Brady and Kessler Interview_Oct Daniel Kessler: Probably not exactly, but where the Bill is going to come out in the end, nobody knows.

Transcription

1 Peter Robinson: For Uncommon Knowledge, I am Peter Robinson. Be sure by the way to follow us on Twitter at You can send us your comments, questions; we would love to hear from you. A political scientist, David Brady is Deputy Director of the Hoover Institution and a Professor at the Stanford Business School and at the Stanford School of Humanities and Sciences. An economist and a lawyer, Daniel Kessler is a Senior Fellow at the Hoover Institution and a Professor at Stanford Business School and Stanford Law School. Today, healthcare and President Obama and politics. President Barack Obama, before a joint session of Congress on September 10 th, the time for bickering is over, the time for games has passed. Now is the time to deliver on healthcare. In no more than one sentence, is President Obama going to get what he wants? Daniel. Daniel Kessler: Probably not exactly, but where the Bill is going to come out in the end, nobody knows. Peter Robinson: David. David Brady: I think it is unclear exactly what President Obama wants. He will get a Bill so he will sign it so maybe that is what he wants. Peter Robinson: All right, segment one, something about this looks familiar. Here is the scene the Democrat has captured the White House, Democrats control both Houses of Congress, a big majority of Americans say the government should guarantee healthcare, and I am talking about 1993, not In 1993, President Clinton s healthcare proposal, despite that scene failed so spectacularly that not a single version ever came to the floor of either the House or the Senate for a vote. Why did Clintoncare collapse David? David Brady: Oh, it collapsed because the policy was too complicated, it was held by Mrs. Clinton in secret hearings and it was too far to the left. So if you really think about it, what matters, when people normally think about the life cycle process, they think the 218 th voter in the House of Representatives. Peter Robinson: Smack down in the middle. David Brady: Right, who was the 50 th Senator? The way to really think about is who is the 60 th Senator on the conservative side. So if you have a policy proposal that is too far left or that a filibuster can move the policy toward the right. Peter Robinson: Okay, now take a moment, this actually is important. The number 60 not 50 and the importance of the filibuster. Why does that shift the decision making power in the Senate off to one side of the spectrum rather than leaving it right smack in the middle? David Brady: It shifts it off to one side because if you think about getting the 50 th vote, if you think about getting the 50 th vote, and that policy is too far left or right, and the 40 th Senator or the 60 th, say in this case because the policy is a liberal policy, the conservative Senator, the 40 th most conservative Senator can bleed a filibuster and the only way you can break the filibuster is move the policy more toward him. The Clinton people proposed a policy too far left and they waited too long Page 1 of 17

2 and sort of toward the end there was the Cooper Bill and there was the Jaffe and the Moynihan tried to cut the coverage to bring to the Bill to the Senate, but it was too late and they never got it there. Peter Robinson: So, I just want to make this one almost mechanical point that gets overlooked, except in your model, to close a filibuster, first of all remember the Senate has the right to stand up and filibuster which means talk and talk and talk without end. You can hold up legislation in the Senate of the United States indefinitely. To vote to shut down a filibuster requires not 51 votes, but 60. David Brady: Right. Peter Robinson: So the threat of a filibuster can stop any major piece of legislation and to get that legislation through you need not 51 votes, but 60. David Brady. Sixty votes. Peter Robinson: So you got, okay. David Brady: And there are a bunch of moderate Democrats some blow dogs. Peter Robinson: Are we in 1993 still? David Brady: Yeah, 1993 or today, the focus is on the same set of people, moderate Democrats. Can you get the votes of the Maryland through Louisiana? Can you get the votes from the Arkansas Senators? Can you get Nelson out of Nebraska? There are Democrats, elected from conservative states. But they are under pressure, electoral pressure to say, I cannot go too far to the left because my State is not that far left. And therefore, they can move policy toward them. Peter Robinson: So we hear over and over again that you have to aim for the middle of the Senate, that is quite not true, so moderate or smack down in the middle Democrats will not do. President Obama address the present case, actually has to get over to 60 Senators, which means he has to bring along a couple of conservative or a handful of conservatives. David Brady: He has to, if you think about it like this, Senator Backus of Montana is right about in the middle. He is not ideologically, he is not enough. You have to go 10 persons to his right to get 60 votes. That means think about here, looking at Enzi, you are looking at Collins. Peter Robinson: Collins of Maine? David Brady: Collins of Maine, Enzi of let me see where is Enzi from, sorry. Peter Robinson: Get it up on the website. David Brady: Oh Wyoming, Enzi is from Wyoming and Nelson from Nebraska and Blanche Lincoln from Arkansas. Those are conservative that they have to have their vote. Page 2 of 17

3 Peter Robinson: Okay, so that is sort of the mechanical piece of your model in decision making. When I say your model, I am talking about the paper the two of you wrote on healthcare also makes a great deal of the condition of incomplete information under which legislatures are being asked to cast their votes, frame up their positions and cast their votes, explain that. Daniel Kessler: Well the uncertainty of actually legislation of this size is huge. First there is the uncertainty about what effect the legislation will have which nobody knows. And second is even if you knew Peter Robinson: That is actually, he just said that in a very straightforward and calm manner, but that is actually very provocative assertion. The effect of the legislation if you ask President Obama or his Chief of Staff Rahm Emanuel hoping to improve healthcare in the country will be to cut costs and extend coverage to the uninsured. Those are the effects of legislation. Daniel Kessler: Those effects are highly uncertain. We do know that coverage will probably expand given most of the Democrat Bills that are being proposed by how much there is a wide range of estimates. How much will it cost? Nobody really knows. The CBO has scores as to what they predict it will cost the government, but how much it will actually cost families is an open issue. Peter Robinson: So you are asserting that even though the President of the United States said in his September 10 th address to the joint session of Congress I intend to extend coverage to the uninsured, I intend to cut healthcare costs and I will not add one dime to the deficit in doing so. Every thoughtful member of that Chamber and every thoughtful member of the press covering him knew that it is much more uncertain than that. Daniel Kessler: As does I am sure President Obama. I mean speaking in political arena; you need to speak in focused terms like that. But everybody knowledgeable about this knows that there is a lot of uncertainty. But the uncertainty about the policies affects is only the start of the problem. Even if you know what the affects were, it is very hard to know how voters will react. How voters will read those affects and those two sources of uncertainty compounded with one another, mean for a member of Congress interested, not surprisingly in getting reelected, that they are going to be highly reluctant to back something where they may have a majority in their district or their State who end up worse off than us and that matters. David Brady: Take 1993 Peter Robinson: Yes go ahead David Brady: In 1993 the Harry and Louise commercials what were they about? Those proposals said you know if you vote for this, if this passes you might not be able to choose your own doctor. And then people thought, I remember members of Congress are going, gee could that happen. And even if they thought, well I am not quite sure, how will the voters react if I am voting to it even it would not happen because the next election we will not know by that time. So the combination of those two things and under conditions of uncertainty, you favor the status quo. Peter Robinson: Okay. Page 3 of 17

4 David Brady: You know the status quo. Brady and Kessler Interview_Oct Daniel Kessler: Absolutely, and you can get reelected on the status quo. Peter Robinson: Segment two, we have been talking about Clintoncare, let us more decisively to the present moment, Obamacare. Nineteen ninety-three to 2009, President Obama comes into office knowing that Bill Clinton a very popular President in 1993 got nowhere on healthcare and yet President Obama is plowing ahead with it. What has changed? Has public opinion changed? Has healthcare itself changed? What is different? What enables him to think he can get it? David Brady: Well, we think that one of the things that has happened is there is slightly more, slightly more, very slightly more people want change. Secondly Peter Robinson: You are talking about the polls. David Brady: Secondly, the Senate is a little further left than it was in 1993 and third and Dan can speak to this better than me, note that none of these plans were as far left as Mrs. Clinton s because everybody says you like your present healthcare policy you can keep it. Now that is an important, that is an important point. That has changed, so it is not as far left and the second thing is the Democrats remember 1994 election and what happened when they did not pass and the President has not been keeping it all in the thing, he turned it over to the House, he has been criticized by some people for saying why would you let them write it, but the fact is he is a lot further toward getting a Bill than Clinton was as you pointed out, not a single Committee vote, he already has two Bills passed in Committee and he is certainly going to have another one in the Senate by the end of the week. David Brady: Yeah, I think the Obama Administration is definitely learned from the Clinton Administration s mistakes along all the lines that they have suggested. But whether or not they are going to get a Bill is still uncertain. Even if they do, it is never going to have everything that they wanted in it from the start. It is going to be a compromise position and so I think that just the experience at having been defeated in 1993, has made the Democrats more amenable to compromise. So you can already see things like that starting to happen. So I think that works in their favor. I think that healthcare costs are higher now than they were in 1993 which militates in favor of reform. Peter Robinson: Let me just take one step back. David Brady: Sure. Peter Robinson: Will return to President Obama and his plan in a moment. Why does healthcare need to be reformed? Let us just ask the baseline question, what is wrong with healthcare in America? You quote in y our article Gallup polls saying that in 2007 and 2008 the number of Americans who rated the healthcare they receive as good to excellent was deep into the eighty percents. David Brady: Yes. Page 4 of 17

5 Peter Robinson: Eighty seven percent is the number that I recall. So what is wrong? David Brady: Well what is wrong is that we have let costs get way out of control and there have been a number of sort of nasty side effects from that. The first nasty side effect is people are not insured. People are not insured because they cannot afford health insurance. The second nasty side effect is flat wages over the past decade or so. The flat real wage growth can be explained entirely due to the rise in real benefit costs, primarily health insurance. We waste a lot of this money. Everybody acknowledges this. There are differences in views about how much waster there, where the waste is but whether the fact that we waste money there is no dispute. So those factors together are a problem. Is it a crisis? No I do not think it is a crisis. Is it a serious problem requiring policy reform? Yes absolutely so. Daniel Kessler: But maybe not in the short run. David Brady: Well, in the long run the costs will Daniel Kessler: If they continue the costs will continue to rise is fact. David Brady: They will hobble along for a while for sure. Peter Robinson: So the next basic, thank you very much, that sort of hurdle question number one. Here is hurdle question number two in my mind to understanding the present situation. Before you even begin to get to the details of the legislation, why one massive Bill. Why not fix a little bit of this here and a fix a little bit of this there which is after all the way the Congress of the United States mostly addresses problems. It will try something here, try something there, wait, see and President Obama is not doing that. Daniel Kessler: It is not clear to me that is the way we are going to wind up in the end anyway, I mean of course from the Democrats perspective they have an extremely charismatic leader, a very high approval ratings, they have Peter Robinson: Dropping, dropping, they dropped by a third at least since he took the Oath of Office. Daniel Kessler: It is inevitable that the honeymoon would slowly phase out. But they have control of both Houses of Congress. They are coming off a big economic crisis that has only enhanced people s support. Peter Robinson: You are giving an argument saying they are doing it in one gigantic Bill because they can. Daniel Kessler: Absolutely. Peter Robinson: I want to know the motivation. Why do they think they should? David? David Brady: Because the campaigns, if you think about, in my view, there is campaigning in governing and campaigning makes you go out and promise things to the core, which in the Page 5 of 17

6 Democratic Party is left to center. So Mrs. Clinton you may remember the debates and Edwards were constantly hitting Senator Obama up with the notion that you do not cover everyone in this healthcare, mine does. And so there was an obligation, you come in, these are the plans I wish to do and if you are going to do it, you better go big because if you go small, first of all Obama is getting a lot of criticism from bloggers on the left as it is. But, if you went smaller, it would be even worse. Daniel Kessler: That is true. David Brady: And I think Dan is right, the end process, not clear the end process will not be more like the piecemeal approach. Peter Robinson: Let me ask you both to address this one briefly because we are at the end of the segment but it is a good question and it comes from an Uncommon Knowledge viewer called Lance K. Hill who sent it in via Facebook. He writes in 1976 the health economist Victor Fukes wrote in the Journal of Law and Economics which I know is your bedtime reading Daniel and he indentified four characteristics of the United States that make this country particularly resistant to healthcare, to a national healthcare plan. Distrust of government, heterogeneity of the population we are different kinds of people, a robust voluntary sector and less sense in this country of noblesse oblige, obligations of the government than in Europe. You buy that and have things changed since 1976? David Brady: I buy most of it, but as Dan and I showed in an article in Health Affairs there is also a fact that people do not really want to pay for benefits for other people. Peter Robinson: So there is a fifth factor, we are tight fisted. David Brady: Well Victor in his other work because agreed with that. Daniel Kessler: I do not think Victor is saying that we will not have some kind of reform that gives additional assistance to lower and middle income people to buy insurance. I think what Victor is saying is we are never going to have something like the British NHS in this country. I think that is right, we never will. Peter Robinson: You do? Daniel Kessler: Oh yeah. Peter Robinson: Okay. Daniel Kessler: And for the reasons that Victor outlined, but that is not what is on the table here, that is not what the President has been proposing, it is not what is in front of Congress. What they are proposing is adding on to our existing system a system of income supports for people who currently cannot afford insurance. David Brady: Dan and I disagree on this. I think over the long haul we will move towards something more like the British system. I think this is Page 6 of 17

7 Peter Robinson: That is what the left of the Democratic, that is what the left in the Democratic Party wishes isn t it? That is why the government option has been so important right? Daniel Kessler: I think so. I can see no other rationale for this so called public option, but some people do not agree. Peter Robinson: All right. Segment three, from the politics to the policy. And I want a little historical perspective here gentlemen. Once again, let me quote President Obama on September 10 th I am not the first President to take up this cause. Theodore Roosevelt first called for healthcare reform and ever since, nearly every President and Congress has attempted to meet this challenge in some way. Now, he is historically provocative, he is making a point there and nobody has spent a century calling for the reform of the clothing industry. Nobody is trying to reform auto insurance at the national level. What is distinctive about healthcare? Why is this endless debate in this country going back roughly a century? David Brady: Because there are issues of life and death. It is your mother that is sick, how long does she get to live. I am sick, it is my daughter sick, how much do you spend. My personal view is there is no amount of money that should not be spent to keep my daughter alive. So, there are life and death issues and that matters to people. By the way of quote of President Obama is that not only is it wrong in the sense that if he got everything he wanted in this Bill, the public option etcetera, the next President and the next President and the next President would be dealing with the issue of cost of healthcare. It will not go away until you fix it in some way that you can get the costs down. Peter Robinson: Well, okay, let us take that as witness the National Health Service in Britain where both sides, once you get National, okay, here let me ask you this. Mark Stein makes the following point. Once the government, once it is accepted that the government is responsible for healthcare, you transform the entire politics of the nation and that will forever more be the dominant issue in the politics of a nation or very close to the top as witness Britain. It becomes impossible even for the right; even Margaret Thatcher never suggested dismantling the National Health Service. You trap the entire political system in this endless debate about how to manage it a little bit better here or a little bit better there and it never; it is a tar baby for an entire politics of a nation. What do you make of that? Daniel Kessler: I mean I am not sure that the British are any more trapped in debating healthcare than we are or than other countries like the Netherlands who have a nominally private system of healthcare provision with a set of income supports very much like what President Obama is suggesting. I think the fundamental issue is what they have started with. These are issues of life and death. I consume a lot of real resources and it is a risky endeavor. It is something that you need insurance for and once you have insurance you have the standard economists morale hazard problem. You have cost growth and everybody is suffering from the same problem. So I am not so sure that we are any worse or any better politically than anybody. Peter Robinson: Well the point is not that we debate it any less, but that in Britain even the right, there is no longer any option for a serious politician to suggest turning over, returning a large portion of the healthcare system in Britain to the free market. That is just not a political option. Page 7 of 17

8 David Brady: There is no option in the United States to end Medicare, Daniel Kessler: Or Medicaid, exactly. Peter Robinson: But isn t that a good argument for drawing the line right there? David Brady: I think it is a good argument before, but when I spoke about the disagreement Dan and I had, the disagreement is not that we disagree of what we think, but the disagreement is going to happen in my view is over time you creep towards something where it is essentially government controlled. Dan knows the numbers better than I, but already some large portion of healthcare expenditures in the U.S. are from the government. Daniel Kessler: Yeah, through Medicare and Medicaid. Peter Robinson: Okay, then let me put this question to you as a layman. You are an expert in political science, you are an economist. It would seem to me a pretty good argument that the history of the last seven decades, from the New Deal on runs as follows: once a welfare or transfer program is enacted in the Federal Government it merely expands. It is almost never subjected to objective tests of efficacy or efficiency, it just keeps growing. Therefore, the only David Brady: Before Roosevelt, the question was welfare or no welfare. After Roosevelt the question was how much welfare. Peter Robinson: So how can you refute, if David s suggestions seems to me to be if Obama gets what he wants, the next President will want more and more and more and how can you refute, how can you resist the suggestion that we will end up with a national health service. Daniel Kessler: Well I do not necessarily resist the suggestion I do not think it is predetermined. I do think that that the evidence is that government programs tend to expand more than they tend to contract. I do not disagree with that. But on the other hand there are examples for example welfare, conical welfare where President Clinton did contract it. Peter Robinson: I beg your pardon, who contracted it? David Brady: President Clinton and the Republican Congress. Peter Robinson: This is the third time the Republicans have sent it to his desk. He signed it, he signed it yes exactly. However, let us keep David Brady: But he signed it. Peter Robinson: Daniel Kessler writing, and a couple of his colleagues writing in the Wall Street Journal recently, the President has made two simple promises. First his plan will benefit everyone who already has health insurance. Second his plan will not add to the nation s yawning budget deficit. Both claims are essentially false. Why won t the President s plan benefit people who already have health insurance? As briefly as you can. Page 8 of 17

9 Daniel Kessler: As briefly as I can. Well read the Wall Street Journal piece. Peter Robinson: Not quite that briefly. Daniel Kessler: There are basically two reasons. The first reason is that the expansion in demand for healthcare because of the expansion in coverage is going to increase everybody else s cost of insurance. It is a standard demand and supply analysis upward sloping supply curves meant that when you expand demand, prices rise. Simple as that. Peter Robinson: So Obama s plan will slosh money into the system increasing demand. Daniel Kessler: Yes. Peter Robinson: But the supply is over at any given moment fixed. Daniel Kessler: Exactly. Peter Robinson: It will take decades to add doctors and hospitals. Daniel Kessler: It will take some time. Peter Robinson: All right. Daniel Kessler: That is point number one. Point number two, why else it might not benefit people who have insurance. Well, because they are mandating all different kinds of coverage in virtually all of the plans that are being batted around, that is going to mean that the kinds of coverage that you can buy, that you might want to buy to help keep the premiums down, some of which are not going to be available anymore. They will just be mandated out of existence. That is exactly the wrong thing for Congress to be doing. Now that cost growth is hurting people so much, what we need is more innovation in benefit design, not less. Peter Robinson: David, President Obama I will not sign a plan that adds one dime to our deficits. You buy that? David Brady: Technically, no, I agree with what Dan said. Technically though he is correct in the sense that when you do a reconciliation budget the language of the budget is it says over the next decade, 10 years, the budget costs, what are the concerns, will not go over by one billion dollars. Peter Robinson: And you wish to subscribe in public on television to that? David Brady: Technically, everyone who uses reconciliation including President Reagan said exactly the same thing. So technically it is correct. Actually I agree with Dan, but the fact is President s can go on and say under the technicality of reconciliaty, turns out three years down the road it does not quite balance out, it is okay. Peter Robinson: It is somebody else s, well, could still be Page 9 of 17

10 David Brady: well, could still, right exactly. Peter Robinson: So why is that a whopper? Brady and Kessler Interview_Oct Daniel Kessler: I think the most egregious piece of that sort of that will not add to the budget deficit claim is that much of the savings; much of the funding for the insurance expansion is to come from Medicare cuts. Cuts in Medicare reimbursement. Well every year, Congress tries to cut Medicare reimbursement and every year, Medicare spending goes up. So, to claim that you are going to get real dollars from legislated mandated Medicare reimbursement cuts it is just not true. David Brady: It is a budget gimmick. The budget is we are going to cut Medicaid so we will not. But then what happens is Congress won. You may wonder how the AMA suddenly came around to support the Bill. There was a proposed 20% cut in fees to doctors. Suddenly that was not in the budget. Suddenly the AMA thought not such a bad plan. Peter Robinson: All right. Segment four, what should be done? Now I want to know what kind of healthcare reform David Brady and Daniel Kessler would advocate under two different conditions. The first unconstrained ability to implement your plan. So if you were designing American healthcare from scratch. If I could just wave a wand and make you Emperor for a day David and Daniel, what would healthcare look like in this country? David Brady: Well Dan s written a book on this with John Cogan so you should start Peter Robinson: The name of the book is? Daniel Kessler: Health, Wealthy and Wise Peter Robinson: All right. What would it look like if you could have your way? Daniel Kessler: If I could have my way, I would have something that looked similar to the American system, but with better incentives in it and with more support for people at the lower end of the income distribution. But, the key elements. Peter Robinson: Better incentives Daniel Kessler: Better incentives Peter Robinson: Provided by the federal government or? Daniel Kessler: No better incentives provided by private markets for people to choose cost conscious insurance options that got them appropriate care at reasonable costs which we do not have today primarily because of the tax incentives we all have to over consume. Peter Robinson: And the tax incentives, would anybody here like to give us a couple of sentences on what Milton Freedman saw as the original sin of healthcare. Page 10 of 17

11 Daniel Kessler: The original sin of healthcare, I do not know if this is what Milton said, but certainly from our government policy perspective, the original sin was making health insurance you get through your job excludable from taxation. Peter Robinson: Right, that is Milton s position certainly Daniel Kessler: Well Milton was one hundred percent right because that when added up across all the people who have employer sponsored health insurance, which is most people in this country, means that none of us are really concerned about the cost or rather we are only concerned about the cost to the tune of one minus the tax rate. Peter Robinson: So David, obviously the correct thing to do is to repeal that provision, which dates from the Second World War. David Brady: Exactly. Peter Robinson: And has been distorting the healthcare market in this country for six decades. David Brady: Exactly, and which President would you suggest to do that? Peter Robinson: Which leads me to the second set of conditions under which I want to examine you which is the constrained condition. You are now an Advisor to President Obama or let us to a Republican who is putting together his policy positions with the thought of challenging Obama in a couple of years. As a matter of practical politics which after all is what you have dedicated your career to examining, what can be done and what should be done? Where is the intersection? David Brady: I would say that the President has to say the kind of President by and by, would say look, you have to set the terms of the debate, you have to say that over time it is just not sustainable and so in a sense Jack Kennedy would toss ideas out, say this may not pass now, but you have to consider it. The most egregious, the problem is I think the first thing is to eliminate the tax break given to employers that we all get because that works against each of us choosing a policy where we make choices based on cost. Until you have that, until you have citizens, consumers making choices, based on affordability and making their own tradeoffs, then you are not going to have any possible reform. So given that the healthcare system is not going to fall apart in the United States for a few years, I think this is an education process. I think it is already started with McCain pushing this issue. Democrats at one time even thought about paying for some of this healthcare reform by eliminating parts of that. It did not work out for them but I think that is where you have to start. Peter Robinson: That is pretty high brow answer, meaning you have David Brady: It is not going to happen. Peter Robinson: No, no, meaning, no, no meaning you have such high regard, you have I know you well enough David to know there is some shrewd, there are wheels turning in your mind here, you actually, you have in your head some model whereby a President or a Presidential candidate can start a conversation doing what, encouraging people in academia who are like minded such that four Page 11 of 17

12 or five years you can, by giving a speech you can bring something into the realm of political reality. David Brady: Think about the conservative movement you were most affiliated with President Reagan. That did not start in Peter Robinson: It did not. David Brady: It started quite a while before with then Governor Reagan talking about those things, other people pushing those issues, the ideas of Milton Freedman. Those ideas came to a point when in 1980 it appeared clear the that government, that we needed to cut back, government was not going to solve all these problems as had been stated and you got some action. It seems to me that you really only get these kinds of solutions when a problem really gets bad. The problem with healthcare is it is not quite that bad. You have just like you said enough people say oh I am pretty happy with what I have, then you propose something that is going to change that, that is harder to do because gee, what happens to the status quo. So, the status quo over time will get worse because costs are not going down. Peter Robinson: Okay, so democracies can only make major adjustments in times of crisis or near crisis and what politicians, right minded politicians and intellectuals such as the two of you should be doing right now, is laying the predicate such that there the intellectual groundwork when the crisis comes. Is that right? Daniel Kessler: I think that is certainly a true statement. But I do not think that excludes pursing other more incremental avenues for changing the system. I do not think we have to wholesale throw out the employer exclusion. For example. Peter Robinson: Give me a couple then. Daniel Kessler: For example one thing that John Cogan, Glen Hubbard and I have proposed is extending deductibility to all healthcare spending, not just employer sponsored insurance. Peter Robinson: So if you cannot repeal the tax favored status of Daniel Kessler: You give it to everybody. Peter Robinson: You give it to everybody. Daniel Kessler: You give it to even out of pocket spending, which would at least level the playing field between insured and out of pocket spending and start to get people out of their terribly inefficient low cost sharing health plans. Another thing you can do which some of the Democrats and Republicans in Congress have now been talking about is gradually erode the employer sponsored exclusion. Start to tax very high cost plans and let that level move down with time, or only increase it at the rate of the consumer price index as opposed to medical price index. David Brady: These are tactics that ends up with the strategy being that deduction is gone in the long run. That is a tactic. You can start with those things and in the long run Page 12 of 17

13 Peter Robinson: President Obama and the current healthcare debate, just at the moment, dominate the media. But you two watch this carefully. Are there any politicians at the national level, Governors, who get this, politicians. I know they are intellectuals like you guys, but do you see anybody? Daniel Kessler: I know that in Florida, then Governor Jebb Bush and now the Governor of Florida has been experimenting with Florida s Medicaid Program and has come up with some interesting findings from there. Governors all throughout the country, both Republicans and Democrats have been experimenting with their Medicaid programs because frankly they have just been pushed to the brink on the cost front. So you do see stuff coming out of there. I think Charles Grassley obviously a very smart guy. Peter Robinson: Senator from Iowa? Daniel Kessler: Yes. Senator from Iowa been working on this issue for a very long time. There are people from both sides of the aisle that understand what is going on here. I think the problem is that the Democrats have boxed themselves in to conflicting goals that just cannot all be achieved. Namely getting costs down, getting complete coverage, they both cannot happen. Peter Robinson: Okay. David Brady: And the Republicans in my view have demogogged the issue in some sense and not offered alternatives that Peter Robinson: In Congress, in Washington. David Brady: I agree with Dan that the innovation will come in the States. The innovation will have to come. And Congress is just too hot, it is too now, they cannot afford to sit back and say oh in the long run this is what I am in favor of, they have to be either for it or against it. Peter Robinson: Right, right, okay. Segment five, we have been talking about President Obama and what he thinks he is doing on healthcare. Economists, a lawyer, a political scientist, I would like to discuss the enigma of our Chief Executive and a couple of other areas and in two or three years, the underlying question will be the same. What does he think he is doing? What does he understand himself to be doing? He assumes office during the worst economic crisis since the recession of 1982 to 1983 and he calls for a stimulus package. President Obama then permits the Democratic leadership of the House to draft the package ending up with almost nine hundred billion dollars in spending. Only a very small proportion of which will be spent within the next two years and could therefore possibly represent a stimulus. Of that even a smaller proportion is actual spending that economists would call simulative. Overwhelmingly it is transfer payments and pork; overwhelmingly it is two years and further out. What did he think he was doing? Daniel Kessler: Not being inside his head of course I cannot say. Peter Robinson: Take a shot at it. Page 13 of 17

14 Daniel Kessler: I have no idea. I mean what is clear everything you said about the stimulus package is completely right. I think that it is unfortunate that it turned out that way, but I think Congress would have acted no matter what the President did. I think the Democrat controlled Congress saw this as an opportunity and whether the President made it better or worse, that is hard for me to say. David Brady: As the Democrats essentially the left of the Democratic Party has been out of power since You might even make a claim that it was Carter was a southerner and Bill Clinton came into office as the later of modern Democrats and passed welfare policy and signed whatever it is. The facts are they have not felt they have been in control until They were going to pass that Bill. They had been waiting, David Obie of Wisconsin had been waiting for 14 years to pass that Bill and he finally has a vote. Peter Robinson: David Obie of Wisconsin, the Speaker Nancy Pelosi of northerner California, Charlie Randall of Harlem David Brady: They were all waiting around. Peter Robinson: These are living folks for liberal districts. Daniel Kessler: Absolutely. David Brody: They were not waiting around. Unlike the President, I do not know Peter Robinson: How do you grade the Chief Executives performance on that though? DO you mean to tell me, it seems to me it could be argued that the whole point of making Rahm Emanuel, Congressman from Chicago, your Chief of Staff is to indicate to those liberal lions in the House, I am in control, not you? Rahm Emanuel is going to ride herd on you. Is that simply impossible? The President did the best he could? David Brady: Rahm, I do not know if he did the best he could, but Rahm Emanuel, nobody riders herd on the House of Representatives and Senate because in the United States of America compared to the British or the German Party system, your career in Germany or Britain depends upon what the party leader thinks of you. Peter Robinson: Right. David Brady: Absolutely not true in the United States. The United States the connection is directly between the representative and his or her constituency. If they want to, think of Phil Graham. Phil Graham comes in and he is a Democrat of Texas, College Station, votes more with President Reagan from 1981 to 1982 than anybody, even the Democrats. So the Democrats strip him, they say okay you cannot be on the Budget Committee. He say bye-bye, resigns his seat, goes back home and wins as a Republican. That does not happen in Germany. So the connection is direct to the voters and the President cannot push them around too far. Peter Robinson: So the leadership. Page 14 of 17

15 David Brady: One last thing. What is the President going to say to John Dingle? John Dingle could say, oh I was here under Eisenhower, you could go through a list of about 13 Presidents. So, I will be here when you are gone Mr. Obama. So do not tell me how to vote. Peter Robinson: Why didn t John Dingle lose to Henry Waxman In? David Brady: Was not liberal enough on the environmental issues, Dingle was a Detroit guy and had for years blocked every time under café standards say the corporate fuel economy to increase the amount of miles, he fought it and won. Peter Robinson: When Ronald Reagan was President, there were many conservative Democrats in the House of Representatives. Are you arguing that the Democratic Party in the House has become dramatically more liberal? David Brody: There are very few liberal, there are very, very few conservative or moderate Democrats and there are very, very few moderate or liberal Republicans. Peter Robinson: Okay so the parties have shifted themselves, sorted themselves out in the last quarter century in ideological minds. To be a Democrat now means to be a liberal. Is much truer than it was David Brady: Much truer, exactly. Peter Robinson: All right. During the campaign, then Senator Obama called the conflicts in Afghanistan a war of necessity contrasting it with the war in Iraq which was a war of choice in his view. President Obama met last week with General McCrystal, the Commander in Afghanistan for a total of 25 minutes and were lead to believe that they had only spoken by telephone once before that. General McCrystal has now requested 40,000 additional troops for Afghanistan and President Obama has made it clear that his administration intends to review the entire situation before he makes a decision. Candidate says it is a war of necessity; President says not so fast. What is going on? David Brady: Well, again it is a campaign in governing. I thought at the time and said on a public forum that I thought Afghanistan could well be Obama s Achilles heel for the following reason. He had voted against the Iraq War and he was getting hit up on that and the one issue where McCain had him was on military affairs and protecting the country. So, in the campaign he had to be tough on one so think about the campaign and what he said was well Iraq was a mistake; we should have gone after them in Afghanistan. That was the issue. So he made a campaign promise. Peter Robinson: I too can be a war President, just the right war. David Brady: And now it is time to deliver on that and suddenly the left in his party wants to leave, George Will is calling for time to get out Afghanistan and so it is the difference between campaigning and governing. Peter Robinson: Daniel? Can you construe this? Page 15 of 17

16 Daniel Kessler: No I will leave it to Dave. I will avoid it. Peter Robinson: Okay, back to healthcare. I see here earlier I said it was 87% of Americans in Gallup polls who say their healthcare is good to excellent, it turns out it is 83%, I got that wrong. It is 83%/ Daniel Kessler: Eighty-three percent. Peter Robinson: Give us a little bit your sense of what is going to happen. David has just told us that in the House of Representatives the President gets pulled where the leaders want to go. Therefore, it seems plausible to suggest that in the House, we will come to the Senate in a moment, in the House, we are going to get a great big Federal Government extends its control of the Healthcare System Bill. It will move to the floor and it will pass. Daniel Kessler: That would not surprise me as the median House member is far more liberal than the median Senate member. It is the Senate though where the rubber will meet the road, where the constraint will be and it will be somewhere around that 60 th Senator. Just to come back to that for a moment. Peter Robinson: Where is the White House in this? Where is the President in this? You have almost made an argument David that Nancy Pelosi is running the country. Daniel Kessler: Running, she is managing the House. Peter Robinson: Okay. Daniel Kessler: I would not say that either, I mean they are supporting the efforts of Congressional Democrats and obviously they are going to sign something, the President will sign something that meets the standards that he set out. But it is in the Senate where the rubber will meet the road. What will happen is it very hard to tell. I think they will get a Bill. I had previously thought that it was possible there would be no Bill, Davis convinced me that is impossible, or that is very unlikely, that the President Peter Robinson: He must have a Bill. Daniel Kessler: The President Congressional Democrats just stake too much on it. But there is room to do stuff short of a huge new entitlement program. There are Medicaid expansions that you could easily see that happening. New insurance regulations, pre-existing condition exclusion bans, things like that. I definitely can foresee something like that. I think the public option is now officially dead. Peter Robinson: David play it out David Brady: I think it is dead because they do not have the votes, they may get it through in the House, they may not, depends on what the blue dogs do. But in the Senate they are just, I do not even think they have 50 votes for the Page 16 of 17

17 Peter Robinson: Republicans. Brady and Kessler Interview_Oct David Brady: You have Conrad and you have the North Dakota, South Dakota, then you move down you have Arkansas, Louisiana and Nelson and Nebraska, and it is just not possible for those guys to vote for that huge, for example if that public option program passed, every hospital in North Dakota would close. The reason being because they have Peter Robinson: A Republican State that happens to have two Democrats in the Senate. David Brady: Yeah, it just is not Peter Robinson: And a very popular Republican Governor breathing down their necks. David Brady: Yes. Peter Robinson: Okay so give me your best, you can even resort to probability distributions if you want to as a political scientist, what do you think is going to happen with regard to healthcare? David Brady: I think they will get a Bill and I believe that Bill will have some of what Dan said spanning Medicaid, but I think it will have State options and I want you to note that, the Amendment passed and the Finance Committee to allow the States to establish their own not for profits like North Dakota and these other States have. I think it will be much more toward the direction of these not for profits which may not be such a terrible thing if they are managed well as they are in some States. But you have to see the details on it. They will not get a public option. Peter Robinson: And the President will take this to the public, he will sign it and take it to the public and declare victory and the left will be furious? They have nowhere to go. They will support David Brady: Well you see the blogs all the time, the blogs are jumping up and down, Obama is in, Bob Hurd in the New York Times is always Obama does not get it, but when I look at the breakdown of what is happening public opinion, where the President has gone from about 60% to 51% or 52% which is where he should be Peter Robinson: Job approval rating. David Brady: Yeah, Republicans about two months ago, three months ago, or four or five months ago, the Republicans bailed out and said they do not approve of his job, Democrats are still at 90%, 88% - 90% in favor of Obama, it is the Independents who swung slightly against him on job approval now. That is where the battle is to be fought. The bloggers it is like listening to Rush Limbaugh on Glenback and Keith Oberman and so on, it is great, it is good entertainment, but that is not where the action is. Peter Robinson: David Brady and Daniel Kessler--thank you. I'm Peter Robinson, for Uncommon Knowledge, thank you for joining us. And, again, please follow us on Twitter: twitter.com\uncknowledge. Send us what you think of the show. Thanks Page 17 of 17