The Key To Obamacare's Survival?

Even though the House of Representatives has just voted to use the budget bill to defund Obamacare, its chances of survival are pretty good.  Not just because the Senate will delink the defunding from the budget bill, but also because Obamacare suddenly seems to have some powerful supporters.

Not that these supporters are speaking openly.  But here's the scoop.  Major American corporations are moving their workers or retirees to the private exchanges.  Wahlgreens, Sears, and Darden Restaurants (think Olive Garden, Red Lobster, Longhorn Steakhouse, Capital Grille and more) have announced that employees will move to the private exchanges.  IBM and Time Warner are moving retirees to the private exchanges.  Apparently, these companies will pay employees or retirees subsidies to reduce their premium costs.  But these companies, and others making similar moves, are offloading a very important risk--the unpredictability of health care costs.  They provide fixed subsidies, thus stabilizing their costs.

Businesses love predictability and certainty.  Profits are more likely if you can control major cost items like health care coverage for employees and/or retirees.  In essence, Obamacare is on the verge of becoming an important subsidy to big business.

Experience teaches that government subsidies are virtually impossible to eliminate.  Long after the Great Depression and Dust Bowl, agricultural subsidies that make no public policy sense persist.  Even after being nationalized just before they could bring down the entire U.S. economy, Fannie Mae and Freddie Mac roll along, now more centrally positioned in the financing of residential real estate than ever before.  Virtual giveaways of access to minerals on federal land continue unabated even though the settlement of the West was effectively complete by 1890.

With Obamacare in the process of becoming a potentially really, really important subsidy to really, really big corporations, do we really think that it's going to be eliminated?  The Tea Partiers in the House make a lot of noise, but can they take on the political firepower that big business lobbyists can bring to bear?  Recent polls indicate that a majority of Americans support Obamacare, and politicians in a democracy eventually have to pay attention to the polls (see Obama-Syria-poison-gas-response for more on this point).  But, just as importantly (or more so), powerful business interests can arrange the survival of big subsidies no matter how loud some people in the House of Representatives scream.  This may reflect poorly on the nature of the political process, but it's the truth.  And Obamacare may well now have the backing of some highly influential lobbyists who will speak softly (to stay out of the cross-hairs of the Tea Party) but will wield big sticks to keep their clients well-subsidized.

How To Stop the Too Big From Failing

Congress, and financial regulators in America and other nations, have struggled endlessly with the problem of financial institutions too big to fail.  Capital requirements have been increased, and regulation has been tightened (somewhat--much of the implementation of the Dodd Frank Act remains unfinished).  But the problem remains.

There is a simple way to seriously reduce the possibility of another taxpayer-funded bailout.  If a financial institution needs a government bailout, force the CEO, COO and CFO, and the members of the Board of Directors, to pay to the government the value of their entire compensation for the preceding five years.  This would include salary, bonuses, stock options, restricted stock, fees, country club memberships, company cars, and all other perks and compensation.  This payment would be required without regard to whether or not the executive officer or director was proven to have participated in any wrongdoing or neglect.  It wouldn't be a penalty for misconduct.  It would be an incentive to avoid sticking the government with the costs of mismanagement.

Any such proposal would, of course, provoke howls of outrage from financial institutions and their free-roaming packs of mouth-foaming running dog lobbyists.  Such a measure would be unfair if the officer or director hadn't been shown to have engaged in misconduct, it would be argued.  However, the SEC already has the legal authority to force a company's CEO and CFO to pay out all their compensation for the 12 months following the issuance of financial statements that are subsequently modified (in a form called a restatement)--see Section 304 of the Sarbanes-Oxley Act.  The SEC isn't required to show that the CEO and CFO did bad things.  They can be forced to make this payout simply because the original financial statements were wrong and needed to be restated.  The courts have upheld this authority.  There's nothing unfair about requiring senior executives to get important things right in the first instance.

Banks and other financial institutions might also object that they couldn't recruit the executive talent they need if this financial Sword of Damocles were to hang over their heads.  But, when we consider the geniuses at some financial institutions in the recent past who steered their firms right over cliffs and into government safety nets, this argument loses its persuasiveness.  Executive compensation arrangements at the too big to fail seem to incentivize risk-taking, even if it might entail unmanageable complexity.  There needs to be a disincentive--and a strong one.

The government has been criticized for not penalizing the high and mighty for the financial crisis of 2008.  Remember, however, that the statutes and regulations governing financial institutions are complex.  Proof of violations can be difficult.  A simple measure like a penalty of five year's compensation for a government bailout offers a way to nail the top dogs for signing a chit the taxpayers have to pay.

One and Done in Syria, Right? Right? . . . Come on, right?

Once upon a time, there were some nasty guys known as al Qaeda.  In August 1998, they bombed the U.S. embassies in Kenya and Tanzania.  Over 200 people were killed, including 12 Americans.  In order punish the baddies, President Clinton order cruise missile attacks on al Qaeda training camps in Afghanistan and a pharmaceutical factory in Sudan which supposedly made chemical weapons.  Dozens of cruise missiles were fired and hit their targets.  After that, al Qaeda was never heard from again.

Unfortunately, the last part isn't true.  Al Qaeda, as we all know, survived in Afghanistan, killed some 3,000 Americans on September 11, 2001, and triggered wars that have turned out to be America's longest military conflicts.  Over 4,800 Americans died in Iraq, and more than 2,000 in Afghanistan.  American personnel are now engaged in fighting al Qaeda or its affiliates in South Asia, the Middle East, the Arabian Peninsula, North Africa, and who knows, maybe even Southeast Asia (there are Muslim insurgencies in Indonesia and the Philippines).   There is no end in sight for America's war against violent Islamic radicals.

President Obama and his supporters seem to think they can conducted a limited strike in Syria to punish Bashar al-Assad for using chemical weapons, and then be done with it.  Who are they kidding?  The bad guys in this scenario grow beards on the other cheek; they don't turn it.  Iran, Syria and Hezbollah are all promising retaliation if America launches cruise missiles.  Americans and American facilities in Iraq, Afghanistan, and probably other places are likely to be on the hit list.  American allies like Israel, Turkey, and other nations may be attacked.  Sooner or later, Assad or one of his allies will do something that will require further American action.  That's what happened with al Qaeda 15 years ago.  The 1998 cruise missile strikes on al Qaeda's training camps led to the 9/11 bombings, which then led to a war we're still fighting.

There is no chance--as in zero percent--that a U.S. cruise missile strike against Assad's forces will be the last word.  President Obama has yet to explain how he will deal with the many retaliatory responses from the bad guys, all without putting boots on the ground in some distant place and without entangling us in another endless war against people who can outlast us because it's their home.  In all likelihood, he has no explanation, because there is no way to contain America's involvement in Syria once we cruise in. 

As Americans know from hard experience, the road to Hell is paved with good intentions, and President Obama has the road we're now on very well paved.   Good intentions aren't the only thing that counts.  Competence and diligence matter, too.  You have to have a strategy to win--convincingly and quickly.  If you don't have such a strategy, don't dive into a war.  Ask the 58,000 Americans who died in Vietnam and the 4,800 who died in Iraq about this point.  There doesn't seem to be much strategic thinking going on in the White House; just political maneuvering in the hope of preventing the President from losing credibility for shooting from the hip.  Some of the U.S. troops in Afghanistan today were seven or eight years old at the time of the 9/11 bombings.  Today's parents of elementary school students should pay close attention to the discussion of U.S. military action in Syria.

How Does Obama Define Success in Syria?

Barack Obama has flinched.  Not once.  Not twice.  But three times in the last year or so.  Each time, he rattled the saber at Syrian President Bashar al-Assad, Assad called Obama's hand, and Obama flinched.  Now, evidently rattled himself by the unexpected rejection of military action by the British Parliament, Obama seems to be looking around for someone to offer a fist bump.  French President Francois Hollande has been supportive, but Obama has called for Congress to pass a resolution endorsing a military response to Assad's use of chemical weapons on Syrian civilians.

The Democrats, who control the Senate, are feeling queasy, but may support a narrowly crafted resolution.  The Republicans, who control the House, are skeptical and may reject the resolution. 

The Administration has offered a variety of negative reasons for striking Assad's forces, arguing that bad or negative consequences will ensue if the U.S. does not strike.  Chemical weapons are horrible and are prohibited by international law.  The United States, and especially the President would lose credibility.  The Iranians would be emboldened in their quest for nuclear weapons.  The North Koreans would be emboldened to pull more septic content.  The Russians would be emboldened in any number of ways. 

Chemical weapons are horrible.  But does the President see himself as a referee, seeking to penalize Assad for face masking?  Is the President's plan to throw down a yellow flag, move Assad back a few yards, and then let the slaughter continue?  Is it okay for Assad to continue his nationwide massacre if he just limits himself to conventional weapons?  Why don't we issue striped uniforms to the U.S. military and give them whistles to blow along with cruise missiles to fire?

As for credibility, Assad is in a fight for his very life.  He couldn't give a rat's left ear what Obama does, because Obama won't put U.S. boots on the ground and hasn't even provided military support to the Syrian rebels that he promised months ago.  Obama doesn't present a significant threat to Assad.  Maybe Assad's forces will refrain from obvious use of chemical weapons for a while and employ more conventional but plenty lethal weaponry to kill many more Syrians.  But nothing Obama is contemplating will make him more credible to anyone who matters.

The Iranians are, if the vaguely sourced information published by the press over the past few years is accurate, hellbent on building nuclear weapons on the fastest possible schedule.  It won't matter a bit what Obama does in Syria.  A U.S. military strike there will only lead the Iranians to more comprehensively disguise their activities.  But it won't dissuade them in the least from halting their nuclear program.

The North Koreans are constrained by the presence of 26,000 U.S. troops stationed along the demilitarized zone in the Korean peninsula.  North Korea can't do anything substantial to South Korea or any other nation without affecting these troops.  As long as those troops are there, what Obama does or doesn't do in Syria isn't significant.

As for Russia, Prime Minister Vladimir Putin is ex-KBG.  If there was an intelligence service that knew how to spot and exploit human weakness, it was the KGB.  Putin surely has Obama figured out--the man isn't bold.  He's not a risk taker.  He wants to be on the winning side no matter who that is or what happens (this is how the U.S. wound up being detested by everyone in Egypt--we tried to be everyone's buddy and ended up no one's buddy).  Obama is like the political equivalent of Microsoft--very successful, but not so likely to continue that success in the future because of an aversion to taking real risks.  Whatever carefully calibrated and narrowly focused military strike Obama now orders isn't going to convince Putin that Obama is anything except a smart, but cautious man trying to stay on his feet in a back alley brawl.  The smartest man in the alley might win the brawl, but the meanest man is the one you have to watch out for.

To persuade Congress and the American people that military action in Syria is justified, President Obama has to present positive reasons.  We need to know how we succeed, how we win.  Waging war for the purpose of stopping bad people from being bad isn't likely to work, unless one is prepared to wage total war and completely conquer the enemy, as America did to Germany and Japan in World War II.  No one has suggested that America conquer Syria.  For the past fifty years, America has dived into military adventures for poorly conceived reasons, and not surprisingly done poorly.  The only clear case for offensive military action--the 2001 invasion of Afghanistan-- was thoroughly botched by the second Bush Administration when it failed to deal definitively with Osama bin Laden after trapping him in late 2001 at Tora Bora.  We're still suffering the consequences of that failure.  If President Obama wants our support for a strike in Syria, he should tell us how we attain victory.  If there is no victory that can be defined or attained, we should hold our fire.