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“Nuclear Option” Does Enable Democrats To Ensure One-Party Authoritarian Control of Health Care

By Michael F. Cannon

Last week, I explained that the U.S. Senate’s deployment of the “nuclear option” — lowering the threshold for approval of non-Supreme Court presidential nominees from 60 votes to 51 votes — does not make it easier for President Obama to use ObamaCare’s Independent Payment Advisory Board. I need to add this caveat: during his tenure. The nuclear option does enhance the ability of the president and his party to control the health care sector well after he leaves office.

It’s true that the rules change will make it easier for the president to have his IPAB nominees approved by the Senate, particularly through January 2015, when the Democratic caucus holds 55 seats. But if the president and Senate fail to seat anyone on the IPAB, the board’s sweeping legislative powers fall to the Secretary of Health and Human Services. If President Obama wants to use IPAB’s powers during his term, therefore, he need only retain Kathleen Sebelius as his HHS secretary.

ObamaCare permits IPAB to exercise its powers, however, only if Medicare’s actuaries project the program’s outlays will grow faster than a specified rate. A number of readers note that Medicare’s actuaries reported earlier this year that their projections currently do not show Medicare spending exceeding that target rate, and that their projections likely will not do so during the remainder of President Obama’s term. Those projections and the resulting determination could change next year. If so, and if the president and Senate have not placed confirmed any IPAB members, Secretary Sebelius could use IPAB’s powers during President Obama’s term. Those powers include the ability to raise taxes, to ration care to Medicare enrollees, and to appropriate funds to her own department, without the consent of the people’s elected representatives. (Critics will object that IPAB has none of these powers. In this study, Diane Cohen and I explain why we think they are incorrect.) Sebelius’ “proposal” would take effect during 2016.

Regardless of whether Medicare’s actuaries pull that trigger, however, President Obama and Senate Democrats face a huge incentive to nominate and confirm as many IPAB members as they can, as quickly as they can: with the nuclear option, Democrats now have it within their power to ensure Democratic control of IPAB — and with it, essentially the entire health care sector — at least through the first term of President Obama’s successor and the next three Congresses, even if Republicans capture the presidency, retain the House, and take control of the Senate. Consider.

  • Despite requirements that the president consult with the leaders of both parties in Congress on his IPAB picks, there is no obligation for the president to select members from both parties. The president can stack IPAB entirely with members of his own party and ideological persuasion.
  • IPAB members serve terms that are nominally six years, but actually serve until they are replaced. So a board member who is confirmed in 2014 will serve at least through 2020, and possibly longer.
  • If President Obama and Senate Democrats seat even one IPAB member, they can maintain Democratic control of IPAB for as long as they retain control of the Senate. If a Republican wins the White House in 2016, the fact that there is one sitting IPAB member is enough to prevent a Republican HHS secretary (Paul Ryan, maybe?) from wielding IPAB’s powers. Only one member need be seated for the “board” itself to do business. A Democratic Senate could then keep that one-member IPAB 100-percent Democratic by blocking any Republican nominees to the board.
  • If President Obama and Senate Democrats seat only eight IPAB members, they will guarantee a Democratic majority on the board through at least 2020 (and beyond if they then control the Senate and/or the presidency).
  • If President Obama and Senate Democrats seat all 15 IPAB members, his successor will not be able to appoint any members during her first term. Even if Republicans take the White House and the Senate. Nor would a Republican successor be able to remove any Obama appointees. The president may remove IPAB members “for neglect of duty or malfeasance in office, but for no other cause.”

Here’s where things get scary.

ObamaCare mandates certain procedures that Congress must follow if it wants to overrule IPAB’s, ahem, “proposals.” The people’s elected representatives must clear certain hurdles — some as high as IPAB wishes to set them — if they want to retain their authority as the ones who write laws regarding health care. (The Congress that enacted ObamaCare had no lawful power to enact such requirements, but no matter. George F. Will writes that Diane Cohen and I “well described” IPAB as “the most anti-constitutional measure ever to pass Congress.”)

As Cohen and I report, during the first term of President Obama’s successor, Congress loses even those limited powers to restrain IPAB:

Worse, if Congress fails to repeal IPAB through the restrictive procedure laid out in the Act, then after 2020, Congress loses the ability even to offer substitutes for IPAB proposals…To constrain IPAB at all after 2020, Congress must repeal it between January and August in 2017.

Though this will be news even to most health policy wonks, I won’t explain here how ObamaCare produces this frightening result. I refer readers instead to the Cohen-Cannon study.

But the upshot is this. To the extent Democrats use the nuclear option to pack IPAB with Democratic appointees in 2014, and are able to retain the White House or the Senate in 2016 and beyond, they will be able to ensure one-party authoritarian control of the U.S. health care sector. That’s not just unfair or partisan or economically inefficient or unconstitutional. It’s also undemocratic.

This article appeared on Forbes.com on November 25, 2013.

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The Scheme behind the Obamacare Fraud

Lies smooth the transition to a fundamental transformation of our health-care system.

November 23, 2013 4:00 AM
By Andrew C. McCarthy

Fraud can be so brazen it takes people’s breath away. But for a prosecutor tasked with proving a swindle — or what federal law describes as a “scheme to defraud” — the crucial thing is not so much the fraud. It is the scheme.

To be sure, it is the fraud — the individual false statements, sneaky omissions, and deceptive practices — that grabs our attention. As I’ve recounted in this space, President Obama repeatedly and emphatically vowed, “If you like your health-insurance plan, you can keep your health-insurance plan, period.” The incontrovertible record — disclosures by the Obama administration in the Federal Register, representations by the Obama Justice Department in federal court — proves that Obama’s promises were systematically deceitful. The president’s audacity is bracing, and not just because he lies so casually while looking us in the eye. Obama also insults our intelligence. It is one thing to tuck evidence of falsehood into a few paragraphs on page 34,552 of a dusty governmental journal no one may ever look at. It is quite something else to announce it in a legal brief publicly filed in a case of intense interest to millions of Americans aggrieved by Obamacare’s religious-liberty violations. To be so bold is to say, in effect, “The public is too ignorant and disengaged to catch me, and the press is too deep in my pocket to raise alarms.”

Still, to show that politicians lie is like pointing out that it gets dark at night. The lie, the fraud, does not tell us why they lied in this instance. The fraud does not tell us what the stakes are. To know that, we must understand the scheme — the design.

The point of showing that Obama is carrying out a massive scheme to defraud — one that certainly would be prosecuted if committed in the private sector — is not to agitate for a prosecution that is never going to happen. It is to demonstrate that there is logic to the lies. There is an objective that the fraud aims to achieve. The scheme is the framework within which the myriad deceptions are peddled. Once you understand the scheme, once you can put the lies in a rational context, you understand why fraud was the president’s only option — and why “If you like your plan, you can keep your plan” barely scratches the surface of Obamacare’s deceit.

In 2003, when he was an ambitious Illinois state senator from a hyper-statist district, Obama declared:

I happen to be a proponent of a single-payer universal health-care program. I see no reason why the United States of America, the wealthiest country in the history of the world, spending 14 percent of its gross national product on health care, cannot provide basic health insurance to everybody. . . . Everybody in, nobody out. A single-payer health care plan, a universal health care plan. That’s what I’d like to see. But as all of you know, we may not get there immediately.

That is the Obamacare scheme.

It is a Fabian plan to move an unwilling nation, rooted in free enterprise, into Washington-controlled, fully socialized medicine. As its tentacles spread over time, the scheme (a) pushes all Americans into government markets (a metastasizing blend of Medicare, Medicaid, and “exchanges” run by state and federal agencies); (b) dictates the content of the “private” insurance product; (c) sets the price; (d) micromanages the patient access, business practices, and fees of doctors; and (e) rations medical care. Concurrently, the scheme purposely sows a financing crisis into the system, designed to explode after Leviathan has so enveloped health care, and so decimated the private medical sector, that a British- or Canadian-style “free” system — formerly unthinkable for the United States — becomes the inexorable solution.

Once you grasp that this is the scheme, the imperative to lull the public with lies makes sense. Like all swindles, Obamacare cannot work if its targeted victims figure out the endgame before it is a fait accompli.

The president is a community organizer in the Saul Alinsky tradition. He is trained to adopt the language and co-opt the sensibilities of the masses in order to become politically viable; then, once raw power is acquired, the Alinskyite uses every component of it to thwart opposition in patient but remorseless pursuit of the given “social justice” goal. Consequently, in pursuit of health-care statism, Obama moderated his rhetoric over the years, but not his ideological goals. He stressed pragmatism: a gradual campaign that kept the ultimate prize in sight. “I don’t think we’re going to be able to eliminate employer coverage immediately,” he told his hard-Left base at a 2007 SEIU health-care forum. “There’s going to be potentially some transition process. I can envision a decade out or 15 years or 20 years out.”

There’s that word: transition. It’s the route “change” takes to reach its final destination: “fundamental transformation.” If you’re paying attention, you’ll hear the word transition a lot in Obama’s health-care speeches. You’ll also find it in that Justice Department brief the administration no doubt wishes Eric Holder’s minions had edited more furtively:

The [Affordable Care Act’s] grandfathering provision’s incremental transition does not undermine the government’s interests in a significant way. Even under the grandfathering provision, it is projected that more group health plans will transition to the requirements under the regulations as time goes on. [Officials of the Department of Health and Human Services] have estimated that a majority of group health plans will have lost their grandfather status by the end of 2013 [emphasis added].

Understand what this studiously unthreatening, gradualist gobbledygook means. A “group health plan” is employer-provided insurance; the phrase thus blithely refers to the “transition” of 156 million Americans who get health insurance for themselves and their families through work. It does not mention the so-called individual market, consumers who buy health insurance on their own. That’s because the administration assumes the “transition” of those 25 million Americans from their preferred plans to Obamacare will already have progressed well toward completion. And indeed it has, as we have seen in the millions of cancellation notices reported in the last six weeks.

The Justice Department’s assertion, based on the administration’s internal analyses, conveys that by the third year of Obamacare’s implementation — “the end of 2013,” which has since been extended by a year due to Obama’s “waiver” of the employer mandate — more than half of those 156 million group policies will have lost their “grandfather status.” “Grandfathering” is the mirage Obama projected for his illusory “if you like your plan, you can keep your plan” guarantee.

You couldn’t keep your plan because Obamacare mandates made it impossible for private insurers to offer it. The mandates essentially require that everything and everyone be covered — even though you do not need coverage for everything (e.g., 23-year-old men do not need birth-control pills, neo-natal care, and periodic colonoscopies), and even though mandatory coverage for preexisting conditions is not insurance but welfare. The mandates are simply cost-shifting from the young and healthy to the older and sicklier — just as you would find in any universal, single-payer system. But Obamacare is camouflaged to make it look like the insurers are deciding not to offer your plan anymore, rather than that the government is forcing their hand.

Of course, that’s not the half of the deceit — not in a program the president publicly insisted was not a tax even as his Justice Department insisted to the Supreme Court that it was one. Obama also said, “If you like your doctor, you will be able to keep your doctor, period.” As Hot Air’s Ed Morrissey noted this week, that promise too is fraudulent. If your doctor is not part of the network offered on the plans in your exchange, you will lose your doctor. To keep costs down, exchanges will limit their provider networks. Top doctors and hospitals are already being cut out. Moreover, the onerous regulations, reporting requirements, and constant threat of fee-slashing are beginning to drive doctors out of the profession.

Then there is the Independent Payment Advisory Board. Stanley Kurtz described the IPAB in all its frightening detail in a 2011 National Review cover story: “An unelected and unaccountable bureaucratic entity with nearly limitless power over federal Medicare spending, [it] will have the power to effectively ration health care through price controls.”

Put aside that the IPAB, which Obamacare insulates from judicial review, is an unconstitutional delegation of Congress’s legislative power — a model that, if adopted in spheres of activity beyond health care, would effectively end popular self-governance. As the rising costs driven by our health-care system’s suffocating regulations compound our astronomical debt, pressure is mounting for the IPAB to oversee cost-cutting — i.e., rationing — not only in Medicare but across the whole Obamacare framework. In fact, as Stanley recounts, the bipartisan Simpson-Bowles commission appointed by Obama made just such a recommendation — giving the president political cover to push hard for IPAB expansion. “Once IPAB’s rules govern America’s health-care system as a whole,” Stanley concludes, “we will be most of the way down the road to a British-style single-payer system.”

So how does Obama get all the way down that road? That is where the scheme’s manufactured crisis comes in. Obamacare commands that all Americans purchase health insurance, whether they want it or not. This is essential: If young healthy people refused to buy overpriced, largely superfluous coverage to underwrite the cost of insuring older and sick people, premiums would further skyrocket. As Powerline’s John Hinderaker explains, insurance companies would either have to fold or shift the costs to whatever employer plans still remained. This, in turn, would spur employers to cancel plans, dumping ever more people into the government exchanges.

The individual mandate is what is supposed to prevent that death spiral. There’s just one thing: The individual mandate is legally unenforceable.

Yes, there is a penalty for failing to purchase insurance — starting at $95 or 1 percent of income the first year and rising sharply thereafter. But the designers of Obamacare went out of their way to prohibit the IRS from using its usual array of civil and criminal processes (fines, liens, etc.) to confiscate it. The government may only collect the penalty by deducting it from tax refunds — meaning people who prudently structure their tax withholding so that no refund accumulates can avoid paying with impunity.

Obviously, it would be far less expensive for young people — who are already disproportionately strained by Obama’s no-growth, high-unemployment economy — to opt for a penalty they are not actually required to pay than to purchase prohibitively costly coverage. After all, under Obamacare, they can wait until they are sick to buy “insurance.” That is, Obamacare’s architects consciously created the incentive to destroy the program’s own insurance exchanges.

By the time that problem erupts, private insurance will already be gutted. Coverage requirements will already be dictated by government, as will pricing, with a subsidy structure that builds in progressive wealth redistribution. And doctors will already be beholden to government for patient access, treatment options, record-keeping requirements, and payment. That is, much of the single-payer infrastructure will be in place.

The manufactured financial crisis will be portrayed as a demonstration that exchanges based on the assumption that individuals will take responsibility for their own “private” insurance arrangements do not work. It will be time to solve the crisis by a seamless transition — there’s that word again — to a fully socialized health-care system, now overtly controlled by the government. “Free” health care for everyone — with all the substandard treatment, absurd wait times, and rationing that entails — will be supported by a few “tweaks” to our progressive tax system . . . no more unwieldy, unpredictable premium payments.

That’s the scheme. Or maybe you still believe that if you like your private medical system, you can keep your private medical system, period.

— Andrew C. McCarthy is a senior fellow at the National Review Institute. He is the author, most recently, of Spring Fever: The Illusion of Islamic Democracy.

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Premeditated Deception “Lie” – A dishonest presidency

November 4, 2013
By Marc A. Thiessen

The Wall Street Journal broke the news this weekend that, even as President Obama was telling the American people they could keep their health plans, “some White House policy advisors objected to the breadth of Mr. Obama’s ‘keep your plan’ promise. They were overruled by political aides.”

Overruled by political aides? This is simply damning.

It’s not easy to get a lie into a presidential speech. Every draft address is circulated to the White House senior staff and key Cabinet officials in something called the “staffing process.” Every line is reviewed by dozens of senior officials, who offer comments and factual corrections. During this process, it turns out, some of Obama’s policy advisers objected to the “you can keep your plan” pledge, pointing out that it was untrue. But it stayed in the speech. That does not happen by accident. It requires a willful intent to deceive.

In the Bush White House, we speechwriters would often come up with what we thought were great turns of phrase to help the president explain his policies. But we also had a strict fact-checking process, where every iteration of every proposed presidential utterance was scrubbed to ensure it was both accurate and defensible. If the fact-checkers told us a line was inaccurate, we would either kill it or find another way to make the point accurately. I cannot imagine a scenario in which the fact-checkers or White House policy advisers would tell us that something in a draft speech was factually incorrect and that guidance would be ignored or overruled by the president’s political advisers.

This whole episode is a window into a fundamentally dishonest presidency. And the story gets worse. After Obama began telling Americans they could keep their plans, White House aides discussed using media interviews “to explain the nuances of the succinct line in his stump speeches.” But they decided not to do so, because “officials worried . . . that delving into details such as the small number of people who might lose insurance could be confusing and would clutter the president’s message.”

Yes, no need to “clutter” the president’s message with confusing details — like the fact that millions of Americans being told by the president that they could keep their plans were being knowingly misled.

Obama could easily have come up with another way to make his point accurately. He could have said “most Americans will be able to keep their plans.” Or he could have said, as his communications director Dan Pfeiffer put it on ABC’s “This Week” Sunday, “if you had a plan before the Affordable Care Act passed, [and] it hasn’t been changed or canceled, you can keep it” (which prompted McConnell spokesman Don Stewart to reply, “So . . . you can keep your plan — unless it’s been cancelled. Gee, thanks.”) That would certainly have been less powerful, but at least it would have been accurate.

But Obama didn’t say those things. He said, “If you like your health-care plan, you’ll be able to keep your health-care plan. Period. No one will take it away. No matter what.” That statement was clear, unequivocal and wrong — and Obama and his advisers knew it.

The president’s defenders are twisting around for ways to explain away his 16 words. The New York Times wrote in an editorial Sunday that “Mr. Obama clearly misspoke.” Misspoke? On 24 separate occasions? Sorry, the president didn’t “misspeak.” This was an premeditated deception. This wasn’t something Obama ad-libbed. It was a line in a presidential speech that was carefully reviewed by the entire White House senior staff. Obama’s political advisers were told by his policy aides the statement was inaccurate — but they decided to let Americans believe the falsehood.

Obama’s former chief speechwriter, Jon Favreau, told the Journal that the speechwriters were working to find ways to explain a complex policy and that the goal was “simplification and ease of explanation . . . while still being true.” Except what Obama said wasn’t true.

Every president faces the challenge of explaining complex policies in simple terms. But the quest for simplicity is no excuse for dishonesty.

Obama’s own advisers told the Journal that they knew those 16 words were untrue, but Obama kept on saying them — over and over and over again.

If that’s the case, then Obama didn’t misspeak.

He lied.

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Obamacare victims and Israel

Obama lies in both domestic and foreign policy.

10/31/2013 20:57
By CAROLINE B. GLICK

US President Barack Obama views lies as legitimate political tools. He uses lies strategically to accomplish through mendacity what he could never achieve through honest means.

Obama lies in both domestic and foreign policy.

On the domestic front, despite Obama’s repeated promises that Obamacare would not threaten anyone’s existing health insurance policies, over the past two weeks, millions Americans have received notices from their health insurance companies that their policies have been canceled because they don’t abide by Obamacare’s requirements.

The Wall Street Journal’s editorial board explained that Obama’s repetition of this lie was not an oversight. It was a deliberate means of lulling into complacency these Americans who opted to buy their insurance themselves on the open market, in order to stick them with the burden of underwriting Obamacare.

In the editorialist’s words, “The [healthcare] exchanges need these customers [whose private policies are being canceled] to finance Obamacare’s balance sheet and stabilize its risk pools. On the exchanges, individuals earning more than $46,000 or a family of four above $94,000 don’t qualify for subsidies and must buy overpriced insurance. If these middle-class Obamacare losers can be forced into the exchanges, they become financiers of the new pay-as-yougo entitlement.”

Sure there is an outcry now about Obama’s dishonesty and the way he has used lying to take away from an unwilling public a right it would never have knowingly surrendered, but it is too late. There is no chance of revoking the law until at 2017, when Obama leaves office.

And by then, everyone will have been forced to accept what they consider unacceptable or be fined and lose all health coverage.

Obama’s mendacity is not limited to domestic policy. It operates in foreign affairs as well. Several commentators this week recalled Democratic Sen. Robert Menendez’s angry response to the Obama administration’s attempt to block Senate passage of sanctions against Iran in December 2011. Expressing disgust at the administration’s bad faith to the Senate, Menendez noted that before the White House tried to defeat the legislation, it first forced senators to water it down, making them believe that the White House would support a weaker bill. In the end, despite the White House’s opposition, the Senate and House passed the watered-down sanctions bills with veto-proof majorities. Obama reluctantly signed the bill into law and then bragged about having passed “crippling sanctions” on Iran.

As was the case with Obamacare, the White House knows that most Americans won’t support its policy of doing nothing to prevent Iran from developing nuclear weapons. So the White House never says that this is its policy. Obama and his advisers insist that preventing Iran from becoming a nuclear power is a central goal of the administration. But their actions move US policy in the opposite direction. And if they get caught on the lies after Iran gets the bomb, well, Obama won’t be facing reelection, so he will pay no price for his duplicity.

The mendacity at the heart of Obama’s political playbook is something that Israel needs to understand if it to survive his presidency without major damage to its strategic viability. The events of the past week make clear that the stakes in understanding and exposing his game couldn’t be higher.

Three major developments occurred this week. Read more: (here)

The Country Is Over

Monty Pelerin April 5, 2013

Data are hard to deal with when your vision is on the wrong side of it. Those wanting to claim there is a recovery underway are having just this problem. These people either have no understanding of economics or they believe falsely that they can inflate “animal spirits” with their hyped reports and that will initiate a recovery.

There will not be an economic recovery given the economic policies of this country. A recovery is not unlikely, I would argue it is closer to impossible if not impossible. The reasons for this position are not complicated. In short, the nation has become an out-of-control welfare state that is rapidly destroying the incentives to work or create jobs. Government policies appear designed toward this end. One doesn’t need a high IQ or  an advanced degree in economics to understand the problems.

There are innumerable factors responsible for the decline of the US. Only three important ones will convey why the economy is dying:

1. The rule of law and property rights are under attack.

What do you really own? The depositors in Cyprus believed they owned what was in their bank accounts. They found out otherwise. Bondholders of General Motors believed they were protected by bankruptcy laws when GM was bankrupted by the government. They found out otherwise. Do you own your pension plans and IRAs. Well you always believed you did except now there is talk about confiscating a portion or all of these funds.

How much of your income do you own? For those doing well, let’s say 60%. But that portion is under attack with the “need” for higher taxes and “fair share” gobbledegook. What about Social Security? Although the government sold it as a retirement policy and told you it is yours, the government says in fine print it is not. That is their excuse for not treating it as a liability on their balance sheet.

The fact is that the rules are being changed at will by the side who has lots of guns. The number of rules and laws that have been changed or ignored in the past several years makes one wonder what laws will remain. We are  approaching the point where there are no rules which means there can be no society. Without cooperation, markets will cease to function efficiently or perhaps at all. Millions of people will starve to death under such conditions.

2. Obamacare has raised costs

The costs associated with Obamacare are still not known or calculable. The rules are still being written. Already there are thousands of pages. Even though we passed it as Speaker Pelosi suggested as a means to find out what was in it, we still don’t know as the rules are still being made up.

For sure the program is driving up the costs of medical care and driving down the quality. That is exactly the opposite of what was promised. Business firms face great uncertainty as to what this mandate will do to their costs and operating procedures. Obamacare is rising the cost of employees. When you penalize something, you get less of it. That is a prime reason why there is no employment recovery in this country.

Employers have frozen their hiring until clarity develops. The development of clarity is no assurance that they will change their behavior. If the costs are too high (and they appear to be for many smaller businesses who create the most jobs), then hiring will not return.

The effect on hiring is only one negative. Full-time workers are being made part-time in order that they be exempted from the Obamacare mandate. These steps are not something business wants to do, it is something they must do in order to survive.

3. Government policies have made the dole more lucrative than work

As we make it easier to get unemployment benefits for longer time periods, more people take advantage of the system. So too with food stamps and disability. All programs are at or near record levels in what is supposed to be four years into an economic recovery. For many, the benefits of becoming a government dependent exceed what they can earn. One study reported that a family of four, collecting all the benefits for which they were entitled, would have to earn $65,000 per annum to have the same after-tax purchasing power.

If you are a product of the government schools and are legal to work (i.e., have skills enough that you are affordable at the minimum wage or higher), at what point do you realize that there is no need to go through the hassle of actual work. You can live pretty well by staying home and taking advantage of the entitlements available to you. That is exactly what a larger and larger percentage of the population are realizing. In many cases, it is economically irrational to work.

This behavior creates a social pathology that only worsens over time. Kids learn from their parents that work is not necessary and the many ways to game the system. In this regard, look for this problem to become worse over time unless these programs are cut back.

There Can Be No Recovery

Despite all you hear coming from the government’s media megaphone, there is no economic recovery underway, nor can there be one. The policies in place ensure that one will not happen. Economics is not a top-down science as Keynesians and politicians want you to believe. You can throw as many Fed dollars into the system or devise innumerable government stimulus programs. These are all top-down. Economics is a bottom-up process that starts with individual decisions and behavior. Individuals respond to available choices and incentives. They act in their own self-interest not in the manner in which some government planner wants them to act. Top-down programs do not affect the incentives of the individual decision-makers.

We raise the costs on those who work (higher taxes) and the businessmen who provide the jobs. One of the basic laws of human nature is that when you penalize something or make it less pleasant, people will want less of it. It is not a mystery why business is not hiring and the number of workers is declining. The return to both is declining as a result of government policies.

We raise the rewards for not working. Another basic law of human behavior is that when you increase rewards for a particular kind of behavior, you will get more of it. It is not a mystery why more people are choosing the dole than ever before. Government has encouraged them to do by providing higher rewards.

Add in the regime uncertainty associated with unstable or unpredictable laws and regulations and you have the perfect storm. There is no incentive to hire. Business hunkers down not knowing what is coming their way next. They understand they are targets of this Administration. It is unlikely that there will be any improvement on this fron while Obama remains in office. This behavior has nothing to do with politics. Even businesses headed by Democrats are behaving in this fashion. It is self-interest as in the desire to survive that motivates this behavior.

Why The Economy is Dying

As government grows the private sector shrinks. As the private sector shrinks there are fewer goods and services produced (government produces no goods and few services). I believe it was Dick Armey who described this situation with the wagon analogy: there are more people riding in the wagon and fewer pulling the wagon. As the wagon becomes heavier, the remaining pullers must work harder to move it.

The pullers must support the riders. Government does not support the riders or anyone else for that matter. Whatever government has it has taken from the pullers. Whatever it doles out it must get from taxes, borrowing or printing new money. Regardless of which means it uses, it is all coming from the pullers. They pay the borrowing back. They have less as a result of higher taxes. They are made poorer by the rising prices from the printing of money.

As the burdens increase on the pullers and the benefits increase for the riders, more pullers decide to ride. The truly creative and talented can always make enough money to continue to work rather than ride. However, when their efforts can be expended in other countries that penalize them less, at some point they no longer pull the wagon. They leave the country to climes where they are treated better.

Each increase in government spending means requires more money from the private sector. That means greater distortions in the incentive-disincentive calculus that produces fewer people pulling the wagon. Now fewer people must support more non-producers. Every time someone gets in the wagon, the burden on the productive sector increases. More must be extracted from a smaller group to serve the increasing riders.

That is what is happening in this country. If it is not reversed, the economy will stagnate and eventually implode. This conclusion is dependent upon nothing more than simple arithmetic. How bad is the imbalance today? Tyler Durden provides some information (my emboldening in red added):

The punchline: 110 million privately employed workers; 88 million welfare recipients and government workers and rising rapidly.

And since nothing has changed in the past two years, and in fact the situation has gotten progressively (pardon the pun) worse, here is our conclusion on this topic from two years ago:

We have been writing for over a year, how the very top of America’s social order steals from the middle class each and every day. Now we finally know that the very bottom of the entitlement food chain also makes out like a bandit compared to that idiot American who actually works and pays their taxes. One can only also hope that in addition to seeing their disposable income be eaten away by a kleptocratic entitlement state, that the disappearing middle class is also selling off its weaponry. Because if it isn’t, and if it finally decides it has had enough, the outcome will not be surprising at all: it will be the same old that has occurred in virtually every revolution in the history of the world to date.

But for now, just stick head in sand, and pretend all is good. Self-deception is now the only thing left for the entire insolvent entitlement-addicted world.

Is The Decline Inevitable?

Of course not. As Lawrence of Arabia stated: “Nothing is written.”

The Economic Solution

The solution to solving the problem is quite simple for an economist. Merely reverse the process. Make it attractive for people to jump out of the wagon and begin pulling. For businesses, make it attractive for them to hire. Make it unattractive to be on the dole. Reverse the growth of government and you increase the size of the private sector. More capital is made available for productive activities rather than being squandered by government. Talent stops leaving the country when they are treated more favorably here, whether this be via lower taxes or less onerous regulatory burdens. Then, get government out of the way and let markets solve the problem.

The Political Barrier

For the political class, the solution borders on the impossible. Politicians have bribed the citizenry with goodies for votes. They have sold the notion that government is responsible for all good things. The economic solution runs counter to everything that politicians have peddled. Further it reduces their power and ability to retain office, at least in a manner in which they are accustomed. It shrinks their perquisites. It shrinks their vote-buying ability. In short, it is virtually impossible for them to go along with such a solution.

What politicians thrive on is what created the current problems. Reversing this behavior is alien to them. They would not know how to behave under such conditions. Yet the economic solution is the only solution!

Do I expect politicians to change and save the country? No! Is it possible they could? Probably not, but “nothing is written.”

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