In my book I wrote about Dead Peasant Insurance. In a few words Dead Peasant Insurance was a life insurance policy that corporate America took out on its lower level employees (hence the term, "Dead Peasant"), which they would cash out later. The interesting thing was that corporate America didn't have to pay for the insurance policy. They were able to get Congress to let them write off the expenses at the end of the year. So, in essence, the company "purchased" a life insurance policy with tax payer subsidized money, but then would receive a tax free sum of money (say, $300,000) upon the death of said employee.
Corporate America, however, would gleefully advertise that they were providing employees with free life insurance. But instead of stating they the policy was worth $300,000 (or so) they would only provide a relatively small amount (usually between $15-25,000) upon said employees death. If the employee left the firm there might not be any payout at all.
In a few words, corporate America essentially got money for nothing because Congress gave them a tax gift that allowed them to profit on death. This is one part of a system that makes it profitable to bank on death ...
I bring this up because Ryan Grimm is pointing to another, similar, corporate scam in the making. Though it doesn't involve death, corporate America - with their Republican friends in Congress - are starting to complain that some of their corporate subsidies will disappear under the new health care reform bill. Here's how it's happening according to Grimm:
Under the previous system, major corporations were subsidized by the government to provide prescription drug coverage to their retired employees. At the same time, corporations could claim on their tax returns that it was they -- not the taxpayers -- who paid for the drug coverage, and could write the expense off as a tax deduction.
Health care reform cuts out that fat. The corporations still get taxpayer money to help pay for their drug coverage, but they can no longer continue the fiction that they're using their own money to do it.
Got that? As was the case with Dead Peasant Insurance, corporate America gets a taxpayer funded subsidy to purchase something for employees. Corporate America claims credit for providing the product when it's actually taxpayer funded. Then corporate America gets a payout. In the case of Dead Peasant Insurance the payout was at the time of death. For corporate America and their prescription drug plan, the payout comes at the end of the year.
Either way, the American taxpayer funded the payout.
What's interesting is that instead of hailing the health care bill as an instrument for weeding out unwarranted, market skewing, corporate subsidies like this, Republicans and corporate America are doing their level best to muddy the waters, and make unsubstantiated claims about the bill. In this case, they're claiming that the health care reform law is a "jobs-killer."
In their world, by removing taxpayer funded subsidies, their bottom line is adversely affected. Ergo, they won't have enough money to hire new people, which makes the health care reform bill a jobs-killer.
My concern is that there are people actually stupid enough to believe this tripe. Sigh ...
As most of you know, I regularly get notes and e-mails from people who don't agree with me on certain issues. I also respond to posts on the site's of friends, most often when I'm asked to. From time to time I share these exchanges here on my blog. With health care reform now law it seems the questions, arguments, and commentary are growing.
Below I am responding to an individual who (1) doesn't believe people (especially young people) should be "forced" into purchasing things they don't want (i.e. health care insurance), (2) doesn't see social security as a good thing, and (3) believes it's good that a handful of Republican Attorney Generals at the state level are challenging the legality of the health care legislation. Here's my response (corrected for typos) ...
I appreciate your arguments. They're thoughtful and well crafted ...
Let me start with this. Our government tells us what to do with private property and purchases all the time, and for good reason ... Suppose you own a home (I don't know if you do). You have a nice neighbor who suddenly tells you he's going to open up a brothel. Can he? No. City and county laws - which were crafted by democratically elected citizens - say there are codes that must be adhered to. If you own a car - a private choice - the government has determined they can stop you in your car with reason (speeding) and without reason (DUI check points) because it's better for society. We purchase our services from government mandated/approved entities all the time as well. If you get your garbage picked up in the city you know this. Relatedly, you can't hire some fly-by-night to come and take your garbage away and not pay the city/county fee for pick-up that week (or later). Most people have to pay fees/taxes for local schools and parks. These are mandated (municipal bonds are the model). You purchase your electricity and water from a single government-sponsored source. It's the concept that surrounds public utilities. Everyone in California must have insurance to drive. This costs money. We have vaccination programs that are mandated, which makes everyone better off. etc.
The point is, we've determined as a society that certain services and functions are necessary so that things work better over all. And, yes, social security is an excellent example of this. Consider the following. Before social security over half of all the elderly in America lived in poverty (many through no fault of their own; think The Great Crash). Social security helped to fix this. In fact, SS has turned out to be a giant subsidy for the middle-class, which has made everyone in America better off. Why is that? I don't have the time to go into detail explaining how and why social security isn't in the trouble you think it is, but you can take a look at some of the things I've written on the topic here. To close on SS, it is one of the best, and most efficiently, run programs in the country. But many don't know about this because there’s a good deal of political capital to be gained by bashing everything the government does as evil. It's irresponsible, but politically effective.
As to your point about someone being young and making the choice to purchase another insurance product (or none at all). One of the reasons this choice is even available is because we haven't had mass outbreaks of things like cholera or polio, we have a relatively healthy and clean public environment which prevent the spread of infectious diseases, government regulations protect you from faulty products that might have claimed your life, you don't have to worry (too much) about being assaulted and maimed on the street, buildings won't collapse on you during moderate earthquakes because of government enforced building codes, etc. Your "choices" as a young healthy individual are shaped and made available by things young people haven't contributed to, nor helped craft. Contrary to bumper sticker talking points, your right to make the choices you claim are yours alone, in many ways, are made possible by government policies and decisions.
Finally, the 15 (or so) Attorney Generals are grandstanding. They know what we do at the federal level is the "supreme law of the land" until the Supreme Court says otherwise. Marbury v. Madison (and subsequent cases) made this clear over 200 years ago. The challenges you see are based on political calculations, and not legal standing. As lawyers these AGs know this, but they have political futures to think about, so filing challenges works (for them). It gets their base riled up. To be sure, it's a waste of taxpayer money, but it gets the political base behind them. This helps out in their next political cycle.
- Mark
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There's more where this came from. I'll share the good stuff as it comes in.
Leave it up to Elizabeth Warren, Harvard Law Professor and chairwoman of the TARP Congressional Oversight Panel, to point out the flaws in the American Banker's Association (ABA) strategy for derailing financial reform. In a few words, the ABA is arguing that if Congress wants to protect consumers and regulate their industry they might as well as kiss the banks good-bye because the industry won't be able to make money. Here's the hypocrisy in the ABA's position according to Elizabeth Warren.
The banks fought lending regulations in 2006 because proposed reforms "overstated the risks" of what was happening in the market at the time. In a few words, the ABA said in 2006 "we know what we're doing, so don't put restrictions on us and don't tell us how to lend our money." More specifically, and according to their 2006 memo, they argued that:
(1) People with no income might still be good credit risks.
(2) Subprime and other toxic mortgage products were good bets according to their models.
(3) Combining consumer protections into industry regulations might confuse the issue.
Of these three, the last one is one for the record books. Imagine the police chief coming out and saying, "Police activities and the law have nothing to do with public safety, so let's not confuse us by trying to get us to understand the law too." You might hear something like that from Chief Wiggum, but not from people who are serious about a functioning society (and a functioning economy).
At the end of the day, Banks were arguing in 2006 that they knew what they were doing and didn't need regulations to be clarified, streamlined, or new ones imposed. Moreover, according to the ABA, consumers would be "confused" with consumer protections that might spill over into regulations. So let's keep consumer protection and industry regulations unclarified and distinct from one another.
Or as Chief Wiggum might say, "Let's not let the law interfere with my real job ... eating a good donut."
Fast forward to today and what do we have? The exact opposite. The ABA is arguing that if lending regulations and consumer protections are separated it will hinder the bank's ability to make money. So we need to put them under one roof, or we need to hide a consumer protection agency in the Federal Reserve, where new administrative hurdles will hinder consumer protection laws. Wonderful.
According to Elizabeth Warren, the 2008 market collapse showed us two things. First, the ABA and their member banks can't be trusted when it comes to assessing what makes their industry risky or profitable. Second, "bank lobbyists will say anything to block meaningful reform." Translated? Let's not listen to the ABA, or their individual members.
I agree. I say that we put some teeth into meaningful legislation, and put a stop to the banks continued extraction of wealth from the American economy.
- Mark
UPDATE: Here's Elizabeth Warren explaining why we need regulatory/consumer protection reform, with all the duties under one agency. It's the clearest explanation I've heard. Using football as an analogy she explains that when the other team is ready to punt you don't send five guys back to return the punt. If you do you'll get into trouble because punt returners run into one another, there's not enough blockers, etc.
As someone who returned punts in high school (my freshman year; I stunk up the place), I concur. You need one person who has the responsibility to get the blocking set up, someone to take responsibility for the direction of the return, etc. The same can be said for financial regulation. You can't have five (we actually have seven) financial regulatory agencies running around barking orders, and getting in each others way. It allows the industry to "agency shop" and pit one group against another.
This Bill Maher "New Rules" was brought to my attention by a FB friend (thanks Paul). It's one of Bill Maher's funnier clips. Fair Warning Caveat: Language gets racy after the first two minutes.
With many Americans - a majority according to some polls - opposed to health care reform, Britian's Financial Timeshas this to say about what President Obama and the Democrats have done by passing health care reform:
... In Europe, rule by a political class that tells voters what is good for them is an idea so familiar that it is quite taken for granted. In the United States it is novel, and not instantly welcome.
Between now and November, Democrats must persuade the country that they acted in its best interests when they overrode the public's doubts. If they succeed and retain their majorities in Congress they will have a green light to advance their wider aims, which include tax reform, labour relations, energy and industrial policies. They will conclude that Clintonism, with its submission to centrist opinion, was an error: they will have learned that they can capture and move centrist opinion. But if voters punish their arrogance, their momentum will be stopped. US policy will be set on a very different course.
Read the entire article. It's pretty sober, and it makes it clear that if President Obama wants to continue operating without the Republicans on big pieces of legislation, that he needs to explain what health care reform really is, and how America benefits. If successful, the political dividends are nothing less than moving America to the Left politically - whether the Republicans like it or not.
This would make President Obama the "transformational" president that Ronald Reagan was, and President Clinton wanted to be.
I just read this post on health care mandates in 1798 (via Dailykos). Here's a snippet:
The merchant mariner's job was physical and difficult, leaving them prone to injury. General illness, tropical diseases, wretched backs, sprained wrists, ankles and broken bones could leave a captain without enough crew to man the ship.
Our Founders realized that a healthy work force was essential to our economic health and growth. It was for this reason that, in July of 1798, Congress passed, and President John Adams signed into law an act “For the Relief of Sick and Disabled Seamen,” establishing the Marine Hospital Service.
Apart from the links provided in the article, here's how the language was recorded for the 5th Congress.
Finally, for those who are still unsure about the authority to pass legislation on health care reform, the preamble of the Constitution makes it clear that in order "form a more perfect union" that promoting the "general Welfare" is part of the equation. Health care (or the lack thereof) in America is part of our general welfare. Article I, Sec. 8, Sec. 9, and 10 help to elaborate the point on congressional authority in the market place.
Here we go again. I just received this from the "send-us-your-money" investment team sponsored by Newsmax.com. In their overly hyped solicitation piece, "FORGET ABOUT SOCIAL SECURITY!", Newsmax does it's level best to scare the hell out of it's readers (with big, spooky looking font) by bringing back the old "social security is going bankrupt" canard.
As I pointed out several years ago, social security is not in crisis. What's in crisis is a morally bankrupt Wall Street and DC crowd that seems bent on putting ideology and their own interests above the good of the country. Back when President Bush was in charge, Wall Street convinced the president that their interests were America's interests. This explains why President Bush pushed for the privatization of social security immediately after his second term began.
Can you imagine how you would have felt in 2008 after the market collapsed, and waking up to realize that there no longer was a social security program because everything had been dumped into Wall Street? The big financial players on Wall Street would have - as we have seen - kept their bonuses and fees (for doing such a bang up job protecting your money). We, on the other hand, would have been left holding the bag (a much bigger bag, that is).
More specifically, we would have been left hoping and praying Washington bailed out Wall Street so we would get something out of the system. Taxes would have to be raised to pay for what we've already paid for, but this time you and I would be fighting Washington AND Wall Street to get some kind of justice. In effect, we would have paid twice. First by dumping the money into Wall Street. Second, to recoup the losses that were sustained on the back of our retirement.
3) Raise the eligibility requirements, or reduce social security cost of living increases (COLAs) by one-half percent per year.
But the investment gurus of America (like those promoted by Newsmax) aren't interested in letting you know about these policy options. They would rather scare you about looming Social Security bankruptcy, then get you excited over their "privileged" market information, and then hope you will forget how Wall Street almost bankrupted America a year and a half ago.
If all goes well - for Wall Street - you would become another Tea Bagging foot soldier, diligently sending your money to their way (I'm not sure if Wall Street sends you a hat).
Here's what's wrong with this scenario. Market newsletters, like from Newsmax, are private investment solicitations. They publish their "experts" advice, but fail to note that many those contributors famously didn't see the 2008 market collapse coming.
To be sure, they did voice concerns and lukewarm predictions from time to time during 2008 (I read them), but these posts were essentially buried by the "invest-with-us-or-lose-your-wealth" death tone of their newsletters. That is, right up until the market collapsed in September. Then market players made claims about how well things would turn out if we just let the market work, and invested with them, again.
What these guys are really after is your money. So pay attention when you see "SOCIAL SECURITY GOING BANKRUPT" from the Wall Street "professionals." These are the same people who think we don't need rules for Wall Street, but then have no problem sticking their hand into your tax paying pocket when things go wrong (you know, privatized the profits, socialize the losses).
OK, the Senate Reconciliation process just ended. The House voted 220-207 to accept Senate changes. Republicans have been confused about how to respond, and it shows ...
The Republicans - with vengence, violence, and denial emerging from what their overly dramatic rhetoric has spawned - unfortunately may have to adopt this as the new anthem for their followers ...
Seriously, someone from the right needs to step up and become an adult, and soon ...
- Mark
UPDATE: Apparently adult supervision won't be coming from Rep. Eric Cantor any time soon. If this is true, Rep. Cantor is a demented human being. Does he think stuff like this won't come out?
Apart from their defeat at the hands of the Germans, perhaps the most important factor that led to the establishment of France's Vichy Regime (1940-1944) was the emergence of a bitter and anachronistic right wing. Focused on a past that wasn't coming back, France's conservative collaborationists embraced a series of delusional and backward-looking policies during the Vichy years.
Seeking to "purify" America from the socialists, the non-patriots, and other demons they see, the American Right - like France's "back to the land" propagandists - is pushing for a return to a nation that never existed. Worse, they continue to bury their heads in the sand and (1) have no clue how their policies have buried the nation in debt, (2) seem to think they deserve to rule simply because "they'll do better" next time, and (3) have no respect for real democracy in action.
And they're going to great lengths to demonstrate how out of touch they are.
VICHY REPUBLICANS
During the Vichy Regime (1940-1944) France's National Assembly was effectively dominated by Germany. In essence, the Vichy Regime ceded control over important policy matters to those who were not elected by the French. In many ways, our Vichy Republic(ans) want the same thing. Only today they want the democratically elected party in power, the Democratic Party, to cede policymaking authority to them. You know, because their ideas worked so well the last time they were in power. They also want to change the Constitution to make sure they continue to get their way.
Take a look at Rep. Louie Gohmert (R-TX). Because he doesn't like the health care bill, he's now calling for the repeal of the 17th amendment, which allows citizens, instead of state legislators, to elect their U.S. Senators. In his world, having partisan legislators select U.S. Senators is significantly better than you and I making choices for ourselves. Vive la France!
What's next for our forward thinking Rep. Gohmert? Does he want to dispense with the Constitution so we can re-implement the Articles of Confederation, which had a notoriously weak central government?
Ahh, the good ol' days ...
Another Texan who can't seem to see beyond the plug of tobacco between his cheek and gum, is Rep. Randy Neugebauer (R-TX). He also has a vision for returning to a more purified America ... you know, when abortions didn't happen, except to immoral and evil people. So what's his inglorious solution to not getting what he wants? Finding phantom scapegoats for his legislative losses, and expressing his sentiments by yelling "baby killer" at Rep. Bart Stupak on the House floor. Classic.
Like the collaborationists in Vichy France, it really doesn't matter what the truth is (and, no, federal funds can't be used for abortions). The goal is to confuse the issues and expose the wickedness of elected "undesirables" who disagree with the true rulers of society ... Republicans.
The good ol' days must be brought back at any cost. Modern government be damned.
Hey, as long as we're trying to glorify the past, I have an idea. Since things were so much better way back when, how about doing away with the 19th amendment? For many conservatives, granting women the right to vote not only sparked the culture wars, but according to many conservative religiousleaders, encouraged women to destroy the family nest with their independence.
And while we're at it, we might as well as repeal Brown v. Board of Education (integration) and the Civil Rights Act too. Think about it. Once the women and colored folk relearn their place in society nature's balance will return, right?
VICHY REPUBLICANS, II
One of the ways to get Democrats in Congress to understand their place in society is to make sure the "homos" and the "colored boys" know their place. Calling them names (which they, no doubt, brought upon themselves) and spitting on them when possible, are just a few of the ways to let them know their place. But the real good stuff is how Republicans and their Tea Party brethren are taking to violence.
At least 10 House Democrats who voted Sunday for health care overhaul have received violent threats to their lives or property. Others have experienced vandalism at their district offices, or their private homes (the gas line was cut outside the Virginia home of Rep. Tom Perriello's brother after a conservative activist posted the address online). For a condensed review of what's been happening, check this and this out.
So, just what do the Republicans and their Tea Party friends (yes, they are one in the same; 74% of Tea Partiers identify themselves as Republican) want? In a few words, they're no longer interested in democracy. Unlike Democrats after the 2000 election - who may have been disatisfied with the results of George W. Bush's electoral victory, but still worked with him - Republicans have effectively decided to take their ball and go home.
They could care less that the country went to hell in a hand basket when it was their turn to govern. They could care less that Ronald Reagan almost tripled the national debt, and George W. Bush effectively doubled it after being handed hundreds of billions in surpluses. They could care less that their tax cuts for the rich and deregulation strategy almost bankrupted America. Like sociopaths in a bad movie, they've decided that they still know what's best, and have decided to gum up the works until they get their way.
FINAL COMMENTS
Because their tactics haven't worked, and health care reform has become law, Vichy Republicans have decided to double down, play innocent about the emergingviolence, and hope that the country doesn't realize the high wire act they're playing. Trying to channel the energy from the ugliness their rhetoric has unleashed, Vichy Republicans - like the Vichy French - can't wean themselves from the self-interested thugs who run the movement. Stories about socialists in our midst, or that Obama's a Nazi and/or Muslim, are standard canards for Republicans.
Worse, Vichy Republicans can't find a way to control the real Puppet Masters. Just like Vichy France could not control the Nazis, today's Vichy Republicans can do little about the Rush Limbaughs, the Glenn Becks, and Fox News' of their world.
Like the collaborationists in Vichy France, Vichy Republicans are caught between speaking for a set of antiquated and failed policies that protect narrow interests, and letting their politics become dominated by by a bunch of thugs.
With all the right wing bluster and violence coming out, I thought I would share with you my most recent response to another Republican "dialogue" request. The primary contents of the Republican letter are apparent from my response.
Mr. T. Party (yeah, it's made up):
You guys need to get off your "socialism" soapbox. As someone who teaches this stuff from a comparative and historical perspective, your team's references are simplistic, ill-informed and embarrassing for what it reveals about your team's intellectual capacity (and your reference to free markets is way off base too; save that one for another day). Seriously, all your team does is work itself up into a lather over things that aren't there, and outcomes that may seem spooky to you, but represent what modern government is all about. The focus on whipping your team up over false assertions of "socialism" and "government takeovers" prevents you from looking at serious policy problems as issues that need to be solved.
Where was your concern over totalitarianism when Bush was carving up the Constitution with signing statements, and spending trillions of dollars on reckless wars? Health care reform will not cost anything near what President Bush's unfunded and reckless war in Iraq will cost us (trillions), and tax cuts for the rich have cost us (about $2 trillion). Bush effectively doubled the national debt. Reagan almost tripled it. Is "borrow and spend" worse than "tax and spend"? Do tell.
Look, Obama's not a socialist. He's not a Muslim. He's not the Antichrist. The fact that your team believes this is the case suggest some real problems that go beyond simple policy disputes.
As usual, I didn't get a response. I'll have more to say about this, and other aspects of the post-Health Care Reform Temper Tantrum from the right, in my next post, "VICHY REPUBLICans" ...
- Mark
For those of you who haven't seen this piece from former Bush speech writer David Frum, it's a must read. Here's a snippet ...
I’ve been on a soapbox for months now about the harm that our overheated talk is doing to us. Yes it mobilizes supporters – but by mobilizing them with hysterical accusations and pseudo-information, overheated talk has made it impossible for representatives to represent and elected leaders to lead. The real leaders are on TV and radio, and they have very different imperatives from people in government. Talk radio thrives on confrontation and recrimination. When Rush Limbaugh said that he wanted President Obama to fail, he was intelligently explaining his own interests. What he omitted to say – but what is equally true – is that he also wants Republicans to fail. If Republicans succeed – if they govern successfully in office and negotiate attractive compromises out of office – Rush’s listeners get less angry. And if they are less angry, they listen to the radio less, and hear fewer ads for Sleepnumber beds.
It may take a few years, and an assassination attempt, but one of these days the Republicans will start listening to people like David Frum. The only real hope the Republicans have now is another market collapse (which, unfortunately, just migh happen).
This post from Dailykos highlights something that Republicans would probably not like to have highlighted: They don't live in a reality-based world.
If the majority of the people in the Republican Party believe that President Obama is a socialist (67%) or a Muslim (57%), while a strong portion believe Obama's not eligible to be president (45%) and/or believe he's "doing many of the things that Hitler did" (38%), you have to wonder about the mental state of the party as a whole.
I'm no mental health expert, but I have to think that these mental caricatures of President Obama aren't healthy (though it does shed light on the party's belief in market fairytopias, where markets work efficiently if we just leave market players alone). And if their mental state is sound - which you would like to believe is the case - these people are just plain ignorant.
OK, I've been writing for some time now about some of the smoke & mirror games that allows Wall Street's biggest financial players to "privatize the profits and socialize the losses." To do this, they've been dumping their toxic - or close to toxic - assets on the American taxpayer, and securing good money for their efforts. Two of ways that Wall Street has been doing this include:
1. Using shaky contracts as collateral for government-backed loans.
2. Revaluing shaky contracts above market price to make these loans bigger than they should be.
If you want to know the technical terms and details behind these deals go to this post from Yves Smith at nakedcapitalism.com. All of the stuff she posts is a treasure trove of insight and information. This post, however, is dedicated to simplifying (oversimplifying?) the details.
Let's say you acquire a car. You expect to make lots of money racing it. You also expect to sell it later as a classic. The car makes you look edgy. You have lots of friends. All is good.
But then things go bad. You wreck the car in a multi-car crash. Your car is still drivable, but you're not going to win any races any time soon. You now have no friends.
Even if you fix the car, problems will arise because of questions about the frame, replacement parts, etc. But things become even worse because people know that you wrecked your car in a demolition derby, where everyone else was trying to win races, just like you.
No one wants the cars that were in the derby. So sad.
The market for cars in general isn't good. But the market for wrecked cars in the derby you raced in - no matter how nice they were to begin with - is even worse.
Now imagine going to a bank and saying, "Give me a full value loan on my fine auto ... it will be worth much more once I fix it." In the real world, this is the response you should expect to get ...
But in our "privatize the profits, socialize the losses" world the Federal Reserve has figured out a way to help you (i.e. Wall Street) out. The Federal Reserve created a Primary Dealer Credit Facility (PDCF) where owners of wrecked vehicles can use their cars as collateral to get a loan. And, just like that, based on the original promise of the car (and your promise to fix it), your racing investment is now worth something.
But no one is quite sure how much a car from the demolition derby - even the ones that escaped major damage - might be worth. Still, you're confident, because The House (the Federal Reserve) is letting you sit at the tables, with their money. They're going to be helpful. Your derby friends return.
Suddenly, things get even better. Since the car is drivable, and you promised to fix it, the Federal Reserve's PDCF window allows you to value the car according to what you think it's worth - or what you think it should be worth - once the market for your wrecked vehicle improves (this is the concept behind "mark-to-market"). Cha-ching ...
You leave the car with the Fed as collateral, and walk out with some real money.
Do you return for the car, and pay back the money? Wouldn't it be so much easier to leave it with the Federeal Reserve? You've got the money, right? Instead, because there are no penalties for being reckless, you go out and buy another car, and do it all over again. The Federal Reserve American taxpayer has to eat the losses on the collateral you left.
In many instances, this is what we're going to end up with on many of the collateral contracts the Federal Reserve the American taxpayer is absorbing through the Fed.
While all of this may be an oversimplified version of what's going on, it makes the point. We're taking on toxic instruments, and exchanging it for good money. But most Americans don't have a clue about any of this because of the complexity behind Iron Maidens, market-to-market accounting, CDOs, etc.
This is why greater transparency about the what the Federal Reserve is doing is necessary. They're not giving up enough information now, which makes the details even more fuzzy. Worse, because there were never any penalties for reckless behavior in the first place (the behavior was rewarded), we may be setting ourselves up for another financial demolition derby.
Want to check out the advocacy battle that was waged by Fox News, and their conservative media friends, over health care? To read about the "end of America" as we know it, and the dire warnings that President Obama was going to "control every aspect" of your life, click here. Want to read about the year long effort by Fox, Rush, and others to get congress to "oppose the bill"? Click here.
Again, I don't mind the advocacy. Just don't call yourself a news organization (though Shepard Smith seems to have a journalistic gene), and then plaster "fair & balanced" everywhere, as if you are.
Last summer, Senator Jim DeMint (R-SC) said that if Republicans could defeat the Democratic health care agenda their triumph would make health care reform President Obama's "Waterloo."
For those who might be unfamiliar with the battle, Waterloo was the site of a major battle that pitted British and German (Prussian) forces against the French, and essentially ended the Napoleonic Wars (1799-1815). At one time Napoleon had fashioned himself a revolutionary, because he was spreading the ideas of the Enlightenment. But he went too far when he decided that all of Europe needed to be guided by his "benevolent" and inspired insights. This united European monarchs against him.
Napoleon's defeat at Waterloo (in present-day Belgium) ended those aspirations. Since then the world has enjoyed "Waterloo" as a metaphor for epic defeat.
Given last night's vote, it appears that President Obama didn't meet his Waterloo. Instead, he may have achieved what Justin Miller suggested would be his Verdun.
The Battle of Verdun occurred in 1916 during World War I, and saw French forces take on a massive German offensive, which the Germans initiated to break the stalemate on the Western Front. Early history suggests that the offensive was supposed to draw the French in and "bleed them white." With Tea Party protests, the Fox News noise machine, and the entire Republican Party marching lock step to oppose anything President Obama proposed on health care, there's little doubt that health care opponents believed they could delay and bury the health care efforts of the Obama administration.
Their efforts, opponents of health care believed, would force President Obama to expend precious political capital that he could not recoup.
While more than 250,000 perished in the Battle of Verdun, and another 500,000 were wounded, the French resisted and were able to outlast the Germans until the United States joined the effort, and decisively turned the direction of the war. The political casualities of this health care battle appear to high as well, with the Tea Party movement taking the biggest hit.
Specifically, Tea Party members spit on a lawmaker and yelled epitaphs - calling out "nigger" and "faggot" to Representatives John Lewis (D-GA), Andre Carson (D-IN), and Barney Frank (D-MA) - suggesting that some of the opponents of health care reform have no problem taking America back to a day when unbridled hatred, and ignorant caricatures, ruled some segments of society.
On the positive side, Republican leaders appear ready to distance themselves from these tactics.
In all cases, I'm with the Dailykos' BarbinMD on this. I have to think this is what Waterloo looks like to Jim DeMint today.
Jim Costa comes through again ... Congressman Jim Costa (D-CA, 20th District) will vote "yes" on the Health Care Reform bill.
Here's part of the text from his press release earlier today.
“After nearly 14 months of thoughtful and passionate debate, there are many opinions on what it means to reform health care. For me, it boils down to this: Who makes the important health care decisions in our country – patients, their families and their doctors, or insurance companies?
“With all the rumored and actual changes made to the health care bill, I was not willing to make a final decision on my vote until I saw the actual language in the bill to protect patients from losing their insurance coverage, from having their rates jacked through the ceiling, and from being denied coverage by insurance companies. I was also able to express my concern to the Administration that the implementation of any health care bill must take into account the unique challenges of the Valley’s farmers and seasonal agriculture workers.
“Having now seen the actual bill and after reviewing the fine print with constituent groups and health care professionals, I am satisfied that it will take life and death decisions away from the insurance companies and protect patient rights. The bill also ensures that patients and our families can receive essential treatment without fear of bankruptcy. That's what healthcare coverage is supposed to do and is what the final language in the bill accomplishes. For these reasons, I will vote “Yes” on the health care reform legislation being considered by the House of Representatives.
“Health care reform is not about Washington. It’s about all the people across our Valley and the 28% uninsured in my Congressional District who are calling for commonsense solutions that will make their lives better. Our work on health care is far from over, but this bill is the first step.”
Those of you who called his office, asking him to support health care reform, be sure to call again and thank Congressman Costa for his vote. There's sure to be plenty of negative and angry calls to his office, so the staff will appreciate hearing from those of you who pushed for this vote. Here are the numbers again ...
Costa in Washington, DC: 202-225-3341
Costa in Bakersfield: 661-869-1620
Costa in Fresno: 559-495-1620
Better yet, how about offering to volunteer and help his campaign? I plan on getting my friends and colleagues to help. There's always something to do.
- Mark
P.S.: For those of you not familiar with where California's 20th district is, here's a map.
Bakersfield Express, our new and local internet source for all things Bakersfield, just posted my article, "It's Time to End the Health Care Debate Roller Coaster" here.
Those of you who follow this site regularly will recognize some of the stories and graphs. Enjoy.
- Mark
P.S.: In the article I discuss the distortions and outright lies used to muddy the health care debate. If the clip below doesn't work click here for a great example of this tactic, by Rep. Scott Garrett (R-NJ), and the much needed House floor smackdown delivered by Anthony Weiner (D-NY).
Want to know why we need health care reform? Check out this story, courtesy of Paul Krugman …
Reuters published an investigative report this week that powerfully illustrates the vileness of our current system. The report concerns the insurer Fortis, now part of Assurant Health, which turns out to have had a systematic policy of revoking its clients’ policies when they got sick. In particular, according to the Reuters report, it targeted every single policyholder who contracted H.I.V., looking for any excuse, no matter how flimsy, for cancellation. In the case that brought all this to light, Assurant Health used an obviously misdated handwritten note by a nurse, who wrote “2001” instead of “2002,” to claim that the infection was a pre-existing condition that the client had failed to declare, and revoked his policy.
This isn’t an isolated incident, or a case of a few bad apples in a rogue claim denial department. It occurs on a regular basis, with claim denials ranging from 2-7 percent in the health insurance industry.
There’s a reason why this goes on. Simply put, it pays.
As Krugman points out a House committee estimated that “Assurant made $150 million in profits between 2003 and 2007 by canceling coverage of people who thought they had insurance”. This amount is a kingly sum compared to what the firm pays in fines and settlements over time. This means private health insurance companies have calculated that denials and settlements are more lucrative and important than actually paying for services that medical doctors assign, and clients have paid for with their premiums.
No wonder Republicans were able to jump on the "death panel" issue so quickly. They've had their Grim Reaper Model for years.
In many ways, when it comes to the economics of medical care denial, private health insurance companies have turned it into a science and, in the process, become pseudo merchants of death. But unlike the arms industry, who don't hide the fact that their product will lead to pain and suffering, the insurance industry will sell you a product and lie to you about the final outcome.
OK, the non-partisan Congressional Budget Office has come back with the new numbers. They look good. A deficit reduction of at least $130 billion over the first ten years (from fees, taxes, and savings on inefficiencies), and a trillion dollar deficit reduction over the next ten years. And we get 32 million more Americans health care coverage. Who would oppose this? Oh yeah …
The Republicans still don’t want to have anything to do with health care reform, and are already trying to confuse the issue (again). Why is this happening? I think I know. And it has very little to do with looking out for what's good for America.
Republicans understand that if President Obama wins, America will end up with a better health care system, and Democrats will look good for getting something big done. They know they can't run on their record, so they've done what they can to distort the issue. As the following illustrates, they've done a very good job at this ...
A while back I had an exchange on health care on someone else’s Facebook site (at least it started out as a health care discussion). I was responding to a Wall Street Journal op-ed that was posted on the site. It was intellectually dishonest, and I made it clear why I thought this was the case. Several people responded. I think the tone of the exchange does a nice job of capturing what’s happened to our national health care debate. It went something like this.
Me:What an intellectually dishonest piece. It repeats Republican talking points, says absolutely nothing about fixing unethical private insurance practices, and ignores that 44,000 die each year from having no insurance.
Respondent:You’re “intellectually dishonest” because you don’t tell us where you get your information. These people would’ve died anyways even if they had insurance. And besides, Rep. Michelle Bachmann (R-MN) says this is the crown jewel of socialism, so I believe her.
Me:The study was done by Harvard University team, and controlled for ailment types, age, etc. This means they asked questions like “Were the 44,000 who died excluded from life saving care because they had no insurance?” ... Also, using Rep. Bachmann as your reference for socialism is like using prostitute connoisseur, and Louisiana Senator, David Vitter to define family values. Neither one understands what they’re talking about.
Respondent:How many people die does not really matter. Numbers are used only to count things. The real issue is giving up our freedom. Jesus liked freedom. Illegals threaten our freedom. Jesus hates illegals.
Me (trying to muster all the ethnic gravitas I have): Hmmm … wasn’t Jesus a non-English speaking traveler, who crossed many borders without a passport? Seriously, WWJD … Who Would Jesus Deny?
(New) Respondent:Mark … you belong to that low life, scum sucking, bottom dwelling, dingy smelling group of nefarious would be communist Marxist … consider yourself vetted and cast out of membership with any real American patriot.
And on it went.
While I’ve synopsized and edited this exchange for purposes of space, in many ways it captures what’s happened to the health care debate. Blinded by ideology, very few people are listening to each other, so they believe what they want to believe. And since numbers can be manipulated and "are used only to count things" others simply don’t care about the facts.
Or, as Popeye might say, “I yam what I yam, and that’s all that I yam”.
Nice.
I say we cut through the spirited distortions and talk about what health care reform will actually do. I’ve already discussed what’s wrong with the proposed legislation here (and there is much that is wrong with the legislation). So, courtesy of The Rachel Maddow Show and the Washington Post'sEzra Klein, here’s some of the good stuff in simple, non-technical, terms.
The World With Health Care Reform
In the first 6 months …
* Those who have been denied coverage for pre-existing conditions will have access to high risk pools. This will happen within 90 days of legislation being signed into law.
* It will be illegal for insurance companies to deny children coverage because of a pre-existing condition. This happens within 180 days of the bill being signed into law.
* Children will also be able to stay on their parents insurance until the age of 26.
* There will no longer be lifetime limits on coverage.
* Insurance companies will no longer be able to terminate (coined “rescission”) your insurance once you file a claim.
By Jan. 1, 2011 …
* If you’re a Medicare beneficiary you qualify for free annual wellness visits.
* Insurance companies will be required to spend between 80-85 cents of what they take in on medical care (currently they spend about 64-70 cents).
* If insurance companies don’t spend 80-85% of what they take in, they will have to refund money to the insurance holder(s).
* Insurance company rate hikes will have to be announced, reviewed, and justified. This means no more arbitrary, and guaranteed, super profits at the expense of medical care.
By Jan. 1, 2014 …
* A complete ban on denying coverage for anyone (not just kids) with pre-existing conditions.
* Insurance exchanges, for those who don’t have insurance, will kick in. In these exchanges regulators will be able to eject insurance companies for bad behavior, while consumers will be able to publicly rate them.
* No more annual limits on how much coverage you can receive in a year.
I’m sure that many (or most) of those who watch Fox News or listen to Rush Limbaugh don't know much about any of these changes. And why should they? Of all the developments that have swirled around the health care debate perhaps the most frustrating is watching as deliberate distortions, myths, and lies have been created. They have no other purpose than to muddy the health care waters. And it continues today.
From assertions about a “government takeover”, to claims that we are destroying the best health care system in the world, to the sudden concern over deficits, the list of health care disasters on the horizon for Republicans is long, and misleading (I'll have more to say about this in the coming days).
We've got a few more days before the vote. But one thing is clear. We need to encourage our fence-sitting members of Congress to join the cause, and support this health care bill. The fact that Dennis Kucinich has done so already says much. You can find your local Representatives and Senators here and here.
For those of you living in the Kern County region you already know that Congressman Jim Costa has done the right thing in the past. Give his office a call, and encourage him to do the right thing again. He really likes to hear from you. And be nice to the staff. Some of them are former students of mine, and are really nice people.
It seems to me that it's only a matter of time before U.S. Treasury Secretary will have to explain his role in helping our nation's largest financial institutions hide their incompetence. The American taxpayer is now sucking on trillions of dollars in "assets" - much of it toxic - courtesy of Tim Geithner's decisions to allow Wall Street to transfer bad bets onto the backs of the U.S. taxpayer.
His decisions, first as head of the New York Federal Reserve, and now as Treasury Secretary, not only misallocates resources, but they undermine what helped to make America. More specifically, Tim Geithner will eventually be seen as one of the architects behind the slow but steady collapse of the moral justification of capitalism in America.
The moral justification of capitalism, as I noted in my book, rests on one single promise: If you work hard you can get ahead. With the American economy being turned into one giant casino this simple maxim is slowly disappearing.
With market fraud rewarded on Wall Street, and hard work kicked in the teeth by a government bent on transferring wealth to Wall Street, there's little doubt that Tim Geithner will eventually have to face the music for his role in enabling Wall Street's stupidity and incompetence. With general market fraud on the rise too, Geithner will become a convenient scapegoat after the next market setback.
Indeed, this piece from nakedcapitalism.com's L. Randall Wray makes it clear that questions are once again being raised about Tim Geithner's role in helping Lehman Brothers hide debt as they slid into insolvency. And Geithner can only hide behind "I-was-on-my-way-out-of-the-NY-Federal-Reserve-so-I-didn't-really-know-what-was-going-on" argument for so long. As former head of the New York Federal Reserve he has been an integral part of the institutions that's been giving bailout primers to our nation's financial mandarins since well before the September 2008 market collapse.
Worse, as Michael Lewis has been arguing during his book tour, Wall Street's been able to delude itself about what it actually does "because it’s paid to delude itself." Geithner's inability to rein in (or even call for reining in) Wall Street's excesses means he's going to have to explain why he's effectively been aiding and abetting a sector that no longer creates wealth, but extracts it.
While there is little doubt that Tim Geithner wasn't at the center of the deregulation and deficit spending orgy initiated by Ronald Reagan, and taken to new heights under George W. Bush, people will need someone to blame when things take a turn for the worse (and they will). When Geithner's been run through the ringer, look for Hank Paulson, Robert Rubin, and Larry Summers to be next in line.
With the moral justification of capitalism on the ropes, you can bet it won't be pretty.
- Mark
UPDATE: Eliot Spitzer and Bill Black make it clear in this piece today that the NY Fed under Tim Geithner knew about Lehman Bros. accounting fraud. More importantly, they did nothing to inform others, and did not compel Lehman 'Bros. to share their smoke & mirrors accounting scheme.
Former Labor Secretary Robet Reich does a great job of explaining why the economic "recovery" we're experiencing is a sham. He takes a look at the positive trends in the economy and explains why good economic numbers can mean the economy is producing as much "illth" as it produces wealth.
In the process Reich illustrates how air dropping money on the financial sector, combined with favorable legislation, has - as Joseph Schumpeter might say - created a group of market players who would rather play monopoly rather than build them. Here's a few of the indicators Reich is looking at:
* GDP Growth Up to 5.9%? Chalk it up to factors like rising health care prices, bailout/stimulus cash inflows, and rising government expenditures.
* Growing Sales for Companies in the Standard & Poor 500 Index? These guys are global, and selling to the fastest growing markets in the world (e.g. India, China, and Brazil).
* Fatter Profits? Bigger profits are a product of companies cutting both jobs and capital expenditures. Fewer expenses in the short-term equals more profits.
* Corporate Debt (bond) Sales Up? Two points. The money is borrowed cheaply (the Fed is keeping rates down). Second, they're using the money to acquire other companies and to buy their own stock back. The first means more layoffs (to cut redundancy), while the latter boosts executive compensation packages by pushing stock prices higher.
These developments do little for Middle Class America. More importantly, they make it clear that economic activity alone does not necessarily translate into better prospects for everyone in the economy. Why? Because structural changes in the economy have created a market system that focuses on rewarding financial activity rather than actual production. Favorable legislation, bailouts, and cheap money are at the heart of all this.
Making matters worse is that small businesses - the real heart & soul of America's econmy - are falling behind because they have to sell in a domestic market made worse by a lack of credit, job loss, and lagging consumer confidence. To be sure, U.S. household debt (which includes mortgages and credit card balances) fell 1.7% last year. This is the first drop in consumer debt since 1945. But all is not good on this front either. Reich reminds us:
Much of the debt-shedding has been through default – consumers simply not repaying and walking away from homes and big-ticket purchases.
Reich ends by noting that once the stimulus spending is over, and the Fed begins to tighten credit, we're looking at an already difficult situation getting worse ... but only for America's middle class. He writes:
Where will demand come from to get Main Street back, create jobs, raise middle class wages? Not from big businesses. Certainly not from Wall Street. Not from exports. Not from government.
Think about it. Wall Street is thriving, yet middle class America is in bunker mentality mode. Big business is borrowing and has access to all the money they need, yet there are no jobs (so much for supply-side economics). Exports? Forget it, we've been up-side down for decades. Finally, the government is already spending at a record clip, but it's misdirected and Americans are getting tired of who's getting the cash (it's one of the greatest transfers of wealth in human history). What we're seeing in America is wealth extraction, not wealth creation.
Long story short. The recovery is a sham. Read the article for the details.
Here are the top three vote getters for the Dynamite Prize in Economics, with a brief professional "bio" explaining their rank.
Alan Greenspan: As the former chair of the Federal Reserve (1987-2006), Alan Greenspan won because of how his fairytopian market views helped ruin our nation's economy. His economic dream world ran so deep that he believed markets didn't need regulation because they're so efficient that even corruption and stupidity are eventually weeded out. People, after all, can be expected to do the right thing when money and profits are staring them in the face. He was so convinced about his Ayn Rand drenched ideology that he consistently lowered interest rates, and expanded the money supply, foolishly believing that people who get money nearly for free will act rationally.
For believing that people are angels in a market setting, Greenspan's award is well deserved.
Milton Friedman: Encouraged by the brilliance of his own writings (he was a good writer), Friedman managed to convince himself that the Federal Reserve was to blame for the Great Depression. Friedman pushed his delusions about markets - and evil government - to such a degree that he wrote the policy paper that led the U.S. out of the draft and into an all volunteer military. To get the results he needed - which focused on market efficiency rather than national security - he deliberately ignored the research methods he was asked by Congress to use in the policy paper. Because of Milton Friedman we now have: (1) a Federal Reserve that believes it's so important that it can stonewall congress, and; (2) a military that allows U.S. presidents to ignore the will of the people (a draft to fight reckless wars would get our attention), and increasingly depends on private mercenary companies, like Blackwater.
After considering how his academic career influenced public policy, Friedman probably should have received a Life Time Achievement Award.
Larry Summers: Former Harvard economist Larry Summers was at the center of the good 'ol boy wolf pack that went after Brooksley Born. Who's Brooksley Born? In her post as director of the Commodity Futures Trading Commission (CFTC), Born warned Washington that if we did nothing to rein in derivative trading that we were looking at a market collapse ... in 1997! Summers - along with Robert Rubin (Treasury), Alan Greenspan (the Fed), and Arthur Levitt (SEC) - thought it was better to bury Born politically. Kudos.
Proving that his Born Stupidity was not a one time fluke, in 1999 Summers also gave intellectual weight to the idea of dispensing with the Glass-Steagall Act (1933). The Glass-Steagall Act separated commercial banks, investment banks, and insurance companies after it was discovered that the financial sector had worked collectively to speculate and defraud customers before 1929. For reasons not yet explained, Summers believed that ignoring history and bringing banks, brokers, and insurance companies together again was a good idea.
Don't feel bad for Larry Summers if you think he should have won this time around. He can still prevail. For my money, as a member of President Obama's "don't-push-Wall-Street-too-hard" economic team, Summers has a very good chance of winning the Dynamite Prize in Economics in the future.
While I would have liked to see Arthur Laffer, the economic genius behind supply-side economics, as one of the nominees, there's no doubt that the top vote getters deserve their place in Dynamite lore.
