The Health Care Exchange debacle

By now almost everybody has heard of the chaos surrounding the government’s roll out of ObamaCare health care exchanges in 36 states.  As near as anyone outside the government can tell (the government thus far refuses to talk about the issue at all), something like 1% of the people who have tried to enroll thus far have been successful, and insurance companies are in chaos because the system is feeding them bad or incomplete information.  Thank goodness IBM put me into a private exchange rather that the government exchange when they dropped retiree health care (thanks again Mr. you can keep your current insurance if you like it!).

Of course the problem was predictable.  Congress (well, the Democrats) expected states to build these exchanges, though of course they didn’t give the states any money to do that, nor enough time.  Not surprisingly, 36 states refused, since no money came with the request and states are having enough fiscal problems of their own.

So the government had to build them, on the same inadequate schedule they had given the states, and with no money appropriated to do the job.  Now a little-known statistic outside of the system engineering field is that over the past four decades about 65% of systems built by the government are so flawed they are never fielded, and the reminder typically take millions of dollars and years to fix enough to make them able to be rolled out. So this is typical, just more public and embarrassing for the administration than usual.

But it sure shows why you really don’t want the government building big IT systems. It’s hard enough when private companies do it, but at least the private companies fire the incompetent managers and programmers when this happens, unlike the government.

For the Arthurian fans among us, from my daughter:

It’s always a bad idea……

I’ve mentioned before that every political act carries a price. It is pretty clear the price the Republicans are paying for their attempt to hardball the President.  What is not so clear, but probably will become so shortly, is the price the President and the Democrats are going to pay for having so humiliated their opponents in this battle.

It is OK to win a battle, in fact that is the whole point, but it is always a bad idea to humiliate your opponents as well, as the Democrats did by not allowing any small face-saving sops to the House Republicans in the final bill. It would have cost them almost nothing to allow, for example, the cancellation of the medical device tax, which the Republicans wanted but in fact is favored by a majority of both Democrats and Republicans anyway. But once again their hubris got the better of them (and the President’s jibe at the Republicans today “Win an election!” didn’t help).

The President hopes to get several more signature pieces of legislation through Congress as part of his legacy, starting with immigration reform.  My bet is that at least for the next few months, anything proposed by the President is dead on arrival in the House, just because he wants it.

A little magnanimity in victory toward one’s opponent is always a good tactic, especially if one is going to meet that opponent again.

Why is Congress acting so stupidly?

It would be easy under the current circumstances to assume that all the members of Congress, as well as the President and his advisers, are just plain stupid.  But in fact few if any are stupid – while one does not have be exceptionally bright or well-educated to get elected, it does take a certain minimum level of competence to run a successful campaign for federal office.  So the answer to why Congress and the administration appear to be acting so stupidly must lie elsewhere.  

In fact, members of Congress are for the most part acting quite rationally from their own point of view.  Tea Party members are doing just what they were elected to do by the voters who put them into office – trying to curb the excessive government spending (ignore the side issue about defunding ObamaCare). Liberals are doing just what they were elected to do by the voters who put them into office – protect popular entitlements and union jobs.

Because of extensive gerrymandering at the state level by both parties, most members of Congress have safe seats (over 95% get reelected), which means they only worry about primary challenges, which would come from more left-leaning challengers in Democratic distracts, and more right-leaning challengers in Republican districts.  So of course they are stubborn in these negotiations; if they weren’t they would risk being defeated in their next primary.

Shorn of all the hyper-partisan rhetoric and largely irrelevant side-issues, the nation’s fiscal problems really come down primarily to the growing entitlement burden – Social Security, Medicare and Medicaid. As the baby boomers retire and live longer, and as the ratio of workers to retirees drops, these programs, as currently constituted, will over the next couple of decades bankrupt the government, absorbing 100% plus of federal revenues. We can look at the current Eurozone crisis to see exactly what happens when voters allow politicians continue to buy votes with expensive social welfare and pension programs that they can’t pay for.

What we as a nation have yet to have is a reasoned national debate about just how much entitlement and social safety network spending we are willing to finance with our taxes. It’s great to give our seniors generous social security and health benefits (I enjoy them), but are young workers willing to pay the taxes needed to support them, especially as the ratio of retired to working people drops over the coming decades?  And if we tax corporations and young workers enough to pay for them will we simply drive businesses out of the country to more favorable tax regimes, making the funding problem even worse?

The reason Congress is at loggerheads at the moment is because we as voters have never had a rational debate about these issues – voters on both sides are still living in fantasyland, liberals ignoring the rising costs of their cherished entitlement programs and conservatives ignoring the real need for social safety networks in a modern economy.  Until we voters come to terms with reality, the representatives we elect will continue to reflect our own unrealistic views of the world.

Recommended: Balance

To paraphrase H.L. Mencken, for every political or economic problem there is an answer which is simple, obvious, plausible, ideologically consistent, and wrong. In the hard sciences theories aren’t accepted until there is hard evidence to support them. Unfortunately the same rules apparently don’t apply in either political thought or economics, where people believe, often passionately, in all sorts of theories for which there is either no evidence at all, or worse yet, clear evidence that they are incorrect.

Glen Hubbard and Tim Kane address this issue in their new book Balance: The Economics of Great Powers from Ancient Rome to Modern America.  Hubbard and Kane are both prominent economists bent on testing popular economic and political theories against real data from the real world. The results are often surprising. Several things I thought were true certainly aren’t supported by the evidence.

I got three major take-aways from this book:

(1) Despite its currently dysfunctional political process, America is still by far the leading economy in the world, and will remain so for some time yet, whatever the pessimists say and however incompetent our politicians prove to be,

(2) the history of great power decline is depressingly consistent throughout history: increased centralization of power, increasing debt, increasing shift of power to rent-seekers (what we now call special interests) who oppose change because it would threaten their prerogatives, until finally the empire/nation is so rotten from inside that it falls to (an often fairly puny) outside threat, and

(3) although America is going down the familiar path of great power decline, there is ample time still to change course, if only we as a people have the will to do so.

This is perhaps the most enlightening book on economics I have read this year.

Recommended: US Debt from the Founder's Perspective

George Friedman of STRAFOR has, yet again, produced an insightful article: US Debt from the Founder's Perspective. He argues that the founders of our nation, always concerned about the growth of the sort of government tyranny that ruled Europe in their time, deliberately constructed a nation in which government moved slowly, with authority divided among many competing groups , the central government, the courts, and state and local authorities, so that they would act as checks on each other. From their perspective, the sort of gridlock currently in evidence in Congress is good - if there isn't consensus on what ought to be done, than better nothing should be done until some consensus can be reached.  In that respect the current impasse isn't a failure, but the passage of ObamacCare by brute force political hardball in the face of majority public opposition was a failure.

With respect to the US debt, he argues to the founders debt was not an economic issue but rather a moral one. It would be unthinkable to fail to pay back a debt one owes as a matter of moral obligation.  But it would be just as unthinkable to assume a debt without any plan or prospect of paying it back. They would no doubt be appalled at the debt we have accumulated, and the purposes to which we have put that borrowed money.

Recommended: First Thoughts - Can Boehner sell the emerging deal in the House?

The NBC News site has an interesting article today entitled First Thoughts: Can Boehner sell the emerging deal in the House? The article itself is intertesting, but especially interesting are the eight political factions they ideintify in the nation, from the "Bleeding Hearts" left through the "Talk Show Heads" right, and the accompanying quiz one can take to see where one's own political views fall on the spectrum (full disclosure, I rank as one of the "MBA middle", socially liberal and fiscally conservative).

The link to the quiz is at the end of the article, and also here.

Of particular intertest is the conclusion that the political middle in the nation as a whole is far larger than is popularly assumed, and far larger than the bitter polarization in Congress would lead one to expect.  But of course it doesn't really matter the composition of the electorate - what matter is the composition of the electorate that shows up on election day. Unfortunately, the ideological extremes tend to be more consistent in voting than the middle, so we seem to be getting more ideologically extreme representatives.  Hence the dysfunction in Congress.

The real problem

Lost in all the rhetoric about the current government shutdown and the impending need to raise the debt ceiling (yet again!) is the real underlying problem - the federal government spends more than it takes it, borrowing the difference, and this is simply unsustainable in the long run. Here is a chart from www.heritage.org, based on Congressional Budget Office figures,  that makes it very plain:

It's all very well for the administration to argue that it needs to raise the debt ceiling to preserve America's fiscal credit, but why, in almost six years in office, has it done so little to address the real issue - the growing deficit?  Only the sequester, to which the administration was dragged kicking and screaming,  has slowed the spending increases.

Recommended: The Roots of the Government Shutdown

George Friedman at STRATFOR has an interesting piece today: The Roots of the Government Shutdown.  He argues that the shutdown is the unintentional result of political reforms movements in the 1960s and 1970s, which took political power away from state-level political bosses who, while certainly susceptible to corruption, were not especially ideological, and delivered it to much more ideologically-driven groups who now see any compromise as betrayal of their principles.

Fareed Zakaria makes something like the same point in his book The Future of Freedom, in which he notes that legislators used to be able to make back-room deals (ie - compromises where each at least got half a loaf), but with the transparency forced by reformers in recent decades, all these negotiation now take place in public, and as soon as one side seems to be compromising they get a thousand phone calls and emails demanding that they not compromise, which pretty well mucks up the political process.

It does seem to me like another case of the road to hell being paved with good intentions - the inevitable unintended consequences of what seemed at the time like good ideas.

Still think NASA is "non-essential"?

Shared by my grandson:

Another government shutdown

Well, now we have it – another government shutdown. Pundits think the Republicans will be blamed by the voting public, and perhaps they will. But in fact Democrats are just as responsible as Republicans for the impasse we have reached.

Michael Barone has an article today in RealClearPolitics, If Only Obamacare Had Been Passed With Careful Deliberation, that compares ObamaCare with passage of the Civil Rights Act, another piece of legislation that was highly controversial, but as he points out, was passed by a bipartisan majority, unlike ObamaCare.

As he says:

Obamacare has been a different story. Universal health care was promised, not to address a high-profile headline crisis, but because President Obama's twenty-something speechwriter wanted an applause line for a campaign speech.

The poorly drafted bill was passed almost entirely on party lines by exceedingly narrow margins -- and in the face of majority negative public opinion.

So it's not surprising that opponents won't accept its legitimacy or permanence. History tells us what that takes. 

All political acts exact a price. The price that the Democrats are paying for the hubris of assuming  Obama’s election  gave them  a mandate to pass major controversial legislation without any bipartisan support at all is the dogged  Republican resistance they now face.  That has been a heavy price – it has stymied most of President Obama’s legislative initiatives.

The bitter partisan warfare in Congress these days isn’t all due to that single act of hubris and hardball politics, but it certainly did exacerbate it.  What liberals have to come to terms with is that the nation is almost evenly divided these days between conservatives and liberals, so neither side has a clear mandate to push ideological policies favored by their extreme ends. The Republicans learned that (maybe) the hard way in the last administration.  The Democrats are learning it the hard way (we hope) in this administration.

Recommended: US and Iranian Realities

George Friedman at STRATFOR has another insightful piece today: U.S. and Iranian Realities.  It is well worth reading.