, it came down to the men who landed here – those who now rest in this place for eternity, and those who are with us today. Perhaps more than any other reason, you, the veterans of that landing, are why we still remember what happened on D-Day. You are why we come back.