Did Ayn Rand cause the GFC?
It's a strange day when I excerpt a column by eccentric Leftist Matt Taibbi but I am running the excerpt below because he is nearly right. That Ayn Rand is responsible for trust in markets is of course just attention-getting nonsense. That trust goes back to Adam Smith, centuries ago, and even Left-leaning economics textbooks spell out the advantages of market systems.
But Smith also warned of a tendency of businessmen to collude in undermining markets -- thus disadvantaging the consumer. So Taibbi is doing little more than updating Smith with modern examples below.
What Taibbi fails to mention is the way big business has the Democratic party in its pocket -- thus ensuring that government also often favours big business at the expense of the consumer. The ties between Goldman and the Obama administration are of course now well known. Without government interventions of various sorts, there would be a lot more transactions governed purely by market forces -- to the great advantage of ordinary folk
SO GOLDMAN Sachs, the world's greatest and smuggest investment bank, has been sued for fraud by the American Securities and Exchange Commission. Legally, the case hangs on a technicality.
Morally, however, the case may turn into a final referendum on the greed-is-good ethos that conquered America in the '80s - and in the years since has aped other horrifying American trends in spreading across the Western world like a venereal disease.
When the globe was engulfed in the flood of defaults and derivative losses that emerged from the collapse of the US housing bubble two years ago, few understood that the crash had its roots in the lunatic greed-centred objectivist religion, fostered in the '50s and '60s by ponderous emigre novelist Ayn Rand....
Last year I wrote a brutally negative article about Goldman Sachs for Rolling Stone (I called the bank a "great vampire squid wrapped around the face of humanity") that sparked a heated debate. On one side were people who believed that Goldman is little better than a criminal enterprise that bilks the market, the government, and even its own clients in a bewildering variety of complex financial scams.
On the other were those who argued Goldman wasn't guilty of anything except being "too smart" and really good at making money. This was based almost entirely on the Randian belief system, under which the leaders of Goldman Sachs appear not as the cheap swindlers they look like to me, but idealised heroes, the saviours of society.
Rand's fingerprints are all over the Goldman story. The case involves a hedge fund financier, John Paulson, who went to Goldman with the idea of a synthetic derivative package pegged to risky US mortgages, for use in betting against the mortgage market. Paulson would short the package and Goldman would then sell the deal to suckers. The SEC's contention is that Goldman committed a crime when they failed to tell the suckers about the vulture betting against them on the other side of the deal.
The instruments in question - collateralised debt obligations and credit default swaps - fall into the category of derivatives, which are virtually unregulated in the US thanks in large part to the effort of former Federal Reserve chairman Alan Greenspan, a staunch Randian. In the late '90s, Greenspan lobbied hard for a law that deregulated the sort of interest-rate swaps Goldman used in its now-infamous dealings with Greece.
Confronted with public outrage, the leaders of Goldman will often appear genuinely confused. It's not an act. There have been a lot of greedy financiers and banks in history, but what makes Goldman stand out is its truly bizarre cultist/religious belief in the rightness of what it does. This Randian mindset is now ingrained in the American character.
This debate is going to be crystallised in the Goldman case. Much of America is going to reflexively insist that Goldman's only crime was being better at making money than IKB and ABN-Amro, and that the meddling government (in the American narrative, always the bad guy) should get off Goldman's Armani-clad back. Another side is going to argue that Goldman winning this case would be a rebuke to the whole idea of civilisation - which, after all, is really just a collective decision by all of us not to screw each other over even when we can.
Medicare Report: Obamacare Bad for Seniors
The Obama administration’s Centers for Medicare & Medicaid Services (CMS) has issued a new report with dire news for America’s seniors. Obamacare’s smoke and mirrors budgeting gimmickry has real world consequences that will cause more than seven million seniors to lose their current Medicare coverage and could force as many as 15% of hospitals, skilled nursing facilities, and home health agencies out of participation in the Medicare system altogether.
On page 9 of the report, Richard Foster, CMS Chief Actuary, warns that the payment rates for Medicare Part A providers such as hospitals, skilled nursing homes and home health agencies, are linked to increased, “unrealistic” economy-wide productivity standards that will be difficult if not impossible to achieve -- likely reducing payments below overhead costs.
From the report:
It is important to note that the estimated savings shown in this memorandum for one category of Medicare provisions may be unrealistic. The PPACA introduced permanent annual productivity adjustments to price updates for most providers (such as hospitals, skilled nursing facilities, and home health agencies), using a 10-year moving average of economy-wide, non-farm productivity gains. While such payment update reductions will create a strong incentive for providers to maximize efficiency, it is doubtful that many will be able to improve their own productivity to the degree achieved by the economy at large.
Over time, a sustained reduction in payment updates, based on productivity expectations that are difficult to attain, would cause Medicare payment rates to grow more slowly than, and in a way that was unrelated to, the providers' costs of furnishing services to beneficiaries. Thus, providers for whom Medicare constitutes a substantive portion of their business could find it difficult to remain profitable and, absent legislative intervention, might end their participation in the program (possibly jeopardizing access to care for beneficiaries). Simulations by the Office of the Actuary suggest that roughly 15 percent of the Part A providers would become unprofitable within the 10-year projection period as a result of the productivity adjustments.
Page 9 of the report also reveals that funds from the new 3.8% Medicare tax (“unearned income Medicare contribution”) are not paid into the Medicare trust funds:
The Reconciliation Act amendments introduced a new 3.8 percent "unearned income Medicare contribution" on income from interest, dividends, annuities, and other non-earnings sources for individual taxpayers with incomes above $200,000 and couples filing joint returns with incomes above $250,000. Despite the title of this tax, this provision is unrelated to Medicare; in particular, the revenues generated by the tax on unearned income are not allocated to the Medicare trust funds.
The Democrats’ primary stated purpose for the passage of Obamacare was to reduce costs. The report also estimates a $311 billion rise in health care costs over the next 10 years.
“This Obama Administration report confirms that Washington Democrats’ government takeover of health care fails to deliver the one thing the American people wanted out of reform: lower costs,” House Republican Leader John Boehner (R-Ohio) said of the new CMS report. “According to his own administration’s analysis, the health care law the President signed one month ago today would violate his pledge to ‘bend the cost curve’ and force millions of seniors off their current Medicare coverage.”
“This is in addition to what we already know about how this new law is squeezing employers with job-killing tax hikes and leaving middle-class families to brace for higher premiums,” Boehner added. “Washington Democrats refused to wait for this critical analysis to be completed before forcing their job-killing health care bill through Congress, and now we know why.”
Republican Study Committee Chairman Tom Price, M.D. (R-Ga.) points out that Obamacare’s $311 billion increase in national health care expenditures will be much higher in the likely event that Congress would intervene on the Medicare cuts -- and Medicaid patients will suffer more limited access to medical care.
“The real increase in spending is almost certain to be even higher than the reported balance of $311 billion because the new health care law relies on unlikely future cuts to Medicare,” Price stated. “The news on Medicaid is no better. The administration chose to put more than half of all newly insured individuals under their plan into Medicaid. Unfortunately, this report confirms that the influx of new Medicaid enrollees will have serious trouble gaining access to care because the program does not cover the costs associated with its patients.”
“The only way to make quality health care both more affordable and more accessible is to put patients in charge,” Price said. “When Washington controls things that should rightly be handled by patients and their families, you get bureaucratic decisions that ignore cost signals and the individual needs of individual patients. One size does not fit all in health care. This report is yet another indication that ObamaCare must be repealed and replaced with true patient-centered health care reforms.”
Rep. Dave Camp (R-Mich.), top Republican on the House Ways and Means Committee, also weighed in on the gravity of this new report.
“This report confirms Americans' worst fears about the health care law: it will increase health spending, increase federal control over our health care system, cut benefits for millions of seniors and jeopardize access to care for seniors and the disabled,” Camp said. “This is a bad law and, according to this analysis, seniors have the most to be concerned about when it comes to the future of their health care. I don’t think the Democrats’ health care bill would have passed if Congress and the American people had this analysis before the vote.”
As usual, government regulation as political payoff: "The old adage about those that live in glass houses and stone throwing immediately came to mind. But, the president really believes that the financial crisis we still find ourselves in despite trillions of dollars in Keynesian spending is somebody else’s fault. In fact, he indicated that, ‘the system as it stands is what led to a series of massive, costly, taxpayer bailouts.’ And I thought it was Mr. Obama and his big government colleagues in the Congress who voted unconstitutionally to give away our money to the greedy, misbehaving banks. Now, the president’s bizarre remarks are one thing, but the financial regulation bill before the Senate is even more bizarre. Crafted by Connecticut Senator Chris Dodd, the bill will do nothing to fix the real causes of the financial crisis. In actuality, the bill amounts to nothing more than a political payoff for Dodd’s benefactors on Wall Street. And this should come as no surprise since Dodd’s donor list reads like a who’s who of the financial services sector.”
Big business depends heavily on privilege: "Notice that the subtitle of Stossel’s article suggests that ‘capitalism’ is synonymous with ‘American business.’ Genuinely freed markets are not mostly cruel and unfair. But I think it’s a stretch to assume that the same is true of big businesses that operate with all sorts of privileges from the state and that benefit from a long history of injustice and dispossession. Big business in America does not enjoy its power and privilege in virtue of a freed market, and there is no reason to think business leaders desire a freed market. The cruelty and unfairness of big business — at home and abroad — may have little to do with free(d) markets, but they’re systemic features of ‘capitalism’ — if by that term is meant ‘rule by capitalists’ or ‘the economic system we have now.’”
It wasn’t capitalism, stupid: "As Lowenstein put it, ‘government support of the mortgage twins was among the original sins of the financial crisis. It stemmed from the country’s affection for homeownership — a legacy of a frontier nation that subsidized homesteading for pioneers and encouraged later generations to homestead in the suburbs via the mortgage-interest deduction ….’ Now whatever one may think of the sentiments that drove all this, one matter should be crystal clear: laissez-faire capitalism is entirely incompatible with such public policy.”
More forced unionization: "A group of personal care providers who work in homes in Illinois filed a class-action lawsuit this week against Governor Pat Quinn and the Service Employees International Union (SEIU). They’re suing because some of the 20,000 of the home-based workers have, against their will, been made dues-paying ‘public employees’ of the state. The National Right to Work Foundation represents some of the thousands of care providers who have turned down union membership, but may still have to fend off union bosses. … I’ve reported on the forced unionization racket in Michigan, where home-based day-care providers, some of whom own their businesses and do not wish to belong to a union, are nevertheless forced to pay union dues. The state deducts the dues from their paychecks when they care for children receiving welfare. The Mackinac Center sued Michigan on behalf of the day-care owners; that case is now before the Michigan Supreme Court.”
Second Navy SEAL found not guilty in Iraq: "A military judge Friday found Petty Officer Jonathan Keefe, one of three Navy SEALs accused in the alleged beating an Iraqi detainee, not guilty, a military spokesman said. Keefe was accused of dereliction of duty for not preventing abuse of a prisoner. The verdict comes a day after another of the other accused sailors, U.S. Navy Petty Officer 1st Class Julio Huertas, was found not guilty of dereliction of duty. Huertas was also charged with impeding an investigation by attempting to influence the testimony of another sailor.”
NC: Is Asheville Obama’s vision for America?: "Okay, maybe the Obamas’ Asheville, N.C., trip is just a romantic getaway and a chance to grab some 12 Bones BBQ, as the White House suggests. But you know something is going on when even the local ‘tea party’ affiliate welcomes Obama to their ‘mountain paradise.’ … [C]ould Asheville itself be a clue to what the President is thinking when he talks about ‘transforming’ America? Founded as a health resort, the little city of ‘hillbilly-hippies,’ entrepreneurs, musicians, retirees and community drum circles is, indeed, a progressive’s vision of America. … But it also represents conservative fears about what President’s intentions might wreak: A dearth of high-paying jobs, relatively high taxes, large numbers of homeless and other wards of the state, a high crime rate, and a progressive ruling class perhaps more interested in maintaining quaintness than thickening residents’ wallets.”
Capitalism vs. capitalists: "If by ‘capitalist’ you mean someone who cares more about his own profit than yours; if you mean someone who cares more about providing for his family than providing for yours; if you mean someone who trusts that he is a better caretaker of his own interests and desires than a bureaucrat he’s never met, often in a city he’s never been to: then we are all capitalists. Because, by that standard, capitalism isn’t some far-off theory about the allocation of capital; it is a commonsense description of what motivates pretty much all human beings everywhere.”
How democracy can go bad: "Democracy is not all bad, don’t misunderstand me. It is only bad when it becomes the central political principle. In a free society some democracy is necessary because it amounts to everyone having a say in political matters, which is their right. The real issue about democracy is, what is the scope of politics. If the scope of democracy in politics is minimal, as it should be in a free country, there is no problem. … But once democracy expands its reach beyond minimal politics, it leads to all kinds of corruption and facilitating of larceny and oppression. If the many can vote themselves the belongings of the few, this is corruption. If the many can impose their lifestyle, religion, priorities and other matters on the rest, that is corruption by democracy.”
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The Big Lie of the late 20th century was that Nazism was Rightist. It was in fact typical of the Leftism of its day. It was only to the Right of Stalin's Communism. The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)