WashACE Blog

Some Follow-Up on the Cap and Tax Vote

Can't beat this New York Times headline for understatement: Climate Change Bill May be Election Year Issue.

And can't beat this NYT column by Paul Krugman for over the top rhetoric:

...as I watched the deniers make their arguments, I couldn’t help thinking that I was watching a form of treason — treason against the planet.

Gotta love that passion.

Finally, the question we've all been asking: Dude! Where's my renewable job? (h/t Instapundit) Good links. Read the whole thing.

More Evidence Taxes Matter

The TaxProf blog reports on a new study (subscription required) showing that taxes play a significant role in small business failures. (H/T The Entrepreneurial Mind) While we can't get the study, TaxProf quotes the key conclusion:

Consistent with the growing tax burden on small-business owners, as well as the growing body of evidence linking higher tax burden with limited entrepreneurial growth and higher closure rates, this study has found that tax problems constitute an important reason for bankruptcy filings for a sizable number of entrepreneurs. Interestingly, those entrepreneurs that attribute their business collapse to tax problems do not come from disadvantageous background. Instead, the average entrepreneur in the bankruptcy sample that has faulted tax problems for his financial woes was typically older male, white, native-born, well-educated and an experienced business owner. Nonetheless, the typical entrepreneur with tax problem in the bankruptcy sample was facing enormously higher debt burden with more than five times as much debts as other entrepreneurs in the bankruptcy sample.

And, Floyd McKay writes at CrossCut that Oregon business leaders will likely seek to reverse the legislature's recent tax hikes.

New Population Estimates Show Slower Growth

No real surprises in today's population estimate from the Office of Financial Management.

While Washington remains more economically attractive than California, Oregon and many other states, population gains due to migration have dropped from 81,000 in 2006 to 58,000 in 2008 and 39,000 for 2009, according to Theresa Lowe, the state’s chief demographer.

Follow the link for some good explanatory charts and discussion.

The Economist Magazine Looks at "Hard Hit" Washington

Earlier this month, the Economist celebrated the "remarkably moderate" politics of our state,  attributing it to our tradition of nonpartisan primaries. I'm not sure I completely buy the picture of Washington's centrist politics. But compared to their counterparts in Oregon and California, our legislators did a workmanlike job, resolving the budget shortfall and avoiding the temptation to indulge in costly health care or climate change experiments. If this is moderation, Congress should follow suit.

Now comes the Economist again to look at how the recession plays here. Noting the dominant role Boeing plays in our economy, the magazine wrote

if [Boeing], still the state’s largest private employer, appeared last year to be saving Washington from the recession sweeping the rest of the country, those hopes died in September.

They did so with one of the machinists’ strikes for which Washington, where the union-friendly closed shop is legal, has an unfortunate reputation. Boeing’s assembly lines ground to a halt. Within weeks the wider economic crisis arrived in the state with full force. A local bank, Washington Mutual, known throughout the state as “WaMu”, became America’s biggest banking failure. Starbucks and the other local notables looked glum. Even Microsoft began laying off workers. By May the state’s unemployment rate was running at the national average of 9.4%.

The writers buy too heavily into the conventional assumption that our tax structure uniquely contributed to the budget challenges facing the state. And, they give Sen. Lisa Brown, an income tax champion, some lobbying space in their pages. (Brown's the only person quoted in both articles - professional courtesy to the economics professor?)

Overall, after documenting the hard hit the state took last fall, the article ends on a positive note. I think they're too optimistic, but I'd gladly be wrong. Read the whole thing.

Cap and Tax Squeaks Through House ... More Squeaks Expected

Yesterday the U.S. House narrowly passed the massive Waxman-Markey climate change (cap and tax) bill, 219-212. Forty-four Democrats voted against it; eight Republicans, including Rep. Dave Reichert, R-Auburn, voted for it. The Seattle Times has statements from members of Washington's Congressional delegation.)

The Washington Post, finding a silver lining in the GOP crossovers, writes,

...a small number but a better show of GOP support than Obama received on key items such as the $787 billion stimulus bill and a $106 billion war-funding bill.

The strongest display of bipartisanship appears to have been on the opposing side.
One House GOP staffer says the bill's dead in the Senate. (I'd have said it's toast, but that invokes an unpleasant global warming image.

Given the close margin and the likely tough-sledding in the Senate, it's timely to recall why this is bad legislation. ShopFloor, the blog of the National Association of Manufacturers, draws on Heritage Foundation research to demonstrate the job losses likely to ensue. 

Economists in The Heritage Foundation’s Center for Data Analysis estimate that manufacturing jobs will fall on average by 400,000. Peak year unemployment in the manufacturing sector alone rises by almost 1.4 million.

Investor's Business Daily calls the bill a man-made disaster, pointing out the sweeping negative effects on virtually every sector of the economy.

Consumers would pay through the nose as electricity rates would necessarily skyrocket, as President Obama once put it, by 90% adjusted for inflation. Inflation-adjusted gasoline prices would rise 74%, residential natural gas prices by 55% and the average family's annual energy bill by $1,500.

In the Wall Street Journal, Kimberley Strassel examines the weakeing case for climate change regulation, noting that the global warming tide has again shifted. 

The number of skeptics, far from shrinking, is swelling. Oklahoma Sen. Jim Inhofe now counts more than 700 scientists who disagree with the U.N. -- 13 times the number who authored the U.N.'s 2007 climate summary for policymakers. Joanne Simpson, the world's first woman to receive a Ph.D. in meteorology, expressed relief upon her retirement last year that she was finally free to speak "frankly" of her nonbelief. Dr. Kiminori Itoh, a Japanese environmental physical chemist who contributed to a U.N. climate report, dubs man-made warming "the worst scientific scandal in history." Norway's Ivar Giaever, Nobel Prize winner for physics, decries it as the "new religion." A group of 54 noted physicists, led by Princeton's Will Happer, is demanding the American Physical Society revise its position that the science is settled.

Today's Seattle Times carries an AP story quoting the president as urging swift passage in the Senate. 

There's no hurry. Senators should take their time. The economic consequences are substantial; the environmental benefits, minimal.

Health Care Legislation Unraveling as Details Emerge

A little weekend catching up on health care reform. The New York Times headlined yesterday Obama and Congress Clash on How to Pay for Health Care. They weren't talking about cash or credit card, although the debt build-up on the Congressional credit card makes cash the only currency most providers should accept. But the exploding deficit is the critical issue according to the NYT.

It has become the trillion-dollar question: can President Obama find that much in spending cuts and tax increases to keep his campaign promise to overhaul the health care system, without adding to already huge deficits? Mr. Obama and the Democrats running Congress are deeply split over the possibilities. House and Senate leaders do not like his ideas but cannot agree on alternatives.

None of the options, the president's or Congress's, seems workable. The Times provides a rundown: more taxes on the wealthy, tax employer-provided benefits, cut Medicare spending, and that old favorite, "sin taxes." The Seattle Times also offers a Washington Post review of the Senate package.

Speaking of Medicare, the Washington Policy Center says the program is a good preview of the proposed "government option." It boasts a huge unfunded liability, massive paperwork, and inadequate provider reimbursement. Not to mention having the market and regulatory clout to dismantle private health insurance industry.

A popular YouTube video contends that eliminating private health insurance has been the goal all along. The public option simply advances the single payer goal. Watch it.

Rich Lowry explains how it works.

Private insurers are at a disadvantage vis-a-vis the federal government because they don't have the power of the government to dictate prices to doctors and hospitals. That's what Medicare does, and why it pays less for health services than private insurers.

...If the public option in ObamaCare underpays providers in a similar fashion, it will charge cheaper premiums than private insurance. Employers will dump their employees into the public plan, and a massive "crowding out" will occur. The respected health care research firm The Lewin Group estimates as many as 119 million people could migrate from private insurance to the government plan...

Read the whole thing. There's really little dispute about the effects of the public option, despite the fervent claims of supporters that they're just providing consumers a competitive alternative. Nevermind that most consumers are happy with the insurance coverage they have.

The more we learn about Congressional health care reform, the less there is to like.

Among the Problems with State-run Health Care ...

... is proper pricing, a factor to be considered in establishing a "public option" government-run insurance program to compete with private plans. One way to look at how governments manage their plans is to consider what they think is appropriate for their own employees.

Consider, for example, health insurance for state employees in Washington. Adam Wilson reports in the Olympian that state health plans may get a big hike.

The Public Employees Benefits Board is considering the increase to make up for rising costs and flat-lined funding. The most popular offering, the Uniform Medical Plan, will not see the steepest out-of-pocket increases. The share of costs paid by members of that plan will rise from 10 percent to 15 percent, and the out-of-pocket maximum will increase from $3,000 a year for a family to $4,000.

Wilson has more details, the state offers several plans, and for the most part the increases seem reasonable given state budget pressures. That's particularly so given the long history of very generous state benefit programs. After the increases, most state workers will continue to enjoy benefits unavailable to most private sector employees.

Still, State Rep. Brendan Williams issued a statement taking the PEBB to task. (The link is to another post by Wilson.)

"If we’re to trust a government role in health care reform, government should set a high standard,” stated Williams.

And that's part of the problem. The "high standard" amounts to highly-subsidized high-cost benefits. The Congressional emphasis on "cost containment" is inconsistent with government-run programs.

Williams writes favorably of our neighbors to the South.

Williams pointed out that the Oregon Legislature, which has increased taxes in its ongoing legislative session, will continue to cover 100% of state employees’ health care premium costs.

The Olympian editorial board appears to understand the problem, at least in the larger context.

Looking for the Economic Recovery

As the head of the state economic and revenue forecast council said earlier this month,

It increasingly appears that we are finally approaching the end of this “Great Recession.”

But signs of recovery continue to elude investors and economists. Warren Buffett, for example, tells CNBC, he sees no signs of recovery yet. From the interview:

Everything that I see about the economy is that we've had no bounce.  The financial system was really where the crisis was last September and October, and that's been surmounted and that's enormously important.   But in terms of the economy coming back, it takes a while.  ...  In the (Berkshire Hathaway) annual report I said the economy would be in a shambles this year and probably well beyond.  I'm afraid that's true.

James Hamilton at Econbrowser continues his skepticism. After reviewing the components of the Conference Board Leading Economic Index (graphs and discsussion here), Hamilton writes:

... maybe we could summarize the recent strength in the leading economic index this way. The main reason we think the economy is improving is because many of us think the economy is improving.

This all comes as jobless claims took a large unexpected bounce.

The Labor Department data released Thursday show jobs remain scarce even as the economy shows some signs of recovering from the longest recession since World War II.

That bit about "signs of recovering" increasingly sounds more hopeful than analytical. But hope's good, right?

Ted Van Dyk, writing at Crosscut, has a nice discussion about how the economy plays into the Obama administration's hopes - there's that word again - for sweeping health care and energy reform. First, he sets the stage.

Most economists continue to predict recession's end by late this year or early in 2010.

But on Main Street, recovery seems distant. Unemployment rates are reaching toward 10 percent (far higher than Obama said they would go) and will not trend downward until months after the actual recession ends. Small business failures have increased. Financial markets seem unlikely to rally strongly until good news drives out the bad.

Then this.

Next week consensus will begin to form around the principal elements of the health-care and energy plans, which will then become characterized as the Obama Plans. ... Obama, finally, will have to make definitive decisions about the elements he will accept. It will be increasingly difficult for the President to keep talking in general terms about reform. He will need to defend specific provisions of the bills in play.

If the economy were growing, at full employment, and generating rising tax revenues, the task would be difficult. In the midst of recession, and with federal debt sharply increasing, it will be more than difficult.

In their current form, both proposals threaten to inflict severe damage on a struggling economy. (See this Wall Street Journal piece to get an idea of the cost of cap-and-tax. And we've linked here to just a few of the persuasive critiques of the health care plan.) If concerns about the economy make it difficult to pass bad legislation, we'll all be well served.

Reactions to the ABC Health Care Special and the President's Lobbying Efforts

Taegan Goddard has a quick roundup of responses to ABC show, with links. General take, the president found a friendly forum, pushed hard for the government-option, and was able to avoid answering unpleasant specifics while demonstrating that he understood the issue.

Politico covers the president's efforts to lobby governors, including Gov. Gregoire.

“There’s no perfect unanimity across the table in terms of every single aspect of reform,” Obama said after his meeting with five governors. “I think everybody here wants to make sure that governors have flexibility, that they have input into how legislation is being shaped on the Hill. ... And we’re committed to working with them in the weeks and months to come to make sure that when we get health reform done, it is in partnership with the states, where the rubber so often hits the road.”

Obama encouraged the governors — two of them Republicans — to continue pressing the need for reform this year. The urgency of the issue was something everyone in the Roosevelt Room agreed on

That urgency, as we've noted previously, is not shared by the public, But given increased skepticism regarding the high cost of the proposal, the president and Congress can only win by scoring quickly.

As we've noted earlier, the disturbing costs continue to climb. Today, the Seattle Times reports that Sen. Max Baucus, chairman of the Senate Finance Committee, says that a $1 trillion health care bill is feasible. Oddly, that's at the low end of the spectrum. (Anyone else tired of Congress rounding everything to the nearest trillion?) Baucus didn't provide details.

The Seattle PI.com reports that Gov. Gregoire weighed in on the public option, suggesting a state role as well.

Gregoire said if a public plan is OK'd it should also be run on the state level. "If a public plan can be developed ... why not?" Gregoire asked. "The fear is that a public plan is step one to government health care. If a public plan plays by the same rules a private plan, what's the concern, what's the threat?"

The threat, of course, is that the public plan won't play by the same rules, a point made, for example, in this dissection of Robert Reich's WSJ argument for the public option and in this IBD editorial. From the editorial:

But the public plan would enjoy unique financial privileges. It's hard to imagine Congress letting it fail. If it comes up short, the government will find ways to get it the money it needs — if not through direct outlays, then through borrowing with an implicit or explicit guarantee. Private insurers would probably have to try their luck with Chapter 11. There is no level playing field when the government is in the game.

And government wants it that way. The public option, as I wrote in this Puget Sound Business Journal op-ed (subscription required), allows supporters to get single-payer without the political hassle of a frontal assault.

"Public Option" Frustrating Health Care Consensus

This morning's Roll Call, David Drucker writes of bleak prospects for bipartisan passage of health care reform. (H/T Taegan Goddard's Political Wire)

Senators conceded Tuesday that it appears increasingly unlikely that Congress will reach a bipartisan consensus on health care reform this year, with a rift growing over whether to include a government-run insurance option in the legislation.

<snip>

The fundamental disagreement impeding bipartisanship, even as both sides continue to butt heads on the cost of health care reform and how to pay for it as well as the role employers will play, centers on a proposal to implement a government-run insurance option as a part of the overhaul. The Democrats generally favor the creation of a robust, Medicare-like public plan to compete with private insurers; the Republicans are almost unanimous in their opposition.

The Wall Street Journal takes a look at the flawed New York Times/CBS News Poll and concludes that would-be reformers

...shouldn't be conscripting voters into their crusade.

<snip>

Even among those who favor the government covering the uninsured, only 47% would still support a public option if it meant their own health costs would rise -- as they inevitably will, until the government is compelled to start rationing.

And the Washington Post notes the same voter ambivalence.

A majority of Americans see government action as critical to controlling runaway health-care costs, but there is broad public anxiety about the potential impact of reform legislation and conflicting views about the types of fixes being proposed on Capitol Hill, according to a new Washington Post-ABC News poll.

The WaPo also notes the president's increasing advocacy of the public option.

Obama also used yesterday's news conference to rebut criticism of one of the more contentious ideas being considered: creation of a government-sponsored health insurance program that would compete with private firms.

Insurers and many Republicans warn that the "public option" included in bills filed in the House and Senate "would dismantle employer-based coverage, significantly increase costs" and add to the federal deficit.

"If private insurers say that the marketplace provides the best quality health care; if they tell us that they're offering a good deal, then why is it that the government, which they say can't run anything, suddenly is going to drive them out of business?" Obama said. "That's not logical."

Well, no one said the government would be driving them "out of business" by offering a better product with more effective outcomes, reduced costs, efficient administration, and so on. Investors Business Daily neatly sums up the economic argument against the public option, citing an authoritative Lewin Group report. (Surprisingly, the Seattle Times editorial board chose to back the plan, taking the same stance unsurprisingly taken by the Everett Herald's liberal columnist John Burbank and former Clinton administration Labor Secretary Robert Reich).

In April, the Lewin Group, one of the nation's most respected health care consultants, reviewed the potential enrollment of the public-plan option. Its study notes: "Medicare premiums would be lower than private premiums because of the exceptional leverage Medicare has with providers." The result, according to the group's vice president, John Shiels: "The private industry might just fizzle out altogether."

Can anyone offer an example of government successfully competing with the private sector on equal footing?