Baseball writer Bill James introduced his 1984 Historical Baseball Abstract as follows:
This is outside baseball. This is a book about what baseball looks
like if you step back from it and study it intensely and minutely, but from
a distance.
The attempt to study baseball from inside makes a non-insider completely dependent on the parochial perspectives of insiders. These insiders often become indignant when someone tries to interpret the game from an outsider's perspective. But James preferred to study from an objective perspective, even if that meant it was impossible to learn about concrete details. After all, he argued, even the dedicated insider will remember only a few concrete details; scientific abstraction was the best way for him to understand the game. To explain this, James employed an extended metaphor about the difference between seeing the forest and seeing the trees. If you are inside the forest, you have an intimate knowledge of the trees, but lack an understanding of the forest as a whole.
Similarly, in politics insiders develop their own sets of goals, commitments and perspectives. One can attempt to track the details of politics by understanding the concerns and methods of the political class, or one can evaluate their results from a distance. Political insiders often become indignant when people do this. "But we have to have a comprehensive [immigration/budget/health care] bill. That's just how Washington works! We've spent months creating an intricate compromise, and you're not going to get a perfect bill." "Yes, yes, but the important thing is to keep The Process moving." "Mr. T Leghorn understands how Washington works."
Harvard economist N Gregory Mankiw is, according to some political insiders, an outsider. His outsider's evaluation of health care reform is as follows:
The President's economic team regularly reminds us of the following:
- The United States faces a large long-term fiscal gap between spending and tax revenue.
- That gap is driven in large measure by increasing healthcare costs.
- Healthcare reform should "bend the curve" and reduce future healthcare costs.
In
light of these facts, shouldn't the healthcare reform bill be more than
deficit neutral? Shouldn't it reduce the long-term structural deficit?
As Donald Marron points out,
current Congressional efforts do not even meet the standard of deficit
neutrality. But even if they were deficit neutral, that would hardly be
a success.
Mankiw examines the health care bill in light of its easily forgotten original purpose, notes that it is not likely to achieve this, and concludes that we are better off with no health care bill. Those who are invested in the debate, and have mastered its intricacies, disagree. For instance, Ezra Klein, a blogger for the very inside baseball Washington Post, opines:
this is worse than a very banal comment: It's disengaged with (sic) the debate.
It's disengaged from the debate! Ezra Klein, who deeply understands the process behind the flawed health care bill, does not like the outsider's analysis of the results of that process, because said outsider is not engaged with the process.
Mankiw's basic argument is that health-care reform should be better
than deficit-neutral. It should be deficit-improving. That is to say,
it should bend the curve in the long term. And it should! But what
evidence does Mankiw have that it won't?
I think that when you propose to comprehensively change 10%+ of the economy, you should be able to produce evidence that you actually will achieve your purposes. But Ezra Klein prefers to ask "how do you know it won't happen?" Mankiw has provided a link which provides the answer to this question:
- First, the House bill would increase health insurance coverage. As noted in a previous CBO analysis (and summarized in a recent post),
that effort would have a net budget impact of $1.04 trillion over the
next ten years; spending would increase by almost $1.3 trillion, while
tax revenues would increase by about $240 billion.
- Second, the bill would change the formula that determines how much Medicare pays physicians. Those
payment rates are scheduled to be cut 21% next year under an arcane
formula (the sustainable growth rate mechanism). The House bill would
replace those cuts with increases in coming years, at a cost of $245
billion over the next ten years.
Ezra Klein does not examine this argument. He does write,
There are at least four ideas in the health-care reform debate that have the potential to deliver on long-term savings....
There's the theory that comparative effectiveness review --
particularly when combined with a new IT infrastructure that could
eventually help guide physician decisions -- will cut down on
unnecessary treatments and allow us to bring high-spending regions of
the country into sync with their low-spending brethren.
There's the idea that the Independent Medicare Advisory Council will
be the locus for a continual process of Medicare reform that will begin
to bring down costs in the Medicare program, and also create a sort of
"best practices" laboratory where experiments can be attempted and the
best efforts can be further developed.
There's the argument for the public plan, and in particular the
public plan with Medicare powers, that implies that a large purchaser
in the center of the system could bargain better discounts with
providers.
There's the argument that the health insurance exchange will grow to
become the primary insurance market and that as insurers begin
competing on grounds of cost and quality -- as opposed to risk
selection -- that efficiencies will emerge and spending will drift
downward, and over time, the employer-based market, which is
responsible for many of the costly problems in the system, will begin
to migrate toward the exchange.
All of these are speculative. But that's true for any cost-saving
measures that aren't either single-payer or some radical turn toward
the free market that rips away subsidies for the poor and benefits for
the elderly. Mankiw, however, doesn't engage with any of them. Not even
glancingly. They don't exist anywhere in his post. Nor do the political
difficulties facing not only these approaches, but anything stronger.
The first two speculations here, if I understand correctly (Klein provides no links or detailed explanation) are cuts in Medicare and other government health programs. They are speculative because political insiders prefer not to be explicit about how they will cut spending; the key (as they are always telling each other) is to "pass something" in order to give power to bureaucrats who are, it is hoped, less sensitive to the wishes of outsiders. Of course an outsider might suggest that we simply cut the relevant programs without adding an expensive public option; but the insider can always explain that the public option is necessary to bribe young voters into voting their parents off the island, so to speak (and I guess S-CHIP and MedicAid beneficiaries, and whoever else depends on government and will thus have the privilege of Comparative Effectiveness Review to "guide [their] physicians' decisions.")
The third speculation is that the Public Plan takes monopolistic market power and can bargain with providers. I'm not sure how much marginal benefit you're going to get here. Medicare and private insurance companies already have collective bargaining power. Some providers are non-profits and as such have no profit margin to play with, and I don't think your local pharmacy is swimming in cash. Drug manufacturers are highly profitable, but any attempt to eat out of their margins means capital flight and less research.
The fourth speculation I don't understand. Insurers are supposed to compete on cost instead of risk selection, but risk selection is a way of competing on cost. He may mean that insurance companies will try to reduce costs by denying coverage, which reduces adverse selection. Instead of health companies driving away the young and healthy by giving them the bill for riskier patients, they will draw them in with cheap health insurance by denying more care to the at risk. I guess the causal mechanism is supposed to be that the public option forces private insurers, with their thin profit margins, to match its care-denial capabilities to stay competitive. (But if you like your current plan, you can keep it! This is the insiders' inside joke.)
But while this last would reduce total health care spending, I don't see how it is supposed to reduce government's bill.
Also, the way Klein talks about the Independent Medicare Advisory Panel, you'd think it was in the bill. You would be wrong:
At a news conference, Pelosi indicated that
she and the Democratic leadership “have been having discussions with
the administration” on giving an advisory body such as MedPAC more
control over setting payments for providers.
“It's something that under certain circumstances we'd be receptive to,”
said Pelosi, adding that House Majority Leader Steny Hoyer (D-Md.) had
reservations about the idea.
I think that's insider speak for "You can forget it, Mr. President." So the reason speculations about the Independent Medicare Advisory Panel "don't exist anywhere in (Mankiw's) post" is that they don't exist anywhere in the bill N. Gregory is discussing.
***
Ezra Klein does not analyze the likely effects of these four potential forces as compared to the effects of the spending increases in the bill, mentioned in Mankiw's link. In fact, one of these increases is a reversal of scheduled MediCare cuts. The status quo was set to make MediCare cuts, which are always so difficult to achieve; but somehow, I guess, if you trick people into thinking that you're reversing these cuts that will lead to the possibility of steeper cuts down the road.
He does mention that there are "political difficulties" facing any efforts to cut costs. From an insider's perspective I'm sure this matters a great deal, but the outsider does not care how difficult it is to achieve a health care bill that reduces the deficit. He only cares whether a comprehensive reform whose purpose is to reduce the deficit will in fact succeed in reducing the deficit.
P. S.
TNR's John Chait also disliked Mankiw's post, making more explicit the insider vs. outsider aspect:
There are lots of academics endowed with
tremendous technical knowledge, but whose understanding of American
politics is rather shallow. For some reason, those who happen to be
economists tend to have their political opinions treated with unusual
deference, even though they often have no more knowledge than the
average math professor.
[Paul Krugman, for instance, opines about politics as a New York Times editorial columnist - ed.]
As Klein inadvertently demonstrated, however, encyclopedic knowledge of American politics has little bearing on the specific issues Mankiw raised, and apparently only serves to confuse one's analysis of the matter. Mankiw starts from a fact-based premise and draws a conclusion- "the current health care bill will increase the deficit (hyperlink to factual support for claim); therefore, we should not pass it in hopes of reducing the deficit. But, reducing the deficit is the purpose of passing comprehensive health reform. Therefore, we should not pass the bill." Klein offers several other facts ("Passing a bill that reduced health costs would be politically difficult...etc.") without relating the facts to the argument at hand. Nevertheless, Chait, one of the brightest lights at The New Republic, considered Klein's post so impressive that he quoted it almost in full.
He then applied the same sort of reasoning to a different Mankiw post, on the cap-and-trade bill. Mankiw wrote, a question Mankiw wished the press would ask Obama:
During your campaign, you said,
"The danger in a cap-and-trade system is that the permits to emit
greenhouse gases are given away for free as opposed to priced at
auction. One of the mistakes the Europeans made in setting up a
cap-and-trade system was to give too many of those permits away." The
climate change bill now being considered in Congress does the same thing. Are you now willing to have the United States make the same mistake the Europeans made, or would you veto the bill?
Chait responded:
Does Mankiw really not understand the
difference between legislation that makes a sub-optimal improvement
upon the status quo and legislation that makes the status quo worse?
Everybody understands this difference, as it doesn't have anything to do with specialized knowledge of the political process. But President Obama's answer would still be illuminating, no?
"Yes, I am willing to have the United States make the same mistake as the Europeans, because I believe that a sub-optimal bill is still an improvement. Although the Europeans have not come close to meeting their emission reduction goals, the important thing is to send a signal, to give a sense..."
Or,
"Yes, I am willing to make the same mistake as the Europeans if that is what Congress decides. A sub-optimal bill is still an improvement; and in the end, the President proposes and Congress disposes. I prefer to defer policy questions to Congress."
"No, I do not want to the United States to make the same mistake as the Europeans. However, I am not willing to actually issue a veto threat." (Surely a political insider can think of ways to say this.)
Or,
"Yes, I will veto any legislation that will fail to sufficiently reduce carbon emmissions. I don't want to send a signal that half-measures are adequate. So, while the cynics will say that pork infested bills are the best thing our process can come up with, I say that our better angels..."
Further, when applied to the specific instance Chait's generalization begs the question of whether the legislation is an improvement on the status quo- is it worth the economic costs? Pundits highly invested in global warming politics almost invariably took the position that Congress should pass and the President should sign the climate bill that came out of The Process, as bad as that bill was. Somehow the signal it sends is more important than its substance. An outsider might note the opportunity costs of a bill; you aren't going to pass cap-and-trade and then a carbon tax (which permit sales would resemble.) Thus the opportunity cost of a bad bill is the possibility of a good bill. There is a limit to the amount of economic disruption, both aggregate and specific, that Congress is willing to impose to reduce global warming.
Finally, a dedicated student of American politics should surely be familiar with the Wilsonian theory of the Presidency, which calls for Presidents to use the threat of a veto to shape legislation, rather than just to veto bills they believe are harmful or (as was once quaintly the case) unconstitutional. It is at least worth discussing in the context.
