False Axioms Produce Serious Nonsense

A long, long time ago you might have found yourself in a geometry class, and most teenagers – being teenagers – had a problem with axioms. Something didn’t seem right – to solve the problem at hand you had to list what was true to start with, something that was just a given, and build your logic on that. Some things – those axioms – were just so, so shut up and accept that they are so. There were Euclid’s Elements – the common sense geometric facts drawn from everyone’s experience – you can draw a straight line from any point to any other point and that sort of thing – and common notions, like things which are equal to the same thing are also equal to one another. But as things got more complicated, and your homework took more of your precious weekend time, you began to get ticked off. Why should you accept what everyone agreed was so? And just who was this Euclid fellow anyway?

 

Part of that was youthful rebelliousness, and part was you not wanting to do the damned homework – but you were bothered. And there were three possible outcomes – you just did the homework and went on with your life, or you came to hate mathematics, logic and school in general, or you discovered the fascinating world of non-Euclidean geometry. Yes, few ended up in that last category, even if all those ellipses and hyperbolic curves are pretty cool. Most teenage boys turn to supple and blossoming teenage girls for such things.

 

But we all work with axioms – those things that are simply true, as any fool can see. We all build our world on axioms, on common knowledge derived from observation and common sense. And we all seem to fight about just what is, as they say, axiomatic. It seems there is geometry, and then there’s real life.

 

And then there is the subset of real life called politics. There some things are said over and over, and everyone nods as if to say, yes, that is so, in order that discussion of policy and action can follow from those axioms.

 

Currently, if you spend time with cable news – CNN, Fox News, MSNBC, and for business, CNBC – you know the axioms – America is a center-right nation, basically conservative and religious, and Americans hate big government – and what is happening with the new Obama administration is that they are raising taxes dramatically on everyone, and on businesses. That seems to be the starting point. From there you can discuss whether this or that policy is a good idea or not. Oh, there are a few other axioms – lowering taxes increases a government’s income, as business booms and the right people makes scads of money, so a tiny tax rate creates many more taxpayers, for a net increase in tax revenue – the Laffer Curve thing. The evidence that is so is somewhere between scant and ambiguous, making this more a theory than an axiom, but most people say it is axiomatic (you cannot question it). Those would be the supply-side followers of Milton Friedman, and now Larry Kudlow. Of course one man’s axiom is another man’s open-to-questions theory. Going back the other way, some say there are givens that Charles Darwin amply presented, and others who say that whole evolution thing is just a theory, and everything could have just as easily been made just as it is by the Big Guy in the Sky – and common sense tells you some things are so complex they must have been designed by a superior being, like the marvel of rapidly metastasizing skin cancer. There is no Euclid for such disputes – as life is not geometry – or perhaps there are too many people claiming to be the new Euclid.

 

Another axiom you hear is the mirror of the given that lowering taxes raises net revenues by freeing capitalism to suddenly bloom – that raising taxes causes everything to grind to a halt, as no one will do much when any success will mean they have to pay higher taxes, and there’s no point in that.

 

That leads to things like the “Go Galt, Go!” Manifesto – Glenn Reynolds, Michelle Malkin and others, identifying the only possible response to Barack Obama’s policies – “going Galt.”

 

Richard Einhorn explains:

 

For those of you who don’t get the reference, John Galt is the copper-haired, white-boy protagonist in Ayn Rand’s Atlas Shrugged. Galt leads a revolutionary movement in which all the top leaders of the banks and corporations forsake their corporate jets and perks to work in diners or as subway repair guys. No, they weren’t fired by Galt. Rather, Galt urged them to go on strike and withdraw their expertise from an increasingly socialist world. Deprived of the genius of their genius, the world economy collapses. Another remarkable feature of Atlas Shrugs’ world is that despite being set in some unspecified late 20th Century America, there are almost no airplanes, only a vibrant and profitable rail system which is run, in all but name, by a 35-year-old blonde woman.

 

Even in their fiction, the right is wrong about everything.

 

But, if you follow Einkorn’s links, there is a group of bloggers on the right urging every CEO in America to show the parasitic losers in America what it would mean to go without their ambition and expertise, by just stopping what they do, until their taxes are lowered even further. Yes, Obama’s is cutting taxes for ninety-five percent of Americans, but not for their betters, the important people of genius.

 

Megan McArdle comments on Ayn Rand:

 

Her philosophy does not work, at least if by work we mean generate a framework by which a person or society can order itself. But she was actually a really very gifted observer, and she had a quite subtle understanding of how all the interconnected elements of an industrial economy fit together. It’s a pity she didn’t quite get how human beings worked, especially herself.

 

That’s cold, but more to the point, no one can agree on the axiom here. Ayn Rand is no Euclid, or is one only for a few.

 

As for areas where the layman knows little – the complexities of the securities and commodities and bond markets, and what they call high finance – everyone is looking for the axioms, for what are the basic givens of the situation. And here the problem is that the one place most Americans turn is the preeminent business news network CNBC. The problem is that they’re full of crap, as Jon Stewart demonstrates in this eight and a half minute segment – many saying it’s the best work Stewart has ever done. Jed Lewison explains:

 

If you can’t or don’t watch the video, the simple summary is this: Stewart runs through old clips of CNBC getting everything wrong about the economy at every possible turn in the road. The video is pure gold, unlike their business sense.

 

It is reminiscent of Jon Stewart’s treatment of “Crossfire,” when he went on the old CNN show and dressed down the hosts and told them their show, and its contrived political fights, was bad for political dialog in America. He gently asked them to stop, and within months, the show was canceled.

 

This one video probably won’t end the CNBC network, but it should go a long way towards discrediting the blowhards that it puts on the air.

 

As Stewart says, he has to say he finds cheap populism arousing. Of course much of this segment centers on Rick Santelli’s rant about how the government shouldn’t bailout any homeowners, and they were losers and deserved to sink, and lose their homes. They’d get none of his money.

 

Stewart invited Santelli on the show, but Santelli got cold feet, so Stewart worked from clips:

 

Santelli: President Obama, are you listening?

 

Stewart: Yeah man, Wall Street is mad as hell! And they’re not going to take it anymore. Unless by it, you mean two trillion dollars of their own bail out money. That they will take.

 

Now Mr. Santelli was invited to come on this show and accepted the invitation and then on Friday canceled, or I guess the phrase would be… bailed out.

 

How many people would have liked to see Santelli come on this program, are you listening? Are you listening, Rick Santelli? You see, Rick Santelli is angry that these loser home owners are going to get bailed out. He believes in personal responsibility, he believes in not rewarding the losers for missing all the warning signs. For God’s sake, the guy works at CNBC. They’re the best of the best.

 

Axioms fall all over the place.

 

And as for America being a center-right nation, which, of course, also simply hates the idea of socialized medicine, see CNN:

 

Seventy-two percent of those questioned in recent CNN/Opinion Research Corporation survey say they favor increasing the federal government’s influence over the country’s health care system in an attempt to lower costs and provide health care coverage to more Americans, with 27 percent opposing such a move. Other recent polls show six in 10 think the government should provide health insurance or take responsibility for providing health care to all Americans.

 

As for detail that complicates that, see this:

 

“That doesn’t mean that health care reform is a slam dunk,” says CNN Polling Director Keating Holland. “Americans tend to support those goals. The question – just as in 1994 – is how they will react to the details of future legislation to address those goals.”

 

But we’re at it again, as on Thursday, March 5, 2009 President Obama convened the White House Forum on Health Reform, where the President and participants were to “discuss ideas on how to bring down health care costs and increase coverage.”

 

Obama’s proposal focuses on three components – expanding coverage, improving quality and lowering costs – rather than the single-payer universal coverage many critics of the current system want. The details are to be worked out by Congress.

 

“On health care reform, the American people are too often offered two extremes – government-run health care with higher taxes or letting the insurance companies operate without rules,” said a White House spokesperson. “To that end, the forum will be a critical first step toward finding a middle ground.”

 

About 120 people – health-care providers, congressional leaders and patients – are expected to attend the summit.

 

Nearly $800 billion is already set aside for such reform.

 

AP covered how that went:

 

President Barack Obama pumped health care allies and skeptics alike for ways to overhaul the nation’s costly and frustrating system Thursday and heard only applause and agreement when he told them there’s “a clear consensus that the need for health care reform is here and now.”

 

However, he conceded at a White House summit that opinions vary widely on exactly what to do and said that winning quick approval for historic and stunningly expensive legislation won’t be easy.

 

Still, the unanimity on the urgency to act underscored how the political environment has become more favorable to revamping the thorny system since President Bill Clinton’s attempt failed in the 1990s under intense resistance from drug makers, insurance companies and others. All those interest groups were on hand Thursday, and Obama intended his daylong Washington session and a series of meetings to follow around the country to signal that his push for universal health care coverage will be more open and inclusive than Clinton’s.

 

“Every voice has to be heard. Every idea must be considered … The status quo is the one option that is not on the table,” Obama said during the White House forum on what he calls the greatest threat to the U.S. economy – rising health care costs.

 

And he added this – “Those who seek to block any reform at all, any reform at any cost, will not prevail this time around.”

 

But that’s hard when people work from different axioms. If it is a given the free-market competition always provides the most effective solution to any problem, then nothing will be done – let the insurers compete, without regulation. Yes, we spend 2.4 trillion dollars a year on health care and have forty-eight million people uninsured and many others without adequate insurance and rank twentieth in the industrial world in outcomes – but we believe in freedom.

 

There had been a curious detail in the Washington Post:

 

Obama’s opening gambit to dramatically expand the health-care system has attracted surprising notes of support from insurers, hospitals and other players in the powerful medical lobby who are set to participate in an unusual White House summit on the issue this afternoon. The lure for the industry is the prospect of tens of millions of new customers: If Obama succeeds in fulfilling his pledge to cover many more Americans those newly insured people will get checkups, purchase medicine, undergo physical therapy and get surgeries they cannot afford today. …

 

Not everyone is happy, of course, and lobbyists and health-care experts warn that major obstacles lie ahead…

 

Former Columbia/HCA executive Richard L. Scott has launched a nonprofit group called Conservatives for Patients’ Rights, which promises a $20 million multimedia ad campaign warning that the country is hurtling toward socialized medicine. Scott, who was pushed out of Columbia/HCA in the 1990s and now runs a chain of Florida urgent-care clinics, said in an interview that he has put up $5 million of his own money to kick-start the effort, with hopes of building a grass-roots campaign.

 

Those of us who have worked in the industry remember him. Richard L. Scott was CEO of Colombia/HCA during the period that it bilked the federal government of hundreds of millions of dollars:

 

The company admitted to systematically overcharging the government by claiming marketing costs as reimbursable, by striking illegal deals with home care agencies, and by filing false data about how hospital space was being used.

 

The company increased Medicare billings by exaggerating the seriousness of the illnesses they were treating. It also granted doctors partnerships in company hospitals as a kickback for the doctors referring patients to HCA. In addition, it gave doctors “loans” that were never expected to be paid back, free rent, free office furniture, and free drugs from hospital pharmacies.

 

The investigation and the plea is an obvious blow to a company that became a Wall Street darling by promising to bring first-class business practices to the hospital sector, still dominated by not-for-profits. Under former Chief Executive Richard Scott, it bought hospitals by the bucketful and promised to squeeze blood from each one.

 

Scott was forced to resign in the wake of the initial fraud charges in 1997. Dr. Thomas Frist Jr., a founder of the original Hospital Corp. of America and the brother of U.S. Sen. Bill Frist, R-Tenn., was brought in to replace him as chairman and CEO.

 

HCA/Colombia eventually paid almost two billion dollars in fines and penalties. Ouch. And now Scott has hired the same PR firm that brought us the Swift Boat Veterans for Truth. So this won’t be easy.

 

Kevin Drum surveys what we have:

 

There are lots of things to hate about our current medical system, and all of us have our own favorite things to hate. This is mine: the fact that the system massively overcharges you if you’re uninsured, and they do it just because they can. If you’re uninsured, you’ve got no leverage, no alternatives, no nothing. So you get screwed. It’s like the shopkeepers who charge twenty bucks for a pair of flashlight batteries after hurricanes. Maybe it’s the free market at work, but if so, that’s all the worse for the free market. In the healthcare biz, it just doesn’t work.

 

Matthew Yglesias looks at the odd players here:

 

…we have the people in the middle. These are people, and you find them in both parties, who happily concede the need to reform the health care system. But they think the time isn’t right. Maybe we should wait until we solve the economic crisis, end the war in Iraq, stabilize Pakistan, and balance the budget and then sometimes in the dim mists of the future we can reform the health care system. Maybe we “can’t afford it” right now.

 

The problem with this view is that we can’t afford not to do it. The problems in the health care sector are not the cause of the current recession, but they are both a drag on the economy’s long-term ability to grow and the primary driver of long-term budgetary challenges. It gets much easier to get ourselves out of the current economic hole if there’s a reason to believe that the foundations for more robust growth and a sustainable fiscal path are being laid at the same time. And those things can’t really be done without health reform.

 

But there is the conservative counter-argument:

 

REP. ZACH WAMP: Listen, health care is a privilege. …

 

MSNBC: Well, it’s a privilege? Health care? I mean if you have cancer right now, do you see it as a privilege to get treatment?

 

WAMP: I was just about to say, for some people it’s a right. But for everyone, frankly, it’s not necessarily a right.

 

Congressman Wamp goes on to claim the given that everyone knows is true – many, many Americans are uninsured by choice, because they “rejected” the insurance plan offered by their employers.

 

At Hullabaloo, “dday” says this:

 

This should be on a billboard in every city in the nation by Friday. It’s a concise and sharp expression of the conservative worldview. They think health care is a privilege. And if you get shot at work trying to ward off an attacker, and your fast-food company’s insurer (the name rhymes with Bickdonald’s) refuses to pay your medical bills, tough, you don’t have the privilege. If you aren’t privileged enough to have health insurance, hospitals can use your lack of leverage or purchasing power to charge you ten times as much for the same treatment – sorry, you don’t have the privilege. If you have insurance, and your insurer decides they don’t want to pay your claims, sending you into a choice between treatment and bankruptcy or illness and solvency, well – you don’t have the privilege. …

 

In the upside-down value system of Republicans, they think that health care is a privilege, but the ability for health insurers to profit off of it is an inalienable right.

 

And he mentions that Senator Mitch McConnell suggested there were areas in which Republicans won’t compromise, particularly the creation of a new public insurance program to compete with private insurers – “Forcing free market plans to compete with these government-run programs would create an unlevel playing field and inevitably doom true competition.”

 

That sets “dday” off and running:

 

…these are the same people who claim that the free market is a universal good and nothing can be run more efficiently or excellently than private enterprise. Somehow, though, if a public option was offered to compete with the free market, it would cause the insurance industry to crumble. Those titans of industry, the masters of the universe, just can’t compete with those government bureaucrats everyone is supposed to hate. This could be a mite bit of a flaw in their logic.

 

The GOP sees polls showing the public supports the concept of government-sponsored health care (and loves government programs like Medicare) – that is, the party knows that if given the choice, many Americans would choose a government-run program over private health insurance. But because the party is so owned and operated by the private health insurance industry, it is willing to effectively undermine its entire macro-argument about the supremacy of the free market so as to shill for its moneyed benefactors.

 

I appreciate McConnell and Wamp for making things clear. The GOP thinks health care is a privilege and that insurance industry gouging is a right. More people besides blog readers should know this.

 

He also recommends Ryan Powers here:

 

Aside from the fact that healthcare for Americans cannot – from an economic or a humanitarian stand point – be viewed as a privilege, Wamp is misrepresenting exactly why so many Americans lack coverage. Indeed, as the Kaiser Family foundation documented, 64 percent of American workers who are uninsured are not actually offered an employer-sponsored health care plan. In all, just 20 percent of uninsured workers who are offered employer-sponsored coverage decline to participate. Further, those workers – and low-wage workers in particular – who decline to participate in employer-sponsored plans often do so because they are unable to afford coverage, even with the contributions offered by their employers.”

 

Steve Benen also comments:

 

When pressed on how Republicans would address the health care crisis, Wamp said he supports “extending health care to the people that need it, not turning the whole health-care system over to the government.” And how do we extend health care to the people that need it? Tax cuts, of course.

 

And House Republicans still wonder why no one takes them seriously on matters of public policy.

 

Well, people work from different axioms. And of course it always comes down to tax cuts and the war on the rich, who, as our betters, deserve more tax cuts.

 

On that matter there is Daniel Gross, Newsweek’s business guy, who often appears on CNBC looking both bemused and amused, who suspects this is nonsense. He says the Republican claim that Obama is trying to bleed wealthy Americans is bogus. And he lays it all out in Slate:

 

To hear conservatives tell it, you’d think mobs of shiftless welfare moms were marauding through the streets of Greenwich and Palm Springs, lynching bankers and hedge-fund managers, stringing up shopkeepers, and herding lawyers into internment camps. President Obama and his budgeteers, they say, have declared war on the rich.

 

He points to Washington Post columnist and former Bush speechwriter Michael Gerson here – “Obama chose a time of recession to propose a massive increase in progressivity – a 10-year, trillion-dollar haul from the rich, already being punished by the stock market collapse and the housing market decline.” Gerson says the plans are so radical that “there will not be enough wealthy people left to bleed.” And there is CNBC’s Larry Kudlow – “Obama is declaring war on investors, entrepreneurs, small businesses, large corporations, and private-equity and venture-capital funds.” And he points to CNBC covering a tax on the rich, a war on the wealthy, and more:

 

My personal favorite was a piece from ABCNews.com, which had to be rewritten and reposted because the original was so poorly done. (The revised version isn’t much better.) It quotes a dentist who is contemplating reducing “her income from her current $320,000 to under $250,000 by having her dental hygienist work fewer days and by treating fewer patients. [That way, she] would avoid paying higher taxes on the $70,000 that would be subject to increased taxation if Obama’s proposal is signed into law.”

 

Gross says that it is “hard to overstate how absurd these claims are.”

 

First, let’s talk about the “massive increase in progressivity” that Gerson deplores. It consists largely (but not exclusively) of returning marginal tax rates to their levels of 2001, before Gerson and the epically incompetent Bush administration of which he was a part got their hands on the reins of power. Obama wants to let marginal rates for families with taxable income (not total income, but taxable income) of more than $250,000 revert from 33 percent to 36 percent, and to let the top rate – currently 35 percent on family income above $357,000 – revert to 39 percent. (Here are the current tax tables.) There’s also talk of capping—not eliminating, but capping—deductions on charitable giving and mortgage interest.

 

Obama’s proposals don’t mean the government would steal every penny you make above the $250,000 threshold, or that making more than $250,000 would somehow subject all of your income to higher taxes. Rather, you’d pay 36 cents to the government in income taxes on every dollar over the threshold, rather than 33 cents.

 

Second, this return to 2001’s tax rates was actually part of the Bush tax plan. The Republicans who controlled the White House and the Republicans who controlled the Congress earlier this decade decreed that all the tax cuts they passed would sunset in 2010. They put in this sunset provision to hide the long-term fiscal costs of the cuts. The Bush team and congressional supporters had seven years to manage fiscal affairs in such a way that they would be able to extend the tax cuts in 2010. But they screwed it up. Instead of controlling spending and aligning tax revenues with outlays, the Bush administration and its congressional allies ramped up spending massively—on two wars, on a prescription drug benefit for Medicare, on earmarks, etc. Oh, and along the way, they so miserably mismanaged oversight of Wall Street and the financial sector that it required the passage of a hugely expensive bailout. Even before the passage of the TARP, the prospect of extending all the Bush tax cuts was a nonstarter. Once Bush signed the $700 billion bailout measure into law, extending tax cuts was really a nonstarter. The national debt nearly doubled during the Bush years. So if you want to blame someone for raising taxes back to where they were in 2001, don’t blame Obama. Blame Bush, his feckless Office of Management and Budget directors, his economic advisers, and congressional appropriators like Trent Lott and Tom DeLay.

 

He goes on, almost making tax policy fascinating. But the general idea is no one is working from anything like reality. And he ends with this:

 

Finally, there has been a near total absence of discussion of what higher rates will mean in the real world. Say you’re a CNBC anchor, or a Washington Post columnist with a seat at the Council on Foreign Relations, or a dentist, and you managed to cobble together $350,000 a year in income. You’re doing quite well. If you subtract deductions for state and property taxes, mortgage interest and charitable deductions, and other deductions, the amount on which tax rates are calculated might total $300,000. What would happen if the marginal rate on the portion of your income above $250,000 were to rise from 33 percent to 36 percent? Under the old regime, you’d pay $16,500 in federal taxes on that amount. Under the new one, you’d pay $18,000. The difference is $1,500 per year, or $4.10 per day. Obviously, the numbers rise as you make more. But is $4.10 a day bleeding the rich, a war on the wealthy, a killer of innovation and enterprise? That dentist eager to slash her income from $320,000 to $250,000 would avoid the pain of paying an extra $2,100 in federal taxes. But she’d also deprive herself of an additional $70,000 in income!

 

Can she, or we, really be that stupid?

 

The answer seems to be yes, we can. That’s not what Obama had in mind.

 

But what people accept as axiomatic changes over time. According to a new Fox News poll, Obama is more popular than Reagan. That’s odd, and Greg Sargent notices this detail:

 

“Do you think asking the wealthiest Americans to pay more in taxes is a good idea because it levels the economic and social playing field, or a bad idea because it punishes hard work and success?” Good idea 55%, Bad idea 39% – with 29% support from Republicans.

 

There may be hope for us yet.

 

About Alan

The editor is a former systems manager for a large California-based HMO, and a former senior systems manager for Northrop, Hughes-Raytheon, Computer Sciences Corporation, Perot Systems and other such organizations. One position was managing the financial and payroll systems for a large hospital chain. And somewhere in there was a two-year stint in Canada running the systems shop at a General Motors locomotive factory - in London, Ontario. That explains Canadian matters scattered through these pages. Otherwise, think large-scale HR, payroll, financial and manufacturing systems. A résumé is available if you wish. The editor has a graduate degree in Eighteenth-Century British Literature from Duke University where he was a National Woodrow Wilson Fellow, and taught English and music in upstate New York in the seventies, and then in the early eighties moved to California and left teaching. The editor currently resides in Hollywood California, a block north of the Sunset Strip.
This entry was posted in Cheap Populism, CNBC, Healthcare Reform, Tax Policy, War on the Rich. Bookmark the permalink.

1 Response to False Axioms Produce Serious Nonsense

  1. Randall says:

    Not being rich must have damaged my mind and the minds of all my not rich friends. We would actually trade our jobs for the job of someone who is making more than 250000 dollars and does not want to pay more taxes. I think it would be a win-win situation. The person who I trade with would only pay about 14000 in taxes and I would gladly pay a million or two in taxes. Now maybe there are some jobs I could not do well, but there are lots I could easily do as well, like running A.I.G. or Countrywide.

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