“And Here We Go Again”: Republicans Are Really, Really Bad At Hostage Negotiations
For some time, I’ve been arguing that we should not just extend the debt ceiling but get rid of it altogether. It’s a weird historical anomaly that serves no practical purpose other than allowing the opposition party, should it be sufficiently reckless, to threaten global economic catastrophe if it doesn’t get its way. I assumed that your average Washington Democrat would share this view, but now I’m beginning to think that if you’re someone like Nancy Pelosi or Barack Obama, the debt ceiling is actually quite helpful, and you’d be sorry to see it go.
Because here’s what keeps happening: The debt ceiling approaches. Republicans begin making threats to torpedo the country’s economy by not raising it, and thereby sending the United States government into default, if their demands aren’t met. We then have a couple of weeks of debate, disagreement, and hand-wringing. Republican infighting grows more intense, and their reputation as a bunch of radicals who are willing to burn down the country to serve their extreme ideology is reinforced. At the end of it, the Republicans cave, the ceiling is raised for some period, and we do it all again in a few months.
And here we go again. The debt ceiling is going to have to be raised in the next month or so. Since the deficit is now at its lowest point since Barack Obama took office, it’s hard for Republicans to say that slashing the budget is so urgent that it justifies threatening to send America off an economic cliff. So what will they demand as their price for assenting to a debt ceiling increase? The answer is…they can’t decide. Yesterday, the House leadership proposed that they demand either a repeal of the “risk corridor” provision in the Affordable Care Act, which protects against a “death spiral” in the individual insurance market (here’s a good explainer on that), or approval of the Keystone pipeline. As Jonathan Chait pointed out, “Republicans have decided that one of these policy demands is so vital that they can insist its fulfillment justifies the threat of global economic calamity. They’re just not sure yet which one.” But it turned out that they couldn’t even unite around one of those two things, and that proposal of the leadership’s is now dead.
So here’s where we are. The Republican position is that something or other, let’s call it the Policy Change To Be Named Later, is so urgent, so pressing, so essential to the future of this great nation that if they don’t get it, whatever it turns out to be, they will force the government into default. And as soon as they figure out what the PCTBNL is, they’ll let us know.
Meanwhile, the Democrats’ position is simple: the debt ceiling needs to be raised, without conditions. Period. And that’s just what’s going to happen. There’ll be some hemming and hawing between now and then, but Democrats are going to win this, and Republicans are going to lose, and look like fools. Given that, if you were Barack Obama, wouldn’t you be perfectly happy to go through this routine a few more times?
By: Paul Waldman, Contributing Editor, The American Prospect, February 5, 2014
“Holding A Blank Ransom Note”: GOP Had A Plan On the Debt Ceiling, But Now Have Absolutely No Idea What To Do Next
Last spring, House Republican efforts to hold the debt ceiling hostage quickly became a fiasco – Democrats refused to play along and Congress passed a clean increase. Last October, House GOP efforts to hold the debt ceiling hostage were arguably even worse – the debacle coincided with a humiliating shutdown, and ended with another clean increase.
Despite this recent history, Republican lawmakers once again said they expected some kind of major policy concession or they would once again push the nation towards a default. Say hello to Debacle #3.
House Republican leaders are at a loss on how to move a debt limit increase.
A GOP leadership aide told CQ Roll Call that after an informal canvas of the House Republican Conference through member meetings and phone calls over the past week, leaders concluded that the top two sweeteners could not attract enough Republican support to pass a debt ceiling hike.
Going into this week, House Republicans had narrowed their scope: they would refuse to pay the nation’s bills unless Democrats gave them either (a) the Keystone XL pipeline and its 50 permanent jobs; or (b) the elimination of risk corridors in the Affordable Care Act, which would add $8 billion to the deficit and risk higher premiums on consumers.
In reality, it was highly unlikely the GOP would get either concession – Democrats don’t see the need to pay a ransom if the hostage takers are bluffing – but Republicans seemed certain they’d seek one concession or the other.
That is, until today, when House GOP leaders suddenly realized that rank-and-file House Republicans aren’t on board with either idea. And since these measures apparently don’t have 218 GOP votes, Republicans would need Democratic support to pull off their own hostage crisis, which isn’t going to happen.
So where does this leave the House of Representatives three weeks before Congress needs to act on the debt limit? Lost and directionless.
A leadership aide told Roll Call, “We are mulling other options and trying to figure out the best way forward on this.”
Or put another way, “We had a plan, but now have absolutely no idea what to do next.”
It’s not too tough to predict how this will play out.
That left Republican leaders with no clear alternative to addressing the debt limit, which the Treasury Department has said needs to be raised by the end of February.
Instead, it now appears that a combination of Republicans and Democrats will be needed to get a debt-limit boost through the House.
And that means a clean debt-ceiling increase, which was the inevitable outcome in the first place.
The lingering question isn’t why GOP leaders are struggling in this fight; it’s why GOP leaders agreed to launch this fight knowing in advance they’d lose.
By: Steve Benen, The Maddow Blog, February 5, 2014
“Obamacare’s a ‘Bailout’ Now?”: Conservative Critics Are Getting Desperate
Conservatives used to say Obamacare is socialized medicine. Now they say it is a “government bailout” of insurers.
The new claim is just as misleading and cynical as the old one.
The latest conservative playing thing is a pair of previously obscure Obamacare features: “reinsurance” and “risk corridors.” Their mechanisms are a bit complicated to explain. (Read here if you want the details.) What matters is their shared purpose, which is to reimburse insurance companies that end up taking heavy losses—say, because the new marketplaces don’t attract enough young, healthy subscribers. Remember, insurers depend on premiums from people in good health to subsidize the costs of the sick. Without the right mix, the premiums insurers collect won’t be sufficient to cover the cost of clams. They’ll lose money, raise premiums in the future, drop out of the market altogether, or some combination of the three. In short, bad stuff will happen.
To Obamacare supporters, reinsurance and risk corridors are tools for stabilizing the insurance market and easing the transition from the old system to the new. (That’s why I’ve been calling them “shock absorbers.”) But the provisions started attracting scrutiny from the right in the fall, when policy watchers like David Freddoso of Conservative Intelligence Briefing first wrote about it. Now reinsurance and risk corridors are getting more sustained attention from the Weekly Standard, Fox News, and the conservative movement writ large. Republican Senator Marco Rubio has sponsored a bill to repeal the risk corridors. “Why should taxpayers have to bail out health insurance companies in the increasingly likely event that ObamaCare leaves them with financial losses?” Rubio wrote this week, in an op-ed for the Fox website. “This is government favoritism and corporate cronyism at its worst, and it’s taxpayers that will pay the price unless we stop it.” Insurers are sufficiently spooked that, as Buzzfeed’s Kate Nocera has reported, they are undertaking a lobbying campaign to keep the provisions in place.
The bailout analogy is potent. And it’s certainly accurate to say that, under Obamacare, some insurers may collect payments from the government to help offset losses. But the analogy breaks down after that.
Bailouts typically start with companies taking egregiously irresponsible actions and end with the government forking over mind-boggling sums of money to save them. Think of the savings and loans institutions misleading the public about the state of their finances in the 1980s—or the financial industry making those bad home loans and risky investments a decade ago. Each of those involved grievous management errors, frequently skirting the limits of legality. The federal outlays to save those banks were in the hundreds of billions of dollars.
With Obamacare, the situation is different. Projecting future insurance costs inevitably involves a little guesswork. With a brand new program like Obamacare, it inevitably involves a lot of guesswork. Even the smartest, most responsible actuaries might not get the numbers right, for reasons Sy Mukherjee of ThinkProgress explains:
Insurance companies were sort of shooting in the dark when they set premiums for Obamacare’s first year. They had to approximate how many people would enroll, how old the customers would be, how sick they would be, how much insurers would have to pay out in claims — but the whole enterprise was, ultimately, a series of educated guesses.
Will the guesses prove wrong? Humana officials told investors last week that the risk pools look a little worse than they had anticipated. But, as Sarah Kliff of the Washington Post just reported, officials at Wellpoint say their risk pools seem ok while the CEO of Aetna described the demographics as “better than I thought they would have been.”
Truth is, no insurer will be sure about its beneficiaries for many months, until the open enrollment period ends and the newly insured have a few months in which to file claims. That makes it impossible to know what kinds of losses, if any, insurers will take. But even if the losses are significant, the taxpayers won’t be in for another Wall Street-style bailout.
For one thing, the reinsurance money comes from the insurers themselves, who pay a tax on each beneficiary. It’s basically a transfer of funds, from all carriers to those companies inside the Obamacare marketplaces that end up with unusually unhealthy members. In this sense, it’s an insurance policy for the insurers—and one they more or less finance on their own.
The payouts from risk corridors are a little different, in the sense that those dollars come directly from government funds and have no actual limit. But the risk corridors also build up government funds—in effect, by claiming some of the profits from insurers who reap unexpected windfalls. The Congressional Budget Office, in its overall cost estimates for the Affordable Care Act, assumed that the inflow and outlfow would be roughly the same, so that the risk corridor program as a whole would be budget neutral. Even if CBO’s prediction is wrong, and the government ends up spending more than it raises, the difference is likely to be modest. The formula for payouts calls merely for government to share in high losses or gains, not to take them on completely. It’s enough to protect the insurers, the thinking goes, but not enough to cause a massive outlay. Meanwhile, lower-than-expected premiums are likely to save the government much more money than the risk corridors would ever pay out.
Conservatives might object to reinsurance and risk corridors on principle, regardless of amounts involved. That would be a perfectly legitimate argument, except for one thing: Reinsurance and risk corridors are already a feature of some government programs, most prominent among them Medicare Part D. The reinsurance and risk corridors in Obamacare and Medicare Part D are remarkably similar, except that Obamacare’s are temporary and Medicare Part D’s are permanent—which is to say, they are still part of the program.
What’s that? You haven’t heard Republicans attacking Medicare Part D as an insurer bailout? Maybe that’s because of one other, obvious difference between Part D and the Affordable Care Act. Only one of them was signed into law by a guy named Barack Obama.
Update: The Rubio bill would repeal only the risk corridors. Originally, I wrote that it would repeal both provisions. My apologies for the error.
By: Jonathan Cohn, The New Republic, January 16, 2014
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