A rather long “Essay on Moral Ecology “

Winston Churchill once said, “If public men of vision are tough, they endure. If they are not, they perish or live out their lives in lonely exile. The future serves as an appellate court, but it cannot award retroactive damages, so one is not always redeemed.”

During the 1990s, I believe society crossed a great divide in the public debate with regards to the economic and social dimensions of our lives. The rebound of the economy from the post 9/11 crash not only discredited the bears and contrarians; it also left political ideology in disarray. George Bush seemed able to win his second term only by dressing as a conservative-in-drag. Sad as it may be, both liberals and conservatives, alike, have elbowed each other to take credit for the economic prosperity of the past 15 years. It is becoming increasingly clear, however, that some new, bifurcated political ideology has emerged; where polarizing differences have divided the country 50/50. Everyone is uncertain that the business cycle has been tamed and prosperity permanently assured. Chronic deficits, entitlement programs on the brink, terrorism, natural disaster and pandemic are assumed to be a “certainty-without-a-date-certain”. The stage has been set for a convergence of events that could threaten democracy as a form of government and possibly our long term survival as a species. Western civilization has been plunged into a Dark Age before by the insanity of barbarians, but this time it may come from our own inability to mobilize before the danger becomes clear and present. The more cynical amongst us mutter under our breath that all along the two political parties have been promoting distinctions without a difference; they are setting us up for failure. The fly in the ointment, of course, is that little wealth creation has trickled down to the middle class, much less to minorities or the poor. The recent series of seemingly irreversible and positive transformations of our economy may be due to the largesse of monetary policy and fiscal stimulus designed to conceal truth. If the business cycle has not really been eliminated, there will be hell to pay when the next correction finally arrives, particularly if it turns out to be grand super-cycle. The recent rise of the stock market, notwithstanding, it is abundantly clear that the present social fabric of our society has already shredded. One need only survey the statistics on crime, teen-age pregnancy and smoking, drug use and high school minority dropout rates to see that the darker side of prosperity contains an array of seemingly intractable problems. When queried as to the solution, both sides of the political establishment espouse the new mantra that to solve such problems: “We must return to traditional family and community values”. Evidently positive, irreversible transformations apply only to economics, not to our social problems. Western society now seems deeply troubled and vulnerable. I believe that the root cause is a politicizing of nearly every aspect of our life. I also believe that a human tragedy has occurred by allowing the spiritual-core of our self to shift to government and its institutions, i.e.., the State. The end result has been the disenfranchisement of the individual and the near total destruction of family and community. Politicians, like evangelical ministers, cannot resist lecturing us about the evils and sins of modern life. The dysfunction we see in our major institutions, such as government, education and health care, they often assert, is because of a lack of adequate support and financial contributions. They caution us that this decline of traditional institutions should be viewed as of great concern, because we as individuals and families now derive our very identity, our meaning, and our value from the outcomes created by institutional processes. Reaching even further, liberal politicians view societal problems as our unwillingness to adopt a ‘communitarian’ ethic where personal, family, clan or tribal self-interest is subordinated to the common good of the mass body politic. Increasingly, I consider these laments timeworn. Neo-conservatives and neo-liberals, alike, have been trying to get us to adopt this as a new religion for too long. Like an ancestral underground coal fire, these arguments have been heatedly argued without resolution since the original founding of the colonies on American shores 500 years ago. One must remember that, in America’s early history, the colonies were the predecessors to today’s states. Rebellious individuals begrudgingly created the federal system. Our founding fathers were members of groups who were determined to escape, forever, the oppressive institutions and governments of their day. By the way, this also included the major organized churches, which for centuries, had been a shadow governing force over people’s lives in Western Europe. The kingship or monarchy form of government, with its condescending attitudes toward commoners further contributed to the intense desire of people to flee oppression. As the last vestiges of agriculture and hunter-gather societies were being destroyed by European-led industrialization, the U.S. became the last best place where sufficient freedom existed for individuals and families to live out their ideals. Our founder’s negative experiences with oppressive, dysfunctional and incompetent government had been repeating itself through the rise and decline of numerous prior civilizations over the millennia. The late 18th century had merely been the climax during a long period of loss of hope; immigration to America was the escape from that domination. With this foremost in their minds, our founding fathers articulated a philosophy of protecting individual(family) rights and assuring the sovereignty of the states(communities). Unless expressly given, all other powers were to be withheld from central government. Numerous individuals, such as Jefferson, idealized settled agriculture as a way of life; he openly held out the hope that the vast frontier west of the Mississippi would be continued in the romantic ideal of the hunter-gather cultures for the American Indian. Jefferson was appalled at the industrialization of Europe; he readily sensed the adverse impact that a mercantilist culture would have on American society. About this time Henry David Thoreau was sequestered at Walden’s Pond, challenging, through his writings, the futility of trying to create a utopian society without first solving the paradoxes of the individual’s inner spiritual life. Thoreau accepted that this meant including an individual’s desire to externalize his self-interests. What either Thoreau or our founders, could not anticipate, however, was the spectacular rise of secular materialism and the technologically-based modern industrial State that came to pass during the 20th Century. They did not expect our country to be globally involved in nation-state conflicts and international economic competition. The issues, which are now front-and-center would have been profoundly threatening to that earlier ideal of American life. Mass immigration, the close of the Western frontier, the decimation of hunter-gather tribal life and the precipitous decline in settled agriculture has had a great impact on families and small communities in the late 1800s. As we now approach the end of the 20th century, the combined forces of increasing urbanization and a decline in the role of manufacturing as a source of employment are again propelling us toward a service economy where all the rules are new. Only 20% of the work force is now needed to grow our food, make our clothing or build our homes. Soon, many of those workers will reside in Mexico or Asia. A full 80% of all workers are already deployed to producing goods and services that are not really necessary to individual and family survival. Demand for such discretionary goods and services is sustained only at the pleasure of the consumer society comprised of individuals willing to use debt to mortgage their futures. The herd of bulls could stampede with the first bolt of lightning. Such a complex society necessitates mirror-image bureaucratic institutions on a large scale to support the social, political and economic transformations of our modern life. This includes legions of social workers, school curriculum planners, health therapists and hospital administrators, building inspectors and county planners, lawyers, judges and legislators, accountants and consultants. Complex institutions will not function without hordes of professional sophisticates, who are also necessary to manage the complexity their fraternity brothers generate through the laws, policies and procedures they write. Under such a system, individuals and families struggle mightily to maintain any semblance of self-interest. In the end, we all volunteer time and contribute additional money to fund the really important causes. Savings are devalued by government’s fiscal and monetary policies and, when the need arises, higher education and health care dispossess us of our paltry savings. Our mythical heroes, the cowboy, mountain man, American Indian, miner and the lumberjack are all, one-by-one, being displaced by pseudo-heroes such as celebrity entertainers. They own the ranches in Montana now. As a society, we are collectively grieving the loss of a real way of life that once harbored our hopes and dreams in a world before industrialization and bureaucratic institutionalization. We want paradise returned; but the sequence of negative social transformations seemingly cannot be reversed, no matter how good the economy performs. At this point, I remind you of the slick sales pitch both liberal and conservative politicians fraudulently use to promise future success. You are merely asked to buy into one of their “-isms”: you know: communitarianism, environmentalism, traditionalism. What they are really saying is: “Forget society’s problems; ignore first causes; take the institutional pill; quell your personal pain”. Our founding fathers and moralists such as Thoreau had it right when, instead, they prescribed self-actualized-individualism, coupled with an internalized-spiritualism. In searching for a label, I have come to call this “moral ecology of the individual”. But, I want to be very clear that moral ecology is not my invention, and I am not attempting to patent improvements. I do not seek to coin a new currency here. My goal is merely to enter the debate and assert that the moral, individualistic way of life is still the only proven path to success in the affairs of family and the broader community. I believe that the only fix is for our culture to embrace such a philosophy, moderate the intensity of secular materialism and embrace a more sacred life linked to the individual’s spiritual core. By doing so, we could as a group, largely eliminate the need for the bulk of our large-scale, bureaucratic institutions and the complex apparatus that tax and govern us. It is important to paint a portrait of the individual as uniquely capable of making decisions of a moral nature. When expressing self interest, the “ecologically moral” individual becomes animated, and is the only one who can be counted on to be a good husband of scarce financial or environmental resources. The institutions within government, education, and health care have, fundamentally, become parasitic. Before the transfer of responsibility to government, traditions developed over the millennia dictated that individuals take responsibility. Circumstance routinely called for self-reliance. But, then, there also seemed to exist a pattern language within the family and community that could grasp the truth as to how the common collective good could also be maximized. We did not have to defer to institutional authority. Unfortunately, instead of nurturing a moral ecology as an appropriate landscape for individualism, we are, of late, turning public entitlements, employee benefit programs and institutional complexity into an “extractives” industry. Worse, we act as if there are no limitations and we do not seem to see any tradeoffs. Our relationship with government has turned addictive and, it contains a high level of hostile codependency. In the particular case of health care, where I have worked extensively, policy-makers seem indifferent to the typical rational and scientific means of making decisions where competing claims on resources are bound to occur. Even worse, there appears to be oppositional defiance to returning decision-making back toward the individual or family where self-interest and responsibility can be pursued. Instead, there is almost a pathological ploy to engage in never-ending public discussion bordering on demagoguery about the uninsured, working poor and rising costs. These symptomatic issues are argued to the total exclusion of root causes such as poor public policy and failure of the individual to pursue a healthy lifestyle. It is ironic to me that government regulators have encouraged a perverse and irrational form of individualism of a different sort to emerge. Government has indulged the social scientist’s values that every individual’s life is infinitely sacred and that each person is unique, irreplaceable, and priceless. Their underlying belief must be that every possible resource should be taken from society’s collective warehouse to prolong life, regardless of the impact such a decision will ultimately have in forcing tradeoffs for others. Why do they do this? It becomes crystal clear when we see that, in reality, government and its institutions derive immense political power from this approach to social and economic transactions. Long ago, government, which controls much of our modern world, lost any real incentive to stimulate public discussion or exert any real moral leadership. In the course of its evolution, like its constituents, it began to treat individuals, families and communities as an extractives industry, too. Seldom confronted or restrained, government and its institutions, naturally, lost respect and began to see us all as unwitting dupes. Government itself completed the circle that is required for a truly codependent relationship. In a society dominated by dysfunctional institutions and a regulatory state, the impact of economic decisions and social choices becomes defocused early on during any policy debate. Dilemmas over the scarcity of resources are blunted, since program administrators feel compelled to think about services for every segment of society. Segmentation is the essence of modern marketing and particularly necessary when polling and conducting focus groups to craft the sound bites necessary for election campaigns. Hard choices are never seriously debated, much less ever really decided. Instead, there is usually an attempt to provide every possible social service to everyone. The social contract with society is constantly amended to be all-inclusive. Tradeoffs between government, health care, education, and other potentially desired goods or services are never really considered. We quickly lose perspective on the necessity for tradeoffs and cultural limitation. Institutional services become just another part of the growing burden of an unsustainable society. In this context, why wouldn’t individuals and families vie for a share? The transfer of responsibilities from the individual, family and community to institutions, particularly government, has been done at the expense of the private sphere of life. Economic and social problems are now almost always defined as public. For example, we increasingly think of infant mortality, AIDS, smoking and other substance abuse as “public” health problems within the domain of government’s responsibility. In doing so, the “market” for individual, family and community responsibility has been replaced by these dominant institutions. Within bureaucratic institutional structure, e.g.: large hospitals, government agencies, insurance companies, professional societies and chancellor’s offices–decisions are not really decisions. Because the market has already been destroyed, there is no moral ecology possible, and the tradeoff curve has been rendered invisible. It is no longer a case of who really deserves services, and cost is the furthest thing from anyone’s mind. Government, where every vote is presumed equal, redistributes income through direct taxation, and, if necessary through cost shifting and hidden forms of taxation. The end goal, of course, is to provide everyone with an infinite array of social services as an entitlement. In the process new rights are given, building a foundation for the future. This process reclassifies services and goods as “public” and places them outside the realm of the competitive marketplace. By doing so, government’s irresponsibility renders invisible what the market used to make clearly visible and distinctive–social values and personal responsibilities and economic tradeoffs. Americans now see themselves caught in a conundrum. Many realize that the old system with its institutional arrangements is despairingly dysfunctional, but our inherited paradigm is so powerful and addictive that it inhibits a sincere quest for a new way. Thus, we are held back from responding to present realities and positioning ourselves for future needs. We are addicted to our current way of life and see no other alternative that is within reach. In designing institutional, regulatory, and taxation approaches to rectify injustices in the past, we have overreached. In the process government destroyed much of the original market system of private consumption; it is now virtually impossible to return to a way of life where personal values can operate within a context of a moral ecology. There is nothing left to sustain the spiritual core of an individual’s life. We are once again at a point in deciding the role of the institutions in our modern life, and it is very clear that many of the arrangements and priorities are no longer worth the price. It is also abundantly clear that government and its designated intermediaries exercise vast and inordinate power over the social and economic systems of our day. Because government officials are assumed to serve as our “loyal agents”, we take for granted that our institutions are doing the right things right. They have never been seriously scrutinized or criticized as to their fundamental motives, competency, or accountability. Abundant evidence exists that the capability of government is questionable. This is particularly the case when it comes to accepting the charge to reform various markets for which they were the original perpetrators of destruction. The rampant and wholesale destruction of previously sound markets, where individuals externalized their self-interests, have purposely been twisted to manufacture evidence that individualism always leads to negative consequences. As a result, we are either shamed into believing individualism is morally and ethically wrong or at best a random act of heroism. The rendering of markets as invisible combined with the demise of individualism paved the way for the enlargement of the bureaucratic empire. Power is supposed to follow wealth in the private sector, but somehow it invariably ends up preceding expenditure in the public sector. Because the government bureaucracy controls entitlement budgets, it, de facto, exerts vast control over the social and political side of the populace. Since the public has already abdicated critical decisions to its representatives, there is no real accountability for the cumulative effect of decades of bad decision-making. Hard-hitting questions are almost never asked about the wisdom of designing even more systems predicated on a perverse, institutional way of life. Prevailing systems and institutions have done almost nothing to date to educate us as sovereign consumer families. We are incapable of being prudent purchasers and we know little about cooperating at the community level. The age-old pursuit of power accumulation by entitlement stands in stark contrast to a world where there are limitations, tradeoffs and someone must take responsibility. So far, our principal legacy as a modern society seems to be the massively false idea that society is outside the natural forces that govern nature, the economy and man’s social life. We have been operating all this time on an earlier presumption that only government bureaucrats and professional sophisticates could hope to understand and administer our vast social and economic system to produce the collective outcomes we desire. The public, particularly individuals and families, have increasingly been seduced into turning over power to intermediaries. In the process, the institutional way of life has become an addictive substance and the self-professed loyal agents were allowed to accumulate excessive power in undemocratic ways. Selected citizen groups have been indulged in an orgy of social services without regard for future costs. This pattern of indulgence now places at risk the future economic status of an entire generation of children and young adults. I fear the codependency will only be broken when collapse of the current system forces a rock bottom shattering of illusion and denial. So, what might make a real difference? Clearly, my waving a moralistic flag, all the while speaking from a soapbox about ethics, values, and individualism is destined to fall on deaf ears. Well, I predict that government will eventually be forced to acknowledge stunning failure in its ability to control the economy and reform institutional systems. The future social and political costs will be enormous. I would go so far as to say that the survival of the nation-state as we have known it might even be at stake. If government and the other major institutions of society fail to deliver on the social contract they have negotiated as a replacement for self-actualized individualism within the family and community, then the legitimacy of our current form of representative democracy will be called into question. All of this was to be expected; the economy has rapidly become deeply intertwined with federal and state governments over the past two decades. The overly political conception of health care, government and education, has turned out to be profoundly destructive to the economic dimension of our society, even in the short run: witness the hyper-inflation and cost shifting in these sectors over the past twenty years. Now, look to the future and acknowledge the virtual bankruptcy of entitlements and the social security safety net. This is why more Americans believe in UFOs than their likelihood of collecting social security benefits. Without a moral philosophy that collectively harnesses the power of individuals as ruthless market maximizers, institutions will just continue to steal from family and community life. The common good is enhanced if, and only if, the complex, interdependent, systemic forces of the market are organized based on the summation of self-actualized individualism. Government program administrators habitually commodify community needs. They also believe that all good government requires is a technically competent organization operating in a context of unlimited economic support. Sadly, whenever we have submitted to an oligopoly of institutions and niche self interests a benevolent tyranny is always created. So, it could have been predicted that we would lose much of our personal freedom in this process. Little did we know, however, the full extent to which we would, so tragically, default on our God-given abilities to choose and self-govern. Bureaucrats have soothed us into believing that they have done their level best, and that life would be much worse, were it not for their efforts. The problem is that the society we are quickly becoming is exploding everywhere in costs, without any meaningful improvement in our life status. This includes health care and education on all fronts. Furthermore, current institutional arrangements are incapable of guaranteeing the emerging permanent underclass or the future generation of today’s youth access to the same entitlements on a par with the past. Immense social and political problems are guaranteed to follow as a result. When government became the funder, underwriter and regulator of all social services it virtually ensured that there would never be a critical appraisal or honest debate as to the degree these services should be a public good and an implicit amendment to the Bill of Rights. All countervailing opinions have been oppressed and obscured. All the while entitlements have been expanded, and the established political order has tightened the garret. The dynamic impetus of the current paradigm seemingly cannot be weakened, no matter whether the Democrats or Republicans are in office. Government and its institutions continually increase power in ways that are invulnerable to the knowledge of everyday citizens. As individuals and families we cannot even understand the fundamental roots of our society’s problems, much less prescribe a solution. Because our power to exercise individual self-interest has diminished so, even collectively we do not think we can make change happen. As experienced by our forefathers, it all but appears that hope of change is long lost. One again I depart from that consensus; I assert that a breakthrough is imminent. We must remember–all organizations are essentially transient and subject to upheaval by technology, economic correction and precipitating events. No matter how great their size or how long their tradition, organizations also contain within their DNA , the seeds of their eventual dissolution and irreversible transformation. Headway is made rapidly when economic conditions are profound enough to prefer different structures, processes and outcomes. Witness the transformation of Russia and the eastern bloc countries. Don’t you think the polit-bureau would have done anything within the realm of possibility to forestall change? Today, the federal government runs as a strong polity only because it has been able to coordinate their agencies, and maintain the illusion they are run by experts. In reality, control was effected largely only by having the will to vigorously initiate and legislate new programs at a pace, two steps ahead of public perception. In the future, however, the federal government will rarely ever be able to achieve intellectual consensus on the big issues. In the vacuum, state and local government will have to take control to get things done. But, this is exactly what our founders intended. The little bit of federal public policy that manages to be developed in the future will have to be more pragmatic. To make it salable, it will have to agree with what the various constituencies at the local level will accept. On the dark side, there is now, more than ever, the specter that unanticipated events might render the nation-state concept illegitimate. Cataclysmic events, beyond the control of even the most powerful nation on earth could redefine collective life as we have known it. Up until now, we have ignored such possibilities because their likelihood is not predictable. The worst-case scenario after such an occurrence, of course, would be balkanization and ethnic rivalry. However, such disintegration would likely allow the reemergence, in a positive way, of the “city-state” and small business as the preferred institutions governing our collective life. Such outcomes would be even more demanding of self-actualized individuals, but they would once again free us to pursue the ideals of family and community, as our founders intended.

Dead-weight loss

We are constantly being massaged to believe that if someone in charge were doing his job, the economy would be back on the tracks chugging along. But, I believe there is a fly in the ointment that cannot be ignored. It’s the economic concept of “dead-weight loss”.

In a nutshell, dead-weight loss represents the difference between what we would pay for something if we had to pay cash versus buy on credit.

DeadweightlossIs there any doubt you would pay less for emergency room services at a hospital if you didn’t have insurance or you had to pay out of pocket? What about the price of your house or car? If you didn’t have access to credit would you pay $350,000 for a large but poorly built house? Didn’t you willingly over-pay for your car because it had zero % financing and the monthly payments fit your budget?


And, what about those Christmas presents under the tree. Would you really have paid the amount your spouse spent in an orgy of spending to fulfill a fantasy? Hell no, you wouldn’t. Economists call this “dead-weight loss”.

American health care is nearly 18% of GDP, which is nearly double what European socialized democracies pay. Many of our best and brightest people go into health care and it is our biggest employer at 14% of the workforce. If we hit the numbers of our socialist comrades in Europe, health care would be 10% of GDP and 8% of employment. And, if health care was a truly competitive and productive sector the U.S. would be at 7% of GDP and employ 5% of the workforce. We are overspending by hundreds of billions of dollars and millions of workers are in employed in health care rather than growing food or inventing the next iPad.

If we continue systematically through every sector of our economy we would find similar savings to be achieved in education, highway construction and government services of all types. Another way to get at the number would be to focus on market segments where there is easy availability of credit. This includes government fiscal and monetary stimulus which force feeds dollars into every nook and cranny such as student loans, SBA guarantees and the like. It represents a false prosperity that leads to dead-weight loss. If we were not printing money so the banks could lend it out and if governments balanced their budgets there would be far less money to spend. Unfunded liabilities for pensions and all manner of debt will eventually require additional funding.

Every trillion dollars of spending equals 10 million jobs. If we suddenly reigned in health care spending and reduced government deficits tens of millions of people would be displaced. What would they do? The plain and simple fact is that government largesse over many years has created a gradient that has encouraged the migration of millions of workers into sectors of the economy that are now infected by dead-weight loss. This inevitably creates bubbles in the economy. When things change there is a bursting of the bubble. Reaction to popped bubbles results in even more dead-weight loss.

Government has painted itself into a corner. In every case in the past, government has used inflation as a way to get itself out of the mess. It pays off old debt with cheaper dollars and it prints money to continue the pensions and false employment. To solve this problem with restraint would displace millions and that is politically untenable.

My criticism of government should be extended to the private sector. Corporate owners achieve the same effect by encouraging massive influxes of illegal immigrants and outsourcing jobs to low cost countries to solve their problems. It contributes to unemployment. And, there are millions of underemployed working in call centers who cannot find jobs in the economy.

Taken as a whole, we have serious structural problems in the economy that cannot be solved by mere tinkering. There is a disconnect between worker skills and education and what the economy needs. We import more than we export and wealth creation has gone into reverse. Our economy cannot sustain itself without the addictive fix of easy credit.

Politicians who purport to have a fix for these problems are simply not leveling with the American people. We are stranded on one side of a raging river at the bottom of a chasm. To cross that gap will be extremely difficult and painful. Anyone who thinks it can be achieved by waving a magic wand will be disappointed in the magic act.

Right now we do not have leaders willing to step up and help us deal with problems because there is a general lack of understanding of the nature of the problem. And, we have not yet sobered up and realized that we are careening down a slippery slope and the rocks are rushing up toward us. Dead weight loss is really the cognitive dissonance between what we as individuals do in our actions and the abstract thoughts we use to perpetuate our addictions and fantasies. We haven’t bottomed out yet. There will be no positive change until that inflection point is reached.

Gods of the copybook headings

My thoughts often turn to the Book of Genesis and its mention of the Garden of Eden and our loss of paradise. Man thought he could do better with his laws and his technology. Nature has clearly suffered and we seems to be drifting away from what little remains. Whether you embrace the Bible’s book of revelations, there is a consistent belief across most religions that this will all end poorly.

* * * * *

Of all the writings that best express my feelings are Rudyard Kipling’s “Gods of the Copybook Headings

As I pass through my incarnations in every age and race,
Peering through reverent fingers I watch them flourish and fall,




When the Cambrian measures were forming, They promised perpetual peace.

On the first Feminian Sandstones* we were promised the Fuller Life

In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peter to pay for collective Paul;


There are only four things certain since Social Progress began: —

The Gods of the Copybook Headings with terror and slaughter return!–Rudyard Kipling

*Feminian sandstones are a geological stratum representing a former age in which sexual mores declined as ours did in the last century, and the human race learned by natural selection that the wages of sin is death.

Isaiah on my mind

Paraphrased from the Book of Isaiah:

Many offered to help;
But, this was something I had to do on my own.
My friends have all grown tired of me!
Now that it is done, I hope they forget all that;
For it is nothing compared to what I am going to do!
For I am going to do a brand new thing.
See, I have already begun! Why won’t they believe it?
I will make a road through the wilderness of the world;
A straight smooth road through the desert;
Fill the valleys and level the hills;
Straighten out the crooked paths;
And smooth off the rough spots in the road,
For my people to return to Paradise; and
Create rivers for them in the desert!
The wild animals in the field will thank me,
The deer, raccoons and homeless cats and dogs, too.
For giving them water in the wilderness;
Yes, springs in the desert

Churchill On Islam








Saving Connect for Health Colorado






















Turning point in health care


Working hand to mouth

















Monkey-wrenching Obamacare

In 1975, Edward Abbey wrote his most famous literary work, “The Monkey Wrench Gang.”  It postulated a vision of environmental activism that eventually manifested worldwide.

Within two decades, environmental activists had gone on the offense to defend owls and prevent bulldozers from building logging roads. Environmental terrorists burned ski chalets and true-believers climbed trees to prevent redwoods from being cut.

Last month’s recent elections threaten to monkey-wrench Obamacare, aka, the Affordable Care Act.

Stalwart defenders of the law believe the bait has been swallowed into the gut of the fish and cannot be retrieved. Taking away the subsidies, mandates and doing a Control-Alt-Delete to reset the system to its pre-2013 status now seems impossible. Most supporters believe the law will remain intact and only minor changes will occur at the margins.

I see it differently.

The ACA was crafted by the insurance industry, not legislators. If you actually read the law and the rules entirely, you will understand. There isn’t a congressman smart enough to write such a complex law.

The ACA has many moving parts that were intended to precipitate a vast sea change in the group health insurance market. It’s covert long-term intention was to do battle against the federal ERISA law of 1974, which has, over the past 35 years, eroded the market share of companies such as Blue Cross/Blue Shield. The ACA’s goal was also to cement the oligopoly power of the seven largest insurance companies who now arbitrage nearly 20 percent of the U.S. GDP.

Our citizenry was thrown under the bus when Obamacare was enacted. It gave a franchised oligopoly to hospitals and insurance companies that were on the verge of being challenged the way IBM was challenged by upstarts like Apple and Microsoft back in the 1970s. It was not just Democrats who participated in this scheme. It was also Republicans and a host of executive branch regulators who owe their very existence to the lobbyists.

The public has not been served by loyal agents.

The current railing against Obamacare would normally be a campaign issue whose energy would dissipate soon after an election. The problem this time  is that too many politicians created a form of political currency by promising to repeal the law. If they fail to deliver, the 2016 election will punish them severely.

How can Obamacare be monkey-wrenched? In my mind there are at least four ways, two short term and two long term:

  1. Harpoon the subsidies,
  2. Destroy the exchanges,
  3. Deregulate health insurance markets, and
  4. Innovate the hedging of risk.

Harpooning the subsidies can come from multiple directions. The subsidies for cost share reduction health plans were never appropriated and are now being litigated. Another way to throw sand in the gears is to force subsidies to be given to lower-income workers who are on groups and being forced to buy platinum plans for their dependents.

The entire subsidy scheme is highly inflationary and it is being applied unequally to taxpayers. Monkey-wrenchers can press to eliminate the mandates and allow those who receive subsidies to obtain them by virtue of tax refunds rather than through the exchanges.

The exchanges themselves are fragile and vulnerable organizations that lack a funding formula beyond 2015. They have used grants to acquire complex technology developed by outside contractors. This, along with their call centers, have high maintenance costs. If people who are mandated to buy insurance and who receive subsidies through the exchanges were allowed to buy insurance from other sources and still receive the subsidy, the exchanges would fall like dominoes. They are being kept alive right now by insurance companies that have agreed to allow individual policies to be taxed and sold by unlicensed agents. Should this support be withdrawn by the federal government or at the state level, the exchanges will wither and die. Many of them already are dead men walking.

The health insurance markets are now where Telecom was in 1996 before it was deregulated. It is a cartel of oligopoly interests. Every aspect of the provisioning of health care has been co-opted by health insurance oligopolies at the state level. They work feverishly to keep the current medieval system in place.

For example, take insurance reserve requirements. They are designed not to insure solvency but to prevent new players from entering the market. The regulation of health insurance premiums along with mandated essential benefits prevent innovation from being effected. Insurance is no longer a device to lay off risk for similarly situated individuals in a group. It has been socialized and is now a public financing and taxing methodology to get the young to pay for the old and the healthy to pay for the sick.

Health insurance needs to be deregulated by allowing individuals and small business to form smaller cooperative and association risk pools on the same basis as larger self-insured corporations and government.

Finally, the hedging of health risks has been corrupted by an age-old contracting process. These contracts extend from the networks that include physicians up to the for-profit conglomerate hospital chains and then on to the reinsurance companies that absorb risk. It is an antiquated form of managing risk that has been displaced and innovated in most other markets.

Commodity exchanges such as the Chicago Board of Trade use futures contracts to lay off risk in everything from currency fluctuations to derivatives. Congress can further this effort the same way it funds the National Renewable Energy Laboratory for alternative energies.

The current set of problems with Obamacare does not stem from giving subsidies to uninsured people. It is because the true sponsors of the ACA, the insurance companies and the hospitals, have overreached and produced legislation whose intended consequences is to disrupt the self-insurance market and effect a migration toward the group and individual markets where certain insurers are dominant. They have enlisted the hospitals as their allies.

This is about to provoke a civil war between the parties in the market.

Like zombies, the monkey-wrenchers are sure to come out at night and do their mischief.