Honest fixer

As Jewish settlement construction has proliferated during the tenure of Israeli Prime Minister Benyamin Netanyahu, he and his coalition government have come under criticism from Israel's staunchest allies: The United States of America. Since the Six Days War of 1967, The United States has provided material and monetary aid to Israel. Additionally, United States policy has backed Israeli policy in seeming lock step during this period. Few American politicians have criticized publicly Israel's expansionist ambitions, law enforcement technique, and military incursions into Lebabon. Condemnation for the aforemtnioned has been the province of European nations such as France and Britain as well as the United Nations Council on Human Rights. However, the State Department and Vice-President Joseph Biden have had harsh words regarding settlement construction in contentious bits of the West Bank and East Jerusalem. The two principle questions are: why now? And should America scale back its relations with Israel?

 

First, why is now an opportune moment to criticize Netanyahu for not placing a moratorium on existing and new construction? The best answer is that the United States is holding the prime minister accountable as he is reneging on an earlier pledge. However,  complex intercalated US-Israeli diplomacy provides fertile ground for what strategic signals this sends. The main signal that the United States has projected are that it cannot seemingly revert on the fine words of Cairo. For Palestinians and Arabs in the region, Obama oratory and Biden's barbs still amount to mere words. Little visible evidence exists that the current administration is any different than the previous one regarding its relations with Israel. Iraq is stabilizing within a fledgling, plural democracy. Syria has been more amenable to talks. Yet, this is not enough. Public perception holds that American foreign policy is influenced by the powerful and well-funded 'Israel lobby' of the American-Israeli Political Action Committee (AIPAC). These inherently conspiratorial claims are somewhat specious since American presidents such as Carter, Clinton and Bush the elder have been able to persuade previous prime ministers that abandoning certain expansion programs were in Israel's national security interest. What makes the claim less specious especially for those in the region is the scale of American aid to Israel in proportional comparison to that given to the Palestinians. This is the principle mitigating factor which casts doubt on American status as an honest broker for peace in the region.

 

However, American diplomats for too long have confused an end to settlement construction as a sufficient condition for peace. The situation is too fraught with other independent variables such as refugee right of return, the status of Jerusalem - a non-starter for even the most dovish of Israeli policymakers, and the fractious, incoherent Palestinian leadership. There is no proof that if the hammers stopped, a solution on borders would ensue. Furthermore, American diplomats have confused that material, financial and moral support for Israel would give the US greater sway over its ally. Years and billions show that Israeli ambition will not be cowed by the whims of US presidents seeking to burnish their places in history. 

 

It is apparent why the US has reacted how it has when it has. Though this administration has shown more openness to nuance than the previous one, it does not mean it entirely understands it. Neither does the American public. Hence, the calls for the United States to 'scale back' relations with Israel. Doing this would be an exercise of folly. If the United States were to follow through on a program of ending or slowing the scale of assistance to Israel, then the strategic signal it would send to other US long-time allies such as France, Britain, and Japan is that you better do what we say. This brand of diplomacy has graver implications than the with us or against us proviso of the Bush doctrine. Even during the Bush years, when international treaties were given short shrift, and suits between the US and the EU piled up in the WTO, the Trans-Atlantic alliances held because there was always more to gain from sustained co-operation than through antagonism. However, much is won and lost in the battle of perception. Whereas other allies are big economies, Israel is at best a newcomer on the world stage. Its economy sprightly and innovative, its military and intelligence superb, Israel is still seen as a quasi-client state of the US. Because of this distinction, the United States ought to begin to treat Israel on a more equal footing. This does not entail withholding material assistance which is what the 'scale back' camp attempts to say implicitly. Moreover, what signal does it send to Israeli leadership? Essentially, it signals that the US has had enough. However, the US is the only country with any influence over Israeli policy. Will Britain and France check Israeli ambition if the US were to decide its relationship has become too cozy, and it must retrench? Loosening ties would make life more wretched for the oppressed Palestinians and could trigger a wider regional arms race and conflict if US involvement receded.

 

In economics, the counterintuitive solution can be the most appropriate. Similarly, strengthening relations with Israel at this juncture is the correct course of action. However, aid to Palestinians must increase. Moreover, it must not be tied to anodyne conditions. Basic improvements in infrastructure and funding NGOs and private firms to provide basic services to improve the lives of the impoverished are key. If schools and hospitals go up in Gaza, built with US funds, designed by an Israeli architect, then that would show that the US indeed is interested Palestinian concerns. If more profound diplomacy creates special economic zones on the border, then a future, more permanent solution would not destroy drivers of wealth creation and opportunity for both sides. The rules and the order have changed since 1967. So have the terms of trade. 'Scaling back' relations with Israel might be a seductive option. Yet, though the rest of the world might not perceive the US to be an honest broker in the region, it is the only one with enough clout to elicit concessions from Israel. That might suffice to make it an honest fixer.

We got it right, right?

At the least, the United States is a bit more humane than it was a week ago after President Barack Obama signed the reconciled health reform act. Despite opposition from vested interests ranging from labor unions to pharmaceutical firms to insurers as well as ideological clash within the House of Representatives, more Americans will have access to health care. Credit Madame Speaker Nancy Pelosi (D-CA) for wrangling the necessary votes in the House of Representatives. Aptly, she convinced holdouts that the reform act was not a referendum on abortion. She succeeded where more influential Speakers such as Thomas O'Neill (D-MA) failed. Language in the bill calls for digitizing medical records, and utilizing new technology so doctors and patients can communicate will decrease monetary and opportunity costs for patients. However, the plaudits end there, for the means fail to justify the ends philosophically and pragmatically.

First, the terms under which this bill came to be enacted are dubious within the context of democratic process and procedure. The bill passed on a pure party line vote. What are the significances? According to Senator John McCain (R-AZ), all other major legislation to pass through Congress has had the imprimatur of bipartisan support. Seemingly left out, Republicans may embark upon a future strategy during this legislative session to obstruct other bits of the Democratic agenda. Laudable ideas such as Senator Maria Cantwell's (D-WA) proposal of 'cap and dividend' regarding carbon emissions standards, the formation of a consumer protection agency or more intelligent financial regulation may stall. By accentuating the polarities within the polity, the terms of future debate will have narrowed. This does not mean that American democracy has reached a crisis point. However, it is difficult to take as axiomatic that the longer term benefits of expanded medical coverage are a worthwhile trade off for short term harm to the democratic process.

On the second, pragmatic level, the health reform act will decrease the number of uninsured, but it will do so without addressing the major structural flaws to the factors highly responsible for cost inflation. Though more media attention focused on the Cornhusker Kickback, Louisiana Purchase, and the Stupak amendment due to their close link to the hot-button abortion issue, more relevant factors received short shrift. These included reformation of the Food and Drug Administration (FDA), statutory caps on payouts in medical malpractice cases and appropriate levels of malpractice cover for physicians, the level of co-payments for those already enrolled, and the effect of mandates.

In an Economics focus column, written in the summer of 2007, in The Economist, a study was cited that the process through which the FDA vets and approves drugs adds an extra $173 billion to the cost of health care in the United States. Essentially, the piece argued, this constituted a stealth tax. FDA drugs approval methods greatly influence the business model of the industry. Due to the high costs and regulatory hurdles of the drugs testing regime, firms invest heavily in developing blockbuster drugs which will yield revenue greater than $1 billion. Because the costs of development are so high, pharmaceutical firms allocate more resources to patent protection. These input costs translate into higher prices for the end-users be they patients or even large entities such as Medicare. Such higher costs create barriers to entry for smaller biotechnology start ups responsible for many of the recent drug patent filings. The status quo detracts from the fundamental competences of science and improving the quality of life. All drugs firm, big or small, will maximize profit. However, the current approval process diminishes their ability to do good and make money. Changes to the approval process that reflect advents and progress in biotechnology will create incentives for larger firms to more targeted research and development as well as to be more acquisitive. Better resource allocation in this area will go a long way to controlling costs.

Next, the dual problem of necessary amounts of malpractice cover and court-ordered tort liability payouts create huge distortions in the practice and delivery of medicine. As courts have raised the value of payouts in medical malpractice cases, doctors have seen their own malpractice cover premiums increase. Since the threat of a malpractice suit can be a career killer, to say nothing if a case goes to trial and results in a guilty verdict, doctors practice what some call 'defensive' medicine. This is a bit of a misnomer. Prevention is by nature defensive, and that is no bad thing in health care. A more appropriate term would be 'disingenuous' medicine where though the patient is by no means neglected, yet the doctor may have an equal concern not to get sued. Hence, physicians order many expensive tests because they are afraid of letters from attorneys. Not all doctors are good. Even competent physicians will err. However, the function of medicine is not to perfect imperfections and to do so perfectly. The dynamic between the threat of a suit, the concomitant potential problems, and the extortionate protection price doctors themselves must pay to insurers has influenced the behavior of an entire profession adversely. In addition, many intelligent and able students will avoid medicine, despite its rewards, if they feel they are beholden to lawyers and insurers as they cannot practice freely. All of society loses out, and the shortage of doctors indicates that despite the reward and prestige of the profession, students will not pursue it if they feel their professional behavior will be governed by outsiders with poor understanding of science rather than by the ethics of their craft.

Third, economists agree that Americans 'over consume' health care. When a co-payment for a doctor visit costs less than a movie ticket, then the price might be too low. Because the price for a doctor visit is low, individual attitude towards health care pay little attention to prevention as well as taking greater interest in one's own health. Insurance premiums are expensive, and many will argue what is the point of paying thousands a year if they never actually go to the doctor. However, higher costs to see a doctor will encourage greater discretion among consumers. Overconsumption stems from a bit of labor practice arcana. During the Second World War, when the government froze wages, employers attracted staff through the payment of benefits, notably health insurance. This hiring practice relic has remained part of the system. These benefits are treated as tax-free. Amending the tax treatment of health benefits would go a long way to changing consumer behavior as firms would get out of the business of health care. Simplifying the way health care is bought and sold would reduce costs. Yet, as the next paragraph will argue, the reform act has expanded the role of firms in the health care marketplace and entrenched these lingering inefficiencies. The expanded roles of the Internet and other information technology will help reduce costs as email will allow doctors and patients to communicate more easily, and routine consultation may not require a trip to the office. This point does not claim that the medical system is backlogged with frivolous visits. However, it does argue that if people go visit a doctor, and each visit requires a test or billable procedure to insurance companies, then premiums will rise due to more claims made on the system. The tax on 'gold-plated, Cadillac' plans is a start, but it does not go into effect until 2014. Advocating greater individual interest and responsibility in one's own health is tough to legislate, but artificially low costs to visit a clinic lead to higher costs of health care as a whole. Such behavior ought to be discouraged.

Lastly comes the issue of mandates. The act has two types of mandates. The first apply to firms. Even the smallest firms must provide health cover. Regarding citizens, they must purchase health cover. Those who cannot would receive subsidies. The first set of mandates are a bit easier to explain. Congress has constitutional authority as written in the 'commerce clause' to regulate interstate commerce. This particular exercise of authority, though technically legal, would raise operating costs for small firms which drive job creation and innovation in the economy. Though the mandate aims to promote equity, it will likely do the opposite as firms may have to shed staff to afford compliance. This must be fixed as this provision creates an ill-timed, ill-conceived burden. The second type of mandate falls upon individual citizens. When on March 11, the Virginia state legislature voted that no individual shall be required to obtain or maintain individual insurance coverage. Mandates were a central issue of the federal Health Care Reform Act. State Attorneys General for Virginia and South Carolina believe the new law creates a Constitutional question on Ninth and Tenth Amendment grounds. Moreover, applying the commerce clause in this context poses a problem because states regulate insurance markets and a compulsory mandate does not fit within the scope of economic activity. Randy Barnett's piece in the Washington Post elucidates these arguments quite clearly. In principle, mandates do impinge on liberty. Also, this type of default into the system has caused some to believe that a public option might be possible. However, compulsory automobile insurance in some states is an example of an explicit-cost default that might seem an affront to liberty but has where the state has a compelling, countervailing, state-interest. Such a mandate sets a dangerous precedent regarding where government can intercede and compel participation. Such a mandate raises fears over what else the government can require on technical grounds without truly representative support of the legislature.

Perhaps these oversights and imperfections are the strengths of the Federal Health Care Reform Act. Perhaps voters and politicians will set aside ideological opinions and the rancorous exchanges the next time Congress or the President propose a fundamentally good reform. The scale of lobbying, the dollops of district aid to garner the necessary votes, and acrimony of the debate might have been too much for the electorate to countenance. However, if debate and resolution of the big issues are left to be decided solely on technicalities, the public will question whether it was a good idea in the first place. The Health Care Reform Act contains some good. That is why Congress must follow through to amend it to make it better. Otherwise, as in the case of employer-provided health care, its lasting effect will eclipse the good intentions at the onset.