What has become a rather curious ritual almost nobody else I've read comments about is Obama's knee-jerk praise anytime the Democratic-led House or Senate comes up with some back office, wheeler-dealer convoluted legislative proposal, which bears almost no recognizable resemblance to campaign high-sounding rhetoric. Senator Mary "Louisiana Purchase" Landrieu (D-LA) went on the Senate floor to complain about conservative bloggers reporting her alleged sellout for $100M on health care: "It is not a $100 million fix, it is a $300 million fix". Point well-taken, Senator: we should never underestimate a Democratic politician's willingness to spend public money for political gain.
Obama's cheerleading reminds me about some programmed patronizing flattery I once got doing some computerized training program. I finished a short chapter with no exercise when this feedback flashed on the green congratulating me for all my hard work. In fact, all I had done was click through 2 or 3 pages. I actually went back to see if there was some exercise I hadn't noticed. Clicking through a couple of pages certainly wasn't worthy of praise. Praise for minimal or mediocre effort is hardly inspiring; it devalues the concept.
The White House, in response to sagging polls on health care reform, is spinning some nonsense about how people will warm up to their version of health care "reform" once it's law. I think that's a state of denial. The Democrats will be held accountable for any benefit gaps or deficiencies in whatever bill emerges, any increases over cost projections or any restrictions on eligibility. The Democrats are setting unrealistic expectations that "reform" will bring down costs, cost savings from Medicare subsidizing the cost (never mind the fact that we have a huge unfunded mandate in Medicare, which any alleged savings should shore up), and the number of uninsured will all but disappear. Yet the Democrats have yet to provide a convincing case that this convoluted wheeling and dealing in Congress will result in success state experiments in Massachusetts, Oregon, and elsewhere haven't been able to achieve. And with the Democrats all doing the heavy lifting to pass a bill (because they refuse bipartisan compromise), the Republicans will be able to tie any and all shortcomings directly to Democratic incumbents.
Kimberly Strassel points out that Republicans are very competitive in a number of states with Democratic Senate seats up for grabs; Colorado, North Dakota, and Delaware could flip; New York and California are in play, as well as Pennsylvania, Arkansas, Illinois, and Nevada, with announced or expected GOP candidates leading or tied with incumbents. There are just over 10 months until then, which is a lifetime in politics. I've seen some Democratic senators or candidates inching back up, including Reid and Dodd, widely considered the most vulnerable Democrats. The GOP expects to make a significant dent in the House, where 4 Democratic incumbents have already announced they will not run for reelection. Conventional political wisdom makes it unlikely that the Dems will come out of the mid-terms holding or increasing their positions. The magnitude of Democratic losses will depend on a number of factors, the principal one being whether the economy will have rebounded sufficiently. The Democrats will be in a bad position if unemployment has not dipped back below the 7.6% at Obama's inauguration; just holding serve won't be good enough. Unemployment is a lagging indicator, and of course Obama and the Democratic Congress will attempt to attribute any cyclic recovery as proof that their stimulus and other domestic spending agendas are working.
But the real take-away from the column involves the real motives behind the Democrats' puzzling obsession with health care reform. It's best understood in the context of the recent Medicare for 55 and above kerfuffle and GOP complaints over cuts to Medicare. As more than one progressive noted: many Republicans had been opposed to Medicare on concept, and so their opposition to cuts in Medicare funding seem politically convenient. To an extent, that's true. However, when most Americans have been paying into Medicare for years, it's become a fact of life; the GOP concern over the Medicare expansion had more to do with counterproductive cuts in doctor and hospital repayments, already subsidized by the private sector, while simultaneously contracting the private sector share. This really amounts to a de facto tax on people in private-sector plans (or paying for services a la carte).
The progressives want to scapegoat the profits of private-sector insurers, but that's wrong on multiple levels. The private sector is intrinsically motivated to minimize costs, including adoption of creative destructive technologies and techniques; in many cases, markups are a percentage over underlying costs; hence, like in last year's oil price squeeze, oil company profits followed the oil price spike; they also dropped in the aftermath of the economic tsunami. But even when gas was $4.50/gallon, gas station operators didn't sell as much gas, so even though their profits were higher per fill-up, they had fewer customers filling up as customers sought to mitigate the cost shock, e.g., cutting back on discretionary driving, using mass transit, etc. And whereas the energy companies reported huge profits, the stock market prices in future profits, and it did not believe the profits were sustainable long-term. The same type thing occurs in the pricing, say, of alternative energy stocks, oil sand stocks, etc., which become profitable at a certain price point for conventionally-produced oil; oil exporters know that which is why sometimes they will call for a price target below the current market price.
We see the same kind of response in terms of health insurance. For example, some policyholders will elect to choose lower-premium higher-deductible plan. Others may elect to do the historical practice of a la carte payment, not paying towards middleman administrative costs (private sector or government). But the progressive theory that the real cost driver is private health insurer windfall profits is preposterous. For one thing, the government is already covering almost half of the population. Second, the industry is already heavily regulated on the state level, Third, non-profits (e.g., Blue Cross) compete in many, if not most of these state markets, and all things being equal, the nonprofits would take market share away from private sector insurers whom did not price their policies competitively. If private companies can make profits in competing with non-profits, why is this an issue? Perhaps they're doing a better job managing their costs. Fourth, profits are the thermostat of the private sector; there are lots of private health insurers. The major issue is any barrier to entry in state markets. Fifth, those who espouse a conspiracy theory need to come with a logical explanation of why this market power suddenly materialized, across the board, in individually-regulated markets. Industry consolidation is driven not so much to obtain pricing power but to increase the scalability of revenues while streamlining redundant costs. If the states are legitimately concerned about the anti-competitive effects of industry consolidation, they should look at lowering barriers of entry (including excessive regulation and expensive mandates).
The real goal of the progressives, as Strassel notes, is getting the American people hooked on government health care (my analogy: not unlike a drug pusher hooking new customers with free or limited-term attractive pricing). All they need to establish at this point is a beachhead. Then it's a matter of conventional government scope creep (just like the handling of SCHIP) But they will also want to make things opaque, e.g., by establishing a value-added tax which yields a prodigious amount of federal money, rather than annual battles over blown health care budgets. If they have to bait the hook of Democratic senators from purple or red states (e.g., Colorado, Louisiana, and Nebraska) and sacrifice Blue Dog Congressmen or centrist Democratic senators whom will pay a steep price their next election, they're willing to do that.
And that's why I think Obama is cheering on whatever piece of health care sausage the Congress sends to him. He knows once he's established that beachhead, the conservatives will have to take on a vested interest of new entitlement enrollees, and he's willing to pay any price for that, even his own reelection.
Job Stimulus II
Because the first one worked so well (and, of course, the Democrats were prescient in that they didn't pass what they really needed the first time when they had the votes...) The new proposal includes new tax incentives (e.g., to have people weatherize their homes--as if intrinsic energy cost incentives aren't enough).
Congressional Democrats scotched the idea of tax incentives for employers during stimulus I (i.e., $787B) because of union paranoia that it might encourage employers to bounce workers (lay off and rehire), simply to pocket the tax credit. This is just ludicrous; most employers have a vested interest in the training and experience of employees, which more than offset gimmicky hiring practices and tax breaks. You cannot bribe employers to hold onto workers during recessionary times. If a company's revenues and profits are falling, they have to cut costs. Unfortunately, labor costs are significant in many companies' goods and services.
It is not a decision made lightly. When I started working for computer consulting companies over a dozen years ago, companies were often willing to hire to the bench (i.e., non-billable) in order to be able to staff projects as quickly as possible. More recent experiences have been that the companies want the consultant billable from day 1, and if you roll off a billable project and there's not another project opening, you may be laid off immediately or when you dip below a certain minimal utilization rate. The bottom line is for a company to remain a viable concern, it needs to service its customers; if it grows, it adds whatever number of employees needed to service those new customers or the increased demand of existing customers. If it doesn't adequately staff to accommodate its customers' needs, it loses customers. An employer will often to resort to whatever tactics are necessary to keep its employees (e.g., reduced hours vs. layoffs). It's not really going to make decisions based on small, temporary tax credits.
In fact, I would argue that gimmicks are not likely to interest employers looking to add long-term employees. For example, stimulus tax cuts to households are often saved rather than spent (and recent $15 tax cuts per paycheck were not that material to goose the economy). It would make far more sense to push for a permanent business-side payroll tax cut.
Some tax relief for the unemployed and the like would be reasonable (just don't call it a stimulus). As for confounding the idea of stimulus with Obama's green energy industrial policy or throwing more money on questionable infrastructure projects, not a chance. I am for a long-term infrastructure commitment where project selection is depoliticized; just don't try to insult my intelligence by portraying wheeling and dealing for crony infrastructure projects as "stimulus": the Bridge to Nowhere was not economic miracle-grow.
Political Cartoon
Bob Englehart mocks the politically correct notions underlying the massive subsidies propping up so-called green technology. But Al Gore is probably more worried about Rudolph's 400 quarts worth of methane burps a day. What sort of policies will politically-correct environmentalists dream of next? Exterminating the world's cattle population? Razing methane-producing swamps?
Christmas Musical Interlude: The King's "Blue Christmas"
How can I have a Christmas hit countdown without the King of Rock 'N Roll, Elvis Presley? Here is his signature Christmas song...
