J.E. Robertson's Open Salon Blog

Banks to Hike Card Rates Ahead of New Restrictions

Fri, 20 Nov 2009 08:11:52 -0500

With new regulatory restrictions on predatory lending practices, including constraints on the freedom of banks to raise interest rates to unsustainable levels, major banks have told federal regulators that they will be hiking interest rates and slashing credit limits for millions of customers, even where payments have not been missed. According to CNN, “a minority of banks” have said they will reduce penalties for good customers; economists worry the credit-card cost hikes will impede economic recovery.

The question many are asking is: what ethical or economic justification can there be for the same banks whose bad-faith practices have led to millions of consumer bankruptcies and home foreclosures, as well as the consumer-protection regulations to take effect next year, using the crisis they created to punish those who can least afford it? Is this not just a return to the same unethical, predatory business practices that led to near total economic collapse?

The fact is, analysts have become much more comfortable over the last year exploring the possibility that the banks were actually the worst deadbeats in a failed credit system, “borrowing” against fictional future wealth claims based on flagrantly unsustainable business practices not founded in any sensible mathematical analysis of real value (of outstanding debt liabilities).

This is the problem the banks are trying to fix: they need to cover the cost of massive projected “losses” that are really just a byproduct of the natural and inevitable correction of their flawed profit projections. They are, quite simply, persisting in the pervasive fiction that pins all responsibility for failed credit relationships on the borrower. The banks seek to sustain the myth that they are only lenders, never borrowers.

Regulators, however, not to mention market analysts, need to look harder at the banks’ relentless push to deflect attention away from their policy of counting future interest-based profits as actual wealth against which they borrow to fund their unsustainable business practices. The manner in which banks have been accounting for current and future assets flies in the face of basic arithmetical reasoning, and has been rooted in fundamental distortions of the reality of both the real extant wealth available to them and their future potential earnings.

The banks have behaved just like irresponsible consumer borrowers who know they cannot pay for the credit they are taking out, but continue to take out more to pay off what they can’t pay. They have done this for at least a decade, by inflating the value of their investment holdings, counting unrecoverable loan valuations as actual wealth, and borrowing against business they knew they could not sustain.

This made them far more vulnerable to the housing bubble, and in fact meant that their actions were not just intimately intertwined with the inner workings of the housing bubble, but were a big part of what created the bubble in the first place. Banks’ need for more consumer revenue drove them to lend in sometimes reckless, sometimes predatory fashion, to borrowers who would not, ultimately, be able to use the loans as they believed they would, and the banks knew they were doing this.

They covered the extreme risk inherent in such deals, or sought to cover it, by “bundling” high-risk loans into derivative packages they then sold off to third parties, or used the questionable practice of credit-default swaps to insure against disaster. The practice was questionable, because the bad loans were so widespread, so fundamental, that the swap system was clearly over-extended and could not reasonably have been expected to work in a crisis.

In 2008, that crisis hit, when one after another major financial institution was suddenly “discovered” to have been too heavily invested in this complex of ill-wrought financial dealings. Some would say it was pervasive systemic fraud, others that it was just a misunderstanding on the part of executives who became overly enthusiastic about the potential ROI of what used to be considered risky business. But when the crisis hit, the wealth was not there to insure against disaster, and the house of cards began to come down.

Now, after tens of billions of dollars in taxpayer-funded bailouts, the banks want to milk those same taxpayers, their customers, for still more money, on top of the already extortionate compounded interest rates, in the midst of the worst foreclosure crisis in American history, with household bankruptcies at record highs, to sustain the same unsustainable business practices that generated the crisis.

The banks’ declaration that their rates will be going up not only represents a draconian disregard for the well-being of their own customers; it clearly illustrates how pervasive is the unwillingness to grow, heal and change with the times and the market environment. The banks argue they are now trying to be “more responsible”, but in effect, they are using the same strategy that pits their bottom line against their customers’ freedom to cover the costs of life as they know it.

In short, to avoid going bankrupt themselves, they plan to bankrupt their customers, without a second thought as to whether such a strategy might make their long-term business plan untenable. If there is no money to pay for their exorbitant profit projections, there is no money. Putting severely increased pressure on consumers in an already severely pressurized economic environment will only exacerbate the underlying consumer-economy crisis: more families closer to bankruptcy, more homes in foreclosure.

The banks have to learn to innovate, and that means they have to learn to do more with less, like everybody else. They have to learn to treat their customers like human beings who cannot magically make money appear out of nowhere and who have priorities like keeping a roof over their heads, food on the table and paying for their children’s healthcare and education. A continued refusal to do this amounts to an assault on the American family and a pathologically determined attempt to prolong this economic crisis.

Iraq War THE CAUSE of High State & Local Taxes

Thu, 15 Oct 2009 11:10:53 -0400

School taxes are soaring, but schools are losing funding. States are going bankrupt and teachers are being threatened with mass layoffs. Property taxes are high, but property values are falling, and banks won't refinance and won't make new loans. The federal government is working to foster economic recovery through targeted investment, lending and community-building projects. But states are dealing with the budget crisis by hiking property taxes and shifting more responsibility to municipalities.

That transition in the manner and nature of funding for state and local government services is being brought about by an economic crisis rooted not only in the mischief of ill-advised financial sector derivatives trading, but also by the extreme impact the Iraq war has had on federal funding priorities. The hundreds of billions devoted year after year to funding the war in Iraq has been drained away from middle America, from programs that provide public services, funding to states, and school districts.

The missing money, poured into the black-hole of an Iraq war that has spawned more terrorist activity than any single undertaking in the history of the United States or the world, is money which would go toward education, healthcare, infrastructure, emergency preparedness and even homeland security. The result of an underfunded economy, with federal assistance to states drying up, has been disorder and the degradation of entire sectors of the economy.

It is due to these Iraq-induced shortfalls that citizens around country are finding state and local taxes becoming more intrusive and less conducive to flexibility in personal choices about life priorities. Foreclosures and other major personal-finance cut-backs are coming not just from irresponsible personal choices, but also from the still mounting stresses of a system that failed to establish fiscal responsibility, because its fiscal resources were drained away for a war in Iraq.

Even with large-scale troop withdrawal scheduled for a year from now, the Iraq war will continue to cost hundreds of billions of dollars this year and next, and much of that cost might wind up being shifted to Afghanistan, along with troops and equipment. That war is now entering its ninth year, making it the longest US war since Vietnam and the second longest our nation has ever fought.

Military strategists and Bush opponents are not alone in arguing that Afghanistan should not have been a decade-long quagmire, but that the war effort there suffered severely when the Bush administration ordered up a new war effort in Iraq, with no connection whatsoever to the attack of 11 September 2001, and began directing four to five times as many resources there as had been devoted to Afghanistan, despite never capturing Bin Laden or Mullah Omar.

It is now possible that by the end of Barack Obama's first term, the Afghanistan war could become the second of George W. Bush's trillion-dollar wars, a colossal and unnecessary waste of blood and treasure that will continue to eat away at the integrated circuitry of public services and federal funding, degrading quality of life at home with questionable benefit to US interests abroad, unless the Taliban threat to Pakistan is halted and al Qaeda significantly dismantled.

The Iraq war devastated the American war effort in Afghanistan, while federal tax policy took an irrational and dangerous turn toward reduced revenues in a time of war. In the meantime, economic and fiscal policy have spurred the collapse of the banking sector and an historic surge in energy prices, actually halting economic growth. The combined drain on federal resources is putting pressure on American states and municipalities to tax their way out of bankruptcy.

How is state or local bankruptcy linked to overseas wars? Because the federal government is not only funding those hugely expensive war efforts, it has also slashed taxes on the wealthiest Americans multiple times during the last decade. (This is part of why the wild success of the investment banks' profit recovery is not filtering down to the rest of the economy yet.)

The government is so strapped for cash, it is starving the states and municipalities of much-needed funding. The incidence of unfunded mandates —federal laws imposing costly change on states without providing funding to enable the changes— increased dramatically under the Republican-controlled Congress, between 2001 and 2006. No Child Left Behind was full of them, and even carried penalties that would reduce funding still further.

In fact, that law was so full of funding problems it wound up being a federal case in which school principals were suing the federal government. The executive director of the NASSP has said:

The unfunded mandates of NCLB have seriously strained America’s public schools. The federal government’s refusal to fully fund NCLB has forced schools to pull resources from other areas, and as a result has reduced the funds available for programs such as music, art, and foreign language.

There are anti-tax radicals in the Republican party who have famously declared their intention to use public policy to "shrink the federal government until it can be drowned in a bathtub", which leads some to speculate whether the coordinated assault on social service funding brought by the two trillion-dollar wars, the massive tax cuts, the huge number of new unfunded mandates and financial regulatory changes that led directly to the record multi-trillion-dollar bailouts, was really a coordinated assault on social services and the federal budget.

That is a story for another day. For now, we're grappling with the aftermath of these devastating policy choices. And the key factor in the whole picture is the war in Iraq. Yes, Saddam Hussein was deposed, but we have a country that may remain for generations on the verge of all-out civil war, and no other event in modern American history has been more devastating to our national finances or economic outlook.

The most famous book written to date about the war in Iraq was titled Fiasco, because aside from "regime change", not one of the stated goals of the Iraq war planners was achieved. The men and women of the US armed forces have performed valiantly and professionally, with a few very visible exceptions, and have succeeded in stabilizing Iraq, so it won't break apart.

Iraq may not only hold together, but US military efforts in rebuilding infrastructure and working with communities and tribes to foster cooperation and a new spirit of civic engagement, collaboration with police and local government, and a reduction in insurgency, have been vital in moving Iraq toward peace. The men and women doing that work deserve credit for such monumentally difficult tasks, it must be noted.

But catastrophically damaging ripple effects from the invasion itself and the clumsy, extreme violence of the early years of the war, have increased the threat to US security, proliferated the number of rogue terrorist groups aiming to kill Americans and left us having lost years of potential global collaboration on security, economic and climate issues, while a handful of companies working as "contractors" in Iraq made tens of millions or even billions of dollars.

The states have seen the tax burden shifted heavily toward them, with no apologies and no plans for reversal. Because no other choice was readily available, given the deep recession he inherited, Pres. Obama's economic recovery strategy calls for putting off the reversal of Bush's tax cuts for the wealthy, in order to help spur job growth and a return to economic expansion.

Until then, states will see federal money harder to come by, will have to borrow, will be forced to raise taxes or commuter fares —where relevant— or decrease tax incentives. There are elections this year and next, in which voters will be judging whether sitting governors or legislatures, or members of Congress, deserve to remain in office, and anger over local and state taxes is sure to drive public opinion in those races.

The issue people need to keep in mind, because it is very much a present-tense problem, is what those officials did to support or oppose the Iraq war's massive drain on federal funding, what they thought about Bush's tax policy, and what they did regarding the 2001-2006 Republican Congress' unfunded mandates.

Insurance Industry Threatens Clients via Paid 'Analysis'

Tue, 13 Oct 2009 14:10:26 -0400

The health insurance industry has released a sponsored "study" to show that if the Senate finance committee's version of healthcare reform were to pass, they would explode costs over the next few years by as much as 40%. The report is being greeted with outrage, as the insurance firms, which stand to reap possibly hundreds of billions in new business from expanded coverage, appear to be trying to extort a strict universal mandate with harsh penalties for noncompliance.

Top political analysts are taking sides, but even opponents of healthcare reform are saying the insurance industry may have "overplayed its hand", revealing its lack of interest in competing fairly in an expanded market with lower costs. Proponents of the "public option", designed to keep the insurers from raising rates arbitrarily and abusively, say the report is the best and clearest argument that could be made for why such a low-cost public option is needed.

What's more, a recent CBO analysis of the Senate finance committee's proposal projected it would reduce costs per patient, be deficit neutral and would actually reduce federal spending by $81 billion over ten years. If that analysis is accurate, it means the average patient would see costs come down, and private insurers would have to compete in that market environment. The 40% rate-increase report, in this light, seems like a pre-emptive strike intended to impede those cost reductions.

There are reports suggesting the analysis was "ham-fisted" and unscientific, and may have been thrown together for political reasons, as part of a disingenuous PR campaign being waged by for-profit firms. PriceWaterhouse Coopers, the firm that carried out the analysis, is being criticized for a history of producing such reports suggesting reforms forcing private business to compete or to work under higher costs would devastate the household budgets of American families.

There have been calls by some to investigate what level of integration or partitioning there might be between the paid analysis and financial management and consulting departments. Some critics believe the firm might be manipulating research —the current report has been slammed for cherry-picking data, economic theory and legal analysis— in order to lobby for their own clients' bottom lines.

PriceWaterhouse Coopers' client roster includes the following insurance firms: Ace, American International Group, AMB Generali, AXA, Legal & General, Millea Holdings, Progressive Corporation, Protective Life Corporation, Prudential Financial, Standard Life, Swiss Re, Zurich Financial Services, as well as the following pharmaceutical and biotech firms: Bayer, Biogen Idec, Bristol-Myers-Squibb, Genzyme, GlaxoSmithKline, Johnson & Johnson, Merck & Co., Novartis, Novo Nordisk, Sanofi-Aventis, Teva Pharmaceutical Industries, Wyeth.

The health insurance industry seeks to maximize profits. Its representatives in Washington tell us that only by doing this can the industry "maximize efficiency", that this is the logic of the marketplace. But competing theories of market economics suggest in a functioning market, businesses seek not to maximize profits, but to optimize the balance between profits and customer value.

The industry's opposition to these reforms is very clearly oriented not toward optimizing customer value, but to maximizing profits at the expense of all other players in the system, with no regard to the broader economic impact wrought by such a strategy. A 40% increase in coming years would directly contribute to a perilous increase in the rate of household bankruptcies, would cause businesses to lay off workers or cut benefits, possibly drive some small businesses to bankruptcy, and force millions out of the insurance market.

The PWC report may be the clearest indication yet that new insurance regulations should not only create a low-cost public option to compete with insurers, but that their pricing mechanisms should be regulated as well. The health insurance industry is more than dysfunctional: it has adopted pricing and profit schemes that cannot sustain the levels of enrollment required to continue expanding their business.

There is not enough household wealth or wage-potential in the average American's life to fund the massive increases in cost the insurance companies have been imposing and continue to project out into the future. The only way the industry's current level of enrollment (35% of the population) is sustainable is for the rate of cost increase to slow to the rate of inflation. This means a lower per-patient profit in coming years, so the only way for the insurance industry's revenues, and therefore profits, to continue expanding significantly is for millions of new people to join the insurance markets.

Whether the insurance industry likes it or not, whether it wants to swallow the necessary new regulations and cost-curbs due to competition, the current reforms are the only real hope the industry can continue to function as it plans, on such a large scale. AIG is just one example of a massive insurance firm whose mega-profits and uncontrolled growth forced the firm into risky decisions, anti-market behavior, and ultimately, catastrophic collapse.

The roughly 108 million people who depend on private insurance to pay their medical bills cannot afford to see their healthcare coverage evaporate, or be scaled back, or cut-off, because the firm responsible for that coverage is overextended or is crippled by not being able to meet irrational profit expectations.

Individual executives, and individual firms, may be convinced that what is best for their firm is the opportunity to expand profits without constraint from regulation, market dynamics or evidence-based analysis, but the fact is: the unwillingness to deal with the sustainability of the balance between pricing, services and market access, is now a deeply ingrained pathology the insurance industry is ill-prepared to deal with.

Since the year 2000, health insurance premiums have more than doubled, increasing by 133%. If this happens again over the next ten years, the average household would not have enough money left for rent and food, let alone transport and the other basic expenses of maintaining their existence. It is inevitable that such a situation will lead to mass flight from the insurance market and/or mass bankruptcy and the deterioration of the healthcare system in general.

The PWC report is incomplete. It flagrantly ignores key provisions aimed at reducing costs to consumers and spurring price competition, such as major new subsidies that would help the uninsured buy into the market, thereby expanding the pool and reducing the premium-level required to maintain solvency across the system. The report specifically states "We have not estimated the impact of the new subsidies."

The report is an attack on healthcare reform as such, because it was released immediately prior to a key vote in the Senate finance committee, using incomplete analysis to reach entirely false calculations. It is ideologically-based, in that it presumes to dictate that any pressure on insurers will drive a massive cost increase, ignoring the very premise that provisions designed to spur competition or lower costs market-wide might actually have a market-wide effect.

The document essentially serves as a form of legislative extortion, threatening consumers with massive penalties if their representatives in Congress pass the much needed reforms. That fact seems to be getting treatment as fairly transparent and egregious. But key question now is whether the report spurs broader support in Congress for an aggressive plan to effect low-cost insurance solutions.

More reporting on the healthcare reform debate

Healthcare Reform Explained

Mon, 21 Sep 2009 11:09:23 -0400

The Short Version...

Healthcare costs have doubled over the last ten years. The primary drivers of this unrestrained cost inflation are massive uninsurance and dysfunctional profit-making schemes for private health insurers. The 'market', so-called, is not really a market, because instead of lowering costs and increasing quality, it has driven costs up while reducing quality. This is what the currently proposed reforms seek to correct.

Reforms proposed by Pres. Obama and the Congressional Democrats aim to:

help private insurers cover more people, by increasing choice, spreading risk, and making plans more affordable;
bar insurers from rejecting treatment or coverage due to "pre-existing conditions";
make Medicare stronger, by cutting waste, expanding benefits and putting patients' needs first;
make sure the doctor-patient relationship is always the priority;
include more people in Medicaid, up to 133% of the official "poverty" classification;
create a low-cost exchange that helps those who still can't get covered buy cheap, quality insurance.

The dysfunctional healthcare market can be fixed, if everyone were able to afford or receive care. The current reforms are designed to expand the private health insurance market, shore up Medicare and Medicaid, and help subsidize those who are still too poor to buy private insurance but not poor enough for Medicaid. That's all. It's a lot, it's complicated, but it's nothing more than that.

The Long Version...

Right now, 52 million Americans have no health insurance of any kind. That's roughly 17% of the population, or one in every six people. (Recent estimates for the number of people who've lost healthcare since the recession began could put the total closer to 57 million, or one in five.) Every time someone with no insurance visits an emergency room, they incur massive costs that can never be paid, causing health service providers to find compensation by increasing charges for everything else.

Over the last two years, one in every three Americans has spent some period of time with no health insurance coverage of any kind. This is everyone's problem, not a problem of people unwilling to pay their way. Fixing the problem requires a significant improvement in the functioning of the existing hybrid public-private health insurance marketplace.

The California Nurses Association has found that over a seven year period, through June of this year, the state's six largest insurers rejected fully 22% of all healthcare treatments required by their paying customers. The private sector is, in fact, rationing care at an unprecedented rate. Currently pending reform proposals aim to stop this practice and ensure that patients get the treatment they need.

Rising costs is the chief reason such practices are spreading, and becoming more severe in their impact on patients. Reducing costs requires genuine success in making sure all potential patients have some form of insurance coverage, to spread risk and avoid the negative impact of expensive, uncompensated care, on prices across the entire system.

The redirection of existing subsidies into helping millions of people purchase low-cost health insurance from the private sector, will cover part of the population of those with no insurance. Expanding Medicaid to cover anyone whose income level is 133% or less of the official poverty line will also help to cover some of that population. Redirecting Medicare-related subsidies to private insurers to make Medicare more sustainable and more robust will also help.

But all such plans leave a certain number of millions (anywhere from 3 to 18 million) still too not-affluent to buy private insurance, even with the subsidies and tax credits, and too not-poor to qualify for Medicaid. Those millions mean there will still be a significant uncompensated care distortion in the pricing of the entire marketplace.

The sole function of the so-called "public option" would be for those people who fit this precise description to buy a plan guaranteed to be affordable, and to not deny treament to the ill or needy, because it is legislated to meet those standards, has no profit motive and yet is large enough to adequately spread risk and be sustainable. Private insurers would be encouraged to provide similar plans so that they could in fact also take over this part of the marketplace.

The result would be a more efficient and effective marketplace, in which competition drives prices down, but also pushes all players to raise the standards of coverage and treatment. This is what a private insurance marketplace is supposed to do, yet in the current climate, the American private health insurance industry is doing exactly the opposite.

In short, the Obama plan, as expressed in the various Democratic proposals in Congress, is intended to expand the market for private insurance, and expand the reach of public plans like Medicare and Medicaid, by making healthcare in general more affordable. As costs for everyone come down, the system itself becomes more sustainable and health professionals have more stable reimbursement in-flows, removing another significant driver of price increases.

Simultaneously, as insurers are able to not only cover more people, but compete in a wider market, they become more sustainable by doing more of what insurers were originally designed to do: spread the risk. They will also be able to dramatically reduce their administrative overhead, by not having to spend tens of millions of dollars per year on finding legal arguments for denying treatment or denying coverage.

GOP Attacks on Health Reform Argue FOR Socialized Care

Fri, 18 Sep 2009 10:09:19 -0400

The most aggressive argument Republicans are now making about healthcare reform is that it would allegedly "gut Medicare and Medicaid", two government-administered health insurance programs that provide treatment coverage for the elderly and the poor, respectively. The irony that emerges from the incoherent oppose everything Obama wants strategy being used by Republicans, shadowy front groups paid for by individuals linked to the insurance lobby, and conservative PACs, is that they are actually now arguing in favor of 'socialized medicine'.

This might actually be owing to an astonishing rhetorical maneuver implemented by Pres. Obama, who long ago decided that the best way to bring pro-market groups into a nationwide effort to enact comprehensive healthcare reform was to use reform to foster better market dynamics. Obama wanted a solution that achieved specific goals of social justice and economic policy aimed at resilience, by way of a market system that will not need an overhaul of the entire existing system in order to take effect.

By privileging a market-based solution (which includes the 'public option'), he put Republicans in a very awkward position. They wanted to continue their unrepentant opposition to healthcare reform —remember, Pres. Bush twice vetoed expansion of SCHIP, which gives needed medical coverage to children of the working poor—, but they would now have to argue that the market was a socialist ploy, that the supposedly "socialist" president was trying to "steal your Medicare" and essentially come out in favor of letting people die due to non-coverage.

The Republicans have opted to falsely label Obama a "socialist", conjure up a phantom "government takeover" of the entire nation's healthcare system, and then object to eliminating fraud and waste from Medicare, the nation's largest program for "government-run healthcare". Some of the same Republicans who routinely vote to slash funding for Medicare and Medicaid are now complaining that Obama's efforts to reinforce the two programs is "taking away your Medicare".

It's obvious to anyone listening that this is political grandstanding, and nothing more than an attempt to hurt Obama's chances of convincing the elderly to support reform plans. The Republicans are thinking electorally, and they know Medicare isn't going away, and for most people, it's a lifesaver they will never relinquish without a fight. So they want to make people believe Obama's the one who wants to take it away, and for the first time in a generation, they are fighting to make sure Medicare is amply funded, even to the point of opposing efforts to reduce waste and fraud.

But it remains to be seen if this strategy will actually hurt the president. Unlike the House of Representatives, his current term isn't up till 2012, so he has time to recover from and explain the truth about the current onslaught of fabrications and attacks. But the Republicans are now engaged in something that is quite a bit more than "flip-flopping" on Medicare. They are simultaneously arguing against and arguing for what they call "socialized medicine".

In short, while they decry the "public option" as "a government takeover", they are daily praising the biggest government health insurance program, and they are explaining point by point the virtues of that system. They are undermining their own future capacity to fight against Medicare, or its expansion. And it should be remembered, the logic of Medicaid is the same, so expanding that will also now be easier, after the Republican offensive in favor of a Medicare-like strategy.

What's more, the public option is much more like Medicare, a public, not-for-profit, system of insurance and reimbursement for healthcare, than it is like any truly socialized system of medicine. Obama has again won the vocabulary debate, because while the Republicans are distracted with hyperbole and fabricated attacks, Obama's goals now frame the entire debate on healthcare reform.

The same thing happened to Hillary Clinton, and to John McCain. Clinton sought to paint Obama as inexperienced, and while her campaign went full throttle into attack mode, looking to craft a narrative that would successfully defame the freshman senator, candidate Obama built up the most comprehensive panel of advisers and policy research teams any presidential campaign had ever seen. He did the work of preparing for government before voters' very eyes, and his speeches helped ensure that it was his vocabulary and his goals that prevailed.

Clinton had to compete on Obama's rhetorical turf, and she wound up having to demonstrate her own credentials in terms of innovative thinking, tech savvy, and commitment to the common good. She ended up having to defend against the charge that she was distorting the facts and bending her own narrative to make herself look bigger than Obama.

John McCain fell, astonishingly, into the same trap. Maybe in order to avoid that fate, he tacked hard to the right, seeking the Republican base, and his campaign, in coordination with the RNC, went after Obama as everything that might be suggested by youth and irresponsibility. But the attacks were all made up out of thin air, and Obama was overseas redefining America's role in the world, while McCain was comparing him, ridiculously, to Paris Hilton.

Obama's very rhetoric of public service, of devotion to the values enshrined in the US Constitution, coupled with his experience working on the problem of adjustable rate mortgages and personal bankruptcies, in the Illinois senate, and his time as a financial writer, before becoming a community organizer, allowed him to ease smoothly into the role of navigator in chief of a startling financial crisis.

His message fit the moment; his vocabulary was already expansive enough and well-attuned enough to be relevant, and he ably showed he knew what he was talking about, while McCain was busy deciding whether surrogates should stop calling him a "terrorist" or not. Obama is a political powerhouse, because he understands the problems the nation is facing, and because his political vocabulary is actually shaped to deal with those problems.

On the issue of healthcare, every major proponent of meaningful healthcare reform over the last several decades has contributed to the framework proposal that he is putting forward, in one form or another. His job has been to filter out the useless or the disruptive, and focus on what works. His vocabulary, the language in tune with the goals he has laid out, now dominates the national debate.

Republicans and their allies in the punditsphere devotedly celebrate every little blip on the radar screen of public awareness that refers back to some distortion or accusation they put out. But while they are consumed with that kind of politics of rumor and innuendo, they have fallen into the same trap as Clinton and McCain: Obama has successfully defined the problem and the practical solutions required.

Congress is squabbling. The public option may be "in jeopardy". The Republicans "smell blood" and are crying "revolution", some of them even urging followers to take to the streets in "open rebellion". But, killing the public option might make a vastly expanded Medicaid more likely. Republican goals are far from relevant to the current reform debate. And the party itself is now arguing that Medicare is a model for solving the problem of uninsurance.