Thoughts on “American Challenges: The Blue Model Breaks Down”

n Saturday night, May 21, 2011, The John Batchelor Show (broadcast from AM 770 in the City and heard in the Albany, NY area on AM 1300) devoted the program to reactions to an article by Bard College professor Walter Russel Mead called American Challenges: The Blue Model Breaks Down (http://blogs.the-american-interest.com/wrm/2010/01/28/american-challenges-the-blue-model-breaks-down/) by several John Batchelor show contributors, such as Dr. Michael Vlahos (of the Naval War College and author of the influential book on the Global War on Terrorism. Fighting Identity) and John Fund (of The Wall Street Journal editorial page).  Mr. Mead’s thesis is:

Here in the quiet precincts of the stately Mead manor in exclusive Queens, as the dew gently falls over the mist-shrouded lawns and the pigeons coo soothingly from the historic-landmarked eaves, it is sometimes hard to believe, but out there in the workaday world the long and graceful decay of the American social model is accelerating into a more rapid and dangerous decline.  The core institutions, ideas and expectations that shaped American life for the sixty years after the New Deal don’t work anymore, and the gaps between the social system we’ve inherited and the system we need today are becoming so wide that we can no longer paper them over or ignore them.

Call this the blue model, and the chief division in American politics today is between those who think the blue model is the only possible or at least the best feasible way to organize a modern society and want to shore it up and defend it, and those who think the blue model, whatever benefits it had in the past, is no longer sustainable. That division is going to begin to erode in the next few years because the blue model is breaking down so fast and so far that not even its supporters can ignore the disintegration and disaster that it entails. (emphasis added)

What Mr. Mead, interviewed on the program, could not identify is what would replace this social model that has held sway in the United States since at least the New Deal, and possibly since the progressive Era of 100 years ago.  The erudite Dr. Vlahos stated that he saw a threat from the rising income inequalities that accompany the end of the Blue Model, similar to the ones that lead to the decline of the Dutch Republic, the French Monarchy and even the Czarist Regime in Russia.

In this essay, I will suggest that the Blue Model was, in fact, a serious digression from the founding economic and political concepts of our country and that the fall of this model will lead to return to the fractal distribution of power between the Federal government ( a government of limited powers, supreme within that limited ambit), the states and the people.  I will also suggest that the collapse of the Blue Model means the end of the Democrats as any kind of a viable, national political party, a process not dissimilar to the end of the Federalist Party and the subsequent “Era of Good Feelings” in the aftermath of the War of 1812, almost 200 years ago.  Finally, I will suggest that the end of the Democrats as a viable political party probably presages a schism in the Republican similar to that which produced the Whig Party in the 1820s.

RED STATES, READ NATION

Then-Senator Obama was right when he said in his 2008 Victory Speech in the Iowa Caucus, “We are not a collection of Red States and Blue States.”  The electoral map of the United States in the 2010 Mid-term elections clearly identifies the United States as a nation of Red States, some of which have Blue Catchment areas sufficient to elect a Democrat to state-wide office.

Many of these Blue catchment areas are becoming less blue.  New York City, as the Jonathan Mahler’s 2005 book, Ladies and Gentlemen, the Bronx Is Burning ( http://en.wikipedia.org/wiki/Ladies_and_Gentlemen,_The_Bronx_Is_Burning), demonstrates was (as late as 1977) a Far Left city, with a generally Far Left government.

That Far Left city has not elected a Democrat Mayor since 1993.  Gov. Andrew Cuomo, probably the only Democrat politician under age 65 with a positive (or any) national reputation other than Pres. Obama, has essentially governed like a Republican, appearing to be more the political son of New Jersey’s Chris Christie than of his own father, Gov. Mario Cuomo, one of the Liberal Lions who contended unsuccessfully for the mayor’s office in New York City in 1977, as recounted in Mahler’s book.

Why this change?

Because the ideas of the Left did not work.  The unworkable, ungovernable catastrophe New York City was in 1977 furnished definitive evidence of that failure and facilitated the election of the fiscally conservative to moderate Ed Koch, who created the foundation for today’s more business-friendly New York City.  Additionally, at the national level during the same period, Keynesian Stimulus, intended to balance out the business cycle, as partially implemented by the Republican President Richard (“We are all Keynesians now”) Nixon, had brought the nation by the late 1970s to a period of high inflation and low growth reminiscent of Great Britain after World War II or, increasingly, the United States today.  The Stagflation of the 1970s paved the way for the Age of Reagan.

The unfortunate part of this is that the Blue Model runs quite counter to the founding ideals of our Republic.  Men like Madison (and, especially, Hamilton) wanted a stronger central government than existed under the Articles of Confederation, but they did not want a unitary Republic.  Their overriding goal was to create a federation of sovereign (but not independent) states, with a Federal government of limited powers, but which would be supreme within that limited ambit.  As Madison wrote in Federalist No. 45:

The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite.

As President, Madison consistently vetoed “internal improvement” projects (such as roads and canals), even though he often favored them on pragmatic grounds as beneficial projects, because he did not believe that the federal government had the power to get involved in such things.  There were principled disputes over the limits of Federal power in the early Republic and views did change.  For example, Madison, who opposed the First Bank of the United States, chartered the Second Bank for reasons that roughly paralleled Justice Marshall’s “necessary and proper” reasoning in McCulloch v. Maryland (1819). However, the overarching understanding was that Federal power was limited.

We have become, because of unfortunate and lawless court decisions, like U.S. v. Butler (1937), which chose to credit Justice Story’s Commentaries on the Constitution over Madison’s Federalist in deciding that a separate spending power existed, more of a de facto unitary republic.  However, Rep. Ron Paul’s 2008 Presidential Campaign, and the burgeoning Tea Party/Liberty Movement that sprang from it, have caused people to look at the legitimacy of programs like Social Security and Medicare, which (in addition to being Constitutionally questionable) are in impending financial collapse.  (As they were, as many people do not remember, during the last major down turn in the early 1980s).

We are, in short, a Red Nation, because we have seen the lack of  workable (even any) ideas in the modern Democratic Party.  We have become more conservative in response to an Obama Administration and a 111th Congress dishing up the failed gruel of Keynesian Stimulus, attempting to solve a debt crisis with more debt, with predictably dire results.  We are a Red Nation because we have READ our founding documents and the works of our Founders and Framers and wish to return to first principals.

FREE MEN, FREE MARKETS, FREE PULPITS OR WHY THE MORMON CHURCH MATTERS

What will replace the failed Blue Model? I think the following ideas, drawn from old and tested concepts, are critical to the new paradigm:

1. If the 20th Century, from Lochner, through Griswold to Roe v. Wade, was the century of the Civil War Amendments, the 21st should be the Century of the Ninth and Tenth Amendments.

2.  The great, looming realities of the 21st Century are: 1) we will have to compete for foreign capital with everyone else; and 2) we will have a less affluent population and a slower rate of growth.  Ever see those commercials for investment in Macedonia on Fox and CNBC?  They are the competition.

3.  These two constraints mean: 1) we will have to have to allocate a lower percentage of our GDP to government to attract investment; and 2) we will probably have a shrinking tax base in any event.

4.  There will, however, be needs that will have to be met and investment rarely comes to unstable nation-states or to those without a properly educated work force.

5.  The key to dealing with items 3 and 4 above are the Ninth and Tenth Amendments.

6.  The Federal Government needs to shrink, performing only its Constitutionally enumerated powers, as Madison believed it should, even though this is not the current state of the law.

7.  Things like Education, properly a State (or, better, a local) function, would be returned to that level and the Federal Education Department could be eliminated.  Something new needs to replace the current model of property-tax-funded, free, universal K-12 public education.  We need as many incubators as possible to develop best practices.  This is the epitome of Brandise’s view of the states as the “laboratories of democracy.”

8.  Universal health care could be pursued through legal reform and the establishment of not-for-profit buying cooperatives/association health plans.  Instead of creating a centralized government bureaucracy like the DMV (or continuing the current employment-based system), Americans should get their health insurance through competing not-for-profit groups like USAA.  The Federal Government, post Iraq and Katrina, does not have the legitimacy to make hard choices in this immensely personal area.

9.  If this proves successful, Social Security and pensions could be privatized on a similar model.

10. National defense is a (perhaps “the”) critical function of government but it does not require continuing to buy weapons for the Cold War.  More money, time and effort need to be given to State and USAID.  The Department of Defense needs to think, not only about the current war(s), but the next.  This would best be done through investing in the development and honing of the Military’s current stable of exceptionally experienced Officers and NCOs.  Why not try to make them all McMasters and Nagles?  GEN Peterus’s exceptional brain trust in Iraq  needs to become the norm, not the exception.

11.  The Troop Program Units (“TPUs”) of the Army and Air Force Reserves should be reassigned to the states.  State National Guards and Militia ought to be capable enough to handle a disaster at the Hurricane Katrina level on their own.  If these forces are deployed in Federal service, there should be Inter-state compacts that handle the issue.  As a result, FEMA should be stood-down, saving money and decentralizing disaster response and recovery.

12.  Returning Education to the States and allowing individuals to come together to solve common problems though voluntary organizations and the “Social Sector” is not only more efficient, it is more resilient, an issue identified by thinkers as diverse as Tocqueville, Drucker, Ramo, Robb, Joe McCormick and the Transpartisans and William Lind.

In short, we must realize that the decentralized, fractal distribution of power between the Federal government, states and people created by the Constitution is a far better approach to today’s decentralized world than the centralized, bureaucratic Blue Model of the last 100 years. We must realize that the self-reliant and communitarian values of the Second Great Awakening, represented by the Church of Jesus Christ of Latter Day Saints (the “Mormons”) who are a veritable Asimov’s Foundation of these values. The Mormon’s highly regarded social welfare system can create a model for the emergence of an effective Social Sector as the Federal Government extricates itself from the business of Entitlements.

After disgrace over private sexual misconduct ended his brilliant career as Secretary of the Treasury, Alexander Hamilton became one of the most successful lawyers in the State of New York at the turn of the 19th Century.  He did this, not by being brilliant, but by returning to first principals and applying them to an increasingly complex world of inter-state and even inter-national commerce and markets.

To thrive, probably even to survive, in a global and interconnected world, our country has to return to its own first principals, returning to being a nation of free men, free markets and free pulpits.

SOCIAL INEQUALITY OR WHY AYN RAND MATTERS

Some say that the end of the Blue Social Model will increase already common social inequality and some say that will have a corrosive impact on the nation.  I disagree, in part because of the writings of Ayn Rand, a naturalized American citizen, who saw something in American culture and character what many of us who were born here do not.

I am no fan of Objectivism, Rand’s “philosophical” movement.  It is, in my opinion, contradictory and pseudo-intellectual.  As a writer, many critics maintain she was a talented purveyor of pulp fiction, as popular in the 1940s and 1950s for her depictions of beautiful, hard women in bright red lipstick being ravaged by Randian Übermenschen as for her “philosophy.”  (I’m as interested in the concept of  beautiful, hard women in bright red lipstick as the next mensch,  Über or otherwise, but that alone is not art, for either Rand or her contemporary, Mickey Spillane.)
However, like most novelists who are remembered, Rand saw something in human nature (or at least the American character) that was true and pure and often ignored.  Rand saw how important the entrepreneur was, not only to our economy, but to our culture.  She also saw that Americans understand that those who are truly talented should be truly rewarded and that we do not have the social and economic jealousies that burden other societies.

In the beginning of the film Patton (1970), George C. Scott delivers a speech as George S. Patton in which he states:

When you were kids, you all admired the champion marble shooter, the fastest runner, big league ball players, the toughest boxers. Americans love a winner and will not tolerate a loser. Americans play to win all the time. I wouldn’t give a hoot in hell for a man who lost and laughed.

This is why the average American does not resent the winners in the “winner take all society.”  This is why Atlas Shrugged is again atop the best seller list and the talk of the young.  This is why most of us, even average schlubs like me, are not offended by the very able people in that novel opting out when they were kept from striving.

We, in short, understand two things as Americans:

1)  as the great Milton Friedman said, “There is no such thing as a free lunch,” you get paid for what you contribute; and
2)  you have to let the fast horses run.

Most of us, plumbers and carpenters, CPAs and lawyers, have jobs because there are people who can pay for the services we offer.  Most of us benefit from what the brilliant scientists and software developers and artists create and are entertained  by the striving of the most talented actors and athletes.  We do not resent these people because we know what these people do and how much more talented they are than we are.  Once we understand just how rare the talents are that make a great hedge fund manager (and how perishable they are) and what importance they have in keeping, for example, pension plans secure, we do not resent them either.

We do resent those whose talents do not merit the rewards they receive however.  As Mr. Mead states in his essay:

First, voters simply will not be taxed to cover the costs of blue government.  Voters with insecure job tenure and, at best, defined-contribution rather than defined-benefit pensions will simply not pay higher taxes so that bureaucrats can enjoy lifetime tenure and secure pensions. Second, voters will not accept the shoddy services that blue government provides.  Governmental is going to have to respond to growing ‘consumer’ demand for more user-friendly, customer-oriented approaches.  The arrogant lifetime bureaucrat at the Department of Motor Vehicles is going to have to turn into the Starbucks barista offering service with a smile.

While demagogue Democrats try to stir up bad feelings about “stagnant” real wages, most of us understand at some level:

1) most of the productivity gains of the last 18 years or so have come from technology (computers, etc.), hence capital, and not labor;
2) that when productivity was stagnant from the early 1970s to the early 1990s, we continued to get pay raises we mostly had not earned;
3) this fueled the Great Inflation of the 1970s and CANNOT be repeated; and
4) most of us are a cost and add little and what we do add is fungible.

If we ourselves do not have the talent and the work ethic to be Henry Ford or Bill Gates (or, for that matter the recent Jamaican immigrant who opens the patty place or the Chinese immigrant who opens a buffet), we instinctively admire those who do.  They work for themselves.  Their success or failure is on their own terms, contingent on the interplay of their talents and flaws.  It is something that resonates in the American heart and Rand, in the depths of the age of The Organization Man and The Lonely Crowd,  understood that.

In short, most of us are smart enough to know that, if you like light at night and cooked food, you should root for Prometheus and not the eagle, or rather, the vulture.

THE NEW ERA OF GOOD FEELINGS

In their roman-a-clef play about the Scopes Monkey trial, Inherit the Wind, Jerome Lawrence and Robert E. Lee’s H.L. Menken figure, E.K. Hornbeck, says of COL Brady (a thinly disguised William Jennings Bryan):

Time was when Brady was the hero of the hinterland. Waterboy for
the great unwashed. But they’ve got inside plumbing in their heads
these days. There’s a highway through the backwoods now, and the
trees of the forest have reluctantly made room for their leafless
cousins, the telephone poles.

Alas, this is the impending fate of  a Democrat Party entwined with old and failed ideas. The travails of Representative Weiner are illustrative of this point. As a political insider  told NY Post columnist Andrea Peyser, part of why Weiner has not yet resigned is that he is unemployable: he has never worked in the private sector (http://www.nypost.com/p/news/national/having_kid_is_not_one_of_the_steps_LROunpWHrWFBlphCWjct7N/1). All he knows is the Blue Model, that is anathema to productivity and achievement.

Some see hope for the Democrats in the young and in our growing African American and Hispanic population. That hope is gravely misplaced.

Immigrants from the global South often come to the United States and Great Britain seeking greater economic and, especially, entrepreneurial opportunity than their own nations’ version of the Blue Model provides, as illustrated by Nigerian-British Economist Dambisa Moyo (http://www.guardian.co.uk/books/2011/jan/16/west-lost-dambisa-moyo-review). Given the almost unimaginable tax impact of the collapsing Blue Model on the young, I can’t see that demographic staying with the Democrats by 2016, as this issue becomes more plain. While the Democrats present themselves as friends of the poor, as Meade points out in a recent Blog (http://blogs.the-american-interest.com/wrm/2011/06/07/fanniegate-gamechanger-for-the-gop/) on Gretchen Morgenson’s Reckless Endnagerment: How Outsized Ambition, Greed, and Corruption Led to Economic Armageddon, the benefits of these programs often go to the rich and connected while the poor bear the inevitable burdens.

As weak as the current Republican presidential field is, I see little confidence in Team Obama.  Like George H.W. Bush, President Obama is an able, decent, cerebral and dispassionate man . . . one admired but not loved.  As George H.W. Bush discovered, a President who governs in hard economic times (that are not improved by his policies seasonably) needs to loved (as FDR was) to be re-elected.  I suspect this Administration will likely be cut short at one term by someone who may not even be in the race yet, or someone being derided, as  Clinton was in 1992, as one of the “Seven Dwarves.”

When you think of Republicans with national reputations under the age of 65 or so, the list is long: Ryan, Jindal, McCotter, Gibson, Bachmann, DeMint, Rubio, Rand Paul, Perry, Hailey and Walker, to name a few.  Outside of Pres. Obama, there is only Gov. Cuomo as a creditable, youngish national Democrat politician, and Cuomo is credible only to the extent that he governs in derogation of the Blue Model.  By 2016, I think the death of the Democrat Party will be clear even to the pundits.

However, by 2022 or so, I would suspect that Republicans will schism.

My guess (at this point, it can’t be more) is that one wing will follow Rep. Ron Paul’s idea that perhaps even the Constitution went too far and that it had the seeds within it that spawned our current Federal Leviathan.  Others, while wanting to strictly construe the “necessary and proper” clause, will be more content with something closer to the 19th Century view of Federalism.  I also think that there will be a schism between those who favor austerity as an intrinsic value and those who see it as the key to renewed economic growth.  Finally, I think there will be a schism between those who favor laws that facilitate the development of what Peter Drucker called the “Social Sector” to replace the Blue Model and those who think this should not be done by government, certainly not at the Federal level.

However, in either case, these views are more effective and more natural to this polity that the Blue Model that went before.  I agree with Mr. Mead that trying times approach.  As with the days of the Founding and the Framing, as with the time of the Civil War, as in the time of the Second World War, these times will also ask us for that which is best in our nature and to strive and risk for what we believe in and think is right.

As one of those people who had the honor of being recalled by the Army after a long break in service for a year (in my case spent reasonably uneventfully in the Horn of Africa), I do not doubt for one moment that the young Marines, Airmen, Soldiers and Sailors I saw serving in the days after 9-11 and their generation, the people one regimental commander called “the new Greatest Generation,” are not ready to better the world, no matter what the cost.  They have done this for the last ten years.  Instead, it is now time for Boomers (like myself) to do what we have never done before: to give up blind self-interest for the sake of doing the right thing.

(A version of this blog first appeared in the Albany Times Union Tea Party Voices Blog.)

If you have been around the healthcare sector  or are “into public policy” (which is clearly less of an issue than being unusually fond of stuffed animals or something, but is still outside the norm), then you know that this is not the first time that Medicare has been in extremis.

Back in 1983, in another major downturn, where revenues from payroll taxes declined, the old Part A (Hospital Trust Fund) payment approach of paying hospitals’ Usual, Customary and Reasonable (“UCR”) rates (i.e., pay hospitals anything they wanted for whatever they did) was changed to a Diagnostic Related Groups (“DRGs”) model, a “case rate” for “bundled services.”  (Which is to say a global price for treating, for example, lung cancer, in a certain type of hospital, in a certain region of the country, no matter what the treatment actually cost.)

That shored up Part A . . . at least until 1994, when every cent of your salary was exposed to the Medicare Pay Roll Tax (unlike Social Security, which is capped at a certain [rising] amount).

This time around, however, those types of tweaks won’t work.

The recent annual Trustees’ Report indicates that the Part A Trust Fund will be insolvent by 2024, some FIVE YEARS sooner than last year’s projection  (https://www.cms.gov/ReportsTrustFunds/downloads/tr2011.pdf).  Given experience with large government organizations over the years, my assumption is that this is likely an extremely optimistic projection.

So, what can be done?

Well, you can always raise the payroll tax, but that seems likely to offend almost all of the population, that payroll tax not being capped.  You can, as has already been proposed for the Patient Protection and Affordable Care Act (“PPACA,” more familiarly “Obamacare”), have a payroll tax on investment income, which in a time of less available capital and global competition for that capital, seems like an adverse policy for growth (or even avoiding a recession).  We currently finance Part D (prescription drugs) and Part B (physician services) out of general fund revenues, so we could use general fund revenues (i.e., Federal taxes), but there seems to be neither political will nor popular support for Federal tax increases.

If we don’t increase taxes, we cut benefits.  As to Part A, hospitals (especially teaching hospitals like  Albany Medical Center) are Medicare-dependent.

As to doctors, under Part B, well, docs used to participate (the buzz word is “par”) with Medicare, even though its payment rates were lower than private, third party payors because it paid with in 45 days on a clean claim without office staff having to do the “Prompt Payment Law Dance” with the Center for medicare and Medicaid Services (“CMS” (or, in the old days, HCFA) as you had to with many private third part payors.

A lot of this has changed  (http://www.recordonline.com/apps/pbcs.dll/article?AID=/20100805/BIZ/8050333/-1/rss06).  Back in the late 1990s, part of the budget fix was to create a “sustainable growth rate” for Medicare, which in English means that docs’ reimbursement for procedures and office visits under the Medicare Fee Schedule would drop . . . a lot.  Since the early part of this century (about 8 years ago), Congress passes a bill each year that circumvents this reduction, called the “doc fix.”

The “doc fix” process makes payment slower, and Medicare a less desirable payor.  However, if the “doc fix” is not done, Medicare reimbursement for procedures and office visits drops like a stone, making Medicare a very undesirable payor.

In the late 1990s, HCFA (now CMS) let docs opt out of Medicare.  Because Medicare was cash flow, that was rare.  Now, because of the slowing payment, uncertainty and the potential to be a major money pit (less money for your most expensive-to-treat patients), more docs either close their practices to new Medicare patients or don’t par at all.

Clearly, something has to be done.  Way out in the wild west of New York 26, “Mediscare” was a big factor (along with a faux Tea Party Candidate and a Republican Party candidate who was more Junior  League / Country Club than Rust Belt, at least in affect, in a formerly industrial district that elected a former Bills QB  to Congress and actually does love pork rinds) in a Democrat taking a traditionally Republican seat.

However, if you think that means something, do the names “Harris Wofford” and “Scott Murphy” strike a familiar note?   (As they used to say on Laugh In.)  People love big social programs . . . until they know how much they cost. (See, e.g., http://content.healthaffairs.o… http://www.nytimes.com/1989/10…

If you don’t like Paul Ryan’s plan for Medicare and Medicaid reform, what are yours?  As John Lennon said:

You say you got a real solution
Well you know
We’d all love to see the plan

So far, the Democrats have not offered “a real solution” (or even a “plan”).

Now, when you get old, you start to get suspicious of anyone who talks about “a real solution,” as opposed to “some real solutions.”  Medicare is a real hard nut of a problem because it really is harder to insure people with experience-rated insurance after a certain point, which is why the program exists in the first place.

However, big, centralized, “Second Wave” (hat tip to the Tofflers) “one-size-fits-all” programs” are failing every where.  (And not just in the public sector.  As Bard College Professor Walter Russell Meade points out in his blog, IBM and Ford were as much Second Wave or, in his words. “Blue Model” artifacts as Medicare http://blogs.the-american-inte…

Given all of this, here are some thoughts.  None are brilliant or original.  None solves the problem in itself.  However, they give some things that people can talk about, rather than demagogue:

1)  You clearly need to make people more price-conscious and see themselves, as I think Rosabeth Moss Kantor of the Harvard Business School said, as consumers rather than patients.  (See, e.g., https://pnd.hseland.ie/downloa… http://www.theatlantic.com/mag…

2)  However, even in a Web-MD world, I don’t see people effectively comparison shopping for cardiac cath.

3) Still, most medical treatment is a routine, “why does this cold linger,” kind of thing.  People could shop around for that and things like Health Savings Accounts (“HSAs”) facilitate that, something that Rep. Ryan’s plan expands.

4)  You could further reduce these costs with some intelligent de-regulation.

Walk-in clinics, staffed by advanced practice nurses using treatment protocols, have out-comes data at least as good (and possibly better) than the traditional primary care practice.  Put those in a Wal-Mart or a Target and you have less expensive provider and lower overhead with at least as good quality.

This happens in many parts of the country.  It does not happen everywhere because of corporate practice and fee splitting laws, such as those we have in New York.  Loosen these restrictions, as we have recently loosened the Nursing Practice Act in the NY Education Law to give advanced practice nurses somewhat more autonomy, and you can get the lee way to find better and cheaper models of health care delivery, the kinds of things that  helped deliver cel-phones to the market that were not the size of a brick and didn’t cost several thousand dollars.  We don’t use mobile phones like Richard Diamond did anymore.  Why is primary  care still largely delivered like it was by Marcus Welby, M.D.?

5)  Another area that could stand extensive de-regulation is tele-medicine.

If we do these types of things, we may reduce the general rate of Medical inflation which is much higher than CPI inflation.  This would make Rep. Ryan’s idea of holding the rate of growth of premium support in his plan to CPI (rather than medical inflation) growth less of a potential hardship on beneficiaries.

6)  Part C (Medicare Advantage/Medicare managed care plans) and the fact that private third party payors cover Medicare-eligible workers who are still in the work force at competitive rates is a sign that many (most?) people are not commercially uninsurable at 65, as in 1965.  (If there is “cherry-picking,” this implies there are cherries to pick.)   The age of eligibility for traditional Medicare could be pushed back to when age-based uninsurability  happens for most people, at perhaps 80.  High risk pools could be used on a case by case basis for covering people with pre-existing conditions and severe illness.

7)  Given that Part C Plans can cover hospitals, physician services and prescription drug benefits, should these service lines be separated generally under Medicare into Part A, B and D?

 Medicare, as a very centralized program whose fee schedules and rules become a de facto “gold standard” in healthcare (most private third party payors’ fee schedules are stated as multiples of the Medicare Fee  Schedule), may be limiting the development of better local solutions.

Large, multi-specialty group practices proliferate, when they may not be the best model, in part because of compliance rules under the Federal Stark Amendment and the Anti-kickback Statute (which outlaw certain self-interested transactions under Federal health care programs like Medicare).  Reducing Medicare might cause better local solutions to emerge.  (See, e.g., http://www.newyorker.com/repor…

9)  PPACA is predicated financially on ending the “doc fix.”  There is no way a Democrat Congress can do that politically, so you will have: 1)  PPACA; 2) the “docfix; and 3) a lot of red ink.

In contrast, there is no way a Republican Congress can avoid repealing PPACA, which means there is money to do the “doc fix,” especially where we are moving under the Ryan Plan to a more sustainable system for the crest of the Baby Boom waive (Year Group 1957 being the crest).

Given this, if the Democrats push “Mediscare,” they probably lose the Senate and  lose many more House seats.

10)  Ryan’s Medicaid proposal will probably be more contentious.

Medicaid is already a State-Federal program.  Since  Medicaid pays for both: 1) routine and acute care for the poor; and 2) last resort long term (i.e., nursing home) care for both the poor and the Middle Class, I would expect more equal protection challenges to this than you saw with Welfare reform in the 1990s.

Rep. Ryan’s alternative to PPACA contained a concept called “association healthcare plans,” where small businesses could band together under the rubric of a not-for-profit entity (like the Chamber of Commerce) to buy insurance.

Possibly, this system could be used to reform Medicaid and State Child Health Plus.  If it worked there, it might prove to be a better mechanism for reform than the Exchanges proposed under Ryan’s Medicare reform plan (or under PPACA).

The old liberal nostrums have failed.  (See, e.g., http://blogs.the-american-inte… http://www.freerepublic.com/fo… http://pajamasmedia.com/instap… Big centralized programs like Medicare and Social Security represent the past.  However, financial security in old age or universal healthcare coverage are not evils.  Paul Ryan, and the Republican Party generally,  are at least thinking about how to do these things in a sustainable and, yes, more legitimate way.  If  Democrats don’t, if they rely on “Mediscare,” they risk irrelevance in 2012 and political extinction by 2016.

Call it “Murphy’s Law.”

In a recent interview with Albany’s Times Union newspaper (http://www.timesunion.com/default/article/Congressman-Scott-Murphy-598287.php), Rep, Scott Murphy (D-Glens Falls) talked about things his constituents might not know about him, among them that “Matt Damon lived in . . . [his] . . . dorm in college at Harvard University.”

This is an ideal metaphor for his race in New York’s 20^th Congressional District against Chris Gibson, the Republican candidate and a retired Army Colonel.  Where Rep. Murphy knew someone slightly who achieved fame playing an Army paratrooper serving in combat during D-Day, Chris Gibson and his men achieved victory being Army paratroopers in combat in Iraq.   

Some people have it . . . and some people . . . don’t.

But that “something” does not have to be physical courage.  It can be moral courage as well.

Rep. Murphy portrays himself as a “fiscal conservative,” yet he voted for things like Cap and Trade that were far from fiscally conservative.  He even “voted for  . . . [the Patient Protection and Affordable Care Act (“PPACA” a/k/a “ObamaCare”) . . .  after voting against it.” 

As of the end of July, Rep. Murphy at long last sought (unsuccessfully http://adirondackdailyenterprise.com/page/content.detail/id/514608.html?nav=5017) to amend the Bill to undo some of the damage this legislation does to small businesses by repealing onerous IRS reporting requirements.   One wonders, if he had this concern and if he were a “fiscal conservative,” why he did not simply continue to vote against a bill he initially did not support?

One especially wonders this based on comments Rep. Murphy made at a Town Hall in Valatie, N.Y. on August 8, 2009.  He talked convincingly about problems his own family was having with the Federal Employee Health Benefit Program (“FEHBP”).  His comment implied that there was a lack of administrative support in FEHBP and that participants and beneficiaries were often left in limbo. His comment implied that there was not, as with good employer-based plans, someone to advocate for the patient (and, by extension, the doctor or institutional provider), something that is commonly perceived about FEHBP.  Given this, Rep. Murphy’s eventual about-face to vote for PPACA, which will likely force people from employment-based plans into the Exchanges, which (like FEHBP) lack a mechanism to advocate for patients and providers, was (and is) stunningly disappointing.

Does Rep. Murphy, this “fiscal conservative,” fear Speaker Pelosi so much that he disregarded his own experience and his constituents’ monolithic opposition to PPACA to vote in favor of this  Bill, which he is now unsuccessfully trying to amend?  Did he think his campaign coffers would swell if he put aside his constituents’ strong and legitimate concerns about PPACA?

If he did, it was all for naught. 

In the second quarter of the campaign, Gibson, a retired career Soldier, who is not independently wealthy and who is in his first political campaign, significantly outperformed Murphy in fund raising.  Gibson’s campaign has also outperformed Murphy’s in collecting petitions.  Even the New York Times rates the race as a “toss up.” ( http://elections.nytimes.com/2010/house/new-york/20)  The handwriting is on the wall for Rep. Murphy’s political career.

In his play Julius Caesar, William Shakespeare wrote:

Cowards die many times before their deaths; The valiant never taste of death but  once.

In the context of the play, the line concerns physical courage and actual death, but it also applies to moral courage.  In the less than three months remaining before November 2d, Rep. Murphy will face many “deaths” before what will likely be the death of his political aspirations (http://www.americanthinker.com/blog/2009/08/town_hall_in_upstate_ny_locals.html).  On the cold morning of November 3d, will Scott Murphy wish for the chance he squandered to stand with his constituents against Speaker Pelosi, where he knew them to be right?

Somehow I doubt Chris Gibson, who if elected will not take his Army pension (http://www.youtube.com/watch?v=P6E5O7ce2mw&feature=player_embedded) and who is campaigning as an advocate for term limits (http://poststar.com/news/local/article_5de8e9d4-9fd4-11df-98d5-001cc4c002e0.html), will have many regrets, or many moments where he will be tempted to put his own passing political advantage ahead of his constituents.

Some people have it . . . and some people . . . don’t.

Gibson has it (or them): convictions.

The campaigns of COL (Ret.) Chris Gibson, a retired, active duty  Army officer running in the New York 20^th District, and Andrew “Rocky” Raczkowsky, an Army Reservist seeking the Republican nomination in the Michigan 9^th, reflect  the general meme of veterans of the “Long War” seeking political office.  However, they also demonstrate the variety of experiences Soldiers, Sailors, Airmen and Marines have had in this “Long War.”

While both are Airborne officers and hold combat decorations for their service, the nature of each man’s service differs.   Gibson commanded an Airborne Infantry Battalion in Iraq, while Raczkowsky served in “the softer side of Special Operations” as a Civil Affairs Team (“CAT”) Leader in the Horn of Africa and Afghanistan.  Gibson is a retired career Soldier seeking to continue to serve his country as a citizen-legislator, while Raczkowsky is a career state legislator, attorney and businessman, who has also served his country in war as a citizen-soldier.

Gibson and his battalion from the storied 82d Airborne Division, attached to the Armored Cavalry Regiment (“ACR”) commanded by the legendary H.R. McMasters, used their military prowess to bring peace and security to the troubled Iraqi city of Tal Afar during the 2005 elections.  Raczkowsky, as a CAT Leader in the Somali National Regional State (“SNRS”) of Ethiopia’s rugged  Ogaden region and as a liaison officer to the US Embassy in Nairobi, Kenya in 2004, used his lawyer and politician’s skills at negotiation and bringing consensus to help keep the Horn of Africa the least eventful place in the Central Command (“CENTCOM”) Joint Operations Area (“CJOA”).

However, both of these men are part of a generation of Army and Marine Corps leaders who reversed the famous quote from Tacitus: they took a desert and made it peace.

Equally important, in a real way, the fight each of these men fought overseas will continue in Congress.

In Iraq, Gibson contended with “dead-enders” who did not want to admit the Baathist/Arab Socialist day of Saddam was through.   Both Gibson and Raczkowsky faced Al Qaida (“AQ”)-related Salafists, who long for some lost former paradise of Islamic fundamentalism that they believe could be realized if Modernity (to use Naval War College scholar Michael Vlahos’s useful phrase) could be done away with.

The opposition they will face in Congress is not composed of evil or violent men and women.  However, their opponents are animated by the same refusal to accept reality.

Those who espouse the failed ideas of Keynesian Stimulus and centralization do so less violently than Saddam’s “dead enders.”   However, these Keynesians’ nonviolent resistance is rooted in same misguided unwillingness to realize that their ideas have failed and have brought in their wake misery for all but a favored few that animated the Baathist’s violent and nihilistic struggle.  In the same way, radical environmentalists, like AQ and the Salafist movement, have an implacable hostility to Modernity, in favor of a sylvan dream that likely never existed and surely will not be made to exist in any real way.

Both Gibson and Raczkowsky’s experiences are the converse of John Reed, the American Journalist who visited Soviet Russia early on, who said, “I have been over into the future, and it works.”  After tours in Post-Baathist Iraq and Post-Communist Yugoslavia, Chris Gibson, for example, can say of the aftermath of the socialist experiment, “I have seen this future and it failed.”

Men and women who have seen the end state of societies that were not built on free men and free markets and free pulpits will not be quick to embrace centralized, one-size-fits-all solutions imposed from on-high. 

They will fight for tax cuts so that people and businesses can decide how to spend their own money.  They will fight to ease the endless, meaningless Harrison Bergeron regulatory impediments imposed on small business.   They will fight the kind of unthinking, bureaucratic, empire building centralization that the Army traditionally (and memorably) characterizes as “chickensh-t.”   

They have read our Constitution and understand that our federal government is one of limited powers, if supreme in that limited scope. They understand that, in many cases, instead of the cry being, “There ought to be a law,” it should be, “There should be a contract, freely made at arm’s length, with the minimum of government interference.”  In the spirit of the Framers’ generation, who were men who mostly fought for this country yet were ambivalent about large standing armies and military adventurism, they will fight to insure we have what we need to defend our country, but will not be quick to go to war for less than compelling reasons.

Radio Talk Show Host Mark Levin said something last week that was very perceptive: after the financial crisis, the welfare state is no longer sustainable—everything has changed.  Levin went on to say that the Democratic Party, in the face of this sea-change, is attempting to make our society more socialized and less free.  The American people know this is unworkable, hence the burgeoning Tea Party/Liberty Movement and hence the poll where 55% of likely voters characterize President Obama as a socialist.  (One wonders what kind of socialist, Ernesto “Che” Guevara, Fred Kite from I’m Alright Jack or, more probably, some academic Marxist from Harvard Yard?)

To achieve a return to limited government and the fractal distribution of power between the federal government, the states and the people called for in the Constitution, we will require the services of men and women who have seen and heard and smelled and tasted what happens if we go toward centralization and away from freedom. 

Those people, people like Gibson and Raczkowsky, have earned our support, not because they served, but because of what they learned while serving.   Elect them, so they may serve us yet again in Congress.                       

Victor Davis Hanson is one of America’s most brilliant public intellectuals. However, in his recent articles on veterans of the Long War running for Congress (http://article.nationalreview.com/433510/soldier-citizens-for-congress/victor-davis-hanson; http://www.nypost.com/p/news/o… he misses the mark in my opinion.

It is Hanson’s opinion that veteran-candidates like retired Army Colonel Chris Gibson run saying, “Vote me for because I did my duty, even if some in this country questioned why one would.” Instead, it seems that people like Chris Gibson run because of what they saw while they did that duty.

Chris Gibson, running for Congress against Rep. Murphy in the New York 20th Congressional District, is a 1986 Magna cum Laude graduate of Siena College, commissioned in the Infantry Branch of the United States Army. Unlike officers commissioned even a few years before, the Cold War was over early in his career. (Although he had served earlier as an enlisted Infantryman, it was in the Army National Guard, in a time when it seldom deployed.) The central question of his military career was not the confrontation between East and West, between Communism and Freedom, but rather was how to deal with the aftermath of that confrontation.

Chris Gibson’s military career, especially beginning with the 1990-’91 Gulf War, was spent dealing with what some have called “the New World Disorder.” With the threat of Armageddon off the table, regional wars became possible and then common. Out of these facts came Gibson’s three subsequent tours in Iraq and his deployment to Bosnia. But in a larger sense, this “New Word Disorder” is rooted in the failure of elephantine, bloated, centralized government structures that were implacably hostile to free markets, free pulpits and free men. The same forces that caused these nations to lose the Cold War often prevented them from liberalizing their economies and improving the lot of their people, leading to conflict.

So when Chris Gibson speaks of the importance of small business, of free markets, or low taxes and limited government, he does so not as a small business man (or a lawyer or accountant who advises them), but rather as a man who lead Soldiers into harm’s way in nations (former Communist Bosnia and former-Baathist Iraq) that had failed because they lacked these things.

Some have attacked Gibson for his lack of private sector experience, but that disregards the fact that he has vast experience helping to re-build places that lacked a private sector and, therefore, collapsed. While some have attacked what he says as merely Republican orthodoxy, that disregards the fact that low taxes, limited government and free market solutions work, and other ideas, as he saw while serving in Bosnia and Iraq, don’t. What is orthodoxy is often synonymous with that which is workable.

Chris Gibson is certainly not a career politician. (Career politicians don’t offer, do they Jack McEneny, to waive their other government pensions if elected, for example.) However, he has seen the political process in the streets of Iraq. His generation of Army and Marine Corps leaders learned the hard way how to reach out to hostile people and forge consensus. He is part of an American Military that itself learned that the centralized, bureaucratic, one size-fits-all approach of the Cold War did not fit the paradigm of the New World Disorder, what the Marine Corps calls “The Strategic Corporal in the Three Block War (http://www.au.af.mil/au/awc/awcgate/usmc/strategic_corporal.htm).”

Chris Gibson was a great Soldier: Airborne Ranger; Distinguished Honor Graduate of his Command & General Staff College Class (like Marshall and Eisenhower before him); wounded in combat; recipient of the Combat Infantryman’s Badge and four Bronze Stars; and the commander of a Parachute Infantry Battalion and Parachute Infantry Brigade in the storied 82d Airborne Division. He is the sort of leader who often receives encouraging notes from his former Soldiers on his campaign web-site, something any former Soldier or Marine will note is uncommon and powerful. But he is also a product of an Army that is attempting to broaden the horizons of its leaders. He received an MA, MPA and PhD. from Cornell and taught government to brilliant cadets at the United States Military Academy. He served two tours as a Congressional Liaison (like John McCain before him). He served as a Fellow at the Hoover Institution. In short, far outside of his combat service, his is a far more varied and significant resume than the incumbent’s.

So it comes to this: who will the 20th Congressional District choose to represent them? Will they choose a former venture capitalist, who voted for a health care bill his constituents opposed (and about which he was clearly troubled) because he could not stand up to his Party? Or will we chose a man who spent his professional career cleaning up the messes created by the kind of social engineering and bureaucratic centralization the “Health Care Reform Bill” represents?

As I write this, Greece, the cradle of Democracy, burns because the people came to expect too much from their government. Will we chose that road? I think not. In closing, I remind you of what Oliver Cromwell said:

If you choose godly honest men to be captains of horse, honest men will follow them . . . .

Choose this honest man, Chris Gibson, to represent the District.

There is much talk about the recent Arizona law on illegal immigration.  But I think it is a proxy for deeper issues about the legitimacy . . . and even the tenability . . . of our Federal system.
 
While crime on the Border itself is flat (http://www.dailykos.com/story/2010/5/2/862771/-AZ-Republic-says-its-NOT-about-the-borders citing http://www.azcentral.com/arizonarepublic/news/articles/2010/05/02/20100502arizona-border-violence-mexico.html), crime in other parts of Arizona rises, often with ties to Mexico (http://www.msnbc.msn.com/id/22614102/).  As Peggy Noonan writes in the Wall Street Journal:
 
     In New York, legal and illegal immigrants keep the city running: They work hard jobs
     with brutal hours, rip off no one on Wall Street, and do not crash the economy. They
     are generally considered among the good guys. I’m not sure New Yorkers can fairly
     judge the situation in Arizona, nor Arizonans the situation in New  York.
     http://online.wsj.com/article/declarations.html
 
Yeah, it is about the Border, Daily Kos to the contrary and, yeah, it is increasingly about a Federal government that seems overbroad and ineffective.  Arizona’s response is ham-handed, excessive and, likely (especially before recent amendments) unconstitutional.  But the concern is real and justified (if over-stated), the product of a Mexican . . . and a US . . . government that seem unwilling or unable to govern.
 
In 1944, Fredric Hayek wrote the very well regarded book, The Road to Serfdom, which stated that centralized systems lead to people losing their liberty, in part because central authority has no access to (and cannot correctly evaluate, due to its frame of reference) local information, part of Peggy Noonan’s point. 
 
However, historically, the actual “road to serfdom” started with the collapse of efficient Roman central authority in the West and the East along with the allocation of power and responsibility to local leaders (Dux Belli, “War Leaders” later “Dukes’) and laws that bound people to the land to increase local agricultural productivity as a result of declining trade during and in the aftermath of the Crisis of the Third Century.
 
From the time of the assassination of Alexander Severus to the rise of Diocletian, Rome suffered a crisis of legitimacy so severe that parts of Rome, in the West, the Gallic Empire in Spain, Gaul and Britain, and in the East, the Palmyrene Empire in Syria, parts of Egypt and the Levant, were ruled by successor states, 
 
Even following the restoration of central authority started by Aurelian and completed by Diocletian, the Imperial authority was broken up, with an Augustus and a subordinate Caser ruling both in the East and in the West.  City dwellers, swarming into the countryside for food and protection during these unstable times, became a new class of second-class citizen called coloni, who later were bound to the land.  The pattern for the Middle Ages, especially in the West, was set. 
 
While it is not the Palmyrene Empire, what Arizona is doing is an assertion of powers reserved to the Federal government: setting immigration and naturalization policy, in other words “defending the Border.”  It is worth noting that this was exactly what the Palmyrenes did: defending Rome’s limes parthanicus against the Sassanid Persians when Roman central authority could not.
 
If the several states do not trust the Federal government to carry out its enumerated powers under Article I, Section 8 of the Constitution, why should they continue to support it, especially where, as with Arizona, they can take on the neglected function?  Would this not be especially true where there is a wide-spread perception that the Federal government creates too great a tax burden and acts too often in an ultra vires manner, as with the recent (and unpopular) Health Care Reform initiative? 
 
This is Russian social scientist, Igor Panarin’s, point when he predicts a break-up of the United States (http://online.wsj.com/article/SB123051100709638419.html).  This is essentially how the Soviet Union broke up, per thinker John Robb: people realized that there was no penalty for non-compliance and people decided that it was much more pleasant and lucrative to be a junior vice president of  Gazprom than an assistant commissar with Ministry of Gas Industry of the Soviet Union.
 
The recent National Association of Business Economists report of the effectiveness (or, more correctly, lack of effectiveness) of the Stimulus Plan (http://money.cnn.com/2010/04/26/news/economy/NABE_survey/) is further fuel for the bonfire of the legitimacy of Federal authority.  Despite its ruinous cost and dubious Constitutional legitimacy, the Federal Stimulus Plan (enacted in the face of bi-partisan opposition) has been amazingly ineffective. 
 
Why should states continue to support this rent seeking, bureaucratic, Federal monolith?
 
It is entirely possible that the several states may well follow Arizona’s lead.  Instead of formal nullification, simply ignoring the laws passed by the Federal Congress may prove more effective and less controversial.  This could be a state version of Andrew Jackson’s “John Marshall made his decision, now let him enforce it.”  The risk, of course, is that Federal authorities may enforce their laws as Aurelian did against the Palmyrenes: by force.  
 
However, the simplest and most constitutionally legitimate course of action, the one that is true to our Constitution and traditions, is this: let us elect men and women to Congress and the Statehouses in November who respect the ideal of limited government; understand the power of the power of free markets, free men and free pulpits; and who embrace Federalism.
 
Let us elect men and women who understand the following:
 

1. If the 20th Century, from Lochner, through Griswald to Roe v. Wade, was the century of the Civil War Amendments, the 21st should be the Century of the Tenth Amendment.

     2.     The great, looming realities of the 21st Century are: 1) we will have to compete for foreign capital with everyone else; and 2) we will have a less affluent population and a slower rate of growth.

     3.     These two constraints mean: 1) we will have to have to allocate a lower percentage of our GDP to government to attract investment; and 2) we will probably have a shrinking tax base in any event.

    4.       There will, however, be needs that will have to be met and investment rarely comes to unstable nation-states or to those without a properly educated work force.

    5.        The key to dealing with items 3 and 4 above is the Tenth Amendment.

    6.       The Federal Government needs to shrink, performing only its Constitutionally enumerated powers, as Madison believed it should.

     7.        Things like Education, properly a State (or, better, a local) function, would be returned to that level and the Federal Education Department could be eliminated.

      8.       Universal health care could be pursued through legal reform and the establishment of not-for-profit buying cooperatives.  Instead of creating a centralized government bureaucracy like the Post Office or DMV (or continuing the current employment-based system), Americans should get their health insurance through competing not-for-profit groups like USAA.

       9.     If this proves successful, Social Security and private pensions could be privatized (or in the case of private, employment-based Plans, reorganized) on a similar model.

      10.    National defense is a (perhaps “the”) critical function of government but it does not require continuing to buy weapons for the Cold War.  More money, time and effort need to be given to State and USAID.  The Department of Defense needs to think, not only about the current war(s), but the next.  This would best be done through investing in the development and honing of the Military’s current stable of exceptionally experienced Officers and NCOs.  Why not try to make them all McMasters and Nagles

       11.   The Troop Program Units (“TPUs”) of the Army and Air Force Reservesshould be reassigned to the states.  State National Guards and Militia ought to be capable enough to handle a disaster at the Hurricane Katrina level on their own.  If these forces are deployed in Federal service, there should be Inter-state compacts that handle the issue.  As a result, FEMA should be stood-down, saving money and decentralizing disaster response and recovery, maximizing local knowledge and ties.   

     12.   Returning Education to the States and allowing individuals to come together to solve common problems though voluntary organizations is not only more efficient, it is more resilient, an issue identified by thinkers as diverse as Ramo and Robb and Kuntsler.  

In a world of “Black Swans” it is wise not to put all your eggs in one Federal basket.    

1)  It creates no mechanism to allow market forces to control costs.  The Exchanges don’t create real group discounts based on experiances with the Commonwealth Connector and the Federal Employee Health Benefit Plan models and won’t reduce out-of-pocket costs for patients.

2) The Bill expands Medicaid, which is already busting the public fisc (albeit, mostly due to long term care) in the states.  Medicaid and SCHP are too “one size fits all” to be effective, but I can’t see effective reform in this politically charged atmosphere.
 
3)  It creates perverse incentives for small businesses to drop coverage and abandon their employees to the Exchanges, as the penalties for not covering employees of employers with 50 or more employees are generally lower than the average costs of coverage (about $2,000 per employee versus about 4,000 to $6.000).

4)  It does nothing to limit the pernicious effect that Medicare has on private third party payors’ rates.  Docs usually get reimbursed as a multiple of the prevailing Medicare fee schedule by third party payors in most places (e.g., “1.25 Medicare” for a given CPT Code).This Bill may even add to the problem, if the rate making effects the Exchanges.  Will rules under this legislation conflict with Medicare rules. which have become the “gold standard?” 

5)  While there would be choice of plans (as with FEHBP), it would not let small businesses band together to create tailored plans, as larger employers like GE and Safeway can today under ERISA.

6)  The Bill does not expand the use of Health Savings Accounts or Flexible Spending Plans that would let people shop around for bargains where they can, particularly, routine diagnostic tests, routine check-ups (e.g., “Well Baby” and “Well Woman” checkups) and management of chronic conditions (as opposed to, say, comparison shopping for a good rate on a triple-bypass or cardiac cath, which is damned near impossible even in this day of Web-MD).  In fact, since the Bill limits co-pays for routine diagnostic checks, it limits the effect of market forces that might drive down the cost of care for these routine, recurring services.
 
7)  If the individual mandate is NOT upheld by the courts, many of the limits on rejecting individuals with pre-existing conditions are going to have the same limiting effect that similar provisions in the NYS Insurance Law passed in 1993 have had on the individual insurance market here.  (Similar provisions for employment-based Plans under the Health Insurance Portability and Accountability of 1996 [HIPAA] work ONLY because the risk is spread over your entire work force.  Without the individual mandate, the payors CAN’T spread their risk.)  (http://online.wsj.com/article/SB10001424052748703298004574455560453947646.html)
 
8)  Where, as in NYS, more types of coverage are mandated and fewer “bare bones” plans are available, insurance becomes more expensive.  The Bill requires a great many things (e.g., the requirement to provide coverage for people up to age 26 under their parents’ plans) that will add to costs and make it harder to find a cheap, basic plan.  (Which would let young adults find their own plan.)
 
(NB:  This is why the Republican idea of “buying insurance across state lines” might work for people in NYS, but might have a lot less impact elsewhere.  With this change, New Yorkers could buy a cheaper “bare bones” plan from, for example,  New Hampshire that you CAN’T write in NYS under our Insurance Law. 
 
However, 1) it does not help people in states with more reasonable insurance laws; and 2) since most health insurance is based on managed care plans and negotiated discounted fee-for-service reimbursement for physicians and institutional providers, you would either have to be a big national insurer or be a nearby but out of state payor (e.g., as today,say,  MVP may operate in Vermont under a Vermont subsidiary) to have the kind of participating provider panel to make this work.   None of this is likely to have much real effect on prices or to increase competition, as the provider  panel/discounted fee-for-service structure of the market is unlikely to be changed and that is the limiting factor. 
 
Additionally, since the large self–insured ERISA plans of large companies like GE and Safeway already can “preempt” state law, this is irrelevant for a lot [but not all] of employment based health care coverage offered through ERISA Welfare (e.g., health insurance, disability, etc.) Benefit Plans. 
 
The McCarran-Fergusson exemption, by the way, is very useful to insurance companies (especially in areas like auto insurance), as it limits their liability to the assets of a particular state-based subsidiary.)     
 
9)  State legislatures should pass tort reform. 
 
(NB:  This is a state issue under the Constitution; regulation of the learned professions, rather than inter-state commerce.  NYS did some things in the 1980s, during the “Medical Malpractice Insurance Crisis” in 1985 or ’86, like reducing the 3 year statute of limitations on negligence to 2.5 years for MedMal and requiring a doctor’s certificate of merit as part of the pleadings. 
 
Caps on non-economic damages might help but moving to an administrative system, as in Worker’s Comp or Disability, that would also include the functions of the Office of Professional Medical Conduct ["OPMC"]under the NYS Department of Education, would be more effective.)  

Anyone have other concerns?  Anyone think the issues I raise are unfounded? 

<!– @page { size: 8.5in 11in; margin: 0.79in } P { margin-bottom: 0.08in } –> <!– @page { size: 8.5in 11in; margin: 0.79in } P { margin-bottom: 0.08in } –>The following represent some general thoughts on law and economics.

The Minimum Wage

Repealing the minimum wage is long overdue.

The fact that unemployment does not spike as predicted when states raise their minimum wage does not indicate that the minimum wage works.  Instead, it implies that the minimum wage acts to suppress wages in good economic times, especially for more productive workers at the lower end of the wage scale.  This is further supported by the fact that people working under the table tend to earn comparable market wages in employment sectors like the building trades.

In bad times, a minimum wage creates a needless economic incentive for employers to drop workers rather than lower wages.  The fact that wages have dropped in this down turn is a sign that employers do see lowering wages as a better option than lay-offs.

There should be income inequality to the degree that more productive people should earn more than less productive people at all economic levels.  The government cannot effectively involve itself with these decisions and should cease to do so.

Economic Regulation: Transparency and Caveat Emptor

The huge money that is available on Wall Street has tended to bring the very brightest people in the world to make their livings, indeed their fortunes, in the US Financial sector, especially in hedge funds.

Michael Lewis’s book, The Big Short (http://www.amazon.com/Big-Short-Inside-Doomsday-Machine/dp/0393072231), brings up a simple truth that many people are uncomfortable with: ordinary people, those not good enough to work in the hedge funds, like the people in the ratings agencies like Moody’s and S&P or with regulatory agencies like the SEC, simply are not able to regulate people who are generally so much more able, have so many more resources and who are motivated by the chance to attain unimaginable wealth.

How then should regulation work?

The best answer is that regulation must be based on transparency, not outcomes.  So long as everything is in the 10-K filing or the bond offering prospectus, the government’s work is largely done.  It is up to short-sellers and hedge funds to discipline the markets by attacking bad business plans and unworkable ideas early.  Individual investors and institutions need to read these market trends, as do regulators looking for clearly fraudulent schemes.

“It takes a thief to catch a thief,” especially where the thieves are among the smartest and best resourced people on Earth.

Health Care Reform:  Still No Real Understanding

People keep repeating the same misunderstandings.

The 1996 Health Insurance Portability and Accountability Act (“HIPAA”)  basically solved the issue of pre-existing conditions in employment-based health insurance, requiring only a waiting period and allowing a higher premium to be charged.  This is because this applies to GROUP plans, where the risk is spread.  In contrast, the Cuomo Administration brought in coverage requirements for pre-existing conditions in individual (non-employment based) health insurance plans in NYS in the early 1990s.  As a result, while individual coverage has grown nation-wide, it has shrunk in NYS.  Health Care Reform (“HCR”) follows the NYS model.

What should have been done?

Rep. Ryan’s ideas of state high risk pools and association plans would have spread risk and made coverage of individuals with pre-existing conditions economically viable for third party payors.

Buying health insurance across state lines is largely meaningless.

In the first instance, McCarren-Ferguson does not keep insurers from operating across state lines. They do so using subsidiaries, a preferable option from a liability standpoint.  The companies that do operate across state lines are either national players (United, GHI, Aetna, etc.) or smaller Managed Care Organizations (“MCOs”) who operate near a state line.

MCOs are not indemnity insurers.  They operate mostly on a discounted fee-for-service basis with a panel of participating doctors and institutional providers.  Unless they can recruit providers for their panels, they can’t come into an area, which is why big national players and smaller regional players whose catchment area naturally crosses a state boundary operate across state lines.  So, competition is not really the issue.

The advantage to “buying insurance across state lines” is that you can get cheaper coverage under a plan that does not have the NYS Insurance Law required “bells and whistles” that we have in New York.  You don’t benefit that much is a state with a less intrusive insurance law.

Is their a better answer?

Yes.  Self-insured Employee Retirement Income Security Act (“ERISA”) Welfare Benefit Plans (i.e., non-pension benefit plans, like disability or health insurance) for health care preempt state law, thus giving you the benefit of buying insurance across state lines, while also having the ability to secure a group discount.  This could have been done through Rep. Ryan’s association plans, for example, with some changes to ERISA.

Tort reform is not a national issue.

Reining in Medical Malpractice excesses is clearly an area, regulation of the learned professions, reserved to the states under the Ninth and Tenth Amendments.  Trying to regulate this by federal fiat, likely runs afoul of Morrison and Lopez, as it seems to be an attempt to poach in an area of specific state concern using the fig-leaf of the Commerce Clause.

Too Big To Fail

Too much government intervention has created these bloated entities which are too big to fail . . . and too big to function effectively in the market place.  In order to down-size these entities, we must either more energetically enforce Anti-trust Laws or allow market forces to make these entities fail.  Regulation by market discipline seems the better course.

Shareholder Rights

If we are talking financial market reform, the best approach might be to give shareholders in public companies the ability to more easily oust self-interested management and captive boards.  Enforcing the fiduciary duties of board members of public companies, ostensibly chosen for their insight and savvy, to the same degree that we do those of executors of small estates might be a good step in the right direction.

Federalism

People often tell me that a country of 308 million needs a large federal government.  I reply that a nation of 308 million that is divided into 50 states should not need such a large government.  This MUST become the century of the Tenth Amendment, as surely as the Twentieth Century was the century of the Civil War Amendments.

“Enough or too much.” —Blake

Introduction

I gave these remarks at a forum in Albany on March 4, called “Do the Peace Movement and the Tea Party Movement Agree?”

The answer is that they do, at least to the extent that they would both agree with Earnest Hemingway, who said, “Never think that war, no matter how necessary, nor how justified, is not a crime.   Ask the infantry and ask the dead.”

However, the tougher question is, when is it justified?  When can you ask your neighbors to go to war?  Sometimes the answer is unclear.

Iraq was probably a mis-step.  It certainly limited resources available for what could have been more effective efforts in Afghanistan and the Horn in the years between 2003 and 2009.  However, Iraq  is now a functional failed state, on the order on Lebanon in the 1970s, instead of what it could have been: 1990s Somalia with more firearms.  It became that (and that is a very positive result) because we stayed the course.

I suspect we still have not answered the question despite 2 or 3 hours of intelligent conversation.

Remarks

History, when you think about it, is the record of other people’s tragedy.

For example, in ancient times there was a simple stone cairn that stood below the barren pass of Thermopylae in Greece. On it were engraved the ringing words of the poet Simonides:

Go tell the Spartans, passer by/ We, here, obedient to their laws lie.

Three Hundred Spartans held that pass against the best forces of the Persian Empire, the greatest power of that day. In doing so, they saved Sparta and the Greek world, the same Greek world that would, in time, become part of the cornerstone of our civilization and of our Republic.

But if you asked those men why they fought, they would not say “the Greek world” or even “Sparta.” Instead, they would tell you that they fought for their homes and their families and out of a Soldier’s pride in unit and leaders and self. In the nine years of the GWOT, many of our fellow citizens have, like those Spartans so long ago, been brought home on their Shields and, like those Spartans, they did not want to die.

They wanted to toil and to prosper. They wanted to see their children grow tall and strong. They wanted to sit in the warm sunshine at the end of a long summer’s day. But in their Republic’s time of need, they gave of themselves, giving even their lives.

Our Republic’s history, going back to the Revolution and the struggles with the French and Indians that preceded it, is a record of this kind of honor and self-sacrifice. But we, unlike the Spartans, are not a people who love war. We are ambivalent about war. That ambivalence is reflected in our founding document.

Under Article I, Section 8 of the Constitution, many of the enumerated powers of the Federal Government concern war and defense, however, no appropriation made for a standing Army can last longer than two years, reflecting a concern about large standing armies that goes back to the disputes with the Crown that lead to the Revolution and even back to the English Civil War. After the Vietnam War, in some quarters, that ambivalence became outright hostility.

This prompted military officers, especially in the Army, to revisit the ideas of Karl von Clausewitz, a Prussian officer who served in the wars against Napoleon, whose book Vom Krieg (On War) proposed the ideas that war is a continuation of politics by other means and that success in war is a function of an iron triangle of factors such as the people’s will, the military’s capabilities and the political leadership’s vision countering chance and war’s brutality. These ideas became the frame work for the Powell Doctrine, which held that American troops should only be committed where there was pervasive popular support and where the issue was one that could be brought to a quick resolution by the application of overwhelming military force, as in the 1990-91 Persian Gulf War.

However, after September 11, 2001, as with many things in our society, everything changed. The attacks gave Secretary Rumsfeld, already trying to re-engineer the Department of Defense, a platform for his ideas on the Revolution in Military Affairs, the utility of “shock and awe” and the advantages of a “smaller footprint.” The result? Rapid victories in Afghanistan and Iraq  . . .  that lead to an intractable insurgency in Iraq and a resurgent Taliban in Afghanistan.

In the face of the setback in Iraq, GEN Petreaus and his counter insurgency brain trust (the buzz word is “COIN”) crafted the new Counterinsurgency Manual and brilliantly executed The Surge, resulting . . . in an Iraq which today is a failed state on the order of Lebanon in the 1970s rather than on the order of Somalia in the 1990s, something which is still an amazing achievment in COIN. The ugly truth is there are no big victories in Small Wars.

So tonight, you are going to hear us, as Shakespeare said, “talk so like some waiting gentlewoman of guns and drums and wounds.” We will talk in high sounding phrases of the Constitution, of Clausewitz Jomini and Sun Tsu. And while we do, young, and not so young, Americans in obscure parts of the world serve and, not infrequently, fight and bleed and die, that we might do so.

These Soldiers, Sailors, Airmen and Marines are our fellow citizens. More, they are a bailment, a trust, entrusted to this Republic by their parents, spouses, children and neighbors. I began by saying that history is a record of other people’s tragedies. However, in a Republic we, whether we are the officers appointed above them, the political leadership,or simply voting citizens of that Republic, are ultimately responsible for those tragedies and the history they form.

In a time of an all voluteer military, many of us who are professionals or managers may not even know anyone who has served. Only three of the six people on this panel on war have any military service. However, we are still responsible.

These Soldiers, Sailors, Airmen and Marines will do everything we ask of them and sometimes they will die trying. It is incumbent on us to ask wisely. So ladies and gentlemen, will you embrace this awful responsibility of citizenship? Will you ensure that no American mother’s child is ever brought home on his or her shield in a cause unworthy of them, their sacrifice or our Republic and its Constitution?