Oprah vs Paul Krugman

This title isn’t to imply that Oprah and Paul are fighting. However, Oprah has started to campaign for Barack Obama in Iowa.

“For the very first time in my life I feel compelled to stand up and speak out for the man who I believe has a new vision for America,” Ms Winfrey told the crowd.

While Paul Krugman has been challenging Barack Obama’s position on the urgency of the Social Security “crisis” and has two columns on the Obama’s health care plan its lack of mandated coverage, 1st column and 2nd column.

Now Oprah carries a lot more influence in America than Paul Krugman, so her support will probably be more helpful than his criticism. However, for me Paul’s criticism deserve a serious look. And so lets look at them.

Social Security

Krugman opens his column with a nasty title, Played for a Sucker. That is got to hurt when you are running for president. So why does Krugman open with such a tough title, well the first is this recent analysis [emphasis added]:

As Peter Orszag, the director of the Congressional Budget Office, put it in a recent article co-authored with senior analyst Philip Ellis: “The long-term fiscal condition of the United States has been largely misdiagnosed. Despite all the attention paid to demographic challenges, such as the coming retirement of the baby-boom generation, our country’s financial health will in fact be determined primarily by the growth rate of per capita health care costs.”

Now if you want to watch an interesting interview on Social Security with Fred Thompson who is credited by inside the beltway pundits as being “serious” on the “crisis” then check out this you tube clip between 2:00 to 6:20.

  • At 3:50 Fred starts putting Medicare with Social Security and George Stephanopoulus calls him on putting the two together as the fiscal crisis (remember above health care costs is the real problem).
  • They also discuss differences with Obama’s plan.
  • Note that Thompson mentions support of his plan by Investors Daily Business, and yes I do think they would benefit from partial privatization of Social Security, which means they have a vested interest in pushing the manufactured crisis.
  • Also in this clip, is Hilary Clinton pointing out Medicare is a bigger problem which is what the experts say.

This is what Krugman had to say about inside the beltway pundits on Social Security

Inside the Beltway, doomsaying about Social Security — declaring that the program as we know it can’t survive the onslaught of retiring baby boomers — is regarded as a sort of badge of seriousness, a way of showing how statesmanlike and tough-minded you are.

Krugman goes on to talk about those who understand the numbers, not just the pundit class.

But the “everyone” who knows that Social Security is doomed doesn’t include anyone who actually understands the numbers. In fact, the whole Beltway obsession with the fiscal burden of an aging population is misguided.

The problem is the Social Security is solvent until 2041 or 2046 depending on if you ask the Trustees or the Congressional Budget Office (CBO), until that time it will not need to reduce benefits or increase payroll taxes to fully fund the promised benefits. If nothing is done, the benefits will be able to pay out 79% of the promised benefits after the trust fund is used up.
Of course the unsaid problem by the media or politicians is that the Social Security Trust Fund (SSTF) is the fund that the federal government borrows from to hide the true size of the federal deficit. See right now the federal government collects more in payroll taxes then it pays out in social security benefits. According to the CBO [emphasis added]:

Beginning in 2019, annual outlays for Social Security are projected to exceed revenues. At that time, the Social Security system will no longer, on net, offset a portion of the deficit in the rest of the budget but instead will increase the total deficit (or reduce the total surplus, if one materializes).

Now the easiest way to deal with this issue in 2019 is to raise taxes, not payroll, but income, capital gains, corporate, and estate taxes. That is raise taxes to pay the debt owed to the trust fund. Of course if you believe that our government looks out for the interests of the wealthy and corporations, more than the average person, you could see why they see this as a “crisis” that must be solved to prevent or delay the pressures to raise taxes in 2019.

Now if you really want to brush up on Social Security, then go to this link of Dean Baker’s blogs on Social Security media coverage and plans by politicians.

So for Social Security, the CBO expects that payroll taxes can fully pay the benefits without having to touch the trust fund until 2019. After that point, unless federal government defaults on its debt, it will still be able to pay the benefits until 2046 (uncertainty by the CBO ranges it from 2035 to 2074). I agree with Krugman, where is the urgency?

Health Care

Now I had the chance to hear Paul Krugman on tour to promote his new book Conscience of a Liberal, and one of the audience members asked him about his support of the Edwards and Clinton plans, as opposed to single payer. Basically his answer is that the Edwards (it came first so I credit him, and Clinton’s mimics it) plan is politically feasible in the next presidency, he thinks implementation by 2011 is possible, and would eventually lead to single payer. If you have the time, Krugman has a great 18 page analysis of health care in the New York Review of Books.

According to Krugman, the weakness of the Obama plan is that it doesn’t mandate insurance, but that isn’t the biggest problem according to Krugman.

Now, however, Mr. Obama is claiming that his plan’s weakness is actually a strength. What’s more, he’s doing the same thing in the health care debate he did when claiming that Social Security faces a “crisis” — attacking his rivals by echoing right-wing talking points.

Now the point of universal health care, is sharing the risk by spreading it as widely as possible. This means that the healthy (healthy right now) and those with health issues pay a lower rate. One of the most perverse parts of our current system is the denial of coverage based pre-existing conditions. It is language that allows insurers to deny coverage to the less healthy. In fact two hospitals in New York filed a racketeering lawsuit against United Health Group and some of its affiliates, as Krugman reported in his column Health Care Racket.

Of course, rejecting claims is a clumsy way to deny coverage. The best way for an insurer to avoid paying medical bills is to avoid selling insurance to people who really need it. An insurance company can accomplish this in two ways, through marketing that targets the healthy, and through underwriting: rejecting the sick or charging them higher premiums.

But without mandates, you will have people that will take advantage of the system.

Look, the point of a mandate isn’t to dictate how people should live their lives — it’s to prevent some people from gaming the system. Under the Obama plan, healthy people could choose not to buy insurance, then sign up for it if they developed health problems later. This would lead to higher premiums for everyone else. It would reward the irresponsible, while punishing those who did the right thing and bought insurance while they were healthy.

So when Krugman calls Obama’s plan weaker, he is right, because it is inviting people to abuse the system. Apparently Obama is also talking about families that can’t afford the cost of coverage, but Edwards and Clinton (and Romney in MA) subsidize the coverage.

The second false claim is that people won’t be able to afford the insurance they’re required to have — a claim usually supported with data about how expensive insurance is. But all the Democratic plans include subsidies to lower-income families to help them pay for insurance, plus a promise to increase the subsidies if they prove insufficient.

In fact, the Edwards and Clinton plans contain more money for such subsidies than the Obama plan. If low-income families find insurance unaffordable under these plans, they’ll find it even less affordable under the Obama plan.

By the way, the limitations of the Massachusetts plan to cover all the state’s uninsured — which is actually doing much better than most reports suggest — come not from the difficulty of enforcing mandates, but from the fact that the state hasn’t yet allocated enough money for subsidies.

And subsidizing the coverage, not just providing tax credits like Giuliani has suggested, which Romney rightfully challenged him, is of no help at all to low income families.

Now if you want to know what Krugman’s biggest beef with Obama, then this makes it the clearest.

O.K., before I go any further, let’s be clear: there is a huge divide between Republicans and Democrats on health care, and the Obama plan — although weaker than the Edwards or Clinton plans — is very much on the Democratic side of that divide.

But lately Mr. Obama has been stressing his differences with his rivals by attacking their plans from the right — which means that he has been giving credence to false talking points that will be used against any Democratic health care plan a couple of years from now.

Basically Obama is lending credibility to right wing talking points to maintain the status quo, or hinders the superior plans of Edwards and Clinton. In fact Krugman ran into this problem (on Social Security) recently on conservative talk radio, as he reported in his blog.

So I just spent a fairly unpleasant 15 minutes on right-wing talk radio. And the host said — this is rough, not a verified quote — “Look, everyone knows that Social Security is going bust, and we’d all be better off if we could put out money in 401(k)s. Even Barack Obama says so!”

Summary

As I opened this piece, the criticism of Paul Krugman are not going to carry as much weight with the general populace as Oprah’s support. It is part of the celebrity worship in society, and it is part of the media’s electoral coverage focusing on horse races, not detailed policy issues.

There is a lot of partisanship in politics and they have been used to roll back the social welfare state as far as possible. Obama’s more cautious plan for health care, in seeking bi-partisanship, or at least to fend off the most vicious attacks from the right wing echo chamber, has caused him to attack the more progressive Edwards and Clinton plans and to attack those plans with the right wing talking points. This will hurt efforts to reclaim the language, to frame the debate and move forward on policies that really can help the most people. Of course, I fear that these criticisms will not cause him to move to the superior Edwards and Clinton plans, at least not until after the election (if he is the nominee) to avoid the flip-flop label.

As an Edwards supporter, it gives me some comfort knowing that Clinton’s plan basically mimics Edwards’, and that she understands Medicaid and Medicare are a much bigger issue than Social Security for our country’s long term fiscal health.

-Josh

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