Saturday, December 19, 2009

"Save Your Presidency"

Barry Ritholtz:

The political buzz today is all about the President’s falling approval ratings. He has now fallen faster than President Bush did (prior to 09/11).

The simple solution for the White House: Stop jerking around with Financial Reform. When there is high unemployment, people don’t want to see bailed out bankers making a killing. Fix what was wrong with the system, what led us down the path to disaster.

As noted in these pages back in September, the brain trust around Obama made a terrible tactical error by tackling Health Care before they fixed Wall Street. (See: Tactical Error: Health Care vs Finance Regulatory Reform). The record low approval ratings during his presidency reflect that.

Unless Obama wants to lose one or both Houses in 2010, he best shake things up.

My advice?

Put Paul Volcker in charge of Financial Reform.


I agree with the diagnosis and the prescription. As Obama's approval rating falls, I wonder to what extent the White House blames healthcare or "uncontrollable" factors like the economy and jobs, and ignores the consequences of its own lassitude on financial reform. Obama's nomination of Bernanke is a big part of the latter. It was a terrible mistake, both on the merits and the politics. Ironically, the president and his advisors probably thought that by keeping Bernanke on, they were insulating themselves from taking complete ownership of the economy and the bailouts. And this might have worked if the public, almost two years after Bear Stearns, believed there had been some sort of meaningful Wall Street reform. But it does not, so the nomination of Bernanke boomeranged. By embracing him in the absence of reform, Obama made himself defender of a deeply unpopular status quo. He has now taken majority ownership of the economy and the bailouts in the public's mind, and put himself and the Democratic party in the bizarre position of risking political and probably electoral capital on a failed Bush appointee -- one who came from the same stellar class as Kerik, Miers, Gonzales, and Brown. Bernanke is far more responsible for the bubble and economic collapse than Michael Brown was for New Orleans. If Brown had been a Bush holdover, can anyone imagine Obama and the Democrats risking anything to defend him? The circumstances are different, but the political dynamic is the same.

In 1983, 16 senators voted against Reagan's nomination of Paul Volcker to serve another term. Bernanke will almost certainly get that many "no" votes and possibly significantly more, a level of opposition unprecedented in the history of the Federal Reserve. If the vote reflects opposition that is strong enough or sufficiently broad-based, Bernanke would be unable to conduct monetary policy effectively even if he wins another term. The Fed is not like the Supreme Court, where a nominee can squeak by on a party-line vote then take refuge in chambers and quietly hear cases for the next few decades. Monetary policy, especially at a critical time like this, depends on broad bipartisan support. The ranking member of the Senate Banking Committee, who is a longtime Fed supporter as well as a senior member of the party that originally nominated Bernanke and the party to which Bernanke personally belongs, just voted against this nomination. That alone should cause the nominee to consider withdrawing.

Since that won't happen, the White House better start counting votes right now. If it looks like a mostly party-line vote or there's a potential for as many as 30 bipartisan "no" votes, Obama has a duty to the country to pull the nomination. I wouldn't expect Geithner or Summers to inform him of that duty. Obama named Bernanke over the summer, when the financial markets were more fragile. I suspect that if he had waited until now to make the nomination, he would probably have picked someone else. It's only one of the most important jobs in the world. Why not get it right?


Blogger Ritholtz said...

We began a discussion of this tactical error (Health Care vs Finance Regulatory Reform) way back in September; You can find that here:

12/19/2009 6:56 PM  
Anonymous Inthon said...

Barry, great work.

TCR, the status quo is precisely why nothing will change. Politics is politics and expecting anything more from a President is asking too much.

Charles Hugh Smith has done a great job of documenting this in his book Survival+ as well as his website.

12/19/2009 9:21 PM  
Blogger Tony said...

As a physician who has kept up on the debate with Mr Ritholtz, I can say that I respectfully disagree.

Granted Obama's problems are myriad, but the need for health care reform has been a festering abscess for a generation. If it isn't done before the off-year elections, it will never get done.

And health care reform is an economic problem, crippling our small businesses and decreasing worker mobility. We simply cannot afford 17% of our GDP going to health care.

12/20/2009 10:06 AM  
Anonymous RW said...

I don't know enough about political tactics to argue that point (the only thing I'm sure of is that a lot of sophistry is involved) but strategically I agree with Dr. Tony: Health care had to come first because the positive case was so complex, the lack of proximal and direct harm to elites and those already covered apparent, the national harm it was causing so incremental ("boiling a frog" syndrome), that the larger task of passage was simply too difficult to risk further delay or setback: Judging by history the chance to do anything significant would not come for another generation if this attempt failed.

But the positive case for financial reform as a result of the current debacle is a populist dream come true and it has had time (and newsprint) for the anger and frustration to reach fever pitch and, what is more, elites are pissed-off too: Personally I would expect the fur to really fly and precious little compromising from reformers once the debate starts in earnest on this one. But then what do I know.

12/20/2009 10:36 AM  
Anonymous RW said...

Just to be clear, I meant I was certain the point of political tactics involved sophistry, not that Barry's argument for his point was sophistic.

12/20/2009 11:48 AM  
Anonymous Pete said...

Dr. Tony, let's hope the source of the "festering abscess" was diagnosed accurately, otherwise the treatment could make it worse.

12/20/2009 11:58 AM  
Anonymous judyo said...

I believe the "foundation" was built on Ted Kennedy's decades of work on the issue (see H.E.L.P)
Obviously, the compromises could be problematic but, I don't believe they undermine the fundamentals.

12/20/2009 12:45 PM  
Anonymous Anonymous said...

I think that the president's problem with both venues of "reform" is that he is showing precious little interest in what the term "change" means. All of his proposals amount to simply tinkering with details, and that's not change: it's merely rearranging the deck chairs on the Titanic.

Volcker is showing how to be an agent of change, by disrupting the discussion in order to better grasp the fundamentals at play, e.g., when he points out that the only worthwhile innovation in banking has been the ATM machine, not CDO's or SIV's or CDS's or other left-overs from the alphabet soup.

We haven't yet seen much of that kind of clear thinking on the health care front, unfortunately, and that's why the debate there is hopelessly muddled. Why citizens should gain health insurance through employers is a question that doesn't actually have a good answer (beyond "it's the way we always did it"), and why we conflate the notion of "health care" with "insurance" in an era where the largest insurer in the world is on taxpayer-funded life support is a mystery to me.

The private insurance model increasingly appears to be simply the wrong approach to handling the aggregate health of the citizenry, so trying to effect a better health care system by tinkering with the wrong model for its delivery is likely to be an exercise in futility. What we need is an honest discussion about the role that the private sector ought to play in health, coupled with some serious evaluation of what role our shared governmental institutions ought to play as well.

But right now, we can't even come to grips with what the goals of "health care" ought to be. The current bill's de facto goals look to be more about guaranteeing the financial health of the insurance and pharma sectors, and less about the medical health of citizens. In short, we may be trying to solve the problem right, but there's little evidence to indicate we are trying to solve the right problem.

12/20/2009 3:10 PM  
Anonymous Inthon said...

The only way people will learn that "health care" is the responsibility of the individual is when the system goes bankrupt and frivolous lawsuits are a thing of the past.

Only when the "free" money shuts off will people actually start caring for their health and realize that your health is YOUR responsibility.

12/20/2009 4:53 PM  
Anonymous judyo said...

Nothing's free. There is a price for everything, including breathing.
Our food isn't safe, our water isn't safe and neither is our air.
"Health" may be an individual responsibility ... right now, it's called rationing. However, if the environment in which we live is not conducive for optimal health, well then ....

12/20/2009 6:16 PM  
Blogger Tony said...

Inthon has enumerated some of the fallacies endemic in the heath care debate.

1. Failure in individual responsibility is a primary driver of increased health care costs, and,

2. Medical malpractice is a primary driver of health care costs. No study has shown this to be true.

Most people have no clue what constitutes adequate or "good" health care. That's like saying clean water is your responsibility and we should stop providing it for "free."

Even the most staunch libertarian is loathe to speak about the requirement that doctors (me) treat people without a source of payment... yet they are strident in their views that they don't want to pay for it.

12/21/2009 12:03 PM  
Anonymous RW said...

Amen Tony:

1. Systemic risks are well, ...systemic (doh!) - they must be born by society because they are too large in scale for the individual to bear or ameliorate.

2. Medical malpractice is approximately 2% of total medical costs and the majority of cases are fully justified to boot (somebody really did screw up)

But the febrile fellows who think the market cures all just can't cope with the empirical evidence that it doesn't so they do what most everyone else does ...invent excuses and, where that fails, go for utter bullshit.

12/21/2009 9:23 PM  
Anonymous Goldhorder said...

Nothing worse than doctors telling everbody how important and wonderful they are as they champion the injection of billions of dollars into the system to enrich themselves like wall street bankers. Nobody believes in free market forces more than doctors. That is why they do everything in their power to limit it so they can continue to enrich themselves at the public's expense. You are evil...evil people.just look at how the AMA strong armed congress into making sure the health clinics wallmart proposed to open and staff with PAs would be so limited in what they could provide as to make them useless. On another note... Gary offers a wonderful conclusion here.

12/21/2009 10:00 PM  
Blogger Tony said...

Thank God for Goldhorder to add the necessary levity to an otherwise dull conversation. Over the years here I have come to appreciate his usual application of assumed motivations, curdled view of human nature and always served with a generous helping of conspiracy theory. Hilarious.

... doctors "enrich[ing] themselves like wall street bankers." Funny stuff.

If not for the tragic case report in the link I would be laughing out loud.

Thanks for the great comment, GH.

12/22/2009 2:18 AM  
Anonymous Inthon said...

I love how people love "free" government solutions.

"free" money ensures someone will get pillaged, always the taxpayer. AMA licensing, pharmaceutical cartels and, yes, bogus lawsuits which drive up malpractice insurance all contribute to higher costs.


The correct direction is for people to eat health, exercise and take care of themselves. This 2,000 page pork-filled bill will solve nothing.

Diabetes and obesity are many times the results of lifestyle choices, whose costs should be borne fully by the individual.

All costs need to be paid by individuals, their families or charities. This will ensure healthy lifestyles. Assuming government can "solve" the healthcare crisis is akin to believing in alchemy.

12/22/2009 12:54 PM  
Blogger Tony said...

Inthon, I am very close to your conclusion. I don't think govt has a "solution" to the health care conundrum, but your premises are inaccurate.

1. The AMA has nothing to do with licensing... states do. And there are a number of health care providers other than physicians that are also licensed: Chiropracters, naturopaths, homeopaths, nurse practitioners, nurse midwives, pharmacists; not to mention your freedom to seek advice from any un-licensed person.

2. Pharma "cartels" are what happens in the absence of adequate govt regulation. Actors in a free market will always work toward restricting that freedom for their own self-interest. How would you propose governing pharma without an authoritative enforcing body? You are free to try your luck with the herbalist, too.

3. Tort law is under the jurisdiction of the individual states, and studies have shown that strict reform may help cut costs on the margin, but not significantly... unless you have a reference to the contrary (this was once one of my pet projects and I was dismayed to find the lack of solid economic evidence to support tort reform.)

4. Let's go get the fatties! Every movement needs a scapegoat. What ever happened the "liberal media", aren't they to blame too?

An excellent (classic but still pertinent) reference on basic health care economics is here:

Also the Kaiser Family Foundation is pretty middle of the road on the topic.

As much as this may go against your clean Manichean world view, the reality is that illness strikes indiscriminately and not every infirmity is preventable. Since health care is a de facto right and has a utilitarian value within western civilization, we as a society need to address the allocation of these scarce resources.

12/22/2009 1:29 PM  
Anonymous Inthon said...


You seem to be caught up in the D vs. R/think tank/policy tweak camp. I have accepted the fact that our country is bankrupt and won't be able to finance any of this.

1) AMA is a lobbying group for doctors, which lobbies state governments to restrict the supply of doctors via licensure and generally "protect" the interests of doctors, nearly always at the expense of the free market.

2) Cartels can only exist when there is a State that will protect said cartel. We could buy pills from all over the world with the Internet, however, big pharma ensures this doesn't happen. This is exactly why government should not have anything at all to do with healthcare. Do you really think regulation by those bribed by big pharma/AARP will stop big pharma?? Do you honestly think this 2000 page bill will solve something as simple/logical as getting medicine abroad?

3) Not sure I fully believe you, malpractice insurance scares doctors away, I'm not sure that can be accurately quantified. Also, easy money/easy credit policies (courtesy of Bush/Obama appointees) ensure smart people do not want to be doctors, but rather i-bankers/traders. Only Ron Paul has taken a stab at promoting a non-fiat currency, which, yes, does affect everything and needs to be respected in any debate.

Also, did your study account for the myriad worthless tests done just to avoid the possibility of a lawsuit, even those totally unnecessary?

4) Yes, fatties indeed. Let them suffer the consequences of their own lifestyle, not me. Not looking for a scapegoat, just something resembling personal responsibility.

There's no liberal media, just a government lapdog/corporatist media that advertises to rubes who believe in "free government money" and "spend ourselves rich".

Rights don't exist. Every "right" is a demand of someone else.

People have forgotten things like saving money for retirement/old age, self-reliance, caring for elderly parents and familial/community cooperation.

Markets (when allowed to work) allocate resources far better than Barack Obama or whatever party is in charge. This bill will be loaded with pork and benefits which will surely keep the status quo intact.

Medical tourism (a.k.a. the glorious free market) will assert itself and this "bill" will solve nothing.

Governments can promise the moon and stars, but with deficit spending and demographics, you can kiss "reform" goodbye. The status quo is here to stay and the country will be bankrupt within 10 years.

It didn't use to be this way:

12/23/2009 1:24 AM  
Anonymous Goldhorder said...

Lol... Awww come on Tony. You r supposed to get all mad so I can then really go on a tirade. Your no fun.

12/23/2009 9:45 AM  
Anonymous Goldhorder said...

There was an article about how A group of people in Iran got together and put an educational program to help rural Iranians Give basic medical care to themselves. There was a high infant mortality rate and this system brought it crashing down. Supposedly the rural South has this issue so it was thought a similar thing could be done here. But if it was tried the people would be thrown in jail for practicing medicine without a license. Totally with Inthon on this. The AMA fights tooth and nail to keep PAs and RNs in a small a box as possible. Making sure supply of medical care from doctors is always at a minimum. The us population doesn't believe in the free market but our doctors sure do!

12/23/2009 12:00 PM  
Blogger Tony said...

I get it, you don't like the govt. Well, maybe you and Inthon should move to rural Iran and learn how to do each other's appendectomies... without govt interference.

Seriously, comparing rural Iran to anywhere in the US is problematic. Some communities in the third world could cut infant mortality in half just by providing clean water. Do you have a REFERENCE for this Iranian miracle?

In most communities in the US certified nurse midwives do the majority of uncomplicated deliveries. Ask them if they would want to work without physician back-up. Do some research.

Lay midwives (not to be confused with certified nurse midwives) are available all over the place in the US. Since you relish in anecdotal stories, I'll tell you one: My neighbor had a "home delivery" just two years ago with a lay midwife. (The baby died-- I have no idea why, but it was a full-term baby and probably avoidable.)

For an analysis of *lay* midwifery and infant mortality:

I welcome solutions to the health care problems; you've provided none. I doubt the current Congressional proposal will "solve" all of them, but the trajectory of the cost curve and lack of access is unsustainable.

The whole notion that doctors are evil is annoying. The VAST majority of docs I know are devoted to their patients and the science of making them better and are aggrieved just as much as you are at the shambles the business interests have made of the health care delivery system.

Most docs I know are just as skeptical of the political process as you are, but the status quo is painful to endure much longer.

Doctors by nature are not risk-takers and do not expect million dollar bonuses at taxpayer expense; most have a blue-collar mentality and want only an honest wage for their effort. Go to your local hospital and follow a family doc or internist or pediatrician around for a day-- they work hard at important things and deserve the avg $140K salary they earn.

Medical care delivery simply does not conform to the free market in the same way making autos or refrigerators does. No advanced society allows health care to be left to the whims of an unregulated market. I guess 2 billion people operating under 30 different govts could all be wrong...

12/23/2009 1:43 PM  
Anonymous Goldhorder said...

ummm i moved to rural US years ago. As far away from police departments, fire departments, hospitals, public schools, and other "vital" services as I can get. I have been buying Gold and Silver Bullion since the Nasdaq crash. The only thing I want in this world... My good friend Tony... Is to quit having my "bettors" like yourself... Stealing from me. I will glad die of some treatable medical condition if you and your communist friends would just agree to leave me in peace. That is all I ask to be happy. Can I own my own body? Can I own my own land... Or do I have to keep paying rent to the government? Can I own my own wages earned only between the exchange of mutual cosenting adults. All i ask in this world is for people like yourself to quit stealing from me. Is it really so hard?

12/23/2009 6:49 PM  
Blogger Tony said...

Thanks for the Iran-Mississippi reference. But to clarify a few points, according to the article:

1. The Iranians reduced *maternal* mortality (not *infant* mortality as you said) by ten-fold to 30/100K which is still triple the US average.

2. It was actually an evil physician who spearheaded the interaction to gain insight into helping his community.

3. The evil Obama State Dept supported the interaction.

4. Neither the "AMA" or any govt agency "threw them in jail for practicing medicine without a license." Get a grip, dude.

Maybe I should spearhead an international symposium to help with reading comprehension?


GH, you can come over any time and take from me whatever you think is rightfully yours. I've never told you how to live... and I've certainly never intimated that I'm one of your "bettors", or "betters" either for that matter

Kudos, it sounds like you have carved out a workable existence for yourself. So what's your gripe?

Fiat money is not ours, it belongs to the federal reserve. You and I are both free to accept it as payment for our labor... or not. Give unto Caesar, yada, yada, yada. Require your employer or clients to pay you in asparagus, firewood or paving stones, for that matter.

I've taken your advice on gold over the years and have profited, so I cut you some slack on your curmudgeonly nature.

Nobody forces me to get out of bed and go to work. I have complete choice in how I spend my days, as do you.

I'm hardly a communist and in fact probably lean more toward your political view than you realize.

Can you own your own body? Sure. Can you own your own land? It's okay by me, but I'm not sure there is a law written or unwritten that guarantees you a piece of land. If the meek are going to inherit the earth, they are going to have kick ass for it.*

Your wages are your own business. If the wage offered isn't fair, then refuse to do the job. It's your choice.

If someone supposedly doesn't care about health care or insurance or global economics, why would they have an opinion about what the govt does about it?

Have a good holiday, my friend.

*to paraphrase Tom Lehrer.

12/23/2009 7:35 PM  
Anonymous Goldhorder said...

I never stated all doctors were evil, just in general or the majority for the record. Yes, this is a good study but it has not been implemented in the US. So there is no reason to throw anybody in jail. If it was tried it would be shut down by congress (like the Wallmart clinics) or people would go to jail. AMA is bad news. A step down from AIPAC and big pharma. Tony... The hardest I ever worked was when I was in the military. 100 plus hour weeks were average for long periods of time. I was paid sh%* and the work I did was evil. You will have to excuse my spelling. I'm public school educated and if I'm still alive after DC has been cleared out I'm coming for them next.

12/23/2009 8:05 PM  
Anonymous Goldhorder said...

Ohhh... And PS don't worry. You and your kind are far down on my list. Merry Christmas.

12/23/2009 8:07 PM  
Anonymous Inthon said...

I mentioned two solutions above, but I can list more if you'd like. The two I mentioned were:
1) Repeal laws that prevent buying medication from foreign nations.
2) Allow anyone, anywhere to open up a cash clinic (even faith healers, quacks, etc.)

2,400 pages of legalese will not solve our addiction to unhealthy food and poor lifestyle.

The whole point is moot since everyone begs the government to solve the problem that has been created by big enterprises BUYING their loopholes.

Seriously though, the US gov't will not be able to finance this or Obama's Afghanistan war.

To cut Obama any slack when he has allowed morons into his advisor circle like Bernanke, Geither, Summers, and Rubin costs you all credibility. Obama already lost.

12/24/2009 12:14 PM  
Blogger mrmetrowest said...

>>2) Allow anyone, anywhere to open up a cash clinic (even faith healers, quacks, etc.)

Worthless. How many people would walk into some unregulated clinic, run by unknowns, and trust their lives to them? And where would those people go after the quack clinic did nothing for their complaint, or made it worse? To a professionally staffed and equipped facility, where they'd be expected to pay a fee commensurate with the level of service delivered. We all like to be paid for what we do. Modern health care is labor intense, knowledge intense and capital intense. I'd argue that health care delivery systems form a natural monopoly.

Blaming 'fatties' for high health care costs is credible only for people who have never heard of genetics. You cannot reverse the ageing process no matter how hard you try, nor can you evade typos in your genetic code. A child does not develop type 1 diabetes from too many Twinkies.

Staying in shape, not smoking etc should all be promoted relentlessly. However, our health care costs are related to increasing longevity, not decreasing health. It's a testament to human perversity that this is seen as a problem. It sucks, but some things you just have to pay for. The issue, for those capable of emotionally mature thought, is not whether to pay for health care - it's why we pay so much more than other nations do, with results that are no better and sometimes worse.

12/24/2009 1:25 PM  
Anonymous KAIMU said...


Quite simply put the US government under either of the two party MONOPOLY can only engage in PRICE FIXING. Price fixing that I speak of is where government assumes the role of the "free market". Much like when the US Dollar defaulted on the gold standard in 1971 under Nixon. Nixon said, "We're all Keyenesians now!" How well has the 'central banking" system performed as a substitute for the "gold standard"? In other words, money is supposed to be a "store of value" not a "store of debt"! The US Dollar today is nothing more than a "debt derivative" ... period! As far as I know Volcker is no "exception" to any rule in that regard. A central banker is a central banker. Their duty is to the banking cartel that controls America's money not to US citizens. I paid 17% on a new truck I bought under the Volcker regime. Can the US government afford a 20% FED FUNDS RATE again? Even Volcker admitted then looked into the abyss ... believe me when I say also that I have read many a FOMC form the 1970s and 1980s and Volcker will intervene and manipulate markets like all the rest. If you have a printing press that is what you do.

Technically speaking I believe the Obama Healthcare is nothing more than a technical default(renege) on Medicare. I am confident we will get something substandard. This is not meant as an indictment against doctors or "well meaning medical groups", but just a fiscal statement on America's debt service. Whatever we end up with it will be yet another "EVER NORMAL GRANARY", one of the first attempts at PRICE FIXING by government when Gracchus first announced it during the days of the Roman Empire. There are only two choices in the World ... GOVERNMENT or MARKETS. Those of us alive today have never witnessed "free markets" in operation. As I have said many times ... "Without government contracts the Fortune 500 would be the Fortune 5"! I ought to know as I was able to retire to Hawaii off highly profitable California Public Works projects. Government always fails otherwise we'd still all be speaking Latin and Julius Caesar XXXXVVVVIII would be the Obama.

We are living under the control of the TWO MONOPOLY system. One is the monopoly that controls our money and the other is the monopoly that controls our quality of life. As a "point-counterpoint" to Dr. Tony, I have always understood that "stress" is a major contributor to poor health. I think you would agree that there is no greater "stressor" in this World than that of financial stress, unless you are directly engaged in a war or famine. The US government and its long storied past of "policy failures" must surely be adding "stress" to each of our lives.

I believe this with all my heart ... "Government is essentially the negation of Liberty". I did not say that Ludwig Von Mises did in 1937. I have to say that I have very little Liberty when 54% of my income must go to various government departments, whether they be the US Treasury or the California Treasury. Government is government. When have we ever tried "less" government in America? The "markets" you see before you are far from "free"!

12/25/2009 8:20 AM  
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