Politics, et Cetera
A publication from The Political Forum, LLC
Tuesday,October 22, 2013
They Said It:
Give a man a free house and he’ll bust out the windows
Put his family on food stamps, now he’s a big spender
no food on the table and the bills ain’t paid
‘Cause he spent it on cigarettes and P.G.A.
They’ll turn us all into beggars ‘cause they’re easier to please
They’re feeding our people that Government Cheese.
Give a man free food and he’ll figure out a way
To steal more than he can eat ‘cause he doesn’t have to pay
Give a woman free kids and you’ll find them in the dirt
Learning how to carry on the family line of work
It’s the man in the White House, the man under the steeple
Passing out drugs to the American people
I don’t believe in anything, nothing is free
They’re feeding our people the Government Cheese….
Give a man a free ticket on a dead end ride
And he’ll climb in the back even though nobody’s driving
Too ******* lazy to crawl out of the wreck
And he’ll rot there while he waits for the welfare check
Going to hell in a handbag, can’t you see
I ain’t gonna eat no Government Cheese.
The Rainmakers, “Government Cheese.”
OBAMACARE AND GOVERNMENT CHEESE.
After last week, and the prior week too for that matter, we had hoped that we were done writing about the quixotic Republican efforts to disrupt the launch of Obamacare. The entire business was ugly and tiresome, and we wanted nothing more than to put it behind us. Unfortunately, we couldn’t. Like a dead mouse in the wall, its bad smell constantly reminds us of its presence. So here we go again.
For starters, let us note that everyone appears to agree that the government shutdown was a disaster for the GOP. Indeed, even those who are not so convinced of this are nonetheless certain that this effort to defund the law was nothing more than an exercise in political posturing.
And maybe that’s true, at least in the main. Still, we are not persuaded. Yes, there was no way that Ted Cruz, Mike Lee and the rest of the Tea Partiers were going to succeed in killing the law, given that the Democrats control the Senate and the man whose name is forever attached to the Affordable Care Act is still the president. But that is not to say that attempt was entirely futile. Indeed, in the days, weeks, and months ahead, we believe it is likely that the extraordinary – and yes, extraordinarily ineffectual – steps taken by the insurgent factions of the GOP will prove valuable in terms of differentiating those who truly believe the contemporary social-welfare state has outlived its usefulness and those who think it needs merely a little tweaking here and there.
We will begin our defense of this position by noting the irrefutable fact that the unveiling of the Affordable Care Act and its web-based exchanges has been an unmitigated disaster for the Obama administration. The federal exchange was built using decade-old technology and was never tested properly, if at all. And this proved to be a boon to the law’s critics and a rude awakening to those few benighted Santa Claus believers who had anxiously awaited the Obamacare launch, only find it mired in bureaucratic incompetency.
Our guess is that the technological aspects of the Obamacare debacle will, in the near-to-medium term, get better. This weekend, the administration sent what’s being described as an “SOS” to its friends and allies in the high-tech industry, begging for help in patching the exchange web site quickly enough to save the entire venture. Given the cronies Obama has collected in the industry, he will probably get the help he needs. The contractors involved in bilking the American people out nearly a half-billion dollars thus far will be happy to bilk them out of some more and will, in relatively short order, make the exchanges minimally tolerable.
Needless to say, the number and sheer enormity of the screw-ups involved in the unveiling of the Affordable Care Act has caused even its most ardent supporters to wonder if fixing the web site will only further expose the other flaws in the system, and to ponder what they will do if the whole massive bureaucratic mess is revealed to be, well, a massive bureaucratic mess.
This worry is more than justified. Various reports over the last week – one in the New York Times, one in the Wall Street Journal, and one by Yuval Levin posted on National Review Online – have highlighted the extent of the problems that plague the system as it currently exists and, more to the point, the extent of the work that the federal government has ahead of it if it is to make the Affordable Care Act at least nominally functional.
Levin’s comments were by far the most interesting and enlightening, based as they were on in-depth conversations with “several officials of the Center for Medicare and Medicaid Services (the HHS agency that is running the exchanges) and with a number of reasonably well placed insurance company officials in Washington.” To wit:
The problems people are now facing with the basic interface have taken up most of the time that CMS and its contractors have devoted to troubleshooting so far, and although things have improved a little on this front quite serious problems remain. But there are very serious problems beyond that, which are more like the sorts of problems people were predicting before the launch: database problems at the nexus of several federal and industry data sources. The federal data hub itself is so far doing reasonably well at its basic tasks, and that has come as a relief to CMS. But some of the site functions that rely on the hub, both in the federal exchanges and a number of the state exchanges, remain highly problematic. The calculation of subsidies continues to fail tests, and it’s pretty clear that some actual consumers have made actual purchases with bad information, which will become apparent to them when they get their first bills. If the interface problems are addressed and the volume of purchases increases, this calculation problem could become a huge concern.
Meanwhile, the back-end communication between the exchanges and the insurers has been terrible, as is increasingly being reported. The extent of these problems has also been a surprise to CMS, and here too an increase in volume if the user interface issues are solved could lead to huge problems that would be very difficult to correct. CMS officials and the large insurers thought at first that the garbled data being automatically sent to insurers must be a function of some very simple problems of format incompatibility between the government and insurer systems, but that now seems not to be the case, and the problem appears to be deeper and harder to resolve. It is a very high priority problem, because the system will not be able to function if the insurers cannot have some confidence about the data they receive. At this point, insurers are trying to work through the data manually, because the volume of enrollments is very, very low. But again, if that changes, this could quickly become impossible.
In a couple of ways, then, the severe user-interface problems at the front end of the federal exchange has actually had some advantages from CMS’s point of view, because by keeping enrollment volume low it has kept some other huge problems from becoming instantly uncontrollable . . . .
The tone of the CMS officials who spoke with me was a kind of restrained panic. Among the insurance company officials (who, I should stress again, work in the Washington offices of some large insurers, and so are basically policy people and lobbyists), there was much less restraint. The insurers are very, very worried about the viability of the exchange system—especially but not exclusively at the federal level.
Needless to say, this means that the disaster known by the public as Obamacare is far, far worse than most people suspect. And that, in turn, means that at some point, it may become necessary to call the whole damn thing off, at least for 2013. As the inimitable Megan McCardle put it, Obamacare needs a drop-dead date.
If the exchanges don’t get fixed soon, they could destroy Obamacare – and possibly, the rest of the private insurance market. The reason that the exchanges were so important was that they were needed to attract young, healthy people into the insurance system. The worry was that if insurance is hard to buy – if you have to do your own comparison shopping and then call the insurance company, and fax in some paperwork and two years of tax returns – that the young and the healthy simply won’t do it. Sick people and old people who were getting huge subsidies — and maybe the ability to buy insurance on the private market for the first time in a long while — would overcome any obstacles, because if you’re spending $15,000 a year on health care, it’s worth a lot of your time to make sure that you have insurance. But if your biggest annual health-care expense is contact lens solution, you may just decide to skip it and pay the fine.
The administration estimates that it needs 2.7 million young healthy people on the exchange, out of the 7 million total expected to apply in the first year. If the pool is too skewed – if it’s mostly old and sick people on the exchanges – then insurers will lose money, and next year, they’ll sharply increase premiums. The healthiest people will drop out, because insurance is no longer such a good deal for them. Rinse and repeat and you have effectively destroyed the market for individual insurance policies. It’s called the “death spiral,” and the exchanges, like the mandate, were designed to keep it from happening.
Without the exchanges, the death spiral seems almost assured.
Given all of this, it strikes us that the Obama administration has three options. First, it can fix the entire system, have it up and running in a couple of weeks, and reassure a now-dubious public that everything is OK. This strikes us as unlikely, but not impossible. As we said, a great many of the greatest minds and greatest egos in the high-tech industry are heavily invested – figuratively and literally – in the Obama administration. And they will do whatever they can to help the federal bureaucracy that is already doing whatever it can (for what that’s worth) to remake the world anew and launch the Affordable Care Act all over again.
Second, Obama et al. can acknowledge both the difficulties involved in remaking the system and the dangers involved in pressing on with a broken system and agree to a one-year delay of the implementation of the exchanges and of the individual mandate. This would, under the circumstances, be prudent and far-sighted.
Third, “the one we’ve been waiting for” can ignore all the advice of both his detractors and his supporters and press on, even with a patched and ailing system. IF the system cannot be entirely remade and IF a postponement is not a political option, then the administration will have no choice but to make like the Captain in Pete Seeger’s “Waist Deep in the Big Muddy,” which is to say that the “big fool” will say to push on.
In our estimation, the most likely of these three is the last one. Obama is quite possibly the most obstinate man to occupy the Oval Office since Lyndon Johnson, i.e. the “Big Fool” to whom Seeger was not-so-surreptitiously referring. It’s not that the guy doesn’t like to lose. It’s that he never HAS lost. He doesn’t know how to do it. Not only has he never been made to be accountable for his mistakes, he’s never even been asked or made to acknowledge them. And we don’t expect him to start doing so now.
In short then, unless the mess can be fixed, and fixed soon, Obama will either have to send his signature legislation limping forward, or he’ll have to postpone it. And in either case, the Tea Partiers – Ted Cruz, Mike Lee, and the rest – will look a great deal more like prophets than the fools they’re dismissed as today. “We tried, and we tried, and we tried to warn them,” they’ll say. “We were dismissed as kooks, nuts, hostage-takers, terrorists, even. But we were right. The whole world knows now that we were right and that our desperation, our agitation, our fear was on behalf of the American people. We’re sorry the rest of Washington was unable to see just how right we were at the time. But they see now. And hopefully they continue to see as we move this country forward.”
As a practical matter, this will be of little consequence. As a political matter, however, it will be enormously important. The Tea Party has taken its lumps over the last several weeks, and, we suppose, deservedly so. Still, if it appears to have been the only force that tried to stop this calamity before it started, then its leaders – Cruz and Lee, most prominent among them – will go from zeros to heroes almost overnight.
But there is more to it than that. You see, it is not often these days that members of either party are able to argue a coherent ideological point and, moreover, to be proven correct in their assessment of the outcome of policy based on that point. But that is precisely the opportunity that presently presents itself to the Tea Party in general and Ted Cruz in particular.
Nearly three months ago, The Daily Caller detailed Ted Cruz’s position on Obamacare and his desire to see it stopped before it was ever started. DC put it this way:
“If there is ever a time to defeat Obamacare, it is now,” Cruz said at a briefing at the Heritage Foundation. “Moreover, we have, I believe, the best opportunity we will have, and possibly the last good opportunity we will have to defund Obamacare with the continuing resolution.”
“If we do not pursue this strategy,” he said later, “we are saying we surrender. Obamacare will be a permanent feature of the American economy.”
Cruz argued that once the law were [sic] implemented, people who were receiving subsidies as a result of the law would fight to keep it, noting that historically, no entitlement program in modern times has ever been rolled back after it was implemented.
This, we should note, is also the position of the Heritage Foundation, which is Cruz’s strongest and best known supporter. Indeed, Heritage promoted the “defund” effort from the beginning and continues to argue to this day that the only way to stop Obamacare is to kill it in its proverbial cradle, to stop it before it starts.
Some observers – most notably the Wall Street Journal’s James Taranto – have responded that the gist of this approach is that Cruz (and Lee, and Heritage, etc.) is afraid that people will like Obamacare. This, they argue, puts them at odds with others on the right, and even at times with themselves, who believe that Obamacare will be such a disaster that no one will like it.
In truth, Cruz’s argument about stopping the program before it starts likely has two components. First, as he says, federal programs, particularly entitlements, are next to impossible to end once they’ve begun. As the eminent William Niskanen pointed out some four decades ago, contemporary bureaucracies tend, over time, to be budget maximizers, which is to say that they are self-perpetuating, justifying their continued existence strictly through the depletion of their budgets. In any case, Cruz’s worries about ending a program already in effect are more than justified, by both theory and experience.
The other, more relevant component of Cruz’s worry – and of the Tea Party/Heritage Foundation concerns more broadly – is what happens to individuals, and to the country in which they live, once they have become dependent on government for certain services, in this case, health insurance. Since the 1960s, conservatives, libertarians, and other friends of free markets have argued that government aid produces dependency, and dependency, in turn, produces two principal effects, both of which can do irreversible damage to an economy and to the character of a people.
The first of these deals with the question of societal harmony and specifically with relations between the various classes in society. Regular readers may note that we are fond of citing Tocqueville on this topic (as on countless others), largely because of his timeless and stunning assessments on wealth, poverty, charity, and welfare, as presented in his Memoir on Pauperism.
At ﬁrst glance there is no idea that seems more beautiful and grander than that of public charity . . . At the same time that it assures the rich the enjoyment of their wealth, society guarantees the poor against the excessive misery. It asks some to give of their surplus in order to allow others basic necessities. This is certainly a moving and elevating sight . . .
Unfortunately, Tocqueville continued, “experience . . . destroys these beautiful illusions.” Private charity, he wrote, is the willing act of man providing for his fellow man, sharing voluntarily from his wealth to enable and empower his less fortunate neighbor. This act, he said, “establishes valuable ties between the rich and the poor,” a “deed [that] itself involves the giver in the fate of the one whose poverty he has chosen to alleviate.” Moreover, Tocqueville noted, “the latter . . . feels inspired by gratitude.” But the involvement of government in that transaction destroys both its inherent nobility and the bond that would otherwise exist between giver and receiver. “Public charity” serves simply to “inﬂame society’s sores,” to create class envy and hatred, and to lay the foundation for what we know today as “class warfare”:
The law strips the man of wealth of a part of his surplus without consulting him, and he sees the poor man only as a greedy stranger invited by the legislator to share his wealth. The poor man, on the other hand, feels no gratitude for a beneﬁt that no one can refuse him and that could not satisfy him in any case . . . . Far from uniting these two rival nations, who have existed since the beginning of the world and who are called the rich and the poor, into a single people, it breaks the only link which could be established between them. It ranges each one under a banner, tallies them, and, bringing them face to face, prepares them for combat.
This is critical, we think, because the key to making Obamcare work is making people think that it is, as the President himself put it yesterday, “a good deal.” Unfortunately for consumers, this is simply not true – or at least it’s not true without government aid, i.e. welfare or public charity, if you prefer. The actual cost of these governmental plans is, in most cases, considerably higher than were plans previously. This only makes sense, of course, given the fact that, as a matter of law, most of these plans are more comprehensive than were previous plans, covering everything from mental health to maternity to pediatric eye care. Additionally, since pre-existing conditions are no longer cause for either denial of coverage or the imposition of higher premiums, the cost of high-risk patients has been factored into the premiums of the entire pool, which is to say everyone purchasing a plan through the individual market. The only thing that offsets these increases and makes plans even tolerable in terms of cost are the government “subsidies,” which are promised to everyone making at or less than 400% of the federal poverty level. These subsidies – again, welfare – are the key to making Obamacare work. They are so critical, in fact, that they are quite possibly the reason the whole darned thing is screwed up. Again, as Yuval Levin puts it:
One key problem, which to date has been the most prominent in public, has to do with a late-in-the-game decision to require users to go through a complex account-creation process before even reaching any coverage options. Administration officials apparently went back and forth several times on this question, and the ultimate decision required the creation of a series of patches over an already developed site in a very short time. Most of the problems people have faced so far are a function of that decision, and have had to do with creating user accounts and so getting through the very first steps involved in purchasing coverage.
As Levin notes and as many others have also suggested, the most plausible reason for this is the fact that the creation of an account involves the input of significant personal information, including Social Security numbers AND income data. And this information, which is available to everyone from HHS to the IRS, is what determines eligibility for subsidies. What this means, then, is that those who register are unable to see the cost of policies without first figuring their subsidy, which means that they never get what Levin calls the “sticker shock” associated with the plans, seeing only the costs that are, in most cases, subsidized by Uncle Sam. In other words, no one gets to see the plans without the government first calculating their welfare benefit.
Contemporary liberalism, of course, argues that this is precisely the way that government should operate. Not only should it provide services to the people, but it should do so in as unobtrusive a manner as possible, so as to protect the dignity of the welfare recipient. Welfare benefits should, therefore, be transactional and obscure. Instead of food stamps, for example, welfare recipients get EBT (Electronic Benefit Transfer) cards, which function and LOOK like credit cards or debit cards. Instead of welfare checks to pay for health insurance, subsidy recipients simply create an account, enter their personal information and . . . voila, they pay a “lower” rate. In this way, the cultural impacts of welfare are minimized, preventing the dysfunction Tocqueville described. Or so we are told.
In reality, the transactional nature of welfare actually exacerbates the problems described by Tocqueville, making recipients feel far more entitled to their “benefit” than they would otherwise. Consider, for example, the recent case of the EBT card system malfunction in Louisiana. Just over a week ago, on Saturday, October 12, the EBT computer system in at least two parishes in Louisiana malfunctioned, leaving card holders with cards showing no spending limits. The Daily Mail of London provides the details:
Dozens of welfare families with EBT cards picked the shelves bare in stores in Springhill and Mansfield on Saturday and walked away with up to ten shopping carts filled with meat and other groceries – in a spending frenzy described by local officials as ‘worse than Black Friday’. . . .
When Walmart employees noticed EBT cards weren’t showing spending limits, they called the corporate office and were advised to allow shoppers to use the cards anyway.
Other stores in the towns temporarily closed or stopped accepting EBT cards. Wal-Mart instead called in police to help control the chaotic crowds of shoppers who flooded the store.
“It was definitely worse than Black Friday. It was worse than anything we had ever seen in this town. There was no food left on any of the shelves, and no meat left. The grocery part of Walmart was totally decimated.” Springhill Police Chief Will Lyn told ABC News.
Word spread across the towns about the loophole and hundreds of families flocked to the two Walmart stories.
Chief Lyn said he saw some families ring up bills up more than $700. The average monthly food stamp allotment in Louisiana is $136 per person.
‘I saw people drag out 8 to 10 grocery carts,’ Lyn said.
The Louisiana Department of Children and Family Services has indicated that WalMart will be held responsible for the losses and, as such, there is no need for anyone to pursue welfare fraud cases against the families who participated in the shopping “frenzy.” Despite this bureaucratic determination of innocence, the facts are clear: the people who participated in the shopping spree were guilty of theft – in some cases, grand theft – just as surely as if they’d walked into WalMart and simply walked out without paying. But because they are “entitled” to their benefits, and because the limits on those benefits were lifted, they decided to take as much as they could.
It never crossed their minds, obviously, that the benefits they enjoy and to which they believe they are entitled are provided by the taxpayers, which is to say that the earned income of someone else is taken from them by the government and then “redistributed.” It also never crossed their minds that if they took more than they were “entitled” to, that even more income would have to be confiscated to pay for it. As it turns out, that final confiscation will come from WalMart shareholders rather than from taxpayers, but the point is the same. As Tocqueville predicted so exactly, the EBT card holders had “no gratitude for a beneﬁt that no one,” not even the cashiers at WalMart, could “refuse” them “and that could not satisfy” them “in any case.”
The result, sadly and predictably, will be the same with subsidized health insurance. Ted Cruz does not fear that people will “like” Obamacare. He fears that they will grow accustomed to it, which is to say that it will become theirs, something to which they are entitled. And then woe be to any man, woman, child, or heir to Sam Walton who would dare to take it from them. Omacare can’t function without its subsidies. And those subsidies breed dependence, which breeds entitlement and eventually a complete and total disconnect about the nature of wealth, who really earns it, and what government does with it once it has confiscated it.
The second, perhaps more serious market complaint about “public charity” is the toll it takes on the general economic output of a people. Or, to put it another way: welfare creates perverse incentives.
Conservatives, of course, have argued the importance of incentives in government policy for decades. If government makes a behavior easier or more rewarding, then it will get more of that behavior. If it makes that behavior more difficult or less rewarding, then it will get less of that behavior. For example, if the government makes it easier for women to raise children without a father present, then it will get more mothers raising children by themselves. Likewise, if the government makes it more difficult for one parent to stay at home with the kids while the other parent works outside the home, then it will get fewer single-income families. This is, as conservatives have always argued, simple human nature.
Over the last three-plus decades, the most obvious and best known example of conservatives arguing about incentives has been with respect to marginal tax rates. When marginal tax rates increase, the incentive for workers, producers, and investors to generate greater wealth for themselves and for the broader economy concomitantly decreases. Conversely, when marginal rates decrease, then the incentive to create wealth increases. This is the very foundation of supply-side economics.
The Left has long disputed this notion, arguing that more money is more money. No one, they argue, will stop working at X-dollars simply because the tax on X+1 is higher than on X. X+1-taxes is still higher than X, therefore the incentive to work – or produce or invest or whatever – will still exist, regardless of the marginal rates. Incentives, they insist, are overrated.
Enter Kathleen Pender, the “Net Worth” columnist for the San Francisco Chronicle. In her column last Saturday, October 12, Pender gave the lie to the leftist denial of government incentives. To wit:
People whose 2014 income will be a little too high to get subsidized health insurance from Covered California next year should start thinking now about ways to lower it to increase their odds of getting the valuable tax subsidy.
“If they can adjust (their income), they should,” says Karen Pollitz, a senior fellow with the Kaiser Family Foundation. “It’s not cheating, it’s allowed.”…
To get a subsidy, the couple’s modified adjusted gross income for 2014 income would need to fall below $62,040, which is 400 percent of poverty for a family of two . . . .
Proctor estimates that her 2014 household income will be $64,000, about $2,000 over the limit. If she and her husband could reduce their income to $62,000, they could get a tax subsidy of $1,207 per month to offset the purchase of health care on Covered California.
That’s great, isn’t it? If you can just figure out a way to earn less, or save less, or work less, or whatever, then you too can get a big bonus from Uncle Sam!
It is, we’d imagine, highly unlikely that the decrease in productive activity stemming from individuals striving to become eligible for Obamacare subsidies would be significant, or frankly even measurable. But that’s not the point. The point is that Obamacare not only creates the same perverse incentives to avoid work as does all welfare, but also assures that such incentives are both widely known and actually advocated by the law’s supporters. This is significant, to say the very least.
The Affordable Care Act was sold to the American people as the means to “rationalize” the health insurance market, to allow that rationalization to slow the increase in health care costs, and to provide affordable insurance to the previously uninsured. As things stand, none of those promises will be kept.
Of course, all of that was largely by design. The ACA was never really about “fixing” the broken market or “bending the cost curve down” as we were constantly told. Rather, it was – and is – about increasing the federal government’s role in the health care sector of the economy and thereby increasing the dependency of the citizenry on said government. The Democrats have always been the party of government “goodies,” of government intercession, of something for nothing – or nothing, that is, except for liberty. And Obamacare is simply more of the same.
The disastrous launch of the Obamacare exchanges offers an incredible opportunity for Republicans and other assorted conservatives to push back against the Democratic/Blue-State/Social Welfare model. As we have argued in these pages before, that model is already collapsing and its ongoing utilization threatens the future of this country is substantive ways.
The irony in all of this, given the beating that they have taken over the last month, is that Tea Party-affiliated politicians, people like Ted Cruz, Rand Paul, and Mike Lee, are the best positioned to take advantage of the opportunity at hand and to push back hard against the creeping statism exemplified by Obamacare. Naturally, only time will tell if these men and women are ready, willing, and able to push back. But if they can, they will more than make-up for the “disaster” they purportedly caused when they shut down the government in the manifestly vain hope of stopping Obamacare before it started. They may be extremists on this matter, but then, we still think that Goldwater had it right when it comes to extremism.