Brother, can you spare my BMW: some of what's on Clinton's agenda - and a lot of what isn't - is a boon to yuppies.
* Clinton is a yuppie. He jogs; his wife is Hillary Rodham Clinton; he sent Chelsea to a Washington private school without even looking at a public one; his household income while governor was $235,000; he wanted to appoint Zoe Baird; he vacations at Hilton Head; he attended Yale Law School; he likes diversity; he listens to Fleetwood Mac; he was never in the army.
* Clinton is not a yuppie. He eats Big Macs; his mother is Virginia Kelley; he
sent Chelsea to a Little Rock public school; his last job paid $35,000; his chief of staff is a man from Arkansas nicknamed Mack; he plays pinochle; he attended Hot Springs High School; he denounced "bean counters" who wanted more women in his cabinet; he listens to Jerry Jeff Walker; he was in Boys' Nation.
At minimum, we've got the makings of an argument here. What's beyond contention is that, unlike members of the Volvo set in his cabinet, Clinton presents a mixed pedigree of yuppie and working stiff, a few parts Hope, a few parts New Haven, equal measures of hardscrabble and suburbia, a little bit country and a little bit rock n' roll. This helps explain how Clinton can convincingly mingle with men in hard hats as well as why, during a speech demanding that the rich pay more taxes, he could seat his wife next to Apple executive John Scully without giving the impression that the man had been lured there so that Hillary could lift his wallet.
The Elvis and the Eli coexist in Clinton. No doubt a leader able to straddle both realms is a good idea and an improvement over a cosseted patrician whose idea of the common touch is carping about broccoli. But the new president's down-home credentials may have a downside. When Bush tried on a populist pose, it looked as fatuous and uncomfortable on him as a hula skirt. When Clinton is faking it, it's harder to spot.
Four months into his administration we've already gotten a sense of how tricky this can be. Clinton has taken some brave stands against a variety of groups (defense contractors and government workers come to mind) just as he has wisely courted a variety of others (Wall Street and Republican leaders, for instance). But Cohen's lament about a yuppie turning against his own occasionally gets it exactly backwards; sometimes Clinton is the middle American selling short middle America. But to understand when his Elvis is an impersonation and his populism a canard, you have to listen to what Clinton hasn't said as closely as to what he has.
Lawyers in love
There's been, for instance, nary a mention of two little words that would save us a fortune but tend to provoke knuckle-whitening fear in lawyers: legal reform. Clinton made it clear throughout the campaign that he thought our system wasn't broken, and the Progressive Policy Institute, the think tank created by the Democratic Leadership Council, has published nothing on the subject in any of its 50 policy papers. No one expected Clinton to be a convert to the cause once he got to the White House, but all hope was lost when he named to his cabinet 13 lawyers who never had expressed much disaffection with the status quo.
The presidency is a superb bully pulpit for legal reform, but all signs indicate that for the foreseeable future, we're stuck with what we've got. And what is that? Bottom line, a system that now costs every household in the country upwards of $1,000 a year in liability premiums, a figure that doesn't even account for the untold billions in health care costs incurred when doctors cover their hides with expensive, unnecessary tests to stave off lawsuits. Even for the ostensible winners in this system--the folks who successfully sue--lawyers and administrative fees now devour roughly half of every dollar won.
If any of this fires Clinton's sense of outrage, he might give more than mere lip service to the kinds of out-of-court arbitration which would make trials quicker and cheaper. "In China, if you refuse to settle in arbitration, your punishment is to go to court," says Bill Fry, head of HALT, a non-profit legal reform group. "We simply need more choices for people." Clinton has intimated that he'd back some forms of Alternative Dispute Resolution (ADR), but that's about as courageous as saying you're for efficient government. And a real push for ADR is improbable given the pooh-poohing it routinely gets from some of Clinton's most ardent backers, the trial lawyers' associations.
Lawyers have also managed to dilute efforts by states to set up genuine no-fault systems, the kind which would end the staggering pain-and-suffering sums that juries often award to the injured. The interest of plaintiff lawyers is clear enough--they're on commission, so the more staggering, the better. But to the extent that juries simply want to punish the ineptitude of, for instance, doctors or drivers, there shotfid be less costly means at their disposal, like taking away operating licenses. It would also help to put an end to a uniquely American species of legal activity: the extortion suit, filed to scare defendants into coughing up settlements instead of shouldering legal fees. As repugnant as it may sound to a Clintonite's ears, that means plumping for the loser pays rule used in England, an idea championed by Bush and Quayle.
What galls about Clinton's position on tort reform is not just that it's a boon to lawyers at the expense of nearly everyone else, but that it's gussied up as putting people first. Clinton's sole campaign statement on the subject, published in the November 2 issue of the National Law Journal, offered this caricature of his opponents' views:
They want to make it harder to bring powerful offenders to justice. The 'reforms' advanced by Mr. Bush and Mr. Quayle are dramatically tilted toward the big polluters, manufacturers and insurance companies, and against consumers and victims.
Some brands of legal reform would, as the president suggests, facilitate corporate chicanery. But others wouldn't, and as a former law professor and attorney general, Clinton must know that court cases are now so drawn out and daunting that most people severely injured by doctors never even bother to sue. According to a recent Harvard Medical Practice study, just one out of seven victims of malpractice actually files a lawsuit. Being concerned about consumers, those injured and those not, compels changing the system.
Of course, being concerned about lawyers--or wanting to carry a little water for them--means keeping the system in situ and avoiding the subject of liability costs even when it's obviously relevant. Consider Clinton's February lambasting of the vaccine industry. Touring an Arlington, Virginia, medical center, he accused the pharmaceutical industry of price-gouging: "Over the past 10 years, while the immunization rates have been declining in many important areas, the price of vaccine has risen at six times the rate of inflation." The president failed to mention that the vaccine business is the paradigm of an industry ravaged by liability costs--in fact, a sorry chunk of the price increase Clinton decried is directly attributable to lawsuits.
Not long ago, the U.S. vaccine business was being sued fight out of existence: In 1981 there were about 12 vaccine companies; today there are five. As vaccine makers were getting pulverized by settlement costs, Congress intervened in 1986 and established the Vaccine Injury Compensation Fund, a no-fault compensation scheme. This slowed the suits, but parents still have the option of turning down settlements they don't like and taking companies to court. So vaccine companies, all of which have lost their coverage and are now self-insured, are still paying painand-suffering damages. Naturally, these costs are passed on to consumers.
In 1982, the full complement of vaccine shots cost doctors roughly $20. Today the shots given to a two-year-old cost about $188. Clinton is fight when he says this is an increase six times the rate of inflation, but he didn't mention that the 1992 dose of DTP (diphtheria, tetanus, and pretussis) now sports an $18.24 liability surtax, MMR (mumps, measles, and rubella) a $4.44 per dose tax, and polio an 87 cent tax--all sums that go directly to the government to pay claims. Clinton also forgot to say that two-year-olds now get two more shots than they did ten years ago, one for hepatitis B and one for bacterial meningitis. Subtract the new shots and lop off the liability charges and the right figure for the basket of vaccines these days--the figure Clinton should have brandished at the pharmaceuticals---is about $100. These profits are still greater than the rate of inflation, even counting increased costs for research, but nothing close to what Clinton suggested. Vaccine makers are hardly corporate samaritans, but this assault was a disproportionate use of presidential force.
Vaccine executives are, of course, easy targets ("Gosh, those companies are hurting the children!"). Still, this was an odd choice for a little post-election demagoguery. Here, after all, is the kind of high-skilled industry that Clinton and Labor Secretary Robert Reich have identified as the country's best long-term economic hope. And as the first president to contemplate appointing an AIDS czar, you'd think that Clinton would know that a number of companies-among them Oncogen, a subsidiary of Bristol Myers, and Genentech, a San Francisco-based biotech company--have already abandoned promising research for fear of lawsuits.
But it was nothing short of surreal that Clinton could deadpan an attack on vaccine makers without once mentioning the obvious and onerous role that liability has played in the past decade. The clincher came when he compared the high costs of American shots to the cheaper ones in England. For a brief, unwitting moment, he was making the case for tort reform.
Whether Clinton will go as easy on doctors, the other quintessentially yuppie avocation, as he has on lawyers is hard to tell. A heartening signal was sent by the Health Care Task Force's decision to keep all special interests at bay--the American Medical Association included---as they drafted their plan.
But for Clinton to both rein in prices and cover the uncovered, he'll have to address the two-to-one ratio by which specialists now outnumber primary physicians (in Canada the ratio is one-to-one). A system weighted toward pricey surgery rather than preventive medicine is wonderful if you happen to be a pricey surgeon, but it's just pricey if you're not. And today our affinity for specialists could be costing us fully a third of the more than $800 billion we spend annually on health care. To reduce costs, Clinton will have to take on the country's scalpel surplus, which means he'll have to get medical schools to stop churning out specialists at the same time that he controls the incomes of ones already minted.
There have been murmurs that the Health Care Task Force will encourage medical schools to reroute trainees toward family practice. But even if Hillary and friends threaten to withhold government subsidies, the real difficulty will be undoing med school culture, which now gets matters backwards by making wannabe specialists feel like they are doing the world a favor and primary care aspirants feel like saps. As for doctor incomes, early signs indicate that Clinton may be overly timid. Most of the measures in his budget outline are designed to control the costs of Medicare treatments, and for doctors there is only this modest measure: The fee increases for primary care physicians will go up on schedule, while specialists' fees will face a 2 percent lower rate of increase. In other words, Dr. Family gets a full raise, and Dr. Surgeon gets a partial one. This is not likely to modify career choices, given that in 1990 the average primary physician made $100,000, and the average cardiothoracic surgeon made $259,000.
If Clinton was sincerely outraged by vaccine companies, he should be livid about doctors. In 1986, the average private practice physician was making $131,000; by 1991, that average had climbed to $191,000. That's an increase at roughly twice the cost of living. And the entire pharmaceutical industry eats up just 6 percent of our total health care pie; doctors eat three times that. If Clinton played it by the numbers, guess who's overdue for a tongue-lashing?
Then there is Clinton's promise to make the rich "pay their fair share" of the tax increase. The proposed budget does contain some menacing snarls at the upper class, but once again it helps to look at the picture's negative--what isn't there--to spot where Clinton and Co. gave fellow middle-aged professionals a break. Conspicuous in their absence are reforms to curb the mortgage interest-rate deduction, a favorite tax break among thirty- and forty-somethings, many of whom have watched the value of their homes stall or fall and are still paying off mortgages. You can guess that a government of senior citizens would have given this particular money-maker a closer look, since more than half of folks over 65 with mortgages own their homes outright.
More revealing is what wasn't said about estate taxes. On the face of it, they make an attractive revenue generator, since they only hit the wealthy. Moreover, taxes today barely nibble at the vast transfer of riches being handed down from parents who profited from the post-war expansion to their babyboomer children. That's because in 1981 the law was changed so that a person could pass on the first $600,000 free--twice that for couples. And the government's take of what's left over has been dwindling. This year the top rate dropped from 55 percent to 50 percent and there are loopholes aplenty for anyone still facing a hefty tax liability. "There are so many ways around the estate tax that it's basically voluntary," says Ed Wolfe, an economist at New York University. The concerned parent can put money in life insurance annuities or sock it away m capital gains investments, which magically lose their taxability when bequeathed at death.
The upshot is that the percentage of estates that get taxed at all has plummeted since 1981 from 10 percent to 3 percent, and a paltry $12 billion is now annually collected this way--just 6 percent of the roughly $200 billion that is passed on. Meanwhile, the amount of wealth in the over-50 age bracket--the folks profiting most handsomely from Medicare and Social Security, by the way--has shot up. Three decades ago only 10 percent of retirees passed on sizable sums to their heirs; today nearly three times as many do.
Over the past decade and a half, parental largesse in the billions has become the dirty little secret of the yuppie class. But the Clinton crowd won't tattle. The budget proposal offered the meekest of changes: raising the top marginal rate back to last year's 55 percent. That's disappointingly little, and not just because it won't generate real money (just $1.6 billion more in five years). From 1940 to 1976, the highest marginal rate was 77 percent, (a rate that today would raise an additional $3.5 billion per year), which gives you an idea of how much of the eighties mentality has become our own and how far we've traveled from our original sense of fairness. Estate taxes have become another piece of Washington furniture that can't be moved, and for near-term, that is what they'll remain.
It's hard to say to what extent Clinton's chumminess with lawyers, gingerness with doctors, and lighthandedness with estate laws is evidence of class self-preservation and how much is simply hugging the shores of what is politically possible. But whether it is because they have political clout or because they are simply the people now in power, it's hard to escape the sense that this administration will be asking for some sacrifices by the affluent middle-aged even as it extends them a few less visible but very valuable favors. It seems, for instance, like Clinton's Eli was ascendent over his Elvis when it was decided that our over-stock of specialists need only face a slower raise, just as it was wisely argued that cuts in private sector weapons production should put 1.1 million blue collar types out of work. Entrenched interests of all stripes will have to be taken on for the new president to be effective and fair in reducing the deficit. If Clinton is both yuppie and non-yuppie, he'll have to be willing to betray both classes every now and then.
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|Title Annotation:||Pres Bill Clinton's economic plan|
|Date:||Apr 1, 1993|
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