>We ought to be used to this by now. Hyperbole permeates almost every form of modern American communication, and Nevada’s governor recently added his contribution to the miasma. His fund raising letter, helpfully provided by Jon Ralston, and eviscerated by Scandalmonger provides an excellent example of unedited, uninformed, and almost unintelligible hyperbole.
Witness the opening paragraph: “We’ve all seen where this “hopey…changey…feely…and now “believey” kind of stuff” has gotten our great Country…to the Socialist World of Big Government and of Higher Taxes…and to a Government Takeover of the Banks…of the Insurance Industry…of the Car Companies…and now…of the Peoples’ Health Care and their Right to make Personal Decisions with their doctors.”
Our first clue comes with the capital letters. Lots of capital letters, but not very many capital ideas. In fact, the litany sounds ever so much like a recitation of GOP buzz words from an unfocused focus group. It’s a long way from buzz words to policy statements, and Governor Gibbons evidently hasn’t made the trip.
“Socialist World of Big Government and of Higher Taxes”
About those higher taxes? Actually taxes have been cut for most American families: “I kept a promise I made when I campaigned for this office and cut taxes for 95 percent of working Americans,” he said in his weekly radio address Saturday. “One thing we have not done is raise income taxes on families making less than $250,000. That’s another promise we’ve kept.” The president noted that the stimulus bill passed last year has already delivered $160 billion in tax credits to Americans.” (Obama) [TDB] Additionally, the child and dependent care tax credit has been expanded for middle class families. The “saver’s tax credit” assists Americans save for retirement by providing a tax credit to match their own retirement savings. [ABC] The Heritage Foundation analysts are not impressed with tax cuts for middle class Americans, insisting that continuing the Bush Administration policy of marginal tax cuts is preferable, and claiming that targeted tax cuts are essentially unfair. The problem with that line of argument is, of course, that marginal tax cuts overwhelmingly favor those in higher income brackets. The bottom line is that the Obama Administration tax cuts target middle income wage and salary earners while the preferred model for the conservatives at the Heritage Foundation includes tax cuts targeted at those in the upper 2% of American families.
Do we have a “Socialist Big Government?” Not really. The standard definition of socialism is an economic structure including either public or worker ownership of the means of production, and the allocation of resources. We don’t have this economic framework in this country. The notion that we might comes from Governor Gibbons’ next string of hyperbolic terminology.
“A Government Takeover of the Banks”
The Governor, and his GOP cohorts nationally, are well wide of the mark. The federal government doesn’t take over banks until they are bankrupt or are very close to that condition. The FDIC has been empowered since March 12, 1933 to place banks in receivership until the bank assets can be acquired by another banking institution. [FDIC] For example, the deposits of recently insolvent Beach First National Bank in South Carolina have been acquired by the Bank of North Carolina. [FDIC] 42 insolvent banks have been closed, and the assets sold off to other institutions thus far. Surely, the transference of deposits from the custody of insolvent institutions into receivership to be acquired by solvent private institutions is not what constitutes “socialism.”
It’s more likely that what the Governor refers to is the purchase of bank holding company stock to shore up the U.S. financial system. Shoring up Citigroup provides an instructive example. During the “Panic of 2008” Citibank received a total of $45 billion to keep it afloat, later on $25 billion was converted into common stock and $20 billion was paid back by Citigroup to the U.S. Treasury. On March 29, 2010 the Treasury Department announced it would begin selling its stake in Citigroup Inc. at a potential profit of about $7.5 billion, for its 18 month investment. The Treasury Department’s sale is “a major step in the government’s effort to unravel investments it made in banks under the $700 billion Troubled Asset Relief Program at the height of the financial crisis.” [NBC/AP]
Even if we grant that the Treasury will not recoup all the funds shoveled in to bail out this floundering financial giant, we have to admit that the common stock conversion was never intended to be a permanent federal investment in the private banking sector. It was messy, complicated, and frustrating, but the final line is that with the sale of the Citi shares, the 8 major banks that got “bailout” money will have repaid the federal government in full. [NBC] If this is socialism, then it’s an extremely strange version in which private banks are temporarily subsidized such that they can return to the private banking sector in a solvent condition.
“of the Insurance Industry”
What insurance industry? It’s difficult to determine what the Governor is talking about here. If he means the buffeted and battered AIG operation, brought down by the financial mismanagement of its hedge fund, then what’s happened hardly fills the definition of a government takeover. The polite way to describe what occurred at AIG in September 2008 is to call it a “liquidity crisis.” Less politely, we could say they “crashed and burned.” The Federal Reserve created a $85 billion “credit facility” to allow the shattered company to meet “increased collateral obligations” when the full force of AIG’s decision to be on the wrong side of the bets on the U.S. housing market sent the corporation reeling toward bankruptcy. AIG agreed to the $85 billion “credit facility” in exchange for the issuance of a stock warrant equal to 79.9% of its equity. In May 2009, AIG received about $70 billion in investment support, a $60 billion credit line, and $52.5 billion to buy mortgage based assets owned or guaranteed by AIG. Since then AIG has sold several subsidiaries and other assets to pay down the loans received, and is still looking for buyers for other assets. Recently, March 5, 2010, AIG announced the sale of its shares in Transatlantic Holdings, Inc. a subsidiary of AIG’s American Home Assurance Corporation. [StreetInsider] Translation: AIG is having a corporate garage sale.
“of the Car Companies”
Once again, the Governor implies that the government assistance to General Motors and Chrysler (Ford was fine, thank you very much), constitutes a takeover. General Motors restructured during a 40 day bankruptcy, and now plans on repaying loans made by the U.S. and Canadian governments by the end of June 2010. The company owes the U.S.government $6.7 billion and another $1.14 billion to the Canadians. The loans have a scheduled maturity of July 2015. Unwilling to grant bridge loans without some collateral (and who would do that?) the Treasury assumed 61% ownership of the company. Thus far this sounds like a “Takeover,” but for the fact that the Obama Administration has allowed corporate management to restructure and run the company. “The Obama administration has been “hands off” and lets the board manage the company, Whitacre said. He said that he speaks with Treasury officials about once a week and that GM’s chief financial officer meets with them about once a quarter.” [Blmbrg] In short, the Treasury has evidenced little, if indeed any, appetite to remain in the automobile business beyond getting as much taxpayer money back as possible.
The situation at Chrysler is slightly different, in no small part because it was a private corporation to begin with. FiatSpA CEO Sergio Marchionne is trying to get Chrysler LLC back to profitability, in spite of the fact that Chrysler Group sales fell 5.3% in the first quarter of 2010. [Blmbrg]There is more risk here for the Treasury, but less exposure. The Treasury’s stake in Chrysler LLC is only 9.9%, hardly a percentage implying government ownership of the means of production. [Cars.com]
The Treasury Department’s commitment to GM and Chrysler included $22.9 billion in loans, $7.4 billion for assistance to auto finance companies, $5 billion to the supplier support program, and $1.1 billion for warranty commitment obligations. [GAO pdf]
The biggest losers should Chrysler and GM fail may not be the U.S. Treasury, but the pension funds of retired employees. The automakers have about $17 billion in unfunded pension obligations. “If either company’s plan must be terminated, the government would become liable for paying benefits to hundreds of thousands of retirees. The effect on the government’s pension insurer, the Pension Benefit Guaranty Corporation, would be “unprecedented,” the report said. The agency manages plans with assets totaling $68.7 billion, less than the $84.5 billion in G.M.’s plan alone.” [NYT] It’s important to remember at this point that failure of these two companies isn’t just a matter of current workers’ jobs, but also of the solvency of the Pension Benefit Guaranty Corporation.
“President Barack Obama has said he wants to sell off the 60.1% stake in GM and the 9.9% stake in Chrysler owned by the federal government as soon as possible. The GAO report said Treasury officials overseeing those stakes expect GM and Chrysler’s profits “will be able to attract sufficient investor interest for Treasury to sell its equity.” [DFPress] Once again, this statement doesn’t seem to reflect the sentiments of an administration seeking to control the means of production and the allocation of resources.
“of the Peoples’ Health Care and their Right to make Personal Decisions with their doctors”
Once more with feeling: Nothing in the health care reform bill recently enacted by Congress and signed into law by the President does anything to insert the government into the actual practice of providing health care, and absolutely nothing in the law creates an intrusion between a patient and physician. However, we probably ought to take a look at what the new law actually does accomplish in the immediate future.
* Health insurance corporations cannot deny children health insurance because of a pre-existing condition. A ban on this type of discrimination for adults takes effect in 2014.
* Businesses with less than 50 employees will get tax credits covering up to 50% of employee premiums.
* Senior citizens will get a rebate to fill the Medicare drug coverage “donut hole” and as of 2011 50% of that “donut hole” will be filled.
* The cut off age for young adults to continue to be covered by their parents’ health insurance increases to age 27.
* Lifetime caps on the amount of insurance an individual can have will be banned. Annual caps will be limited, and banned in 2014.
* A temporary high risk pool will be set up to cover adults with pre-existing conditions, to be replaced with health care exchanges in 2014.
* New health insurance plans must cover checkups and other preventive care without co-payments. All plans will have to have this benefit by 2018.
* Insurance corporations may not longer abuse the rescission clauses and cut someone off from the insurance plans they’ve been paying for when the person becomes ill or injured.
* Insurance corporations must publicly reveal how much money they spend on overhead costs for administration and other expenses.
* Any new insurance plan must now implement an appeals process for coverage determination and claims.
* New screening procedures will be implemented to help eliminate health insurance fraud and waste.
* Medicare payment protections will be extended to small rural hospitals and other health care facilities that have a small number of Medicare patients.
* There will be a temporary program for companies that offer early retiree health benefits for those between 55 and 64 to help reduce the cost of that coverage.
* The Department of Health and Human Services will establish a Web site to make it easier for Americans in any state to find affordable health plans, and will also include information useful to small business owners. [HuffPo]
Screeds For Screeds Sake
The Governor has joined the GOP chorus calling for a declaration of unconstitutionality in regard to the health care insurance reform measure. So, at this juncture it’s appropriate to ask: Does the Governor really want to have the immediate benefits listed above terminated by a court decision declaring the law unconstitutional? Does he really want insurance companies to revert to their abuse of rescission clauses, lifetime caps on coverage, and denying coverage to children based on a pre-existing condition? Nothing in the aforementioned list does anything other than to increase the likelihood of a person being able to afford to see a physician in the first place. How could this be even remotely considered a barrier between an individual and his or her doctor?
The answer, of course, is that nothing in the health care law serves to place obstacles between patient and doctor. Nothing in the implementation of the Troubled Asset Relief Program could be labeled a government take over of the banking industry. The Administration is trying to get out of the car business as quickly as possible, but not at the expense of the Pension Guaranty Corporation’s solvency. And, nothing in the Governor’s overheated rhetoric supports the contention that we are barreling down the road to any form of socialism.
What we have in the Governor’s fund raising letter is the kind of pure hyperbole that pre-supposes that increasing the decibel level adds credence to the assertions. It is almost as if the Governor gathered all the recent talking points from the Party of No, reduced them to phrases, and sent them out in a blast of meaningless verbiage.
It’s very difficult to maintain civic discourse when one side or the other insists on replacing policy statements with talking points, and ever more difficult when those talking points are reduced to sloganeering. However, this letter comes from an individual who eschewed substantive policy debates during his election campaign, and ran on slogans without being called to explicate their content. He was all “no new taxes,” “tax and spend,” and “less government” before, and now he’s merely replicating the substance-free campaign of a previous season. Nevada voters deserve better.