Saturday, February 06, 2010

State of the Union Address: ... the Bad ...

In my most recent post I talked about the “good”, or the parts of the State of the Union address in which I like what President Obama said, even though I doubt that what he says and what he means are always the same. This time, my focus is on the “bad,” what he said that I don't like. Next will come the “ugly.” Early in his speech, President Obama proposed a “fee” (euphemism for tax) on the largest banks in order to recover the money that was lent to some large banks in the TARP program, otherwise known as the bank bailout. What is bad about his proposed fee is that it isn't aimed at the banks that still owe the government money, but it is a tax on large banks in general. Extracting repayment from banks who haven't paid their debts is one thing and is good; punishing banks just for being big is wrong. It is just taking political advantage of the fact that large banks are unpopular. Not that the large banks are going to get hurt much; they will pass the extra cost on to their customers.

The President claimed that two million workers who would otherwise be unemployed have jobs because of the American Recovery and Reinvestment Act. His allegation is based on what the recipients of the stimulus money told him about jobs that were “saved or created” by the money paid out so far. There is a strong conflict of interest here – the recipients are motivated to claim that they created or saved jobs in order to continue to receive funds. I don't believe that there is any serious verification of the numbers of jobs actually saved or created, again because of a conflict of interest; the administration wants to claim great success for the Recovery Act and verifying the numbers might make them lower and less supportive of claims of success. While it is clear that the Recovery Act has been expensive, it is far less clear that it has saved or created any jobs when you consider the jobs lost because businesses hesitate to hire when government policies make the future of business so uncertain. The President proposed in his speech more of the same, except this time he calls it a “jobs bill,” in part because, the American Recovery and Reinvestment Act came to be called the “stimulus bill” and acquired a reputation for being expensive and ineffective. Doing the same thing again, but changing the name will not improve the results.

The President wants an energy and climate bill to “make clean energy profitable”. He was apparently referring to the cap and trade bill that had already passed the House of Representatives. What cap and trade will do is make most kinds of energy that people actually use much more expensive and decrease supply by making energy production less profitable or unprofitable, which will be devastating for the economy and would make hardly a dent in whatever global warming may be occurring. If clean energy requires subsidies from taxpayers for the companies that supply it to make a profit, then the clean energy isn't really profitable; what is profitable is getting favors from the government. If getting favors from the government is profitable, then that increases the influence of lobbyists, which is something that the President claimed he opposes. Despite the President's assertion that there is overwhelming evidence of climate change caused by greenhouse gas emissions, much of the “overwhelming evidence” is overwhelming only because data that didn't support the notion of global warming has been suppressed. Then he said that the nation that leads with a clean energy economy will lead the global economy. Not if Spain is any example. Spain spent much money subsidizing a “clean energy” economy only to see its debt and unemployment rates climb as a result.

The President said that he plans to end subsidies to banks for student loans. I like that idea because I am generally opposed to subsidies, but what he really meant is that he plans for the government to completely take over the business of making student loans. That does not represent an improvement. Taxpayer money is still spent to subsidize student loans but the people administering them will be government employees instead of bank employees. The improvement is – what? The President proposed that no student would be required to pay more than ten percent of his or her income to repay a student loan and the balance would be forgiven after 20 years, or after 10 years if the former student enters “public service.” Pardon me, but even though I have spent a career in the federal government and am presently employed part-time by the State of Connecticut, I reject the idea that people who are working in the private sector are serving the public any less than those who have government jobs; nearly all provide a valuable service and some in the private sector are serving the public more than those in the public sector because their compensation and even the existence of their jobs is more closely tied to performance.

The worst part of the speech was President Obama's continued support for “his” health reform plan. It changed from a health care plan to a health insurance plan when it occurred to him that health insurance companies were unpopular and could be demonized. Also, he has never really laid out what “his” health insurance reform bill is. The versions that passed the House and the Senate have several major differences between them. Is one of them his and the other not? Is his plan something that differs in some way from both? What exactly is his plan? His claim that Americans opposed the health insurance reform bills because he didn't explain them well enough is arrogant and untrue. He has made televised speeches, many containing health reform in the subject matter, on a regular basis. It hardly seems likely that he hasn't made enough speeches! Also, the more time the public has had to learn the contents of the proposed legislation (in either the House or Senate version), the less popular it becomes. It isn't because the public does not understand the proposed health insurance reform legislation that it is unpopular, it is because the public does understand it. President Obama then repeated his mantra that if anyone has ideas to bring down the cost of health care without reducing quality and without increasing the deficit, he would like to hear them. No, he wouldn't! The ideas are out there, but he is deaf to any proposal that does not increase the government's role in health care. I can't go into to much detail about better ideas for reforming health care without making this post unreasonably long, but I will mention some briefly. Tort reform would reduce the cost of health care by reducing what doctors have to pay for malpractice insurance. Insurance plans with coverage for only catastrophic medical conditions combined with health savings accounts for more routine care would reduce the cost of insurance by making patients more aware of costs and reducing administrative expenses. Shifting the tax advantages of buying insurance from employers to insured persons would make give consumers more control of the costs of health insurance and health care. Allowing insurance companies to sell each insurance policy in all states instead of individual states would give consumers more choices and reduce the cost of insurance premiums by promoting competition between insurance companies. Instead the health insurance reform bills passed by each house of congress give consumers less choice and less control and drive up costs of providing insurance while doing little or nothing to decrease the cost of providing health care. I intend to write more about health reform later. For now, it is enough to say that the proposals that the President supports are almost entirely backwards from what would provide the best health care to the most people at the least cost.

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