Why Small Benefits Work Better

The Fixes blog in the New York Times on an excellent program called Youth Villages that helps to keep kids in their homes and out of foster care.  There's a few things I want to pick out about this article, which I'll go through.  The central them is that in home care is almost always cheaper than institutional care.

By age 23 or 24, fewer than half of the former foster care youths in the study were working. Close to a quarter had no high school diploma or equivalency degree and only 6 percent had completed a two- or four-year post-secondary degree. Nearly 60 percent of males had been convicted of a crime and 77 percent of females had been pregnant.

This frames how bad the issue is.

The idea is to help youths return to their original families wherever it is possible to do so safely by providing their parents, or in some cases other relatives, with an extensive array of in-home support services. This approach may seem counterintuitive, given that child welfare agencies intervene when courts deem parents unfit to care for their children. However, evidence indicates that intensive in-home services can bring substantial changes in families — and produce more successful outcomes than out-of-home models like foster homes or institutional care.

This isn't counter-intuitive to anyone that works in government.  Trying to get this through people's heads is one of the key roles my agency plays.  Government, and especially the Federal government, knows just how terribly wasteful institutional care is and works hard to try to get public support for these programs.  It doesn't work, because the reaction is always we only want to give services to people that really need it.  Everyone else should just be more personally responsible and the wouldn't need services.

While this may or may not be true, the result of this attitude is that by the time anyone is in bad enough shape that it's evident they really need it and aren't trying to skim from the public purse, it's already a crisis and institutionalization is usually the only option.  Raising eligibility requirements makes this worse.  Lowering eligibility requirements so that more people qualify for cheaper service intervention can save money in the long run and has much higher success rates in turning these people into production citizens.  This will be costly in the short run however, since it requires temporarily paying for the high number of institutionalized people in the system currently as well as the increased benefits.  Since means testing and other forms of eligibility requirements are so popular to save money right now, expect things to move in the opposite direction.

Youth Villages monitors outcomes for every child it serves and allows independent researchers access to its data. The organization reports that, two years after completing its in-home programs, 83 percent of youths served were living successfully in families, 85 percent were in school or had gained a high school or equivalency degree, and 82 percent reported no trouble with the law.

America Compared

Charles Blow has an excellent chart up today comparing America to other advanced economies on a number of measures on the New York Times today.  I'd like to see per capita GDP, 10 year average growth rate, workforce participation, government spending as % of GDP, and dependency ratio (with separate entries for over 65 and under 18) added to it to capture what I feel are the most relevant variables, but it's still good.  I'd also like to see this done for 1960, 1970, and 1980 as well.  In those decades I believe America would score much higher.  The chart basically points out that on a number of measures we've fallen behind our peers (Canada and Australia serve as the best examples of where we should be at).  Obviously we're still tops on per capita GDP (barring micro states, which aren't good for comparison to territorial states), but other measures look bad and will likely translate into lower GDP growth in the future.

If I get really, really bored I may try to do this sometime, the work doesn't sound that hard (though some of the measures, such as Gallop Global Wellbeing probably aren't available).  One of the main themes I've been taking up is that we have been going from top dog and losing our relative spot since the 1980s.  This comparative historical data would be necessary to illustrate the point.  Without knowing when things started to go wrong, we can't identify with any certainty what changed here (or didn't change here but changed elsewhere) that has been causing our relative decline.  I've obviously got some ideas, but haven't yet gotten around to compiling hard historical data to prove the point.

More on New York and Medicaid

Following up on the last post, which got heavily side tracked about two minutes into writing it requiring a change of course, this post is on what I originally intended to discuss.

First home home care:

Care delivered at home by health aides trained to handle minor medical tasks grew by 90 percent per recipient from 2003 to 2009, to reach more than $15,500 a year. Personal services delivered by nonmedical attendants, such as assistance with dressing and bathing, grew by 38 percent, to reach almost $30,000 a year. Right now this care is mostly delivered on a fee-for-service basis with hours of care determined primarily by the providers who have an incentive to run up the bill with more and more services.

 If I was at work I'd have an excellent article to quote from on this, however I don't have it so this will be more general.  An issue I have with this is that there is a huge discrepancy between these kind of benefits through most of the state and these benefits in New York City.  The article I alluded to looked at 24 hour nursing care in the rest of the state compared to New York City, New York City had more than a magnitude difference in proportion of people receiving 24 hour nursing care relative to population compared to the rest of the state.

There is of course a good reason for part of this, care in facilities is higher in New York City than in the rest of the state so there is a larger group where the marginal cost of providing 24 hour care is still lower than the cost of care in a facility.  Still, this doesn't explain the entire discrepancy by a long shot.  So an examination of how these programs are run could easily find savings to be had by simply making the local bureaucracies adhere to in state best practices (though it should be noted that areas in the rest of the state would probably benefit by providing 24 hour care more frequently since this would often be cheaper than institutional care, savings can be had on both ends).

The Market and Health Insurance Sales Across State Lines

The New York Times this morning had a short piece on New York Medicaid cuts.  It's a decent overview, there are just a few bits I'd like to add my 2 cents to.  This post is a bit of a tangent, it deals with a concrete reason for why I oppose cross state sales of health insurance, given current institutions.  New York is the state with the most generous state health benefits so it provides an excellent example for how an integrated market forces democratic decision making up to the national level because decision making done at the state level imposes decisions made in one state on others, which is arbitrary and undemocratic from the point of view of the other 49 states.

To frame this, the high cost of long term care in New York, and that mental illness is a portion of this.

In 2009, the latest year with audited data, New York covered more than 300,000 patients — the elderly, chronically ill, patients with mental illness, substance abuse and other difficult problems — at a cost of $23.1 billion or almost half of the state’s total Medicaid spending that year.

And this is essentially why I'm opposed to cross state sales of health insurance.  New York has chosen to be the most generous state in the nation as far as medical benefits go. Whether or not any individual agrees with this, it is our democratically chosen decision.  As a result of this, mental health parity laws are a very big deal here, they mean that private insurers pick up some of the tab for those patients with mental illness rather than the state, without this those with expensive conditions would fall back on the state for benefits while private companies only paid for the cheap stuff (or at least for this one condition, though this could be extended to other areas of health care New York is generous in).  Many states do not have mental health parity laws and their private health plans offer little, if any, benefits to patients with mental illness, which results in throwing them back on state services. 

Letting insurance be sold across state lines would pose major problems to a state like New York.  Maintaining the level of services to the mentally ill that we currently provide would become far more difficult if people started opting for HSAs that were cheaper in states without mental health parity and then developing schizophrenia in their 20s or 30s (I'm choosing mental health for this topic because the population it impacts is the one most likely to opt for inexpensive health insurance with minimal coverage, which is problematic because it's also one of the most expensive long term conditions).  This isn't so costly for those states that give less benefits, for us, it would put additional strain on our mental health system, which is already under substantial strain with or without the budget crisis.

Breast Feeding and Cross Cutting Cleavage

I wasted some time reading this article, so I thought I'd spread the pain.  Apparently, there is a tempest in a teacup over Michele Obama's efforts to encourage breast feeding.  Apparently, both support and outrage cross political lines.  My personal reaction is that there is nothing nanny state about promoting public health issues, this is an age old function of government.

What I find absurd is that we're making our already far too complex tax code more complex by one line by making breast pumps tax deductible.  Since very few except the wealthy itemize, and they can afford a few hundred dollars for a breast pump, I don't see the point.  What I would like to see is some programs that actually work to make motherhood and employment easier to juggle for the working class and single mothers in particular, while there's probably a few that will benefit from this I believe for most it will do little to nothing.

Let's not even get into the idea that some people are outraged that the government is promoting something that their life style doesn't allow them to do (perhaps the government could mandate that women be given some time to use a breast pump, or would that be too nanny state).  Of course some government programs aren't going to equally apply to everyone, doesn't make them less beneficial to the people that can benefit or that need the encouragement.  If you have a good job that won't let you use the pump, you're probably not the target for the program in the first place.  Just silly.

Am I Suggesting Class War?

I realized the last few posts could be fairly easily classified as class war.  The short answer is that no this is not meant to advocate for class war.

The longer answer is that this is not class warfare from anything like a socialist perspective, I am making no claims, and do not believe, that there are any inherent conflict of interest between the wealthy and the rest of society or that this is some way linked to control of the means of production or any particular segment of society's resources.

What I'm suggesting instead is pure interest group politics.  A number of innovations, some outside our control and ultimately part of the international system, as well as a number of others particular to decisions made by our government, have led to a shift in incentives and potential awards among groups that individuals can potentially identify with and become a member of.  Unsurprisingly, this leads to them joining and identifying more frequently with the groups whose rewards have become greater.

This of course is a huge problem.  Our system works because it manages to align the interests of many groups in our society, I would be willing to say that the success or failure of a society is largely determined by its ability to align the interests of the individuals making it up and its ability to attract new individuals into it.  Changes that interfere with this are potentially extremely destructive, the more interests begin to diverge the more potential gain that individual actors see in creating further divergences that benefit themselves more than others.  Eventually, cooperation becomes increasingly more difficult the further interests diverge and the lack of coordination between actors begins to shrink the pie.

In our system, it used to be that the interests of the wealthy diverged significantly from each other and were more closely aligned with the interests of their business and those that were involved in their industry.  While this may not have declined greatly, their interests as members of the upper income bracket, and probably more significantly, as earners of investment income have certainly converged meaning that, at the margins, they have become more likely to cooperate with each other and gain those benefits and let the interests of their individual industry and business be secondary (at the margins is an important phrase here, I'm not suggesting they no longer put their business first, just that there is a greater range where their business interests seems less relevant than the interests they share with other wealthy folks).

So, fundamentally, this is a simple failure of political economy, not class war.  There is no inherent conflict between income brackets, but a failure of political culture has strengthened a community of interest within the upper income bracket while weakening the community of interests between income brackets relative to this.  This is leading to a predictable outcome.

Bridging Cross Cutting Cleavages, Horizontal and Vertical Links

I plan for this to be my last post on this subject, it has already gone on far longer than I had intended it to do.

The first issue is another driving factor behind the increasing community of interests that elites have.  That is the 1980s tax reform which substantially simplified our tax policy.  While in general I support this reform (capital gains being taxed at a lower rate excepted) this reform inadvertently eliminated many of the issues that previously created divisions within the broader group of the wealthy.  With the earlier tax code, a wide variety of loopholes existed which created incentives for the wealthy to protect the loopholes they used, while regarding others as expendable.  The simplified tax code eliminated these divisions, creating a greater community of interest.  Again, I like tax simplification and think it is worth it, but since I also like for people in a democracy to be divided so no one group can win out, I think it's worth noting that there's a potential cost to simplification.

On to the main topic, which is the linkages between groups.  The main point is that there are very strong horizontal issues that unite the wealthy and distinguish them from the rest of us.  The biggest one being the focus on investment income rather wage income.  This presents a unified front and the group is manageable enough to keep up a coherent message.  Below this level, despite the relatively low earnings from capital gains, we are simply to diverse to match this lobby.

These leads naturally into some of the vertical linkages that still exist.  Corporations themselves are an important vertical link between the wealthy and the rest of us.  This gives many of them a way to identify their interests with those of all of us, after all, if your employer is doing well it's more likely you'll do well.  However, the way that income is earned at the top has caused this linkage which involves shared interests across most sectors of society (the bottom quintile doesn't have much say here) to weaken relative to the horizontal linkages amongst the wealthy.  Despite this, this vertical linkage inherent in the corporation provides the wealthy with a platform to make their own views heard potentially in virtually every electoral district in the US.  It also allows them to speak for an entire group of people, rather than having to speak solely for themselves, even when they are advancing their narrow interests rather than the interests of the company as a whole.  If it were truly corporations advocating rather than their wealthy owner, our corporate taxes would be rock bottom and our capital gains and income taxes wouldn't have changed so much.

My evidence for this is a bit weak, but something that always nags at me when looking at US policy is how effective mobilization has been among the wealthy over the past 30 years in lowering the top income brackets as well as the capital gains rate while simultaneously being abjectly horrible at lowering the corporate tax rate, whose base level is well above OECD averages.

This really lies at the root of my thinking on this issue. Policy changes instituted in the 80s led to a great strengthening of interests that united the upper end of our income bracket while not materially effecting interests or incentives for the rest of society to become more unified.  Over time, these changes have played a self-reinforcing role, as the wealthy adapt their existing portfolios to match with the new set of incentives their rewards for going along with the interests of the rest of the wealthy increase, while their incentives for focusing on the vertical linkages with the rest of society decrease.  Today's wealthy are far more diversified and have a much more international outlook than previous generations, they simply aren't as tightly tied to the individual businesses that unite their interests with the rest of society's.  Since corporate taxes continue to vary greatly between industries, the owners of businesses have widely varying incentives in pressuring for changes in these taxes, while their incentives for lowering the income and capital gains taxes are similar.  So, given the choice, they'll accept the continuation of high corporate taxes, but rising capital gains or personal income taxes are something worth fighting with all their might.

This isn't to say that there don't remain a number of vertical linkages, but most of these are a side show rather than something fundamental to our success as a society.  The NRA would be a great example of this kind of vertical link, while it may advantage a few particular wealthy interests it is a link between them and the rest of society, however, it's not exactly advocating on issues that will make or break the future success of our society.

It may also be that the internet will eventually allow the creation of horizontally linked groups among the non-wealthy that can successfully apply counter pressure.  The Tea Party could be a forerunner of this, though it is arguably if the pressure they are applying could be called counter pressure.  It remains to be seen however if this pressure will be a long term thing or simply a temporary response to current conditions.  The policy changes that have altered incentives at the top have led to constant pressure, and the formation of a number of long lived formal entities, such as think tanks.  To properly counter this it would be necessary for citizen groups to form that would have a similar longevity and ability to get out the vote and to apply pressure to individual Congresspeople year in and year out.  I'm sceptical this will happen, though hopeful it will.

[Edit:  I will do one more very short post, probably a paragraph or two at most, on this subject that I forgot to include in this post that I think is very relevant for addressing how divergent interests can easily lead to regulatory arbitrage among the states.]

How Has Cleavage Become Less Cross Cutting

In my last post I advanced a thesis that the problem for our democracy wasn't money in politics, that's always been there, but instead that there is a greater community of interest among the wealthy today than in the past, the wealthy have advantages of organization that allow their interests to operate across multiple districts, and fewer groups exist today that can operate with similar reach and influence within districts.  So what has changed over the past 30 years to lead to this result?  This is by no means a complete (or even all that well thought out) list but just my general impression.  It could certainly use some research to look at how influential various groups have been and to examine the degree to which they were cross cutting.  However, that's beyond the scope of a blog post.  Please feel free to suggest additional groups I'm ignoring or pointing out connections I missed, I'm curious how well this would stand up to serious scrutiny.

So the first issue is what changed to provide a unity of purpose among the wealthy that was previously lacking.  The first issue is the rise of multinational corporations.  This has been going on for some time and in my opinion is probably on the whole a good thing.  This does however make it very difficult for local or state governments to check a corporation since they are so mobile and even restricts the Federal government to some degree.  It provides a unity of purpose by focusing all those involved in these corporations on issues such as repatriating foreign earnings as well as on US trade law.  Before, businesses would have had more competing interests by which state they operated in, with this development their competing interests are all abroad while they are a more unified front in regards to US policy as a whole.

The second issue is the financialization of the US economy.  This is linked to deregulation and increased possibility of profits and to probably a greater degree the lowering of the capital gains tax.  This vastly increased incentives for the wealthy to focus on income from capital gains rather than from income from dividends or other sources of profit from their businesses.  Since finance and investment impacts all businesses this led the wealthy to have a greater community of interest in making it easier to earn from sources that would provide from capital gains rather than focusing on what benefited the earnings from their particular line of business.  By making capital more fungible, individual investors had less incentive to be divided among the lines of their particular business and more incentive to identify with other investors relative to their individual industries.

The third issue is the emergence of a greater sense of identification among elites.  I don't want to make too big a deal of this, especially since I haven't read any of the books that discuss this at length, but the idea that there is a global elite that shares a number of values and interests and feels little attachment to individual countries has become common enough that I give it some credence, at the margins anyway.  To the extent this is true, it makes coordination easier and provides more forums for the individuals involved to meet each other and to begin to identify with a shared set of values rather than being divided among groups identifying more with their home state and region and thus having more common purpose with their region of origin rather than other elites.

I'm being far more long winded than I intended, or have time for.  The rest of this post will be more summary.

Money, Politics, and Cross Cutting Cleavages

So, this post was spurred by reading a couple of different posts on the Economist today (one on Bob Herbert, the other, less influential one for this post, on ideology and in particular the bit about politicians serving special interests as corrupt, which I find nonsensical since I believe all interests, including the people at large, are special interests.  If they weren't why do we still have the home mortgage deduction and low gas taxes, those individual special interests aren't strong enough, the people at large however preserves this folly.) , as well as by Bob Herbert's column.

Money influencing politics is a common, and in my opinion, lazy correlation to draw and not clearly causal of anything.  Concentrations of wealth have always been around, the question is whether and to what degree that influences the political process, and to the extent that it does how to forestall this.  To figure that out requires that we think for a bit about how money might influence the political process, beyond the easy way of campaign contributions, which I've read enough on to believe they aren't highly correlated with elections and thus probably not all that influential.

I believe that a better way of looking at it is solely in the terms of interest group politics (and, to pick on an earlier linked post, something that I think all politics is so it's impossible to distinguish between corrupt politicians serving special interests and others).  Specifically, I have in mind Federalist Paper Number 10.  In my view, the great and aggregate interests particular to the wealthy have benefited from an ever larger number of innovations that have made coordination amongst them easier as well as making their interests more uniform while reducing the influence of smaller and particular interests in breaking up the great interests.  In addition, great and aggregate interests that used to have the power to counter the interests of the wealthy, such as labor unions (not that I like labor unions, I believe they deserved what they got due to their own bad policies, but despite their flaws they were an aggregate interest that was able to oppose the wealthy on the national stage), have declined in power and lost their ability to act as a separate countervailing interests.

Chinese Families and the Market

I hadn't originally tended to blog about this, but it has been rattling round in my head so I figured I'd bring it up despite the article being a week and a half old.  The New York Times has an article on a Chinese ministry which is proposing a law requiring children to regularly visit their elderly parents.  I don't really think this law has a chance of succeeding, states have never been successful at enforcing these types of social policies simply through enforcement measures and punishments (altering incentives is a different kettle of fish, but not why I brought the topic up).

So, as far as the law itself goes, this is little other than a curious footnote about a changing China.  But I believe it illustrates a very important point about social evolution, and in particular, that it is still happening in the modern world.  Filial piety is a very old Chinese virtue with a centuries long past.  However, modern social pressures threaten it, even when state collapse, invasion, and Communist rule, with all its efforts to break down other social bonds, didn't succeed.

Social Impact Bonds

I hadn't heard of this specific type of policy before, but it's interesting and the brief NY Times article on it worth reading.  Social impact bonds seek to spur innovation by offering to reimburse non-profits or other groups for social policy investments if they meet certain benchmarks, with bonuses for exceeding them.  While there are a number of limitations with this approach, there remain areas where this is potentially useful as a way to spur innovation and investment when money is tight.

While this innovation is useful, I do think it needs to be noted that government in general has a pretty strong accountability movement that currently seems to be active, at least within the parts of the bureaucracy I have experience with.  We are hearing quite a bit about the need to be more accountable and are having a lot more pressure to create strong benchmarks.  To some extent, I'm sure this is the way things have always been, but looking at our within agency data I can certainly see how procedures have changed to enhance accountability so there does seem to be something real going on, at least within the disabilities field.  These social impact bonds are probably more an outgrowth of this general movement towards accountability rather than an isolated innovation.  I also have to add that it has been normal practice for a very long time to cut off receivers of funds that miss performance goals.  The reasons for continuing failing policies are complicated, but there's a fair amount of oversight with the more narrowly focused programs these bonds try to address.

Still, the more things we try, the more likely we are to find something that works.  Though the hard part is shutting down the things that don't and replicating the things that do.  A problem I often see with the idea of the states as laboratories of democracy is that generally what a lab does is try to do something on a small scale which can then be brought up to a larger, more efficient scale.  This second piece seems to break down too often in the US, it often seems that something works in one state but it never gets replicated at a bigger, more appropriate scale nationally because too many other states prefer to go their own way rather than listen to the lab results.

One problem with this idea is that it seems like something that puts all the responsibility on the small non-profit and not with anyone else.  While this enhances accountability for the money, a good project can potentially fail because in say a recidivism project, the prison itself has little incentive to follow the non-profit's suggestions.  This limits areas where this type of intervention can be applied, the presence of actors with little incentive to change can thwart the best intentions of even active and well run outsiders.  A second issue that I've come across from working with grants, is that even a project that seems good and seems to be working can end up failing with time due to an unforeseen obstacle in another part of the system.  While this isn't an ideal result, it is a frequent one and one that points eventually to a solution, assuming contingent reforms (which often don't happen, but this is another topic).  Simply learning about another problem that needs to be addressed is a valuable outcome since it makes later change possible, though this has to be carefully weighed against the possibility of mission creep. 

Despite this, the reality of society is that many problems are interlinked, a problem may be fixable through policy, but it may take a series of contingent policy changes to successfully address (we're working on a multi-stage grant process to reduce recidivism among inmates with disabilities, we're modeling our program on one that worked with mental health so the end outcome should be successful, but if we were dependent on strong benchmarking from the first part and didn't have a previous model its questionable if we could put the whole thing in place since the first part didn't impact recidivism significantly but it was necessary for the next part which we expect will).  Expecting outcomes from a single policy change may be too much to ask with complicated problems which require multiple interventions, resulting in non-profits doing real work that would address the issue with additional interventions but that get no return because their single intervention was insufficient.  Of course, at this point the objection is complex and won't always apply, but it's worth noting that there's a limited range of projects these grants are appropriate for, there are many others where a long term, integrated approach will be necessary.

Some Lessons from a Needle Injection Pilot

Excellent article (and some must see accompanying photographs in the linked page) on a drug injection site project in Vancouver.  Articles on these places always interest me, the evidence is overwhelming that they bring multiple benefits and no one has been able to show significant downsides to them (assuming they are put up in already rough areas, I can see why people wouldn't want them in an area with little existing crime or illicit drug use).  Yet, in most places, the public and the government hates them.  While I haven't read anything to confirm this, there are two reasons for this that seem intuitive.  First, they make problems more visible that people prefer to ignore and have left to back alleys and dingy rooms rather than publicly funded clinics.  Second, they are very challenging ideologically to anyone that takes a tough on crime stance.   That these things work and have a growing body of literature to support this is tough when the tough on crime stance and incarceration enjoys little data to support its effectiveness.  If more data continues to come in showing these things work, especially if they affect drug usage rates as well (which this article doesn't go into), it brings a lot more into question than needle injection site.

A second observation from the article is that it illustrates a theme I keep coming back to with my health care posts.  That theme is the idea that the fractured nature of payments in the US is one of the key drivers of health care costs.  Since in Canada all health care is paid for by the government these problems don't exist.  AIDS patients are very expensive to treat and can have high externalities for the rest of society.  From the government's perspective almost the entire externality is captured, it bears the costs of treatments, the lost taxes due to illness, costs imposed by new infections, public order costs from drug use outside the clinics, political pressure from fears of a rising AIDS rate, etc.  In the US, no single actor feels the effects of all of these externalities.  A private company may bear the cost of treatment, but it doesn't see a decline in revenues nor does it feel public pressure by a rising AIDS rate and likely does not bear the cost of an additional infection, it certainly doesn't feel any responsibility for the public order issues of drug injection.  The same can be said for the US government, it doesn't necessarily bear the full cost for each infection since the private sector is responsible for some of the payments.  While AIDS and drug injections are an unusually clear case of this, it's illustrative of why I think only the government is positioned to fully bear both the costs and benefits of health issues and is the only economically efficient actor to bear these costs, due to the number of costs and benefits that cannot be internalized by other economic actors.

The article contains some striking information on the public health issues involved, one striking number given was this:

Even $50 million spent on drugs, he said, ultimately saves $300 million because roughly 400 people a year avoid infection. (The estimated lifetime cost of treating a Canadian with AIDS is $750,000.)

 A very powerful argument in favor of these treatments, if they can be backed up, but one that only partially applies in the US, where in many cases the government won't be baring the costs, assuming that the drug addicts will rarely receive retrovirals and the people getting treated are those infected when it spreads into the wider community (through many channels, including prostitution, but also other channels as well).

Another striking statistic specific to HIV infections:

A 1997 study in The Lancet found that in 29 cities worldwide with needle exchange, H.I.V. infection dropped 6 percent a year among drug injectors, while in 51 cities without, it rose by about 6 percent.

Thinking Through the Constraints in Egypt

At this point what exactly happens in Egypt is anyone's guess.  Still, I think over the past few days some constraints on the actions of various parties has emerged that limits the possible outcomes. I'll review over what I think I see in current events, with the caveat that not knowing specifics about Egyptian institutions or the personalities of the key actors involved no real predictions can be made.

As I've written before, the military seems to be the central institution concerned in the current struggle.  This NY times article goes into a decent overview of the situation with the military, I'm betting the regime is regretting not paying them better now.  The major constraint is the questionable reliability of the armed forces, while the armed forces seem to be basically loyal to the regime there seems to be significant enough doubts about the rank and file that leadership has been reluctant to test this.  While they may have been able to use the army to suppress the protests initially, that particular ship has sailed and I doubt they will test this at this point.

Which brings up the second constraint, the amount of support the regime gets from the United States.  While this influence shouldn't be exaggerated it doesn't seem unlikely that the amount of aid received from the US and the risk of alienating its US backers may have contributed to what I think may have been a critical delay in the use of force.  While the counterfactual is unknowable, attempts to break the protesters would likely have been more successful in the first few days, either by pro-Mubarak mobs or by a military whose rank and file may have been more reliable in early days but has reliability has since become more questionable.

The third constraint is the late use of force to try to rout the protesters and the following international reaction.  From what I can tell, this action was basically a high reward but high risk though low severity gamble, though it is not surprising the regime took it.  There was a chance that the protesters would break, but this was small by the time mobs were actually put into play.  However, this alienated foreign backers of the regime, which threatens the aid the military received.  This was a bad call on Mubarak's part because now there is something of a rift between the two which was less pronounced before.  The military kept its distance from the counter-demonstrations and probably has little to worry about in the medium to long term with its funding.  However, Mubarak's actions gave an incentive for foreign regimes to distance themselves from him, both to help relations with other powers and whatever regime ultimately has power in Egypt.  This makes Mubarak something of a liability to the military, though continued allegiance to him may have other benefits.  It certainly made keeping those benefits potentially more costly in the short term, however.

The next constraint is the lack of clear leadership or even clear factions within the protesters.  This has two effects, it makes them harder to bargain with and it makes it harder to try to divide and conquer.  There remain fears about the Muslim Brotherhood (legitimate or not, I have mixed feelings on them), and perhaps more generally, what effects any perception of them winning will have on the rest of the region, no matter their long term role in Egypt.  My guess is that this will make the situation drag on for longer than it otherwise would have, beyond that I think it will make it more unlikely for the government to offer strong concessions.  The army simply won't feel any confidence that they can influence what follows strongly enough without knowing that there is a leadership in place that will be able to deliver on any agreements made.

The next constraint is closely related, and that is that always volatile nature of the Mid-East and fears of jihadist groups using the situation to their advantage.  While I think this is unlikely, I do think that fears of this will secure the current Egyptian regime, and in particular it's army, basic levels of foreign political support and if necessary funding, to be able to hold on as long as they need to.  I don't see foreigners sticking their necks out simply to ingratiate themselves with any new regime, risks elsewhere in the region will make this outcome unlikely.

The last constraint is the seeming lack of serious unrest in the rest of the country.  As long as the army doesn't break ranks it seems unlikely the protesters can break the regime from their current outpost.  Serious unrest elsewhere in the country could possibly threaten the regime's stability and cripple their revenues which would stand a good chance of unseating them.  Lacking this, it seems reasonable that they could keep the protesters bottled up for some time without being forced to give in.

So to some this up the outcome will depend largely on the deliberations at the top ranks of the military.  I think they are likely coming to see Mubarak as something of a liability, as a face saving measure they will probably provide some sort of temporary position but I think they will sacrifice him once the situation begins to seem too costly.  I believe their ideal outcome will be for Suleiman to step directly into Mubarak's position in some form of negotiated process, but without knowing more about the Egyptian military I will confess that there are likely many political outcomes possible within staff negotiations that I am unaware of.

From the standpoint of the protesters, I don't see them having the leverage to get too many concessions.  However, they may get increasingly desperate, fears of arrests and repressions after they leave the square may force them to remain there until some kind of settlement is reached.  I have no idea if they will accept Suleiman or not, but it is hard for me to see how they can get new elections in the short term.  Perhaps what they will need for their security will be something like one of their leaders brought into the regime to insure their safety, I have no idea who could fill this role however.

On the whole, there seems to be an impasse.  The military is too uncertain in its loyalties to allow a crackdown, and in any case the military remains sufficiently well liked that it can be assured a strong voice in whatever comes next, whether this is driven by the protesters or the current government makes little difference so they have little incentive to crack down just to insure Mubarak's survival.  Their optimal move seems to be to simply sit this out and wait and see what happens, which may mean it will be awhile till this gets resolved.  The end result will be short of a bloody crackdown that solidifies the regime and less than a collapse of the regime.  Whatever happens, the military will probably come out ahead and play an increased role under the new regime, whether chosen by elections or headed by Suleiman.

Or to put this whole post more succinctly, I think at this point things are at an impasse and will go in favor of whichever side the military throws its weight behind.  However, since the military is on good terms with both sides the military really has no incentive to go either way since this will mean alienating someone.  This makes the result unpredictable, the longer this goes on the greater chance that something unexpected will throw things into chaos (imagine what a large terrorist attack could do right now), but barring the unexpected, this simply becomes a test of endurance between the two sides.

Mubarak Massively Misstepped

Given the swiftness that US rhetoric changed with, I'd bet that the administration had decided days ago that if Mubarak used violence that we'd abandon him.  Bypassing the army for crowds probably led to a meeting or two to see if this counted, but we turned on a dime here (for international dialogue anyway).  We won't know unless someone publishes a book afterward but I think we put out a landmine and didn't let Mubarak know it was there.  Alternately, we told him no violence or we'd abandon him, and got really, really pissed off when he tried to pull a fast one on us.  Now that I've written it, second option seems likeliest.  Nothing harms relations like someone feeling that someone else tried to play them for the fool.