It is a good morning. We haven’t had enough of those in this country in the past decade.

hat tip: Kevin Drum

Last night, Congress approved the health care bill.

University of Rome Tor Vergata economist Robert Waldmann cried tears of joy. George Mason University economist Don Boudreaux wanted to vomit.

Okay, not everybody is happy this morning. For my less-enthused readers, I thought I’d post a special edition in our “What to Read” series. Herewith, I reproduce the best articles, columns, essays, and posts that I’ve read on the health care debate since I started this blog. But first, I want to second Steve Coll’s motion to celebrate one journalist in particular:

If you, like me, are uplifted by the historical potential of Sunday’s vote, then the best way to sit still inside what has happened is to scroll back through Ezra Klein’s blog. If you haven’t been reading Klein throughout the health care reform debate, you’ve missed one of the inspiring examples of how new forms of journalism in the hands of a new generation of journalists (who don’t always admire, but don’t always disrespect, the example of the generation before them) can produce vital new work. Klein is an example of a policy wonk in possession of both passionate opinion and scientific method who put himself into position to cover the dull-but-important story of a lifetime.

Coll has inspired me to create a new tradition for this blog: a “Journalist of the Year” award. With a little backdating, we are proud to honor Ezra Klein with the 2009 Trading 8s “Journalist of the Year” Award.

And now, everything you need to know about the health care bill, including many fine posts by our first annual Journalist of the Year:  

What, exactly, is in this bill?

Health Reform Implementation: What Happens When — Austin Frakt
For Consumers, Clarity on Health Care Changes — Tara Siegel Bernard
What Health Care Reform Will Mean for You — Mary Carmichael
Improve the Bill, Yes. Kill the Bill, No. — Igor Volsky
Beware This Republican Narrative — Jonathan Cohn
Health Reform Myths — Paul Krugman
The Five Biggest Lies in the Health Care Debate — Sharon Begley

What did it take to get the bill passed?

Pelosi Steeled White House for Health Push — Carrie Budoff Brown & Glenn Thrush
GOP Attacks on Pelosi Ring Familiar — John Aloysius Farrell
What Failure Would Cost the Democrats — Norman Ornstein & Thomas Mann
The Limits of Rahmism — Peter Baker
Most Americans Want Health Care Reform — Joel Benenson
Which Party Uses Reconciliation More Often? Looks Like Harry Reid Was Correct — Joshua Tucker
Health Care No Stranger to Reconciliation Process — Julie Rovner
Is “the Process” Driving Opinion About Health Care? — John Sides
Policy Compromise Is Easy. Political Compromise Is Impossible. — Ezra Klein
PANIC!!! — Jonathan Chait
What Will Make People Trust Government Again? — John Sides
A Formula for Futility — Ronald Brownstein
Health Care Tests the Senate’s Credibility — Steven Hill
The 19.5 Years Test — Ezra Klein
The Best Deal the GOP Will Get — Matthew Yglesias
We on the Right Should Remember 2003 When We Lament 2010 — Andrew Samwick

Why should we extend insurance to everyone, and why does it require such a big bill?

Why Reform Health Care? — James D. Hamilton
What Jim Hamilton Gets Wrong on Health Care Reform… — J. Bradford DeLong
The 150,00-Life Health Care Plan — Ezra Klein
Letting Perfect Be the Enemy of the Good? — J. Michael McWilliams
All You Ever Wanted to Know About the Research on Health Insurance and Health–and More — Stan Dorn (via Ezra Klein)
California Death Spiral — Paul Krugman
No Such Thing as “Simple” Health Reform — Uwe E. Reinhardt
Why the Health Care Bill Is Worth Passing — James Surowiecki
Why I Prefer French Health Care — Matt Welch
Are We Going to Let John Die? — Nicholas D. Kristof
A Failure to Explain Financial Benefits of Health Care Reform — Thomas F. Schaller
Health Care Rationing, American-Style — Uwe E. Reinhardt
The Cost of Not Enacting Health Care Reform — Linda J. Bilmes & Rosemarie Day
Mass Appeal — Jonathan Cohn
How Health Care Reform Could Combat Crime — Mark A. R. Kleiman
Health Insurance Exchanges: An Overlooked Key to Reform’s Success — Ezra Klein
Adverse Selection — Mark Thoma
Health Insurance “Innovation” — James Kwak
DeMint Offers a Teachable Moment — Paul Krugman

What will this bill do about rising costs?

This Won’t Hurt a Bit — Sharon Begley
“Cadillac” Tax Isn’t a Tax: It’s a Plan to Finance Real Health Reform — Jonathan Gruber
Health Cuts with Little Effect on Care — David Leonhardt
Coverage and Costs — Paul Krugman
The Senate Bill Saves Families Money — Jonathan Cohn
Health Reform Legislation Would Accomplish More Than Critics Admit — Henry J. Aaron
How the Senate Bill Would Contain the Cost of Health Care — Atul Gawande
Show Workers the Money: Rising Health Costs Take a Bite Out of Raises — Ezra Klein
The Hospital That Could Cure Health Care — Jerry Adler & Jeneen Interlandi
The Uproar Over Mammography — Uwe E. Reinhardt
A Milestone in the Health Care Journey — Ronald Brownstein
If Health Care Is Going to Change, Dr. Brent James’s Ideas Will Change It — David Leonhardt
Is This Why Republicans Can’t Support Health Care Reform? — Ezra Klein
Health Care Reform and the Unpopular T-Word — David Leonhardt
Health Care Premiums Run Amok — David Cutler
The Good, and Bad, of Health Care — David Leonhardt

How will this bill affect the federal budget deficit?

Fiscal Realities — Peter R. Orszag
As RomneyCare Moves Toward Probable Final Passage, Douglas Holtz-Eakin Says 463+123+114 = 562 — J. Bradford DeLong
How Health Care Reform Reduces the Deficit in 5 Not-So-Easy Steps — Ezra Klein

These links (mostly) do not address the public option (because it didn’t end up in the final bill) or what steps we need to take next (because I discussed that here). It will not resolve our long-term problems, but it is a beginning…much like a rising sun.

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Coming from one of the world’s leading experts on econometric predicting, Hamilton’s improved mood says more than all of Jim Cramer’s rants put together. He cites increased activity in the auto industry, an uptick in home sales, a slight increase in consumption, increased expectations for third quarter sales in several large industries, and significant recovery in the Aruoba-Diebold-Scotti Business Conditions Index. (Full disclosure: Frank Diebold, one of the authors of the index, is a good friend and former teacher of mine. He is also a world-class econometrician, but I have not asked him for his outlook at present.) Indeed, those are most of the important measures of whether individuals and firms are starting to spend again, which is precisely what is needed to end a recession.

Hamilton is not taking a stand on whether the recession is over and cautions that the end of “Cash for Clunkers” could prick an artificial high in auto sales, personal income still hasn’t risen, and unemployment shows no signs of falling. But the latter two usually follow on the heels of the other indicators he cites, and the positives seem to greatly outweigh the negatives. So why isn’t Hamilton’s emoticon smiling?

A lot of it has to do with the “shape” of the recession, as economists have explained it to the public of late. A “V-shaped” recession, like we used to have in the 1960s and ‘70s, implies a sudden end to the recession and a sharp return to growth. A “U-shaped” recession, like we had earlier this decade, means growth will be slow and unemployment will continue to rise for awhile even after the recession technically ends. Because consumers are still “deleveraging”—that is, because they have more debt than twentieth-century consumers had—most economists predict the latter, as spending won’t return full-force until they pay off their debt. If nothing else, such an expectation warrants a neutral face instead of a smiling face. The economy may grow again, but it’ll be a long slog before we return to the good old days.

There is, however, a third possibility: a “W-shaped” recession. Granted, it’s rare and frightening, but several well-known economists warn it is very possible. The last time it reared its ugly head was the early 1980s, when the economy dipped into two recessions within the first three years of Ronald Reagan’s first term, and before that, it was the Great Depression, when the initial recovery was brought to a halt by deficit hawks who forced Franklin Roosevelt to raise taxes and balance the budget in 1937.

Investors disagree. All summer, the story has been the stock market rally that looks to be pulling us out of the recession. After a terrifyingly close call from the collapse of Lehman Brothers to the passage of fiscal stimulus, banks have raised capital, Detroit has escaped bankruptcy, and one-by-one economic data seem to be following the stock market’s lead and forming a bottom.

But something is amiss. “We’ve never had six-month period before where we’ve lost two million jobs and the market’s gained 50%,” says Wall Street expert Barry Ritholtz. “That’s simply unprecedented.” Ritholtz thinks the rally will reverse, and if today’s dismal performance is any indication, investors should pay attention.

So who’s right? Let me first say that you should never ever make a financial decision based on my opinions. If financial economics teaches us anything, it’s that the stock market is next-to-impossible to predict, and even if it weren’t, I’m not confident enough in my financial savvy to be responsible for your risk-taking. That said, I’m with Ritholtz on this one, for the following reasons:

1. As indicated above, unemployment will remain high for some time, and with unemployment comes…
2. …foreclosures, which show no sign of slowing down. Government intervention has helped many people, but if we want to make a dent in the larger economy, stronger intervention is required.
3. A whole slew of adjustable-rate mortgages still haven’t reset—which is to say, some homeowners are about to get hit with higher interest rates—so you can expect more defaults.
4. Repeated reports indicate banks still have too many toxic loans on their books. If the Obama administration had taken the advice of many of us and run the worst offenders through FDIC receivership, we wouldn’t have this problem, but alas investors will start to get worried if these reports keep coming.
5. September is historically a bad month for the stock market.
6. Far more insiders—people who know what’s under the hood, so to speak—are selling than buying.
7. The easiest way to measure valuation is the price-to-earning (P/E) ratio. If stocks are selling for a lot more than their companies are earning, beware. The historic P/E average is 15. Right now, it’s 100+! Even if you use the more stable “operating earnings” because you think reported earnings have been depressed too low by the credit crunch, it’s still overvalued at 20+.
8. The output gap—the difference between what we should be producing and what we are actually producing—is still significant. Some economists recommend another fiscal stimulus. I worry about dynamic timing, which is economist-speak for “It took you so long to spend the last stimulus, how do I know this one won’t be delayed until the recession is over?” The last stimulus clearly boosted the economy before most of it was even spent. John Maynard Keynes would call that the result of “animal spirits”: Consumers knew the economy was about to get a jolt, so they started spending again. If the stock market dips or foreclosures increase, however, another immediate stimulus should boost “consumer confidence” like the first one did. If Congress can’t get its act together fast, though, it’ll only add excess inflation after the recession ends.

Economists have two fears: (1) From March till now, we have been in a “bear market rally,” which means the rise in stock prices has been false hope amid a longer decline. (2) The entire economy will turn down again.

The first is a financial concern, the second a broader economic one—though of course the first affects the second. I am not predicting anything, but I am saying that we should be cautious for the 8 reasons above. And I am admonishing the Obama administration and Congress for failing to prevent these fears with mortgage cramdown, a larger stimulus with fewer tax cuts and more spending, and nationalization of certain banks. As James Kwak said earlier today, the fact that the TARP loans are showing profits—which Ritholtz rightly debunked as incomplete analysis—only indicates that the government made a bad bet and got lucky. I hope they (and we) continue to get lucky, but for now I’m with Jim Hamilton: I’ll smile when we’re sure this is all over.

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