seeking knowledge and laughter, putting a bullseye on inaccuracy


Why a Public Health Care Option?

One of the key sticking points in the health care reform debate is whether we need to have a public option, and if so, what rules will govern it. Some argue that a public option is absolutely necessary because they have ideological view that something as important as health care should not be run solely by profit-maximizing companies.

For those who do not share that belief, I just finished a convincing piece in The New Republic that explains why not all countries need a public option but that the history of the U.S. suggests we do - a short, pragmatic argument that I find rather convincing. I like this snippet, but it does not do justice to the full (but rather short) article.

In principle, effective government regulation can curb this behavior. In practice, insurers have demonstrated an uncanny ability to circumvent regulations. Just ask the senior citizens duped by deceptive marketing of Medicare supplemental insurance over the years, or the many working-age Americans who bought private insurance on their own and filed a claim, only to have their carriers rescind coverage retroactively after deciding there was some hidden preexisting condition in their distant medical histories.

TNR has featured a lot of health care commentary and coverage - the current issue (July 1, 2009) features a number of articles about health care reform that are interesting and recommended to those following this important issue. For those who are following it very closely, check out the Treatment, a new blog specifically about health care from TNR.

The Stock Market: What is it Good For?

Have you noticed when pundits try to read the market to gauge political opinion? For instance, some right-wingers claimed that the stock market's dive on Obama's inauguration represented Wall Street disapproving of his policies. Leave it to Jonathan Chait in The New Republic to debunk the Obama-killed-the-market myth with style.

After election day, the stock market dropped. After the stimulus bill was signed, the market tanked. It must have been because Wall Street hates progressive policies.

Sure, unless you realize that those events just might have been priced into the market already. Obama, in case you forgot, was considered a lock before Election Day. (On election eve, Intrade had given Obama a 92 percent chance of winning.) Likewise, the vote that made the stimulus bill a fait accompli took place several days before the bill's signing. The real market-driving news came even earlier, when Obama unveiled his plan. Contemporaneous reports on the market reaction-The New York Times, December 9: "WALL STREET SURGES ON STIMULUS HOPES"-dug up little evidence of fears about socialism.

Continuing with more humor:

It's true! "The Dow fell 332.13 points on inauguration day," noted Barnes, holding this up as evidence that "The market's view is that an Obamanomics-driven economy looks grim." I'm trying to figure out the operating theory here. One possibility is that, before January 20, investors thought Obama would get cold feet, or that maybe President Bush would surround the White House with tanks and stay forever. Alternatively, the markets did know Obama would assume the presidency that day, but got really depressed when it actually happened. Neither of these possibilities speak well of the stock market as a rational gauge of the country's economic future.

But this is the reason it is worth reading: educating people on what the market means! Much like the religion-pushing political right-wingers who cannot recite the Ten Commandments, most of the right-wing pundits who talk about the "market" have no understanding of economics.

Start interlude:

In a recent conversation, I was explaining my theory of why Reaganism and conservatives are so out of touch with reality. It goes something like this:

From the start of this country to the Great Depression, we suffered a difficult econonimc boom and bust cycle where every 10-15 years or so, a whole lot of banks would fail. Enter FDR and his supposedly socialist policies. American capitalism never had it so good. For 40-50 years, the economy hummed along with a whole bunch of regulation from the government.

During this time, an entire generation of people is raised in a time of relative abundance and market-driven prosperity. These people, by and large, have no understanding of the previous boom-and-bust cycles. They just see markets working pretty damn well and start to think about ways of getting the stupid and stodgy government out of the way.

They start repealing some laws in the late 70's and lo - Savings and Loans go boom. This could not have been a market failure, right? Markets don't fail! Markets haven't failed us in decades! Time to remove more regulation.

This is all paired with an unprecedented rise in right-wing media from loosening of the laws governing radio (the Fairness Doctrine), as well as increasing media consolidation and a rise of pundits (who talk a lot more than they think). With Reagan in power, conservative ideology on the march, conservatives increasingly rely on talking points rather than actual knowledge, theory, and research (remember, they created a whole lot of think tanks to create all this theory originally).

Turn to today - many of these people honestly believe the government cannot do anything right because they cannot name anything the government does well (regulating banks to prevent a massive recession is not something you can easily sum up, and even if you could, it would be boring).

End interlude.

Now that we know why most of the pundits have no freaking clue what the "market" is, Chait will explain what the stock market is:

The larger fallacy here is to assume that the stock market is a proxy for the entire economy. Many people realize that the stock market is an imperfect gauge. But it's not just an imperfect gauge of the economy-it doesn't even attempt to measure the economy. Stock prices represent the market's guess at the profitability of corporations. While that's related to the health of the overall economy, it's not the same thing, and sometimes the two diverge sharply. During the Bush administration, for instance, corporate profits soared while wages for most families flatlined.

One clear instance where Obama hurt the stock market came when Tim Geithner announced the administration's financial rescue plan. Stocks dropped that day. Was this a fair indictment of the plan? Or a reaction to the possibility that the government might wipe out shareholders? In other words, was the market drop a signal that Obama's plan was bad for the economy as a whole or just bad for bank stocks? The two propositions mean very different things.

Markets are great things, and when used appropriately can benefit everyone. On the other hand, without regulations, you get shitty markets. Witness Somalia.

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