Until the fat lady sings....

How rapidly the political landscape changes. A month ago Democrats were sure the unwise (actually, stupid) Republican government shutdown had set them up for an easy election cycle next time. Now Democrats are in full panic mode as the ObamaCare mess continues to deepen, and the president's approval ratings have falling to a new low. As they say, a week is a lifetime in politics.

Underneath all of this, the nation is still split almost exactly 50-50 between conservative and liberals, so election results will probably be determined more by local gerrymeandering and local issues than by any of this Congressional posturing. No doubt there are more ObamaCare problems to come, since the government seems incapable of even fielding a relatively simple website one can assume the deeper and more complex issues (like linking all the various agency databases together correctly, and managing the high volumes many were never designed for) will produce yet more discomforting news for Democrats.

On the other hand, Republicans show no sign yet of having learned anything useful from all their various missteps in recent years, so perhaps they will again manage to snatch defeat from the jaws of victory. In the famous words of journalist Ralph Carpenter "It ain't over till the fat lady sings..."

Do we really want the government to manage our health care?

Liberals, with a decidedly paternalistic outlook on the nation, would dearly love to have the government run our health care system, the way the British government, for example, runs their health care system. Does anything about the rollout of the heath care websites give any confidence that the government can do this without massively screwing up? Does anything about the British health care system (currently 2.9 million Britains are waiting to get into a hospital) give anyone any confidence our government can run a health care system?

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.