Misreading Political Tea Leaves

On the political will to repeal/replace the ACA, Kevin Drum (Mother Jones) gets it exactly wrong. Drum quotes a New York Times story about how political “intensity” now favors “Save Obamacare” as opposed to the “Repeal/Replace” rallies that were so prominent during Obama’s tenure.

According to Drum:

So reality has set in for everyone. The Republican rank-and-file has finally figured out they never really cared all that much about taxing the rich an extra three points to provide health care for everyone. The Democratic rank-and-file has finally figured out that Obamacare is a pretty good program and it’s worth fighting for.

No. 100% wrong. This is has nothing to do with policy and everything to do with political economy.

The rank-and-file of either party is no more or less informed about the (de)merits of Obamacare than they were before. Drum’s mistake is to think that political intensity has much to do with policy at all. To the contrary, it has far more to do with status and rivalry -our team versus theirs- and risk/reward for elected officials.

First, the status issue:

The fight against Obamacare was a fight against Obama. That campaign was successfully concluded with the election of Donald Trump. Without an actual Obama to rail against, railing against Obamacare (and all those complicated details) is a lot less fun. Plus it was exhausting. Likewise, the fight for Obamacare is now a fight against Trump, which wasn’t really possible until Trump became president. When Obama was president, by contrast, fighting for the status quo just wasn’t that inspiring. “Status Quo You Can Believe In” might have been Hillary’s campaign slogan.

What should be obvious is that people (especially the sorts of people who have the time to show up at rallies) have no real idea about how Obamacare works–not now, not before, not ever. Not even the “experts” can really agree on how Obamacare works because health insurance is a really complicated thing (really many things) with a zillion different moving parts that all interact with each other in unpredictable ways. Policymakers are guessing, just like everyone else that designs a product or makes an investment, etc. [The only difference is that policymakers get to offload the costs of their failures to someone else . . .]

Other than special interests (more on them below), the people who show up at rallies are just rallying against their diminished status as members of the losing team. Policy is besides the point.

Second, political economy:

The reason the GOP is having hard time repealing the ACA is because it’s hard to pass law generally – Congress is highly deliberative and there are a lot of mouths to feed. It’s especially hard to repeal entitlements because costs will be glaringly obvious – even if relatively small – while the benefits will be obscure – even if relatively large. For politicians, that’s a losing strategy. They favor small but obvious benefits with large but obscure costs.

Consider the political economics of repealing a subsidy: when you take a subsidy away, the loss is localized, salient and immediate, while the gains are dispersed, subtle and down-the-road. For example, if repeal will save 100 million people $1 each ($100,000,000) and will cost 1,000 people $100 each ($100,000), it’s almost certainly a great idea ($100,000,000 > $100,000) . . . but it will still be exceedingly hard to accomplish. The 1,000 people will holler “why us?! we’re so sympathetic!” and the 100 million people will be too busy to complain much about $1. That’s especially true when they’ve got so many other $1 charges on their bill it’s hard to pick just one. The only way the 100 million repealers will match the “intensity” of the 1,000 savers is if 100 Obamacares were all repealed at once. That’s a hell of a coordination and marketing problem – and again, it’s really hard to pass a law, let alone 100 laws.

Politicians live for this kind of stuff – spreading (future) costs widely and distributing (immediate) benefits locally – because that’s how elections are won. It’s also why elections create really bad incentives for politicians. Winning elections encourages a policy of death by a thousand cuts. Politicians are eager to take credit for a subsidy – 1,000 very happy voters – but when the total costs get too high, a politician can always say “my policy only costs you a dollar – blame the other 99 politicians for the high tab.” Credit is easily attributable, but blame is not.

It’s like hundreds of different credit cards all linked to the same account (paid for by millions of unrelated and exasperated parents). Each elected is eager to show off his/her shiny new purchase, but making a return will only be a drop in the bucket for the taxpayer . . . that all the other electeds will probably take credit for (without returning their respective shiny purchases).

For something like Obamacare, it’s even worse because some of the costs are sunk costs, i.e. no refunds. Shifting your business model around, building new products, and devising and implementing new policies and procedures is all really expensive. Shifting everything back will also be really expensive, and none of the money from the first shift is coming back.

When you hear people argue against repeal because repeal would be too “disruptive” that’s more or less what they mean. Of course, if something is going to be too expensive to fix if it goes wrong, then it’s probably a terrible idea to try it in the first place, unless you’re really sure it’s going to work. It’s even dumber to force everyone to try your little experiment all at once . . . because then it’s going to be really “disruptive” to clean up the mess you’ve made.

Saying repeal is “too disruptive” only demonstrates that it ought never to have been passed in the first place (which is all the more reason to repeal it). If repeal fails, Democrats will surely crow, but they’re really dancing on their own graves. If a policy as costly, disruptive and dysfunctional as Obamacare can’t be repealed, it’s just further evidence that elected officials lack the incentives to serve the public-at-large, as opposed to discrete interests. “Hooray! We’re just as harmful as you said we were!”

 

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