Obamacare endgame and the fall of Greece

James: This week, Shane and I thought we’d try something different.
Instead of using our columns to talk past each other, his assessment of politics from a conservative perspective and mine from a more liberal one, we’d actually sit down and have a conversation about the week’s political news.
We are at downtown Aspen Coffee and it’s been a busy week in political news. Everything from Obama’s final push for health care reform to the fall of Greece — again.
Let’s start with health care, the topic on the minds of many Americans.
The president made some major news this week on the health care front.

Shane: That’s right. Health care has returned from the dead. In the last couple of weeks, we’ve seen a bipartisan health care summit and all this talk of “reconciliation.” Hardly a minute passes the 24 hour news cycle someone without mentioning that buzz word.

James: Ah, the “R” word. What’s this reconciliation talk?

Shane: Recently, Democrats appear determined to pass sweeping health care legislation even without the usual 60-vote majority in the Senate. So, in comes “reconciliation.” Typically used on budgetary issues, it requires a simple up-and-down vote (majority) to pass legislation.
When examining recent history, one discovers that reconciliation is far from the “nuclear option” portrayal that Democrats and Republicans have pushed on certain issues. Democrats cried foul of its use in 2001 for the Bush tax cuts. Now, you’ll find Republicans complaining about its use in terms of passing health care legislation.
However, in this case, its use is fairly unique. The previously mentioned Bush tax cuts had bipartisan support in Congress in the form of 12 “Yes” votes from Democratic Senators. The 1995 Welfare Reform Act also used reconciliation, but with significant bipartisan support. At this point, it appears unlikely that a Republican will accept the latest health care bill. Obviously, reconciliation isn’t unheard of in the Senate, but its past examples have seen both Republicans and Democrats supporting the legislation. At this point, Team Obama is going it alone.

James: You know what I find interesting here?
Go back and look at the 12 Democratic “Yes” votes, you see some familiar faces, specifically Sen. Mary Landrieu (LA), Sen. Ben Nelson (NE), Max Baucus (MT)
Those names are the names responsible for the mess we’re in right now, both in regards to our current economic crisis —better known as the Great Recession — and the health care nonsense in Congress.
Those tax cuts you reference?
If you ask most economists, partisanship aside, they will tell you that reason we have the record deficit problems we have right now are three things:
1) The unfunded Bush Tax cuts in 2001 that the Republicans championed and conservative Democrats— Landrieu, Nelson, and Baucus — went along with to shore up their so-called fiscal conservative bona fides.
2) The entitlement programs in desperate need of overhaul, i.e. Medicare and social security
3) The two wars we’re mired in at present in Iraq and Afghanistan that we were so patriotic to fight but not to fund.
Then, the spending the Obama administration has done since coming to office, a drop in the bucket in comparison to the first three.
So, that’s an example of the right using reconciliation.
Here, we have a health care bill that not a single Republican is interested in passing for political reasons despite poll after poll showing support for the specifics of the bill
And, those conservative Democrats? They’re the ones asking for special deals, the ones conservatives on Fox News are so pissed about.
So, let’s get real here.

Shane: I’m not sure if you can call $3.6 trillion a drop in the bucket. That is Obama’s 2010 budget, after all.

James: In comparison to the wars we’re still funding, etc., a drop in the bucket but, point taken.

Shane: I think most everyone agrees that the health care system in this country needs some degree of reform. However, I contest that the American people want this specific piece of legislation. As of today, the RealClearPolitics.com average comes out to be 51 percent in opposition, with only 40 percent supporting it.

James: Again, point conceded.
Most Americans do oppose this bill but, when these same polls ask if voters favor the specifics of the bill —i.e. the creation of insurance exchanges where folk could compare plans, preventing insurance companies from denying people on the basis of preexisting conditions, allowing young Americans to remain on their parents insurance plans until age 26, even the creation of a so-called public option to help compete against the insurance companies, the results reverse dramatically. You have to pass those specifics together if the bill is to prove effective.
Voters — Republican, Independent and Democrat — are pissed that some Democratic Senators got sweetheart deals, that a single-payer system was never even up for debate, and they’re concerned, rightfully so, about costs during a recession.
But, the current system is madness and unsustainable, like you noted.
At least Obama’s recent proposal removes those sweetheart deals and offers a foundation to build on, at least that’s my hope as a progressive.
That said, what’s the likelihood Obama gets a bill on his desk to sign?

Shane: Using the reconciliation process, I think there’s a very high probability that Obama will see health care legislation on his desk. Despite widespread opposition and virtually no bipartisan support, Obama will then proudly proclaim “Mission Accomplished.” Never mind that the bill will cost Americans for years before they see any sort of supposed benefit.

James: On that point, the Democrats and Obama are making quite a political risk.
After the summit, Ezra Klein wrote in the Washington Post on Ryan’s assessment that “the true 10-year cost of this bill in 10 years” will be $2.3 trillion.
Ryan’s partially right. If his math and the Democrats’ math plays out, the bill will cost $2.3 trillion but save $2.95 trillion, “a net deficit impact of negative $650.”
The problem is that we gotta hope they all get the math right because Democrats will need to show voters the changes they promised as soon as the bill passes before Republicans focus their efforts solely on the bill’s price tag in the mid-term elections.
But, let’s move on to another story in the news this week and that’s Greece, one you and I have followed closely.
A few weeks ago, the New York Times published the headline “Wall St. Helped Greece mask Debt Fueling Europe’s Crisis.”
The reporting basically showed how Goldman Sachs, the same banking giant that helped usher in the worst economic crisis since the Depression with its subprime mortgage scheme, helped the country of Greece hide its debt from Europe and debtors in order to gain entrance to the European Union in the early 2000s.
We don’t have much time to do this real justice but I just want to quote the article briefly.
“As in the American subprime crisis and the implosion of the American International Group, financial derivatives played a role in the run-up of Greek debt. Instruments developed by Goldman Sachs, JPMorgan Chase and a wide range of other banks enabled politicians to mask additional borrowing in Greece, Italy and possibly elsewhere.”
What this makes clear, crystal clear, is that in Greece, the birthplace of democracy, greedy bankers found a way for deregulated capitalism to trump democracy.
It’s shameful.
We don’t yet know the full ramifications but if Greece goes bellyup, we can thank the folk on Wall Street and on the right who championed the deregulation of these banks and, specifically, the deregulation of these complex derivatives, which, as Warren Buffet described them, are financial weapons of mass destruction.

Shane: I’m shocked that you’re jumping all over Wall Street, James! As I recall, Wall Street had little to do with Greece’s unfunded social entitlement programs. The banks didn’t let government employees retire at 58. You cannot blame capitalism when one of the most lavish pension plans in the world crumbles under its own weight. We’re not talking about your average American unable to afford their mortgage. This is a publicly elected government, which knew full well that it was putting its debt off on future generations.
It’s oddly reminiscent of politicians in this country.
The Wall Street Journal recently covered those unregulated derivative swaps in an article titled: “Greek Budget-Busting Outweighed Effect of Swaps Such as Goldman’s.” The evil unbridled capitalism you rail against had the following effect according to WSJ: “The 2001 currency-swap deal arranged by Goldman trimmed Greece’s deficit by about a 10th of a percentage point of GDP for that year.” A tenth of a percent does not amount to financial ruin. If it’s a fiscal weapon of mass destruction you’re looking for, consider that public pension liabilities amount to 25 percent of GDP in Greece.
To say that Wall Street is to blame completely misses the problem. Greece is a progressive utopia that collapsed under its own entitlement weight. The state of California faces the same problem. Capitalism simply cannot overcome the burden of enormous social welfare programs that liberals so desire. Greece, far from exposing the flaws of the free-market, should serve as a warning to those who believe that the state can solve every issue.

James: What an odd position you must find yourself in, defending Wall Street and the banks.
Of course, Greece shares the responsibility. To say they don’t misses my point. Greece needed a product and Goldman Sachs offered that product. Greece wanted something to help hide the debt on its books so it could keep up with the European Joneses and Goldman created just the product to do it, to hell with the long-term economic consequences so long as they could turn a short-term profit. Goldman even bet against Greece’s ability to repay their debt because Goldman knew the truth behind their books.
What will be interesting to me is how the crisis in Greece shapes the debate in Congress, as the Senate takes up financial regulation reform in the coming weeks. I’m sure we will both be following closely how that debate plays out and I know we have much more to say when we return from spring break.
Shane: We always have more to say James. I’ll be interested to see how the Greek crisis develops, as well.
James: Well, until then.