The last squawk of the deficit hawks

Steven Rattner has a column in the New York Times bemoaning the supposed fiscal profligacy of the rising Democratic 2020 agenda, including ambitious programs like Medicare for All, free college, and the Green New Deal. It’s a retread of the deficit hysteria from the early 2010s that bound the Obama administration’s post-recession agenda in a self-imposed straightjacket. Progressives should not put on that jacket again.

Rattner, a Wall Street financier who led President Obama’s auto industry task force, criticizes what he calls “a convenient bit of progressive dogma: Don’t worry about the fiscal impact because America’s rising budget deficits and debt levels don’t much matter.” (That’s a reference to Modern Monetary Theory, a heterodox school of economic thought gaining traction in some circles on the left by attempting to decouple taxation from government spending.) Rattner calls MMT-inflected deficit arguments a “scary drift of thought” that “should set off alarm bells for all Americans” because “[v]ast increases in debt will ultimately compromise Washington’s ability to maintain its current array of spending programs, let alone add new ones, and threaten our standard of living.”

Rattner is right that progressives are feeling increasingly uninhibited when it comes to proposing deficit-financed programs. That’s a good thing, and it’s the confluence of several factors.

The first is a rising hard-nosed progressive attitude that wants to level the political playing field by fighting like Republicans would on a variety of fronts. Republicans have repeatedly engaged in the bait-and-switch of complaining about deficit spending when Democrats are in office and then throwing fiscal hawkery out the window while in power to pass gargantuan debt-financed tax cuts. Take the transformation of White House Chief of Staff Mick Mulvaney, one of the most hysterical deficit-phobes during the Obama years, who recently admitted that deficit reduction would not make an appearance in Trump’s State of the Union address because “nobody cares” about it. Republicans have repeatedly pulled this bait-and-switch over the years, and Democrats are rightly determined to stop falling for it.

There’s also some strategic calculation behind the Democrats’ willingness to propose big new policies without a plan for generating corresponding new revenue: they’ve determined that their policies stand a better chance of advancing without being shackled to unpopular funding streams. For example, Senator Brian Schatz proposed a big debt-free public college program last year. He told Vox: “I don’t play the pay-for game. I reject the pay-for game. After the Republicans did the $1.5 trillion in unpaid-for tax cuts, . . . I just reject the idea that only progressive ideas have to be paid for. We can work on that as we go through the process, but I think it’s a trap.” Schatz and other Democrats have strategically opted to leave the pay-for details of their policies TBD so that they aren’t targets for withering attack from the very start.

There is another game Democrats can play, however. Rattner warns that “progressives argue that certain kinds of spending are, in reality, investments that will bring large dividends in the future. With interest rates still near historic lows, they contend that the returns from borrowing for these investments would greatly exceed interest costs.” It’s the progressive equivalent of the conservative argument that tax cuts will pay for themselves. Progressives can (and in my opinion, should) argue that current spending on education, income security, and other priorities will pay dividends over time, covering their own costs by raising incomes, standards of living, and future tax revenue. That’s especially true for health care reforms and spending in green energy and infrastructure: dealing with the fallout of our health care and climate crises on the backend will be far, far more costly than preempting those crises today.

There is historic precedent that progressives can point toward: the post-World War II G.I. Bill. Here’s historian Jill Lepore in her magnificent These Truths: A History of the United States:

[The G.I. Bill] created a veterans-only welfare state. [It] extended to the sixteen million Americans who served in the war a series of benefits, including a free, four-year college education, zero-down-payment low-interest loans for homes and businesses, and a “readjustment benefit” of twenty dollars a week for up to fifty-two weeks, to allow returning veterans to find work. More than half of eligible veterans–some eight million Americans–took advantage of the G.I. Bill’s educational benefits. Those who did enjoyed average earnings of $10,000-$15,000 more than those who didn’t. They also paid more in taxes. By 1948, the cost of the G.I. Bill constituted 15 percent of the federal budget. But, with rising tax revenues, the G.I. Bill paid for itself almost ten times over.

So the G.I. Bill added a massive new set of welfare benefits onto the federal budget, funding free education, subsidies for housing and entrepreneurship, and a time-bound basic income guarantee for millions of Americans. It seized upon the unwinding war mobilization to reshape the American economy by creating a broad new middle class. And by opening the doors to the middle class, the G.I. Bill produced more middle-income households, which led to higher tax revenue in the long run, paying for itself, and then some.

Many consider the G.I. Bill to be one of our country’s crowning legislative achievements. Indeed, our modern conception of middle-class America would not exist without it (both for good and for ill, given its virtual exclusion of African American service-members). Perhaps it’s time for progressives to emulate the bill’s achievements to restore the middle-class after four decades of erosion.

For Rattner, the problem appears to run deeper than merely how to finance a twenty-first century version of the G.I. Bill’s achievements. “It’s like a couple in their 40s deciding to borrow money to sustain a lavish lifestyle and then leaving the debts for their kids to pay off after they’re gone,” he writes. Analogizing federal spending to household budgets notoriously tilts the debate toward austerity. But comparing programs to reduce income inequality, guarantee universal health care, and combat climate change to a “lavish lifestyle” completely misses the base, to say the least.

The last decade of policymaking has disabused progressives of their terror of debt politics. There is no constituency for tough-choices austerity. In 2019, sniping at the progressive agenda over missing pay-fors sounds a lot like the last squawk of the deficit hawks.

Medicare for All meets health reform physics

Kamala Harris came face to face with the physics that have governed American health care politics for nearly thirty years.

Harris, a Democratic contender for the 2020 presidential nomination, is a co-sponsor of Senator Bernie Sanders’s Medicare for All bill. That bill would enroll all Americans in a single government-run insurance plan, abolishing private health insurance in the process. During a CNN town hall in Des Moines, Iowa, on Monday, Jake Tapper asked Harris if her plan would eliminate private health insurance. Harris answered unequivocally, “Let’s eliminate all of that. Let’s move on.”

The right pounced. The Republican National Committee said that Harris wants to “wants to eliminate private insurance even if you like your plan.” Conservative policy writer Philip Klein said Harris was “gambl[ing] that kicking 177 million people off of their private insurance is good politics.” Even coffee mogul Howard Schultz pounced, adding Harris’s health care plan to the growing list of things he has declared “un-American” during his fledgling pre-presidential campaign.

Of course, it’s a literal truism that Medicare for All would involve moving all Americans off of their current insurance plans and on to Medicare. But it’s also a somewhat disingenuous attack. Most people only have any particular attachment to their insurance plan because it unlocks access to a particular set of providers and benefits. They have loyalty to their physicians and hospitals, not to Aetna or UnitedHealth. Medicare for All might become the only game in town for insurance, but it would  give everyone absolute choice of health care provider by getting rid of the networks that today limit which doctors and hospitals you can visit.

The best case for Medicare for All is that it would be liberating, providing truly universal access to health care, good anywhere for any physician you’d like to see. As Sanders colorfully explained, under Medicare for All, “You go to any damn doctor you want to go to. What’s going to change is the wording on the card that you have.” Harris too made this case on CNN, saying, “The idea is that everybody gets access to medical care,” she explained. “You don’t have to go through the process of going through an insurance company, having them give you approval, going through the paperwork, all of the delay that may require.”

But maybe that case isn’t enough to overcome the profound loss aversion people feel thanks to the health care status quo. Because our current private insurance plans all come with limited provider networks, changing plans right now really does threaten to throw a monkey wrench in your health care treatment by cutting your doctors out of your new network. It would be a tragic irony if the health insecurity of our current ramshackle system turns replacing that system into an inescapable catch-22.   

But that’s the tightrope that several generations of progressive health reformers have walked: attempting to create a more sensible and universal health care system while inflicting as little disruption as possible on the already insured. Tumbling across that trip wire is what burned Bill Clinton’s health reform attempt in the early 1990s. The trauma of that failure is what led Barack Obama to over-promise: “If you like your plan, you can keep it.”

Current polling bears this out still. The topline popular support for Medicare for All quickly collapses when people are told that it would eliminate private insurance coverage. But what large majorities — to the tune of 70 percent of the country — do support Medicare for More: giving people the voluntary choice to opt into a Medicare-type public insurance program.

That might be a best-of-both-worlds approach. Progressives could take solace in having a strong public option to serve as default fallback health coverage for everyone, while those who like their current plans can keep them. Not to mention, in many other countries with “single payer” systems, private insurers still play an active role.

The Medicare for More public option seems to be the real health care plank among most of the Democrats’ 2020 field. After her town hall backlash, Harris noted that she has co-sponsored a number of bills providing public options through Medicare or Medicaid. So too have many other prospective Democratic candidates. Elizabeth Warren summed it up well when asked about her vision for American health care: “I’ve signed onto Medicare for All. I’ve signed onto another [bill] that gives an option for buying into Medicaid. There are different ways we can get there. But they key has to be always keep the center of the bulls eye in mind. And that is affordable health care for every American.”

So what role is Medicare for All playing in the progressive health care debate? Is it a serious proposal for an immediate social democratic revolution? Is it a long-term aspiration? A wistful ideal for a tabula rasa state? A way of meeting a perceived progressive litmus test in a crowded primary?

Or maybe it’s just marking out the left flank of the Overton Window. That’s what Bonnie Castillo, the executive director of National Nurses United, seemed to suggest when she criticized watered down versions of Medicare for All. “Don’t start bargaining with yourself and undermine yourself,” she told Politico. “The opposition, the insurance companies and pharma, they will come out against anything, whether it’s a half-measure or even a one-quarter measure. That’s why we have to aim high.”

Maybe Medicare for All will prove to be a useful negotiating tactic. But you can’t wish away loss aversion among the insured, or the elimination of millions of jobs for people employed in the health insurance industry and medical billing. The physics of American health care politics persist, like it or not. Kamala Harris was just the latest to learn that the hard way.