Daily Archives: March 23, 2010

Think The Democrats Just Scored One for the Little Guy? Think Again.

By Robert E. Prasch
Professor of Economics
Middlebury College

As a resident of Massachusetts, where the backlash is already well underway, I thought I should add a comment.  Let’s begin by considering the origins of “Obamacare”.  It comes from Massachusetts.  It was passed early in Gov. Patrick’s reign because during the campaign it was already in debate as it was Gov. Mitt Romney’s proposal.  Now, one might wonder where the conservative, free market, head of Bain Consulting governor might go finding a healthcare plan?  Well, he got it from the Heritage Foundation.  And why did they have such a plan?  Well, they developed its broad outlines during the 1993-4 years as the Republican ANSWER to Hillary’s effort.  So, that is our new federal plan — it is a warmed over version of the Heritage Plan.  This, I submit, might explain a few things.  (1) It was Obama’s idea all along to “triangulate” the Republicans on this issue, and (2) why many of them are really very bummed out that their leadership did not take up the chance to show “bi-partisanship” on this issue (see David Frum on this).

Now, I tend to be skeptical of Heritage Foundation health-care plans.  For several reasons:

(1) By design, costs are not contained, neither is health care reformed.  This means that “affordability” does not come from controlling costs, but by shifting them.  Shift to whom?  A hallmark of the Heritage/Romney plan is that no change of the distribution of income is to occur with the financing of this plan.  NONE.  Rather, funding is to be from three sources — those with supposedly “Cadillac” plans, those who have “opted out’ because of the laughably high cost of coverage relative to their own risks, and to the state general fund.  (2), In light of state budget shortfalls, it is no surprise that the latter source is declining quickly, and tens of thousands of Mass residents have ALREADY lost their subsidies (this trend will certainly occur on Capitol Hill over the next several years as ‘deficit mania” kicks in).  So, get this, as your income declines and your house is repossessed, the cost of your health care rises with higher premiums AND lower subsidies.  But, make no mistake, even as the subsidies decline, the mandate will stay — why should the big companies give up this huge windfall of unchecked access to the wages of the low paid?

(3) I also wish to warn against the ‘NPR version’ of the story that this bill “gives” health care for those without.  Nothing is given, it is a MANDATE.  Now, while the original ‘vision’ of the bill had subsidies, these are fading rapidly.  So, now we have a dramatically underfunded mandate.  Solving the lack of insurance by mandating the poor to buy it is, to be blunt, Dickensian.  Obama himself stated it very well during the campaign “It is like solving homelessness with a mandate that those living on the streets buy a house”.  Those who are poor understand this point, and resent it.  True, there are some young people who are in good health and, understanding statistics and rapacious health care insurance firms, “choose” not to get health insurance (as I did for several years in my 20s as the teaching assistantship I got from DU during my years studying for my MA could not cover my living expenses AND health insurance), yet the bulk of non-buyers are people who have found that with little in the way of family funds, other priorities (rent, car repairs, food, school fees, etc.) are a greater priority.

So, now the Democrats have taken it upon themselves to decide the priorities of millions of our poorest citizens.  Thus, thanks to the Democrats, non-negotiable required fees from the insurance industry will be several multiples of the current income taxes of the lowest paid.  This is sticker shock at its worse.  Even Republicans know that the money will go to rapacious, soulless, insurance companies under the careful guidance of the IRS (here in MA, we have several extra highly-complex pages on an already long tax form where we have to prove that we have insurance).  Stated simply, the Democrats have decided to go into the business of being the “enforcers” of the big insurance firms.  This is NOT a good place to be in an election year.  This is ESPECIALLY not a good place to be when you are already presenting yourself to voters, as Obama seems committed to do, as the die-hard supporter of the big banks that foreclosed on people’s homes and blew up their economy.

With such a context, along comes someone who calls himself a “regular guy” with a pickup truck (he failed to mention that he has five homes, one in Aruba, but the truck was in all the ads), and he takes Kennedy’s seat in Mass.  In MASSACHUSETTS!  Only one year after Obama wins this state by 20 points!  Wow.  This, folks, is what a backlash looks like, and it is enormous.  Turning the wages of the working classes over to the insurance companies, without recourse or mercy, is not going to win this state, and it will not win in many others.  If the Democrats lose any less than 35 house seats this election I will be amazed.  And, note my wording, the Republicans did not, and will not, win them.  No, the Democrats have decided to lose these seats.  Amazing.

Sorry about bringing the bad news.  But this bill is a disaster, and it is worse than nothing, as it will destroy the incomes of those it purports to help along with the Democratic Party.  It is especially bad since a public option was always an option, I do not believe the D.C. spin on this for even a minute.  Just as Obama never wanted to renegotiate NAFTA or leave Iraq, it was clear from the outset that the White House never wanted a public option, which explains why Rahm said so early last summer.  Why?  Because the big insurance companies did not want it, so Rahm did not want it.  End of issue.