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Krugman Shoots the Messenger: Blames Wheeler, FDL for Fueling “Fake Scandal” over Gruber

t_Paul_Krugman_243005Paul Krugman challenges Marcy Wheeler’s work on Jonathan Gruber’s failure to disclose his contract with HHS, saying it is simply the result of Gruber “being too much of an academic” who needs to “to reserve as much space as possible for real content” in 800-word essays.

He argues that Gruber was only saying what he would have said anyway, even if he weren’t being paid, and concludes:

What the folks at Firedoglake should ask themselves is this: do you really want to become just like the right-wingers with their endless supply of fake scandals?

Gruber received $780,713 in government contracts in 2009. In addition to the HHS contracts, he was hired by the Department of Justice, the NIH and the State Department for work this year. Krugman is right to say that the government awards these kinds of contracts to academics on a regular basis. But there is a fundamental difference between the HHS contract and the others.

Krugman says “Gruber’s grant is from HHS, not the West Wing.”  But in point of fact, he was hired expressly to advise the West Wing.

On February 25, the Department of Health & Human Services began a presolicitation of Gruber’s services on a “sole-source basis” to “developed a proprietary statistically sophisticated micro-simulation model” to analyze, advise, and report on all the elements relating to insurance.  The HHS synopsis says:

The information will facilitate the Office of Health Reform’s efforts to develop proposals to increase access to affordable health insurance for all Americans.

The Office of Health Reform. That’s a White House office, headed by Nancy-Ann DeParle, whose appointment was announced along with that of Kathleen Sebelius on March 3:

She works closely with her old friend, Health and Human Services Secretary Kathleen Sebelius on the administration’s biggest, and possibly toughest, legislative goal.

In fact, when HHS announced the next presolicitation for Gruber’s services on May 21 for $295,000, the wording changed:

The alternative specifications to be considered will be derived from the President’s health reform proposal.

The President’s health reform proposal. Not some remote project off in the bowels of the Department of Health & Human services, as Krugman suggests.

Gruber had worked closely with Peter Orzsag in the past, authoring a number of papers on Social Security and taxation together. In 2007, Gruber had praised George Bush’s health care plan for taxing “excessively generous, even gold-plated, health insurance.” And, in 2008, Gruber was on a panel at the Senate Finance Committee Health Care Summit, chaired by John Kerry (who authored the excise tax language contained in the Finance Committee bill). Orszag attended, as well. There was every reason to believe that when HHS solicited Gruber’s services in February, shortly before DeParle and Sebelius were appointed, that they knew exactly what they were getting by hiring an economist who had been one of the primary architects of the Massachusetts plan. That plan relied solely on private insurance plans with no public option, and when they hired Gruber in February it was clear that this was the model they intended to pursue. In Gruber, they had an economist who had a vested interest in defending his previous work on that project. His models would in all likelihood show what they had shown before: that taxing “Cadillac plans” was the way to go.

Krugman says that Gruber’s contract with HHS has nothing to do with politics, and that, therefore, disclosure is just not an issue.  But the point is that Gruber’s work for HHS became expressly political, and was used for political purposes:

  • On November 2, Gruber evaluated the CBO report on the House health care bill. In it, he uses his model to evaluate the House bill, concluding that it “will deliver savings ranging from $470 for singles to $1260 for families – even without subsidies.”  
  • On November 20, he published a paper entitled “Impacts of the Senate High Cost Insurance Excise Tax on Wages: Updated,” claiming that the excise tax would result in wage hikes of $234 billion from 2013 through 2019.
  • On November 27, he published a paper entitled “The Senate Bill Lowers Non-Group Premiums: Updated for New CBO Estimates,” issuing a paper saying the Senate bill “will deliver savings ranging from $200 for singles to $500 for families in today’s dollars – even without subsidies.”

At no point in any of these papers did Gruber indicate that this was exactly the work that the Department of HHS had contracted him to do on behalf of the “President’s plan.”

Now, you could certainly argue that the Senate and the House plans were not “the President’s plan.”  If that’s the case, was he doing these papers out of the goodness of his heart?  And where is the work that he has been contracted to do on behalf of DeParle and the Office of Health Reform?  Is it stashed away some place, out of the prying eyes of the public?

While Gruber may have said the exact same thing if he hadn’t been paid by HHS,  the White House was inordinately happy with the work he did do. They began furiously promoting his findings as soon as they were out, emphasizing his connection to MIT — but never making mention of the fact that he had been engaged by HHS to do work on their behalf.

November 11, on the White House blog, Jesse Lee wrote a post entitled  “Word from the White House: Objective Analysis Shows Reform will Help Small Businesses, Lower Premiums for American Families.” He noted that “MIT economist Jonathan Gruber has a new report out showing that reform will lower premiums for Americans purchasing insurance on their own.”  Emphasis on “objective analysis,” no mention that he had been contracted to advise the White House.

On November 28, Nancy Ann-DeParle herself wrote on the White House blog:  “MIT Economist Confirms Senate Health Reform Bill Reduces Costs and Improves Coverage.”  Emphasis on MIT, no mention of the fact that he was a contractor who was paid to advise her office on just these matters.

On December 3, Kathleen Sebelius herself issued a statement on the Senate bill citing Gruber’s work — but with no mention HHS was paying him.

On December 14, the Executive Office of the President released a paper from the Council of Economic Advisors, which said “Research by Jonathan Gruber finds that even just a single provision – the excise tax – would increase after-tax wages by $234 billion from 2013 to 2019.”  It also claimed that “Under the Senate bill, CBO projects no excise tax revenue in 2012 and $30 billion in 2018. CBO and JCT estimate that 81.2 percent of this additional revenue is attributable to higher wages as employers shift compensation from health insurance to wages.”  The citation for both was Gruber’s November 20 paper.

John Kerry cited Gruber’s work on the floor of the Senate as justification for his excise tax. But he wasn’t alone. Harry Reid, Bob Casey, Sheldon Whitehouse, Blanche Lincoln, Tom Udall,  Max Baucus, Jeff Bingaman, Al Franken, Tom Harkin, and Tom Udall all cited Gruber in support of their votes on the Senate bill.

The DNC sent 71 emails out between July and December of 2009 promoting Gruber’s work. Ron Brownstein obliged, writing a piece on Gruber‘s support of the excise tax and urging House Democrats to drop their opposition to it.  According to Mike Allen, Obama made the Brownstein piece “mandatory reading for all senior staff”:

Sources say President Obama declared that a Saturday blog post by Ronald Brownstein on The Atlantic’s “Politics” channel — on how health reform would control costs — was mandatory reading for all senior staff and that everyone involved in, or covering, the health care debate should see the piece.

Rahm Emanuel reportedly told the White House Staff “not to come back to the next day’s meeting if they hadn’t read the article.”

At no point does anyone in the Senate, the White House or the DNC note that the work they were promoting was work done by an economist paid by HHS to consult with the White House.

Gruber was brought on board to do what everyone knew he would do: use his models, and his credibility as an academic at MIT, to promote the excise tax.  As Jon Walker notes, “Gruber’s ethical failing is that he allowed himself to be falsely depicted as an objective outsider judge, which he was not.”

Krugman has always been quick to defend his academic pals. Ben Bernanke has “done a fine job in the crisis” and should be appointed to a second term. And now, in order to defend Jonathan Gruber, he insults Marcy Wheeler for being “just like the right wingers,” and fueling a “fake scandal.” This despite the fact that the Washington Post and the New York Times both say that Gruber misled them, as do a host of journalists who feel Gruber should have disclosed his financial ties to the administration — including Ron Brownstein himself.

Krugman owes everyone an explanation as to why he thinks it’s okay to smear someone fairly investigating a legitimate controversy in defense of a friend who misled people for months, who stood on the sidelines mutely while the White House promoted his work as objective verification of their own policies in a self-generated validation loop.

And he owes Marcy Wheeler an apology.

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Jane Hamsher

Jane Hamsher

Jane is the founder of Her work has also appeared on the Huffington Post, Alternet and The American Prospect. She’s the author of the best selling book Killer Instinct and has produced such films Natural Born Killers and Permanent Midnight. She lives in Washington DC.
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