The Costs of the Healthcare Jam-down

Have the Democrats really stopped to think what they are doing with this health care jam-down?

The so-called Baucus bill (which is not a bill but "conceptual language") was clearly written to game the CBO scoring system. In other words, it was written to make it seem that the government takeover of health care would cost under a trillion dollars over ten years.

But it won't. We know it won't.

The excellent Michael Barone has a telling article about this, and about the special deals that Senators Reid (D-NV) and Schumer (D-NY) have written into the bill to help their states.

Lyndon Johnson reportedly ignored the advice of his economists back in 1965 when he was costing out Medicare. He just lied about the estimated costs and got his Medicare passed.

Maybe Democrats think that they can get away with it again.

But I think they are fooling themselves. I think that if they pass this bill they will reap a generation of rage. I think that this bill gets us to the Tipping Point on government spending. I think it will power up a new generation of conservative activism which will truly redeem President Reagan's boast that "you ain't seen nothin' yet." Here's why.

• Government health care stops the market from seeking out new procedures and new economies. It maintains health care as expensive, cartelized crony capitalism.
  
• Government health care reverses the reward for prudence. It rewards people who don't take care of themselves and their families.
• Government health care will turn into rationing. It has to, because there is an almost unlimited demand for free or subsidized health care.
• Government health care will force Americans to fight each other. That's what happens in education, according to Andrew Coulson in Market Education. Government always selects one way to do everything. That means that people that want another way have to fight.
• Government health care puts politicians at the center of power and society. It means that politics will decide issues rather than economics or compassion or caring. The only thing that matters is whether you can scare or bribe a politician.

Guess what. People don't like that stuff. And conservatives are going to have an open line to moderate women. We are going to be able to say: Democrats don't care about you and your family. They just care about power and about special interests.

Liberals and Democrats better understand what they are doing here. They are visiting a monstrous injustice on the American people and they will pay dearly for their arrogance and their pride.

Well, it's about time.

After Nobel Comes the Whirlwind

I wouldn't want to be a liberal right now. Because any liberal with any sense must see that a perfect storm is brewing.

We wish President Obama well, and we congratulate him on winning the Nobel Peace Prize for his efforts in diplomacy.

The trouble for the president is that this award probably will be remembered as an inflection point. After today, things will start going downhill for the president, and I predict that they will go down fast.

Let's look at all the issues that are combining, like weather disturbances, into the perfect storm.

1. The dollar. The Obama administration has done nothing to adjust to the fact that, after the Crash of 2008, the nation is poorer. That means it can afford less government. That means that it must revive the economy by--get this--reviving the private sector. That means it is going to have to defend the dollar or see massive inflation. But instead the Obama administration has governed as if nothing had changed. The US consumer and the US creditor aren't going to like this.
   
   
2. Government Spending. The Obama administration spent about a trillion dollars on a "stimulus" bill. Actually the bill was not a stimulus but a payoff to Democratic voters. It won't stimulate the economy. This is going to result in higher unemployment in 2010 and 2012 than otherwise. The US voter isn't going to like this.
   
   
3. War on Terror. In the Oughties, Democrats said that the Iraq War was a mistake and a distraction. The real war was in Afghanistan, and how come we haven't captured Bin Laden yet? Of course, as Charles Krauthammer makes clear, the only reason the Dems talked about Afghanistan was that it was a way to criticize President Bush while neutralizing the Democratic reputation for being soft on defense. "Bush Lied," they said. Well, you ain't seen nothing yet. The American people aren't going to like this.
   
   
4. Health Care. The Obama administration proposes to spend at least a trillion dollars on extending health care subsidies to their supporters. Probably this is a gross underestimate. This additional burden on the private sector will make the economy weaker.
   
   
5. Cap and Trade. The Obama administration is proposing to raise energy taxes by trillions of dollars in order to "save the planet." Leaving aside the science of global warming, and leaving aside whether carbon reduction is the appropriate response, Americans just don't want to pay more in taxes, especially in the middle of a recession.

Of course, there is more stuff that the American people don't like. They don't like the corruption; they don't like the regulation of the blogosphere; they don't like the use of the "race card." And on and on.

When all these issues combine together, we are going to see a perfect storm. It will transform the US economy, and it will transform US politics.

There is no way to tell what all the ramifications of the storm will be. In any storm, the damage will be horrific, but it will be impossible to tell, before the storm, what will survive and what will be utterly destroyed.

But I will make this prediction. After the storm has passed, and after the American people have viewed the wreckage, and taken in the scale of the disaster, our liberal friends will be utterly discredited.

Cameron Takes Fight to Labour

David Cameron, the leader of Britain's Conservative Party, delivered a barn-burner speech (PDF) to his party's conference, taking the fight directly to Britain's lefty Labour Party.

With an election about seven months away, and Labour discredited with massive deficits and swelling unemployment, Cameron's party is proposing major reforms to government education and government welfare. But that is not all. He is blaming Labour directly for failing to educate children and failing to give the poor a hand up.

Who made the poorest poorer? Who left youth unemployment higher? Who made inequality greater? No, not the wicked Tories… you, Labour: you’re the ones that did this to our society. So don’t you dare lecture us about poverty. You have failed and it falls to us, the modern Conservative Party to fight for the poorest who you have let down.

I wonder if a GOP presidential candidate will be saying that to a roaring Republican National Convention in 2012 after a disastrous Obama term in office when the economy fails to respond to "stimulus" and fails to generate jobs.

Cameron's peroration is one for the ages.

I can look you in the eye and tell you that in a Conservative Britain:

If you put in the effort to bring in a wage, you will be better off.

If you save money your whole life, you’ll be rewarded.

If you start your own business, we’ll be right behind you.

If you want to raise a family, we’ll support you.

If you’re frightened, we’ll protect you.

If you risk your safety to stop a crime, we’ll stand by you.

If you risk your life to fight for your country, we will honour you.

Ask me what a Conservative government stands for and the answer is this, we will reward those who take responsibility, and care for those who can’t.

Who says that conservative is dead, or brain dead, or losing its way? I predict that you ain't seen nothing yet. And we will see in the US, in 2010 and in 2012 such an explosion of generous, patriotic, optimistic conservatism as you never imagined was possible.

Our Problem, Our Opportunity

Three conservative pundits lead off today with end-of-the-world-as-we-know-it pieces.

Michael Medved tells the third party enthusiasts: "The Only Way to Beat Obamanism: Elect More Republicans." Unless we elect more Republicans, the liberals in Congress will keep passing more legislation to concentrate more power in the government. Street protest, funny hats, and cute slogans on placards won't do it. Only a Republican Congress and a Republican President will do it.

John Stossel tells freedom lovers that we deal with the unavoidable truth that government is a "Transfer Machine" in which politicians inevitably use the nation's wealth to win office and pension their supporters. And today the nation is evenly split between transferees and transferers.

Walter Williams rehearses the bloody record of "Elites and Tyranny." As long as we are pursuing "social justice" we are going to end up with bloodied elites pushing people around, and chaps who are good at it, like Stalin, Hitler, and Mao, rising to the leadership positions for which they are so qualified by ruthless temperament and experience.

Things really look black, don't they? The tide of big government seems unstoppable.

Maybe it is. But maybe it isn't. When the tide comes in particularly high, then there is often a good opportunity to turn it back. It is when an invading army is fully extended that the best opportunity for counter-attack occurs. The battle of Stalingrad occurred after the German Army had flooded across southern Russia up to the foothills of the Caucasus. It was when the German Army was all strung out that the Red Army counterattacked on the neck of a great salient and forced the Germans into an epic retreat.

Now let's look at the advantages that conservatives have in the months ahead.

• Obama is a weak leader. He may not even be a very good campaigner. He just had the good fortune to run when Republicans were utterly discredited.
• Forty percent of Americans identify as conservatives and 40 percent identify as moderates. RIght now moderates are in the middle of cognitive dissonance. They thought they were getting a moderate, post-partisan president. Because that is how Obama sold himself to them. Ninety-fice percent of Americans would get a tax cut, they thought. It will take a while before they are fully convinced that they have been had.
  
• Americans hate the things that the Obamites are doing. They hated the porkulus, they hate the cap and trade, they hate the government mucking around with their health care.
• Conservative Americans are really getting riled up. That is the necessary foundation for a tidal change in politics. Trust that the leaders will emerge. Trust that the issues will get defined. Trust that the money will be there. But first of all you have to have enthusiasm.

You can argue that it doesn't really make any difference, that government will keep getting larger, that, as some wag said years ago, nothing ever changes until Attila the Hun rides over the horizon. All true.

But we did put the kings out to pasture. We did stop slavery. We did revolutionize life expectancy. We did create a Constitution. We did win World War II against the German Nazis and the Japanese militarists. We did win the Cold War against the Soviet Union. We did persuade the Chinese, by "soft power" rather than military might, that the future was capitalism not socialism.

Now we have the one great opportunity in a generation to turn the American people from the adolescent meaningless of the welfare state and inspire them with the vision of a sociable state.

What is a "sociable state?" It is a state where the vital work of health, education, and welfare is done by free people in sociable cooperation rather than through the compulsion of beetling government compulsion and power.

What three things is America are a mess today? Exactly. The health system, the education system, and the welfare system. Then there's the finance system as well. What is the common problem with all these messes? The government controls them in almost every detail, and it makes a complete mess of them.

The truth is inescapable. Government is hopeless and the social and compassionate work of health care, of preparing children for adulthood, and relieving the poor. There has to be a better way.

Candidate Obama promised Hope and Change. He has delivered precious little of either. How could he? Government is not the vehicle of hope and change. Government is the vehicle of force and compulsion.

But the city on a hill is still there, for America is "still a beacon, still a magnet for all who must have freedom."

Barney Frank Pours Oil on Fire

Remember the Community Reinvestment Act of 1977? That's the wizard wheeze behind the housing bubble.

Back in 1977 there was a problem. Low income people and people living in run-down neighborhoods couldn't get mortgages. Red-lining, it was called. And the banks were to blame.

So the Dems came up with a cool idea. Why not force the banks to lend in low-income areas by imposing government regulation, and why not sicc non-partisan activist groups with no ties to unions or to the Democratic Party, i.e. ACORN, on the banks to apply a little encouragement?

Why is it that the only thing that politicians deal in is force?

Then in the 1990s they updated the act and made it tougher. Pretty soon, a bank couldn't open bank branches or do a merger without a signoff from a non-partisan activist group. Usually this signoff could only be obtained with a bit of a non-partisan contribution to the activist group, i.e. ACORN.

Well, we know what happened next. By the peak of the housing bubble, Fannie and Freddie were issuing so many "sub-prime" mortgages that they amounted to over 40 percent of all mortgages bought and securitized by the mortgage giants. The banks were making sub-prime mortgages, as required by the Community Reinvestment Act, and they were selling the mortgages to Fannie and Freddie.

And now, according to reports, Barney Frank (D-MA) wants to extend the powers of the government to meddle in consumer lending with the Community Reinvestment Modernization Act of 2009. Writes Byron York:

It would extend CRA's strict lending requirements to non-bank institutions like credit unions, insurance companies, and mortgage lenders.

Oh great. Back in the Oughties, Democrats were unanimous in sneering at the stupidity of President George W. Bush. All that Bush wanted to do was to restart the economy and fight against Islamofascism. But this takes the cake.

However. I do not think that Barney Frank is stupid. I think he is very clever. But I think that he just doesn't care if he wrecks the whole credit system with his handouts and his subsidies. For him, it's all about power. The only thing that matters to him is helping his friends and supporters with other peoples' money. Because that's what liberal politicians do. They call it compassion.

At least these people aren't fooled by Barney Frank.

How to Stimulate the Economy

When you are in the middle of a recession and people are losing their jobs left and right, what do you do?

In the nineteenth century, the answer was simple. Nothing. The government was not expected to manipulate the business cycle. It was expected to maintain the value of the currency. However, the history of the 19th century shows that much of the economic turmoil was due to politicians mucking around with the credit system. Think Andrew Jackson and the Second United States Bank. Think the deflation after the Civil War when the government deliberately worked to increase the value of the dollar back up to its prewar level. Think free silver.

In the first great crash of the 20th century, the Crash of 1907, J.P. Morgan brought the wealthiest men in America together to organize a bailout. They conducted a triage operation on ailing companies. They refused to bail out companies that they judged would survive the crash anyway. They refused to bail out the companies that they judged would fail anyway. They decided to bail out the companies that they judged would survive if loaned some money.

The 1907 crash occurred before the creation of the Federal Reserve Board. So it's not surprising that when the first big financial crisis hit in 1929 the Fed botched the job. You'd expect that with a new government program. The Federal Reserve, set up as a lender of last resort, let thousands of banks fail. The money supply contracted sharply and the credit system ground to a halt. Millions were thrown out of work, and unemployment went over 20 percent.

In the 1930s, British economist john Maynard Keynes wrote The General Theory of Employment, Interest, and Money. It actually wasn't much of a general theory, but it did propose a policy for getting out of the Great Depression. The policy was to ramp up government spending on useful projects, like infrastructure--roads and bridges. This would create a "multiplier" effect that would stimulate other economic activity and so get the economy out of the slump.

In the event, the US economy finally recovered with the war spending of World War II.

The problem with the Keynesian stimulus policy is that the projects the government chooses to fund may not in fact be economically beneficial projects that stimulate other economic activity. They might be bridges to nowhere. Or they might be bailing out companies, like General Motors, that probably cannot be saved anyway. In other words, government chooses based on political considerations, while bankers like J.P. Morgan choose based on economic considerations.

That's the situation we are in the present time. The Democrats, inspired by Keynes, have enacted a huge stimulus program to stimulate the economy. But it has turned out that the stimulus program is not full of economically beneficial projects but political payoffs. It is designed to help Democrats and Democratic constituencies weather the recession. It is not designed to encourage economically beneficial activities.

Of course, if you want to turn the economy around, then you need to encourage people to do things that will start a a new economic expansion. You want to direct credit towards those activities that will deliver the most profit, understanding profit as a surplus of benefit over cost. If you think that then you will be inclined to reduce tax rates on employment, such as the FICA tax. Or you might want to reduce tax rates on small businessmen, who are the primary generators of new ideas and new employment.

But politicians don't think that way. They do not get elected by helping unknown business startups in unknown garages. They get elected by helping established special interests that have the money to support their campaigns and the influence to bend their ears and threaten bad things if they don't get what they want.

In the United States, marginal rates on business taxes are already high. The corporate income tax rate hits 34 percent for income over $75,000 and then bobbles around, hitting 39 percent before settling down at 35 percent for corporate income over $18,333,333.

Guess what. In Europe corporate income taxes are in the 25 percent range. In Japan there is not capital gains tax at all. So US businesses are at a disadvantage.

Next year, 2010, the Bush tax cuts will expire and individual income tax rates will go up.

The issue really is this. Do you think that politicians and their staffs are best at figuring out what projects are best for the economy? Or do you think that individual businessmen are best?

The answer is important. About 10 million people have lost their jobs in the last two years. They want to get back to work.

Conservatism Brain-Dead?

I can't quite decide if Steven F. Hayward is serious in asking the question "Is Conservatism Brain-dead?" Because I can't help feeling that his article in The Washington Post is Straussian. That is: it reads one way to the uninitiated and another way to those in the know.

Officially, Hayward is bemoaning that we have nothing like the weighty bestsellers of yesteryear:

The bestseller list used to be crowded with the likes of Friedman's "Free to Choose," [1962] George Gilder's "Wealth and Poverty," [1981] Paul Johnson's "Modern Times," [1983] Allan Bloom's "The Closing of the American Mind," [1987] Charles Murray's "Losing Ground" [1984] and "The Bell Curve," [1994] and Francis Fukuyama's "The End of History and the Last Man." [1992]

I have sneakily added in the publication date each book. Notice anything interesting? These books weren't crowding together. They were spaced out over 30 years! Admittedly, a lot of them crowded into the 1980s. But that was after the Reagan Revolution. The heavy lifting had been done years earlier.

No. I think that conservatism is in the cat-bird seat. And my big thing is the rise of the "chick-cons." Yes, if you look at the lists they are crowded with titles by conservative women: Return to Modesty by Wendy Shalit, Smart Sex by Jennifer Roeback Morse, Domestic Tranquility by Carolyn Graglia, The War Against Boys by Christina Hoff Sommers, What Our Mothers Didn't Tell Us by Danielle Crittenden. And let's not forget The Forgotten Man by Amity Shlaes, which is not strictly chick-con but a history of the 1930s.

Now if we descend to include important titles by men, there's the stand out Liberal Fascism by Jonah Goldberg. That's a real bestseller. But of course there is a lot of heavy lifting going on below the radar. I'm thinking of Rodney Stark with his raft of books on the sociology of religion. There's From Mutual Aid to the Welfare State by David T. Beito and A Farewell to Alms by Gregory Clark. There's Market Education by Andrew Coulson and The Beautiful Tree by James Tooley, both on education reform. Not to mention the standout works by Peruvian Hernando De Soto including The Mystery of Capital.

My feeling is that the books below the radar are more important than the best-sellers. The best-sellers tend to come, like the conservative best-sellers of the 1980s, when it's all over bar shouting, as my grandfather used to say.

But let us get down to activism. The chick-cons are really busy networking and organizing, as you'd expect. There's NeW, the Network of enlightened Women, an organization of conservative women college students that are reading chick-con books together and doing activism. There's Smart Girl Nation. They are the ladies that first got the Tea Parties going.

I'm still not sure whether Steven F. Hayward, author of The Age of Reagan, was serious about conservatism being brain dead, or whether he was trying to fool the liberals at The Washington Post.

Doesn't matter. Conservatism ain't brain dead. It's so alive that it's scary.