Obama Downplays Health Care Law Implementation Fears

President Obama downplayed the risks involved in the rollout of his health care law at a press conference today. Asked by MSNBC's Chuck Todd why Sen. Max Baucus (D-MT) believes the implementation might be a "train wreck," Obama suggested that the majority of the law's installation had already been successfully carried out:

So there are a whole host of benefits that -- for the average American out there, for the 85 to 90 percent of Americans who already have health insurance, this thing's already happened, and their only impact is that their insurance is stronger, better, more secure than it was before. Full stop. That's it. Now they don't have to worry about anything else.

The implementation issues come in for those who don't have health insurance, maybe because they have a pre-existing condition and the only way they can get health insurance is to go out on the individual market and they're paying 50 percent or a hundred percent more than those of us who are lucky enough to have group plans.

The president did hedge his bets, somewhat, warning that setting up the law's state-level health insurance exchanges would be a "big complicated piece of business" and that dealing with Republicans in Congress and in state capitals "makes it harder." He also predicted future "glitches and bumps" along the way to full enactment of the law.

Yet overall his reassurances did not rise to the level of the the concerns that have been raised by Baucus and other Democrats about implementation. Baucus, in particular, in his "train wreck" comments was asking Health and Human Services Secretary Kathleen Sebelius about the public's lack of understanding of the law. Those fears are not going away. A Kaiser Family Foundation poll released just today indicates that 40 percent of Americans are not aware that the law is on the books.

Even more importantly, Democrats' and others' worries that the implementation might not go according to schedule or as planned are well founded. John Harwood sketched out some of the immediate challenges the administration faces in yesterday's New York Times:Among the complex imperatives: pushing reluctant states to set up insurance marketplaces and expand Medicaid programs, keeping an eye on insurance companies as they issue new rate schedules, measuring the law’s effects on small-business hiring, and coaxing healthy young people to buy coverage so the system works economically for everyone else.

Even if the administration is able to manage all of those complex tasks before Congressional Democrats face voters in 2014, Republicans will be watching to pick up on any signs of malfunction. The Washington Times reports that Utah senator Orrin Hatch, the ranking Republican on the Finance Committee, is monitoring proposed rate plans from across the country for any sign of spiraling insurance premiums. In Harwood's New York Times piece, conservative economist N. Gregory Mankiw indicates that the GOP will be on the lookout for evidence that the law discourages lower-income worker from working longer hours. And Republicans will also watch for corporations or state and local governments shifting workers on the exchanges.

The challenge of the health care law's implementation is a real one. Obama may be able to downplay the size of the task for now. But that won't be a viable strategy as 2014 draws nearer for Democrats in the House and Senate, the laws' deadlines approach, and news continues to trickle out about "glitches and bumps" in the process.

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White House Admits 2012 Was Costliest for Regulation

In a long-awaited report to Congress on the costs and benefits of federal regulation, the Office of Information and Regulatory Affairs (OIRA) conceded 2012 was the costliest year ever for red tape. With $19.5 billion in regulatory costs, 2012 topped the next highest cost year by 57 percent. But that’s only the tip of the iceberg. The report, which was well overdue, also failed to record costs of six “economically significant” regulations. AAF’s tally has last year’s regulatory cost at $215 billion – still a pure addition of administration data.The OIRA report, which is traditionally released with the president’s Budget, was even more overdue than that – more than a week late.  This is actually an improvement from earlier delays.  Its final report from last year wasn’t released until last week, and the Unified Agenda of federal regulations from last spring wasn’t released at all.

One can’t blame the administration for not wanting to release this report. The cost drivers behind the $19.5 billion figure are hardly surprising to those who follow the regulatory world, but staggering nevertheless. EPA and the Department of Transportation implemented $17.5 billion of the total, followed by the Department of Health and Human Services, at $1 billion, with ObamaCare rules driving that total.

The actual rules that contributed to last year’s red tape binge also received plenty of attention: new CAFE rules ($8.8 billion), Utility MACT or the Air Toxics Rule ($8.2 billion), and new school lunch standards ($500 million).  Although the report might be an interesting read for those craving details on federal regulation, what’s not in the report is perhaps more intriguing.

For example, the White House included only 14 rules in its quantified figures. According to White House records, there were 45 major final rules published during the covered period, and 3,827 rules published in the Federal Register – the definition of cherry picking.

To be fair, the practice of selectively picking rules is common for an administration seeking to hide the costs of a regulatory agenda. However, the omission of six regulations where the regulatory text itself admitted it was “economically significant,” the jargon for a measure that imposes a $100 million impact on the economy, is troubling.

These six regulations all conceded they were economically significant and they all impose costs of more than $115 million, easily above the $100 million threshold. Combined, the White House excluded more than $1 billion of final rule costs and more than $1.4 billion of proposed rules. 

Economically Significant Regulations Omitted from OIRA Report

For an administration that boasts transparency and “good government” principles, these omissions are troubling. It has become common practice to hide-the-ball on regulatory transparency. Last year, the American Bar Association even chastised the administration for failing to release its agenda of federal regulations on time. Shouldn’t businesses at least know when regulations are scheduled for release and how much they will cost?

In the end, the administration itself admits 2012 was the highest cost year ever for federal regulation, and that is with a mere one-third of one percent sample of all rules published. The reality is that costs were far higher.

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Study: Minority-Owned Banks Less Likely to Receive TARP Program Funds

Banks owned by African-Americans and other minorities may have suffered racial discrimination at the hands of the TARP bailout program, a new study finds.

The report, authored by Louisiana-Lafayette finance professor Linus Wilson and Stanford political science grad student Lucas Puente, finds that non-minority banks were approximately 10 times more likely to obtain funds than African-American owned banks, controlling for other factors. The researchers compared the 36 banks and thrifts that received of roughly $500 million in funds disbursed through the TARP’s Community Development Capital Initiative (CDCI) in 2010 and controlled for differences other than race to obtain their results.

Wilson, a frequent critic of TARP, emailed RealClearPolicy: “It is disappointing to learn that black owned banks were significantly less likely to get TARP funds. The TARP program is distasteful enough to most Americans without the program being tainted by the specter of racial discrimination.”

The authors suggest that the racial gap in CDCI investments might have been related to the then-ongoing controversy surrounding Maxine Waters, who was at the time the third-highest-ranking Democrat on the House Financial Services Committee. Waters’ husband owned stock in an African-American-owned bank that received funds from a different TARP program at Waters’ urging. Following the incident, Waters became the subject of a Congressional ethics inquiry. The charges were resolved in 2012 in her favor, although her grandson, who served as her chief of staff, was reprimanded for his role. Puente and Wilson speculate that the controversy surrounding the episode may have scared off African-American banks or Treasury officials.

The study also concludes that recipients of CDCI funds were more likely to have participated in the original TARP capital infusion program, but that political influence was likely not a factor in the loans made.  

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Obama Budget: Why $4.3 Trillion in Deficit Reduction?

President Obama’s just-released budget includes plans for a total of $1.8 trillion in deficit reduction, for a total of $4.3 trillion in such measures intended to lower deficits for his tenure. “That surpasses the goal of $4 trillion in deficit reduction that many economists believe will stabilize our finances,” Obama said in his weekly address on Saturday.

As the president’s budget is rolled out and discussed, it’s worth reviewing that $4 trillion goal. Why $4 trillion, and not some other number?

$4 trillion in a decade is the number the Simpson-Bowles deficit commission chose as its starting point. Although the bipartisan commission failed, its recommendations have served as a benchmark for both parties since.

It’s also the amount that would roughly stabilize the debt near its current levels in the 10-year budget window. As the left-of-center Center for Budget and Policy Priorities points out, that would take roughly $4 trillion in lowered spending or increased taxes. The fiscal cliff tax hikes and sequester leave the government just $1.4 trillion away from that goal (Obama’s budget includes measures to replace the $1.2 trillion sequester with other policy savings and add on another $600 billion of other deficit reduction measures):

The idea behind the Obama budget’s $1.8 deficit reduction goal, then, is that, if everything goes as planned, the public debt would be not much higher than it is now, at 73 percent of Gross Domestic Product.

Of course, there are any number of reasons to think that not everything will go as planned, and that the federal government faces a severe financing problem beyond the 10-year window.

But setting aside questions about the assumptions undergirding the president’s budget, it’s worth asking why 75 percent of GDP is the goal debt level, other than that it’s about where happen to be right now.

Ethan Pollack of the Economic Policy Institute, for example, has suggested that the debt could just as easily be stabilized at 85 percent of GDP later in the decade, allowing for more stimulus now (although Pollack doesn’t address the longer-term debt problem in his argument). It’s not clear what the difference between 75 and 85 percent would be for the purposes of current planning. It’s also worth mentioning that Japan, a nation that’s followed a fiscal and economic trajectory in many ways similar to the one the U.S. is on, currently maintains a debt level above 200 percent of GDP, and hasn’t yet faced a fiscal crisis.

On the other hand, the fiscal hawks at the Committee for a Responsible Federal Budget think that Obama’s aiming for only have the amount of spending cuts and tax hikes the country needs. In a recent report, the CFRB suggested that the while the level of debt Obama’s aiming for “may not be a disaster, it would still amount to nearly twice our historical average and well above the international standard of 60 percent.”

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The Suburbs vs. School Reform

(Image via the White House Flickr feed)

If education policy is a war between reformers and teachers unions, the reformers seem to be winning. Under Education Secretary Arne Duncan, the Obama administration has steadily expanded accountability measures and boosted charter schools, making Duncan a foe of teachers unions. It’s not just Democrats, however, who have reason to celebrate. GOP reformers in red states such as Indiana and Louisiana are experimenting school choice measures, such as vouchers and education savings accounts, that threaten to undercut the unions’ position.

Yet the K-12 landscape is more rugged than meets the eye. As the education analyst Lewis Andrews has argued, teachers unions are far from the only ones resistant to change. An underappreciated feature of the American school system – and all of American politics – is that suburban families can be the greatest obstacle to change in the system. And while the teachers unions have seen their power chipped away during the Obama years, the submerged coalition of middle- and upper-middle-class families has removed all threats.

The Obama administration has aggressively pursued incremental changes to the way schools across the country work with whatever means available to it – most notably, the $4.35 billion Race to the Top slush fund created by the stimulus. At the same time, however, it has drastically reduced the impact of the Bush-era No Child Left Behind Act on suburban schools in what RiShawn Biddle, the editor of education news magazine Dropout Nation and a friend of RealClearPolicy, calls the Obama “waiver gambit.” For the 34 states and the districts that have submitted to the administration’s conditions for students’ college readiness, the administration has granted waivers to those states to ignore the Adequate Yearly Progress requirements of No Child for all but the bottom 5 percent of schools. In other words, suburban schools have evaded the most onerous requirements of No Child.

Meanwhile, as successful as conservative reformers have been in advancing a fairly ambitious school choice agenda, it’s clear that their efforts to enact school choice will not extend to middle class families. Most school voucher programs are geared toward benefitting students attending failing urban schools. Indiana’s voucher program, the nation’s most expansive, only serves children eligible to receive federal aid for school lunches; Louisiana’s choice program extends vouchers only to lower middle class families. Other forms of school choice have not been fared so well with suburban families. Charter schools, which have become the education providers of choice in cities such as New Orleans and Detroit, have made few inroads into the suburbs. Public school choice programs, which allow for urban students to attend suburban schools, are even more hotly contested. A plan proposed by Michigan Gov. Rick Snyder in 2011 to expand the state’s public school choice program, which allows urban students to attend suburban schools, died in the legislature.

Scratch the surface, and it’s obvious that families in suburban districts will hold out against change longer than the teachers unions will, and likely longer than would-be reformers will too. They’re motivated by the most powerful of kitchen table issues, one that is tangled up in childrearing, real estate, race, and crime.

That’s not to say their kids’ schools don’t need reform. Far from it. Schools that are in the middle of the pack in America lag those of other nations with advanced economies. Furthermore, our suburban school districts are in many cases failing to provide quality education to poor and minority students. There is no reason for upper-middle-class America to feel good about its schools, except for that they’re not as bad as their inner-city neighbors.

Michael Petrilli, an official in the Bush Department of Education, wrote in a 2005 New York Times that “despite all the talk about improving inner-city schools, the greatest promise of the No Child Left Behind Act was always in America's leafy suburbs.” Eight years later, Petrilli, having moved to a wealthy and snow-white school district for his own kids’ school years himself, has concluded that the political costs of bringing change to the suburbs are too high.

There is probably no changing this state of affairs. The chastened Petrilli suggests a system of limited integration, including setting aside a portion of seats in good schools for poor children from neighboring areas. Left-of-center reformers, such as Richard Kahlenberg of the Century Foundation, have proposed alternative ideas for socioeconomic integration. Biddle, on the other hand, argues that reformers should work more closely with the growing number of minorities in suburbia, who have found that the schools their kids now attend are often little better than the urban schools they fled.

But the modesty of these proposals attests to the power of suburban parents in U.S. politics. “You need political will to do this,” Petrilli says of his own plan. The lessons of the ‘70s busing episodes have probably been too well learned for any officeholder to muster that political will.

The top priority in the U.S. education system today is undoubtedly turning around the dropout factories that are failing our cities. But as momentum builds to force those schools to change, it’s worth noting that in American politics, some things never do.

Update: This article has been edited for clarity.

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Why Young Folks Aren't As Wealthy As Their Parents Were

A recent Urban Institute study mulled over the implications of the fact that today's under-40s have less wealth than their parents' generation did at the same age. It appears that the story can be boiled down to two factors.

The first cause of the drop in wealth for younger Americans is that most people buy their first home sometime in their early 30s. Of course, the timing wasn't going for the cohort of 30-somethings who bought their first house in the mid-2000s:

And this comes after they'd racked up unprecedented levels of student debt in their 20s:

The Urban Institute folks reach the same conclusion as Allison Schrager did: policy needs to be shifted to make non-retirement saving easier for young Americans.

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Are Americans Saving Enough?

The Economist's Allison Schrager notes that trend that might be of concern: Americans are saving less:

And the savings that Americans do have are mostly tied up in retirement savings (her data is from the Survey of Consumer Finance):

So savings are down overall, and funds set aside for short-term needs and rainy days are down even more.

That Americans are saving less isn't self-evidently problematic. But the fact that savings increased dramatically when bad times hit around 2007 suggests that in aggregate people didn't have enough saved up. Schrager goes into some of the possible policy-driven explanations for why Americans are undersaving. It's worth considering if there are ways to encourage precautionary saving -- or obstacles to doing so that could be removed.

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Saudi America?

AEI's chartmaker extraordinaire Mark Perry has come up with a picture worth 1,000 words:

Perry writes: "...for the second month in a row, “Saudi America” took the top spot in December as the No. 1 petroleum producer in the world."

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