Unintended consequences? What are those?

Hmm... I wonder how Henry Waxman is going to prevent this kind of unintended consequence...

Thousands of consumers are gaming Massachusetts’ 2006 health insurance law by buying insurance when they need to cover pricey medical care, such as fertility treatments and knee surgery, and then swiftly dropping coverage, a practice that insurance executives say is driving up costs for other people and small businesses.

In 2009 alone, 936 people signed up for coverage with Blue Cross and Blue Shield of Massachusetts for three months or less and ran up claims of more than $1,000 per month while in the plan. Their medical spending while insured was more than four times the average for consumers who buy coverage on their own and retain it in a normal fashion, according to data the state’s largest private insurer provided the Globe.

...

The problem is, it is less expensive for consumers — especially young and healthy people — to pay the monthly penalty of as much as $93 imposed under the state law for not having insurance, than to buy the coverage year-round. This is also the case under the federal health care overhaul legislation signed by the president, insurers say.

Oh, well. I'm sure the central planners have got a great solution for this problem, a solution with no other unintended consequences...

The Waxman-Stupak Letter

Because the volume of traffic downtown and the resultant noise and air pollution had become intolerable, the speed limit was lowered to tenty miles per hour and concrete "speed bumps" were installed to prevent cars from exceeding it...the lower speeds forced cars to travel in second rather than third gear, so they were noisier and produced more exhaust. Shopping trips that used to take only twenty minutes now too thirty, so the number of cars in the downtown area at any given time increased markedly. A disaster? No - shopping downtown became so nerve-racking that fewer and fewer people went there...even though the volume of traffic gradually went back to its original level, the noise and air pollution remained significant. To make matters worse, during the period of increased traffic, word had gotten around that once-a-week shopping expeditions to a nearby mall on the outskirts of a neighboring town were practical and saved time...downtown businesses that had been flourishing now teetered on the edge of bankruptcy. Tax revenues sank dramatically. The master plan turned out to be a major blunder, the consequences of which will burden this community for a long time to come.

- Dietrich Dormer, The Logic of Failure

I said yesterday that I want to address Henry Waxman's letter, and I do. As I work through it, though, I find that there's one sentence so egregious that nothing else seems to matter. Yes, he dishonestly cites the CBO, but that's been done, and I don't feel any particular urgency to redo it right now. Yes, he clearly misrepresents the Business Roundtable "report," and I could walk through that, but again, that particular dishonesty¹, in context, pales in comparison to the rest of the letter.

So where's the big problem? Right up front. Here, in paragraph one, is the item that most warrants comment.

One of the top priorities of the House Energy and Commerce Committee will be to ensure that the law is implemented effectively and does not have unintended consequences.

The arrogance of that statement is breath-taking. Staggering.

If you've followed me for any length of time, you've heard me talk about unintended consequences. More specifically, I talk about the "law of unintended consequences." I believe that it is a "law," just as gravity is a law. Bugs Bunny could disobey the law of gravity (because he "never studied law") but Henry Waxman would have as a good a chance of disobeying the law of gravity as he does of disobeying the law of unintended consequences. Every time that anyone does anything, there are consequences. Some of them are intended - after all, there's a reason that you took the action. But some of them are not. They may be ancillary, they may be unimportant, but they occur.

Go look at that introductory paragraph again. That's a very typical result of a "master plan." It's from the introduction of an outstanding book, which I guarantee that neither Henry Waxman or Barack Obama has ever read. The idea that Congress can pass a 2000+ page law (about absolutely any topic whatsoever) increasing taxes and regulations on activities which touch virtually every citizen, and which covers approximately one-sixth of the American economy, and that there wouldn't be "unintended consequences" is so farcically unrealistic that I almost cannot believe that he put it into a letter.

People respond to incentives. When behavior is subsidized, you get more of it. When behavior is punished, you get less of it. If you give corporations a tax break or subsidy for keeping retirees on their medical plans, you'll get more corporations doing so. Take away the subsidy and it becomes more expensive for them to do so, and then you'll get fewer corporations doing so. In the 1990 tax deal that effectively ended George H. W. Bush's re-election hopes, the Congress passed high taxes on luxury boats in order to increase tax revenues. The result of that was that people who wanted, and could afford, luxury boats then bought and harbored them offshore, boat-builders went out of business, and tax revenues dropped. The was not the intent of the law, of course. It was just one of the unintended consequences. Subsidize teen pregnancy, because you want to be kind and humane to pregnant teenagers, and you end up with more of it. Subsidize single-motherhood, you get more of it. With all of the social ills associated with it. Make a design decision that you only need two digits to represent the year in your database because memory's expensive, and you have to invest massive resources redoing it as you approach the end of a century.

You cannot see all of the impacts of what you're doing. You try, you do the best you can, but you cannot see them all. No one can. It is not possible. Congressman Waxman is as likely to leap the Capitol Dome in a single bound as he is to prevent "unintended consequences" of this piece of legislation, and the fact that he's willing to say that he can is indicative of a severe mental problem. He either a) doesn't know what he's saying (in which case he's stupid) or b) knows what he's saying and doesn't really believe it (in which case he's lying) or c) knows what he's saying and does believe it (in which case he's both stupid and incredibly arrogant).

Obviously, whichever of those is the truth, the letter reflects poorly on Congressman Waxman (and Congressman Stupak [the father of taxpayer funded abortion]). It is a blatant attempt to browbeat and intimidate private citizens and private enterprizes going about doing their business. And it's prima facie evidence that those "Representatives" ought not hold the positions that they hold.






¹ - To be fair to Congressman Waxman, maybe he isn't intentionally misrepresenting the Business Roundtable report. Maybe he just doesn't understand what it says and when it was written. Suffice it to say that it doesn't say what he represents it as saying.

Henry Waxman knows enough to be dangerous (and not a jot or tittle more...)

I don't know if everyone has seen this yet, or not, but the following is a copy of a letter from Representatives Henry Waxman and Bart Stupak to the chairman of AT&T, following AT&T's announcement that the new health care reform bill would mean a $1 billion write-down for the company.





Leaving aside, for the moment, the petulance, ignorance and idiocy on display in that letter (though I hope to come back to it), let's briefly discuss a little bit of history for Representative Waxman. We don't need to go all the way back to the creation of the Securities and Exchange Commission in the wake of the 1929 Wall Street crash and the start of the great depression. We can stay within the last decade and talk relevant history.

In late 2001, Enron, a large energy services company based in Texas, went bankrupt. Spectacularly. The reasons for this are varied, and include a business model in which they didn't actually produce anything, and there was never a legitimate reason for the company to be valued as highly as it was at the peak. Essentially, Enron was a bubble, but the bubble had been sustained by some fraudulent accounting.

Well, clearly, the Enron bankruptcy was disastrous for many people. Equally clearly, what some people did was just plain wrong. So Congress sprang into action, as it is wont to do (as Rahm Emmanuel said following the Obama election, "you never want to let a crisis go to waste") and, in 2002, passed the "Public Company Accounting Reform and Investor Protection Act," better known as Sarbanes-Oxley. One can debate its efficacy (which is, frankly, unknowable) vs. its cost (which is considerable - a boon to accountants and lawyers, not so much to the rest of the world [as is so often the case when Congress passes legislation]) but it is the law of the land, and businesses need to comply with it.

So here are a couple of brief summaries of part of what Sarbanes-Oxley requires of corporations and their accountants and officers.

Summary of Section 401

Financial statements are published by issuers are required to be accurate and presented in a manner that does not contain incorrect statements or admit to state material information. These financial statements shall also include all material off-balance sheet liabilities, obligations or transactions.

Summary of Section 409

Issuers are required to disclose to the public, on an urgent basis, information on material changes in their financial condition or operations. These disclosures are to be presented in terms that are easy to understand supported by trend and qualitative information of graphic presentations as appropriate.

This is really pretty easy to follow. A publicly-traded corporation is legally required, when something happens that materially affects its bottom line, to make that information known to current and potential investors. That is to say, they must - must, under penalty of law - declare that things which are going to affect the bottom line are going to affect the bottom line. They must do it in forms which are legally required to be filed with the Securities and Exchange Commission.

When the chairman of AT&T stands up, or issues a press release, saying that the new health care law is going to have $x million dollars of impact on AT&T's bottom line, he is not being partisan. He's not engaged in Obama-bashing, or trying to subvert the Congress. No, he's complying, as required, with the law that Congress has enacted.

Period.



(Sick of this? Sorry, not done yet. Blame Obama and Pelosi and Reid...)