The Impact of Federalism on Corporate Power in American Legislatures: The Case of Health-Insurance Reform

Florida, like about a dozen other states, debated in 2009 a proposed amendment to its state constitution that would have blocked, at least symbolically, much of the federal health-care insurance overhaul on the grounds that it tramples individual liberty. Behind the amendments was an industry with a vested interest—an industry that made substantial campaign contributions to the supporters of the amendment. I contend that there is an ethical conflict of interest lurking here, even if it is constitutional (assuming that wealth constitutes free speech, which itself is a problematic assumption), but the main issue here is how the blockage of federal law applying in Florida (and other states) would have affected federalism. What would have been better for the American federal system: federal or state legislation, or perhaps a combination? 

It was not just ideology that united the proposal’s legislative backers in Florida. The amendment's 42 co-sponsors, all Republicans, were almost all recipients of out-sized campaign contributions from major health care interests, a total of about $765,000 in 2008 alone. Around the 2008 election, moreover, the groups that provided health care contributed about $102 million to state political campaigns across the U.S., surpassing the $89 million the same donors spent at the federal level. 

The conflict of interest for the 42 co-sponsors in the Florida legislature opened them and their health-insurance backers to attack by those who wanted the federal government to be involved in health-insurance. Indeed, those federalists argued that the magnitude of the health-care industry’s contributions demonstrated the dangers of leaving such a question up to individual states, where campaign finance and ethics rules varied at the time from strict to negligible. The industry had enormous power at the state level, those federalists contended, and very few states had state-level consumer groups that were able to lobby effectively against the industry-legislator nexus. 

On the other hand, federalizing health-insurance law contributed to the consolidation-tendency of the "extended republic" at the expense of its member republics, or states. Indeed, the matter of the U.S. Government’s enumerated (i.e. limited) powers was not lost on the state legislators of several states who  were opposed to a federal health-care law. “We are trying to prepare, and trying to send a message that there is no reason for those decisions to get made at the federal level,” said Representative Linda L. Upmeyer, a Republican who was leading efforts in Iowa's legislature to prevent the anticipated federalization by the federal president, Barak Obama.[1] Upmeyer and anti-federalists knew that without “opt-in” or “opt-out” provisions in the federal legislation, state constitutional amendments would be preempted even should Congress refuse to reform health insurance. 

To be sure, states opting out of the eventual Affordable Care Act could have compromised the economies of scale assumed by the federal cost-saving measures. However, not even the cost-efficiency of proposed federal legislation should always overrule the contribution of the bill on the system of federalism. This focus had been a factor in the trend since the 1860's toward the consolidation of power at the federal level at the expense of the diversity-expressive power of the states. Too much "one size fits all" with not enough taking into account the differences between the member-states in an empire-level political union leads to an unbalanced system of federalism and thus eventual demise of the union itself. This point is lost when the focus is on particular pieces of legislation, and more specifically on their respective redeeming cost-efficiencies. 

What if industry power over legislation is strongest at the state level? Would not another incremental movement towards political consolidation at the expense of federalism have the virtue of protecting democracy from the encroachment of plutocracy, the rule by wealth? Yet leading up to Obama's Affordable Care Act of 2010, the president dropped his public-option for health insurance when the lobbyist for the private health-insurance industry threatened to withdraw its support. Obama's political calculus was doubtless that the vote would be so close that he would need the industry's support--hence, as often is the case in American legislation--incrementalism is the rule and large packages like FDR's New Deal are the exception. 

Therefore, even though the member-state legislatures are perhaps more easily dominated by big business, the federal head is also capable of being controlled or steered. Perhaps part of the solution to the problem of industry dominance over government lies in enabling the state governments to be able to check the federal government, and vice versa. In other words, the worst enemy of corporate corruption of public officials at either government may be balanced federalism.

1.  David D. Kirkpatrick, “Health Lobby Takes Fight to the States,” The New York Times, December 28, 2009. 

Should Health Care Be a Right?

In the Spring of 2019, President Trump promised that a Republican alternative to "Obamacare" would soon be unveiled; the majority leader of the U.S. Senate, Mitch McConnell, quickly informed the president that the prospects of such legislation passing the Democratic-controlled U.S. House were zilch. This virtually guaranteed that health care would be play a salient role in the upcoming 2020 presidential race. The underlying question, I submit, has been whether health care ought to be a right, which the government would be obligated to ensure. Such a right would obviously not be one of those that hold government back (e.g., the right to liberty). Whether a right ensured by government or holding government back, the nature of a right is such that it is to be respected by others, whether individuals, organizations, or the state. Such respect, being an obligation, constrains those others. Hence, health care as a right has been controversial in the U.S. 
The Senior US Senator from Illinois, Dick Durbin, said the following just before one of the votes in December, 2009 on the Affordable Care Act, the health-care insurance reform legislation initiated by President Obama: “Thirty million Americans who currently don’t have health insurance  have the peace of mind of knowing that they have health insurance,” Mr. Durbin said. He added, “This is a real debate over whether or not health care is going to be a right or a privilege in America.”[1] By using the word, privilege, Sen. Durbin was implying that having access to health care on the sole basis of whether a person has money is unfair. 
If being wealthy is a good indication of being worthy of survival, then it may be assumed that health care for all, whether through private, non-profit, or government insurance, would undermine survival of the fittest. This in turn takes fit to mean strong or good. Were the humans in the financial sector before the financial crisis of 2008 strong or good? Does not fraud point to an underlying weakness? When Dick Fuld was CEO of Lehman Brothers before it collapsed, was he a strong leader or a pitiful man whose ambition got the best of him? 
In "survival of the fittest," fit has to do with fitting in with a changed environment. Such fitness, or fit, is on nature's terms rather than necessarily according to our notions of strong and good. For instance, a young drug dealer in a large city may have twelve "baby mamas." This means that the man had impregnated twelve women, who had been attracted to him on some basis that they valued. The sheer number of offspring suggests that the man was successful in reproducing himself; he thus fit well in his environment on this nauralistic basis. If survival of the fittest lies the availability of health care, should that man be covered while a poor religious man who has contributed to society without earning much money or having children should not? 

See also "Congressional Cuts to Foodstamps: Violating a Human Right?"

1. David Herszenhorn and Robert Pear, "Parties Stay United as Health Bill Clears Steps in Senate," The New York Times, December 22, 2009.

The Right in European and American Politics: Disentangling Right from Right

The far-right in Europe has been quite different than the right-wing in American politics. Putting aside the usual caricature of “people in pointy hoods and the Ku Klux Klan,” Marine Le Pen said she still believed “the American right [was] much more to the right than the National Front.” She may have agreed with those who wanted to manage American frontiers more effectively and prevent massive illegal immigration, but she was also a big believer in the state’s ability and obligation to help its people. “We feel the state should have the means to intervene,” she said. “We are very attached to public services à la française as a way to limit the inequalities among regions and among the French,” including “access for all to the same level of health care.”[1] This statement implies that survival is a human right--something the American right has tended to eschew in favor of a survival-of-the-fittest mantra that conflates the state of nature with the interdependency in a developed economy. 

Therefore, it can be concluded that American right has been more far-right than the European far-right has been in terms of government having a responsibility to take care of people in need, even providing a survival-net so that no one need go hungry, homeless, and without medical-care. Of the latter, it took President Obama, a corporate Democrat, to widen the net on medical insurance, though even he caved to the private-insurance lobby, which threatened it would withdraw its support unless the president dropped his support for a public option.  

So from an American standpoint, it is particularly striking that the European right has consistently advocated universal health-care. To the American right, even a “public option” for government-run health insurance can only be odious socialism, which in turn, if generalized, could bring down the Union. Moreover, the American rich who retort, “I don’t want to help others with my tax dollars—just defense,” is absent from the E.U.'s far-right. This point demonstrates a real cultural divide between the E.U. and U.S. 

In terms of federalism, the “Euroskeptics” have been much more skeptical of the E.U. than the state rights advocates in America have been of the federal-level of governance in the U.S. Even though in both unions secession movements have resulted from the Euroskeptic ideology, it has had more influence in terms of the constitutional design of the E.U.'s federal system as well as in European politics. For example, the governor of Hungary came to the defense of Poland when the federal Commission went after the latter for subjugating the judiciary to politics. In terms of federalism, the European right is more to the right than is the American right.

Immigration is another policy area in which the European right is further right. France's president Sarkozy’s attempt to send the Roma out of his state makes Arizona's Jan Brewer’s proposal to allow her state's police to verify the citizenship of people already involved in a police action seem down-right moderate. Whereas in the spring of 2011 the Danish government considered putting up border guards to keep African immigrants out, the Arizona government did not add border guards of its own in 2010. To be sure, U.S. President Trump did exactly that in 2018, perhaps to keep certain peoples out or to stop drug-trafficking and illegal immigration. In European far-right politics, going after particular peoples already legally in the E.U. has been fair-game. In the E.U. state of Belgium, some establishments in the Flanders region as late as 2010 have brandished signs stating “No Walloons Allowed”—similar to “No Blacks Allowed” in Alabama until the 1970s. It would be interesting to compare racism in the E.U. against Africans with racism in the U.S. against Black Americans (who go by the misnomer of African-Americans, which is an ethnic rather than a racial designation).

Perhaps it could be said that whereas culturally and in terms of federalism the European right has been more to the right, the European value of solidarity has moderated that far-right appreciably, whereas the right-wing in American politics has known no such moderating factor. Therefore, caution should be exercised when comparing seemingly-parallel parties in American and European politics. The two unions have rather distinct politics even though “right” and “left” apply to both unions. 

For more comparisons, see Essays on Two Federal Empires, available at Amazon.

1. Tracy McNicoll and Christopher Dickey, “What a Tea Party Looks Like in Europe,” Newsweek, September 6, 2010.

The U.S. Senate: What Is It Really?

Part I

In 1928, the Senate stopped the bill that would have given WWI vets their bonus then rather than in 1946.  Mass protests for weeks by thousands of vets on the U.S. Capitol may have swayed the U.S. House, but the Senate was undaunted: passage of the bill would be economically disasterous .   Such a scenerio is exactly what the delegates in the U.S. constitutional convention in 1787 would have predicted.  They designed the House to reflect the passions of the people, and the Senate as a check on such passion where it is intemperate.   Looking back at Shays’ Rebellion in Massachusetts, the delegates feared excess democracy.  No supporter of the Senate, Madison nonetheless points out that “a numerous body of Representatives were liable to err also, from fickleness and passion. A necessary fence against this danger would be to select a portion of enlightened citizens, whose limited number, and firmness might seasonably interpose against impetuous councils” (Madison’s Notes, p. 194).

However, the delegates also designed the U.S. Senate “to represent the wealth of the Country” (Pinkney, in Madison’s Notes, p. 198).  Col. Mason claimed that “one important object in constituting the Senate was to secure the rights of property” (Madison’s Notes, p. 200).  Does being wealthy make one temporate or enlightened?   Madison observes that “wisdom & virtue” are among the objects of the proposed Senate (Madison’s Notes, p. 195).  Does being wealthy mean that one is apt to stand up for virtue?  Does wisdom come from having inherited or earned wealth?

As if these two purposes etched in the design of the U.S. Senate are not sufficiently disjoined, the delegates also intended that the Senate represent the State governments so as to proffer them a means of defending their turf against encroachment by the U.S. Government.  Senators were selected by State governments before the ratification of the 17th Amendment in 1913.  It was debated in the convention whether popular election would give the senators a sufficient incentive to protect their respective State governments.  The delegates concluded that it would be insufficient, and history has proved them right–as the governments of the States have steadily lost power to the expansive U.S. Government.

So, the U.S. Senate was designed as a check on the excess democracy possible in the U.S. House, to protect the interests of property, and to represent the State governments and protect the balance of power so crucial to the viability of federalism.   It is not clear to me that these three functions are mutually-supporting or even compatible.  I don’t see evidence in Madison’s Notes of Debates in the Federal Convention of any consideration of the assumed compatibility.

Just as any human institution is apt to subtly morph if it endures for a sufficient time, the U.S. Senate has changed through the centuries.  As a result of the 17th Amendment wherein U.S. Senators are now popularly elected (by State), the U.S. Senate is more democratic–hence more like the House.  The six year senatorial term is a buffer, to be sure. However, re-election is never too far off to be absent from a given Senator’s political and legislative calculation.   Hence we are unwittingly leaving ourselves vulnerable to our own excesses.  Are we assuming that our passionate, spur-of-the-moment, collective impulse cannot be reckless and ultimately not in our own best interest?

I have already pointed to the implications for the State governments, and we have seen their eclipse through the last century.   What about the protection of property?  How does this mix with the more-democratic “structural tendency” in the Senate?   Are Senators more oriented to the upper-class voters while soothing the rest as if we too are being represented?  In other words, is there a sort of duplicity built-in to this combination?

In my opinion, the U.S. Senate can represent the State governments while simultaneously serving as a check on the intemporate excesses possible in the U.S. House.  Property is sufficiently represented in the U.S. Government as a whole, given the small number of elected and appointed officials relative to the entire population.   I would look to the commensurate European Council in the E.U.   The Council not only represents the State governments, the chief executives of the States (or their ministers when specialized topics are decided) sit on the Council.   It is a viable check on the European Parliament, which is commensurate with the U.S. House (i.e., elected representatives by the people of the EU).   We could do better by emulating the European Council.

Accordingly, I recommend that the governors sit in the Senate (which would meet periodically…with the governors’ respective staffs doing the leg work), with the relevant members of the States’ cabinets meeting on specialized topics.   This might seem confusing, but it works in Europe.  Essentially, officials in the respective State governments would meet in a common council.  50, not 100 members.  The latter number is too numerous for a council.   Because governors are elected, democracy would not be shirked even as the Senate would be a viable check on the excesses in the House (because the governors acting in a council are “two degrees” from the voters while the U.S. Reps are only one).   To be sure, the Senate would not be meeting every day, but meeting periodically to decide the major points.

The Senate representing the State governments would distinguish the Senate from being a replica of the House.  Do we really need two Houses?   Strictly speaking, proportional representation applies where citizens are being represented.  In contrast, in an intergovernmental council each government is a member–a person, as it were–regardless of how much each weights (e.g., different populations, territorial size, or wealth).  The European Council deviates from the “intergovernmental council” model because the number of votes assigned to the governments is influenced by its population.  I don’t see why the Senate would no longer be an intergovernmental council just because the votes are proportional; the key would be that governments would be voting, so the one vote per government could be relaxed.  Because proportional represention is the rule in the U.S. House, the big States can protect themselves.  So I don’t view the one vote per government in the Senate as problematic in terms of the Congress as a whole.  In general terms, the more we can distinguish the two bodies of the Congress, the more we enrich our system of government by taking advantage of the unique contributions from different forms of polity.   If there is a downside to proportional representation,  a Senate not partaking of that method would automatically be a check (and vice versa, of course).

Part II

The US Senate is “absurd.” So said Katie Connolly of MSNBC in 2010.  She was referring to Sen Shelby (R-AL) being able to singlehandedly place a hold on all pending nominations.  Citing a congressional scholar, Johathan Chait noted that a blanket hold has never been used before. Connolly argued that Shelb was doing it “because he wants a European corporation to build some planes in his state.”  Such a reason would be ubiquitous if not squalid enough in either body of the US Congress, so it is certainly plausable.  One might recall the money Sen. Ben Nelson got for Nebraska by agreeing to the health care reform bill.  In needing all 60 votes from the democrats and two independents, that bill gave us all a reminder of what an international body is like where each member has a veto.  In singlehandedly blocking all pending nominations before the US Senate, Sen Shelby was drawing on this theory as well.  While it is easy to trounce on each Senator (or each state) having a veto, I would argue that it is far less sordid than Shelby’s reason (i.e., more pork).  Because every state in the Union is semi-sovereign (and enjoys residual sovereignty as per the tenth amendment), there is constitutional support for any state represented in the US Senate having a veto on any legislation or appointment.  Because the veto is based on governmental sovereignty (i.e., the US Senate being in this respect an international body—unlike the US House), Alabama can use its veto even for reasons we might find disgusting.

So if each Senator (who represents his or her state as a political body even though he or she is elected by the citizens of his or her state) having a veto makes the US Senate “absurd” (and I join with those who are frustrated by it), we might want to consider the consequences that would be involved in depriving the political members of the Union of their vetos in the General Government (ie., Washington).  We could expect an acceleration in the consolidation of power in the General Government at the expense of the state governments—resulting in one size fits all in a heterogenous empire-scale Union (i.e., empire).  Any state government objecting to Washington taking over yet another domain of power would be powerless to stop that train without breaks running down the tracks toward a central state.  Meanwhile, that train would be able to pass more legislation through the US Senate, further accelerating its speed.

Some time back, I asked Sandra Day O’Connor of the US Supreme Court why she wasn’t objecting to the US Government going beyond its enumerated powers.  She replied to the small group that Congress was acting like a state legislature.  Disgust was palpable in her voice.  In a sense of futility, she added that it takes five on the US Supreme Court to have a majority decision (meaning that a majority would not go along with her on the enumerated powers matter).   You might be wondering what is wrong with Congress acting like a state legislature. The problem is that the US is in scale (and its make-up) commensurate with an empire by today’s standards.  In other words, most of our states are equivalent to countries.  You just can’t (or shouldn’t) run a combination of countries as though it were one country.  For one thing, a combo is inherently diverse.  Also, its center is further from the people.  It means less democracy or republican principles of representation because there are far fewer US Reps and Senators than state Reps and Senators.  Also, the US Government is designed as an empire-level polity.  Whereas the states’ Senates represent citizens (just as the states’ assemblies do), the US Senate (unlike the US House) represents political entities (the states) rather than US citizens.  In other words, both US citizens and US states are members of the US.  The US Government isn’t fashioned like a state government because the Union is a combination of such states (whereas a state is not a combo of republics in turn).

So we ought to be very careful about kneejerk reactions to fix the “absurd” US Senate.  To be sure, holding up appointments to get pork is squalid even by a pig’s standards, but turning the US Senate into a state senate would drastically alter what the US are.   Even though we use “the US” as a singular noun, the entity itself and its government were formed and designed with it as a plural noun (the states) in mind.  The US constitutional convention delegates invented modern federalism to suit this new genus of an empire: the Union.  The EU has since come into being along similar principles because it is of the same genus.  To treat either the US or EU as though it were commensurate with one of its states would be to treat something other than what it is.  That can only lead to a downfall.   So perhaps rather than change the US Senate to fit our understanding, we might alter our understanding to fit what the US are. This would entail taking the pressure off of the US Senate by returning most of the domestic legislation to the state governments (where there is more democracy).  Consider the coherence in having the US Senate  mainly involved in foreign policy (and regulating between the states) and having a filibuster (which is close to the principle of international organization).  That is, the state governments meet in the US Senate technically on an international basis. Moreover, the U.S. Constitution forms a hybrid between or composed of international and national governance.  This unique situs fits with the empire-scale of the United States, especially as they have expanded to fifty. 

Treating the US Senate as a state legislature…legislating on everything from healthcare to education…is a gross departure from this coherence.  It is indeed absurd—only we have the arrows reversed.  It is our use of the US Senate that is absurd—not the Senate’s principles (even though they can be abused, such as by Nebraska and Alabama). Treating the US Senate (and the Union) as other than what it is can only lead to the fall of our empire…our Union of States. To be sure, every empire that rises must fall.  So why write?  I’m merely trying to stay the fall a bit, but the outcome is certain.  In the meantime, let’s not help it along.  This will take more humility and much less presumptuousness in what we think we know about our system of public governance.  With more humility, perhaps more of us will be content to get involved in our state governments.  As it is, we overlook them and advocate changing the US Senate into our own image of what it should be, presuming the extant Senate is "absurd" (perhaps it is sheer hubris to make such a summary judgement?).

Source: http://blog.newsweek.com/blogs/thegaggle/archive/2010/02/05/need-more-evidence-the-senate-is-absurd-look-no-further.aspx

Automatic Standing: The American States in Federalism Cases

Unlike that of the E.U., the U.S. system of public governance is structurally biased toward  political consolidation at the expense of federalism. In fact, the bias extends to jurisprudence. This is evident in a ruling by the U.S. Court of Appeals for the Fourth Circuit on September 8, 2011 against Virginia on the 2010 federal health-insurance reform law.

According to the Wall Street Journal, at issue was “whether the federal government can require Americans to either carry health insurance or pay a fee starting in 2014.” In a unanimous opinion, a three-judge panel at the U.S. Court of Appeals for the Fourth Circuit in Richmond Virginia “found Virginia Attorney General Ken Cuccinelli lacked legal standing to bring his challenge. That threw out a ruling [in 2010] by a lower court judge who said Mr.Cuccinelli was entitled to sue and found the law’s requirement to carry insurance went beyond Congress’s powers under the U.S. Constitution. Mr. Cuccinelli, a Republican, had argued Virginia had standing because, shortly after President Barack Obama signed the health law, the state’s previous governor had signed a law saying the state’s residents shouldn’t be required to carry health insurance. But the Fourth Circuit judges found that law alone wasn’t enough to generate standing for Virginia, and the state couldn’t show it was directly burdened by the insurance requirement. ‘If we were to adopt Virginia’s standing theory, each state could become a roving constitutional watchdog of sorts; no issue, no matter how generalized or quintessentially political, would fall beyond a state’s power to litigate in federal court,’ Judge Diana Gribbon Motz wrote. She and the other two judges were appointed by Democratic presidents.”

Analysis:

In her statement, Judge Motz fails to grasp one of the fundamental mechanisms of modern federalism—namely, that the two systems of government—that of the states and the federal government—check and balance each other. This is necessary because governmental sovereignty is divided up between the two systems in modern federalism. The division and the related enforcement mechanism of “check and balance” are means of protecting the citizens’ liberty at the expense of tyranny (i.e., unaccountable government action). For modern federalism to work effectively, any encroachment on the sovereignty of one system by the other must be repelled. Otherwise, even one successful encroachment by one system could snowball into such an imbalance of sovereignty between the two systems that the federalism itself is defeated and the union is either de facto dissolved or consolidated with the people’s liberty paying the ultimate price.

Accordingly, governments of republics that are members of a modern federal system of governance have standing constitutionally, as semi-sovereign members, to challenge possible encroachments by the general government. I contend that Virginia had standing in the appeal because a Congressional over-reach based on the interstate commerce clause (i.e., the enumerated power authorizing Congress to regulate the commerce between two or more states) would be at the expense of Virginia’s sovereign sphere. Moreover, it is in the interest of the federal system itself, and the U.S. Constitution, that members or branches of one of the two systems of government have standing to contest over-extensions by a member or branch of the other system because otherwise one system could come to eclipse the power of the other (i.e., consolidation or dissolution).

It could be argued that Virginia’s standing is pretty obvious given Virginia’s membership in the U.S. federal system and the fact that Congress’s encroachment would be at the expense of the polity members because the federal law would bind the Virginia government. The fact that the appeals court is itself a member of one of the branches of one of the parties may account for the judge’s refusal to find standing.

In terms of the constitutional law jurisprudence, being burdened should not be required of Virginia in order for the republic to have standing; merely having an interest in terms of its sovereignty should be sufficient. Such an interest is triggered by a possible encroachment by Congress beyond its enumerated powers because the Virginia government would not otherwise be confined in its legislative, executive or judicial actions. Above all, it is in the interest of the federal system itself, and thus the United States, that both systems of government within the system have standing to contest any and all possible encroachments. Perhaps if the state governments’ standing were recognized where it is possible that Congress, the president or a federal court has unduly constricted the states’ semi-sovereign situs in the federal constitutional order, the U.S. system of public governance would be closer to federalism rather than consolidation. Given the extent of the latter, it would not be a bad thing to have each state “become a roving constitutional watchdog of sorts; no issue, no matter how generalized or quintessentially political, would fall beyond a state’s power to litigate in federal court.” Perhaps then a balance of power—and of the respective sovereignties—which is necessary for a modern federal system (i.e., not confederalism, such as in an alliance), would be within reach; the check and balance between governments that exists in viable federalism could once again function (if it ever did in the American context).

Source:

Janet Adamy, “Court Upholds Health Law,” Wall Street Journal, September 9, 2011. 

On the State of the (American) Union: Getting Real

It is certainly more politic to declare the state of the union to be strong rather than weak. In his State of the Union speech in January 2011, President Obama ended by stating definitively, "The state of the union is strong." Even though particulars could doubtless be found to support his claim, I contend that he severely understated the weakness in the state of the union at the time.

The $45 billion deficit in the Social Security fund ought to have raised more than a few eyebrows, not to mention the U.S. Government deficit of over $1 trillion and the related debt of $14.3 trillion. To claim strength as if the U.S. were still a going concern as long as such a debt exists is more fitting for a magician than a U.S. President. Furthermore, one could point to the 3.4 million inhabitants expected to be foreclosed by the end of 2011 or the 9.7 million unemployed on unemployment compensation in January, 2011 (51,000 added the last week of January alone), as well as to the 40 million inhabitants within the U.S. still without health insurance (i.e., having to wait until 2014 because of a deal made with the insurance company lobby--a party with a vested financial interest).

The President's State of the Union speech evinces a state of denial going far beyond one man. One might ask, moreover, whether structural or systemic solutions are even possible in a representative democracy, or is the free world destined to be poll- and issue-driven? Furthermore, are we too fixated on the status quo wherein we prioritize our debate on the size and involvement of government (e.g., tax increases vs. spending or tax cuts, rather more revenue and less spending) over the immediately pressing exigency of fiscal balance and the human rights of the least well off (John Rawls' criterion for a just outcome)? Are we destined to have solutions foisted on us by the brute force of necessity? In short, can we bracket our incremental approach based on convenience and think instead about the long-term viability of the system itself? The State of the Union of 2011 notwithstanding, the state of our union is worth taking another look.

Source:

David M. Herszehhorn, “Deficit Forecast Nears $1.5 Trillion, Fueling Partisan Battle on Federal Spending,” The New York Times, January 26, 2011.

Real or Incremental Change?

On October 13, 2010, Fox News reported a poll that found that women were turning on Obama.  The reason cited was that they feel there has been too much change—that it has been “jarring.”  I was stunned—wondering if I was listening to a broadcast from another planet. I remembered that when I had been sampling a fattening food item in a grocery store in my antiquated home town in Illinois; the old woman who gave me the sample, said, “We have lots of devils here!” as she was handing me the sample.  She was referring to the array of food samples in the store that day a few weeks before Thanksgiving.  My reaction, which I charitably did not share with her, was, Oh, horrors! I wondered what century she was from (probably Calvin's, I concluded privately as I chewed a “devilish” olive). I wondered, moreover, why some people magnify little things into horrendous sins. Such people, I concluded, cannot seem to let go of what is to the rest of us so utterly antiquated and get with it. That is, why are some people so resistant to change? Why do they perceive small, incremental changes as somehow momentous—even jarring?

In a preface to one of his books, Milton Friedman wrote, "Only a crisis—actual or perceived—produces real change. When the crisis occurs[,] the action taken depends on the ideas that are lying around.” That is to say, human nature is not exactly designed in favor of substantial change—being more inclined to the incremental variety. When a culture says that real change is to be feared and people don’t bother to come up with a broad array of ideas, even a crisis may not result in real change. Such can be said of modern American society, even as “change” shows up consistently in American political campaigns.

In terms of the jarring change being reported on Fox News, the journalist pointed to the health-insurance reform law as a case in point.  In spite of its purported “socialism,” the law relies on private health-insurance companies, whose lobby pressured Obama into dropping his “public option” requirement and adding a mandate that requires Americans to become customers of those companies.  If relying on extant private companies—giving them a guaranteed and vastly enlarged customer base—is somehow “jarring” change, I have to start wondering about whether some people have a pathological issue with change itself.

One need only point to the Dodd-Frank financial regulation law of 2010, which subjects banks deemed too big to fail to additional capital requirements and requires the banks to develop liquidation contingency plans. This “change” pales in comparison to breaking up the banks having $1 or more trillion in assets so they do not pose a danger while extant. That some people might find increasing capital requirements as jarring boggles the mind. Are such people familiar with real change—even if they voted for it in 2008? I suspect they would not recognize it if it jumped up and bite them on their asses, and yet political campaigns are ostensively all about change—or the illusion thereof—but just enough to tell people what they want to hear.

Not surprisingly, much of the campaigning in the 2010 midterm elections was oriented to incremental change on a variety of issues, rather than to real change, even though the latter would have been more fitting given the systemic negative effects of the financial crisis of 2008. Even in states bordering on bankruptcy, like California, Florida and Illinois, campaigning as usual belied any purported crisis. 

For example, I watched a candidate forum that was being held in Illinois and one of the main questions was why a candidate’s business was so successful.  Meanwhile, the last governor had been impeached and removed from office by a nearly-unanimous vote in the legislature, and the government was borrowing $18 billion in 2010 alone.  The forum struck me as an exercise in “rearranging the deck chairs on the Titanic” as if the ship of state was not on the verge of sinking.  In other words, it was business as usual in a context that demanded substantial change. Clearly, the candidates knew of Illinois’s fiscal (and corrupt) condition. It occurred to me that they were either bereft of ideas or too accustomed to going along on the track of status quo to proffer any real alternatives. Lest one heap all the blame on the candidates at the forum, it is important to note that it was a citizen of Illinois who asked about the candidate’s business. Perhaps the society in Illinois is too entranced by custom and thus insufficiently equipped for real change—ironically even as one of Illinois’ former U.S. senators was serving as the “real change” president of the United States.

Lest the pallid phenomenon be presumed to be limited to the heartland, the California Governor’s race between Jerry Brown and Meg Whitman also evinced politics as usual. The two candidates had a chance in their debates to persuade a California-wide audience that they could turn around the economically-troubled republic. Instead, they resorted—at least in their third debate—“to many of the personal attacks that have dominated the last few weeks of the campaign,” according to MSNBC, whose verdict can be said to apply to American politics even in the wake of a crisis: “Neither candidate presented any new ideas.”

Source:

Jeff Madrick, Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present (New York: Alfred A. Knoff, 2011).

TARP Paid Off: But What about the Foreclosures?

TARP, the "bailout" for banks rather than mortgage borrowers, was the first big issue facing the Obama administration before the roughly $800 billion stimulus plan and the health insurance overhaul that stoked the rise of the Tea Party movement. After supporting TARP, several Republicans lost in the elections of 2010 largely because of their votes. For many Americans, TARP is a symbol of big government at its worst, intervening in private markets with taxpayers’ billions to save Wall Street plutocrats while average Americans continued to struggle to make mortgage payments or lost their houses outright.  “This is the best federal program of any real size to be despised by the public like this,” said Douglas J. Elliott, a former investment banker now associated with the Brookings Institution. “It was probably the only effective method available to us to keep from having a financial meltdown much worse than we actually had. Had that happened, unemployment would be substantially higher than it is now, the deficit would have gone up even more than it has,” Mr. Elliott added. “But it really cuts against the grain for a public that is so angry at banks to think that something that so plainly helped the banks could also be good for the public.” TARP was good for the public not in that the funds enabled Wall Street bonuses; rather, the good was solely on the macro level, as the frozen credit markets eventually thawed such that the financial system meltdown was averted.  However, this does not mean that it was "the only effective method available."

Specifically, the TARP funds could have been used to subsidize mortgage borrowers demonstrating difficulty in making the payments. On a CBS news show May 15, 2011, Speaker Boehner was asked about the four foreclosure programs of the U.S. Government. "They have all failed," he told the journalist. However, the Speaker then refused to have the government get involved; the best we can do is wait for the market to solve the problem as more buyers enter. However, that would only spur foreclosures, as more buyers would make it easier for banks to sell their foreclosed houses. It is interesting that hundreds of billions of taxpayer dollars could go the big banks, enabling record executive bonuses, whereas all we can do is rely on the market to mitigate the foreclosures. This squalid double-standard can be explained by simply looking at the bankers' interest, which is at odds with that of the mortgage borrowers. Considering the problematic way in which the sub-prime mortgages had been produced (e.g., liars' loans and no-document mortgages), I contend that the interests of the banks' customers ought to be given primacy here. The problem is that the borrowers are dispersed, whereas the bankers have concentrated leverage via their capital and lobby over government officials who would like to be re-elected. In a republic, the leverage ought to go in the opposite direction: elected representatives coming down on the bankers for their shaddy lending and related double commissions at the expense of the borrowers.

Laying the power reality aside, an alternative to TARP can be envisioned. This exercise, although inexorably futile, can tell us something about the opportunity costs involved in enabling the powers that be rather than holding them accountable. Along with a federal law limited the rate resets on the ARM sub-prime mortgages (resisting the pressure of the banking industry that recklessly had originated or bought the mortgages), subsidies could not only have removed a major toxic element from banks' balance sheets and thus opened up lending, but also perhaps fortified the housing markets in the U.S. such that homeowners duped into houses over their heads could have had some time to sell and find more suitable housing. In other words, the "two birds with one stone" could have applied, instead of the top-directed infusion. TARP did not come with requirements that lending reach a minimum level so even though the banks did not fail, it took even the TARP banks a long time to raise lending again; the return to lending should have been immediate.

It could be argued that the TARP funds put into banks gave the U.S. Government the corresponding benefit of bank stock. To be sure, selling the stock has made up a large part of the TARP funds already by 2011, but it was at that time uncertain whether the government would make a profit. In the fourth quarter of 2010, the U.S. Treasury projected that taxpayers wouuld lose less than $50 billion at worst, but at best could break even or even make money. Its best-case assumptions, however, assume that A.I.G., which had received $182 billion in TARP funds, and the auto companies would remain profitable and that Treasury would get a good price as it sells its corporate shares in coming years.

In May 2011, AIG and the Treasury Department announced that they would sell $9 billion in stock altogether, but for less than half of the expected price. As of May 10th, the AIG stock pre-market price was thirty cents off from the government's breakeven point. AIG stock had slid from the mid 40s to the mid 20s. I submit that these considerations of U.S. profit-taking, although appealing from a capitalist standpoint, misses the bigger picture in terms of a government's mission. I contend that governments do not exist to make profits. Furthermore, a government's primary charge is to protect citizens, whether from foe or famine. Failing to mitigate or obviate foreclosures even as banks got funds to keep them afloat is thus a blight on the U.S. Government. To be sure, maintaining the viability of the financial system is legitimately part of the government's job, that function could have been accomplished by protecting citizens who otherwise lost their homes. This is not to say that the homeowners deserved to stay indefinitely in houses too big for them; rather, it is to say that homeowners could have been kept from being tossed onto the street. The U.S. Government could have helped two birds with one bag of birdfeed while meeting its own obligations as a government.

Sources:

Jackie Calmes, “TARP Bailout to Cost Less Than Once Anticipated,” The New York Times, September 30, 2010.

The Huffington Post, "AIG, U.S. Will Sell $9B in Stock -- But for Less than Half of Expected Price," May 11, 2011.

De-Funding Obamacare

It is odd that even after a bill becomes a law, it can be defunded, thereby effectively killing it even though it has not been voted down.  One would think that it would be required to pass the funding that is required by the law. The Republican Party has strategized on how to deconstruct Obama’s health-insurance law through various means.

Republicans could turn to the annual appropriations and budget process or push stand-alone bills to delay or stop funding for provisions of the law they dislike, including the individual mandate, the health insurance exchanges and the Medicaid expansion. They might also work to weaken provisions in the bill that deal with Medicare physician reporting requirements that some physicians find onerous and block the creation of a nonprofit research institute to examine the effectiveness of various medical treatments. Mandatory funding, which comprises much of the health measure that began in 2014, will continue unless Republicans can change current law. Discretionary funding must be approved each year but differences between House and Senate versions of appropriations measures must be ironed out and that generally produces a compromise package. Why all of the law’s funding would not be mandatory as part of the law defies logic and government functioning. Also, how the mandatory funding could comprise much of the law when the individual mandate, the exchanges, and the medicaid expansion can be defunded, is also beyond me.

A major problem with the defunding strategy is that since so much of the bill is inter-related, trying to dismantle it piecemeal could lead to unintended consequences. While the individual mandate is unpopular, “you can’t pull it out of the law without all sorts of other elements falling apart,” Reischauer says. And scrapping the mandate, which requires most people to have coverage or pay a penalty, would anger health insurers — a core GOP constituency. Insurers have agreed to abide by new consumer protections, such as not denying coverage based on a pre-existing medical condition, in exchange for 32 million new customers. Hospitals agreed to payment cuts on the premise that more people would have health care and hospitals would have less uncompensated care. In other words, because the health insurance industry got basically what it wanted—the mandate without a public option—it would be highly unlikely that certain parts of the law would be defunded unless it were in the interest of the health insurance companies.  Therefore, the mandate is not apt to be defunded unless the rest of the law is to go down too.

I contend that law should not be allowed to be defunded. That is, upon passage, the law should have its required funding established as a matter of law.  Secondly, I contend that private companies with a vested interest in a law should not be allowed to have such power that they can tailor the law to their liking. Extant industries have too much power in the US Government.  As a reflection of this condition, we over-rely on private companies and the market—ignoring their downsides. Where basic necessities such as access to basic health-care is concerned, our over-reliance can be fatal.

Source: http://www.msnbc.msn.com/id/39295110/ns/health-health_care/

A Bit of Federalism in ObamaCare

Senator Ron Wyden has written to government officials of Oregon to encourage them to “come up with innovative solutions that the Federal government has never had the flexibility or will to implement.” This is significant because he is a democrat. As long as a state covers the same number of uninsured and keeps coverage as comprehensive, the following can be waived:

1. the individual mandate to purchase insurance (i.e., what Virginia and Florida are suing over)

2. regulations about business taxes

3. federal standards for minimum benefits

4. allocation of subsidies in the insurance “exchanges.”

These are called section 1332 waivors. There is also some flexibility on medicaid--but how much flexibility do these waivors proffer? The states might be able to determine how the uninsured are to be insured. For instance, they could go single-payer. Or could they?The federal allocation of subsidies in the insurance “exchanges” can be waived, but can the “exchanges”?

There is a trade-off involved in federal standards and state waivors. If the federal standard is too high (e.g., the number of uninsured covered and the amount of minimum coverage), then not much freedom is involved in the waivors because the standards must be met regardless. Given the diversity within the Union and our system of federalism, the US Government should have been oriented to coming up with minimum standards for health-care rather than trying to make it a federal responsibility. By minimum, I mean that below which is unacceptable for a state in this union. For instance, it could be that universal health-care is a minimum if health care is to be considered an American right. The states, rather than the general government, would then be required to pass laws to implement the minimum standard in any way they preferred. They could determine the means, whether single-payer or exchanges. I’m not sure that the existing waivors, which do not begin until 2017, allow for such flexibility as would accommodate the various political ideologies of our states. Once power is grasped, it is very difficult indeed to let go of some of it.

Source: Wyden Defects on ObamaCare, WSJ, September 3, 2010, p. A16.

Betraying an Electorate: On President Obama's Deal with Drug Companies

While campaigning for the U.S. presidency in 2008, Barak Obama decried the greedy Republican lawmakers acting at the behest of the drug companies to keep drug prices artificially high. A year later, those same drug companies wanted Obama to oppose a Democratic proposal that was intended to bring down the prices of medicine. Beyond betraying those voters who voted for him based on his campaign rhetoric on drug prices, Obama belied the trust that is necessary for a viable republic to function democratically.

 “On June 3, 2009,” according to the New York Times, “one of the lobbyists e-mailed Nancy-Ann DeParle, the president’s top health care adviser. Ms. DeParle sent a message back reassuring the lobbyist. Although Mr. Obama was overseas, she wrote, she and other top officials had ‘made decision, based on how constructive you guys have been, to oppose importation on the bill.’ Just like that, Mr. Obama’s staff abandoned his support for the reimportation of prescription medicines at lower prices and with it solidified a growing compact with an industry he had vilified on the campaign trail the year before.” 

As per the quid pro quo, the industry sponsored its own advertising campaign in favor of Obama’s health-insurance proposal. It was not just the guys’ constructiveness that had convinced Obama’s staff to “make the deal.” To be sure, the staff could have been supposing that the subsidies enabling middle-income Americans to afford health insurance and the expansion of Medicaid to cover 30 million uninsured Americans would relieve people from having to pay high prices for medicine (though everyone, even if only as payers of higher taxes, would be paying the price in the form of higher insurance premiums). However, there would be no guarantee that the government would pick up the tab when needed. Furthermore, the higher prices could widen government deficits.

Beyond health-care and budget policy, moreover, is the contradiction between Obama’s campaign speeches and his staff’s decision to oppose the bill. The implication is that Obama went back on his word, essentially betraying anyone who voted for him because he promised to support lower drug prices. Beyond Obama’s public credibility lies the mechanism of democracy wherein voters trust that a candidate’s campaign bears some relation to the candidate’s governance. Otherwise, the “will of the people” breaks down and mistrust sets in on a societal basis. In other words, when representatives say one thing on the trail and quietly do the opposite behind their desks, democracy itself suffers.

In the wake of the financial crisis of 2008, it was said that trust is vital to the financial system. The same can be said of a viable republic. The question, therefore, is how candidates can be held accountable for the assumed congruence when so much of governance is done behind closed doors. In an electoral system where not voting for one candidate benefits the candidate even further from the voter’s preferences, it can be difficult indeed to hold an office-holder accountable at the ballot box. 

Source:

Peter Baker, “LobbyE-Mails Show Depth of Obama Ties to Drug Industry,” The New York Times, June 8, 2012.

Drug Companies as Feeding Machines: Don't Feed the Sharks

In 2008, drug companies raised the wholesale prices of brand-name prescription drugs by about 9 percent, according to industry analysts. That added more than $10 billion to the nation’s drug bill, which was on track to exceed $300 billion in 2009. By at least one analysis, this was the highest annual rate of inflation for drug prices since 1992. “When we have major legislation anticipated, we see a run-up in price increases,” says Stephen W. Schondelmeyer, a professor of pharmaceutical economics at the University of Minnesota.  A Harvard health economist, Joseph P. Newhouse, said he found a similar pattern of unusual price increases after Congress added drug benefits to Medicare a few years ago, giving tens of millions of older Americans federally subsidized drug insurance. Just as the program was taking effect in 2006, the drug industry raised prices by the widest margin in a half-dozen years.  “They try to maximize their profits,” Mr. Newhouse said. However, the drug companies claimed they were having to raise prices to maintain the profits necessary to invest in research and development of new drugs as the patents on many of their most popular drugs were set to expire in a few years. The drug makers were proudly citing the agreement they had reached with the White House and the Senate Finance Committee chairman to trim $8 billion a year — $80 billion over 10 years — from the nation’s drug bill by giving rebates to older Americans and the government. However, if realized, the price increases in 2009 would effectively cancel out the savings from at least the first year of the Senate Finance agreement. Moreover, some of the critics claimed that the surge in drug prices could change the dynamics of the entire 10-year deal. “It makes it much easier for the drug companies to pony up the $80 billion because they’ll be making more money,” said Steven D. Findlay, senior health care analyst with the advocacy group Consumers Union.

That the firms were trying to maximize their profits ought not be viewed as  new thing.  That is what they do.  To expect a shark not be be a feeding machine is at the very least highly unrealistic.  It is not fair to the shark that was designed to feed.  If a shark is able to feed, it will.  If a drug company is able to charge more for its products, it will.   It is interesting that the question of motive is deemed relevant.  I myself wonder whether the price increases are really motivated by the anticipated expirations of patents or the $80 billion to be paid as part of the health-care reform.  Can I trust the self-serving explanation of the firms in the face of the experts’ studies of historical price patterns before major pieces of legislation affecting the industry?  A shark will feed; we don’t ask about its motives.  Were a shark to have reasons, they would be whatever furthers its feeding. Whether it is lying would be irrelevant.  In fact, the normativity of truth-telling would not register, as it does not have a taste-element.   We project onto the shark when we presume a motive or that a normative judgment is pertinent.   If the shark can feed, it will.  It is a feeding machine. Social responsibility does not make sense to a feeding machine or to those humans in their capacities in running the machine. For them, it is a technical matter. To realize the wider social goals through business, the wider goals must be put in line with the feeding incentives. As the umpire and protector of the chessboard, the government can structure the rules of the game--and there must be rules for any game--such that the incentives match. The question is perhaps whether the rules might function as nets and suffocate the sharks, or channel them as mighty yet dangerous swimmers.

If we as self-governing citizens do not want the sharks to feed on a given plant, we could make it very costly for them to do so. Simply forbidding them is apt to be disobeyed, and thus costly to enforce. Telling them they shouldn’t feed on something tasty simply does not make sense to a shark. They will be like cats circling an open can of tuna, constantly trying to figure a way around the artificial barrior.  As an alternative, leaving the matter to the sharks themselves to regulate would be like having the wolves police the hen house. In terms of social responsibility, getting mad at a shark for having what we presume is the wrong motive is utterly futile.  We tend to assume or project motives on business managers other than simply to feed. If we want to delimit the feeding, we might look into how the tank we have designed permits or even encourages over-feeding. That is to say, we can change the tank. 

We can’t very well change the shark without making it no longer a shark.  We could pass legislation outlawing profits, then we would not have companies, and they produce our products that we consume.  We want some feeding.  We are convinced that we need some feeding in the tank.  We just don't want such feeding that compromises the tank (or us). The question is how to prevent over-feeding at our expense. Presuming the shark will respond to our charges of its immoral motive is a non-starter, but we can redesign the tank, which the shark must take as a required constraint. 

For example, we can apply anti-trust law such that any sharks that become too big for the tank get chopped up and become shark-food.  We can install steel bars in the tank to limit where the sharks can feed (i.e., maximum prices or profits).   That the drug companies are price-setters rather than takers strongly points to the need for anti-trust enforcement.  Of course, if the sharks are threatening to eat our representatives, we can’t count on our politicians to give us straight talk on significant reform of the tank any time soon.  Rather, they will try to convince us that they have sufficiently modified its structure, when in fact they are enabling the sharks to continue over-feeding.  Perhaps the officials are sharks themselves.  Sharks, whether in business or government, policing a tank of sharks while the rest of us wonder why the over-feeding goes on and on is simply a recipe to get gouged, or bitten.

Source:

Duff Wilson, "Drug Makers Raise Prices in Face of Health Care Reform," The New York Times, November 15, 2009.

Subsidiarity: Federalism Over Catholic Social Ethics?

In the E.U., the principle of subsidiarity functions in theory like the Tenth Amendment does in the U.S.—again in theory. In both cases, public authority on a given domain or policy-area is preferentially to be exercised at the state rather than federal level. The principle, while not federalism per se, can be an element of it. Taking subsidiarity to be “really federalism” turns the latter into an alliance—giving the states potentially so much power that the government of the federation or union itself cannot act as a check on the state governments.

The complete essay is at Essays on Two Federal Empires.

Wen and Obama: Breaking Up the Banks

Chinese Premier Wen Jiabao told a radio audience on April 3, 2012 “that China’s state-controlled banks are a ‘monopoly’ that must be broken up.”[1] He also urged other businesses to get into the financial sector. “Let me be frank,” he said. “Our banks earn profit too easily. Why? Because a small number of large banks have a monopoly. To break the monopoly, we must allow private capital to flow into the financial sector.”[2] This included raising the total amount foreigners can bring into China under the Qualified Foreign Institutional Investor program to $80 billion.

Besides combined earnings of a bit over 632 billion yuan ($99 billion) in a slowing economy, the largest banks—Industrial & Commercial Bank of China, Bank of China, Agricultural Bank of China, and China Construction Bank—were able to raise fees indiscriminately, sparking the popular resentment that Wen was able to tap on the radio. Beyond the unfairness of the windfall profits, the artificially low cost to the banks in borrowing from domestic savings accounts meant that investment has proceeded at the expense of consumption. Given that the current account surplus stood at just 2.7% of GDP in 2011 due to slackening demand in Europe and North America, the imbalance regarding consumption could already be seen as a potential constraint to economic growth.

Therefore, Wen’s strategy in going after the unpopular banking oligopoly was wise both politically and economically. The question at the time was whether anything would come of his remarks. “The major question is whether increasing rhetoric and new initiatives toward economic revisions will lead to broader reform. Prior efforts have faltered amid Beijing’s drive to keep a tight rein on the economy and opposition from interest groups.”[3] That Wen made his remarks as he was preparing to leave office may mean that they should be regarded as akin to President Eisenhower’s “Beware the military-industrial complex” farewell speech. A swan song is not apt to be followed by still another act.

In terms of lessons from a comparative approach, it would be ironic, to say the least, were the Chinese government willing and able to break up the four largest banks while the Dodd Frank Act of 2010 in the U.S. let the banks too big to fail remain intact in spite of the plights of Bear Stearns and Lehman Brothers in 2008. That is to say, if the Chinese government could have taken on its powerful banks, the U.S. government would have looked comparatively weak as against the American banking sector.

Lest it not be forgotten, however, President Andrew Jackson’s defunding of the Second Bank of the United States at around 1830 was daring even bank then when the financial sector was smaller relative to the U.S. economy as a whole. Five or six years later, Congress finally got around to ending the bank’s charter altogether. Jackson’s argument was that having a bank would make Congress, and thus the U.S. Government, too powerful in the American federal system. The dangers to the American republics in having a powerful moneyed interest were also not lost on the nineteenth-century president.

Therefore, we can view the Dodd Frank Financial Reform Act of 2010 through the lenses both of China, assuming something comes of Wen’s remarks, and of American history. President Obama barely broached the subject of breaking up Wall Street banks even though they had been culpable in the derivative mess. Congress would hear nothing of it.  The Chinese government may not be so constrained by the self-serving interests of its banking oligarchy.

Similarly, claims that President Obama’s reliance on private health-insurance companies rather than a state-owned entity in his Affordable Healthcare Act of 2010 was somehow socialism (i.e., ownership by the state of means of production) can also be viewed relative to a Wen’s criticism of the state-owned banks (which favor state-owned enterprises in terms of lending). Obama caved to the private health-insurance company lobby on even a public option, whereas Wen suggests that the Chinese government might break up the four biggest banks. Is the Chinese state stronger than the U.S. Government relative to the interests of private capital?

Relative to the “socialist” leader’s distancing himself from a bias toward state-owned banks (and enterprises in general) in China, President Obama’s support of both the Dodd-Frank and Health-care Affordability laws can be seen in retrospect as anything but advocating U.S. Government ownership of means of production/services. Wen’s remarks show a movement away from socialism, toward Obama’s stance, though perhaps with government rather than banks in the driver’s seat.

1. Dinny McMahon, Lingling Wei, and Andrew Galbraith, “Chinese Premier Blasts Banks,” The Wall Street Journal, April 4, 2012.

2. Ibid.

3. Ibid.