Monday, January 03, 2011

Obama's Mistakes

This month marks the half-way point of President Obama's first term. While the Democrats are quick to tout the President's accomplishments, he has made some serious mistakes. When I say "mistake", I don't mean "Oops, I'd better fix that!" mistakes. I mean decisions that will haunt the country a decade or more from now.


The big one is, of course, Obamacare, not just because it is a bad piece of legislation, but because of what it doesn't cover. Two years ago the big concerns were the rising cost of medical care and of prescription drugs. Obama himself agreed with the first when he first proposed health care reform. He admitted that Medicare and Medicaid are going to go broke soon unless we "bend the curve" on health care cost.

That was about the last we heard about containing costs. Obamacare extends coverage and encourages check-ups without any mechanism for enlarging the medical care system. Basic economics says that this will make everything cost more. On top of that, part of the funding for Obamacare comes from an excise tax on medical equipment.

From the beginning, Obama and the Democrats decided not to touch malpractice suits. This is because of the influence of trial lawyers. They come in just after unions as the party's biggest donors and malpractice suits are a major source of income for many of them including John Edwards. These suits are a major factor in rising health care prices. Some specialties such as neurosurgery are so risky that specialists can expect half their patients to sue them. To keep these doctors in practice, the costs of their malpractice insurance are spread across all doctors so they are all paying outrageous rates. At the same time, most doctors practice defensive medicine. If a patient complains of a headache for a couple of days then the doctor will order a CAT scan. This is expensive and repeated, unneeded scans can increase the risk of cancer over the patient's lifetime.

Prescription drugs are another area that the Obama White House declared off-limits. This was a straight political deal. Obama agreed to leave the drug companies alone if they pledged to support whatever else the Democrats came up with.

None of these problems have gone away but the fight for Obamacare was so grinding that no politician is likely to try it again over these issues.

The Economy

Obamacare is also a factor in his other mistakes. The next one is the economy. Obama likes to say that when he took office the economy was in free-fall and that he stabilized it with the stimulus. His favorite simile involves the Republicans driving a car into the ditch then asking for the keys back after the Democrats pushed it back out. The economic decline mainly happened between September, 2008 and April of 2010. The stimulus was signed into law on February 17, 2009 with less than $200 billion to be spent in 2009. Personally, I find it hard to believe that the promise of future spending was enough to stabilize the economy by April. Most of the credit has to go to President Bush who pushed through various bailouts and the TARP. Obama continued Bush's policies. To amend Obama's favorite story, after the car went into the ditch, Bush pushed it 2/3s of the way out then Obama pushed it the rest of the way and took full credit.

But unemployment continued to rise after the economy stabilized and remains high today? What happened?

Obamacare is one factor, although a specialized one. It kicks in on companies employing 50 or more workers. That is a strong disincentive for companies to stay small.

There are other factors. Economists often cite "uncertainty". This means that companies are afraid of what the Obama administration will do next. Obama has shown that he puts ideology ahead of American competitiveness. He has made an end run around Congress on fleet mileage and CO2 emissions.

It has been pointed out many times that Obama has yet to appoint a cabinet official who has actually run a business. Instead he has appointed career politicians and academics.

Green Energy

Obama is convinced that global warming is real and that we have to do something about it. He has talked about green energy as being one of the three supports of the new American economy (along with health care and education). Right now, green energy means subsidized energy. We are subsidizing the conversion of food into fuel and the sales of automobiles as well as a long list of other technologies that only exist because of the subsidies.

The new focus on "green" has transformed the meaning of "green". Previously green meant good for the environment. Now it means low-CO2. Environmentalists from 30 years ago would be amazed that chemically inert light bulbs are being phased out in favor of ones containing mercury and other toxic chemicals.

The biggest driver of "green" is electricity generated through wind or solar and stored in high-efficiency batteries. An additional justification is energy independence but we are simply replacing an addiction to fossil fuels with one for lithium and rare earth metals. Most of these come from overseas and China, a major producer, has shown that it will use its exports as a political weapon.

Class Warfare

From the beginning, Obama made it clear that he does not like the wealthy and that he has a very broad definition of wealth. $200,000 ($250,000 joint income) sounds like a lot of money but it does not buy you the lifestyle of Paris Hilton, John Edwards or Al Gore. Obama makes no distinction by region, either. $200,000 buys you a lot more in West Virginia than in New York City.

It is toxic to society for the government to be dividing the population into the deserving poor and the undeserving rich. It also distorts the distinction between people who are really rich from those who are simply well-off.

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