If President Obama’s proposal for federal regulation of health insurance rates becomes law, rates for individual policyholders likely would still climb, experts said Monday, but not by as much as insurers might want.

Roughly half the states have the power to limit or block rate hikes for individual health insurance customers. Initial increases generally get knocked down by state officials, often substantially, based on recent cases.

And holding down rates below the level where insurers could make a fair profit would only drive many out of the market, consultants and analysts said, reducing competition and reducing access ”” the opposite of what the Obama administration has been seeking.

Read it all.

A century ago, Herbert Croly published “The Promise of American Life,” a book — still in print — that was prophetic about today’s progressives. Contemplating with distaste America’s “unregenerate citizens,” he said that “the average American individual is morally and intellectually inadequate to a serious and consistent conception of his responsibilities.” Therefore, Croly said, national life should be a “school” taught by the government: “The exigencies of such schooling frequently demand severe coercive measures, but what schooling does not?” Unregenerate Americans would be “saved many costly perversions” if “the official schoolmasters are wise, and the pupils neither truant nor insubordinate.”

Subordination is dependency seen from above. Today, it is seen approvingly by progressives imposing, from above, their dependency agenda.

There is no school choice here; no voucher will enable Americans to escape from enveloping dependency on this “government as school.” The dependency agenda is progressive education for children of all ages, meaning all ages treated as children.

Read the whole piece.

…the basic system works; but that is no excuse for ignoring areas where it could be reformed. In the House the main outrage is gerrymandering. Tortuously shaped “safe” Republican and Democratic seats mean that the real battles are fought among party activists for their party’s nomination. This leads candidates to pander to extremes, and lessens the chances of bipartisan co-operation. An independent commission, already in existence in some states, would take out much of the sting. In the Senate the filibuster is used too often, in part because it is too easy. Senators who want to talk out a bill ought to be obliged to do just that, not rely on a simple procedural vote: voters could then see exactly who was obstructing what.

These defects and others should be corrected. But even if they are not, they do not add up to a system that is as broken as people now claim. American democracy has its peaks and troughs; attempts to reform it dramatically, such as California’s initiative craze, have a mixed history, to put it mildly. Rather than regretting how the Republicans in Congress have behaved, Mr Obama should look harder at his own use of his presidential power.

Read it all.

How polarized is America today? Not all that polarized by historical standards. In 1856, a South Carolina Congressman beat a Massachusetts Senator half to death with his cane in the Senate chamber ”” and received dozens of new canes from appreciative fans. In 1905, Idaho miners bombed the house of a former governor who had tried to break their union. In 1965, an anti”“Vietnam War activist stationed himself outside the office of the Secretary of Defense and, holding his year-old daughter in his arms, set himself on fire. (She lived; he did not.) By that measure, a Rush Limbaugh rant isn’t particularly divisive. Americans may yell at one another about politics, but we mostly leave our guns and bombs at home, which is an improvement….

What really defines our political era, as Ronald Brownstein notes in his book The Second Civil War, is not the polarization of Americans but the polarization of American government. In the country at large, the disputes are real but manageable. But in Washington, crossing party lines to resolve them has become excruciatingly rare.

The result, unsurprisingly, is that Americans don’t like Washington very much. According to a CNN poll conducted in mid-February, 62% of Americans say most members of Congress do not deserve re-election, up 10 points from 2006. Public skepticism about the Federal Government and its ability to solve problems is nothing new, but the discontent is greater today than it has been in at least a decade and a half. Witness the growth of the Tea Party movement, a diffuse conglomeration of forces that have coalesced around nothing so much as a shared hostility toward Washington. Or the Feb. 15 announcement by Indiana Senator Evan Bayh ”” a man who almost made it onto three presidential tickets ”” that he would not stand for re-election because “Congress is not operating as it should” and “even in a time of enormous challenge, the people’s business is not getting done.”

Read it all.

So all is coming right. Sales of existing homes in the final quarter of last year were 27.2% above the 2008 level. Home construction jumped 2.8% in January, to its highest level in six months. The mining, manufacturing and utilities sectors also grew at satisfactory rates as did retail sales.

So confident is the Federal Reserve in the recovery that it has raised a key interest rate.

Alas, every silver lining has a cloud ”” in the case of the American economy, several. For one thing, the fiscal deficit, which is fuelling some of the growth, is clearly unsustainable. Even under the rosy scenario posited by the president ”” economic growth at about twice the rate the non-partisan Congressional Budget Office is predicting ”” the deficit will still be unsustainably high, and rising, in 2020.

Congress knows this, the president knows this, and the opposition knows this. But the Democrats want to fill the gap by raising taxes, anathema to Republicans, who fear such a move would stifle growth by reducing entrepreneurs’ incentive to create new businesses and jobs. The Republicans want to cut spending, a move the Democrats say would stifle growth by prematurely withdrawing a prop from a fragile recovery.

Read it all.

After decades of warnings that budgetary profligacy, escalating health care costs and an aging population would lead to a day of fiscal reckoning, economists and the nation’s foreign creditors say that moment is approaching faster than expected, hastened by a deep recession that cost trillions of dollars in lost tax revenues and higher spending for safety-net programs.

Yet rarely has the political system seemed more polarized and less able to solve big problems that involve trust, tough choices and little short-term gain. The main urgency for both parties seems to be about pinning blame on the other, before November’s elections, for deficits now averaging $1 trillion a year, the largest since World War II relative to the size of the economy.

Mr. Bayh, the centrist Democrat from Indiana, lodged his complaint about excessive partisanship and Congressional gridlock on Monday by way of explaining his decision not to seek re-election. But he is hardly alone in sounding an alarm about the long-term budgetary outlook, which has Medicare, Medicaid and Social Security costs growing at unsustainable rates and an inefficient tax system that cannot keep up.

“I used to think it would take a global financial crisis to get both parties to the table, but we just had one,” said G. William Hoagland, who was a fiscal policy adviser to Senate Republican leaders and a witness to past bipartisan budget summits. “These days I wonder if this country is even governable.”

Read it all.

An Indian-American Muslim who is a product of the liberal, syncretic cultures of India and the United States has been appointed Washington’s special envoy to the Organization of Islamic Conference (OIC), much to the delight of Indian-Muslims who see this as vindication of their plural and moderate ethos by the Obama administration.

The White House on Friday named Rashad Hussain, an Obama acolyte who is son of Indian immigrants from Bihar, as the US envoy to the 57”“member OIC, following up appointments of several Indian-Americans, including at least two other Indian-American Muslims, to high level posts.

One of the appointees, Srinagar-born Farah Pandit, who is the State Department’s Special Representative to Muslim communities, arrived in New Delhi on Monday on a visit aimed at furthering Washington’s engagement with Muslims around the world. Obama has also named Dr Islam Siddiqui, an immigrant from Uttar Pradesh, as the Washington’s chief agricultural negotiator, although the nomination is currently held up in the Senate.

White House officials said that as Special Envoy to the OIC, Hussain will “deepen and expand the partnerships that the US has pursued with Muslims around the world” since Obama’s speech in Cairo last June in which he reached out to the Islamic world.

Read it all.

What we in the western world are about to learn is that there is no such thing as a Keynesian free lunch. Deficits did not “save” us half so much as monetary policy ”“ zero interest rates plus quantitative easing ”“ did. First, the impact of government spending (the hallowed “multiplier”) has been much less than the proponents of stimulus hoped. Second, there is a good deal of “leakage” from open economies in a globalised world. Last, crucially, explosions of public debt incur bills that fall due much sooner than we expect

For the world’s biggest economy, the US, the day of reckoning still seems reassuringly remote. The worse things get in the eurozone, the more the US dollar rallies as nervous investors park their cash in the “safe haven” of American government debt. This effect may persist for some months, just as the dollar and Treasuries rallied in the depths of the banking panic in late 2008.

Yet even a casual look at the fiscal position of the federal government (not to mention the states) makes a nonsense of the phrase “safe haven”. US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941.

Even according to the White House’s new budget projections, the gross federal debt will exceed 100 per cent of GDP in just two years’ time. This year, like last year, the federal deficit will be around 10 per cent of GDP. The long-run projections of the Congressional Budget Office suggest that the US will never again run a balanced budget. That’s right, never.

Read it all.

This touches on the still-essential question that historians will write books about: How did the president lose the room? How did he lose popularity?

The leftward edge of the left says he did it by being too accommodating, by trying for a bipartisanship that doesn’t exist. The rightward edge of the right says he did it by revealing his essentially socialistic agenda. The center has said, in polls and at the polls, that it didn’t like his administration’s first-year obsession with a health-care bill that was huge, costly and impenetrably complicated, and would be run by those people who gave you the DMV and the post office.

The political class this week blamed it on the Chicago Mafia, the longtime Obama friends and associates who surround him in the Oval Office. But even that doesn’t explain it. What did they do wrong? And why do people think Mr. Obama’s advisers are different from Mr. Obama?

Washington’s pundits have begun announcing that the White House is better at campaigning than at governing, but that was obvious last summer. The president and his advisers understand one thing really well, and that is Democratic primaries and Democratic politics. This is the area in which they made their careers. It’s how they defeated Hillary Clinton””by knowing how Democrats think. In the 2008 general election, appealing for the first time to all of America and not only to Democrats, they had one great gift on their side, the man who both made Mr. Obama and did in John McCain, and that was George W. Bush.

But now it is 2010, and Mr. Bush is gone. Mr. Obama is left with America, and he does not, really, understand it. That is why he thinks moving to the center would be political death, when moving to the center and triangulating, as Bill Clinton did, might give him a new lease on life.

Read it all from yesterday’s Wall Street Journal.

But while the president preached unity, this year’s National Prayer Breakfast was surrounded by controversy. There were signs this event on the semi-official Washington calendar may no longer be able to serve as a safe forum in which a wide variety of religious and political leaders can unite their voices. The breakfasts began in 1953 and every president since Dwight Eisenhower has taken part.

Before the event, the leaders of the watchdog group Citizens for Responsibility and Ethics in Washington sent a letter to the White House and to congressional leaders calling for a boycott. They also urged C-SPAN not to televise the breakfast. Meanwhile, a coalition of gay-rights activists and religious liberals announced a series of alternative “American Prayer Hour” events in Washington and other cities nationwide.

Both groups focused intense criticism on The Fellowship, the nondenominational Christian organization that sponsors the prayer breakfast and similar networking events in Washington and around the world. The key is that numerous Ugandan leaders are active in Fellowship activities in that country, including the politician who introduced anti-gay legislation that includes capital punishment for some offenses.

Read it all.

The 25-member council advising the White House on faith-based issues has voted on two contentious issues for religious charities that receive government funds.

By a vote of 13-12, the council members said the government should require houses of worship to form separate corporations in order to receive direct federal funding for social services.

Separately, when asked whether the government should permit charities to offer social services in rooms containing religious art, symbols, messages or scripture, 16 said yes, two said no, and seven said they should be permitted if no other space is available.

Read it all.

“I am really worried about the United States … more worried than I’ve ever been in my career,” McDonald, chairman and chief executive of the world’s largest household products maker, told Reuters in an interview at his company’s Cincinnati headquarters. “I worry about the deficit, I worry about an uncertain future.”

McDonald, a member of the U.S. Advisory Committee for Trade Policy and Negotiations who visited Washington, D.C. last weekend, said he has told government officials that they must “create greater certainty for business.”

Read it all.

…Mrs. [Angela] Braly says. “We really do have to get at the underlying question of health-care costs.”

That was the core promise of ObamaCare. Overall health costs for people insured by WellPoint increased by 8.9% in 2009 alone, and arresting this climb was the reason so many industry groups, not only the insurers, joined with the White House and Democrats. Nobody thinks the status quo is a success. But as Mrs. Braly notes ruefully, “The nature of health care is very complex, and sometimes the nature of politics is very simple.”

The tragedy, as she sees it, is what “a wasted opportunity” it all turned out to be. “Health-care reform” soon became “health-insurance reform” exclusively. “It was a pivot that was””unfortunate,” she says, “because it is not going to solve the longer-term problem.”

It’s hard to see how WellPoint could be to blame for surging health spending, Mrs. Braly says, when 85 cents out of every premium dollar or more “is paid out in the actual cost of care, doctors, hospitals, suppliers, drugs, devices.” Confiscating the 2009 profits of the entire insurance industry would pay for two days of U.S. health care.

Read it all from this Weekend’s Wall Street Journal.

[Reinhold] Niebuhr is getting attention again because he has a fan in the Oval Office.

In a widely cited New York Times column, President Obama called Niebuhr his “favorite philosopher.” But how precisely has Niebuhr’s philosophy influenced Obama and his handling of everything from health care reform to fighting terrorists?

The answer may be seen by looking at Obama’s first year in office, several scholars, and a relative of Niebuhr’s, suggest.

Read it all.

The US economy is in a mess ”“ even if growth has resumed, and bankers are once again receiving huge bonuses. More than one out of six Americans who would like a full-time job cannot get one; and 40% of the unemployed have been out of a job for more than six months.

As Europe learned long ago, hardship increases with the length of unemployment, as job skills and prospects deteriorate and savings gets wiped out. The 2.5-3.5 million foreclosures expected this year will exceed those of 2009, and the year began with what is expected to be the first of many large commercial real-estate bankruptcies. Even the Congressional Budget Office is predicting that it will be the middle of the decade before unemployment returns to more normal levels, as America experiences its own version of “Japanese malaise….”

Three things can make a difference: a second stimulus, stemming the tide of housing foreclosures by addressing the roughly 25% of mortgages that are worth more than the value the house, and reshaping our financial system to rein in the banks.

Read it all.

Don’t get confused by the size of the numbers at stake. Pay attention to the ratio of cumulative debt to the size of the national economy. That will tell you how easily we can manage the debt.

The debt-to-GDP ratio right now is close to 53%””still in the manageable zone. But after the boomers hit retirement, it will soar. One of the most telling figures in the president’s budget document is the Congressional Budget Office’s projection that by 2020 the debt-to-GDP ratio will be 77%, assuming no entitlement reforms. That’s bad news. The ratio is moving in the wrong direction. At some point, the dollar could tank and interest rates explode.

—Robert Reich in today’s Wall Street Journal

I understand that positioning for the next election, partisan politics and lobbying money are a deadly combination to any possible reform. But its so obvious to me watching these folks push and shove good ideas away that they: 1) are utterly clueless how all of this (credit crisis, recession, housing bust) happened; b) have absolutely no idea how to fix any of it; iii) are primarily concerned with getting re-elected.

—Barry Ritholtz

The Obama administration projects rosier economic-growth prospects than most mainstream economists do but a sobering jobless recovery, according to documents released Monday about underlying assumptions in the government’s $3.83 trillion federal budget for 2011.

Other documents outlining proposed tax cuts and hikes reveal that the administration, concerned about growing income inequality, seeks to pay for a number of programs to help the middle class by taxing the wealthiest Americans and imposing new taxes on corporations, especially those with international operations.

The administration created a public relations nightmare for itself last year when it came into power forecasting an optimistic 8 percent unemployment rate. Policymakers then watched in horror as the jobless rate climbed to 10.2 percent before dipping back to 10 percent in December.

Read it all.

President Obama was forced to concede today that the US deficit will soar to record levels this year as he unveiled a $3.8 trillion annual budget that faces a perilous passage on Capitol Hill and could decide the fate of his presidency.

Blaming the extraordinary levels of government debt on the profligacy of his predecessor George W. Bush, Mr Obama said that the deficit would reach nearly $1.6 trillion this year, far more than the White House predicted last year and a staggering level that is alienating voters.

Mr Obama, facing a difficult political landscape and an economy where one in ten Americans is still unemployed, sought to present a budget with dual priorities: bringing down the deficit while spending billions of additional dollars to create jobs.

Read it all.

I do not know about you but I don’t have the ability to comprehend the magnitude of these figures. In any event, read all the links.

President Barack Obama will propose on Monday a $3.8 trillion budget for fiscal 2011 that projects the deficit will shoot up to a record $1.6 trillion this year, but would push the red ink down to about $700 billion, or 4% of the gross domestic product, by 2013, according to congressional aides.

The deficit for the current fiscal year, which ends on Sept. 30, would eclipse last year’s $1.4 trillion deficit, in part due to new spending on a proposed jobs package. The president also wants $25 billion for cash-strapped state governments, mainly to offset their funding of the Medicaid health program for the poor.

Read it all.

Will an 82-year-old veteran central banker be the man who finally stops the music for the bankers of Wall Street?

A Congressional hearing in Washington on Tuesday may well provide the answer.

A week ago, US President Barack Obama, appeared to be telling America that the ideas of Economic Recovery Advisory Board chairman Paul Volcker would be the centrepiece of his plan to make the global financial system safer, announcing that the “Volcker rule” would determine the future of the world’s banks.

But since then, there has been complete confusion as to exactly what the President and Mr Volcker have in mind.

Read it all.

…it should not be impossible for a president who pledged to change Washington’s culture to introduce a note of competence and sobriety in his justifiable fight against banks.

Not that the financial industry has done much to deserve a more adult debate. Wall Street’s normally loquacious titans have so far been deafeningly silent. Their contributions to a battle that could shape their industry for years have been limited to private rants and a misguided attempt at suing the government. (Only bankers could think that hiring lawyers would increase their popularity.)

Here is a novel idea for banking chiefs: get down from your ivory towers and propose (not lobby for, propose) a plan to reduce reckless risk-taking without harming the financial system or the economy. A nation awaits.

Read the whole piece.

Despite the length of the speech – it lasted 70 minutes, making it the longest since he shot to national attention with his perfectly pitched address at the 2004 Democratic convention – it was short on detail. At times it seemed like a laundry list of proposals that could have been issued at any time.

Mr Obama laughed a bit at himself. This was uncharacteristic and disarming. But he insisted that he would press on. “We don’t quit,” he said as he reached his final crescendo. “I don’t quit.”

Despite some attempts at optimism, Mr Obama’s underlying message was the same as his campaign theme – that Washington is broken. At the end of the speech, however, no one was any the wiser as to whether he even knows how to fix it.

Read it all.

President Barack Obama’s message to the country Wednesday night boiled down to a Reaganesque mantra: Stay the course.

Stick with the man they elected 14 months ago to change Washington. Trust that his stimulus plan, now projected to cost $862 billion, is lifting the country out of its worst economic mess in 80 years. Push forward to enact the rest of his blueprint, including at least some overhaul of the country’s health care system, to build a strong recovery.

Sure, Obama tried to tap into the voter anger and anxiety about the economy in his first State of the Union address, hoping to channel it rather than being overrun by it, as the Democratic Party in Massachusetts was last week. He added some new proposals, such as $30 billion to small banks to encourage lending and tax breaks for small businesses, calling them just more steps in his plan to grow the economy and create jobs. He also vowed to start reining in soaring budget deficits.

Yet despite the stinging defeat his party suffered in Massachusetts, the erosion of his own political support and calls from Republicans and moderate Democrats to change his agenda, Obama signaled that he’ll make no abrupt turn from the path he set more than a year ago.

Read it all.

As the CBO notes, Fannie and Freddie “purchase mortgages at above-market prices,” driving down interest rates and passing some of the savings to home buyers. That subsidy is felt right away, but the risks in providing it are stored up over time, and their real costs may not be felt for years or even decades””as was the case in the years leading up to their spectacular collapse in 2008.

Yet this is precisely the fiction that the Obama Administration seeks to preserve by keeping the cost of Fan and Fred off the government’s books. The Administration’s budget accounting assumes Fannie and Freddie are private companies. So under its preferred treatment, the only recognized cost to taxpayers is the money that is being pumped in to keep them afloat””$110 billion so far.

That’s plenty as it is, but in the wake of their government takeover, there is no justification for pretending that their risks aren’t taxpayer risks. This is all the more true with the likes of New York Senator Chuck Schumer giving the companies marching orders to rescue tenants in the Stuyvesant Town development in Manhattan.

Read it all.

Obama pledged to spend money to fix the economy now while pushing for longer-term efforts to cut the deficit. He continued to strike a populist tone in calling for tougher rules on banks and for rolling back a Supreme Court decision vastly expanding the influence of corporations in electoral politics. “I don’t think American elections should be bankrolled by America’s most powerful interests,” he declared, “or worse, by foreign entities.”

At the same time, Obama sought to grapple with public unhappiness over the economy, a particularly strong sentiment among working-class voters, who have most felt the lash of hard times. It was clear that if Obama did nothing else, he would identify himself with the word “jobs” and shout his determination to bring them back.

It was also obvious that he realizes his administration lost two critical battles last year: to define his stimulus plan and his health-care proposal. Polls show that Republicans’ negative claims have stuck with voters, while the administration’s arguments for the merits of both plans have not.

Obama made the case for his ideas again, but he also challenged Republicans to do more than criticize.

Read it all.

* Middle Class Relief. These are the type of proposals that work for politicians in normal economic times. In bad economic times, the middle class (and others) do not want symbolism and sympathy. They want economic growth and jobs.

* Economic Growth and Jobs. Tonight the president had one main task: to make a credible case that his policies will help reduce unemployment. For the most part, he failed. His proposal to cut the capital gains tax for small business investment seems positive. His other ideas — taking money from some bankers and giving it to other bankers and a temporary hiring tax credit — are a caricature of job-creation policy. For the most part, Obama defended a continuation and expansion of the stimulus package, which promises to bring prosperity on high-speed trains. Compare Obama’s speech to John Kennedy’s State of the Union in 1963, which called for permanent tax cuts that would allow America to move toward full employment. Some Democratic presidents have actually understood how the economy works.

Read it all.

One year had taken him from a self-professed unifier to a historically divisive president; from the man selected to solve the country’s problems to the person often disparaged as their cause. He squinted against the lights and stared hard at the audience for his first State of the Union address, looking a little grayer, a little older than when he assessed the country in the same venue last February. A circus of cameras and power brokers stirred around him, yet he stood alone at a single microphone, quieting the crowd with a series of somber nods.

It had been, Obama told the audience, “one of the most difficult years in our history” — and it had been one of his most difficult years, too.

The president had plenty of reasons to be frustrated Wednesday night, and he channeled all of them during his 71 minutes at the podium. The poker player so often lauded for his evenness was instead pleading and persistent, frank and angry. His words as much as his body language suggested a shift, that this was the time not only to address the populist aggravation but to make it his own. He pressed his forefinger against his thumb and made jabs at the air to accentuate his points. He told the crowd that he “hated” the bank bailout, that he wanted the government to match the public’s “decency,” that he was tired of “the numbing weight of our politics.”

“How long should we wait?” he asked. “How long should America put its future on hold?”

Read it all.

Abroad, America’s greatest source of strength has always been our ideals. The same is true at home. We find unity in our incredible diversity, drawing on the promise enshrined in our Constitution: the notion that we are all created equal, that no matter who you are or what you look like, if you abide by the law you should be protected by it; that if you adhere to our common values you should be treated no different than anyone else.

We must continually renew this promise. My Administration has a Civil Rights Division that is once again prosecuting civil rights violations and employment discrimination. We finally strengthened our laws to protect against crimes driven by hate. This year, I will work with Congress and our military to finally repeal the law that denies gay Americans the right to serve the country they love because of who they are. We are going to crack down on violations of equal pay laws ”“ so that women get equal pay for an equal day’s work. And we should continue the work of fixing our broken immigration system ”“ to secure our borders, enforce our laws, and ensure that everyone who plays by the rules can contribute to our economy and enrich our nations.

In the end, it is our ideals, our values, that built America ”“ values that allowed us to forge a nation made up of immigrants from every corner of the globe; values that drive our citizens still. Every day, Americans meet their responsibilities to their families and their employers. Time and again, they lend a hand to their neighbors and give back to their country. They take pride in their labor, and are generous in spirit. These aren’t Republican values or Democratic values they’re living by; business values or labor values. They are American values.

Unfortunately, too many of our citizens have lost faith that our biggest institutions ”“ our corporations, our media, and yes, our government ”“ still reflect these same values.

Read it all.