Sunday, June 21, 2009

The Costs of Health Care Reform, Stimulus Update, Some Historical Perspective

The Cost of Health Care Reform
It struck me as I was listening to some of the debate on the Sunday morning talk shows this morning, that we have lost all perspective in the health care discussion. Here are some facts to form the basis for an informed discussion. Where spending numbers are cited, they are based on CBO estimates.

(1) The federal government approximately $1 trillion per year on health care, excluding the costs of health insurance for federal employees. This is comprised of $700 billion in Medicare and Medicaid spending, $250 billion for tax preferences and subsidies for health insurance and $50 billion in veterans care and other miscellaneous health care initiatives.

(2) The leading proposed health care reform proposal, Senator Kennedy's (D-MA) bill, is estimated to cost $100 billion per year. You have probably heard a $1 trillion price tag, but this is over 10 years (1 trillion divided by ten is 100 billion.)

(3) The war in Iraq is estimated to have cost over $1 trillion over the course of 6 years.

(4) The economic stimulus package will cost an estimated $787 billion over the course of less than 3 years.

(5) The federal deficit this year is estimated at $1.8 trillion.

(6) The Kennedy bill is estimated to cut the number of uninsured in this country by 15 million, solving less than a third of the overall problem.

So, let's analyze. Health care reform as proposed, will be cheaper on an annual basis than the Iraq war. It will be about one third the size of the economic stimulus package. If totally unfunded, it would add about 6% to the deficit. It would represent about a 10% increase in total government health care spending.

Frankly, folks, the cost and scope of this thing is overblown. We are not having a real debate on a Canadian or British-style single-payer system. We are debating about nibbling at the edges with a proposed government-backed insurance alternative.

If the Democrats in Congress can't get this meager piece of reform done, they deserve to be voted out in 2010. Right now, they do not appear to have the votes. We'll see how the debate unfolds. Even former President George W. Bush got prescription drug benefits done.

Incidentally, here is some food for thought. In the history of publicly funded health care (approximately the past 100 years), no country that has gone to a government-run system has ever gone back. That means that EVERY country that has passed universal health care has found, over time, that it is superior to a free-market system. Just some food for thought.

Stimulus Update
The latest figures:
Authorized: $147.2 billion (29.5% complete) -- up $6.2 billion from last week
Spent: $48.9 billion (9.8% complete) -- up $2.5 billion from last week

Money continues to flow, although the trend continues to be that it is getting authorized a lot faster than it is getting spent. Traditional infrastructure spending, such as roads, bridge, etc., the so-called "shovel-ready" projects have lagged, with only $217 million spent by the Department of Transportation so far, despite $17.5 billion being authorized.

The pace will have to pick up to have quell rising unemployment. It is interesting to note, however, that for the first time since the recession began, last week the number of people receiving unemployment benefits actually declined modestly. This could foretell a drop in the unemployment rate, or it could just mean that a lot of people are having their benefits expire. We'll see when the June figures are published.

Historical Perspective
Since I publish frequent updates on President Obama's popularity, it's time again to put that approval rating in some perspective. We are well out of the much-lauded "first 100 days", so let's see how President Obama stacks up against some recent occupants of the White House in terms of approval. As we don't have the benefit of the same sample-weighted average poll of polls for previous President's that we have for President Obama, we will rely on Gallup data for comparison, as Gallup has had a tracking poll for every Post-World War 2 President. At comparable points in their Presidencies, the other Post-World War 2 Presidents stacked up this way:

Harry Truman: 65% Approval
Dwight Eisenhower: 70% Approval
John Kennedy: 72% Approval
Lyndon Johnson: 74% Approval
Richard Nixon: 60% Approval
Gearld Ford: 51% Approval
Jimmy Carter: 62% Approval
Ronald Reagan: 58% Approval
George H.W. Bush: 60% Approval
Bill Clinton: 44% Approval
George W. Bush: 55% Approval
Barack Obama: 58% Approval

You can see, in the Post-Nixon era, average approvals have declined a lot more quickly. The average for Truman through Nixon is 68% at this point in their terms, Ford through Obama, the average is 55%. This likely reflects the increased public scrutiny of public officials in the post-Watergate era and, more recently, the rise of 24/7 media.

So, President Obama is tracking behind all the Presidents through Nixon at this point in his term. Versus the post-Nixon Presidents, he is ahead of Ford, Clinton and W. Bush, even with Reagan and behind H.W. Bush and Carter. Of course, Clinton and W. Bush were re-elected and H.W. Bush and Carter were not. In fact, the average for those re-elected Post-Nixon is 52%, whereas those who were not re-elected is 58%.

So do these numbers actually tell us anything at this point?

All things being equal, obviously if I were President I'd rather be popular than unpopular, but it just shows that a heck of a lot can happen in three and a half years. Here are the things to watch out for in the trending. Let's look at what happened to the President's who won and lost re-election after this point:

The Winners
Ronald Reagan -- continued to decline, all the way to a 39% trough in early 1983 as the recession deepened and the GOP suffered huge losses in congress in 1982. Then, slowly ascended to 60% by the 1984 election.
Bill Clinton -- was on an uptick and broke back above 50% in early 1994, then declined again to 40% in late 1994 and suffering massive congerssional losses that year. He then began a slow rise to 57% by election-time in 2006.
George W. Bush -- stayed in a narrow channel in the mid-50s until September 11th, when his popularity spiked to over 90%, which helped to lead to unusal GOP gains in the 2002 mid-terms. It then began slow, steady decline, but was still at 53% in the 2004 elections.

The Losers
Jimmy Carter -- saw a slow, steady decline all they way to 30% in late 1979. He then saw a brief bump to above 50%, but was back to the low 30s come election day in 1980.
George H.W. Bush -- approval spiked up to near 90% by early 1991 as Operation Desert Storm kicked into full gear. Then saw a steady decline to the high 30s by election date as the recession took hold. Ironically, rose to above 50% approval after the election as economic conditions started to improve.

So what can we glean from this? Approvals at this point in a presidency probably say a lot more about how the mid-term congressional elections will go than how the next presidential race will shape up. Second, major events, particularly in foreign policy, can cause dramatic changes in Presidential approval. Finally, President Obama is slightly, but not dramatically above the mid-point for post-Nixon Presidents. He has certainly been among the most active in his early administration, partly due to circumstances, partly due to Democratic congressional control and partly due to his own tendencies towards a shift from Bush administration policies.

Next time, I'll take a look at macro-political trends to answer the question, in context, as to how much trouble the GOP is in. A good place to start is to compare this GOP to the post-Watergate GOP and draw comparisons.

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