Diatribes of Jay

This is a blog of essays on public policy. It shuns ideology and applies facts, logic and math to economic, social and political problems. It has a subject-matter index, a list of recent posts, and permalinks at the ends of posts. Comments are moderated and may take time to appear. Note: Profile updated 4/7/12

14 September 2012

The GOP’s Five Big Lies


[The GOP’s five big lies from 2008-09 are still around. But now the GOP has five new, more specific lies tailored to the 2012 campaign. Its PR hacks are nothing if not productive.]

Big Lie Number 1: Repealing “Obamacare” will reduce health-insurance premiums
Big Lie Number 2: Obama and the Democrats will weaken our armed forces and national security
Big Lie Number 3: Wind and solar power are uneconomic and won’t work
Big Lie Number 4: Cutting taxes and regulation and making government smaller will revive our economy
Big Lie Number 5: The President has failed

The presidential debates are coming up. In them, you will hear five big lies that Republicans and Fox have tried to get gullible Americans to believe. You’ll hear them over and over again, just as you already have. But endless repetition won’t make them true.

The five lies are big, gross and vile. They are big because they touch important issues. The realities they deny and distort affect the life and happiness of every American and our future as a prosperous and peaceful nation. If believed widely enough, they will make us dangerous to ourselves and everyone else.

The lies are gross because they are self-evidently wrong. They deny reality. Some of them belie even recent memory: all you need to refute them is recall longer than a gnat’s.

The lies are vile because their motivation is raw self-interest on the part of people who are already very, very rich. They undermine the interests of ordinary people, our nation, and our species. Those who promote them for their own enrichment are far from patriots; they are telling these lies just so they can continue to line their own pockets. And our Supreme Court has given them a microphone as big as their wealth.

Here are the five lies and the truths they contradict:

1. Big Lie Number 1: Repealing “Obamacare” will reduce health-insurance premiums.

As you may have noticed, Mitt has flip-flopped, once again, this time on “Obamacare.”

He no longer wants to repeal the whole thing. Now he wants to keep the parts that everyone likes, including coverage of pre-existing conditions, prohibitions against caps on benefits (so you don’t lose health insurance when you really need it), and letting kids under 26 use their parents’ health insurance. But Mitt still wants to repeal the heart of “Obamacare,” which will require and allow more than 30 million Americans to get health insurance for the first time.

Under “Obamacare,” government subsidies and a “mandate” (or a “tax,” as Chief Justice Roberts sees it) will pull and push those new insurance customers into the system. Mitt and the GOP want you to think the subsidies and mandate are, respectively, a giveaway to undeserving freeloaders and a gross infringement of individual liberties.

But in reality, they are neither. They are a way of lowering insurance premiums for everyone, including you.

All insurance depends on the size of the “pool.” A large number of customers in the pool each pays in a little money as a premium, in exchange for protection against rarely occurring losses like illnesses, injuries, fires, or auto accidents. The premium money from the entire pool pays the costs of reimbursing the few customers who incur the losses. The bigger the pool and the rarer the risks, the lower the premiums.

Insurance is that simple. There is only one important nuance: the collective premiums also have to pay for insurers’ administrative expenses and private insurers’ profit. But the basic rule is sound and universal: the bigger the pool, the lower your premiums. (For insurance, this rule supersedes the normal supply-demand rule for free markets: that increasing demand drives prices up.)

This rule applies especially to health insurance. Why? Because health risks are much more common than other insured risks, such as car crashes, floods and house fires. Most people go through their entire lives without a major car crash, flood or house fire. But only a very few lucky people avoid illness or injury, especially as they get older. Nearly everyone goes to a doctor now and then.

Because health losses are more common than other losses, the pool of health-insurance customers has to be bigger—much bigger—in order to keep premium prices down. That’s why every developed country but ours has some sort of national health insurance, a single-payer system with a huge pool. (Nearly all such big pools co-exist with private health insurance for more affluent people. But the basic national pool gives everyone, including the middle class and the poor, affordable insurance to keep them healthy and alive.)

We Americans spend more than twice as much for health care as citizens of any other developed country. Yet according to a recent global survey of customer satisfaction, 37% of Americans give our health-care system a failing grade. That put us tenth out of twelve countries surveyed—behind Portugal. (Figure 6.)

One reason is that our health-insurance pools are so small. Except for Medicare, we have no national pools at all. All our pools are balkanized state by state because we authorize and regulate all insurance state by state.

Within each state, we further balkanize insurance into pools offered by separate private insurers. Then within each private carrier, we further divide pools into insurance plans tailored for individual employers or employer groups. As a result, nearly all our health-insurance pools are wildly suboptimal in size for doing what insurance is supposed to do: spread the risk of costly but rarely occurring losses widely and reduce premiums.

It this analysis just theory? Not a bit. For the past year or so, the manic increases in health-care expenses have abated. What’s going on?

What’s going on is competition. There isn’t much competition in our broken health-insurance system because of its multiple kinds of balkanization. But already there is some competition among private insurers to attract those thirty-plus-million new customers that “Obamacare” will force into the system when its subsidies and mandate go into effect in 2014. Within each balkanized market, the large-pool rule makes competition intense because it makes each such market winner-take-all.

That new rules are only about sixteen months away. So health-insurers are already testing the waters by preparing limited policies with lower premiums. They know that these new customers will be price conscious, either because they don’t have much money or because they will be buying insurance just to avoid the mandate-tax.

Getting insurance pricing right is not an easy thing. It requires quantitative prediction of the highest order. And in a balkanized industry, it requires guessing what competitors will do. So insurance companies are already jockeying for position in the new market, trying to become the low-cost brand for all those new customers.

When “Obamacare” first became law, the insurance companies did just the opposite. They raised premiums for two reasons. First, they hoped to skim the cream of profits before various provisions of the new law went into effect. Second, they wanted to scare the public with higher premiums, arguing that the new law would raise them.

But now that Chief Justice Roberts has upheld the law, they know they can’t avoid it. Whatever happens in this election, there is no chance that the GOP will have the filibuster-proof majority that it needs in the Senate to repeal it. The cry for repeal is just another lie for gullible, ignorant voters’ ears, which will go nowhere.

So when “Obamacare” takes effect fully in 2014 (no matter who is president!), expect insurance premiums to fall, not rise. In fact, their rate of increase is already dropping as insurers jockey for that winner-take-all position in the coming market (actually, multiple balkanized markets) for thirty-million-plus new customers.

Expect that trend to continue well into 2014, and perhaps beyond. Watch what insurers do, not what their lying mouthpieces say. “Obamacare” will drive your health insurance premiums down, not up.

2. Big Lie Number 2: Obama and the Democrats will weaken our armed forces and national security.

Of all the lies that Republicans repeat interminably, this is the easiest to refute. Who killed bin Laden, after his two predecessors (one from each party) couldn’t? Who didn’t start a force-draining war to do it, but cleverly used our modern ninjas?

The President, that’s who.

Who has marginalized terrorists with drone attacks, ninjas, and financial and cyber countermeasures, without starting any new wars? Who has cleverly assisted the Arab Spring, which ultimately may kill the political pressure that supports terrorism?

The President, that’s who.

Who wound down one war (in Iraq) that was horribly costly in lives and treasure, among the longest in our history, and ended up accomplishing little or nothing besides killing Saddam? Who is winding down the other needless war (in Afghanistan) and has a plan to pull out American combat forces by 2014?

The President, that’s who.

Who replaced Dubya’s and That Idiot Rumsfeld’s useless and costly Maginot Line for Missiles with a much cheaper and more effective system to protect us and Europe from Iranian missiles? Whose decision did our ablest Secretary of Defense in recent memory, Robert M. Gates (who is a Republican), enthusiastically support?

The President’s, that’s whose.

Who continues our decades-long policy of nuclear arms reduction, thereby reducing the enormous expense and environmental hazard of maintaining a grossly excessive nuclear arsenal? Who is winding down wasteful expenditures on “conventional” (non-nuclear) big Cold-War arms systems so that we can spend a little on systems that meet twenty-first century challenges?

The President, that’s who.

In contrast, rashly flirts with jingoism, threatening a trade war with China and a real war with Iran, in order to disguise his utter absence of military and foreign-policy experience?

Mitt Romney, that’s who.

Slowly, subtly and effectively, the President has reversed the dumbest and most destructive foreign policy in our history: the “Bush doctrine” that anyone who harbors terrorists is our enemy. That childish policy implicitly declared war on some sixty countries, including some of our allies. It was partly responsible for two of our longest wars, which nearly bankrupted us.

Making war recklessly and wasting money on huge, obsolete Cold-War weapons systems won’t make us stronger. They will make us weaker. But Mitt and the GOP support these fools’ errands because they would enrich their business cronies.

The President has stopped the hemorrhaging and the stupidity and has redirected our military-industrial complex toward twenty-first century threats. He prepares cleverly to let us fight smart, if need be. And unlike Mitt, he and the Democrats actually care for our troops, making real plans to give them first-class care and civilian job training when they come home.

These policies have made every American more secure. They have made life better for our troops both when they fight and when they come home. Democratic policies promise to bring the last of our much-abused troops home in less than two years, and to keep more Americans from dying or being maimed needlessly. If you want more needless war and more useless, expensive, never-used weapons systems, plus less care and fewer civilian jobs for homecoming troops, vote for Mitt.

3. Big Lie Number 3: Wind and solar power are uneconomic and won’t work.

I’ve already devoted an entire essay to this lie. I won’t repeat all the analysis here. But the essential points are easy to restate.

Wind and sun are both free. They are working right now, all over the world, providing exponentially increasing renewable prower.

Wind and solar power have no fuel cost. Their operations create no pollution, global warming or other marginal (ongoing) costs. You have to build the plants and install the generators and smart grid, of course. But once you do that, the wind or sun gives you power for free. The only costs are amortized capital cost and maintenance.

So wind and solar power present a classic economic tradeoff of short-term investment for long-term gain. You have to spend some money up front. Then you get power for free, with no additional cost (except for maintenance), for as long as the plants and infrastructure last. We don’t yet know how long that will be, but we can have high confidence that long-term amortizedcosts will be far below what we currently pay for power.

As for capacity, a recent Stanford study of wind alone reveals enough to power all of human civilization seven times over. Solar power promises even greater capacity. A land area one twenty-ninth the size of Texas had enough sunshine to power the entire United States for 2005-2006. If you extrapolate that figure in time and space, there’s enough sun on the globe’s land areas now to power all of human civilization hundreds of times over.

There are many solutions for the intermittency of wind and sun. In the long term, a hydrogen-fuel economy based on electrolyzed water seems best. (Germany is working on a variant involving synthesized methane. [Second-to-last paragraph.]) In the medium term, large-area grids can average out local geographic variations in wind and sun, making their power reliable. (The Germans are building such a smart grid right now.) In the shorter term, nuclear power and cheap natural gas can take up the slack by providing easily variable “baseload” power.

So who is fighting hard to keep us from investing in free power that will not make acid rain, mercury pollution, or particulate smog, will not heat our planet, and won’t change our climate?

The fossil-fuel barons, that’s who. The Koch oil barons are the worst of the worst. They are not content just to sit back and reap the rewards of ever-increasing market prices for oil—a dwindling resource—and gasoline. They are spending millions funding propaganda to protect their vested interests by buying this election for the GOP. They fund Republican lies about energy.

The Koch Brothers’ motives are obvious: raw, short-term self-interest. But why is the GOP working so hard to protect an obsolescent industry? Doing so makes no economic sense. Exxon-Mobil, the world’s best fossil-fuel company, is already moving on from oil to natural gas. Two years ago, its management confessed that oil will only get scarcer, harder to extract, and more expensive as time goes on.

So why does the GOP support the likes of the Koch Brothers, when their interests are adverse to those of all energy users (everybody!), the public, and the rest of American industry? Because the Koch Brothers support the GOP with tens of millions for its lies.

The simple answer is the GOP is for sale. Anyone and anything that will support it the GOP in turn will support. It’s a party without ideals or principles, which panders to the basest human instincts, greed and fear.

That’s why it has become the party of extremists and the party of obsolete industry. And that’s why, if it wins, Germany and China, not America, will lead the global energy industry in the twenty-first century.

4. Big Lie Number 4: cutting taxes and regulation and making government smaller will revive our economy.

Of all the GOP’s big lies, this one is the most improbable. It’s not improbable that the GOP would tell it; the GOP has complete confidence in the ability of Fox and its PR hacks to make people believe anything. What’s improbable is that more than a minuscule fraction of Americans would fall for this lie.

Cutting taxes, cutting regulation and making government smaller has been the GOP’s game plan for at least thirty years, ever since Ronald Reagan took office in 1980. That game plane is not one for the country; it’s one for the big corporate money men who finance the GOP’s lies. They are short-term thinkers, selfish as sin, but they pay the piper and call the tune.

A Republican has been president for twenty out of last 32 years, or two-thirds of the interval since Reagan took office. Taxes are now the lowest they have been since the end of World War II. They are especially low on the rich.

During that time median real incomes have fallen for the vast majority of taxpayers. The middle class and the poor have fallen behind, while the rich have gotten richer. In fact, the rich-poor income gap is at a modern high. At the same time, we now have the largest government deficits since World War II. As Sarah Palin might say, “How’s that cutting-government thingy working’ out for ya?”

Have you ever heard of the Crash of 2008? You have to remember for yourself, because Mitt and the GOP don’t ever mention it.

According the a recent tally based on simple principles, it set us Americans back $12.8 trillion. And it all started before Barack Obama ever took office.

Our own economy and the global economy were doing fine before it. Yet since the Crash, we have had the longest and highest spate of unemployment since the Great Depression, and our economic growth has been anemic.

Cutting regulation caused the Crash. We abandoned the Glass-Steagall wall between investment and commercial banking under Clinton in 1999. Then the Fed, Fannie and Freddie feel asleep while mortgage bankers made lairs’ loans and investment bankers packaged them and sold them to banks and pension funds at home and abroad. The result was the Crash, which caused all our current difficulties.

The GOP admits that government helped cause the crash, but it fudges the precise reasons why. It tries to make you think government wanted the Crash to come.

That’s ridiculous! Among the very few government servants who foresaw the Crash was Byron Dorgan, then Senator from North Dakota. He accurately predicted it as he voted against repealing Glass-Steagall in 1999. No one else in government had a clue. And the regulators (the Fed, Fannie and Freddie) cetaintly weren’t encouraging the banks to make liars’ loans, let alone requiring them. The bankers did that all by themselves.

So how would cutting regulation fix our problems, when it helped cause them? How would cutting taxes on the rich, when for more than a decade they’ve already been the lowest they’ve been for half a century, and the cuts have yet to boost our economy?

The GOP doesn’t say. It hopes that people won’t remember even recent history. It hopes they won’t notice that its smaller-government prescription hasn’t worked in thirty years and helped cause the 2008 collapse.

5. Big Lie Number 5: The President has failed.

This lie just follows from the last, Big Lie Number 4. The GOP wants voters to blame the President for problems that longstanding GOP policies caused.

The Republican policies of cutting regulation—which Bill Clinton shamefully adopted in killing Glass-Stegall in 1999—were a direct cause of the Crash of 2008. In turn, the Crash is the source of all our current economic difficulties: our struggling economy, our high unemployment rate, our deficit-ridden states and local governments, and the epidemic of financial gambling that threatens to do it all over again.

The other major causes of the Crash were bankers’ greed and stupidity. Mitt, who is an investment banker himself, wants voters to forget that, too.

But all that’s just the beginning of this multipart lie. Not only do Republicans want you to forget who pushed (for decades!) the deregulation that let greedy bankers cause the Crash. Not only do they want you to forget that Mitt is one of those greedy bankers himself, and that his entire claim to executive competence comes from his private-equity banking work.

They also want you to forget that their man, Dubya, spent the lion’s share of our deficit by starting two off-balance-sheets wars and setting the precedent for bailing out Wall Street. Dubya had spent or committed 6.6 trillion dollars on bailouts before President Obama ever took office

And that’s still not all. Instead of helping the President dig us all out of the big hole they had dug, Republicans fought him every inch of the way. After Democrats took control of Congress in 2006, they used the filibuster 142 times more often than it had been used during the period 1917 to 1972.

So there you have it. The GOP made an unholy economic mess. It created a monstrous deficit by reducing taxes, starting two needless, off-balance-sheet wars, and bailing out Wall Street. Then, when the President took office, it refused to help him do anything to fix the problems it had caused.

Yet despite all the opposition, the Presidents’s policies saved GM, prevented a second Great Depression, limited the damage, wound down the two needless wars, killed bin Laden and strengthened our economy, albeit slowly.

That’s not a failure. It’s a success after thirty years of failed Republican policies, and despite vile, nonsensical, treasonous opposition.

According to a recent poll, zero percent of African-Americans support Mitt. If you want to know why, just think about history. African-Americans have lots of experience with this sort of treatment.

It’s an old Southern trick. You make an unholy mess. Then you hire a conscientious black guy to clean it up. As he works and sweats, you jeer from the sidelines, trip him up, and subtly sabotage his work. When his Herculean labor has cleaned up most of the mess, you point out the few parts he missed. You mock him for not performing miracles, despite all your sabotage. You declare him a failure, fire or demote him, and reap the profits his labor made possible.

African-Americans have seen this all before, for four centuries. Many have experienced this trick personally. So it’s not surprising that zero percent of them buy the lie. What’s surprising is how many whites can’t see what’s going on, right under their noses, when their and their children’s futures are at stake, too.

Our nation’s future depends on us all seeing clearly before November. If just half of us whites wise up, Obama will win handily, and we can do something about our troubles besides blaming Democrats for Republican failures.

Footnote 1: There are three reasons why the large-pool rule supersedes the normal supply-demand rule for pricing in insurance markets. First, insurance is an abstraction, not a physical commodity in limited supply. Any firm that can write one policy can write as many as it has customers, regulators permitting.

Second, with word processing, standardized policies, and electronic contracting—now available in all fifty states—the marginal cost of writing each additional policy is close to zero. Insurers can even set up automated systems to write contracts and verify payment.

Third and most important, the rule of large pools gives insurers an irresistible incentive to reduce premiums and attract more customers. As long as the pool of customers is large enough for collected premiums to cover claims, administrative expenses and the insurer’s profit, the insurer makes money. If the pool is too small, normal claims will cause the insurer to lose money. But the normal supply-demand rule works strongly on the customers’ side. As long as policy terms and insurers’ reliability ratings are similar, insurance is fungible, and customers will choose the lowest-price policy, every time.

Thus the large-pool rule makes insurance a winner-take-all market. This result applies in practice, as well as in theory, but separately within each balkanized state-carrier-employer market. It works well as long as there is competition in that market, i.e., as long as customers have a choice of insurers and plans and reliability ratings are similar.

Footnote 2:The figures for Texas are based on a total-US generating capacity for 2005-06 of 1.067 terawatts. [See last paragraph before “Replacing Oil.”] Our own Energy Information Administration projects [Figure 17] total global electric-power generation as reaching 23 trillion kilowatt-hours in 2015. Since there are 24 x 365 = 8,760 hours in a year, that means an average global generation of 2.625 billion kilowatts (terawatts), or about 2.5 times 2005-06 US total capacity. Thus an area of land about one-tenth the size of Texas could supply the whole world’s electricity from solar power in 2015.

Six years ago, the US had the capacity to generate about 40% of the power the whole world is projected to generate in 2015. That’s a much larger figure than the 25% of global resources we are supposed to consume. The difference is due to the use of 2005-2006 figures for US generating capacity, which is larger than power actually generated. But this rough calculation shows that there is ample bare land worldwide to satisfy human civilization’s appetite for electricity from solar power alone.

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2 Comments:

  • At Fri Sep 21, 12:42:00 PM EDT, Blogger Greg hodges said…

    Dear Jay -

    As always, I am electrified by your essays. Thanks for articulating what has become a stark contrast between the candidates.

    A note: in paragraph 2 of Point #5, you mentioned the repeal of the Glass-Steagall Act in 2009. I thought that was in 1999 with the Gramm-Leach-Bliley Act. I think your date may be a typo.

    Again, thanks for your time and efforts.

    - Greg

     
  • At Tue Sep 25, 10:22:00 PM EDT, Blogger Jay Dratler, Jr., Ph.D., J.D. said…

    Dear Greg,

    Thanks for the support and the correction, which I've made. It wasn't a typo but an over-fifty moment, which can be just as random.

    Best,

    Jay

     

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