KeithHennessey.com

President Obama: “Our government is deeply in debt after what can only be described as a decade of profligacy.”
Hennessey: “Which decade?”

The President proposed his budget today. I will focus on the size of the proposed budget relative to the rest of the economy. The deficit is an important but incomplete measure of this. It’s important to remember that every dollar not spent by the government is a dollar that can be spent by individuals, families, and firms. We should care not just about the difference between spending and taxes, but also on how big government is relative to the private sector.

If enacted quickly, the President’s new Small Business Jobs and Wages tax credit proposal will therefore create fewer (and maybe far fewer) than 165,000 – 297,000 jobs this year. For comparison, remember that the U.S. economy has lost 2.7 million jobs since a year ago, and 7.2 million jobs since the beginning of the recession in December 2007. 297,000 is 4.1% of 7.2 million, so you’re talking about a policy change that at best would restore fewer than 1 out of 25 jobs lost since the recession began.

Some in the House are floating the idea of splitting up either the House or Senate health bills into component parts and passing them individually. Some may see this as a way to get partial substantive wins. Others may hope the component bills die in the Senate so they can blame Republicans in November. This strategy does not work substantively.

I wrote yesterday that the bill is not dead until the Speaker says it’s dead. I think she in effect did so yesterday. Based on this development I have increased my prediction of collapse to 90%, and I believe the comprehensive bill is dead.

Like Schrodinger’s cat, the health care bill is in a strange place where it is simultaneously alive and dead. I predict that when we can see inside the box of the House Democratic Caucus, there’s a 3 in 4 chance we will see that the bill is dead.

A deficit-reduction commission that is trying to actually make changes to law must be credibly balanced and it must have formal authority to bind policymakers. The Conrad-Gregg proposal has both. The rumored Administration proposal has neither.

I am getting questions about a two bill strategy for health care if Scott Brown wins in Massachusetts today. I’ll be generous and give it a 2% probability. It’s an interesting idea in theory. In practice it would be a nightmare to execute.

This is the third of three posts on how the Massachusetts special election interacts with health care reform. Before Tuesday’s election, I predict a 75% chance that there will be a health care law. If Scott Brown wins on Tuesday, I will guess a 45% chance that health care implodes.

This is the second of three posts on how the Massachusetts special election interacts with health care reform. Let’s examine the procedural options for Team Obama and the Democratic Congressional leaders, assuming Mr. Brown wins the Massachusetts Senate special election on Tuesday. Each option is painful for the President and Democratic Congressional leaders.