Paul Ryan’s floor speech

As most of the country knows, the House of Representatives passed its latest version of healthcare reform yesterday, and emotions are running high on all sides as a result. Rep. Paul Ryan, a Republican from Wisconsin whom we sincerely admire, seemed to best embody his party’s core philosophical objections to the bill. Unfortunately, too many of the GOP’s arguments are stubbornly anachronistic and overly narrow. They don’t fully reflect the realities of healthcare, and they conveniently overlook the fact that we have had ‘socialized’ medicine in this country for quite some time – since Medicare and Medicaid became laws, and since the tax code and other regulations began to favor group insurance plans.

Our intent isn’t to cheer or take shots at either side. Instead, it’s to raise the level of discourse, something that neither party nor the press has done very well. With an issue as complicated and important as this one, political maturity is a must, and truth telling from leadership is absolutely vital.  Unfortunately, Ryan’s speech was riddled with shallow thinking and empty slogans. Perhaps that suited its purpose, but it does little to move the debate or the electorate in constructive directions.

At 1:45 of the video:  “Our founders got it right, when they wrote in the Declaration of Independence that our rights come from nature and nature’s God, not from government.”

For tens, perhaps hundreds of thousands of years, and in almost every part of the world, invoking divinity is how the powerful have justified their position (they still do in some parts of the world). So Jefferson may simply have been speaking the English monarchy’s language when he wrote that in the DOI.

More seriously, in today’s world, rational people ought to be able to agree that political rights are absolutely defined and managed by governments. The classical liberal principle of doing no harm to others is a great starting point, but the philosophical or religious beliefs that inform one’s political philosophy are not in and of themselves “rights”.

In fact, in a society of diverse religious and philosophical views, it’s absolutely vital that a government does just that.

1:57 “Should we now subscribe to an ideology where government creates rights, is solely responsible for delivering these artificial rights, and then systematically rations these rights?”

Government does indeed create rights. It defined and allocated them in the Constitution without any mention of God as a source. And it has amended and reallocated them many times since. Calling them “artificial”, as in man made, is no more meaningful than the typical PETA slogan, or the idea that human creations, good and bad, are somehow ‘unnatural’.

And political institutions absolutely ration individual rights. They always have, all the way back to our hunting and gathering days, so it’s an idea that we really ought to be used to by now. The challenge is to hold governments accountable for doing it in a way that approaches some social optimum. That’s what the Constitution has done rather well over two centuries, and it’s something that modern political institutions have tended to become more adept at over time.

2:09 “Do we believe that the goal of government is to promote equal opportunity for all Americans to make the most of their lives? Or do we now believe that government’s role is to equalize the results of people’s lives?”

Long ago, the federal government enacted some stupid ideas on how to finance health care coverage. For generations, those ideas have benefitted employees of large corporations, unions, and public sector employees. They have been subsidized, either through higher premiums, greater personal risk, or less health care, by the self-employed and entrepreneurs (which may be why politicians always try to kiss their rear ends), as well as those who do not qualify for private insurance coverage, Medicare, or Medicaid. From the get go, these ideas have promoted INEQUALITY.

Healthcare reform is aimed, in part, at finally addressing this situation, a situation that has stood in stark contrast to the principle of equal opportunity. Over the years, the GOP has developed some good ideas on this issue, but in session after session, they utterly failed to do anything about it. They punted repeatedly until the situation got bad enough that the Dems were finally able to run the ball down their throat. Tua culpa, GOP.

Furthermore, this legislation can’t be said to seek equal outcomes, and Ryan surely most know that. It does seek to extend the social safety net, i.e., to redefine the acceptable minimum outcome in personal health care coverage. It also seeks to impose responsibility, in that everyone must chip in in some way. Personally, I don’t care for that kind of thing, and I know I’m not alone in that. Compulsory anything tends to rub Americans the wrong way.

Unfortunately, as long as there is Medicaid, and as long as health care costs of the uninsured are borne socially (via welfare or higher costs for others), it doesn’t make any sense to avoid a minimum level of buy in. It’s similar to having to carry liability coverage on your automobile, except that we are all physical bodies, and thus all have to participate.

If that really rubs you the wrong way, you have a few options:

• Start working on the technology that will provide the bodily equivalent of mass transit and other alternative modes of transport.
• Work to repeal Medicaid (why not Medicare while you’re at it?).
• Move.

2:24 “The philosophy advanced on this floor by this majority today is so paternalistic, and so arrogant. It’s condescending. And it tramples upon the principles that have made America so exceptional.”

Both parties have been guilty of arrogant, condescending paternalism throughout their history. I’m not sure what makes this bill so special. And if we look at the trajectory of American greatness, it’s hard to say that it’s based solely on founding principles (though they’ve certainly made it possible, along with plenty of luck).

Did the U.S. become more exceptional or less after the Progressive movement, the New Deal, and the Great Society? My point is not to sing the usual lefty praises for those episodes, but to point out that they do not seem to have undermined American exceptionalism at all.

3:18 “As we march towards this tipping point of dependency, we are also accelerating toward a debt crisis, a debt crisis that is the result of politicians of the past making promises we simply cannot afford to keep. Deja vu all over again…It’s unconscionable what we are leaving the next generation.”

First I’ll note my love for Yogi Berra quotes. Then I’ll reiterate that there is no U.S. debt crisis.

We do have entitlement and dependency issues to face as a society. But the federal budget is unlike any other budget in our country. It’s not like personal, household, business, or state and local government budgets. In the world, the only budgets that operate in a truly similar fashion are Japan’s and the United Kingdom’s (and in a far more constrained fashion, the European Monetary Union’s). Japan is about ten years ahead of us on the demographic curve, and its net public debt has reached levels that all the deficit hawks in the U.S. now shudder about. What happened? Nothing – no debt crisis, no threat of default, no crowding out. Nothing but a handful of downgrades from the credit rating agencies, and trading floors littered with the bodies of almost two decades worth of misguided hedge fund managers.

And the worst debt to GDP projections, even if we overlook the uncertainty involved in forecasting a decade or more, don’t reach any kind of level that justifies the prevailing deficit anxieties — not for a large modern economy with monopoly power over issuance of the currency used to pay interest on and retire its debts. Until people no longer want to accept dollars (and it’s easy enough for anyone to test out that hypothesis), the government can create more of them. In other words, unlike the rest of us, the only budget constraint faced by the federal government is the socially acceptable level of inflation.

Finally, without proper context, the ‘debt on the backs of our grandchildren’ meme is so much claptrap. If more debt now means better economic outcomes overall, then we are imposing severe opportunity costs on future generations if we do not run larger deficits.

That said, it may be true that health care reform does not represent a social investment with positive ROI. It may also be true that simply rectifying distortions and making the system fairer could have been accomplished with far less than what this bill contains. The electorate has a little over seven months to reflect on it before rendering its judgement in November, and as we’ve noted here and here, this issue deserves a lot more philosophical honesty than it’s been getting. It’s difficult, complicated stuff, with no right or wrong answers – only some as-yet-unknown social optimum, which our sometimes messy political processes are helping us grope our way towards.

URLs:

http://www.youtube.com/watch?v=lwk1aHU-pms

http://www.newdeal20.org/2010/02/10/the-federal-budget-is-not-like-a-household-budget-heres-why-8230/

http://symmetrycapital.net/index.php/blog/2009/07/should-health-care-be-a-right/

http://symmetrycapital.net/index.php/blog/2009/07/ryan-what-does-it-look-like-in-september/

Some personal Facebook ’stats’ on healthcare reform

Some very crude sample statistics on voter reactions to the passage of healthcare reform legislation, derived from my personal Facebook account:

Percentage of connections who cared enough to comment: 1.7%

Opposed: 60%

Approving: 40%

With so few people posting, the results are not statistically significant, but they do line up with more credible poll findings: http://healthcarepolls.blogspot.com/2010/03/comparing-iwfpolling-company-and.html

Shovel-ready news bits

It’s another shovel ready snow day in the mid-Atlantic, with our second two footer in five days. Too bad we can’t ship the stuff to Vancouver efficiently. A couple of interesting things on the wires today:

The Fed’s exit strategy

Ben Bernanke outlined the Fed’s game plan for tightening monetary policy when the time is right. In our judgement he said the right things for the most part. The relatively new policy tool that is getting the most attention is the payment of interest on excess reserves that member banks have on deposit with the Fed (“IOER”).

Our initial take on IOER when it was legislated in 2008 was that it offered a way around the zero bound on the Fed’s interest rate target, but that was wrong. We overlooked that (1) the interest is not necessarily paid with new USDs, but could be paid out of cash flows earned on the voluminous assets that have been taken onto the Fed’s books and (2) the incentive effect of the interest payments is to “tie up” banks’ reserves outside of credit creation channels.

Fortunately, the Fed’s current interest rate is not competitive with spreads on public and private sector credit; instead, it appears to compete solely on the basis of risk, as banks don’t have to worry about mismatching assets and liabilities (borrowing short term and lending long term). But overall, it’s hard to see how those two effects of IOER support economic activity in the present. Apparently we’re not the only ones trying to get our heads around this.

ABC News poll

Headline numbers from a recent ABC News poll look bad for President Obama and Democrats, but there are some interesting things under the hood. First the headlines:

• Trust in Democrats’ ability to handle critical policy issues such as the economy and terrorism gave decline steadily since last year, with the overall gap versus Republicans falling from roughly 25% to 5%. 
• Obama’s approval ratings are below 50% on creating jobs, the economy, health care, and the deficit (his approval on terrorism is a very healthy 56%).

Some of the nuances that should be very relevant for political strategists include:

• While the margin has dropped considerably from 13%, 49% of independents lean towards Dems, 45% towards the GOP (p.5).
• While respondents viewed the loss of the Dems’ Senate super majority positively, 58% view the GOP as obstructionist, and 68% say that obstructionism should only be used infrequently (p.4).
• 48% describe themselves as “anti-incumbent”, below the 54% and 53% that preceded the “throw the bums out” elections of 1994 and 2006.

Health care reform is especially interesting; while most respondents view the present outcomes negatively:

• 80% support banning limits on pre-existing conditions.
• 56% support a personal health insurance mandate, including public assistance.
• 65% say the current approach is overly complicated, and 59% say it’s too expensive.
• 74% of those with private insurance trust their carrier to handle claims fairly, and more of these folks oppose the current reform packages.

One takeaway is that there’s plenty of room for strategic and tactical maneuvering by both parties in the quarters ahead.

Another, based on that last bullet point on health care, is that there appears to be a powerful asymmetry at work, one that I’m much more sympathetic to nowadays: people who have satisfactory health coverage are going to have a harder time empathizing with the challenges faced by those who don’t. That seems pretty rational, if not a little cut throat – if it ain’t broke for me, why should I have to pony up for your troubles?

My wife, who has worked in architecture for almost twenty years, was out of work for most of 2009. If not for the COBRA subsidy, we would have been in a much deeper financial hole, to the tune of about $600+ per month. When the subsidy was set to expire in December, we applied for coverage with the carrier we had through her prior employer, but were denied coverage for preexisting conditions, namely minor wear and tear to one of my knees and heightened anxiety in a person who had just lost her job and income. Huh??? 

And if you’ve ever tried to purchase a policy as an individual, you know how frustrating it is to try making comparisons between apples, oranges, cumquats, dragon fruit, and a bunch of others (let alone issues like financial strength and ratings). You also have to be a very savvy insurance consumer to detect the coverage gaps at work in different kinds of policies.

The family’s now fully insured thanks to good news on the employment front, but this is an issue that we have a whole new perspective on — one that’s firmly supportive of well designed health care reform.  

URLs:

http://news.yahoo.com/s/ap/20100210/ap_on_bi_ge/us_bernanke_exit_strategy

http://www.ny.frb.org/newsevents/speeches/2009/dud090729.html

http://www.newsneconomics.com/2008/12/why-exactly-does-fed-pay-interest-on.html

http://abcnews.go.com/images/PollingUnit/1102a22010Politics.pdf

President Still on Message…and It’s a Costly One

President Obama stumped over the weekend for Martha Coakley, who is running for Ted Kennedy’s vacant Senate seat against GOP upstart Scott Brown. He echoed his recent hawkishness, pitting green jobs against the oil industry, and taxpayers against “fat cat” Wall Street bankers, repeating his “I’ll get your TARP money back” meme. 

[1/20/2010 UPDATE - In an interview currently running on CNBC, Warren Buffet pointed out that most of the TARP recipient banks have repaid the federal government with interest, and that the industry, via FDIC, has absorbed the losses resulting from bank failures. TARP losses are the result of GSE's like Fannie and Freddie, and AIG, where many stakeholders - not just CDS counter parties, but also insurance settlement and annuity receipients - were paid with TARP funds. Important points, and they make the President's recent TARP rhetoric all the more puzzling.]

Obama’s current approach to policy is a net economic negative that will not reduce unemployment, at least in the short run. It will merely shuffle employment around between industries, creating inefficiencies and piling additional dislocation on top of the residual pain of a deep recession. And preaching to the choir could not have helped Coakley, given that she had lost a double digit poll lead due to migration of moderate and independent voters in recent weeks. Arch lefties are simply not going to swing the special election in Massachusetts, and they are probably not going to swing the 2010 midterm elections. For the second time in the last couple of weeks, we are left to wonder which cabinet member(s) the president is currently getting his strategic and tactical guidance from, and how much it’s going to cost his party before he starts looking for better advice.

We would assert that the Dems have lost a great deal of ground since they and the president began taking a more hawkish fiscal stance, and since PAYGO came back into vogue (though we could be wrong – perceptions of overreaching on health care reform may have been more important, for example). The parties’ current approaches to policy are basically:

Dems:    increased public spending  + higher taxes

GOP:      decreased public spending + lower taxes

It’s interesting to note that in many environments – this one included, we think – those options won’t differ a whole lot in terms of economic output. Thus, the choice may not be about economic performance as much as private versus public control of resources, which seems to be fairly characteristic of the American voter. That’s too bad, as there are some important public sector initiatives, including infrastructure, energy efficiency, gaps in the health care system, even a public employer of last resort, that could and arguably should be undertaken. Unfortunately, every time the President or members of his party claim that the private sector (however narrowly defined and targeted) will be put on the hook for funding some initiative, he shuts down these important opportunities.

As we’ve noted elsewhere, the federal government issues the money used to service its debt. Thus, the only real constraint on public sector deficits is inflation expectations coming unhinged. This has not happened to date, and most forward looking indicators are pointing in a disinflationary if not outright deflationary direction, at least in purely domestic goods and services. This realization offers a less divisive way forward for whichever party grasps it first, i.e.:

Dems:    increased public spending  + increased deficits

GOP:      lower taxes + increased deficits

In what appears to be a  ’Keynesian’ decade ahead, these approaches offer a healthier framework for policymaking. And arguably, the Dem direction – if they had the courage to advocate it, and the sense and restraint to do it reasonably well – would lead to better economic outcomes overall.

The “Obamacare” Debate

Some key pieces in the debate over the healthcare reform bills passed by the House and Senate are linked below (TOH to Brad DeLong for the first three). We put “Obamacare” in quotes in the title of this piece because, while Obama’s election certainly paved the way for health care legislation to proceed, ownership of health care reform extends far beyond - and before - the current administration.

A WSJ editorial from mid-December argued against cost containment arguments made in support of the legislation:

The White House hawked a permanent entitlement expansion on flimsy and speculative theories that its own partisans now admit—albeit when it is nearly too late—aren’t more substantive than the triumph of hope over experience, while simultaneously writing off the one policy that has been effective in the real world. The cost control mantra of ObamaCare was always a political bill of goods, and its result will be the opposite of its claims: poorer quality care at higher costs.

The editorial incited a spirited defense from Peter Orszag, head of the Administration’s Office of Management and Budget (OMB):

We are not setting out a plan with every detail laid out for what the health care system of the future should look like.  Thinking that we could lay out in full detail a perfect system today would show a foolish disregard for the dynamism of the health care sector – and of the American economy in general.  Instead, we are putting in place processes by which what works and what doesn’t can be rigorously tested, and then scaled up over time as they are reflected in the decisions of thousands upon thousands of hospitals, physicians, and other providers.  Does the Journal have a better suggestion about how to approach policymaking in a dynamic world?

…Can more work be done on health reform? Sure. And that is what is occurring through the legislative process as I write. Moreover, even after passage, we will need a continuous assessment of what works and what doesn’t and rapid adjustments to a changing market – all of which can be done with the mechanisms laid out in this bill.

The bottom line is that continuing on the road we are on will overwhelm our economy and our federal budget. The health care plan being considered in the Senate now is built on the best available knowledge and most promising ideas from across the political spectrum. Critics may fear this change, but what we should fear more is doing nothing.

Along those lines, David Frum, a bit of a black sheep in the GOP of late, offered a pithy but interesting critique of his party’s strategic response to health care reform and other legislation: “Republicans could have been architects of improvement, instead we made ourselves impotent spectators as things get radically worse. Plus – the bad new Democratic proposal will likely be less unpopular with voters than their more promising earlier proposal. Nice work everybody.”

Frum’s position on healthcare is fairly orthodox among conservatives, but for those who subscribe to Barron’s, we highly recommend the columns that Thomas Donlan has posted on the issue over the past year. In his most recent column on the subject, he reviewed T.R. Reid’s The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care, and pointed to at least three critically important factors that will be stubborn barriers to cost control:

American docs can make four times as much as those in Japan, France, Britain and other countries. The foreign docs, however, mostly go through med school on government-paid tuition, and graduate free of debt. They pay what Americans would consider extremely low malpractice-insurance premiums. And those in private practice do not need to hire their own administrative staffers to deal with a myriad of insurance administrators and claims adjusters.

Donlan recaps Reid’s overview of the French health care system, illuminating some of the contrasts (and critical differences) between our system and one designed to provide universal access at a relatively low cost. Anticipating concerns about the potential for waste, fraud, and abuse in a system like France’s, he asks “what accounts for the fact that the country spends $3,165 per citizen for a system that covers everybody, while the U.S. spends almost twice as much per citizen and covers only 85% of them?” Donlan concludes:

Americans…should come to grips with [T.J.] Reid’s frank advocacy of some kind of universal health care for the U.S. on the grounds that everyone has a human right to “adequate” health care — although not without limits, whatever they may be.

Every other country that can afford it has decided to provide a minimum level of health care to everyone, regardless of income and wealth, at a minimum cost out-of-pocket. The U.S. Medicaid program also provides a minimum level of nearly free health care, but not to everyone. It aids 59 million people, the poorest 20% of Americans, by Medicaid but the coverage and eligibility vary widely.

Too many Americans say health care is a right and don’t want to have any responsibility in paying for it. Too many want market-driven health care without winners and losers. A close reading of Reid’s book may help them think more clearly.

Donlan’s conclusion lends support to our prior assessments of health care reform — that it is complicated stuff, both philosophically and operationally.

URLs:

http://delong.typepad.com/sdj/2009/12/ten-economic-paragraphs-worth-reading-december-21-2009.html

http://online.wsj.com/article/SB10001424052748703558004574583962940536556.html

http://www.whitehouse.gov/omb/blog/09/12/14/No-Illusions/

http://www.frumforum.com/the-cost-of-no-deal

http://online.barrons.com/article/SB125935468698266957.html

http://www.amazon.com/gp/product/1594202346?ie=UTF8&tag=symmetrycapit-20&linkCode=as2&camp=1789&creative=390957&creativeASIN=1594202346

http://symmetrycapital.net/index.php/blog/2009/07/ryan-what-does-it-look-like-in-september/

http://symmetrycapital.net/index.php/blog/2009/07/should-health-care-be-a-right/

DISCLOSURES: Symmetry Capital Management, LLC is an Amazon associate and earns a referral fee for any sales resulting from a “click through” purchase on Amazon.com.

H1N1 Update

AP is reporting that “some people who aren’t at high risk for swine flu complications got the much-in-demand vaccine…healthy adults or senior citizens instead of kids, pregnant women and people with health problems.”

Should that be cause for alarm? On the one hand, public health officials and members of at-risk populations should be proactive about getting the vaccine, and others should be supportive of those efforts. But on the other, the greater the number of vaccine administrations, the lower the risk of H1N1 to the rest of the population, including at-risk groups. As the article reports:

One of the doctors who helped draw up guidelines for vaccine priority groups also isn’t surprised at how things are unfolding.

The government’s vaccine advisory panel “did not expect vaccine police to be set up around the country,” said Dr. William Schaffner, a flu specialist at Vanderbilt University Medical Center, who is on the panel.

If vaccine demand is low in some locations, it makes sense for non-priority groups to get it instead of wasting the supply.

“I don’t consider it a problem,” said Schaffner. “I consider it more of a problem if vaccine is left unused.”

That seems to make sense. Also, flu trends being reported by the CDC are scary enough this year that we can understand people’s temptation to avoid chivalrous conduct. Based on the latest data released for Week 41, which ended October 17th:

• Just about all of the reported and tested flu cases this season appear to be H1N1 (“swine flu”).
• The proportion of deaths relative to the number of hospitalizations has run between roughly 3% and 8%. Granted, this is a hospitalization-fatality rate, not a case-fatality rate. But imagine you have a severe enough case to enter the hospital, and have a 5% chance of not returning home. And while the proportion of deaths appears to be trending down since late August, the number of hospitalizations is up over 500%, so a lower percentage of fatalities out of a much larger number of hospitalizations provides little comfort — for example, the number of deaths in week 41 was up more than 200% over week 35.
• The number of flu deaths per week has been increasing exponentially since 2006, and to paraphrase George Soros, it’s gone ‘parabolic’ this year. There were 1.5 deaths per week in 2006-07, 1.7 in 2007-08, and 2.23 in 2008-09, while the current run rate for 2009-10 is 7.6! [We divided by fifty two because the flu didn't take its normal seasonal break this summer; the actual number of deaths per week during flu seasons would be higher than those figures.]
• According to this chart of expected versus actual cumulative hospitalizations and deaths, it’s not apparent that any age groups are at higher risk  than any others. In fact, one could argue that the 18-49 group should be at the front of the line! As we pointed out previously, this mimics the ‘W shaped’ global influenza pandemic of 1918 that killed many, many millions of people, and a far greater number of healthy adults than a typical influenza virus.

H1N1 is not only scary enough at the moment to excuse some people elbowing their way to the front of the line for the vaccine. You can actually make a sound argument, based on historical evidence and current data, that healthy twenty to forty year olds should be included in the target population for the vaccine. Perhaps that’s one reason why the CDC is not up in arms about the lack of ‘vaccine police’.

URLs:

http://news.yahoo.com/s/ap/20091030/ap_on_he_me/us_med_swine_flu_vaccine_cheaters

http://www.cdc.gov/flu/weekly/

http://www.cdc.gov/flu/weekly/weeklyarchives2009-2010/AHDR41.htm

http://www.cdc.gov/flu/weekly/weeklyarchives2009-2010/IPD41.htm

http://www.cdc.gov/flu/weekly/weeklyarchives2009-2010/EIP41.htm

http://www.cdc.gov/ncidod/eid/vol12no01/05-0979-G2.htm

http://www.cdc.gov/ncidod/eid/vol12no01/05-0979.htm

http://www.amazon.com/gp/product/0971542821?ie=UTF8&tag=symmetrycapit-20&linkCode=as2&camp=1789&creative=390957&creativeASIN=0971542821

PLEASE NOTE: Symmetry Capital Management, LLC is a state registered investment advisor. The foregoing information is for informational, educational, or entertainment purposes only. It does not constitute an offer to buy nor a solicitation to sell any security, or to engage in any investment strategy. Symmetry Capital Management, LLC is an Amazon.com associate, and may earn a percentage of any sales generated by clicking through to the Amazon.com website from links on our website.

Perseverance: Coach Don Meyer

Here’s a powerful and inspiring story from the recent ESPN Espy Awards — Northern State University (S.D.) men’s basketball coach Don Meyer was awarded the Jimmy Valvano Award for Peseverance, after surviving and eventually losing a leg to a horrific traffic accident, and undergoing treatment for liver and intestinal cancer that was discovered during the trauma surgery. Meyer coached last season primarily from a wheel chair, and broke the national record for most career wins in men’s college basketball — toughness and dedication.

In his acceptance speech, he said that the experience taught him that “peace is not the absence of trouble, trials, and torment, but calm in the midst of them.” Good stuff.

URLs:

http://nsuwolvesathletics.com/news/2009/7/21/MBB_0721090257.aspx?path=mbball

Ryan: What Does “It” Look Like in September?

Interesting comments on CNBC from Rep. Paul Ryan (R-WI) on the current versions of health care reform: http://www.cnbc.com/id/32008145

One of his more interesting arguments is from 3:00 to 3:50 of the clip, where he talks about the likely effects on the health insurance industry — he sees a handful of the largest health insurers becoming claims processors for the federal government. This is similar to a warning we offered in 2008 regarding corporate tax burdens:

[O]pponents [of lower corporate taxes] often overlook entirely the aggregate costs imposed by all business related taxes (e.g., payroll and a variety of state and local taxes) and regulations that dictate the allocation of a significant share of resources. Left leaning critics should be mindful of the risk that these kinds of barriers are more beneficial than harmful to ‘big business’, as they tend to limit competition.

Ryan’s comments were later followed by a panel including Howard Dean, who (almost) argues that the private health insurance industry isn’t really worth saving: http://www.cnbc.com/id/15840232?video=1188383109&play=1

Dean’s comments about health care costs leading to job losses due to lower costs abroad is interesting — but we continue to believe that this is more a function of the rising relative marginal corporate tax rate in the U.S. — which we could reasonably lump employer health care mandates into.

That Howard Dean and Rep. Coburn (R-OK), who helped pen a competing health care proposal with Rep. Ryan, have both been practicing physicians is interesting — and seems to support the idea that this is complicated stuff, both philosophically and operationally. In fact, at 7:30 of the second clip, Dean argues that health coverage shouldn’t be subject to the costs found in most competitive enterprises — executive salaries, sales and marketing, and returns to [creditors and] shareholders. Ryan countered that the plan won’t address health inflation, and that the CBO still sees health care costs rising well in excess of inflation. Dean deftly counters that health care costs have been rising at substantial rates under our private insurer system.

Once again, complicated stuff. If you’re waiting for an easy answer and a simple solution, don’t hold your breath (that includes you, Mr. President).

URLs:

http://symmetrycapital.net/index.php/blog/2009/02/trade-insights-and-more-thoughts-on-corporate-taxes/

http://symmetrycapital.net/index.php/blog/2009/07/should-health-care-be-a-right/

An Obama Reset?

There’s a thoughtful op-ed in the WSJ today by Ted Van Dyk, a veteran Democrat and author who worked in the LBJ administration. In it, he argues that President Obama needs to “reset” his presidency by scaling back his policy ambitions and exerting more influence over the legislative process, arguing that by delegating control to Congressional leaders and committee chairs, he has come up short on his campaign promise to engage in genuine bipartisanship (we’ve emphasized our favorite passages in bold).

The first warning signals for me came with your acceptance speech at the Democratic National Convention. In it, you stressed domestic initiatives that clearly were nonstarters in the already shrinking economy.

Van Dyk takes a notable swipe at at least one senior Obama staffer’s cynical (or callously opportunistic) candor:

Many of the missteps that have followed flowed, in part, from your reliance on these Clinton holdovers. Your chief of staff, Rahm Emanuel, defined your early strategy by stating that the financial and economic crises presented an “opportunity” to jam through unrelated legislation. To many of us, the remark was cynical and wrong-headed.

The crises did not represent an opportunity. They presented an obligation to do one thing: Return our financial system and our economy to good health.

He then contrasts the manner in which the Johnson and Obama administrations have pursued health care and energy initiatives:

[A]t every stage [in the Johnson administration], congressional leaders of both political parties and financial, business, labor and other private-sector leaders were consulted. Johnson wanted to assure that his legislation was substantively sound and could get consensus support in the Congress and the country.

Your strategy, by contrast, has been to advocate forcefully for health-care and energy reform but to leave the details to Democratic congressional committee chairs. You did the same thing with your initial $787 billion stimulus package. Now, you’re stuck with a plan that provides little stimulus until 2010. A president should never cede control of his main agenda to others.

This tactic has already had negative consequences. Frightened by the prospective costs of your health-care and energy plans — not to mention the bailouts of the financial and auto industries — independent voters who supported you in 2008 are falling away. FDR and LBJ, only two years after their 1932 and 1964 victories, saw their parties lose congressional seats even though their personal popularity remained stable. The party out of power traditionally gains seats in off-year elections, and 2010 is unlikely to be an exception.

This might indeed be a factor behind the decline in Obama’s ratings over the last few months. However, we think it’s unlikely that the GOP will gain seats in 2010, based on the last time we checked the data (when only Sen. Dodd’s seat appeared to be at risk), some recent high profile implosions in the GOP, and an expanding vacuum of formidable GOP candiates for 2010 and 2012.

You made promises about jobs that would be “created and saved” by the stimulus package. Those promises have not held up. You continue to engage in hyperbole by claiming that your health-care and energy plans will save tax dollars. Congressional Budget Office analysis indicates otherwise.

Amen. We’ve been complaining about the double and triple speak since the 2006 Congressional elections. The first time we hear a politician talk in NET terms about some program they advocate — whether jobs, revenues, or outlays — we’ll announce it, loudly.

It’s time to re-examine these initiatives. Could your health plan be scaled back to catastrophic coverage for all — badly needed by most families, but quite affordable if deductibles are set at the right levels? Should the Rube Goldbergian cap-and-trade proposals be replaced with a simple carbon tax, with proceeds to be allocated to alternative-fuels development?

No wonder we like Van Dyk’s op-ed. We’ve advocated for both of these more centrist alternatives over the ‘expensive messes’ he says are now in the works:

The evolving health and cap-and-trade bills are loaded with costly provisions designed to gain support from congressional leaders and special-interest constituencies. In short, they have become an expensive mess. This legislation will not clear Congress by the August recess, as you have requested, and could be stalled for the remainder of 2009. Settle for incremental change: Do not press Democratic legislators to vote for something they fear will destroy them in 2010.

Van Dyk’s warning below about enacting ‘high risk’ legislation is probably sound, and we certainly like the centrist tenor of his piece. But as noted above, we can’t ignore the state of utter disrepair that the GOP finds itself in — and as Rahm Emmanuel might counsel, why not take advantage of the opportunity?

This tension between short term opportunism (Emmanuel) and sound long term strategy (Van Dyk) has analogues in the investment world. Short term opportunism contributed to today’s woeful state of the GOP, and will probably have similar effects on the Democrats, eventually. But for the time being, there’s little standing in the way of the party’s agenda.

DISCLOSURES: The foregoing is for informational purposes and/or entertainment only. It is not an offer to buy or a recommendation to sell any security, or to engage in any investment strategy. Please note that Symmetry Capital Management, LLC earns a revenue sharing fee of 4% from Amazon.com for any ‘click-through’ transactions. The firm, its principals, and its clients do not own shares in Amazon.com.

URLs:

http://online.wsj.com/article/SB124779697143755743.html

http://www.citypages.com/2008-02-13/calendar/ted-van-dyk/

http://www.amazon.com/gp/product/0295987510?ie=UTF8&tag=symmetrycapit-20&linkCode=as2&camp=1789&creative=390957&creativeASIN=0295987510

http://news.yahoo.com/s/ap/20090717/ap_on_re_us/us_sc_governor_travel

Should Health Care be a Right?

There’s a deep philosophical debate underlying Congressional attempts to craft a health care reform bill, centered around whether access to health care is (or should be) a basic human right. Up front, we see compelling arguments on both sides, and the “Yes” camp might even have the weightier material arguments on its side.  But the philosophical ones should not be brushed aside – especially given that the philosophical underpinnings of classical liberalism have served the U.S. and other western democracies pretty well (to critics, yes, realities have been far removed from ideals at times, but overall, these systems have proven remarkably stable and reasonably progressive).

The American Declaration of Independence asserted that three rights had been granted by God to each individual – life, liberty, and the pursuit of happiness (or as Woody from Cheers memorably put it, “the purfuit of hapineff”). This was based on John Locke’s philosophical writings, and contextually, it was a declaration that no individual should be deprived of their life, property, or vocation involuntarily. In other words, the experience of human beings under governments should exclude unjustified limitations, expropriations, torture, and death. Thus the conservative nature of classical liberalism – there’s not a whole lot at work here, other than setting limits on what people can do to one another, including those in positions of political power. Within those boundaries, there’s a vast range of possibilities for human conduct.

In the modern secular world, rights are no longer granted to individuals by God, but are now social contracts – through democratic institutions, a society determines and declares what rights an individual is entitled to. For example, social welfare systems have evolved since the late 19th century as an embodiment of the idea that people should have a right (if they choose to exercise it) to a minimum standard of income (transfer payments), housing, and health care (e.g., Medicaid). Educational systems embody a similar principle. This modern version clearly has a more solid logical foundation, as deeming rights is clearly an endogenous human activity (presumably, if God cares and we get any of them wrong, he or she will let us know at some point). So that transition away from divinely granted rights seems OK to us. But like the opening of Pandora’s box, the transition carries risks — primarily that the list of rights grows substantially over time, with many unintended consequences.

[On a side note, this observation should illuminate the remarkable arc of governments since the time of Locke and later Jefferson. Back then, rights were necessary to protect individuals from the depradations of the powerful. Since then, governments have been increasingly designed to benefit the weak at the expense of the powerful (or perhaps more accurately, the poor at the expense of the wealthy). Of course, they don't always work that way. But clearly, the idea of 'tyranny from below' is more feasible in modern social democracies.]

So today, instead of determining that individuals have rights that limit a government’s power over them, we articulate rights to things which, in many cases, governments must provide or at least enforce the provision of. That’s the critical distinction between rights today and rights in earlier centuries. Those earlier rights were intended to level the playing field between, e.g., landed aristocracy and free individuals, by transferring a certain amount of political and social power from the former group to the latter. Today they are more often intended to extract resources from the haves for the benefit of the have nots – however defined for that particular right.* To the extent that that the public reallocation of private resources provides a greater level of security and productivity overall, it may be a desirable activity. But that doesn’t address whether those reallocations need to be, or should be, enshrined as ‘rights’.

This is tangential to the choice between a political system guided by principles versus one guided by mandates. A principles-driven system has a core of ideals that can be applied flexibly to a wide range of real world situations. It allows for the rational acceptance of human imperfections, and the development of institutions for dealing with them as they occur. A system based on mandates is inevitably more complex, with rigid and sometimes contradictory rules and regulations that often become more complicated over time, and utopian standards of outcomes and conduct that, carried to an extreme,  almost require that we legislate risk, bad outcomes, and human nature itself out of existence. An expanding list of human rights is almost certain to lead to the latter type of system. As just one example, consider ‘The Human Right to Health‘ declaration from The People’s Movement for Human Rights Education. It captures well the idea that we’ve gone beyond the right to not have government interfere with the voluntary conduct of individuals, to the right to have government provide (or ensure provision of) certain things for all individuals. These two kinds of ‘rights’ are conceptually so different that they probably ought to have different names.

If we’re going to take a rational approach to the question of whether access to health care is a right, we should look for a suitable existing analogue. To us, it looks like access is the key word, and that access to legal systems and political processes are close analogues. As law and political systems evolved, people have demanded (and received) greater access to them. More recently, as medical standards, technologies, and delivery have advanced, the demand for universal access to them has increased, and that’s not unreasonable. But whereas in Locke’s time, declarations of rights sought to reallocate power from ‘enemies’ of liberty who possessed too much of it (and too often wielded it unjustly), a declaration of a human right to health care requires a significant reallocation of resources from some of us to others of us. In other words, there is no ‘enemy’ in the situation at hand unless, to borrow from Pogo, one believes that enemy is us — that some have been depriving others of access to health care. And that presents a thorny set of issues for society to debate. Unfortunately, they’re not getting much attention.

As we noted at the outset, this is a deep philosophical question, and so this missive, like any colloquium in philosophy worthy of the name, utterly lacks a satisfying resolution. We would just ask people to be aware of the following: the distinct historical conceptions of rights; the unintended consequences that are bound to follow the adoption of any expanding compendium of human rights; and most importantly, in our view, the fact that past attempts at ensuring individuals’ access to health care have contributed directly to the large numbers of uninsured individuals and families and to the precipitous rise in medical expenditures. And we would point out that the current legislation only piles on to those previous errors.

* There are current debates that relate primarily to founding principles and rights. For example, same sex marriage clearly relates to liberty and (according to 20th century SCOTUS interpretations) the pursuit of happiness, and on its surface it would not appear to involve the reallocation of private resources. But ironically, it’s due to the existence of laws governing the allocation of resources, such as probate and spousal benefits, that same sex marriage becomes a thornier political issue than it might otherwise be.

URLs:

http://news.yahoo.com/s/ap/20090715/ap_on_go_co/us_health_care_overhaul

http://graphics8.nytimes.com/images/2007/11/25/arts/25carr2190.jpg

http://www.igopogo.com/we_have_met.htm

http://www.pdhre.org/rights/health.html