Tag Archives: Obama

Will Republicans Flip Health Care the Byrd?

The administration has laid out a two-prong strategy for getting health care reform this year. The first part is to present Congress with only the bare outline of a plan and let legislators fill in the details. The second is to bring the bill to the floor under the budget reconciliation process. The budget resolution passed in April contains reconciliation instructions for several committees to produce a health care reform bill by October 15. Consequently, under congressional budget rules, this health care bill cannot be filibustered and requires only 50 votes in the Senate.

Neither part of the strategy is failsafe. How can the president expect Congress to work out the details when it doesn’t agree on them? Take the goal of creating a public insurance plan that can compete along side private insurers. Few if any Republicans are willing to support such a provision for fear that the public plan would drive private plans out of business and expand the government’s role in health care. After the GM nationalization, the GOP cry that the Democrats will use the public plan to gin up a government takeover of health care ought to spook enough voters to make moderate Democrats nervous. Other parts of the plan including a “play or pay” employer mandate and the possibility of taxing some employer-provided health benefits are just as controversial.

The plan to use the reconciliation process is just as tricky. The use of the reconciliation process is governed by the Byrd Rule, named for America’s senior senator Robert Byrd. Essentially, the Byrd Rule places two important restrictions on the use of reconciliation. The first is that it disallows any “extraneous” provisions in which “changes in outlays or revenues … are merely incidental to [its] non-budgetary components.” As Ezra Klein pointed out a few months ago, health care legislation will certainly contain many provisions that may run afoul of this rule.

But is regulating insurers “merely incidental” to government revenues? How about reforming hospital delivery systems? How about incentives for preventive treatment? Or the construction of a public plan? An individual mandate?

The second relevant provision of the Byrd Rule is that the bill cannot contain provisions that increase the deficit in a year not covered by the reconciliation instructions unless their effects lead to an overall reduction in the deficit. Consequently, because the budget resolution is based on a five-year window, a health care reform bill passed via reconciliation must be budget neutral or decrease the deficit beyond 2014 (its short term costs are covered by the $635 billion set aside contained in the budget resolution).

The upshot is that if Republicans raise a point of order on either of these grounds and it is upheld by the Senate parliamentarian, a 3/5s majority is required to waive it. So essentially, the bill (or at least some of its provisions) would lose filibuster protection.

Klein is correct to worry about points of order based on “merely incidental” provisions. But as he points out, these are essentially judgment calls by the parliamentarian (and the Democrats can always follow the GOP strategy of firing uncooperative parliamentarians.)

So I think it is the second Byrd Rule objection that may be the more dangerous one. The effects of the health care bill on the deficit will be scored by the Congressional Budget Office. It will be much more difficult politically to confront the CBO over an adverse scoring decision than it would be to fire the parliamentarian. So budget neutrality is an absolute necessity for the reconciliation gambit to work.

I believe it will prove very difficult to produce a meaningful health care reform bill that is budget neutral over the long run (or at least one that will be scored by the CBO that way). First, any budgeting for a health care plan is going to rely heavily on cost savings through hard to quantify reforms like electronic medical records. If the CBO comes back with a low number for these savings, other cuts or revenue increases will be required. Second, many of the revenue enhancements expected to be in any reform bill such as employer “play or pay” or the taxing of some employer-provided benefits may not sit well with many moderate Democrats. As these provisions get scaled back to keep the moderates on board, expenditure cuts will be necessary to ensure Byrd Rule compliance.

For 60 years, Democratic presidents have sought to reform the health care system. Clearly, President Obama thinks this time will be different. Perhaps it will be, but it is far from a done deal.

Another Random Thought about Obama’s Tax Plans

One of the features of the U.S. income tax system is that despite very considerable variation in the cost of living across regions the tax rate schedule is uniform across the country. Consider my favorite two states: Texas and New Jersey (how many people can say that?). Based on state level estimates of cost of living, the same consumption bundle costs 35% more in New Jersey than it does in Texas. Nevertheless a New Jerseyan and a Texan with the same dollar income will pay the same dollar amount in taxes. But the Texan will pay 35% less in terms of local consumption. Consequently, the tax system violates an important principle: two people with the same ability to pay should pay the same taxes.

Of course, there are a lot of factors that offset these differences. First, unlike politics, not all consumption is local. Both the New Jerseyan and the Texan pay the same for their EuroDisney vacation. But enough consumption (especially housing) is local so that large differences remain.

Within the tax code itself, the major offset to these differences has been on the deduction side. New Jersey housing costs more so that the New Jersayan has a bigger mortgage deduction than a Texan. It costs more to sustain her local charities so the New Jerseyan may give more to charity. Her state government costs more for a given set of services so she pays more state taxes and gets a larger deduction.

But with its phase outs of itemized deductions, the Obama tax plan moves in the direction of exacerbating the regional differences in “real” tax liabilities. One of the ironies (that soon may not be lost on his administration) is that many of the states that are most affected by this inequity are those that strongly support his election.

Obama’s Math

In the vain hope of making sense of the president’s budget proposal, I have begun reading it with some care. I’ve become stumped, however, by some of the math used to justify his tax plans. His budget promises, as did his campaign, to only raise taxes on the top 5% of American households or those couples making over $250k ($200k for individuals). My first problem is that those two cutoffs are not the same.

According to the Census Bureau’s current population survey, the top 5% of households in 2007 were those with incomes over $177,000. Thomas Piketty and Emmanuel Saez’s data on tax returns (the Gold Standard for measuring the income distribution) show that the cutoff for the top 5% was $148,000 in 2006 (I believe their number is lower because they exclude government transfer payments.) So my puzzlement is whether ultimately Obama’s commitment is to not raise taxes on those families below $250k or is to not raise taxes on those below $177k or ($148k).

The question has both important political as well as economic ramifications. The Republicans will obviously fare much better in their quest to defeat Obama’s tax plan if they can portray Obama as ultimately willing to extend his tax increases to much lower income levels.

The economic ramification is one that exacerbates the political one. To pay for the spending increases that the budget calls for and to keep deficits within reason, taxes will almost certainly have to go up on families making more than $150k (if not less).

A little of my math helps explain why I believe this. Assume that tax increases are limited to those families making above $250k. From eyeballing Picketty and Saez’s data, 33% is a reasonable estimate of the share of national income received by this group of families. This implies that to increase revenue by 1% of national income the average tax rate on those above $250k will have to rise by 3 percentage points (because they control a third of national income their taxes must go up three time the total increase). Obama’s budget projects deficits at 4% of GDP from 2013-2019 (even after an initial round of high-income tax increases). So if these future tax liabilities are to be borne only by the $250k-and-up club, their taxes would have to go up 12 percentage points. How large a tax increase would this be? Currently, the average federal tax rate on families over $250k is about 30% (this includes all federal taxes). Obama’s proposed increases are likely to push that number to around 34%. To cover all future liabilities only through taxes on this group, their average tax rates will have to rise to 46%, a 50% increase in federal taxes. By contrast, the rate on the top 1% was 38% in the last year of the Carter administration before Reagan’s tax cuts. Even if Obama were willing to raise taxes on the top 5 percent (i.e. those with incomes greater than $150K), the average tax increase for that group would still be around 10 percentage points. While I often believe that supply-siders overstate their case against taxes, this clearly represents a level at which perverse incentive effects including non-compliance and reduced labor supply (especially among second earners) could materialize. So even tax hikes of the magnitude I’ve described may not produce the desired level of revenue.

So it seems very clear that enactment of Obama’s ambitious spending plans (many of which I support) will require taxes to go up (now or later) much more broadly than either his $250k or top 5% pledge would seem to allow. An administration that prides itself on its openness and transparency would do well to acknowledge that inconvenient fact sooner rather than later.

My Take on the Speech

Despite my chosen profession, I have never been a fan of the State of the Union address. Although President Obama’s speech before Congress was technically not an SOTU address, it had all the trappings: a cabinet member abandoned in a secure location, a visitors’ gallery full of human interest stories, and an absurdly large number of standing ovations. Because I find most of these rituals silly and annoying, I generally must force myself to watch in the hopes of obtaining new insights about the president’s agenda and approach to governance.

My gamble paid off only partially tonight. It was clearly a well-written and delivered speech. The president did a very good job of highlighting his priorities. Some may argue that in the current economic crisis progress on health, education, and the environment is improbable in the short run. But he made a good case for linking these priorities to economic recovery. I am at least reassured that Obama did not deliver a Clintonesque laundry list chock full of v-chips and school uniforms.

But in many other regards the speech was disappointing. It was never more specific on policy matters than a campaign stump speech. If the markets crave more details on the bank recovery and housing plans, they will go to bed hungry. His proposals on health, education, and the environment did not break any new ground. About the only thing I learned is that he plans to repeat Clinton’s mistake of using a big multi-stakeholder commission to write the healthcare bill.

The speech was also politically incoherent at times. In discussing the bank recovery plan, he employed all of the populist tropes blaming the crisis on greedy, over-paid bankers. But then he turned to a full-throated defense of “trickle-down” bank recovery economics. It is hard to see how the populist rhetoric is going to help sell a policy of massive subsidies to the financial sector.

I was especially concerned with some of the president’s statements and rhetoric on trade. He has long struggled to reconcile his internationalist pro-trade sympathies with the more protectionist elements of his base. Given that congressional Democrats are pushing “Buy American” provisions and restrictions on Mexican truck drivers, I had hoped for a stronger assertion of the president’s commitment to trade. Instead I heard a lot of economic nationalism. What’s wrong with Korean batteries for plug-in hybrids? Why does there have to be an “American” automobile industry (as opposed to autos built in the U.S. by international firms)? He did commit to working with the G20 to fight the rising tide of protectionism, but I fear that he’s part of that wave.

Short Takes

  • Did anyone find Speaker Pelosi’s behavior and body language as bizarre as I did? The energetic bounding from her seat and exaggerated clapping upon each semi-colon made her look goofy. At times, Joe Biden seemed embarrassed. I wonder if she is on retainer from the Daily Show.
  • I know that politicians specialize in obtaining free media and getting face time with the big fish, but I was quite amused by the report that Elliot Engel (D-NY) obtained an aisle seat 12.5 hours before the speech started.
  • At the risk of “messing with Joe,” let me say that I am not comforted by the fact that compliance with the stimulus bill will fall to an inter-agency task force headed by the vice-president.
  • Didn’t Roland Burris seem like the loneliest guy in the room?
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The Transition Race

One of the truly distinctive features of American politics is the massive turnover of top officials following the inauguration of a new president. In no other advanced democracy is the personnel turnover associated with a transition of executive power as extensive.

Given the domestic, international, and economic challenges the country faces, the need for a quick and orderly transition is more imperative than in any time since perhaps 1932. But back then the federal government was smaller and the appointments process was far less contentious and politicized compared to now.

Given how crucial and challenging President Obama’s transition will be, I thought it might be interesting to track how quickly he fills key positions compared with his predecessor. To construct a rough gauge, I have collected information on the confirmation dates of department secretaries, deputy secretaries, and under secretaries (and the Justice Department equivalents) for the Obama and George W. Bush administrations. I’ve narrowed the list to positions that both presidents had to fill (thus ignoring positions that were created or eliminated between 2001 and 2009). This leaves me with a list of 64 positions. Obviously, this list has some limitations. First, it omits the White House staff. This is necessitated by the fact that each president organizes the White House in different ways so that I could not make position by position comparisons. Second, there are important positions in the departments that have titles other than deputy or undersecretary. Nevertheless, comparison across presidents for positions on the list is useful.

In aggregate, the record for Obama is slightly better. By February 20, 2001, Bush had filled 15 of the 64 positions by obtain Senate confirmation or keeping the incumbent from the Clinton administration (one undersecretary of Agriculture). Over the same period, President Obama had filled 17 of the positions. But the aggregate number is a little misleading, Obama filled three of the positions in the Department of Defense with Bush holdovers (Secretary Gates and two undersecretaries). And of course, Obama still has three cabinet openings. Health and Human Services and Commerce lack nominees, and Hilda Solis will not be confirmed at Labor until next week at the earliest. Conversely, Bush had his cabinet secretaries in place by January 29, 2001.

It probably is too early for any definitive assessment. During Bush’s first term, the bulk of the positions on my list were filled in May (24 of 64). So I’ll continue to track this and report back as interesting patterns emerge.

The Politics/Policy Firewall

One of the many things that the Bush White House was criticized for was the lack of a meaningful distinction between the policy apparatus and the political operation. Of course, this conflation was personified by the role that political advisor Karl Rove played in formulating Bush’s policy initiatives and priorities.

Despite assertions that the Obama White House would do a better job keeping politics and policy separate, David Axelrod seems to be reprising the Karl Rove role. First, it has been reported that Axelrod was intimately involved in the TARP II planning, strenuously arguing for tougher executive pay limits. Second, Axelrod has become a fixture on the Sunday morning talk shows. Granted such appearances would be absolutely appropriate to communicate the president’s policy decisions. But his appearances seem to indicate just how deeply involved he’s been in formulating those policies.

Of course, as a political scientist, I’m not naive enough to think that it possible (or even always desirable) to keep political and policy deliberations separate. But because there is always the temptation for the political considerations to overwhelm the policy ones, maintaining some wall of separation is important. Otherwise, every decision becomes politicized. I certainly hope that the Obama White House doesn’t repeat the mistakes of the Bush White House.

On the Virtues of Strategic Bipartisanship

President Obama has been roundly criticized for making such demonstrative efforts to woo Republican support and having his efforts rewarded with only three votes and a weaker stimulus plan. Although it would be hard to argue that his post-partisan strategy paid short term dividends, I believe that it was the right approach over the long run.

In evaluating the strategy, we have to compare it to some other approach. It seems that the only other option to compromising would have been to “play chicken” with the Republicans. He could have presented exactly the plan he wanted and dared them to filibuster it. The Republicans almost certainly would have done so and defended themselves with the argument that a left-wing president was trying to ram his agenda through Congress. So the net result may well have been a delayed stimulus package and possibly new doubts among centrist voters about the president’s ideological proclivities. Moreover, the president may well have had to compromise anyway to secure cloture.

So instead, I think the president took a very politically shrewd approach. He courted and wooed Republicans and conservative opinion makers. He pledged to work with them. He transformed much of the stimulus into the only policy instrument that Republicans believe in: tax cuts. Yet, 98% of the Republican in Congress voted against. So who looks like extremists now? It will be much harder for Republicans to run against Obama as a leftwing extremist and easier for him to run against them as unreconstructed Hooverites. Of course, the Republicans will still cry out that socialism is on the march, but I think it will work even less well than it did in November.

So is there any evidence that I’m right and Obama’s critics are wrong? I think the Clinton healthcare debacle shows exactly how the counterfactual would have played out. The Clintons decided to pursue what they viewed was the right policy and hoped to use the Democrat’s numerical majority to enact it without compromise. This approach made it easier for Republicans to attack the plan as complex, bureaucratic, socialized medicine. The failure of Clintoncare and the perception that Clinton’s policy views were outside the mainstream contributed to the Republican sweeps in the 1994 election.

Ironically, the Republicans are still playing by the old script. Only time will tell whether Obama’s bipartisan ad lib will change the storyline.

P.S. Tim Groseclose and I formalize a similar argument here (JSTOR access required).

Fastest Veto in History?

It was reported yesterday that President-elect Obama told a closed-door meeting of senators that he would veto any resolution to restrict the second TARP tranch of $350 billion. Because Congress has fifteen days from Monday to pass the resolution and the president has 10 days to veto it, any such showdown would occur no later than the president’s first two weeks in office. But because of the urgency involved, it could come as early as inauguration day.

That got me, the author of a recent paper on the history of the veto, wondering whether it would be the earliest veto in any president’s first term. As I suspected even before cracking the books, the current record holder is Gerald Ford who vetoed legislstion to “reclassify positions of deputy marshals” on day 4 of his adminstration. But, as they would say in track and field, that record is “wind-aided.” Similarly, Lyndon Johnson vetoed amendments to a tariff act on day 37. Among first term elected presidents, the mark is day 36 by U.S. Grant. This one also deserves an asterick because it was a pocket veto after one of the short March legislative sessions that were held prior to the constitutional amendment moving inauguration from March to January.

So I declare that the modern record is held by Obama’s idol FDR who vetoed amendments to the Federal Farm Loan Act after just 103 days. So Obama would absolutely smash this mark unless one side blinks (which alas I predict will be the case).

Here is how all the other presidents since 1900 stack up. The topics of some of the vetoed legislation are downright quaint.

President Entered Office First Veto Day in Office Topic
Bush II 1/20/2001 7/19/2006 2007 Restrictions on Stem Cell Funding
Clinton 1/20/1993 6/7/1993 139 FY 1995 Supplemental
Bush I 1/20/1989 7/1/1989 163 Export of technology for FS-X aircraft
Reagan 1/20/1981 11/23/1981 308 Continuing appropriation for FY 1982
Carter 1/20/1977 11/5/1977 290 Authorization for Energy Research Development Admin
Ford 8/9/1974 8/12/1974 4 Reclassify positions of deputy Marshals
Nixon 1/20/1969 1/26/1970 372 Labor/HEW Appropriations
Johnson 11/24/1963 12/30/1963 37 Amend Tariff Act of 1930
Kennedy 1/20/1961 5/26/1961 127 Relief of William Joseph Vincent
Eisenhower 1/20/1953 6/15/1953 147 Relief of Helmuth Wolf Gruhl
Truman 4/12/1945 7/17/1945 97 Amend Selective Training and Service Act
F. Roosevelt 3/4/1933 6/15/1933 104 Amend Federal Farm Loan Act
Hoover 3/4/1929 4/21/1930 414 Coin 50-cent pieces commemorating Gadsden Purchase
Coolidge 8/2/1923 5/3/1924 276 Omnibus pension bill
Harding 3/4/1921 12/20/1921 292 Codify, Amend, and Revise Laws related to Judiciary
Wilson 3/4/1913 10/22/1913 233 Reinstate Adolph Unger at West Point
Taft 3/4/1909 3/28/1910 390 Amend military record of Aaron Cornish
T. Roosevelt 9/14/1901 3/11/1902 179 Remove Desertion charge from John Glass
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Doesn’t He Also Need a Czar Czar?

President-elect Barack Obama is in the process of naming more czars than a Russian history text. He has named a climate czar, a performance czar, a bailout czar, and a Middle East policy czar. He has plans for a technology czar, a car czar, an urban policy czar, and the list keeps growing. Presidents appoint czars to coordinate different agencies working in similar areas and give symbolic importance to issues on the president’s agenda. While czars are often appointed with great promise and fanfare, they rarely live up to their promise.

One problem with czars is that they lack any formal authority. They do not control budgets, select personnel, or promulgate regulations. Rather, they have to ask other senior government officials to do those things. These other officials are often Senate-confirmed appointees with powerful patrons in Congress and national reputations. Senior presidential appointments have the legal authority to direct thousands of employees and set policy in their agencies. They rarely have to listen to anyone short of the president or key chairpersons in Congress. This was part of the reason why Congress and the president decided to create a new Department of Homeland Security in 2002 to replace the homeland security czar created by the president in the aftermath of 9/11.

The primary power of czars is their proximity to the president. Theoretically, these officials speak for the president and powerful government officials must come in line or suffer the wrath of the president. In practice, access to the president is scarce and czars without access are officials without power. A former Reagan Treasury Secretary once told a class I taught that he never had a conversation with the president about what Reagan wanted him to do as Treasury Secretary. If the Treasury Secretary cannot get access to the president, you can imagine how hard it will be for the performance czar or the technology czar. And, the more czars the president creates, the less power any one of them is likely to have.

Will Obama’s czars suffer this same fate? Even if they have consistent access to and support from the president, their very existence makes it hard to keep and motivate good people below them. Czars in the White House effectively make cabinet secretaries middle managers. It is hard for the president to get the captains of industry, academia, and government to serve and stay loyal the president’s program if they are repeatedly overruled by White House czars. These officials agree to serve because they want to have influence over important policies and problems. How long would Hillary Clinton serve if she had a “foreign policy czar” over her who held the real power? How hard would her team work if they repeatedly lost out in bureaucratic turf fights arbitrated by this czar? How long would they hold off making their grievances public? What is true in foreign policy is true in climate policy, government management, urban policy, and technology policy.

The president-elect has reportedly been reading through various histories in preparation for his tenure as president. He would do well to study the histories of past czars in consumer affairs, drug policy, or intelligence before creating any others. If he reads these histories so he might decide to limit the number of czars and write a more successful history for his own administration.

Editor’s Note: David Lewis, Professor of Political Science at Vanderbilt University, has generously accepted my invitation to be my first guest blogger.

The Cabinet

That Obama is set to nominate so many former legislators to his Cabinet and senior White House staff provides a rare opportunity for comparing the ideological make-up of the new administration to that of Congress.

With the nomination of Hilda Solis to be Labor Secretary and Ray LaHood to be Transportation Secretary, there will be six former House and Senate members in the cabinet (including Clinton, Daschle, Salazar, and Richardson). Throw in Obama himself, Joe Biden, and Rahm Emanuel, we have a pretty good sample of former legislators to compare to the current composition House and Senate Democratic caucuses.

To gauge the differences between the administration and Congressional democrats, I use Keith Poole’s “common space” measurement of conservatism. This measure is an adjustment of DW-NOMINATE scores designed to facilitate comparison of the House and Senate. Each legislator is given a single conservatism score for her entire career ranging from around -1 (very liberal) to 1 (very conservative). One drawback is that these scores are only available up through the 109th Congress (2005-2006). So I can only compare the cabinet to the Democratic caucuses of that term. Another is that Bill Richardson’s score more than a decade old (but the rest continued to serve through the 110th Congress).

The following table list the conservatism scores for the administration as well as the House and Senate leaders and the medians of the caucuses.

Pelosi -.455
Solis -.451
Clinton -.359
Obama -.343
House Democratic Median -.329
Biden -.326
Emanuel -.323
Senate Democratic Median -.316
Daschle -.278
Richardson -.255
Reid -.251
Salazar -.220
LaHood .265

The evidence is pretty strong that the administration lies considerably to the right of the Democrats in the House, but is reasonably representative of Senate Democrats. But only Solis comes from the most liberal wing of the party. The center of the party is well represented in powerful positions by the president, vice-president, secretary of state, and WH chief of staff while the lower cabinet is filled with more moderate Democrats and a Republican. No wonder Nancy Pelosi is worried about being triangulated.

Of course, maybe the table is misleading because it only includes cabinet-designates who served in Congress. Maybe liberals and progressives are better represented in the other positions. Doubtful. Gates is a Republican. Teachers unions were disappointed with Duncan. Geitner is a Robert Rubin/Larry Summers protégé. Napolitano and Vilsack are red state governors. Shinseki is a hero to the left, but probably not of the left. Donovan appears to be a centrist who worked in both the Clinton and Bloomberg administrations. Holder is a corporate lawyer. So think I that leaves Stephen Chu as the only remaining cabinet member with views consonant with the progressive wing of the Democratic party.

There has been a fair amount of grumbling just below the surface about how poorly progressives have fared. Rick Warren’s invitation didn’t help matters. It will be interesting to see how long Obama can keep the lid on it before it boils over.