In this country it seems there are those with a sense of personal responsibility – the doers, who ask nothing of anyone and get everything done – and those who just take and expect more. And you didn’t pay your taxes, reluctantly, to support this second group – to undo the harm their foolish choices have caused them. At least that’s the myth.
Well, something is wrong. You can see the signs. The Washington Post reports that in certain regions, waiting times to see a doctor are getting completely out of hand:
Just six months ago, the clinic delivered same-day care to most callers, the gold standard from a health perspective. But in October the delays crept to four days, then 19 in November and 25 in December. In January, HealthServe temporarily stopped accepting new patients, and almost immediately 380 people put their names on a waiting list for when the crunch eases.
This is North Carolina, where more than a quarter of adults now have no health insurance:
A steep rise in unemployment has fueled a commensurate increase in the number of people who do not have health insurance, including many middle-income families.
“I used to be upper middle class,” said Amy, who called HealthServe every morning for weeks before getting in to see Talbot….
“I haven’t told anyone I’m coming here,” she said, asking that her last name be withheld because she is embarrassed to be seeking discounted medical care.
Amy doesn’t want to be part of that second group. She’s bought into the myth. But then nobody wants universal health insurance – socialized medicine and all that. There’d be rationing and long waiting lines and all that – cue up the horror stories from Canada or the UK. We prefer a free-market system, a private system, where the need to make big bucks forces giant for-profit insurance companies to provide the very best product as they compete for our dollars, not the government’s dollars. And we also don’t want a nanny-state, where people get used to the idea that the government will take care of them, will catch them when they fall, and in some way protect them from their own foolishness. That robs people of the sense of personal responsibility – the very thing that makes Americans the productive and resourceful people that we are, as opposed to, say, the feckless French. You’ve heard it all before. So has Amy.
In hard economic times, when so many are out of work, or soon will be, the argument for market-based health insurance will get harder to make – and it seems we now do have de facto rationing, and the long lines.
This gets people thinking dangerous thoughts. Here Hilary Bok wants to know why Republicans oppose universal health insurance:
Though I don’t agree with them, I can see the argument for not providing help for problems that are in some way people’s own fault, or that might lead to big problems with moral hazard. But health care isn’t like that. While some illnesses are due to people’s choices, many are not. When you get sick, you can be ruined financially, whether or not you have been prudent. When acts of God ruin like hurricanes or earthquakes ruin people’s lives, we step in to help. I have never understood why health care should be different.
One of Andrew Sullivan’s readers runs with that – as the standard conservative approach to healthcare relies on one key, underlying assumption, the assumption that all things will behave like a free market. The idea here is that this may be at the root of the problem:
Free markets are based on two primary principles – the idea that people have sufficient information to choose the optimal solution, and that they can and will delay gratification. Neither idea seems particularly plausible when it comes to health care.
Consider the first contention, that no one knows enough to make a rational choice:
Even highly educated people are unable to assess whether a particular test or procedure is worth the cost. Nor, generally speaking, do they even have the time to research their options – if you’re having a heart attack, are you really going to debate with the doctor whether a stent is necessary or try and determine which is the lowest-cost hospital? You could argue, I suppose, that of course people can’t and shouldn’t make those sort of micro-decisions, but that they should be able to choose among insurance plans and thus free market principles can operate in that arena. Only, the incentive structure for insurance companies isn’t weighted properly either.
The problem is obvious:
Insurance only works at all because of pooled risk – you pay into a general pool and insurance companies are able to calculate the statistical likelihood that they’ll have to pay out in case of accident. “Accident” is the key word – it’s an event that has some probability of occurring given someone’s history and lifestyle. But it’s a finite, time-limited occurrence that incurs a certain amount of cost. Car insurance, therefore, works. Yes, you pay more if you’re a poor driver or a 16 year-old, but there’s still some statistical probability that these people won’t get into accidents.
Healthcare isn’t like that. If healthcare insurance companies were only hedging against the likelihood that someone will slip and fall and break an arm, or fall off the ski lift, then the private solution would work fine.
But that’s not the case, if you continue the analogy:
Pretend that everyone has one car that cannot be sold. Some people have lemon cars whose brakes fail every week, or have continuous oil leaks, etc. In other words, the insurance company knows that it will have to pay out on the people with lemon cars, not just occasionally, but continuously. There’s absolutely no incentive to insure these people at all.
We could, as a society, say well, that’s tough. Only, eventually, we all end up with lemon cars – we’re all going to die one day, and the large majority of us will be sick for some time before that. The only way to insure people with lemon cars is stick them in a large group of average people and calculate the risk for that pool as a whole. This is why employer-provided health care insurance works – the employer has done the risk pooling and the insurance company can’t sift through the employee rolls to weed out anyone with a lemon car.
This is why the standard Republican plan strikes this person as nonsense – that would be the plan where you decouple healthcare from the job and give people tax credits so that with the money they save on taxes they can go out and buy any kind of private healthcare insurance that tickles their fancy. Of course that might range from six to twelve thousand dollars a year, or more, so those in the lower income ranges, or in the middle, won’t get enough back to cover even a fraction of the cost of the insurance, but it’s the concept that counts here. The only problem is, there no reason to sell insurance to people with pre-existing, chronic conditions, or who will get sick – there’s no financial incentive. These companies are not stupid. They make rational business decisions. And we’re stuck:
In the end, I think that the only way for health care to work is to force large enough risk pools such that the cost is spread among many – and the only entity with the incentive to do that in the long run is the government. It won’t be perfect, there will inefficiencies, and it will cost a lot, but given the current imperfections, inefficiencies (the US spends more on administrative health care costs than any other civilized nation), and cost, I’m still pretty sure that it be an improvement.
This reader says he just doesn’t get the free-market thing, in this one case.
But he doesn’t account for the doers, who ask nothing of anyone and get everything done, who wouldn’t buy his argument.
And we do live in a free-market world:
In the first major disclosure of corruption in the $750-billion financial bailout program, federal investigators said Monday they have opened 20 criminal probes into possible securities fraud, tax violations, insider trading and other crimes. …
The report said little about who is under investigation and how the fraudulent schemes work, but investigators are already on alert for a long list of potential scams. Such schemes could include obtaining bailout money under false pretenses, bilking the government with phony mortgage modifications, and cheating on taxes with fraudulent filings.
The idea is to make money, and if you see an opening, you take it. Neil Barofsky, the special inspector general overseeing the bailout program, is quoted as saying that fraud is likely to get even worse in the newest stage of the bailout, since it allows investors to get in on the action with only a small bit of their own money at risk. Doers are like that, acting as rational players, getting away with what they can. The Treasury, in response to the Barofsky report, says his recommendations would be “considered.” That might have something to do with not pissing off Wall Street. They are the others – those who get things done.
And they’re not happy at all. Gabe Sherman has the cover story of the April 27 issue of New York – he reports on the “wail of the one percent” – the Wall Street millionaires saying the financial crisis wasn’t their fault, and that they’re the good guys. These are the guys who “grew up” in the housing bubble saw themselves as “fighter pilots of capitalism” – the people who earned seven figures and donated to charity, and went to restaurants, and bought art, and paid taxes to keep streets clean. They were the heroes, and now they face a future where banking may become “a boring, riskless profession.” In short, everyone is mad at them, just because they’re rich, and all the fun is gone.
And they are not bad people:
Wall Street people are not moral idiots (most of them, anyway) – it’s not as if they’ve never pondered the fairness of their enormous salaries. “One of my relatives is a doctor, we’re both well-educated, hardworking people. And he certainly didn’t make the amount of money I made,” a former Bear Stearns senior managing director tells me. “I would be the first person to tell you his value to society, to humanity, is far greater than anything that went on in the Bear Stearns building.”
That said, he continues, “We’re in a hyper-capitalistic society. No one complains when Julia Roberts pulls down $25 million per movie or A-Rod has a $300 million guarantee. We have ex-presidents who cash in on their presidencies. Our whole moral compass has shifted about what’s acceptable or not acceptable. Honestly, you can pick on Wall Street all you want – I don’t think it’s fair. It’s fair to say you ran your companies into the ground, your risk management is flawed – that is perfectly legitimate. You can lay criticism on GM or others. But I don’t think it’s fair to say Wall Street is paid too much.”
Kevin Drum is a bit stunned:
It’s hard to know what to say about this. It just leaves you speechless. And this guy is one of the more self-aware ones.
Later on Sherman quotes another Wall Streeter who’s livid over Obama’s plan to raise tax rates slightly on the rich. “He doesn’t want to have any wealth creation,” the guy wails, and that really seems to get to the heart of all this.
Many would agree. Things have gotten a bit fuzzy:
Financial industry players sincerely seem to view all “wealth” as equal. If the market pays you a lot, it’s because you’re responsible for creating a lot of wealth, and that’s that. The fact that the wealth you created was largely divorced from even a notional real-world benefit to the larger economy doesn’t matter. Money is money.
Still, both these guys are right: the big players in the financial industry get paid a lot because they’re responsible for creating gigantic streams of money for their firms. As long as that stays the case, they’re going to continue making truckloads of money no matter what we do.
One of Drum’s readers adds this:
Who says no one complains about people like Julia Roberts or A-Rod? Both are as much symbols of our dysfunctional society as the Wall Street types. It’s just that neither Julia nor A made their fortunes by convincing people to buy homes that they couldn’t afford, so they are not on the hot seat today.
And another says this – “If I rob a bank, I’m richer, but did I create wealth?” And a third says this:
Although misallocating capital is bad for an economy, it is the political power of that capital to influence economic policy that is worse, giving a powerful voice to those lucky enough to accumulate capital without ever having to add any value to goods and services. These lucky ones can be seen on business television programs complaining about the wages of autoworkers and how tax rates for corporations and investment bankers should be reduced. They not only have the ears of regulators and politicians, they become regulators and politicians, using their wealth to broadcast their messages repeatedly to an economically ignorant public, who are unable to recognize wealth earned by adding value to goods and services against wealth earned by asset inflation.
Without the power of government to limit the power of capital, even shareholders will eventually lose the value of their equities, and wealth, because they have stripped economic power from every other economic participant, which drastically reduces economic activity.
But these Wall Street players did create vast wealth, sort of. They are the doers, if you want to look at it that way. And they do claim to be special:
“No offense to Middle America, but if someone went to Columbia or Wharton, [even if] their company is a fumbling, mismanaged bank, why should they all of a sudden be paid the same as the guy down the block who delivers restaurant supplies for Sysco out of a huge, shiny truck?” e-mails an irate Citigroup executive to a colleague.
Felix Salmon, at his Reuters blog, comments:
As Sherman says, bankers are the last Americans to Get It: they don’t think that the excesses of Wall Street were responsible for wealth destruction rather than wealth creation, and they still think that a degree from Wharton is, in and of itself, a Good Thing. One financier essentially tells Sherman that the going rate for any job which involves being woken up in the middle of the night should be roughly $2 million a year – which is not the kind of attitude guaranteed to make you friends among, say, the farming community.
Most people outside Wall Street have come to the conclusion that excess pay was a direct cause of the current meltdown, but the highly-paid symbolic analysts at our biggest investment banks somehow have a massive blind spot when it comes to that fact.
They would just argue that they were the ones who took big risks, so they should get big rewards. Salmon considers that nonsense:
So long as they’re not gambling away trillions of dollars of other people’s money at systemically-important institutions, they’re welcome to do as they like. But if they do work at a systemically-important institution – one where the government and the economy as a whole will pay dearly if they blow up – then they shouldn’t be paid the kind of money which encourages putting on outsize risks. And the sooner they wake up to that fact, the better.
But other things here can disturb you, as these heroes, these “fighter pilots of capitalism,” do say odd things:
“”Without exception, Wall Street guys have gotten accustomed to not being stuck in the city in August. So it becomes a right to have a summer home within an hour or two commute from Manhattan,” says the Goldman vet. “There’s a cost structure of going with your family on summer vacation that’s not optional. There’s a cost structure of spending $40,000 to send your kids to private school that is not optional. There’s a sense of entitlement, that you need that amount of money just to live, that’s not optional.”
“You can’t live in New York and have kids and send them to school on $75, 000,” he continues. “And you have the Obama administration suggesting that. That was a very populist thing that Obama said. He’s being disingenuous. He knows that you can’t live in New York on $75,000.””
Hilary Bok disagrees:
And yet, strange to say, in 2007 the median family income in New York City was $52,871. Maybe New York takes in floods of new residents every year, and so many of them die of starvation that the median income is actually below the level needed to survive. Maybe over half of the families in New York are zombies. Or maybe – just maybe – over half the families in New York live well below the level this “Goldman vet” thinks you just can’t live on.
And she’s not happy with the comment on Julia Roberts and A-Rod:
If you want to say that whatever the free market in its wisdom dictates that people are paid is fair, then the fair wage for people at AIG, Citi, and any other firm that would not have survived without government assistance is zero. If you want to use some other metric, then Julia Roberts et al are irrelevant. But you do not get to appeal to the marvels of the market to justify your exorbitant salary when times are good without accepting its conclusions when it implies that the fair value for your work is nothing.
And I don’t even know what to say about this: “There is rage at Obama for pushing to raise taxes (“The government wants me to be a slave!” says one hedge-fund analyst)”
If raising the marginal tax rate to 39.6% counts as “slavery”, then I suppose that the fact that top marginal tax rates during the Truman, Eisenhower, and Kennedy administrations were over 90% is a Holocaust. Or, you know, maybe not.
She’s just amazed at the self-delusion:
They don’t get the fact that it is abnormal when people right out of college or business school can command more money than most people will ever see in their lifetimes. They don’t get the fact that the firms for which they worked produced an economic catastrophe that has reduced people all over the world to genuine poverty (as opposed to living on $75,000 in New York.) They don’t get the fact that the compensation at those firms had a lot to do with that catastrophe. They don’t get the fact that because of their greed and stupidity, we had to rescue those firms – which means that their lifestyles are being supported by truck drivers and pharmacists and primary school teachers across the country, many of whom would love to try to scrape by on $75,000 a year.
And they really don’t seem to get what’s wrong with this. They really are the others.
Of course the problem is that the myth of the noble doers, and whining takers, is fading in the reality of where we find ourselves now. Perhaps it always was a myth anyway. But “fighter pilots of capitalism” – that was pretty cool.