Pay-go rule proves Nancy Pelosi and the centrist Democrats do not think Medicare for All is a good idea

The Intercept reports that centrist Democrats will include a pay-as-you-go rule for the House of Representatives. The Intercept and others have done a fine job explaining what this does; I don't need to repeat the details here. In brief, pay-go makes it nearly impossible to create new social spending, without putting up any hurtles to cutting taxes.

Progressive and further left Democrats were immediately up in arms, pointing out that this rule will make progressive and socialist goals, like Medicare for All or dealing with climate change, all but impossible to pass. This frustration is captured in a quote provided to the Intercept by a spokesperson for the progressive Justice Democrats:

“There’s enormous appetite in the Democratic Party and among all Americans for major public investment to tackle our nation’s major crises: deepening inequality and structural racism and climate disaster,” said Waleed Shahid, communications director for Justice Democrats, in a statement to The Intercept. “Pelosi and the Democratic Party leadership’s support of Paygo makes actually solving these crises all but impossible. The Democratic Party leadership is unilaterally disarming and shooting themselves in the foot.”

Disarming themselves? Shooting themselves in the foot?

Pelosi and the other centrist Democrats are not stupid. Pelosi is without exception one of the most talented lawmakers in the history of Congress. There is no legislator more talented than Pelosi. She and the other centrist Democrats know exactly what they are doing; to argue otherwise is to assume stunning levels of incompetence of a group we have no reason to believe is incompetent.

So why is it so important to centrist Democrats like Pelosi that pay-go pass? Because they don't think Medicare for All is a good idea. That pay-go will stop Medicare for All from passing is not a downside of pay-go. It is the entire reason they desire pay-go.

If we assume that centrist Democrats want Medicare for All and wish to stop climate change, then pay-go makes no sense. But if we assume that they do not think these things are a good idea--and pay-go prevents these things from being implemented--then pay-go makes perfect sense.

Actually, Jacobo Arbenz was a communist, and so was the Guatemalan land reform (Part 2)

Image: A 1951 rally supporting Guatemalan President Jacobo Arbenz (source)


Part 1 of this series explained the history and theory behind the Guatemalan land reform act, Decree 900, as well as its successes before American-sponsored coup de etat ended both Decree 900 and democracy in Guatemala. In brief, Decree 900 used a principle similar to eminent domain in the United States, wherein the government forced landowners to sell land at 100% of its value (as the landowners themselves had indicated on their tax forms). However, Decree 900 only allowed for the forced sale of unused land; any land a landowner was using could not be taken. The government distributed this land to poor Guatemalans and provided them with low interest loans to start a new farm and create a happy livelihood.

If it were a simple matter of losing some unused land (and being compensated for it), extremely profitable producers like United Fruit would have written off the loss and moved on. But Decree 900 was more than a negligible business loss. First, it altered the macroeconomics of Guatemala, changing the ratio of job seekers to job openings. With fewer job seekers relative to job openings, this put upward pressure on wages, cutting into the profits of United Fruit and other landowners. And furthermore, Decree 900 called into question the power structures surrounding macroeconomic policy, full employment, wage labor, and private property. If ordinary Guatemalans realized that they could improve their lives by voting to change the rules governing economic or property relationships, what might follow this relatively modest, initial reform? Apparently, United Fruit preferred to end democracy than find out.

The initial coup de etat occurred in 1954. The democratically elected government of President Arbenz was overthrown, and a military dictatorship replaced it. The American government funded this military dictatorship for decades, also arming its military and training its soldiers and death squads at the School of the Americas. 200,000 Guatemalans died in the conflict which lasted until 2001--nearly half a century--all because United Fruit (now Chiquita Banana) was forced to sell some land it wasn't using.

A truth commission sponsored by the Catholic Church--which had ironically opposed the land reform that triggered the intervention in the first place--found that nearly 90% of atrocities were committed by government forces (the military dictatorship that replaced Arbenz and the Guatemalan Congress) while less than 5% were committed by the guerrillas (with the remainder unclear who was responsible). For revealing this truth, the Archbishop of Guatemala City was brutally assassinated, bludgeoned to death in his own home. A later report by the UN attributed 93% of atrocities to the government and 3% to the guerrillas.

Among this sordid history, the issue I wish to address is the tendency for American commentators to condemn American actions because the Guatemalan government was not communist. According to this perspective, United Fruit and the CIA played on President Eisenhower's fear of the Soviets to get him to authorize the coup de etat. They falsely argued to the Eisenhower administration that President Arbenz was a communist in order to justify the invasion. But because these were lies--because President Arbenz wasn't a communist and Decree 900 wasn't a communist plot--this intervention was unjust.

This recent New York Times op-ed by Stephen Schlesinger is typical in this regard. Let's look at his key points, one by one. He starts out condemning American atrocities:

Actually, Jacobo Arbenz was a communist, and so was the Guatemalan land reform (Part 1)

Image: A mural in Guatemala City commemorating President Jacobo Arbenz and Decree 900. (source)


In 1952, democratically elected Guatemalan President Jacobo Arbenz signed into law Decree 900, passed by the democratically elected Guatemalan Congress. Decree 900 bought 1.5 million acres of land from private owners and distributed it to 500,000 Guatemalan families, or about one sixth of the population of Guatemala. The purchase of these 1.5 million acres of land was not voluntary, yet it was fair to landowners. Similar to the principle of eminent domain in the United States, the Guatemalan government paid the owners 100% of the value of the land that they themselves had indicated on their tax returns. And, the Guatemalan government only forced the sale of land that was not being used by its owners. Legally, any land that was actually being used by its owners could not be taken.

The logic of Decree 900 was very straightforward:

• Those who do not have ownership of their own capital (in this case, land to cultivate) can be exploited.
• Those who own large amounts of capital tend to manipulate the political and economic system for their own benefit.

This assessment was very accurate in Guatemala.

First, wages for rural Guatemalans were extremely low, at or below sustenance level. Because poor, rural Guatemalans did not own land, they had to work for wages for people who did. Given the choice between working for wages and starvation, this lack of ownership opened poor Guatemalans to terrible exploitation.

Furthermore, just 2% of the population owned 70% of the land of Guatemala. The American company United Fruit alone owned a staggering 42% of the total landmass of Guatemala, including some of the most productive farmland in the entire world on Guatemala's west coast. Obviously, the ownership of so much of Guatemala's productive capacity by so few concentrated a great deal of power in very few hands.

These wealthy, powerful landowners had used their power to manipulate Guatemala in order to further increase their profits. Most obviously, they carved out special rules for themselves. United Fruit, for example, had been able to secure exemptions for its massive profits from nearly all taxes. Despite owning nearly one half of the landmass of Guatemala, they paid nearly nothing to support the country.

A better world is impossible without demilitarization and an end to war

Image: Martin Luther King breaks his silence about the Vietnam War at Riverside Church in New York City, April 4, 1967. (source: public domain)



Note: Throughout, this series, I put the word "enemies" in scare quotes. I do this in keeping with the socialist tradition which notes that the ruling classes make wars to enrich or entertain themselves, while sending those they rule to fight and die in them. A slogan of the 1916 Irish Easter Rising was:

The socialist of another country is a fellow patriot! The capitalist of my own country is a natural enemy!

This post is an introduction to a series on antiwar issues. There is a tendency among liberals to view all left-of-center movements as independent--particularly movements against war and in favor of disarmament. What does an end to the war in Afghanistan have to do with, say, disparities in primarily education? This view was most famously criticized by Martin Luther King:

Over the past two years, as I have moved to break the betrayal of my own silences and to speak from the burnings of my own heart, as I have called for radical departures from the destruction of Vietnam, many persons have questioned me about the wisdom of my path. At the heart of their concerns, this query has often loomed large and loud: “Why are you speaking about the war, Dr. King? Why are you joining the voices of dissent?” “Peace and civil rights don’t mix,” they say. “Aren’t you hurting the cause of your people?” they ask...

I come to this platform tonight to make a passionate plea to my beloved nation. This speech is not addressed to Hanoi or to the National Liberation Front. It is not addressed to China or to Russia. Nor is it an attempt to overlook the ambiguity of the total situation and the need for a collective solution to the tragedy of Vietnam. Neither is it an attempt to make North Vietnam or the National Liberation Front paragons of virtue, nor to overlook the role they must play in the successful resolution of the problem. While they both may have justifiable reasons to be suspicious of the good faith of the United States, life and history give eloquent testimony to the fact that conflicts are never resolved without trustful give and take on both sides. Tonight, however, I wish not to speak with Hanoi and the National Liberation Front, but rather to my fellow Americans.

Since I am a preacher by calling, I suppose it is not surprising that I have seven major reasons for bringing Vietnam into the field of my moral vision. There is at the outset a very obvious and almost facile connection between the war in Vietnam and the struggle I and others have been waging in America. A few years ago there was a shining moment in that struggle. It seemed as if there was a real promise of hope for the poor, both black and white, through the poverty program. There were experiments, hopes, new beginnings. Then came the buildup in Vietnam, and I watched this program broken and eviscerated as if it were some idle political plaything on a society gone mad on war. And I knew that America would never invest the necessary funds or energies in rehabilitation of its poor so long as adventures like Vietnam continued to draw men and skills and money like some demonic, destructive suction tube. So I was increasingly compelled to see the war as an enemy of the poor and to attack it as such.

Perhaps a more tragic recognition of reality took place when it became clear to me that the war was doing far more than devastating the hopes of the poor at home. It was sending their sons and their brothers and their husbands to fight and to die in extraordinarily high proportions relative to the rest of the population...

To update this message for current levels of military spending, Demos created a striking graphic to drive this point home:

Actually, I don't find that graphic as striking as it could be. Circular graphs tend to be misleading, so I made a fan graph:

Also: we're set to spend $1 trillion on nuclear weapons (emphasis added):

Isn’t it rather odd that America’s largest single public expenditure scheduled for the coming decades has received no attention in the 2015-2016 presidential debates?

The expenditure is for a 30-year program to “modernize” the US nuclear arsenal and production facilities. Although President Obama began his administration with a dramatic public commitment to build a nuclear weapons-free world, that commitment has long ago dwindled and died. It has been replaced by an administration plan to build a new generation of US nuclear weapons and nuclear production facilities to last the nation well into the second half of the 21st century. This plan, which has received almost no attention by the mass media, includes redesigned nuclear warheads, as well as new nuclear bombers, submarines, land-based missiles, weapons labs and production plants. The estimated cost? $1,000,000,000,000.00 — or, for those readers unfamiliar with such lofty figures, $1 trillion.

Critics charge that the expenditure of this staggering sum will either bankrupt the country or, at the least, require massive cutbacks in funding for other federal government programs. “We’re… wondering how the heck we’re going to pay for it,” admitted Brian McKeon, an undersecretary of defense. And we’re “probably thanking our stars we won’t be here to have to have to answer the question,” he added with a chuckle.

Obamacare was a failure

With Obamacare sure to be repealed by President-elect Donald Trump and a Republican Congress, it's worth considering what Obamacare's legacy will be: a demonstration of both the folly of health care reforms that preserve the profit motive or emulate free markets, as well as the urgent need for single payer.

Before we take each of Obamacare's fundamental failures in turn, it's worth pointing out that--not only would single payer have avoided all of the failures of Obamacare, but it would have cost far, far less. I've covered at length the mammoth inefficiencies of Obamacare, the American health care system generally, and any market-based system for social welfare provision, in comparison to slim and efficient universal social welfare systems like single payer.

Failure #1: Uninsurance
The biggest goal of health care reform was to reduce the United States' massive uninsurance rate, a problem without parallel in the developed world.

Yet Obamacare was never intended to be a universal health care system. The framers of Obamcare intended to leave a large portion of Americans without health insurance. I've written at length about how Obamacare was expected to--at best--only cut in half the uninsurance rate. There's no need to rehash these arguments here.

But as President Obama himself acknowledged in an article he wrote for the prestigious Journal of the American Medical Association (JAMA), Obamacare failed to even cut the uninsurance rate in half; it was reduced from 16% in 2010 when the law was passed to 9% in 2015:

Since the Affordable Care Act became law, the uninsured rate has declined by 43%, from 16.0% in 2010 to 9.1% in 2015, primarily because of the law’s reforms.

There's not really anything else to say here. Single payer would have achieved a 0% uninsurance rate. As Obama himself said in 2009, nearly a year before he signed Obamacare into law,

I want to cover everybody. Now, the truth is that unless you have what's called a single-payer system in which everybody is automatically covered, then you're probably not going to reach every single individual.

Obamacare failed on uninsurance, but, then again, it never really set out to succeed.

Failure #2: Underinsurance
In a critique of Obama's JAMA article, Adam Gaffney notes:

One issue Obama does briefly address is the frequently heard critique that the ACA has bolstered the rise of health-care cost-sharing: the payment due at point of use that includes things like copayments, deductibles, and coinsurance. High cost-sharing means the underinsured frequently avoid going to needed doctor’s appointments, having important tests run, or even visiting the emergency room. When they do, they are often left with punishing bills.

While admitting that deductibles have been rising, Obama asserts that the rate of increase has not changed. But he misses the point: the argument isn’t that the ACA created “underinsurance” — it’s that it didn’t reduce it, much less eliminate it, which should be our real goal.

Not much more to say here either. Single payer would have reduced the underinsurance rate to 0% instead of continuing the trend of shifting more and more of the cost of health care upon ordinary Americans.

Failure #3: Only government insurance was effective
Obamacare expanded insurance in two ways--a boring way, and a sexy, innovative way.

The boring way was simply allowing more people to enroll in Medicaid.

The sexy, innovative way was giving people who couldn't get health insurance through their employer (or through the government) a cash subsidy to purchase private health insurance. This caused significant buzz in 2009, because--in theory--once ordinary people were able to afford coverage for themselves and their family, they would be empowered to choose the private insurance plan that was right for them. In this way, Obamacare was supposed to harness the power of free markets to reduce health insurance costs. When people could purchase the best plans for the lowest cost, those insurers would be rewarded with more customers and their competitors would be forced to improve their products or else go out of business for want of customers.

This system of subsidies for beneficiaries and competition for private plans was called the Health Care Exchanges, which were most famously accessible online through a state Exchange (like NY State of Health, KYnect, etc), or the federal Exchanges (healthcare.gov) for residents of states that did not set up a state Exchange.

Which was better? Boring old Medicaid or the innovative Exchanges?

While considerable attention has been paid to the exchanges, they have so far contributed only modestly to the aggregate increase in coverage—accounting for 11 percent of the 8.38 million-person net increase in health insurance enrollment during the first three quarters of 2014. The other 89 percent of net enrollment growth during that period came from the expansion of Medicaid.

Yes, anxiety about the economy explains the rise of Donald Trump

Updated below

Digby rounds up some links arguing that economic anxiety does not explain the rise of Trump.

She blockquotes Philip Klinkner:

You can ask just one simple question to find out whether someone likes Donald Trump more than Hillary Clinton: Is Barack Obama a Muslim? If they are white and the answer is yes, 89 percent of the time that person will have a higher opinion of Trump than Clinton.

That’s more accurate than asking people if it’s harder to move up the income ladder than it was for their parents (54 percent), whether they oppose trade deals (66 percent), or if they think the economy is worse now than last year (81 percent). It’s even more accurate than asking them if they are Republican (87 percent).

Those results come from the 2016 American National Election Study (ANES) pilot survey. My analysis indicates that economic status and attitudes do little to explain support for Donald Trump.

They both misunderstand the meaning of these data.

Klinkner argues that if anxiety about the economy explains the rise of Trump, then everyone worried about the economy should support Trump. For those who answered 'yes' to the economic anxiety question ("...if it’s harder to move up the income ladder than it was for their parents"), only about half (54%) support Trump. That's statistically meaningless--a coin flip. Klinkner interprets this to mean that economic anxiety cannot explain the rise of Trump; among people with high economic anxiety, about half support Trump and half don't. There's no relationship between economic anxiety and support for Trump.

But this conclusion is ridiculous. Noting that half the people who are worried about the economy support Trump does not mean that Trump supporters aren't motivated by anxiety over the economy. It might mean that one's views on the economy are unrelated to support for Trump, but it could also be that about half of the people worried about the economy have been driven to the far right--to Trump--and everyone else worried about the economy has reacted in other ways.

Indeed, in times of economic crisis, societies sometimes undergo left-right polarization. These data are consistent with a left-right polarization: the reason that only half of the people worried about the economy support Trump is not because support for Trump is unrelated to the economy, but rather because the other half has lurched leftward, towards Sanders.

An analogy might be helpful. Let's substitute "vitamin C deficiency" for the economy, "oranges" for Trump, and "green peppers" for Sanders.

Two of the best sources of vitamin C are green peppers and oranges. Instead of asking people if they are worried about the economy, we've asked who is worried about vitamin C deficiency. Let's say exactly 100 respondents say they are worried about vitamin C deficiency. Of those, 54 respondents report eating extra oranges, while most of the remaining 46 report eating extra green peppers.

By the logic of Klinkner and Digby, eating oranges in unrelated to vitamin C deficiency: since only half of respondents worried about vitamin C deficiency are eating extra oranges, vitamin C deficiency cannot be motivating people to eat extra oranges. But that's clearly ridiculous; about half of people worried about vitamin C deficiency have chosen to eat extra oranges while the other half decided to eat extra green peppers instead. Just because only half the people have chosen oranges does not mean that their decision is not motivated by anxiety over vitamin C deficiency.

Let's cut and paste that above paragraph with economy, Trump, and Sanders sprinkled in:

By the logic of Klinkner and Digby, eating oranges in unrelated to vitamin C deficiency. Since only half of respondents worried about vitamin C deficiency (the economy) are eating extra oranges (supporting Trump), vitamin C deficiency (the economy) cannot be motivating people to eat extra oranges (support Trump). But that's clearly ridiculous; about half of people worried about vitamin C deficiency (the economy) have chosen to eat extra oranges (support Trump) while the other half decided to eat extra green peppers (support Sanders) instead. Just because only half the people have chosen oranges (support Trump) does not mean that their decision is not motivated by vitamin C deficiency (the economy).

If so, this means that Klinkner's causality is all wrong. He notes high levels of racial resentment predict support for Trump. He and Digby interpret this to mean that high levels of racial resentment is causing support for Trump, while economic concerns are unrelated. But the data don't show that. These data on racial resentment would also be consistent with left-right polarization. Among those worried about the economy, about half have begun blaming their problems on minorities and immigrants, and find an outlet for their racist/xenophobic beliefs in Trump. The other half has begun to blame capitalism for their problems and has found their outlet in Sanders' socialism. If left-right polarization is occurring, this is exactly what we would expect: a large portion of respondents with anxiety over the economy, and the half that blames minorities and immigrants supports Trump whereas the half that blames something else are against Trump. All that racism and xenophobia didn't just appear out of thin air.

Actually, paternalism in factor income is not at all unprecedented

Matt Bruenig has an interesting post on his Demos blog. In a nutshell, he asks why so many people believe transfer income should be treated very differently than wages. He quotes a Washington Post editorial by Michael Strain:

If we take money from John to give to Matthew, who would starve without it, then we owe it to John to make sure that his money is appropriately spent on Matthew’s food and shelter, not on Matthew’s alcohol and gambling.

And Bruenig asks why the same paternalism shouldn't apply to wages spent on alcohol or gambling?

But wait! Paternalism used to be the norm for waged labor!

Here's a 1931 article on Henry Ford's "shotgun gardens," so-called because employees were forced to keep them or they would be fired. Here is a quote from Henry Ford's actual press release introducing the policy:

"Next year, every man with a family who is employed at the plant will be required to have a garden of sufficient size to supply his family with at least part of its winter vegetables. Those who do not comply with the rule will be discharged. The man too lazy to work in a garden during his leisure time does not deserve a job. When the people of our country learn to help themselves they will be benefited far greater than they would be by employment insurance. If our agricultural plan is adopted throughout the country, the dole need never be thought of."

This sort of thing was really common. In The Invention of Capitalism, Michael Perelman quotes the welfare secretary of the steel giant American Iron and Steel Institute: 

regulation of his meals, the amount, the character and the mastication of them, the amount and character of drink, the hours of rest and sleep, the ventilation of rooms . . . washing of hands before meals, daily washing of feet, proper fitting of shoes, amount and kind of clothing, care of the eye, ear and nose, brushing of the teeth, and regularity of the bowel. (cited in Montgomery 1979, 40)

Yes, this company had a welfare committee (or in other words, a paternalism committee).

Why such paternalism? An early economist, James Steuart, calculated that a two full days' work at the going wage rate in Scotland was enough to support that worker (not the worker's family--just the worker) for one day. Families had to support themselves by gardening and selling products they could make by hand, such as handloom weaving. (For the record, Steuart didn't consider such sub-poverty wages a problem; he viewed it as a great efficiency, a triumph of the free market).