Prerequisites for Peace in Palestine/Israel [feedly]

Prerequisites for Peace in Palestine/Israel
http://www.globalpolicyjournal.com/blog/12/09/2017/prerequisites-peace-palestineisrael

his people-focused contribution questions fundamental assumptions about the persistence of the Palestinian-Israeli conflict and discusses prerequisites for alternative strategies. It argues that without addressing people's perceptions and beliefs, peace will remain elusive. It also argues that moving beyond the cycles of failure and impasses requires serious engagement in a process of decolonization of Palestine, new framings and new assumptions to understand why this conflict persists. Only by addressing the imbalances of power and ending the Israeli occupation in the short term can future long-term solutions be discussed. A version of this chapter first appeared in Mediterranean Politics. This version will appear in the forthcoming e-book 'The Future of the Middle East' co-produced by Global Policy and Arab Digest, and edited by Hugh Miles and Alastair Newton. 

The distorted peace process between Palestinians and Israelis assumed that the Palestinian‒Israeli conflict is solvable and will reach an end in the near future. This simplistic assumption needs to be reversed, this contribution argues, in an attempt to look for realistic and workable alternative solutions. What if the underlying assumption of the peace process was that this conflict is persistent, protracted and possibly unsolvable? How would this new assumption affect the available set of policy options and interventions? And how would a different starting point impact on the Palestinian and Israeli strategies?

These questions are not merely posed as an intellectual exercise but are inspired by the complex dynamics of the conflict, the embedded vested interests and realities on the ground, and the asymmetric power relations. Evidently, a just and lasting peace is very far off. Indeed, it is a myth to claim that a  negotiated peace is around the corner, or that the two-state solution is the only viable option for a lasting peaceful settlement and the realization of fundamental rights. Realizing rights and the traditional two-state solution have proved to be incompatible spheres. Rather, any analysis should start from the one-state reality (State of Israel) – not to be confused with the one-state solution – its nature and policies, its apartheid structures and regime, and its colonial settler project in the occupied West Bank and Gaza Strip.

However, beginning the search for alternative strategies and visions from this starting point necessitates a number of prerequisites or pillars to allow the Palestinians and Israelis to engage in a process of positive change. For the Palestinians, the absence of a unified, representative and accountable political leadership, the absence of a culture of debate, and fragmentation on all fronts are some of the factors that define their weakness. For the Israelis, underpinning factors for the persistent impasse include an unwillingness and inability to recognize and feel the costs of the military occupation, the overall feeling of superiority, and the failure to address the demographic phobia ‒ and the associated phobias ‒ in the collective narrative.

Homework for the Palestinians

To address the leadership legitimacy gap, Palestinians are in desperate need of new intellectual leadership. It must revive and re-shape Palestinian political thinking and work towards intellectual cohesion in order to offer alternative strategies and visions that guide political actions. Indeed, it is a precondition for recreating the Palestinian political system. This intellectual leadership needs to be inspired by the people's voices and aspirations, by thinking outside the box towards creative and realistic – not in the conservative sense – solutions. The existing Palestinian political system marginalizes the Palestinian people, particularly the refugees, and pushes them to the periphery of the political system instead of bringing them to its core. Over the years it has also entrenched a personalized and neo-patrimonial style of governance.

The leadership should not be allowed to use the sacrifices and suffering of the Palestinian people to achieve narrow political and, sometimes personal, goals that benefit the few (elite) not the many (nation/society). This will only be possible when a culture of accountability becomes the rule rather than the exception, and when the Palestinian people decide to sit in the driver's seat of the governance processes by challenging and clashing with the multiple levels of internal and external forms of repression and injustice.

The Palestinian people's ownership of their political system will not only ensure public accountability, but it will also bridge the legitimacy and trust gap. The first question that any new Palestinian intellectual and political leadership needs to address is: where are the Palestinian people in their political system? This is not a utopian vision, but rather a very basic one if democratic rule is the objective. What is required is a new dedicated Palestinian leadership that rejects the fundamental pillars of the Oslo Peace Accords and the existing rules of the game (the matrix of control). Rejecting the Oslo Accords fundamentally is not a rejection of peace, but a rejection of slavery and oppression that has persisted for decades. Indeed, without confrontation with Israel, Palestinians will never escape the status quo, which is the favoured scenario for Israel. Confronting the occupier, colonizer or oppressor is the main lesson from the history of liberation movements across the world.

Currently, and after a quarter of a century of failed negotiations and peace processes, this confrontation strategy in local and international theatres, and at the micro and macro levels, for instance by using boycott, divestment and sanctions (BDS), the International Criminal Court (ICC) or other forms of resistance to realize rights, is the only way to address the imbalances of power between Palestinians and Israelis. Unless the power asymmetry is addressed and the military occupation of the West Bank and the Gaza Strip is ended there will never be a lasting and just peace. It is crucial to highlight that ending the occupation is necessary for either the one-state or two-state solution.

Homework for the Israelis

As for the Israelis, the continuous shift towards electing ultra-right-wing leaders, some of whom do not even consider Palestinians as fellow human beings or reject them as a nation, does not provide grounds for optimism. During the summer of 2015, I was able to spend considerable time exploring parts of historic Palestine, Israel today, and talk to many Israeli people from different backgrounds and levels of religiosity, without revealing my identity as a Palestinian. This exercise showed me how far removed the attitudes and beliefs of 'ordinary' Israelis are from the Israeli occupation, which in most cases is only 15–60 km away. In other words, it showed me how large and well-sealed the Israeli narrative bubble is in avoiding recognition of the occupation.

The Israelis I talked to either refused to consider the current situation as an occupation, or they really struggled to understand what I was referring to. How can it be that the biggest elephant in the room can be so easily missed? This remains an open question. However, answering this question may also provide part of the solution. Unless 'ordinary' Israelis recognize the occupation and acknowledge it as the main source of their insecurity, there is very little hope for peace. The role of the international community, particularly the European Union, is crucial here to start the process of recognition, through tactics of boycott, divestment and sanctions, but also by refusing to subsidize the Israeli occupation via the international aid industry in the West Bank and Gaza Strip. Measures that have daily economic, political, moral and personal impact on 'ordinary' Israelis are necessary prerequisites for changing the future dynamics of the Palestinian-Israeli relations.

Another observation from my small, random and unrepresentative sample is the sense of superiority. Liberal, leftist, fundamentalists, secular, religious and progressive voices, from different generations living in different cities, shared the feature of superiority, which is problematic at the very personal and human level, before it extends to politics. Statements like 'we are God's chosen nation', 'we don't care about international law', 'we help those poor Palestinians to end the occupation', 'we offer Palestinians jobs and they work for us', 'Gaza is irrelevant', and 'I have Palestinian friends but would never trust them' characterized the discussions. Therefore, unless 'ordinary' Israelis perceive themselves as ordinary people and not superior to other nations it is impossible to imagine how a one-state or two-state solution could work.

Furthermore, just as the Palestinian people and leadership need to engage in a serious process of reforming their strategies, so do the Israelis. The Israelis need to reconcile internally a number of issues mainly related to apartheid structures, Jewish supremacy, the Jewish nature of the state, the demographic phobia and the return of the Palestinian refugees from exile. The status of Jerusalem, however, remains a key issue that needs to be tackled urgently due to its centrality in the current and future dynamics of the Palestinian‒Israeli relations. Israelis must not underestimate what Jerusalem means to the Palestinian people. Nothing can illustrate this better than the protests and acts of resistance that erupted in occupied Palestine in October 2015 and July 2017. It is a daunting task to address these issues and to debate them. However, these issues cannot be dismissed if the different actors are interested in finding realistic solutions.

Towards a Lasting and Meaningful Peace

This selected set of personal observations and broader themes may help assess the future of Palestinian‒Israeli relations. In short, I argue that a people-focused reflection and understanding is the missing element in the vast majority of analyses, and that without popular legitimacy, without bringing people back to the core of the political systems, and without the fulfilment of people's aspirations, peace will remain elusive and the conflict will remain unsolvable. The perceptions of the people, their fears and sufferings, their set of values and beliefs, and their powerful narrative can no longer be neglected if we are interested in achieving justice and equality. However, the conventional tools, assumptions and frameworks are fundamentally flawed. Moving to alternative frameworks and tools necessitates first and foremost a firm acknowledgment that the existing framework must be laid to rest.

Nearly a quarter of a century of failures reveals where the problems lie. Indeed, it exposes the deficiencies of an approach that dismisses the root causes of the conflict and supports the normalcy of domination and colonization. Moving beyond the cycles of failure and impasses requires serious engagement in a process of decolonization of Israel and Palestine, and new framings and new assumptions to understand why this conflict persists. Neither the old tools nor the current frameworks can serve as a catalyst for a positive future change. Only by addressing the imbalances of power and ending the Israeli occupation in the short term can future long-term and lasting solutions be discussed.

 

 

 

 

Dr. Alaa Tartir is the Program Director of Al-Shabaka: The Palestinian Policy Network and a Research Associate at the Center on Conflict, Development, and Peacebuilding (CCDP) at the Graduate Institute of International and Development Studies (IHEID), Geneva, Switzerland. Amongst other positions, Tartir previously served as Visiting Scholar at Utrecht University's Department of History and Art History, The Netherlands, Post-Doctoral Fellow at The Geneva Centre for Security Policy (GCSP), and Researcher in International Development Studies at the London School of Economics and Political Science (LSE), where he earned his PhD. Follow Alaa Tartir on Twitter @alaatartir and read his publication at www.alaatartir.com  

Note: This is an Author's Accepted Manuscript of an article (Palestine‒Israel: Decolonization Now, Peace Later), published in Mediterranean Politics, 2015, © 2015 Taylor & Francis, available online at: http://dx.doi.org/10.1080/13629395.2015.1126391

Photo Credit: West bank 378 Via Flickr (CC BY 2.0)

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Dean Baker: Adults in the Room: The Sordid Tale of Greece’s Battle Against Austerity and the Troika [feedly]

Adults in the Room: The Sordid Tale of Greece's Battle Against Austerity and the Troika
http://cepr.net/publications/op-eds-columns/adults-in-the-room-the-sordid-tale-of-greece-s-battle-against-austerity-and-the-troika

dults in the Room: The Sordid Tale of Greece's Battle Against Austerity and the Troika

Dean Baker
HuffPost, September 15, 2017

See article on original site

Yanis Varoufakis begins his account of his half year as Greece's finance minister in the left populist Syriza government (Adults in the Room, Farrar, Straus, and Giroux) with a description of a meeting with Larry Summers. According to Varoufakis, Summers explains that there are two types of politicians. There are those who are on the inside and play by the rules. They can just occasionally accomplish things by persuading others in the room to take their advice.

Then there is the other type of politician, those who don't agree to the rules and will never get anywhere. Summers asks Varoufakis which type of politician he is.

We don't know what answer Varoufakis gave to Summers, but he wastes no time telling us he is the second type. He is committed to accomplishing something for his people, most immediately the people of Greece in the struggle to end mindless austerity, but ultimately the people of Europe and arguably the world, in an effort to fight against needlessly cruel economic policies. If this means breaking with the decorum of the elites, so be it.

There is no reason to question Varoufakis' commitment. He left a comfortable life in Austin, Texas to take up what he certainly knew to be an incredibly difficult job as Greece's finance minister in the middle of a financial crisis. The newly elected populist government was despised by most of the business and political establishment in Greece and across Europe. Only a person with a genuine commitment to the stated goals of the new government would take on this role. But reading his account, it is questionable whether the path he took was necessarily the best one for Greece and for Europe.

The Long Six Months

To give the basic story, at the start of 2015 Greece was being confronted by the joint power of the European Commission (EC), the European Central Bank (ECB), and the International Monetary Fund (I.M.F), collectively known as the "Troika", who were insisting that Greece impose further spending cuts and tax increases even though the country had already endured seven years of depression.

I am using "depression" in the interest of accuracy, not exaggeration. By 2015 Greece's economy had contracted by more than 25 percent compared with its 2007 level. Employment was down by almost 22 percent from where it had been at its pre-crisis peak. By comparison, in the Great Depression the U.S. economy shrank by 28 percent from 1929 to 1933, but had exceeded its pre-crisis peak by 1936. Greece will be lucky if its economy gets back to its 2007 level of output by 2027.

The Troika had gotten the previous conservative government to agree to a wide range of tax increases and spending cuts that had both devastated the economy and left many of the country's poorest people in desperate straits. They had agreed to large cutbacks in already meager pensions, as well as cuts to a variety of programs designed to serve the poor.

The ostensible purpose of these cuts was to have Greece build up a large budget surplus, which would allow it to repay prior loans from the Troika. The budget target demanded by the Troika was an annual surplus on the primary budget, which excludes interest payments, equal to 3.5 percent of GDP (a bit less than $700 billion in the U.S. economy in 2017). The Troika's program also included a wide variety of other demands, including privatization of many public assets and measures designed to weaken the power of Greece's workers.

While there was much for any progressive to object to in the Troika's program for Greece, Varoufakis' key point throughout the book is that the program clearly would not work if the point was to get the money back for Greece's creditors. He argues that there was no way for Greece to run the large surpluses demanded by the Troika. This meant that the debt was likely to grow through time rather than shrink. He argued that the only honest route forward was a write-down of large amounts of the debt, admitting that this money was lost. After a write-down, which would free Greece of onerous interest payments, the country could get back on a course of stable growth.

The book is a tale of bureaucratic dysfunction and outright treachery. In the latter category we find the Socialist finance minister of France as well as the Social Democratic economy minister of Germany. Both are warm and supportive of Varoufakis in private meetings, but then turn around and condemn Greek profligacy when they speak in public. Any number of other figures accept the logic of Varoufakis' argument in private, including top officials at the I.M.F., but then melt into submission in the presence of German Finance Minister Wolfgang Schäuble, Varoufakis' main nemesis.

The account would be comical if the lives of real people were not at stake. We also get an inside look at the absurd bureaucratic structures that have been created by the European Union. Varoufakis repeatedly finds himself at meetings where no one has the power to do anything to help Greece in its efforts to seek debt relief. While much of this was obviously a deliberate effort at obstruction, the structures of the EU do make it difficult to get anything done and hold anyone accountable for what ultimately happens.

Varoufakis explains to us his negotiating strategy, and ostensibly the strategy of Syriza government to which he belonged. The goal was to accomplish debt relief while staying in the euro zone. He knew that the Troika would never grant debt relief without some threat. (Why would they give to a populist government that had harshly criticized them a deal that they would not give to a subservient right-wing government?) Varoufakis' threat was to leave the euro zone and establish a new currency.

Throughout the book, he is very clear that the goal was always staying in the euro. For an outsider following the negotiations closely at the time, this certainly seemed to be the case. However, he argued that the exit option was essential in order to force concessions from the Troika. His ranking of outcomes was always first, stay in the euro with debt relief, second leave the euro and unilaterally default, third stay in the euro and endure further austerity.

To jump to the finish, Greece ended up staying in the euro and enduring further austerity. In other words, it ended up with the worst option. In Varoufakis' account this was due to the unwillingness of his government to be prepared to carry through on the threat to leave the euro. Without this threat, the country had no bargaining power and therefore no option other than further austerity.

The Exit Option: Was It a Real Threat?

To evaluate Varoufakis' assessment it is worth asking about the motives of the Troika. One that he repeats several times is that debt relief would imply that the first two bailouts Greece had received had been a hoax. In effect these bailouts were about rescuing banks (mostly German and French) from their bad loans, not about helping Greece get back on a stable growth path.

Varoufakis is undoubtedly correct about the purpose of the bailouts, but governments have gotten very good at hiding the reasons for their actions from the public. Part of the Obama administration's stimulus package was a first-time homebuyer's tax credit. The credit almost immediately stopped the plunge in house prices as people rushed to get the $8,000 the government put on the table (myself included). However since the bubble had not yet fully deflated, house prices began plunging again in the summer of 2010 after the credit ended.

The tax credit had the effect of allowing the payoff of hundreds of billions in mortgages that likely would have gone bad if the house price decline continued. Many of these mortgages were in the hands of banks or privately issued mortgage backed securities. When the homes were sold the new mortgages were almost exclusively government backed, since the private securitization market was destroyed by the financial crisis. This little trick was especially pernicious since the temporary reversal in pricing was most pronounced at the bottom end of the market. In effect, the credit was a great way to get hundreds of thousands of moderate income households to buy into the bubble market before it fully deflated.

Virtually no one paid attention to this massive transfer of high risk debt from the private sector to the government through the tax credit and to this day even most careful followers of the crisis haven't noticed this effect. It not plausible the reason for refusing a write-down of Greek debt was just to hide bailout loans. When it comes to public deception, Varoufakis was dealing masters of the art. These people certainly could have found some clever way of giving a backdoor debt write-down which would not require any acknowledgement of the purpose of the previous bailouts.

A second possible motive was to force labor market reforms on Greece and other countries in the euro zone. This was clearly a goal of the bailout packages, but it is not clear that it precluded debt forgiveness. Varoufakis even says that he offered to work out an acceptable package of labor market reforms with Schäuble, but he didn't express any interest in pursuing the issue.

Perhaps Schäuble didn't think he could come to any agreement with Varoufakis on the issue, but if labor market reform really topped his agenda, it's hard to believe that Schäuble would not at least pursue a preliminary discussion on the topic. In this respect, it is worth noting that Emmanuel Macron, Varoufakis's great French ally on the write-down issue, is putting labor reform front and center in his agenda as president of France.

The third reason, which Varoufakis hints at several times, is that if Germany agreed to a write-down for Greece, it would be pressed to do the same for Italy, Spain, and other heavily indebted countries. While Greece is small change in the context of the EU budget, Italy and Spain certainly are not, especially if both are seeking write-downs at the same time. Certainly Schäuble understood that he had to give the respectable politicians running other heavily indebted countries at least as good a deal as he gave to the scruffy radicals running Greece.

This one seems the most compelling. If we assume the governments of other euro zone countries are run by competent people, then there is no way that Schäuble could give any substantial debt reduction to Greece and keep it secret from them. If he allowed Greece to write down a substantial portion of its debt he would have to do the same with other countries. This would be real money. For this reason it is completely understandable that Schäuble would not want to give Greece a debt write-down; he would have to soon do the same with other troubled debtors.

Of course we have to take a step back and ask what would be the problem if the EU did make the money available to allow large-scale debt write-downs for all the heavily indebted countries. The ECB did have the money for even a major dose of debt forgiveness since after all it prints the stuff.

Whatever the economic reality might be, we shouldn't rule out the possibility that these people really don't understand the basic economics. They may really believe that the euro zone was genuinely constrained in its ability to finance debt forgiveness. If this is the case, Schäuble's refusal to seriously discuss terms with Varoufakis makes perfect sense.

There is another aspect to the issue that is worth considering. Varoufakis's trump card was the threat to leave the euro. He is undermined in this threat by his prime minister, Alexis Tsipras, who backs away from the threat when push comes to shove.

But suppose that Germany, and in particular Schäuble, didn't care if Greece left the euro. Back in 2011, at the height of the crisis, Greece's exit could well have led to the collapse of the euro. But by 2015 the markets had stabilized. ECB bank president Mario Draghi's commitment to "do whatever it takes" to support the bonds of the countries in the euro zone had done its job. The interest rates on the non-Greece crisis countries had come down to very manageable levels. They likely felt that the euro could withstand a Grexit at that point, even if they might have preferred a compliant Greek government to accept their package.

If this is the case, then the threat to leave the euro was of little value. The real choice was accepting the bailout conditions and staying within the euro or taking the leap and leaving. Tsipras was elected on the agenda of ending the austerity and staying within the euro. If this was impossible, then the question was which of his commitments to the public he should break. He may have chosen the wrong one, but he really had no good choices from day one.

In this respect it is worth noting an issue that Varoufakis mentions in passing but doesn't fully pursue in the book. As his meeting with various ministers and officials were proving fruitless, Varoufakis had an opportunity for a face to face meeting with Schäuble. At this meeting Schäuble explained that Greece really didn't belong in the euro. He proposed an orderly departure, which he said could be a temporary time-out. This departure would come with a grace period on debt obligations and assistance in re-establishing its own currency.

It's not clear if Schäuble was fully serious in putting this proposal on the table or that he had the backing of Angela Merkel to pursue it. However if debt forgiveness within the euro was not a possibility, this sort of orderly exit certainly would have been the best possible option. If there was any way Greece could have pushed forward along the lines Schäuble suggested to Varoufakis, this should have been his top priority. However his book suggests that he treated the proposal as a passing curiosity, not something that should distract him from his quest for a debt write-down within the euro.

There is one point that should jump out at any reader of this book. The title, "adults in the room" is a quote from I.M.F. managing director Christine Lagarde. It refers to the people with whom Varoufakis spent his six months negotiating. By contrast, he and his scruffy populist colleagues had questionable status in this world.

On this topic it is worth checking the scorecard. These are the people who controlled economic and financial policy as the world saw the growth of asset bubbles of unprecedented size. The collapse of these bubbles, coupled with the weak response of fiscal policy, and to a lesser extent monetary policy, cost the world tens of trillions of dollars of lost output. This translated into tens of millions of people needlessly going unemployed, millions losing their homes, and others going without access to health care or being denied the opportunity to get an education. (FWIW, the I.M.F. now projects that Greece's primary budget surplus in the years ahead will be almost exactly the 1.5 percent of GDP offered by Varoufakis.)

The events of the last decade were a true disaster from which we have still not fully recovered. In a just world, the people who were responsible for this momentous failure would have been pushed out of their jobs. Instead, with few exceptions, the same group of people who led us into disaster are still the ones determining economic policy. These people may have considerable power, but that doesn't make them adults.

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Cassidy-Graham is the Latest Attempt to Take Away Healthcare Coverage from Thousands of West Virginians [feedly]

Cassidy-Graham is the Latest Attempt to Take Away Healthcare Coverage from Thousands of West Virginians
http://www.wvpolicy.org/cassidy-graham-is-the-latest-attempt-to-take-away-healthcare-coverage-from-thousands-of-west-virginians/

The latest attempt to repeal the Affordable Care Act, the Cassidy-Graham bill, would cut West Virginia's funding for Medicaid by $2.0 billion by 2027. This would undermine health coverage for tens of thousands of West Virginia's and threaten the state's historic gains in health coverage.

The Cassidy-Graham bill cuts health coverage in two main ways.

Block Grants are no replacement for ACA provisions.

The biggest cuts in the Cassidy-Graham bill come from converting the ACA's Medicaid expansion and marketplace subsidies with smaller, temporary block grants. According to the bill's sponsors, this block grant would give states "flexibility," allowing them to maintain the coverage available under the ACA if they wanted to do so while enabling other states to experiment with alternative approaches. But in reality, states wouldn't be able to maintain their coverage gains under the ACA, because the block grant funding would be insufficient to maintain coverage levels equivalent to the ACA. The block grant would provide $239 billion less between 2020 and 2026 than projected federal spending for the Medicaid expansion and marketplace subsidies under current law.

In 2026, this funding would completely go away, leaving states with 100 percent of the cost for the people covered under these programs. This cut would almost certainly leave states no choice but to discontinue these kinds of coverage. The result is that, beginning in 2027, Cassidy-Graham would be virtually identical to a repeal-without-replace bill — except for its additional Medicaid cuts through the per capita cap, described below. CBO estimated that the repeal-without-replace approach would ultimately leave 32 million more people uninsured. The Cassidy-Graham bill would presumably result in even deeper coverage losses than that in the second decade.

A permanent and ongoing cut to traditional Medicaid

Like prior House and Senate Republican repeal bills, the Graham-Cassidy bill would radically restructure and cut the rest of Medicaid, outside of the ACA's Medicaid expansion. It would end the federal-state financial partnership under which the federal government pays a fixed percentage of a state's Medicaid costs. It would instead impose a per capita cap, under which federal Medicaid funding would be capped at a set amount per beneficiary, irrespective of states' actual costs, and would grow each year more slowly than the projected growth in state Medicaid costs per beneficiary.

The result would be deep cuts to federal Medicaid spending for seniors, people with disabilities, families with children, and other adults (apart from those affected by the bill's elimination of the Medicaid expansion). Notably, these per capita cap cuts would come on top of the cuts to Medicaid expansion funding and marketplace subsidies under the block grant discussed above.

Starting in 2025, the annual adjustment of per capita caps is reduced to an even lower level, creating even deeper cuts to Medicaid. In 2027, after the block grants disappear and Medicaid per capita caps are further reduced,  combined would result in a $2.042 billion federal funding cut for West Virginia.

Disruptions to the individual markets

In addition to hurting healthcare coverage through major Medicaid cuts, Cassidy-Graham would also disrupt the individual market. The Cassidy-Graham bill would immediately eliminate the individual mandate requiring everyone to have some kind insurance coverage or else pay a fine, which the Congressional Budget Office estimated would result in 15 million more uninsured in the following year.

The bill's elimination of the ACA marketplace subsidies and start of a block grant in 2020 would cause massive additional disruption. States would lack guidance, standards, or administrative infrastructure for creating their own coverage programs, and insurers would have no idea how the individual market would operate, including what their risk pools would look like. Insurers would most almost certainly impose large premium rate increases to account for uncertainty; some would likely exit the market altogether.

Then in 2027, when the block grant disappeared entirely, insurers would face a market without an individual mandate or any funding for subsidies to purchase coverage in the individual market. Yet they would still be subject to the ACA's prohibition against denying coverage to people with pre-existing conditions or charging people higher premiums based on their health status. Many insurers would likely respond by withdrawing from the market, leaving a large share of the population living in states with no insurers, as CBO has warned about previous repeal-without-replace bills.

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Intellectual Property Laws: Wolves in Sheep's Clothing

Posted on September 15, 2017 by Brink Lindsey and Steven M. Teles

In the rogues' gallery of regulatory rent-seeking, copyright and patent laws are the wolves in sheep's clothing. According to the ingenious and highly effective rhetoric of their beneficiaries and supporters, these laws are the very antithesis of rent-seeking. Far from conferring special and undeserved privileges, they merely defend the rightful owners of "intellectual property" from "theft" and "piracy." While rent-seeking misallocates resources and retards growth, intellectual property advocates claim that patent and copyright protections unleash artistic creativity and technological innovation by securing for artists and inventors just recompense for their efforts. Copyright and patent laws, therefore, are not only an integral part of the private property system that undergirds all market economies, but they are also a vital linchpin of innovation and growth in the contemporary knowledge-based economy.

 

Just as their supporters claim, intellectual property protection does deliver real benefits. By preventing others from copying their work, at least temporarily, IP protection boosts the payoff for artists and inventors and thus gives them stronger incentives to create and innovate. The problem is that IP protection also imposes costs, not just on consumers who have to pay higher prices for copyrighted and patented goods, but also on other artists and innovators. Unfortunately, a radical and ill-considered expansion in the scope and reach of this protection over the past few decades has resulted in a dramatic escalation of those costs with little in the way of compensating benefits. As a result, the rents that now accrue to movie studios, record companies, software producers, pharmaceutical firms, and other IP holders amount to a significant drag on innovation and growth, the very opposite of IP law's stated purpose.

 

Until the 1970s, intellectual property was a sleepy little backwater of American law. The benefits of IP protection may have been modest, but so were the costs. Since then, the scale and complexity of IP law have exploded even as, with the rise of the information economy, the relative importance of IP-intensive industries has soared. Since 1976, copyright protection has been extended to unpublished works, the requirement to register one's copyright has been dropped, and copyright terms have grown from 28 years (plus one possible 28-year renewal) to the life of the author plus 70 years. Enforcement of copyright law has also grown more aggressive: it is now done primarily through criminal prosecution by the federal government rather than private civil complaints, and criminal fines have soared from $1,000 to $250,000 per infringement.

 

Brink Lindsey

With regard to patents, the expansion of the law during recent decades has occurred largely through court decisions rather than via new legislation. In 1982, the newly established Court of Appeals for the Federal Circuit (CAFC) was vested with exclusive appellate jurisdiction over patent cases. Since then, the CAFC has reshaped the law by lowering the standards for patentability and expanding the scope of patentable inventions to include software, business methods, and even parts of the human genome. As a result, the number of patents issued annually by the U.S. Patent and Trademark Office has increased almost fivefold, from 61,620 in 1983 to 109,414 10 years later, to 186,591 another decade later, to 302,150 in 2013.

 

The excesses of IP law are now a serious obstacle to innovation and economic growth. Hostility to unauthorized copying in virtually any form, the core principle of modern copyright law, stands in direct opposition to the logic of the Internet, the greatest technology ever devised for reproducing and disseminating information. Consequently, copyright law casts a pall over the most promising arena for technological and economic progress in the current age. Consider the Google Books Library Project, in which the Internet search giant is collaborating with major research libraries to digitize all the world's approximately 130 million books (it has completed about 30 million so far). For books in the public domain, Google Books functions as an online library, with full texts available for reading and downloading. Alas, such books comprise only about 20 percent of the total. For all the rest, including the roughly 70 percent of all books that are out of print but still under copyright, Google Books can offer only brief snippets of text in response to searches—and its right to do that has been vindicated only after a decade of court battles with authors and publishers.

 

Similar problems afflict efforts to digitize and make publicly available the vast troves of recorded music, film, video, photographs, and artwork currently moldering in library archives. Between automatic copyright protection without formalities and greatly extended copyright terms, vast numbers of "orphan works" now exist whose copyright holders are unknown and unreachable. These works can't be safely reproduced and disseminated because nobody knows whose permission to get first. Meanwhile, access to the vast storehouses of scientific research is bottled up by copyright. A small group of academic publishers, most prominently, Elsevier, Springer, and Wiley, rake in profit margins in excess of 35 percent as subscription prices for university libraries race well ahead of inflation. "Their business model [i]s a marvel," writes copyright historian Peter Baldwin: "Sell scholarship back to the same universities whose scientists had produced, written, peer reviewed, and edited it largely for free."

 

Steven M. Teles

Meanwhile, the evidence is mounting that the patenting explosion has been harmful for many innovators. Research by James Bessen and Michael Meurer compared the estimated value of public companies' patent portfolios to the estimated cost of defending patent cases during the 1980s and 1990s. In particular, they divided the public companies they studied into two groups: chemical and pharmaceutical firms, on the one hand, and all other firms, on the other. For both groups, the cost of defending patent cases began rising sharply in the mid-1990s. For chemical and pharmaceutical firms, the value of their patent holdings remained clearly greater than those litigation costs, approximately $12 billion in value compared with roughly $4 billion in costs as of 1999. For all other industries, however, the situation was reversed. By 1999, litigation costs had soared to around $12 billion, whereas the total value of their patent holdings was only $3 billion. In other words, outside the chemical and pharmaceutical industries, American public companies would apparently be better off if the patent system didn't exist.

 

A major part of the problem lies in the differences between chemical and pharmaceutical patents and most other kinds of patents. For the former group, the scope of patents is clearly and precisely delineated by chemical formulas. Accordingly, it is relatively straightforward for subsequent innovators to discover whether their new products are covered by any existing patents. By contrast, the scope of other kinds of patents, especially new-style patents for software or business methods, is described by abstract language that is invariably open to differing interpretations. This vagueness in the boundaries of intellectual property, combined with the immense number of patents in force at any one time, make it virtually impossible for downstream innovators to be sure whether the new products they are developing are infringing on someone else's patents.

 

The dysfunctions of the patent system have been exacerbated in recent years by the rise of so-called patent assertion entities, better known as "patent trolls." Patent trolls are firms that neither manufacture nor sell products but instead specialize in amassing patent portfolios for the purpose of initiating infringement lawsuits. According to a White House report, lawsuits by patent trolls tripled between 2010 and 2012 alone, as the share of total patent infringement suits initiated by such firms rose from 29 percent to 62 percent. That's right: most patent infringement suits are now brought by firms that make no products at all and whose chief activity is to prevent other companies from making products. A 2012 study found that the direct costs of defending patent troll suits (i.e., lawyers' and licensing fees) came to $29 billion in 2011. To put that figure in context, it amounts to more than 10 percent of total annual R&D expenditures by U.S. businesses.

 

The current state of intellectual property law may be bad for economic growth overall, but it is highly effective at showering riches on a favored few. In IP-intensive industries, the monopoly power created by copyright and patent protections encourages industry concentration, inflates corporate profits, and exaggerates the tendency toward winner-take-all "superstar markets." As a result, income and wealth are even more highly concentrated at the top than would otherwise be the case.

 

The IP-intensive industries of entertainment, software, and pharmaceuticals all feature powerful economies of scale. The upfront fixed costs of producing the first copy of a product are high, while the variable costs of producing additional copies are low. The larger the sales volume, the more sales there are over which fixed costs can be spread and for which the unit costs of production will be lower. This dynamic leads to high levels of concentration in which a few firms account for the vast bulk of sales and profits.

 

Pushing in the other direction, however, is the vulnerability of companies in these industries to relatively easy imitation. Open competition would allow new entrants that did not have to incur all the heavy fixed costs of the first mover and that could therefore sell profitably at a much lower price. These new entrants would drive down prices and take market share away from the first mover (although significant first-mover advantages still remain).

 

Strong intellectual property protection—copyright for entertainment, patents for drugs, and a combination for software—eliminates or at least reduces this threat of copycat competition. Accordingly, the effect of patents and copyright is to allow industry leaders to take fuller advantage of the potential scale economies that the nature of their industries permits. The result is even higher levels of inter-firm inequality than would otherwise be possible, with industries dominated by a few highly profitable giants.

 

Consider how top-heavy the entertainment industry has become: four record labels (Sony BMI Music, Warner Music Group, EMI Music Group, Universal Music Group) account for roughly 85 percent of U.S. recorded music sales and 70 percent of the global market, while five movie studios (Walt Disney, Paramount, Sony, Twentieth Century Fox, Universal Pictures, and Warner Brothers) have captured around 80 percent of the U.S. market and 75 percent globally. The computer/software industry has featured a succession of dominating giants, with Microsoft, Apple, Google, Facebook, and Amazon topping the list. Concentration in the pharmaceutical sector has been checked to some extent by the rise of generic drug producers and biotech startups, but still a merger wave in recent decades has produced the huge companies now known as "Big Pharma." As a result, the market share of the top ten firms in the industry jumped from around 20 percent of global sales in 1985 to 48 percent by 2002. The profitability of the sector is abnormally high, with average operating margins around 25 percent, compared to 15 percent or less for other consumer goods producers.

 

The enormous aggregations of market capitalization and profits in the IP-intensive industries then translate into soaring wealth and incomes for shareholders, employees, and professionals. Most obvious are the vast fortunes made in entertainment and the Internet sector, but the effect on economic inequality is considerably broader than the mind-boggling payouts for those at the very top of the income scale. Because these industries are skill intensive (i.e., their employees are more highly skilled than the work force as a whole), any pass-through of rents to workers in the form of higher wages will go mainly to more highly educated and highly paid employees. The effect then is to further increase the growing inequality between the highly skilled and everybody else.

 

The copyright and patent laws we have today therefore look more like intellectual monopoly than intellectual property. They do not simply give people their rightful due; on the contrary, they lavish special privileges on copyright and patent holders to the detriment of everyone else. Therefore, it is entirely appropriate to strip IP protection of its sheep's clothing and to see it for the wolf it is, a major source of economic stagnation and a tool for unjust enrichment.

 

[Brink Lindsey (@lindsey_brink) is vice president and director of the Open Society Project at the Niskanen Center. Steven M. Teles is associate professor of political science at Johns Hopkins University and a senior fellow at the Niskanen Center. This piece is adapted from their upcoming book "The Captured Economy: How the Powerful Enrich Themselves, Slow Down Growth, and Increase Inequality" (Oxford University Press).]

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John Case
Harpers Ferry, WV

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A typology of responses to Jared Bernstein's support of Bernie’s single payer proposal [feedly]

A typology of responses to (Bernstein's support of) Bernie's single payer proposal
http://jaredbernsteinblog.com/a-typology-of-responses-to-bernies-single-payer-proposal/It's Friday, I'm on the Amtrak with coffee and bagel at hand, so let's get metaphysical!

I've received many responses to my piece praising Sen. Sanders newly unveiled Medicare for All plan, and read many different takes. Here's a rough grouping of where they fall:

Go, Bernie, Go!

This group shares my enthusiasm of the aspiration goal of the plan, is less worried about the extent to which, at this early juncture, the numbers add up, and is especially impressed to see the evolution of the political support among Democrats.

Politically, some of these supporters are motivated by the belief, one that appears to be shared by some politicians with national aspirations, that Democrats need a strong, simple progressive message like this. It is a signal, one that's heretofore been missing from the party, to a lot of economic vulnerable people, that Ds are willing to get outside the usual establishment box, go around vested interests, and fight for a policy that the base has long believed in.

Wonkily, some people in this group operate from the simple principle that if we're spending 17 percent of GDP on healthcare while others with various versions of universal coverage—not all single payer, but all heavily regulated with cost controls and coverage mandates—pay an average of 10 percent—that's 7 percent of GDP, $1.4 trillion/year, that could be put to better uses than excess profits by drug companies and insurers. True, many in this group recognize the missing pieces stressed by the next group, but they're less worried about such details at this point.

Go, Bernie, but there are a lot of details to fix, especially re financing…

This group is supportive of the goal of universal coverage, if not single payer, but sees higher barriers to getting there than group #1. They also have issues with the plan as articulated thus far.

Some of the critiques, ones I find to be highly valid, center on the financing. Though I cited a number of options offered by Sanders as payfors, my pal Jason Furman points out that they these options understate the cost of the proposal and their tax base is too narrow. Over to the Furmanator:

I appreciate the way in which the Sanders bill is moving the dialogue forward on how we can and should continue to expand coverage. But I am concerned that it is missing a big opportunity to have the honest debate we should be having about what fiscal direction we want to take as a country and, in the process, offering false hopes of free(ish) lunches. When we established Social Security and Medicare they were paid for in a broad-based manner through payroll taxes. The system was progressive but everyone paid. The European social welfare systems take this principle even further—people, and not just the wealthy, pay more and get more. They achieve much more progressivity through their fiscal systems than the United States and do it largely through providing broadly shared benefits rather than making the tax systems very progressive.

Whether the United States should move further in the direction of broader-based benefits is an important debate—and one that Senator Sanders would be ideally poised to lead. But instead in this proposal, and in previous rhetoric, he is implying that most of this could be paid for by closing tax loopholes on corporations and taxing the wealthy.

Do not get me wrong—I am all for closing tax loopholes and taxing the wealthy more. But there is a limit to how much that could raise and it certainly is not enough to cover Medicare for All, let alone also paying for higher Social Security benefits, preschool, free college, paid leave, infrastructure, and deal with our existing fiscal hole. If we keep focusing on only raising taxes on the top 2 percent of Americans and corporations we will not be able to do all of this [JB: this last point is particularly germane]. Advocates of these ideas need to convince the public that it is worth the cost to them—a cost that would be borne in a broad-based VAT or a payroll tax or some other instrument. And, in the process, advocates should make sure that the focus of the debate is on the overall progressivity of the system—how we raise the money and what we spend it on—not just on each of those ideas individually.

Another econo-pal, Dean Baker, crunches some numbers in the journal Democracy and finds Sanders' financing to come up short to the tune of $650 billion per year—real money, even in DC world.

Other objections from supporters relate to major transitional challenges. I'd put most of these under the heading of status-quo bias, which is not, btw, to be at all dismissive. Almost 160 million people, 57 percent of the under 65 population, get health care through their employer, and they often like it. So, if you believe that keeping what you have is a major selling point, you've got to consider the possibility that the hit to many service providers under single payer would be highly disruptive (many would presumably change who, where, and what they treat). I'm less worried about this part, ftr, as "keeping your doctor" is already less a feature of most people's coverage.

Stop, Bernie, Stop!

Of course, many in this camp are stakeholders who risk potential displacement under single payer, or even under a more tightly regulated health care sector, i.e., the folks who lose when you take numerous percentage points of GDP out of the system.

Others just think you can't get there from here, ever. Single payer, or even Euro-style highly regulated universal coverage is not our fate, and Sanders and his co-sponsors are falling into the Democrats version of the trap in which the Republicans recently got caught. The status-quo and path dependency are too strong; having started from where we did, we now have an entrenched private sector presence in the sector, and the best we can maybe do is inject some sort of public option somewhere into the ACA.

Moreover, they argue, by falling into the health care trap, Democrats will rue the day they stood with Bernie on this.

FTR, I'm in group 1.5, i.e., I reject the pessimism of group #3 and very much share the enthusiasm of group #1. But I think points like Jason's are essential to start steering the policy process in a more feasible direction (to state the obvious, nothing in this space is feasible today or tomorrow, no matter how deep the love affair between Don, Chuck, and Nancy). In fact, that dynamic lies at the core of my WaPo piece. If Bernie didn't get this out there, then Jason, Dean, et al don't get to start wonking about it.

So. let the analysis, the politics, the advocacy, and the argumentation begin, develop, and penetrate the echo chamber of the possible. That's a highly salutary development, a sliver of light in our pretty dark times.

 -- via my feedly newsfeed

Bernstein ON Sanders Medcare for All Plan

Bernie Sanders's Medicare-for-all plan is only a start. But it's the right start.

By Jared Bernstein September 14 at 9:55 AM

Jared Bernstein, a former chief economist to Vice President Biden, is a senior fellow at the Center on Budget and Policy Priorities and author of the new book 'The Reconnection Agenda: Reuniting Growth and Prosperity.'


On Wednesday, Sen. Bernie Sanders (I-Vt.) and 16 co-sponsors, all Democrats, introduced a new "Medicare for All" single-payer, health-care bill. It's a thoughtful, ambitious place to start this critical policy discussion of how to squeeze costly inefficiencies out of our health-care system, while ensuring robust, affordable coverage for all.

But hold up. Isn't that what the Affordable Care Act was all about, and haven't recent politics revealed that the ACA appears to be here to stay? Should not our efforts in this space be devoted to shoring up that program, protecting it against Republican sabotage? Isn't this single-payer stuff dangerous politics?

[Sanders introduces universal health care, backed by 15 Democrats]

I'll get to those questions, but first, a brief description of Sanders's plan. In year one of the plan, Medicare is expanded to cover children 18 and under and adults 55 and up. Over a four-year period, the plan transitions all Americans into a comprehensive package covering most health-care needs, including hospital and primary care, maternity care, and prescription drugs, vision and dental benefits, and reproductive services. The government would be the sole insurer.

The critique that Sanders doesn't say how he'd pay for this huge shift in how we spend over $3 trillion per year on health care, or 17 percent of GDP (about twice that of other countries on a per capita basis), is incorrect. Here's his list of pay-for options, which mostly include progressive taxes, assumptions about savings on health-care spending, and repealing the "employer exclusion," the single largest tax expenditure in the U.S. system, costing about $260 billion this year. The tax expenditure would no longer be necessary as eventually, the federal government would replace employers as the source of their workers' health coverage.

As these options reveal, the plan obviously requires a bigger government footprint in health care and thus higher taxes, which will be one of many sources of attack by opponents. These will include insurers, the Pharma lobby, and many health-care service providers whose reimbursements would fall under the plan, not to mention higher-income taxpayers dinged by some of the pay-fors. You don't cut per capita spending by this much without goring somebody's ox.

At the most basic level, Sanders is talking about taking "rents" — excess profits — out of the current system and using that money to provide comprehensive coverage for all. Of course, what he's calling excess profits, somebody else — typically a powerful somebody with scads of politicians on auto-dial — calls "my family's income."

Regarding costs, supporters will counter, correctly, that the cost to households must be considered net of insurance premiums they currently pay. The pay-for sheet above claims this leaves many middle-income families ahead ("The typical middle class family would save over $4,400 under this plan"), but let's see if this sticks in future scores, which will surely be forthcoming. Sanders's argument is that under his plan, people should be able to swap out some of what they now pay in premiums for what they'll pay in taxes, and get more robust coverage at a better price. No question, there's a ton of disruption and trench warfare with deep-pocketed stakeholders between here and there, but Sanders's basic formulation does describe health systems in most other advanced economies.

Obviously, there is much to be said about the reality of all this. But to say it's not going anywhere in this Congress misses the point.

Back in President Barack Obama's first term, the theory of the case was that a realistic health-care plan with any chance of passage and implementation had to go through, not around, the very stakeholders that Sanders phases out (I worked for the administration back then). We can argue all day about whether that was the right path to take, but there's no denying that the ACA has driven the share of Americans without health coverage to the lowest levels on record, while helping to slow the rate of cost growth.

Current political realities require building on these gains, inclusive of all stakeholders. It is interesting and notable that Sanders not only clearly gets this, but was himself one of the most energetic defenders of the ACA during the recent Republican attempts to repeal it.

Thus, what I hear Sanders implicitly saying is that we've got to walk and chew gum. We must both respect path dependency and act incrementally while at the same time envisioning and plotting a new path toward a much more progressive future.

This is why I find his plan, and the fact that it has all these co-sponsors, so downright inspiring. Look around, fellow progressives. I can't speak for you, but what I see is a horribly cramped debate in every area that matters to me, including taxes, health care, climate, immigration, inequality, public investments, and so on. The indefatigable Sanders is trying his damnedest to blast that cramped debate wide open. Finally, a Democrat willing to envision a much different, more equitable political economy!

But isn't single payer becoming a dangerous litmus test that will tank Democrats once the opposition goes on the attack, telling swing voters how this plan will empty their wallets and squash their freedoms?

Not if they play it right. Sanders's plan only starts this conversation, and the plan itself is actually highly modular. I can easily envision more moderate, path-dependent/incremental Democrats saying, "I agree with where Sen. Sanders wants to go here, but to minimize the disruptions and costs to the system, we must significantly extend the transition period." That is, add a Medicare buy-in to the ACA and very gradually expand eligibility (some call this "Medicare for More").

For far too long, Democrats have way over-negotiated with themselves, starting debates where they wanted to end up, and getting pushed hard to the right by conservatives. Sanders's plan is one of the few I've seen for a long while that sees the folly in this and takes strong, corrective action. So go Bernie!

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John Case
Harpers Ferry, WV

The Winners and Losers Radio Show

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