Saturday, October 17, 2009

Bi-Partisanship Is Highly Over-Rated

President Obama and the Democrats need to master the art of effective partisanship.

The problem with our present political system in the United States is not a lack of bi-partisanship, it’s a lack of effective partisanship. Every four years political parties hammer out a platform identifying the problems they feel we face as a nation and stating their proposed solutions. Ultimately, very few of the remedies proposed in party platforms are enacted into law. As a result, party platforms are largely ignored by many voters, and by politicians in both parties.

This is unfortunate for citizens who long for effective government. For some of us, the position a candidate (and/or party) takes on issues we consider important is our primary means of deciding how to vote. When so few of the proposed remedies in either party’s platform get tested by being implemented, we are left with a dysfunctional government that does not address critical problems effectively.

Gridlock is, of course, one major roadblock on the path from platform to enactment. For thirty of the past forty years control of the government has been divided, with a president of one party and at least one house of Congress controlled by the other party.

There have, however, been three brief periods over the past four decades when one political party has controlled both the legislative and executive branches. President Carter had a Democratic Congress for all four years of his administration. The Democrats controlled both branches for the first two years of President Clinton’s time in office. And President Bush (the younger) had a Republican majority for four years, from 2003 through 2006.

Neither party took advantage of these opportunities to address any of the major problems facing our country with meaningful legislation. We can’t blame these failures on gridlock. The primary reason parties failed to govern effectively during these periods is the corrupting influence of money within our political system and the duplicity it evokes in politicians.

The primary goal of nearly all of our elected representatives is to remain in office. Successful politicians must master a delicate balancing act. During elections they must spout rhetoric that makes it appear that their views are in line with what the polls indicate their constituents want done. Once the election is over, they get back to the serious business of raising money for the next ridiculously expensive political campaign. Most of that money comes (with strings attached) from corporations and other special interests who oppose most of what the electorate favors.

It is understandable that President Obama wants to change this “culture of corruption” in Washington, D. C. I wish him great success in that endeavor. It would be nice to see the corrupting influence of money reduced significantly. It’s not going to happen, but it would be nice.

President Obama’s desire for bi-partisan support is also understandable to some extent. One of the president’s best qualities is his desire to compromise in order to forge a consensus, as opposed to simply ramming his own agenda through. However, the Republicans have made it clear that they will use any means necessary to keep the Democrats from implementing their platform.

They may be playing politics. They may be protecting the status quo. They may be holding fast to their basic principles. What they are not doing is compromising. The Republicans have not given an inch with regard to health insurance reform and it is doubtful that they will be any more accommodating on any other major issue.

The Republicans, however, do not control either Congress or the White House. They can not stop the Democrats from passing legislation that will fulfill the promises made in their platform without help from some of the Democratic members of Congress. If President Obama and the Democrats squander the present opportunity to enact their platform, critical problems will be left unaddressed once again.

It is time for President Obama and the Democratic leadership in Congress to give up on getting bi-partisan support and to focus on uniting their own party and enacting the proposals included in the platform they hammered out last year.

It may be a two-step process. Step One will involve Democrats who support their party’s platform introducing legislation and amendments to legislation in a manner that will make it easy for voters (and the party) to identify which Democratic members of Congress are blocking the implementation of the Democratic platform. Step Two is to target them in next year’s primaries. The Republicans have their “RINOs” (Republican in name only), it’s time for the Democrats to identify the “DINOs” and to start working toward their extinction.

The citizens who voted for Obama and put the Democrats in control of both houses of Congress must stay focused through next year’s election. If we do, we can add enough members to the moderately progressive bloc of representatives in Congress to enable them to get down to the business of effectively addressing the serious problems we face.

For the past forty years, members of both parties have been proving President Reagan correct in his belief that “government is not the solution to our problem, government is the problem.” If the Democrats blow this chance to disprove that adage by governing effectively, voters need to take advantage of the opportunity to implement their own version of a “public option” in November of 2010 by voting the members of both parties who are blocking meaningful reform out of office Can we do it? Yes we can

Tuesday, October 13, 2009

A Public Option Even Blue Dogs and Republicans Can Embrace

A market oriented public plan would help rein in costs and make insurance affordable without raising taxes or the deficit.

The “public option” is poised to be the deal-breaker with regard to health insurance reform. Progressive legislators are pledging to vote against any reform bill that does not include a public option. Blue Dog Democrats and Republicans are adamantly opposed to any bill that includes a government-run plan.

The key to breaking this stalemate and achieving bi-partisan support in Congress for health insurance reform is a market-oriented public plan that Blue Dogs and genuine conservatives can support - a government owned corporation (similar to the Federal Deposit Insurance Corporation) that would offer only catastrophic health insurance policies.

This “Federal Health Insurance Corporation” (FHIC) should be self-supporting, with premiums set just high enough to cover the cost of benefits paid. Since the public plan would be revenue neutral, it would not add to the deficit or require raising taxes.

The FHIC could issue vouchers for regular check-ups to promote preventative care. All other interactions between patients and their doctors, hospitals, and other care providers would be paid for directly by the policyholder. If total expenditures for a given year reached a relatively high deductible amount, the policyholder would be reimbursed for any expenses over that amount.

Some private insurers already offer catastrophic plans, primarily to individuals not covered by their employers. These plans are not terribly popular because premiums are still relatively high. (Furthermore, they don’t have the advantage of creating the illusion that somebody else is paying for your health care.) A market-oriented public plan could set premiums much lower since it would not have to show a profit or cover the costs of maintaining a sales staff, advertising, and paying executives tens of millions of dollars per year.

By working the way insurance is supposed to work (covering only catastrophic events) this approach would further reduce the cost of health care by doing away with the “middleman” in most doctor-patient interactions. The bureaucrats at private health insurance companies would not be replaced by government bureaucrats.

The vast majority of people do not need thousands of dollars worth of health care in a given year. The premiums we pay (directly or indirectly) for “comprehensive” health insurance plans are far and away the biggest health-related expense for the vast majority of individuals and families. The cost of a few office visits, routine tests and minor procedures, could easily be paid out of pocket if insurance premiums were drastically reduced.

The fact that the “public option” would be limited to offering catastrophic health insurance policies and reimbursing policyholders whose health care costs exceed the deductible amount should make it clear that it does not amount to a government “takeover of health care.”

People who believe that the government can’t do anything right, or who want comprehensive policies, would be free to continue patronizing private insurance companies. On the other hand, individuals who cannot afford health insurance now because of pre-existing conditions or limited income would have an affordable alternative to remaining uninsured.

The establishment of a Federal Health Insurance Corporation would be a giant step in the right direction toward both of our stated goals: reining in the cost of health care and reducing the number of uninsured.

Thursday, October 30, 2008

It’s Time To End Unemployment As We Know It

Congress has coughed up seven-hundred billion dollars so far to cover the bad bets made by the high-rolling denizens of Wall Street. Henry Paulson and Ben Bernanke have managed to scrape up a few hundred billion more here and there to shore up and bail out companies they deemed to be “too big to fail.” Despite the infusion of this tsunami of taxpayer and governmental largess, the stock market is still in free fall because investors realize that we are in the early stages of a recession that threatens to become a second Great Depression. The actions taken by Congress and the present administration address the effects and the most proximate cause of the current financial crisis (the dramatic increase in the number of bankruptcies and foreclosures), but do very little to address the root cause - job loss.

Now, in an attempt to address public anger related to The Great Wall Street Rescue Mission, there is discussion among our elected representatives about cutting taxes or sending out another round of stimulus checks. While these measures may enable over-extended debtors to make ends meet or credit-starved consumers to go on one last spending spree, we need to realize that we can not consume our way out of a crisis that was created, in large part, by over-consumption. We need to work our way out. We need to put a solid foundation under our economy by putting every able-bodied worker to work.

The loss of jobs due to outsourcing, downsizing, and a faltering economy was the first domino to fall in the present financial crisis. Putting people back to work will reduce the number of foreclosures and give newly employed workers the means necessary to rent or purchase some of the houses that are now sitting empty. The private sector is not going to create jobs in the face of a serious, possibly long-term, downturn in our economy. The government is going to have to step in, as it did during The Great Depression, if we hope to reverse the downward spiral of job losses and avoid a serious recession.

In an essay in Newsweek George Will quotes, approvingly, the response of a fictional Republican candidate for president on NBC’s “The West Wing” to the question “How many jobs will you create?” His response: “None. Entrepreneurs create jobs, businesses create jobs. The president’s job is to get out of the way.”

It is true that entrepreneurs and businesses create jobs when they believe that economic conditions are such that they will realize a reasonable profit from starting or expanding a business. On the other hand, when economic conditions lead them to experience or expect lower profits, or monetary losses instead of capital gains, businesses don’t create jobs, they shed them. Working with Congress, a president in such a situation should take up the slack and find meaningful employment for people who are unable to find work on their own.

In the Capitalist Bible (more commonly known as An Inquiry into the Nature and Causes of The Wealth of Nations) Adam Smith’s prescribed a laizzez faire approach to the economy on the part of the government because he felt that workers would, if left alone by the government, do whatever work would create the most wealth for themselves. Collectively, this would lead to the greatest possible accumulation of wealth within a nation.

Smith wrote at the dawn of the Industrial Revolution. When Wealth of Nations was published (1776) 97% of the people in the United States lived and worked on farms and produced nearly everything they needed themselves. A person’s standard of living was tied directly to how hard he or she worked and nearly everyone was “self-employed.”

In the wake of the Industrial Revolution, mechanization, along with the principle of division of labor, and the specialization that results from it, have made us highly inter-dependent. Very few people are self-sufficient or self-employed. We are highly dependent upon the business community, both large corporations and smaller businesses, to provide employment. When young adults leave school and enter the work force, or older workers are laid off, most of them think in terms of “finding a job.” Very few think in terms of starting a business. We look to existing businesses to provide employment for us, but business owners and managers are driven by the profit motive, creating and providing jobs is simply a by-product.

Adam Smith’s famous “invisible hand,” its movements dictated by the immutable laws of supply and demand, takes away jobs as readily as it creates them. Markets operate quite efficiently for those involved, while leaving any number of people out of work. At the present time, as the prospects for profit dim for most industries, more and more people are finding themselves out of work and unable to find work. The downward spiral of recession has begun.

As George Santayana famously remarked, “Those who cannot remember the past are condemned to repeat it.” We keep hearing that this is “the worst financial crisis since the Great Depression” and yet our political leaders don’t seem to remember the curative power of alphabet soup. The various jobs programs of the “New Deal” (the WPA, PWA, and CCC) were quite effective in ameliorating the effects of The Great Depression and eased the suffering of millions of people in the bargain.

Franklin Roosevelt never fully bought into Keynesian economics and his jobs programs stopped short of achieving full employment. As a result, economic conditions improved, but it took our entry into World War Two to finally put an end to both joblessness and The Great Depression.

After the war Congress, worried that unemployment resulting from the shift back to a peacetime economy would send our economy back into a depression, passed the Employment Act of 1946 (typically referred to as “The Full Employment Act”) which stated that “it is the continuing policy and responsibility of the Federal government to use all practicable means . . . to foster and promote . . . useful employment opportunities, including self-employment, for those able, willing, and seeking to work.” Right there, in a bill passed by the seventy-ninth Congress and signed into law by President Truman over sixty years ago, is the key to an effective and equitable solution to our current economic crisis.

The “Full Employment Act” stopped short of guaranteeing everyone a job. That would require making the government the employer of last resort. It’s time to take that step. To paraphrase the welfare reform of the 1990s, we need to end unemployment as we know it. Paying able-bodied workers to sit home and do nothing when there is work to be done is inexcusable. It robs the workers of their dignity and shortchanges taxpayers in the bargain.

According to the latest report from the Bureau of Labor Statistics, 9.5 million people were unemployed nation-wide in September of 2008. For less than half the amount authorized to bail out Wall Street and financial institutions we could put every one of those unemployed people to work for a year at wages or salaries averaging $35,000.

A few members of Congress, including Senator Obama, have mentioned putting people to work on infrastructure and energy-related projects. There is a clear need for some public works projects to be undertaken at the present time. Our nation has a crumbling, outdated infrastructure and a dire need to implement an energy policy that includes speeding the development of new sources of energy.

Our government can reduce unemployment significantly by simply putting people to work on these projects that desperately need to be done, but we need to move beyond these obvious examples and develop a much broader range of opportunities to provide meaningful employment for those unable to find jobs on their own. Even the standard example, often given as a criticism of “make work” projects - digging holes in the morning and filling them up in the afternoon - could be made meaningful today if we combat global warming by having the workers involved plant a tree in between the digging and the filling in of the hole.

Putting people to work will increase our GDP and give taxpayers some benefit in return for their money. Achieving, or even approaching, full employment will pay for itself, at least in part, by leading directly to reduced pay-outs for unemployment benefits and other forms of welfare. There is plenty of work to be done. It’s time to limit the size of the cast of “American Idle” to those who are truly unable to work.

Putting people to work is the key to avoiding a deep and lengthy recession and helping individuals turn their financial fortunes back in a positive direction. Given jobs that pay a decent wage, many of the individuals who are in over their heads financially could eventually work their way out of debt and hold onto their homes, or a less expensive home, in the bargain. People who have already gone bankrupt, or lost their home, as a result of job loss will reenter the market to buy or rent a house when they find work. Slowing the tidal wave of foreclosures and increasing the demand for housing will halt the erosion in the value of houses, which will stabilize the value of the mortgage-backed securities (“collateralized debt obligations”) whose decline in value triggered the present financial crisis.

Creating jobs and adjusting the terms of mortgages held by homeowners who are capable of paying off a mortgage if the terms are renegotiated will take more time and effort than simply buying up the “bad paper” Wall Street has generated, but working from the bottom up in these ways is a more effective and a more equitable means of avoiding a second Great Depression than bailing out the fat cats and hoping some of the benefits trickle down. The belatedly risk-averse gamblers who have converted Wall Street into a casino can then decide for themselves whether they should sell out now at fire-sale prices or give the “buy and hold” strategy a chance to work.

Sunday, March 16, 2008

Meek Proposal Could Help Avoid A Bloodbath For The Democrats

The increasingly negative tone of the exchanges between Hillary Clinton and Barack Obama, their staffs, and their supporters, isn’t the only bullet the Democrats need to dodge to avoid tipping the odds in John McCain’s favor. The brewing storm over the issue of whether the delegations from Michigan and Florida should be seated at the Democratic convention is the other obvious factor that could drive a wedge into the party that could cost them votes in November.

Florida and Michigan held their primaries early in clear defiance of the rules laid down by the Democratic party. The candidates agreed not to campaign in those states. Four candidates, including Obama, took their names off of the ballot in Michigan. Now the Democrats are concerned about alienating voters in those states if they are not represented at the convention.

If the delegates who were elected in those states' primaries are seated, it is clearly to the advantage of Senator Clinton, who “won” both primaries. If she were to get the nomination, helped by this sort of maneuver, there is absolutely no doubt that a sizable number of Obama’s supporters would not support her in November.

The primary discussion of what to do about this situation has focused on allowing some sort of “do-over” — mail-in ballots, caucuses, or even new primaries in both states. This is a bad idea for at least a couple of reasons.

First of all, any of these options will cost the party, at either the state or national level, a lot of money that could otherwise be used to try to win the general election.

In addition to the cost, a re-vote of any sort not only removes the punishment, stated in advance, for violating party rules, it actually rewards the renegade states. Florida and Michigan jumped the gun hoping to have added impact in determining the party’s nominee for president. With the contest for the nomination too close to call, giving them a re-vote at the end of the process gives them exactly what they were seeking to begin with - an out-sized role in determining the nominee.

Of course the Dems could simply let the credentials committee hash the matter out in August, but that is a recipe for disaster. No matter what they decide, if their decision is the deciding factor in determining the Democratic candidate, the losing candidate and his or her supporters are going to cry “foul” with good reason.

The Democratic party is really stuck between a rock and a hard place. The best way out of this dilemma has been offered by Jerry Meek, the chairperson of the North Carolina Democratic Party. Meek’s proposal is that after all of the other primaries and caucuses are over (around mid-June) the convention credentials committee would allocate delegates for Florida and Michigan based on each candidate’s percentage of the total popular vote in other states. That might not make the renegade states happy, but it is the best solution possible under the circumstances.

Monday, March 10, 2008

An Open Letter To Barack Obama

The Clintons are making you an offer you can, but shouldn’t, refuse.

There may well be an element of calculated scheming on the part of the Clintons in floating the offer of a "joint ticket." I think you would be wise, however, to take them up on the offer. An agreement between yourself and Senator Clinton that whoever comes in second for the Democratic nomination will accept the vice-presidential slot on the ticket would go a long way toward ensuring a Democratic victory in November.

Over seventy percent of the Democrats polled have indicated a preference for both yourself and Senator Clinton to be on the ticket. We already have a president who ignores the will of the people. It would be nice to see the leading Democratic contenders respond to the preferences of their supporters.

The number of new voters participating in the Democratic primaries and caucuses this year is a real tribute to you and to the power of your approach and your message. The excitement that you have generated among your supporters needs to be maintained through November and beyond. Even a minor mud-slinging contest between yourself and the Clintons has the potential to turn off the supporters of the losing candidate to the point where they stay home in November.

I know how difficult it can be to resist the urge to strike back when you are being criticized and attacked. You have demonstrated admirable restraint in that regard. Lately it seems that you are beginning to weaken a bit and have made a few negative comments of your own. Stay strong.

More than the mere hope of change, you have already changed the climate of this election. You have demonstrated the power of staying positive.

I am convinced that if the Clintons continue to go negative and you can resist the temptation to fire back a little longer you will win the nomination. If you don’t get the nomination - agreement or not in the meantime - I hope you will join the "dream ticket."

Wednesday, February 27, 2008

Let’s Turn Down The Heat On Discussions Of Global Warming

Even if the alleged threat of global warming is a nefarious plot by power-hungry, mad scientists to trick us into giving up our cars, we will benefit from changing our energy-intensive ways.

Despite consensus within the scientific community that global warming constitutes a serious threat to the human race and that human activity is contributing to the warming trend, there are some people who insist that there is nothing to be concerned about and no reason to alter our behavior.

For some reason discussions of global warming tend to get a bit heated. Several possible explanations for this angry tone come to mind. The long-standing antagonism between environmentalists and industry may be one factor. The tension between science and religion may be another. Some people may be concerned that addressing global warming threatens our love affair with the automobile - fearing that sooner or later the government is going to take our cars away or require us to drive cars powered by carrot juice that won’t even come close to going zero to sixty in a matter of seconds. A final possibility is that we may be witnessing the "Springerization" of America. Heated exchanges of opinion score much higher ratings for talk radio and television programs than calm, reasoned discussions. Repeated exposure to loud, angry shouting matches may have desensitized us and created a mind-set that prefers heat to light when discussing the issues of the day.

Whatever the explanation, global warming seems to have become one of those issues, like abortion or gay marriage, where no one is allowed to remain neutral. There seems to be very little middle ground. You either accept global warming as a serious threat, or dismiss it entirely.

I am not a scientist, but I do my best to understand the scientific aspects of important issues. When "four out of five dentists" recommended sugarless gum "for their patients who chew gum," I didn’t switch to sugarless gum, I quit chewing gum. (I also found myself wondering what was wrong with that fifth dentist.) In the same spirit, if four out of five scientists are concerned about global warming, I am willing to share their concerns.

Global warming seems to be an issue where we would be wise to err on the side of caution. If the grim scenario envisioned by the scientific community comes to pass, the consequences will be severe. We should be doing everything we can to minimize the damage.

The good news for those who are not alarmed by the threat of global warming is that even if the scientific community is wrong about the seriousness of the threat or the fact that human activity is contributing to the problem, we will still benefit from the actions we should take. In the process of reducing our "carbon footprints" we will save money on gas for our cars and on our utility bills. We will lessen the inflationary impact of increases in the price of oil. We will send less money to OPEC.

America has had a long and smoggy relationship with the automobile. That love affair is a bit rocky at present. As the price of oil rises, the cost of driving is going up. By subsidizing the oil industry and keeping taxes on gasoline relatively low, the government has helped to keep gas prices down. For a long time now, we have paid much less for gas than drivers in Japan or Europe. With each new spike in the price of oil the ability of the government to cushion the effects gets more difficult.

I am personally opposed to corporate welfare and I believe the subsidies to oil companies should be eliminated. That would, however, lead to additional increases in the cost of gasoline. I also believe that the benefits-received principle of taxation should be utilized whenever possible. Excise taxes on gasoline should be levied by state governments and by the federal government at a level that provides all of the money needed to maintain our streets, highways, and bridges. This too would lead to a rise in gas prices. The combined effect of these two actions would result in a fair market price for gasoline. That price would be substantially higher than it is now.

If we want to abandon our commitment to a market economy, the government could keep gas prices artificially low by regulating oil company profits or by nationalizing the oil industry. Even if the government were to take either of these highly unlikely steps, it would offer only a temporary respite. In the long run, the price of gas is rising, and will continue to do so, for reasons that are beyond our government’s control.

Oil is a finite resource. While the amount of oil on the market at any given time may fluctuate, the amount of oil left in the ground (the total supply) can only go down. The demand for oil is rising as China and India and other smaller countries around the globe join the Industrial Revolution. Anyone who understands the law of supply and demand, knows that when supply goes down and demand goes up, prices rise.

The law of supply and demand is not subject to repeal by Congress. Our economy is going to be impacted by rising oil prices. By acting aggressively to reduce our oil consumption, we will be less susceptible to inflationary pressures as the scenario described above continues to unfold.

Calls to reduce our dependence on foreign oil have been a staple of political rhetoric since the the first OPEC oil crisis in the early 1970s. There are good reasons to move beyond vague, empty promises. Not all of the petrodollars flowing to OPEC are being used to build lavish palaces. A fair percentage is being spent on weapons.

We would be wise to remember Lenin’s remark that we (capitalists) would sell them (communists) the rope they will use to hang us. It’s not just communists who might use weapons we have sold or financed against us. Reducing or eliminating the transfer of huge sums of money to the kings and dictators running the countries that sell us much of the oil we consume would be a wise move.

Energy independence is an important goal. We need to stop talking about it and take action.
With or without the threat of global warming, there are absolute benefits to minimizing our consumption of oil. By finding cleaner ways to power our cars, driving less, and driving fuel efficient cars, we will save ourselves a lot of money and have cleaner air to breathe.

The second major prescription for individual action to combat global warming is to use less energy to light, heat, and cool our homes. We are being asked to insulate our homes more effectively, to turn our thermostats up a little in the summer and down a little in the winter, and to purchase energy efficient appliances.

What if we do all this and it turns out that scientists have sounded a false alarm with regard to global warming? We will have saved a considerable amount of money on our utility bills. Those of us who have gone so far as to install solar panels or other devices to generate electricity for our homes will not even have utility bills.

Utility companies are well aware of the threat of extinction. They can build wind farms and huge banks of solar panels, but it is quite possible to create energy from these sources without the involvement of utility companies. Homes have already been built, and in other cases retrofitted, with devices that generate electricity using renewable, non-polluting sources. A growing number of homeowners have been able to "go off the grid" entirely. In some cases homeowners are even able to sell unused electricity back to utility companies.

This trend is not going to be reversed. As the demand for solar panels and other products providing clean, renewable energy continues to grow, prices will drop, profits will increase, and it will become more and more cost-effective for homeowners to switch to these options.

While coal is still relatively abundant, it is, like oil, a finite resource. In the long run the price of coal can only go up.

We can argue about how long our supply of coal will last, but sooner or later we will have to switch to renewable sources of energy. There are environmental and economic benefits to doing that sooner rather than later. We may disagree about how much damage is done to the environment by burning coal, but nobody is arguing that burning coal is good for the environment. The sooner we switch to clean sources of energy, the better.

Another key argument made by those who oppose taking action to combat the effects of global warming is that we will damage our economy in the process of acting to counter the threat. Will our economy suffer? Yes and no. Whenever major changes take place in an economy there is some disruption. Some jobs are lost. Some new jobs are created.

This process is already underway at present. Research and development into green products is beginning to produce results. Concerned consumers are already helping to increase demand for the new products that are being developed and introduced in response to global warming.

To cite one example, electric cars are already on the market. They will continue to improve in terms of range and ease of use. Automobile manufacturers who continue to crank out gas guzzlers have been losing market share for some time now. The market share of automakers who produce electric cars, hybrids, and fuel efficient vehicles is expanding and will continue to expand. Those auto manufacturers who don’t transition fast enough may ultimately go out of business.

The revolutions in transportation and communication have accelerated the globalization of the economy. With or without a response to the threat of global warming, some industries are going to shrink, while others are going to expand. Serious efforts to combat global warming might speed up the process, but the end result will be the same.

The business community has already joined the fight to reduce carbon emissions. The full weight of entrepreneurial activity, inventors, and venture capitalists is on the side of new technologies. The smart money is no longer being invested in typewriters or telegraph lines. Gas guzzling cars and coal-burning utility plants will eventually go the way of the typewriter and the telegraph, but companies utilizing old technologies will do everything they can to drag out the process of changing over to new technologies.

Coal companies, large utility companies, and oil companies, in particular, want to keep their gravy trains running for as long as possible. They don’t want to leave any coal or oil in the ground. The slower we move in the direction of renewable energy, electric cars, etc., the more profit they stand to make. The key battles in their efforts to maintain profitability will be fought in the halls of government.

Utilities and oil companies wield considerable influence within the political arena. Their profits are threatened by most of the actions we need to take to counter the effects of global warming. They will not go down without a fight.

It would be nice if governments at all levels were willing to take the lead in addressing global warming, but the pressure these industries exert make governments reluctant to act. The primary concern of most politicians is staying in office. They will remain comfortably in the pockets of oil and utility companies unless and until they get the feeling that they are losing more votes by supporting those interests than can be offset by the votes they can purchase with the campaign contributions they are getting from them.

A button I have left over from the 1960s says "If the people will lead, eventually the leaders will follow." Responding to the threat of global warming is a cause where this may need to be the case. We can drive less. We can drive 55 miles per hour on highways even if the posted limit is higher. We can buy electric cars or hybrids. At the very least, we can buy the most fuel-efficient cars possible.

We can switch to compact florescent light bulbs. We can buy energy-efficient appliances. We can plant trees. We can turn our thermostats up a bit in the summer and down a bit in the winter.
The "power of one" is a popular concept these days. The power of a hundred million, or two hundred million, is even greater. Let those who doubt the scientific community go on doubting. If enough of us who are concerned take action, we can begin to turn things around without the help of the government.

At some point we will manage to elect a Congress and a president who will join, or perhaps even lead, our efforts. The government plays a huge role in our economy. (Larger than it should, but that’s another matter.) It is important that they join our efforts as soon as possible.

There is a lot governments could do to reduce carbon emissions short of passing legislation. Government contracts for calculators were a major factor in creating a level of demand that led to mass production and, in turn, to drastic reductions in the price of calculators. Government contracts for solar panels, electric cars, etc. would have the same effect.

If governments joined concerned individuals in making fuel efficiency a top priority when buying cars, the government wouldn’t need to mandate fuel efficiency. The market would take care of that. If governments at all levels simply joined consumers by purchasing only compact florescent light bulbs, the demand for conventional light bulbs would plummet and companies would stop producing them.

As mentioned above with regard to individual consumers, the government could save a lot of money by becoming more energy efficient. That would enable them to reduce taxes, which as any good Republican will tell you, is a great way to win votes.

Even if the scientific community is wrong about global warming, taking the actions listed above will give us cleaner air to breathe and save us a lot of money on transportation and utility bills. We have little to lose and much to gain by moving in the direction of non-polluting, renewable sources of energy.

The dire predictions of Karl Marx have proven to be less than accurate, but his rhetoric was quite energetic, so I will close by paraphrasing him: Concerned citizens of the world conserve. We have nothing to lose but high gas prices, soaring utility bills, and polluted air. We have a world to save!

© 2008 Gary Winston Apple

Used by permission. All rights reserved.

Permission is hereby granted to make or post copies of this essay for non-commercial use, provided the copyright notice is included in the copy.

Tuesday, February 19, 2008

A Modest Proposal for Reforming the Health Insurance Industry

How To Reduce Health Care Spending With Or Without Help From The Government

Reform is coming to the health insurance industry. If we’re not careful, the reforms may make matters worse instead of better.

The pressure for reform is building because the skyrocketing cost of providing health insurance for employees is becoming too much of a burden for businesses. Large firms find themselves at a competitive disadvantage in the global economy. Small businesses simply can’t afford the cost. The percentage of workers with health insurance provided by employers is declining.

The practice of providing health insurance as a fringe benefit began during World War II as a means of circumventing wage controls. It has endured because it benefits everyone involved. Employers can deduct the full cost of providing insurance as a business expense. Workers pay less in taxes since they are not taxed on the value of the premiums paid on their behalf. Insurance companies get more business than they otherwise would.

Since increases in premiums don’t show up as a reduction in take-home pay, workers have been insulated from the impact of dramatic increases in the cost of health insurance. Now costs have reached the point where employers are reducing their contributions toward premiums and co-pays are rising.

As more and more workers are left to fend for themselves, even those who can afford health insurance experience a great deal of "sticker shock" when the cost of premiums is no longer hidden among their fringe benefits. Individuals with incomes just above the limits for Medicaid simply can’t afford to purchase a policy on their own. Many young and healthy members of our society who could afford coverage, elect to forego having health insurance if it’s not provided through their employer. The people who need insurance the most - those with serious health issues and/or chronic conditions - are the most likely to be priced out of the market or simply excluded by insurance companies.

Health care spending in the United States has been spiraling out of control for some time now. A report by the World Health Organization paints a very clear picture:

  • The percentage of our gross domestic product devoted to health care more than tripled during the period from 1960 to 2005, growing from 5.2% to 16%.
  • Overall, the World Health Organization ranked our health care system as 37th best in the world.
  • In 2004 we spent $6102 per person on health care, compared to $3165 for Canada, $3150 for France, $3043 for Germany, and $2508 for Britain.
Although we outspend them by a wide margin, life expectancy in the U. S. is lower than it is in any of these other nations. All of these other nations have universal health care.

Britain, with the lowest cost per capita, is the only nation with a system that can legitimately be labeled "socialized medicine." Hospitals in Britain are owned by the government. Doctors and other health care providers are government employees.

Spokespersons for the insurance and pharmaceutical industries and their reactionary supporters in the Republican Party often use the term "socialized medicine" to describe the Canadian system. (Actually, they don’t just use the term, they hurl it like an epithet.) The Canadian, French, and German systems can more accurately be described as "socialized health insurance."

Advances in medical technology and new medications have increased the cost of health care. It is now possible to treat medical conditions that were previously not treatable. These new care options are expensive, but also improve the quality of life, and may even extend life itself, for chronically ill and terminally ill patients. Diverting a little of our GDP from SUVs and iPhones seems a reasonable trade-off in such cases.

The higher cost of health care in the United States, compared to the other nations mentioned above, can be attributed to a second, less benevolent, factor - the involvement of private insurance companies in nearly every interaction between health care providers and patients with health insurance. The army of bureaucrats who screen applicants, review and approve (or disapprove) claims, and handle disputes adds to the expense of health care. The clerical workers needed to shuffle paperwork back and forth between insurance companies and health care providers adds to the cost of health care. And the profits of insurance companies adds a final measure of cost.

Our "health care" crisis is, in reality, a health insurance crisis. The involvement of the insurance industry does nothing to improve the quality of health care, while adding significantly to the cost. In a strange perversion of the normal role of insurance, with regard to health care, the burden of paying the premiums for coverage has become unbearable for many people who don’t have any significant medical expenses other than insurance premiums.

It is no accident that the primary focus of "health care" reform is on making sure every member of our society has health insurance. Insurers and drug companies have managed to put a fair number of politicians in their debt through the legalized bribes known as campaign contributions. As a result, they may well retain a dominant role within the health care market even if we get a few reform measures passed.

Our timid, frightened representatives in Congress find themselves trapped between insurance and pharmaceutical companies who make large contributions to their election campaigns and outraged citizens tired of being forced to choose between living with the risk of being uninsured (including the risk of being denied care) or of being fleeced by the insurance industry. Now Congress faces increased pressure as their corporate sponsors outside the insurance business join the chorus calling for reform.

Although members of both major political parties have been co-opted to some extent, health care reform is one issue where there is a stark contrast between the parties. The positions of this year’s candidates for the presidency (some no longer in the race) illustrate the differences.

Not a single Republican candidate has offered any reform that would reduce the role of the insurance industry. They propose "health savings accounts" that would let businesses off the hook and privatize risks. They want to put caps on damage awards and end "frivolous lawsuits" in cases of medical malpractice. They favor tax credits to offset the cost of individuals purchasing insurance on their own. (This, of course, would make it easier and more acceptable for businesses to drop coverage as a fringe benefit.)

Republicans warn of the dangers of "socialized medicine" and "one-size-fits-all" programs controlled by the government. The Democrats favor a larger role for government.

Dennis Kucinich was alone among the candidates in supporting "Medicare-for-all." While this approach has merit, it is not likely to be implemented, at least not directly.

The mainstream Democratic plan to achieve universal health insurance was originally put forward by John Edwards. It has now been adopted (with minor differences) by both Hillary Clinton and Barack Obama.

The plan involves four key elements: (1) "community rating," which would require insurance companies to accept all applicants and charge all policyholders the same premiums; (2) subsidies for small businesses and moderate-income individuals; (3) mandated coverage, which requires employers to provide health insurance and also requires individuals who aren’t covered through their jobs to purchase insurance; and (4) a buy in to Medicare, or a similar government operated program.

Several of the Republican candidates offered support for subsidies for small businesses and low-income individuals to help achieve universal health insurance. Some Democrats would support tax credits to offset the cost of purchasing insurance for individuals who are not covered through their jobs. Other than that there is little agreement between the parties. Control of Congress and the White House after this year’s elections will determine the nature of health care reform.

The insurance industry will have no problem with tax breaks, subsidies and/or mandates since all of these measure will increase their profits. Insurers may not even object to community rating as long as the government is willing to put up the money needed to pay for the higher premiums resulting from the inclusion of high risk individuals. The net result of these "reforms" would be universal health insurance through private insurance companies.

Forcing businesses to provide coverage, requiring individuals to purchase insurance, and using taxpayer’s money to pay for those who can’t afford insurance, will shift the burden of paying off the insurance companies, but these reforms accomplish nothing in terms of reducing the overall cost of health care.

Insurance companies are the problem. Increasing their role in health care is not the solution. The overall cost of health care in the United States is not going to be reduced unless we succeed in eliminating or marginalizing, the role of insurance companies.

The battle will be joined - and won or lost - on the basis of the last element in the Democratic plan. Giving people the option to buy in to Medicare, or some similar government-operated program, at a price equal to the actual cost, will reduce the role of private insurers. It will also reduce their profits. The insurance industry will fight this piece of the Democratic plan with every weapon at their disposal.

Medicare has several advantages over private insurance companies with regard to keeping costs down. In addition to eliminating profits, there is no money spent on advertising, there is no need to maintain a sales force, and policing the system costs less than what private companies spend trying to deny claims and screen out high risk individuals.

It will be difficult for Republicans to object to a buy-in option if it’s done right. The government would not be forcing anyone to sign on, but would simply offer consumers a choice between private insurance and a public plan. If the premiums to buy into the program are equal to the cost of running the program, offering people that choice will be revenue neutral. There would be no need to raise taxes to pay for the program.

Republicans never miss an opportunity to push the message that government is incompetent and incapable of providing services as efficiently as private enterprise. If they truly believe that, they have nothing to fear from offering people a choice between private insurance and a government-run program.

Should the Democratic Party manage to get all four elements of their plan passed into law, we will have accomplished a reasonably satisfactory reform of the health care industry. A "Medicare for all who want it" system will reduce the overall level of spending on health care.

The primary inefficiency within a Medicare-style system is that it is open to abuse by providers of medical care who can increase their income by over-treating patients. If Uncle Sam is picking up the tab, there is no incentive for either patients or doctors to limit the duration or range of treatment. Providing oversight to limit such abuses adds to the expense of the program.

To keep health care costs to an absolute minimum, we need to offer consumers one additional option - catastrophic illness plans that make health insurance work the way insurance is supposed to work.

In Wealth of Nations, Adam Smith described the virtues of a market economy where fair prices result from a large number of buyers interacting with a large number of sellers. To achieve the efficiencies of a market economy, we need to reduce the role of both the health insurance cartel and the government by limiting health insurance to the traditional role of insurance - spreading and sharing the risk of catastrophic events.

You can get a tune-up for your car or get minor repairs done without involving the company that provides your car insurance. You can replace a broken window or repair a leaky faucet without involving the company that insures your home. We could achieve a significant reduction in the cost of health care by eliminating routine care from insurance policies. We should be able to get treatment for minor accidents and ailments, without involving a health insurance company.

In any given year, the vast majority of us have no need for anything more than routine medical care. Within a system where insurance functioned in the normal manner, a substantial percentage of the interactions between doctors and patients would take place without generating additional costs for both providers and insurers that result from the review and approval process and the associated paperwork. This simple change in our approach to health care would reduce the cost of health care more significantly than any other reform being proposed.

Consumers would have complete freedom to patronize any doctor or hospital. To help them make informed decisions, a complete list of the fees charged by each doctor and hospital should be available upon request. The transparency of the fee structure alone would help to control costs. The complex deals negotiated between insurance companies and health care providers make it difficult to even figure out the true cost of care.

Some insurance companies already offer plans with greatly reduced premiums and high deductibles. In some cases companies pay for part of the cost of preventative measures, such as annual check-ups, but most of the cost of health care is paid directly by patients.

These types of plans are not very common. They are often considered as a last resort for those who can’t afford the premiums for full coverage. They are also not very popular with many people who are forced to settle for such a plan. Overcoming the resistance to this approach might be difficult.

A system where employers or the government pays your premiums creates the illusion that you are getting something for nothing with regard to health care. A lot of people are addicted to that illusion. They fail to realize that the costs are passed on to them through a combination of higher taxes and reduced pay. (Shall we blame Milton Friedman for failing to convince more people that there is no such thing as a free lunch?)

A plan with lower premiums and a high deductible makes a lot of sense for healthy individuals. A Medicare-style plan makes more sense for those with chronic health problems. These alternatives, however, should be offered as options, not mandated.

Even though catastrophic illness plans save most people money and would reduce the overall cost of health care if they were widely adopted, some people will not want to buy into a plan that requires them to pay for health care directly. After all, paying for health care is not nearly as much fun as going shopping. On the other hand, more people might take advantage of this option if it were readily available. It is a choice that should be offered by both employers and the government.

Employers who provide health insurance as a fringe benefit could reduce their costs by negotiating to include catastrophic illness plans as an option offered employees. If a reasonable share of the savings from reduced premiums were passed on to employees to offset their increased out-of-pocket expenditures for health care, most workers would eventually realize that they are better off financially with that type of plan. Even employees whose medical expenses exceeded the deductible amount would see only a small increase in actual cost. The overall cost of health care would be reduced for both workers and employers.

The decreased income to insurance companies would be largely offset by the savings they would realize from having a greatly reduced role in the health care system. They would no longer need to provide oversight or approval for routine medical transactions. Profits might decline somewhat, but insurance companies would remain profitable.

If such a plan were offered by the government it could help moderate-income individuals and families by basing premiums on ability-to-pay. With or without a progressive premium schedule, a government-run plan offers the additional benefit of maximizing over-all savings by eliminating profits.

The primary goals of whatever reforms are implemented should be to reduce the overall cost of health care and to offer consumers a range of meaningful choices. Consumers should have the choice of acquiring a policy through a private company or buying in to Medicare. Consumers should have a choice between full coverage and a policy that covers only catastrophic costs. All of these options need to be available if we hope to reduce the cost of health care significantly.

If Congress manages to supplement the existing Medicaid and Medicare programs with a buy-in to Medicare they will deserve a higher approval rating and a brief respite from being labeled a "do-nothing" Congress. If they add the option of a catastrophic illness plan they will have done everything we can reasonably expect from the government with regard to reducing the cost of health care.

If the unholy alliance of insurance companies, pharmaceutical companies, and Republicans, manages to buy-off and/or bluff the Democrats into stopping short of these goals, people who want to limit the cost of health care will have to go it alone.

The savings from eliminating profits could be realized without government involvement through an insurance company organized by consumers as a not-for-profit corporation or a co-operative. The primary challenge for this approach would be enrolling enough people to spread risk broadly.

Given my own libertarian leanings, I am inclined to believe that this would be a better solution to the health care crisis. Considering the dismal track record of libertarian ideas, I’m willing to settle for government getting the job done.

This is one issue where a grassroots movement could be quite effective. It would involve nothing more than individuals and individual employers negotiating and purchasing catastrophic plans in lieu of, or as an alternative to, full coverage plans. People who want to go on paying off the insurance industry to meddle in their dealings with doctors should be free to do so. Those of us who are tired of supporting "bureaucratized medicine" should band together to limit the role of insurers with or without help from the government.

© 2008 Gary Winston Apple
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